PRELIMINARY ATTACHMENT: G.R. No.

125027 August 12, 2002

On August 1, 1988, the sheriff filed his Sheriffs Return showing that summons was not served on petitioner. A woman found at petitioners house informed the sheriff that petitioner transferred her residence to Sto. Nio, Guagua, Pampanga. The sheriff found out further that petitioner had left the Philippines for Guam.5 Thus, on September 13, 1988, construing petitioners departure from the Philippines as done with intent to defraud her creditors, private respondent filed a Motion for Preliminary Attachment. On September 26, 1988, the trial court issued an Order of Preliminary Attachment6 against petitioner. The following day, the trial court issued a Writ of Preliminary Attachment. The trial court granted the request of its sheriff for assistance from their counterparts in RTC, Pampanga. Thus, on October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga served on petitioners household help in San Fernando, Pampanga, the Notice of Levy with the Order, Affidavit and Bond.7 On November 7, 1988, petitioner filed an Urgent Motion to Discharge Attachment8 without submitting herself to the jurisdiction of the trial court. She pointed out that up to then, she had not been served a copy of the Complaint and the summons. Hence, petitioner claimed the court had not acquired jurisdiction over her person.9 In the hearing of the Urgent Motion to Discharge Attachment on November 11, 1988, private respondent sought and was granted a re-setting to December 9, 1988. On that date, private respondents counsel did not appear, so the Urgent Motion to Discharge Attachment was deemed submitted for resolution.10 The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon filing of petitioners counter-bond. The trial court, however, did not rule on the question of jurisdiction and on the validity of the writ of preliminary attachment. On December 26, 1988, private respondent applied for an alias summons, which the trial court issued on January 19, 1989.11 It was only on January 26, 1989 that summons was finally served on petitioner.12 On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of improper venue. Private respondents invoice for the freight forwarding service stipulates that "if court litigation becomes necessary to enforce collection xxx the agreed venue for such action is Makati, Metro Manila."13 Private respondent filed an Opposition asserting that although "Makati" appears as the stipulated venue, the same was merely an inadvertence by the printing press whose general manager executed an affidavit14 admitting such inadvertence. Moreover, private respondent claimed that petitioner knew that private respondent was holding office in Pasay City and not in Makati.15 The lower court, finding credence in private respondents assertion, denied the Motion to Dismiss and gave petitioner five days to file her Answer. Petitioner filed a Motion for Reconsideration but this too was denied.

ANITA MANGILA, petitioner, vs. COURT OF APPEALS and LORETA GUINA, respondents. CARPIO, J.: The Case This is a petition fore review on certiorari under Rule 45 of the Rules of Court, seeking to set aside the Decision1 of the Court of Appeals affirming the Decision2 of the Regional Trial Court, Branch 108, Pasay City. The trial court upheld the writ of attachment and the declaration of default on petitioner while ordering her to pay private respondent P109,376.95 plus 18 percent interest per annum, 25 percent attorneys fees and costs of suit. The Facts Petitioner Anita Mangila ("petitioner" for brevity) is an exporter of sea foods and doing business under the name and style of Seafoods Products. Private respondent Loreta Guina ("private respondent" for brevity) is the President and General Manager of Air Swift International, a single registered proprietorship engaged in the freight forwarding business. Sometime in January 1988, petitioner contracted the freight forwarding services of private respondent for shipment of petitioners products, such as crabs, prawns and assorted fishes, to Guam (USA) where petitioner maintains an outlet. Petitioner agreed to pay private respondent cash on delivery. Private respondents invoice stipulates a charge of 18 percent interest per annum on all overdue accounts. In case of suit, the same invoice stipulates attorneys fees equivalent to 25 percent of the amount due plus costs of suit.3 On the first shipment, petitioner requested for seven days within which to pay private respondent. However, for the next three shipments, March 17, 24 and 31, 1988, petitioner failed to pay private respondent shipping charges amounting to P109, 376.95.4 Despite several demands, petitioner never paid private respondent. Thus, on June 10, 1988, private respondent filed Civil Case No. 5875 before the Regional Trial Court of Pasay City for collection of sum of money.

Petitioner filed her Answer16 on June 16, 1989, maintaining her contention that the venue was improperly laid. On June 26, 1989, the trial court issued an Order setting the pre-trial for July 18, 1989 at 8:30 a.m. and requiring the parties to submit their pre-trial briefs. Meanwhile, private respondent filed a Motion to Sell Attached Properties but the trial court denied the motion. On motion of petitioner, the trial court issued an Order resetting the pre-trial from July 18, 1989 to August 24, 1989 at 8:30 a.m.. On August 24, 1989, the day of the pre-trial, the trial court issued an Order17 terminating the pre-trial and allowing the private respondent to present evidence ex-parte on September 12, 1989 at 8:30 a.m.. The Order stated that when the case was called for pre-trial at 8:31 a.m., only the counsel for private respondent appeared. Upon the trial courts second call 20 minutes later, petitioners counsel was still nowhere to be found. Thus, upon motion of private respondent, the pre-trial was considered terminated. On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order terminating the pre-trial. Petitioner explained that her counsel arrived 5 minutes after the second call, as shown by the transcript of stenographic notes, and was late because of heavy traffic. Petitioner claims that the lower court erred in allowing private respondent to present evidence ex-parte since there was no Order considering the petitioner as in default. Petitioner contends that the Order of August 24, 1989 did not state that petitioner was declared as in default but still the court allowed private respondent to present evidence ex-parte.18 On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled the presentation of private respondents evidence ex-parte on October 10, 1989.1wphi1.nt On October 10, 1989, petitioner filed an Omnibus Motion stating that the presentation of evidence ex-parte should be suspended because there was no declaration of petitioner as in default and petitioners counsel was not absent, but merely late. On October 18, 1989, the trial court denied the Omnibus Motion.19

On December 15, 1995, the Court of Appeals rendered a decision affirming the decision of the trial court. The Court of Appeals upheld the validity of the issuance of the writ of attachment and sustained the filing of the action in the RTC of Pasay. The Court of Appeals also affirmed the declaration of default on petitioner and concluded that the trial court did not commit any reversible error. Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals denied the same in a Resolution dated May 20, 1996. Hence, this petition. The Issues The issues raised by petitioner may be re-stated as follows: I. WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF ATTACHMENT WAS IMPROPERLY ISSUED AND SERVED; II. WHETHER THERE WAS A VALID DECLARATION OF DEFAULT; III. WHETHER THERE WAS IMPROPER VENUE. IV. WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS OBLIGED TO PAY P109, 376.95, PLUS ATTORNEYS FEES.20 The Ruling of the Court

On November 20, 1989, the petitioner received a copy of the Decision of November 10, 1989, ordering petitioner to pay respondent P109,376.95 plus 18 percent interest per annum, 25 percent attorneys fees and costs of suit. Private respondent filed a Motion for Execution Pending Appeal but the trial court denied the same. The Ruling of the Court of Appeals

Improper Issuance and Service of Writ of Attachment Petitioner ascribes several errors to the issuance and implementation of the writ of attachment. Among petitioners arguments are: first, there was no ground for the issuance of the writ since the intent to defraud her creditors had not been established; second, the value of the properties levied exceeded the value of private respondents claim. However, the crux of petitioners arguments rests on the question of the validity

of the writ of attachment. Because of failure to serve summons on her before or simultaneously with the writs implementation, petitioner claims that the trial court had not acquired jurisdiction over her person and thus the service of the writ is void. As a preliminary note, a distinction should be made between issuance and implementation of the writ of attachment. It is necessary to distinguish between the two to determine when jurisdiction over the person of the defendant should be acquired to validly implement the writ. This distinction is crucial in resolving whether there is merit in petitioners argument. This Court has long settled the issue of when jurisdiction over the person of the defendant should be acquired in cases where a party resorts to provisional remedies. A party to a suit may, at any time after filing the complaint, avail of the provisional remedies under the Rules of Court. Specifically, Rule 57 on preliminary attachment speaks of the grant of the remedy "at the commencement of the action or at any time thereafter."21 This phrase refers to the date of filing of the complaint which is the moment that marks "the commencement of the action." The reference plainly is to a time before summons is served on the defendant, or even before summons issues. In Davao Light & Power Co., Inc. v. Court of Appeals,22 this Court clarified the actual time when jurisdiction should be had: "It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of defendant - issuance of summons, order of attachment and writ of attachment - these do not and cannot bind and affect the defendant until and unless jurisdiction over his person is eventually obtained by the court, either by service on him of summons or other coercive process or his voluntary submission to the courts authority. Hence, when the sheriff or other proper officer commences implementation of the writ of attachment, it is essential that he serve on the defendant not only a copy of the applicants affidavit and attachment bond, and of the order of attachment, as explicitly required by Section 5 of Rule 57, but also the summonsaddressed to said defendant as well as a copy of the complaint xxx." (Emphasis supplied.) Furthermore, we have held that the grant of the provisional remedy of attachment involves three stages: first, the court issues the order granting the application; second, the writ of attachment issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the defendant be first obtained. However, once the implementation of the writ commences, the court must have acquired jurisdiction over the defendant for without such jurisdiction, the court has no power and authority to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant. 23 In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and implemented on October 28, 1988. However, the alias summons was

served only on January 26, 1989 or almost three months after the implementation of the writ of attachment. The trial court had the authority to issue the Writ of Attachment on September 27 since a motion for its issuance can be filed "at the commencement of the action." However, on the day the writ was implemented, the trial court should have, previously or simultaneously with the implementation of the writ, acquired jurisdiction over the petitioner. Yet, as was shown in the records of the case, the summons was actually served on petitioner several months after the writ had been implemented. Private respondent, nevertheless, claims that the prior or contemporaneous service of summons contemplated in Section 5 of Rule 57 provides for exceptions. Among such exceptions are "where the summons could not be served personally or by substituted service despite diligent efforts or where the defendant is a resident temporarily absent therefrom x x x." Private respondent asserts that when she commenced this action, she tried to serve summons on petitioner but the latter could not be located at her customary address in Kamuning, Quezon City or at her new address in Guagua, Pampanga.24Furthermore, respondent claims that petitioner was not even in Pampanga; rather, she was in Guam purportedly on a business trip. Private respondent never showed that she effected substituted service on petitioner after her personal service failed. Likewise, if it were true that private respondent could not ascertain the whereabouts of petitioner after a diligent inquiry, still she had some other recourse under the Rules of Civil Procedure. The rules provide for certain remedies in cases where personal service could not be effected on a party. Section 14, Rule 14 of the Rules of Court provides that whenever the defendants "whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in a newspaper of general circulation x x x." Thus, if petitioners whereabouts could not be ascertained after the sheriff had served the summons at her given address, then respondent could have immediately asked the court for service of summons by publication on petitioner.25 Moreover, as private respondent also claims that petitioner was abroad at the time of the service of summons, this made petitioner a resident who is temporarily out of the country. This is the exact situation contemplated in Section 16,26 Rule 14 of the Rules of Civil Procedure, providing for service of summons by publication. In conclusion, we hold that the alias summons belatedly served on petitioner cannot be deemed to have cured the fatal defect in the enforcement of the writ. The trial court cannot enforce such a coercive process on petitioner without first obtaining jurisdiction over her person. The preliminary writ of attachment must be served after or simultaneous with the service of summons on the defendant whether by personal service, substituted service or by publication as warranted by the circumstances of the case.27 The subsequent service of summons does not confer a retroactive acquisition

of jurisdiction over her person because the law does not allow for retroactivity of a belated service. Improper Venue Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in private respondents invoice which contains the following: "3. If court litigation becomes necessary to enforce collection, an additional equivalent (sic) to 25% of the principal amount will be charged. The agreed venue for such action is Makati, Metro Manila, Philippines."28 Based on this provision, petitioner contends that the action should have been instituted in the RTC of Makati and to do otherwise would be a ground for the dismissal of the case. We resolve to dismiss the case on the ground of improper venue but not for the reason stated by petitioner. The Rules of Court provide that parties to an action may agree in writing on the venue on which an action should be brought.29 However, a mere stipulation on the venue of an action is not enough to preclude parties from bringing a case in other venues.30 The parties must be able to show that such stipulation is exclusive. Thus, absent words that show the parties intention to restrict the filing of a suit in a particular place, courts will allow the filing of a case in any venue, as long as jurisdictional requirements are followed. Venue stipulations in a contract, while considered valid and enforceable, do not as a rule supersede the general rule set forth in Rule 4 of the Revised Rules of Court.31 In the absence of qualifying or restrictive words, they should be considered merely as an agreement on additional forum, not as limiting venue to the specified place.32 In the instant case, the stipulation does not limit the venue exclusively to Makati. There are no qualifying or restrictive words in the invoice that would evince the intention of the parties that Makati is the "only or exclusive" venue where the action could be instituted. We therefore agree with private respondent that Makati is not the only venue where this case could be filed. Nevertheless, we hold that Pasay is not the proper venue for this case. Under the 1997 Rules of Civil Procedure, the general rule is venue in personal actions is "where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff." 33The exception to this rule is when the parties agree on an exclusive venue other than the places mentioned in the rules. But, as we have discussed, this exception is not applicable in this case. Hence, following the general rule, the instant case may be

brought in the place of residence of the plaintiff or defendant, at the election of the plaintiff (private respondent herein). In the instant case, the residence of private respondent (plaintiff in the lower court) was not alleged in the complaint. Rather, what was alleged was the postal address of her sole proprietorship, Air Swift International. It was only when private respondent testified in court, after petitioner was declared in default, that she mentioned her residence to be in Better Living Subdivision, Paraaque City. In the earlier case of Sy v. Tyson Enterprises, Inc.,34 the reverse happened. The plaintiff in that case was Tyson Enterprises, Inc., a corporation owned and managed by Dominador Ti. The complaint, however, did not allege the office or place of business of the corporation, which was in Binondo, Manila. What was alleged was the residence of Dominador Ti, who lived in San Juan, Rizal. The case was filed in the Court of First Instance of Rizal, Pasig. The Court there held that the evident purpose of alleging the address of the corporations president and manager was to justify the filing of the suit in Rizal, Pasig instead of in Manila. Thus, the Court ruled that there was no question that venue was improperly laid in that case and held that the place of business of Tyson Enterpises, Inc. is considered as its residence for purposes of venue. Furthermore, the Court held that the residence of its president is not the residence of the corporation because a corporation has a personality separate and distinct from that of its officers and stockholders. In the instant case, it was established in the lower court that petitioner resides in San Fernando, Pampanga35 while private respondent resides in Paraaque City.36 However, this case was brought in Pasay City, where the business of private respondent is found. This would have been permissible had private respondents business been a corporation, just like the case in Sy v. Tyson Enterprises, Inc. However, as admitted by private respondent in her Complaint37 in the lower court, her business is a sole proprietorship, and as such, does not have a separate juridical personality that could enable it to file a suit in court.38 In fact, there is no law authorizing sole proprietorships to file a suit in court.39 A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the owner of the enterprise.40 The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual and requires its proprietor or owner to secure licenses and permits, register its business name, and pay taxes to the national government.41 The law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court.42 Thus, not being vested with legal personality to file this case, the sole proprietorship is not the plaintiff in this case but rather Loreta Guina in her personal capacity. In fact, the complaint in the lower court acknowledges in its caption that the plaintiff and defendant are Loreta Guina and Anita Mangila, respectively. The title of the petition before us does not state, and rightly so, Anita Mangila v. Air Swift International, but rather Anita Mangila v. Loreta Guina. Logically then, it is the residence of private

respondent Guina, the proprietor with the juridical personality, which should be considered as one of the proper venues for this case. All these considered, private respondent should have filed this case either in San Fernando, Pampanga (petitioners residence) or Paraaque (private respondents residence). Since private respondent (complainant below) filed this case in Pasay, we hold that the case should be dismissed on the ground of improper venue. Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court, petitioner expressly stated that she was filing the motion without submitting to the jurisdiction of the court. At that time, petitioner had not been served the summons and a copy of the complaint.43 Thereafter, petitioner timely filed a Motion to Dismiss44 on the ground of improper venue. Rule 16, Section 1 of the Rules of Court provides that a motion to dismiss may be filed "[W]ithin the time for but before filing the answer to the complaint or pleading asserting a claim." Petitioner even raised the issue of improper venue in his Answer45 as a special and affirmative defense. Petitioner also continued to raise the issue of improper venue in her Petition for Review46 before this Court. We thus hold that the dismissal of this case on the ground of improper venue is warranted. The rules on venue, like other procedural rules, are designed to insure a just and orderly administration of justice or the impartial and evenhanded determination of every action and proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted freedom to choose where to file the complaint or petition.47 We find no reason to rule on the other issues raised by petitioner.1wphi1.nt WHEREFORE, the petition is GRANTED on the grounds of improper venue and invalidity of the service of the writ of attachment. The decision of the Court of Appeals and the order of respondent judge denying the motion to dismiss areREVERSED and SET ASIDE. Civil Case No. 5875 is hereby dismissed without prejudice to refiling it in the proper venue. The attached properties of petitioner are ordered returned to her immediately. SO ORDERED. G.R. No. 139941 January 19, 2001

The instant petition arises from transactions that were entered into by the government in the penultimate days of the Marcos administration. Petitioner Vicente B. Chuidian was alleged to be a dummy or nominee of Ferdinand and Imelda Marcos in several companies said to have been illegally acquired by the Marcos spouses. As a favored business associate of the Marcoses, Chuidian allegedly used false pretenses to induce the officers of the Philippine Export and Foreign Loan Guarantee Corporation (PHILGUARANTEE), the Board of Investments (BOI) and the Central Bank, to facilitate the procurement and issuance of a loan guarantee in favor of the Asian Reliability Company, Incorporated (ARCI) sometime in September 1980. ARCI, 98% of which was allegedly owned by Chuidian, was granted a loan guarantee of TwentyFive Million U.S. Dollars (US$25,000,000.00).1wphi1.nt While ARCI represented to Philguarantee that the loan proceeds would be used to establish five inter-related projects in the Philippines, Chuidian reneged on the approved business plan and instead invested the proceeds of the loan in corporations operating in the United States, more particularly Dynetics, Incorporated and Interlek, Incorporated. Although ARCI had received the proceeds of the loan guaranteed by Philguarantee, the former defaulted in the payments thereof, compelling Philguarantee to undertake payments for the same. Consequently, in June 1985, Philguarantee sued Chuidian before the Santa Clara County Superior Court,1 charging that in violation of the terms of the loan, Chuidian not only defaulted in payment, but also misused the funds by investing them in Silicon Valley corporations and using them for his personal benefit. For his part, Chuidian claimed that he himself was a victim of the systematic plunder perpetrated by the Marcoses as he was the true owner of these companies, and that he had in fact instituted an action before the Federal Courts of the United States to recover the companies which the Marcoses had illegally wrested from him. 2 On November 27, 1985, or three (3) months before the successful people's revolt that toppled the Marcos dictatorship, Philguarantee entered into a compromise agreement with Chuidian whereby petitioner Chuidian shall assign and surrender title to all his companies in favor of the Philippine government. In return, Philguarantee shall absolve Chuidian from all civil and criminal liability, and in so doing, desist from pursuing any suit against Chuidian concerning the payments Philguarantee had made on Chuidian's defaulted loans. It was further stipulated that instead of Chuidian reimbursing the payments made by Philguarantee arising from Chuidian's default, the Philippine government shall pay Chuidian the amount of Five Million Three Hundred Thousand Dollars (US$5,300,000.00). Initial payment of Five Hundred Thousand Dollars (US$500,000.00) was actually received by Chuidian, as well as succeeding payment of Two Hundred Thousand Dollars (US$200,000.00). The remaining balance of Four Million Six Hundred Thousand Dollars (US$4,600,000.00) was to be paid through an irrevocable Letter of Credit (L/C) from which Chuidian would draw One Hundred Thousand Dollars (US$100,000.00) monthly.3 Accordingly, on December 12, 1985, L/C No. SSD-005-85 was issued for the said amount by the Philippine National Bank

VICENTE B. CHUIDIAN, petitioner, vs. SANDIGANBAYAN (Fifth Division) and the REPUBLIC OF THE PHILIPPINES, respondents. YNARES-SANTIAGO, J.:

(PNB). Subsequently, Chuidian was able to make two (2) monthly drawings from said L/C at the Los Angeles branch of the PNB.4 With the advent of the Aquino administration, the newly-established Presidential Commission on Good Government (PCGG) exerted earnest efforts to search and recover money, gold, properties, stocks and other assets suspected as having been illegally acquired by the Marcoses, their relatives and cronies. Petitioner Chuidian was among those whose assets were sequestered by the PCGG. On May 30, 1986, the PCGG issued a Sequestration Order5 directing the PNB to place under its custody, for and in behalf of the PCGG, the irrevocable L/C (No. SSD005-85). Although Chuidian was then residing in the United States, his name was placed in the Department of Foreign Affairs' Hold Order list.6 In the meantime, Philguarantee filed a motion before the Superior Court of Santa Clara County of California in Civil Case Nos. 575867 and 577697 seeking to vacate the stipulated judgment containing the settlement between Philguarantee and Chuidian on the grounds that: (a) Philguarantee was compelled by the Marcos administration to agree to the terms of the settlement which was highly unfavorable to Philguarantee and grossly disadvantageous to the government; (b) Chuidian blackmailed Marcos into pursuing and concluding the settlement agreement by threatening to expose the fact that the Marcoses made investments in Chuidian's American enterprises; and (c) the Aquino administration had ordered Philguarantee not to make further payments on the L/C to Chuidian. After considering the factual matters before it, the said court concluded that Philguarantee "had not carried its burden of showing that the settlement between the parties should be set aside." 7 On appeal, the Sixth Appellate District of the Court of Appeal of the State of California affirmed the judgment of the Superior Court of Sta. Clara County denying Philguarantee's motion to vacate the stipulated judgment based on the settlement agreement.8 After payment on the L/C was frozen by the PCGG, Chuidian filed before the United States District Court, Central District of California, an action against PNB seeking, among others, to compel PNB to pay the proceeds of the L/C. PNB countered that it cannot be held liable for a breach of contract under principles of illegality, international comity and act of state, and thus it is excused from payment of the L/C. Philguarantee intervened in said action, raising the same issues and arguments it had earlier raised in the action before the Santa Clara Superior Court, alleging that PNB was excused from making payments on the L/C since the settlement was void due to illegality, duress and fraud.9 The Federal Court rendered judgment ruling: (1) in favor of PNB excusing the said bank from making payment on the L/C; and (2) in Chuidian's favor by denying intervenor Philguarantee's action to set aside the settlement agreement. 10 Meanwhile, on February 27, 1987, a Deed of Transfer11 was executed between then Secretary of Finance Jaime V. Ongpin and then PNB President Edgardo B. Espiritu, to

facilitate the rehabilitation of PNB, among others, as part of the government's economic recovery program. The said Deed of Transfer provided for the transfer to the government of certain assets of PNB in exchange for which the government would assume certain liabilities of PNB.12 Among those liabilities which the government assumed were unused commercial L/C's and Deferred L/C's, including SSD-005-85 listed under Dynetics, Incorporated in favor of Chuidian in the amount of Four Million Four Hundred Thousand Dollars (US$4,400,000.00).13 On July 30, 1987, the government filed before the Sandiganbayan Civil Case No. 0027 against the Marcos spouses, several government officials who served under the Marcos administration, and a number of individuals known to be cronies of the Marcoses, including Chuidian. The complaint sought the reconveyance, reversion, accounting and restitution of all forms of wealth allegedly procured illegally and stashed away by the defendants. In particular, the complaint charged that Chuidian, by himself and/or in conspiracy with the Marcos spouses, engaged in "devices, schemes and stratagems" by: (1) forming corporations for the purpose of hiding and avoiding discovery of illegally obtained assets; (2) pillaging the coffers of government financial institutions such as the Philguarantee; and (3) executing the court settlement between Philguarantee and Chuidian which was grossly disadvantageous to the government and the Filipino people. In fine, the PCGG averred that the above-stated acts of Chuidian committed in unlawful concert with the other defendants constituted "gross abuse of official position of authority, flagrant breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of the Constitution and laws" of the land.14 While the case was pending, on March 17, 1993, the Republic of the Philippines filed a motion for issuance of a writ of attachment15 over the L/C, citing as grounds therefor the following: (1) Chuidian embezzled or fraudulently misapplied the funds of ARCI acting in a fiduciary capacity, justifying issuance of the writ under Section 1(b), Rule 57 of the Rules of Court; (2) The writ is justified under Section 1(d) of the same rule as Chuidian is guilty of fraud in contracting the debt or incurring the obligation upon which the action was brought, or that he concealed or disposed of the property that is the subject of the action; (3) Chuidian has removed or disposed of his property with the intent of defrauding the plaintiff as justified under Section 1(c) of Rule 57; and

(4) Chuidian is residing out of the country or one on whom summons may be served by publication, which justifies the writ of attachment prayed for under Section 1(e) of the same rule. The Republic also averred that should the action brought by Chuidian before the U.S. District Court of California to compel payment of the L/C prosper, inspite of the sequestration of the said L/C, Chuidian can ask the said foreign court to compel the PNB Los Angeles branch to pay the proceeds of the L/C. Eventually, Philguarantee will be made to shoulder the expense resulting in further damage to the government. Thus, there was an urgent need for the writ of attachment to place the L/C under the custody of the Sandiganbayan so the same may be preserved as security for the satisfaction of judgment in the case before said court. Chuidian opposed the motion for issuance of the writ of attachment, contending that: (1) The plaintiff's affidavit appended to the motion was in form and substance fatally defective; (2) Section 1(b) of Rule 57 does not apply since there was no fiduciary relationship between the plaintiff and Chuidian; (3) While Chuidian does not admit fraud on his part, if ever there was breach of contract, such fraud must be present at the time the contract is entered into; (4) Chuidian has not removed or disposed of his property in the absence of any intent to defraud plaintiff; (5) Chuidian's absence from the country does not necessarily make him a non-resident; and (6) Service of summons by publication cannot be used to justify the issuance of the writ since Chuidian had already submitted to the jurisdiction of the Court by way of a motion to lift the freeze order filed through his counsel. On July 14, 1993, the Sandiganbayan issued a Resolution ordering the issuance of a writ of attachment against L/C No. SSD-005-85 as security for the satisfaction of judgment.16 The Sandiganbayan's ruling was based on its disquisition of the five points of contention raised by the parties. On the first issue, the Sandiganbayan found that although no separate affidavit was attached to the motion, the motion itself contained all the requisites of an affidavit, and the verification thereof is deemed a substantial compliance of Rule 57, Section 3 of the Rules of Court.

Anent the second contention, the Sandiganbayan ruled that there was no fiduciary relationship existing between Chuidian and the Republic, but only between Chuidian and ARCI. Since the Republic is not privy to the fiduciary relationship between Chuidian and ARCI, it cannot invoke Section 1(b) of Rule 57. On the third issue of fraud on the part of Chuidian in contracting the loan, or in concealing or disposing of the subject property, the Sandiganbayan held that there was a prima facie case of fraud committed by Chuidian, justifying the issuance of the writ of attachment. The Sandiganbayan also adopted the Republic's position that since it was compelled to pay, through Philguarantee, the bank loans taken out by Chuidian, the proceeds of which were fraudulently diverted, it is entitled to the issuance of the writ of attachment to protect its rights as creditor. Assuming that there is truth to the government's allegation that Chuidian has removed or disposed of his property with the intent to defraud, the Sandiganbayan held that the writ of attachment is warranted, applying Section 1(e) of Rule 57. Besides, the Rules provide for sufficient security should the owner of the property attached suffer damage or prejudice caused by the attachment.17 Chuidian's absence from the country was considered by the Sandiganbayan to be "the most potent insofar as the relief being sought is concerned."18 Taking judicial notice of the admitted fact that Chuidian was residing outside of the country, the Sandiganbayan observed that: "x x x no explanation whatsoever was given by him as to his absence from the country, or as to his homecoming plans in the future. It may be added, moreover, that he has no definite or clearcut plan to return to the country at this juncture given the manner by which he has submitted himself to the jurisdiction of the court."19 Thus, the Sandiganbayan ruled that even if Chuidian is one who ordinarily resides in the Philippines, but is temporarily living outside, he is still subject to the provisional remedy of attachment. Accordingly, an order of attachment20 was issued by the Sandiganbayan on July 19, 1993, ordering the Sandiganbayan Sheriff to attach PNB L/C No. SSD-005-85 for safekeeping pursuant to the Rules of Court as security for the satisfaction of judgment in Sandiganbayan Civil Case No. 0027. On August 11, 1997, or almost four (4) years after the issuance of the order of attachment, Chuidian filed a motion to lift the attachment based on the following grounds: First, he had returned to the Philippines; hence, the Sandiganbayan's "most potent ground" for the issuance of the writ of preliminary attachment no longer existed. Since his absence in the past was the very foundation of the Sandiganbayan's writ of

preliminary attachment, his presence in the country warrants the immediate lifting thereof. Second, there was no evidence at all of initial fraud or subsequent concealment except for the affidavit submitted by the PCGG Chairman citing mere "belief and information" and "not on knowledge of the facts." Moreover, this statement is hearsay since the PCGG Chairman was not a witness to the litigated incidents, was never presented as a witness by the Republic and thus was not subject to crossexamination. Third, Chuidian denies that he ever disposed of his assets to defraud the Republic, and there is nothing in the records that support the Sandiganbayan's erroneous conclusion on the matter. Fourth, Chuidian belied the allegation that he was also a defendant in "other related criminal action," for in fact, he had "never been a defendant in any prosecution of any sort in the Philippines."21 Moreover, he could not have personally appeared in any other action because he had been deprived of his right to a travel document by the government. Fifth, the preliminary attachment was, in the first place, unwarranted because he was not "guilty of fraud in contracting the debt or incurring the obligation". In fact, the L/C was not a product of fraudulent transactions, but was the result of a US Courtapproved settlement. Although he was accused of employing blackmail tactics to procure the settlement, the California Supreme Court ruled otherwise. And in relation thereto, he cites as a sixth ground the fact that all these allegations of fraud and wrongdoing had already been dealt with in actions before the State and Federal Courts of California. While it cannot technically be considered as forum shopping, it is nevertheless a "form of suit multiplicity over the same issues, parties and subject matter." 22 These foreign judgments constitute res judicata which warrant the dismissal of the case itself. Chuidian further contends that should the attachment be allowed to continue, he will be deprived of his property without due process. The L/C was payment to Chuidian in exchange for the assets he turned over to the Republic pursuant to the terms of the settlement in Case No. 575867. Said assets, however, had already been sold by the Republic and cannot be returned to Chuidian should the government succeed in depriving him of the proceeds of the L/C. Since said assets were disposed of without his or the Sandiganbayan's consent, it is the Republic who is fraudulently disposing of assets. Finally, Chuidian stressed that throughout the four (4) years that the preliminary attachment had been in effect, the government had not set the case for hearing. Under Rule 17, Section 3, the case itself should be dismissed for laches owing to the Republic's failure to prosecute its action for an unreasonable length of time. Accordingly, the preliminary attachment, being only a temporary or ancillary remedy, must be lifted and the PNB ordered to immediately pay the proceeds of the L/C to Chuidian.

Subsequently, on August 20, 1997, Chuidian filed a motion to require the Republic to deposit the L/C in an interest bearing account.23 Annex "D"; Rollo, pp. 77-79.23 He pointed out to the Sandiganbayan that the face amount of the L/C had, since its attachment, become fully demandable and payable. However, since the amount is just lying dormant in the PNB, without earning any interest, he proposed that it would be to the benefit of all if the Sandiganbayan requires PNB to deposit the full amount to a Sandiganbayan trust account at any bank in order to earn interest while awaiting judgment of the action. The Republic opposed Chuidian's motion to lift attachment, alleging that Chuidian's absence was not the only ground for the attachment and, therefore, his belated appearance before the Sandiganbayan is not a sufficient reason to lift the attachment. Moreover, allowing the foreign judgment as a basis for the lifting of the attachment would essentially amount to an abdication of the jurisdiction of the Sandiganbayan to hear and decide the ill gotten wealth cases lodged before it in deference to the judgment of foreign courts. In a Resolution promulgated on November 13, 1998, the Sandiganbayan denied Chuidian's motion to lift attachment.24 On the same day, the Sandiganbayan issued another Resolution denying Chuidian's motion to require deposit of the attached L/C in an interest bearing account. 25 In a motion seeking a reconsideration of the first resolution, Chuidian assailed the Sandiganbayan's finding that the issues raised in his motion to lift attachment had already been dealt with in the earlier resolution dated July 14, 1993 granting the application for the writ of preliminary attachment based on the following grounds: First, Chuidian was out of the country in 1993, but is now presently residing in the country. Second, the Sandiganbayan could not have known then that his absence was due to the non-renewal of his passport at the instance of the PCGG. Neither was it revealed that the Republic had already disposed of Chuidian's assets ceded to the Republic in exchange for the L/C. The foreign judgment was not an issue then because at that time, said judgment had not yet been issued and much less final. Furthermore, the authority of the PCGG Commissioner to subscribe as a knowledgeable witness relative to the issuance of the writ of preliminary attachment was raised for the first time in the motion to lift the attachment. Finally, the issue of laches could not have been raised then because it was the Republic's subsequent neglect or failure to prosecute despite the passing of the years that gave rise to laches.26 Chuidian also moved for a reconsideration of the Sandiganbayan resolution denying the motion to require deposit of the L/C into an interest bearing account. He argued that contrary to the Sandiganbayan's pronouncement, allowing the deposit would not amount to a virtual recognition of his right over the L/C, for he is not asking for payment but simply requesting that it be deposited in an account under the control of

the Sandiganbayan. He further stressed that the Sandiganbayan abdicated its bounden duty to rule on an issue when it found "that his motion will render nugatory the purpose of sequestration and freeze orders over the L/C." Considering that his assets had already been sold by the Republic, he claimed that the Sandiganbayan's refusal to exercise its fiduciary duty over attached assets will cause him irreparable injury. Lastly, the Sandiganbayan's position that Chuidian was not the owner but a mere payee-beneficiary of the L/C issued in his favor negates overwhelming jurisprudence on the Negotiable Instruments Law, while at the same time obliterating his rights of ownership under the Civil Code.27 On July 13, 1999, the Sandiganbayan gave due course to Chuidian's plea for the attached L/C to be deposited in an interest-bearing account, on the ground that it will redound to the benefit of both parties. The Sandiganbayan declared the national government as the principal obligor of the L/C even though the liability remained in the books of the PNB for accounting and monitoring purposes. The Sandiganbayan, however, denied Chuidian's motion for reconsideration of the denial of his motion to lift attachment, agreeing in full with the government's apriorisms that: x x x (1) it is a matter of record that the Court granted the application for writ of attachment upon grounds other than defendant's absence in the Philippine territory. In its Resolution dated July 14, 1993, the Court found a prima facie case of fraud committed by defendant Chuidian, and that defendant has recovered or disposed of his property with the intent of defrauding plaintiff; (2) Chuidian's belated presence in the Philippines cannot be invoked to secure the lifting of attachment. The rule is specific that it applies to a party who is about to depart from the Philippines with intent to defraud his creditors. Chuidian's stay in the country is uncertain and he may leave at will because he holds a foreign passport; and (3) Chuidian's other ground, sufficiency of former PCGG Chairman Gunigundo's verification of the complaint, has been met fairly and squarely in the Resolution of July 14, 1993.28 Hence, the instant petition for certiorari contending that the respondent Sandiganbayan committed grave abuse of discretion amounting to lack or excess of jurisdiction when it ruled that: 1) Most of the issues raised in the motion to lift attachment had been substantially addressed in the previous resolutions dated July 14, 1993 and August 26, 1998, while the rest were of no imperative relevance as to affect the Sandiganbayan's disposition; and 2) PNB was relieved of the obligation to pay on its own L/C by virtue of Presidential Proclamation No. 50.

The Rules of Court specifically provide for the remedies of a defendant whose property or asset has been attached. As has been consistently ruled by this Court, the determination of the existence of grounds to discharge a writ of attachment rests in the sound discretion of the lower courts.29 The question in this case is: What can the herein petitioner do to quash the attachment of the L/C? There are two courses of action available to the petitioner: First. To file a counterbond in accordance with Rule 57, Section 12, which provides: SEC. 12. Discharge of attachment upon giving counterbond. At anytime after an order of attachment has been granted, the party whose property has been attached, or the person appearing on his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge of the attachment if a cash deposit is made, or a counterbond executed to the attaching creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made, in an amount equal to the value of the property attached as determined by the judge, to secure the payment of any judgment that the attaching creditor may recover in the action. Upon the filing of such counter-bond, copy thereof shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance with the provisions of this section the property attached, or the proceeds of any sale thereof, shall be delivered to the party making the deposit or giving the counter-bond, or the person appearing on his behalf, the deposit or counter-bond aforesaid standing in place of the property so released. Should such counterbond for any reason be found to be, or become, insufficient, and the party furnishing the same fail to file an additional counter-bond, the attaching creditor may apply for a new order of attachment.1wphi1.nt or Second. To quash the attachment on the ground that it was irregularly or improvidently issued, as provided for in Section 13 of the same Rule: SEC. 13. Discharge of attachment for improper or irregular issuance. - The party whose property has been attached may also, at any time either before or after the release of the attached property, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other evidence in addition to that on which the attachment was made. After hearing, the judge shall order the discharge of the attachment if it appears that it was improperly or irregularly issued and the defect is not cured forthwith.

It would appear that petitioner chose the latter because the grounds he raised assail the propriety of the issuance of the writ of attachment. By his own admission, however, he repeatedly acknowledged that his justifications to warrant the lifting of the attachment are facts or events that came to light or took place after the writ of attachment had already been implemented. More particularly, petitioner emphasized that four (4) years after the writ was issued, he had returned to the Philippines. Yet while he noted that he would have returned earlier but for the cancellation of his passport by the PCGG, he was not barred from returning to the Philippines. Then he informed the Sandiganbayan that while the case against him was pending, but after the attachment had already been executed, the government lost two (2) cases for fraud lodged against him before the U.S. Courts, thus invoking res judicata. Next, he also pointed out that the government is estopped from pursuing the case against him for failing to prosecute for the number of years that it had been pending litigation. It is clear that these grounds have nothing to do with the issuance of the writ of attachment. Much less do they attack the issuance of the writ at that time as improper or irregular. And yet, the rule contemplates that the defect must be in the very issuance of the attachment writ. For instance, the attachment may be discharged under Section 13 of Rule 57 when it is proven that the allegations of the complaint were deceptively framed,30 or when the complaint fails to state a cause of action.31 Supervening events which may or may not justify the discharge of the writ are not within the purview of this particular rule. In the instant case, there is no showing that the issuance of the writ of attachment was attended by impropriety or irregularity. Apart from seeking a reconsideration of the resolution granting the application for the writ, petitioner no longer questioned the writ itself. For four (4) long years he kept silent and did not exercise any of the remedies available to a defendant whose property or asset has been attached. It is rather too late in the day for petitioner to question the propriety of the issuance of the writ. Petitioner also makes capital of the two foreign judgments which he claims warrant the application of the principle of res judicata. The first judgment, in Civil Case Nos. 575867 and 577697 brought by Philguarantee before the Santa Clara Country Superior Court, denied Philguarantee's prayer to set aside the stipulated judgment wherein Philguarantee and Chuidian agreed on the subject attached L/C. On March 14, 1990, the Court of Appeal of the State of California affirmed the Superior Court's judgment. The said judgment became the subject of a petition for review by the California Supreme Court. There is no showing, however, of any final judgment by the California Supreme Court. The records, including petitioner's pleadings, are bereft of any evidence to show that there is a final foreign judgment which the Philippine courts must defer to. Hence, res judicata finds no application in this instance because it is a requisite that the former judgment or order must be final.32 Second, petitioner cites the judgment of the United States District Court in Civil Case 86-2255 RSWL brought by petitioner Chuidian against PNB to compel the latter to pay the L/C. The said Court's judgment, while it ruled in favor of petitioner on the matter of

Philguarantee's action-in-intervention to set aside the settlement agreement, also ruled in favor of PNB, to wit: Under Executive Order No. 1, the PCGG is vested by the Philippine President with the power to enforce its directives and orders by contempt proceedings. Under Executive Order No. 2, the PCGG is empowered to freeze any, and all assets, funds and property illegally acquired by former President Marcos or his close friends and business associates. On March 11, 1986, PNB/Manila received an order from the PCGG ordering PNB to freeze any further drawings on the L/C. The freeze order has remained in effect and was followed by a sequestration order issued by the PCGG. Subsequently, Chuidian's Philippine counsel filed a series of challenges to the freeze and sequestration orders, which challenges were unsuccessful as the orders were found valid by the Philippine Supreme Court. The freeze and sequestration orders are presently in effect. Thus, under the PCGG order and Executive Orders Nos. 1 and 2, performance by PNB would be illegal under Philippine Law. Therefore PNB is excused from performance of the L/C agreement as long as the freeze and sequestration orders remain in effect. (Underscoring ours) xxx xxx xxx

Chuidian argues that the fact that the L/C was issued pursuant to a settlement in California, that the negotiations for which occurred in California, and that two of the payments were made at PNB/LA, compels the conclusion that the act of prohibiting payment of the L/C occurred in Los Angeles. However, the majority of the evidence and Tchacosh andSabbatino compel the opposite conclusion. The L/C was issued in Manila, such was done at the request of a Philippine government instrumentality for the benefit of a Philippine citizen, the L/C was to be performed in the Philippines, all significant events relating to the issuance and implementation of the L/C occurred in the Philippines, the L/C agreement provided that the L/C was to be construed according to laws of the Philippines, and the Philippine government certainly has an interest in preventing the L/C from being remitted in that it would be the release of funds that are potentially illgotten gains. Accordingly, the Court finds that the PCGG orders are acts of state that must be respected by this Court, and thus PNB is excused from making payment on the L/C as long as the freeze and sequestration orders remain in effect.33(Underscoring ours) Petitioner's own evidence strengthens the government's position that the L/C is under the jurisdiction of the Philippine government and that the U.S. Courts recognize the authority of the Republic to sequester and freeze said L/C. Hence, the foreign judgments relied upon by petitioner do not constitute a bar to the Republic's action to recover whatever alleged ill-gotten wealth petitioner may have acquired. Petitioner may argue, albeit belatedly, that he also raised the issue that there was no evidence of fraud on record other than the affidavit of PCGG Chairman Gunigundo. This issue of fraud, however, touches on the very merits of the main case which

10

accuses petitioner of committing fraudulent acts in his dealings with the government. Moreover, this alleged fraud was one of the grounds for the application of the writ, and the Sandiganbayan granted said application after it found aprima facie case of fraud committed by petitioner. In fine, fraud was not only one of the grounds for the issuance of the preliminary attachment, it was at the same time the government's cause of action in the main case. We have uniformly held that: x x x when the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty," or "an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought," the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiff's application and affidavits on which the writ was based and consequently that the writ based thereon had been improperly or irregularly issued the reason being that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular trial.34 (Underscoring ours) Thus, this Court has time and again ruled that the merits of the action in which a writ of preliminary attachment has been issued are not triable on a motion for dissolution of the attachment, otherwise an applicant for the lifting of the writ could force a trial of the merits of the case on a mere motion.35 It is not the Republic's fault that the litigation has been protracted. There is as yet no evidence of fraud on the part of petitioner. Petitioner is only one of the twenty-three (23) defendants in the main action. As such, the litigation would take longer than most cases. Petitioner cannot invoke this delay in the proceedings as an excuse for not seeking the proper recourse in having the writ of attachment lifted in due time. If ever laches set in, it was petitioner, not the government, who failed to take action within a reasonable time period. Challenging the issuance of the writ of attachment four (4) years after its implementation showed petitioner's apparent indifference towards the proceedings before the Sandiganbayan. In sum, petitioner has failed to convince this Court that the Sandiganbayan gravely abused its discretion in a whimsical, capricious and arbitrary manner. There are no compelling reasons to warrant the immediate lifting of the attachment even as the main case is still pending. On the other hand, allowing the discharge of the attachment at this stage of the proceedings would put in jeopardy the right of the attaching party

to realize upon the relief sought and expected to be granted in the main or principal action. It would have the effect of prejudging the main case. The attachment is a mere provisional remedy to ensure the safety and preservation of the thing attached until the plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction.36 To discharge the attachment at this stage of the proceedings would render inutile any favorable judgment should the government prevail in the principal action against petitioner. Thus, the Sandiganbayan, in issuing the questioned resolutions, which are interlocutory in nature, committed no grave abuse of discretion amounting to lack or excess of jurisdiction. As long as the Sandiganbayan acted within its jurisdiction, any alleged errors committed in the exercise of its jurisdiction will amount to nothing more than errors of judgment which are reviewable by timely appeal and not by special civil action of certiorari.37 Moreover, we have held that when the writ of attachment is issued upon a ground which is at the same time the applicant's cause of action, the only other way the writ can be lifted or dissolved is by a counterbond, in accordance with Section 12 of the same rule.38 This recourse, however, was not availed of by petitioner, as noted by the Solicitor General in his comment.39 To reiterate, there are only two ways of quashing a writ of attachment: (a) by filing a counterbond immediately; or (b) by moving to quash on the ground of improper and irregular issuance.40 These grounds for the dissolution of an attachment are fixed in Rule 57 of the Rules of Court and the power of the Court to dissolve an attachment is circumscribed by the grounds specified therein.41 Petitioner's motion to lift attachment failed to demonstrate any infirmity or defect in the issuance of the writ of attachment; neither did he file a counterbond. Finally, we come to the matter of depositing the Letter of Credit in an interest-bearing account. We agree with the Sandiganbayan that any interest that the proceeds of the L/C may earn while the case is being litigated would redound to the benefit of whichever party will prevail, the Philippine government included. Thus, we affirm the Sandiganbayan's ruling that the proceeds of the L/C should be deposited in an interest bearing account with the Land Bank of the Philippines for the account of the Sandiganbayan in escrow until ordered released by the said Court. We find no legal reason, however, to release the PNB from any liability thereunder. The Deed of Transfer, whereby certain liabilities of PNB were transferred to the national government, cannot affect the said L/C since there was no valid substitution of debtor. Article 1293 of the New Civil Code provides: Novation which consists in substituting a new debtor in the place of the original one, may be made without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237.

11

Accordingly, any substitution of debtor must be with the consent of the creditor, whose consent thereto cannot just be presumed. Even though Presidential Proclamation No. 50 can be considered an "insuperable cause", it does not necessarily make the contracts and obligations affected thereby exceptions to the above-quoted law, such that the substitution of debtor can be validly made even without the consent of the creditor. Presidential Proclamation No. 50 was not intended to set aside laws that govern the very lifeblood of the nation's commerce and economy. In fact, the Deed of Transfer that was executed between PNB and the government pursuant to the said Presidential Proclamation specifically stated that it shall be deemed effective only upon compliance with several conditions, one of which requires that: (b) the BANK shall have secured such governmental and creditors' approvals as may be necessary to establish the consummation, legality and enforceability of the transactions contemplated hereby." The validity of this Deed of Transfer is not disputed. Thus, PNB is estopped from denying its liability thereunder considering that neither the PNB nor the government bothered to secure petitioner's consent to the substitution of debtors. We are not unmindful that any effort to secure petitioner's consent at that time would, in effect, be deemed an admission that the L/C is valid and binding. Even the Sandiganbayan found that: 36 Sta. Ines Melale Forest Products Corp. v. Macaraig, Jr., 299 SCRA 491, 515 (1998). x x x Movant has basis in pointing out that inasmuch as the L/C was issued in his favor, he is presumed to be the lawful payee-beneficiary of the L/C until such time that the plaintiff successfully proves that said L/C is ill-gotten and he has no right over the same.42 In Republic v. Sandiganbayan, we held that the provisional remedies, such as freeze orders and sequestration, were not "meant to deprive the owner or possessor of his title or any right to the property sequestered, frozen or taken over and vest it in the sequestering agency, the Government or other person." Thus, until such time that the government is able to successfully prove that petitioner has no right to claim the proceeds of the L/C, he is deemed to be the lawful payeebeneficiary of said L/C, for which any substitution of debtor requires his consent. The Sandiganbayan thus erred in relieving PNB of its liability as the original debtor. WHEREFORE, in view of all the foregoing, the petition is DISMISSED. The Resolutions of the Sandiganbayan dated November 6, 1998 and July 2, 1999 are AFFIRMED. The PNB is DIRECTED to remit to the Sandiganbayan the proceeds of Letter of Credit No. SFD-005-85 in the amount of U.S. $4.4 million within fifteen (15) days from notice hereof, the same to be placed under special time deposit with the Land Bank of the Philippines, for the account of Sandiganbayan in escrow for the person or persons, natural or juridical, who shall eventually be adjudged lawfully entitled thereto, the same to earn interest at the current legal bank rates. The principal
43

and its interest shall remain in said account until ordered released by the Court in accordance with law.1wphi1.nt No costs. SO ORDERED. G.R. No. 156580 June 14, 2004

LUZ DU, petitioner, vs. STRONGHOLD INSURANCE Promulgated: CO., INC., respondent. DECISION PANGANIBAN, J.: Preference is given to a duly registered attachment over a subsequent notice of lis pendens, even if the beneficiary of the notice acquired the subject property before the registration of the attachment. Under the torrens system, the auction sale of an attached realty retroacts to the date the levy was registered. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the March 19, 2002 Decision2and the December 5, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 50884. The CA disposed as follows: "Parenthetically, when the decision in Civil Case No. 90-1848 became final and executory, levy on execution issued and the attached property sold at public auction, the latter retroacts to the date of the levy. Said the High Court: In line with the same principle, it was held that where a preliminary attachment in favor of A was recorded on November 11, 1932, and the private sale of the attached property in favor of B was executed on May 29, 1933, the attachment lien has priority over the private sale, which means that the purchaser took the property subject to such attachment lien and to all of its consequences, one of which is the subsequent sale on execution (Tambao v. Suy, 52 Phil. 237). The auction sale being a necessary sequel to the levy, it enjoys the same preference as the attachment lien enjoys over the private sale. In other words, the auction sale retroacts to the date of the levy. [Were] the rule be otherwise, the preference enjoyed by the levy of execution

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would be meaningless and illusory (Capistrano v. Phil. Nat. Bank, 101 Phil. 1117). (Underscoring supplied) "By and large, We find no reversible error in the appealed decision. "IN VIEW OF ALL THE FOREGOING, the instant appeal is ordered DISMISSED. No pronouncement as to cost."4 The questioned Resolution, on the other hand, denied petitioners Motion for Reconsideration. The Facts The CA narrated the facts as follows: "x x x Aurora Olarte de Leon was the registered owner of Lot No. 10-A (LRC Psd 336366) per Transfer Certificate of Title No. 582/T-3. Sometime in January 1989, De Leon sold the property to Luz Du under a Conditional Deed of Sale wherein said vendee paid a down payment of P75,000.00 leaving a balance of P95,000.00. "Then again, on April 28, 1989, Aurora de Leon sold [the] same property to spouses Enrique and Rosita Caliwag without prior notice to Luz Du. As a result, Transfer Certificate of Title No. 582/T-3 was cancelled and Transfer Certificate of Title No. 2200 was issued in favor of the Caliwag spouses. "Meanwhile, Stronghold Insurance Corp., Inc. x x x commenced Civil Case No. 90-1848 against spouses Rosita and Enrique Caliwag et al., for allegedly defrauding Stronghold and misappropriating the companys fund by falsifying and simulating purchases of documentary stamps. The action was accompanied by a prayer for a writ of preliminary attachment duly annotated at the back of Transfer Certificate of Title No. 2200 on August 7, 1990. "On her part, on December 21, 1990, Luz Du initiated Civil Case No. 60319 against Aurora de Leon and the spouses Caliwag for the annulment of the sale by De Leon in favor of the Caliwags, anchored on the earlier mentioned Deed of Conditional Sale. "On January 3, 1991, Luz Du caused the annotation of a Notice Of Lis Pendens at the back of Transfer Certificate of Title No. 2200. "On February 11, 1991, the decision was handed down in Civil Case No. 90-1848 in favor of Stronghold, ordering the spouses Caliwag jointly and severally to pay the plaintiff P8,691,681.60, among others. When the

decision became final and executory, on March 12, 1991, a notice of levy on execution was annotated on Transfer Certificate of Title No. 2200 and the attached property was sold in a public auction. On [August] 5, 1991,5 the certificate of sale and the final Deed of Sale in favor of Stronghold were inscribed and annotated leading to the cancellation of Transfer Certificate of Title No. 2200 and in lieu thereof, Transfer Certificate of Title No. 6444 was issued in the name of Stronghold. "It came to pass that on August 5, 1992, Luz Du too was able to secure a favorable judgment in Civil Case No. 60319 and which became final and executory sometime in 1993, as well. "Under the above historical backdrop, Luz Du commenced the present case (docketed as Civil Case No. 64645) to cancel Transfer Certificate of Title No. 6444 in the name of Stronghold with damages claiming priority rights over the property by virtue of her Notice Of Lis Pendens under Entry No. 13305 and inscribed on January 3, 1991, and the final and executory decision in Civil Case No. 60319 she filed against spouses Enrique and Rosita Caliwag. According to Luz Du, despite her said notice of lis pendens annotated, Stronghold still proceeded with the execution of the decision in Civil Case No. 90-1848 against the subject lot and ultimately the issuance of Transfer Certificate of Title No. 6444 in its (Strongholds) name."6 The trial court ruled that Stronghold had superior rights over the property because of the prior registration of the latters notice of levy on attachment on Transfer Certificate of Title (TCT) No. 2200. For this reason, it found no basis to nullify TCT No. 6444, which was issued in the name of respondent after the latter had purchased the property in a public auction. Ruling of the Court of Appeals Sustaining the trial court in toto, the CA held that Strongholds notice of levy on attachment had been registered almost five (5) months before petitioners notice of lis pendens. Hence, respondent enjoyed priority in time. Such registration, the appellate court added, constituted constructive notice to petitioner and all third persons from the time of Strongholds entry, as provided under the Land Registration Act -- now the Property Registration Decree. The CA also held that respondent was a purchaser in good faith. The necessary sequels of execution and sale retroacted to the time when Stronghold registered its notice of levy on attachment, at a time when there was nothing on TCT No. 2200 that would show any defect in the title or any adverse claim over the property. Hence, this Petition.7 Issues

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Petitioner submits the following issues for our consideration: "I. "Whether a Notice of Levy on Attachment on the property is a superior lien over that of the unregistered right of a buyer of a property in possession pursuant to a Deed of Conditional Sale. "II. "Whether the acquisition of the subject property by Respondent Stronghold was tainted with bad faith."8 The Courts Ruling The Petition has no merit. Main Issue: Superiority of Rights Petitioner submits that her unregistered right over the property by way of a prior conditional sale in 1989 enjoys preference over the lien of Stronghold -- a lien that was created by the registration of respondents levy on attachment in 1990. Maintaining that the ruling in Capistrano v. PNB was improperly applied by the Court of Appeals, petitioner avers that unlike the circumstances in that case, the property herein had been sold to her before the levy. We do not agree. The preference given to a duly registered levy on attachment or execution over a prior unregistered sale is well-settled in our jurisdiction. As early as Gomez v. Levy Hermanos,9 this Court has held that an attachment that is duly annotated on a certificate of title is superior to the right of a prior but unregistered buyer. In that case, the Court explained as follows: "x x x. It is true that she bought the lots with pacto de retro but the fact of her purchase was not noted on the certificates of title until long after the attachment and its inscription on the certificates. In the registry, therefore, the attachment appeared in the nature of a real lien when Apolonia Gomez had her purchase recorded. The legal effect of the notation of said lien was to subject and subordinate the right of Apolonia Gomez, as purchaser, to the lien. She acquired the ownership of the said parcels only from the date of the recording of her title in the register, which took place on November 21, 1932 (sec. 51 of Act No. 496; Liong-Wong-Shih vs. Sunico and Peterson, 8 Phil. 91; Tabigue vs. Green, 11 Phil. 102; Buzon vs. Lucauco, 13 Phil. 354; and Worcester vs. Ocampo and Ocampo, 34 Phil. 646), and

the right of ownership which she inscribed was not an absolute but a limited right, subject to a prior registered lien, by virtue of which Levy Hermanos, Inc. was entitled to the execution of the judgment credit over the lands in question, a right which is preferred and superior to that of the plaintiff (sec, 51, Act No. 496 and decisions cited above). x x x"10 Indeed, the subsequent sale of the property to the attaching creditor must, of necessity, retroact to the date of the levy. Otherwise, the preference created by the levy would be meaningless and illusory, as reiterated in Defensor v. Brillo:11 "x x x. The doctrine is well-settled that a levy on execution duly registered takes preference over a prior unregistered sale; and that even if the prior sale is subsequently registered before the sale in execution but after the levy was duly made, the validity of the execution sale should be maintained, because it retroacts to the date of the levy; otherwise, the preference created by the levy would be meaningless and illusory. "Even assuming, therefore, that the entry of appellants sales in the books of the Register of Deeds on November 5, 1949 operated to convey the lands to them even without the corresponding entry in the owners duplicate titles, the levy on execution on the same lots in Civil Case No. 1182 on August 3, 1949, and their subsequent sale to appellee Brillo (which retroacts to the date of the levy) still takes precedence over and must be preferred to appellants deeds of sale which were registered only on November 5, 1949. "This result is a necessary consequence of the fact that the properties herein involved were duly registered under Act No. 496, and of the fundamental principle that registration is the operative act that conveys and binds lands covered by Torrens titles (sections 50, 51, Act 496). Hence, if appellants became owners of the properties in question by virtue of the recording of the conveyances in their favor, their title arose already subject to the levy in favor of the appellee, which had been noted ahead in the records of the Register of Deeds."12 (Citations omitted, italics supplied) The Court has steadfastly adhered to the governing principle set forth in Sections 51 and 52 of Presidential Decree No. 1529:13 "SEC. 51. Conveyance and other dealings by registered owner. - An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Registry of Deeds to make registration.

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"The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or the city where the land lies. "SEC. 52. Constructive notice upon registration. - Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering."(Italics supplied)1avvphil.net As the property in this case was covered by the torrens system, the registration of Strongholds attachment14 was the operative act that gave validity to the transfer and created a lien upon the land in favor of respondent.15 Capistrano Ruling

"x x x the rule now followed is that if the attachment or levy of execution, though posterior to the sale, is registered before the sale is registered, it takes precedence over the latter. "The rule is not altered by the fact that at the time of the execution sale the Philippine National Bank had information that the land levied upon had already been deeded by the judgment debtor and his wife to Capistrano. The auction sale being a necessary sequel to the levy, for this was effected precisely to carry out the sale, the purchase made by the bank at said auction should enjoy the same legal priority that the levy had over the sale in favor of plaintiff. In other words, the auction sale retroacts to the date of the levy. Were the rule otherwise, the preference enjoyed by the levy of execution in a case like the present would be meaningless and illusory."19 (Citations omitted, italics supplied) Second Issue: Taking in Bad Faith

Correctly Applied The preference created by the levy on attachment is not diminished even by the subsequent registration of the prior sale.16That was the import of Capistrano v. PNB,17 which held that precedence should be given to a levy on attachment or execution, whose registration was before that of the prior sale. In Capistrano, the sale of the land in question -- though made as far back as 1946 -was registered only in 1953, after the property had already been subjected to a levy on execution by the Philippine National Bank. The present case is not much different. The stipulation of facts shows that Stronghold had already registered its levy on attachment before petitioner annotated her notice of lis pendens. As in Capistrano, she invokes the alleged superior right of a prior unregistered buyer to overcome respondents lien. If either the third-party claim or the subsequent registration of the prior sale was insufficient to defeat the previously registered attachment lien, as ruled by the Court in Capistrano, it follows that a notice of lis pendens is likewise insufficient for the same purpose. Such notice does not establish a lien or an encumbrance on the property affected.18 As the name suggests, a notice of lis pendens with respect to a disputed property is intended merely to inform third persons that any of their transactions in connection therewith -- if entered into subsequent to the notation -- would be subject to the result of the suit. In view of the foregoing, the CA correctly applied Capistrano, as follows: ALEJANDRO NG WEE, petitioner, vs. MANUEL TANKIANSEE, respondent. We now tackle the next question of petitioner: whether Stronghold was a purchaser in good faith. Suffice it to say that when Stronghold registered its notice of attachment, it did not know that the land being attached had been sold to petitioner. It had no such knowledge precisely because the sale, unlike the attachment, had not been registered. It is settled that a person dealing with registered property may rely on the title and be charged with notice of only such burdens and claims as are annotated thereon.20 This principle applies with more force to this case, absent any allegation or proof that Stronghold had actual knowledge of the sale to petitioner before the registration of its attachment. Thus, the annotation of respondents notice of attachment was a registration in good faith, the kind that made its prior right enforceable.21 Moreover, it is only after the notice of lis pendens is inscribed in the Office of the Register of Deeds that purchasers of the property become bound by the judgment in the case. As Stronghold is deemed to have acquired the property -- not at the time of actual purchase but at the time of the attachment -- it was an innocent purchaser for value and in good faith. WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner. G.R. No. 171124 February 13, 2008

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DECISION NACHURA, J.: Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the September 14, 2005 Decision1 of the Court of Appeals (CA) in CAG.R. SP No. 90130 and its January 6, 2006 Resolution2 denying the motion for reconsideration thereof. The facts are undisputed. Petitioner Alejandro Ng Wee, a valued client of Westmont Bank (now United Overseas Bank), made several money placements totaling P210,595,991.62 with the bank's affiliate, Westmont Investment Corporation (Wincorp), a domestic entity engaged in the business of an investment house with the authority and license to extend credit.3 Sometime in February 2000, petitioner received disturbing news on Wincorp's financial condition prompting him to inquire about and investigate the company's operations and transactions with its borrowers. He then discovered that the company extended a loan equal to his total money placement to a corporation [Power Merge] with a subscribed capital of onlyP37.5M. This credit facility originated from another loan of about P1.5B extended by Wincorp to another corporation [Hottick Holdings]. When the latter defaulted in its obligation, Wincorp instituted a case against it and its surety. Settlement was, however, reached in which Hottick's president, Luis Juan L. Virata (Virata), assumed the obligation of the surety.4 Under the scheme agreed upon by Wincorp and Hottick's president, petitioner's money placements were transferred without his knowledge and consent to the loan account of Power Merge through an agreement that virtually freed the latter of any liability. Allegedly, through the false representations of Wincorp and its officers and directors, petitioner was enticed to roll over his placements so that Wincorp could loan the same to Virata/Power Merge.5 Finding that Virata purportedly used Power Merge as a conduit and connived with Wincorp's officers and directors to fraudulently obtain for his benefit without any intention of paying the said placements, petitioner instituted, on October 19, 2000, Civil Case No. 00-99006 for damages with the Regional Trial Court (RTC) of Manila.6 One of the defendants impleaded in the complaint is herein respondent Manuel Tankiansee, Vice-Chairman and Director of Wincorp.7 On October 26, 2000, on the basis of the allegations in the complaint and the October 12, 2000 Affidavit8 of petitioner, the trial court ordered the issuance of a writ of preliminary attachment against the properties not exempt from execution of all the defendants in the civil case subject, among others, to petitioner's filing of a P50Mbond.9 The writ was, consequently, issued on November 6, 2000.10

Arguing that the writ was improperly issued and that the bond furnished was grossly insufficient, respondent, on December 22, 2000, moved for the discharge of the attachment.11 The other defendants likewise filed similar motions.12 On October 23, 2001, the RTC, in an Omnibus Order,13 denied all the motions for the discharge of the attachment. The defendants, including respondent herein, filed their respective motions for reconsideration14 but the trial court denied the same on October 14, 2002.15 Incidentally, while respondent opted not to question anymore the said orders, his codefendants, Virata and UEM-MARA Philippines Corporation (UEM-MARA), assailed the same via certiorari under Rule 65 before the CA [docketed as CA-G.R. SP No. 74610]. The appellate court, however, denied the certiorari petition on August 21, 2003,16 and the motion for reconsideration thereof on March 16, 2004.17 In a petition for review on certiorari before this Court, in G.R. No. 162928, we denied the petition and affirmed the CA rulings on May 19, 2004 for Virata's and UEM-MARA's failure to sufficiently show that the appellate court committed any reversible error.18 We subsequently denied the petition with finality on August 23, 2004.19 On September 30, 2004, respondent filed before the trial court another Motion to Discharge Attachment,20 re-pleading the grounds he raised in his first motion but raising the following additional grounds: (1) that he was not present in Wincorp's board meetings approving the questionable transactions;21 and (2) that he could not have connived with Wincorp and the other defendants because he and Pearlbank Securities, Inc., in which he is a major stockholder, filed cases against the company as they were also victimized by its fraudulent schemes.22 Ruling that the grounds raised were already passed upon by it in the previous orders affirmed by the CA and this Court, and that the additional grounds were respondent's affirmative defenses that properly pertained to the merits of the case, the trial court denied the motion in its January 6, 2005 Order.23 With the denial of its motion for reconsideration,24 respondent filed a certiorari petition before the CA docketed as CA-G.R. SP No. 90130. On September 14, 2005, the appellate court rendered the assailed Decision25 reversing and setting aside the aforementioned orders of the trial court and lifting the November 6, 2000 Writ of Preliminary Attachment26 to the extent that it concerned respondent's properties. Petitioner moved for the reconsideration of the said ruling, but the CA denied the same in its January 6, 2006 Resolution.27 Thus, petitioner filed the instant petition on the following grounds: A. IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS SHOULD NOT HAVE GIVEN DUE COURSE TO THE PETITION FOR CERTIORARI FILED BY RESPONDENT, SINCE IT MERELY RAISED ERRORS IN JUDGMENT, WHICH, UNDER PREVAILING

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JURISPRUDENCE, ARE NOT THE PROPER SUBJECTS OF A WRIT OF CERTIORARI. B. MOREOVER, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS COMMITTED SERIOUS LEGAL ERROR IN RESOLVING FAVORABLY THE GROUNDS ALLEGED BY RESPONDENT IN HIS PETITION AND (SIC) LIFTING THE WRIT OF PRELIMINARY ATTACHMENT, SINCE THESE GROUNDS ALREADY RELATE TO THE MERITS OF CIVIL CASE NO. 00-99006 WHICH, UNDER PREVAILING JURISPRUDENCE, CANNOT BE USED AS BASIS (SIC) FOR DISCHARGING A WRIT OF PRELIMINARY ATTACHMENT. C. LIKEWISE, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS ERRED IN SUSTAINING THE ERRORS IN JUDGMENT ALLEGED BY RESPONDENT, NOT ONLY BECAUSE THESE ARE BELIED BY THE VERY DOCUMENTS HE SUBMITTED AS PROOF OF SUCH ERRORS, BUT ALSO BECAUSE THESE HAD EARLIER BEEN RESOLVED WITH FINALITY BY THE LOWER COURT.28 For his part, respondent counters, among others, that the general and sweeping allegation of fraud against respondent in petitioner's affidavit-respondent as an officer and director of Wincorp allegedly connived with the other defendants to defraud petitioner-is not sufficient basis for the trial court to order the attachment of respondent's properties. Nowhere in the said affidavit does petitioner mention the name of respondent and any specific act committed by the latter to defraud the former. A writ of attachment can only be granted on concrete and specific grounds and not on general averments quoting perfunctorily the words of the Rules. Connivance cannot also be based on mere association but must be particularly alleged and established as a fact. Respondent further contends that the trial court, in resolving the Motion to Discharge Attachment, need not actually delve into the merits of the case. All that the court has to examine are the allegations in the complaint and the supporting affidavit. Petitioner cannot also rely on the decisions of the appellate court in CA-G.R. SP No. 74610 and this Court in G.R. No. 162928 to support his claim because respondent is not a party to the said cases.29 We agree with respondent's contentions and deny the petition. In the case at bench, the basis of petitioner's application for the issuance of the writ of preliminary attachment against the properties of respondent is Section 1(d) of Rule 57 of the Rules of Court which pertinently reads:

Section 1. Grounds upon which attachment may issue.-At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: xxxx (d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof. For a writ of attachment to issue under this rule, the applicant must sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor's mere non-payment of the debt or failure to comply with his obligation.30 The applicant must then be able to demonstrate that the debtor has intended to defraud the creditor.31 In Liberty Insurance Corporation v. Court of Appeals,32 we explained as follows: To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the circumstances attendant in each case.33 In the instant case, petitioner's October 12, 2000 Affidavit34 is bereft of any factual statement that respondent committed a fraud. The affidavit narrated only the alleged fraudulent transaction between Wincorp and Virata and/or Power Merge, which, by the way, explains why this Court, in G.R. No. 162928, affirmed the writ of attachment issued against the latter. As to the participation of respondent in the said transaction, the affidavit merely states that respondent, an officer and director of Wincorp, connived with the other defendants in the civil case to defraud petitioner of his money placements. No other factual averment or circumstance details how respondent committed a fraud or how he connived with the other defendants to commit a fraud in the transaction sued upon. In other words, petitioner has not shown any specific act or deed to support the allegation that respondent is guilty of fraud. The affidavit, being the foundation of the writ,35 must contain such particulars as to how the fraud imputed to respondent was committed for the court to decide whether or not to issue the writ.36 Absent any statement of other factual circumstances to show that respondent, at the time of contracting the obligation, had a preconceived plan or

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intention not to pay, or without any showing of how respondent committed the alleged fraud, the general averment in the affidavit that respondent is an officer and director of Wincorp who allegedly connived with the other defendants to commit a fraud, is insufficient to support the issuance of a writ of preliminary attachment.37 In the application for the writ under the said ground, compelling is the need to give a hint about what constituted the fraud and how it was perpetrated38 because established is the rule that fraud is never presumed.39 Verily, the mere fact that respondent is an officer and director of the company does not necessarily give rise to the inference that he committed a fraud or that he connived with the other defendants to commit a fraud. While under certain circumstances, courts may treat a corporation as a mere aggroupment of persons, to whom liability will directly attach, this is only done when the wrongdoing has been clearly and convincingly established.40 Let it be stressed that the provisional remedy of preliminary attachment is harsh and rigorous for it exposes the debtor to humiliation and annoyance.41 The rules governing its issuance are, therefore, strictly construed against the applicant,42such that if the requisites for its grant are not shown to be all present, the court shall refrain from issuing it, for, otherwise, the court which issues it acts in excess of its jurisdiction.43 Likewise, the writ should not be abused to cause unnecessary prejudice. If it is wrongfully issued on the basis of false or insufficient allegations, it should at once be corrected.44 Considering, therefore, that, in this case, petitioner has not fully satisfied the legal obligation to show the specific acts constitutive of the alleged fraud committed by respondent, the trial court acted in excess of its jurisdiction when it issued the writ of preliminary attachment against the properties of respondent. We are not unmindful of the rule enunciated in G.B. Inc., etc. v. Sanchez, et al.,45 that [t]he merits of the main action are not triable in a motion to discharge an attachment otherwise an applicant for the dissolution could force a trial of the merits of the case on his motion.46 However, the principle finds no application here because petitioner has not yet fulfilled the requirements set by the Rules of Court for the issuance of the writ against the properties of respondent.47 The evil sought to be prevented by the said ruling will not arise, because the propriety or impropriety of the issuance of the writ in this case can be determined by simply reading the complaint and the affidavit in support of the application. Furthermore, our ruling in G.R. No. 162928, to the effect that the writ of attachment is properly issued insofar as it concerns the properties of Virata and UEM-MARA, does not affect respondent herein, for, as correctly ruled by the CA, respondent is "never a party thereto."48 Also, he is not in the same situation as Virata and UEM-MARA since, as aforesaid, while petitioner's affidavit detailed the alleged fraudulent scheme perpetrated by Virata and/or Power Merge, only a general allegation of fraud was made against respondent.

We state, in closing, that our ruling herein deals only with the writ of preliminary attachment issued against the properties of respondent-it does not concern the other parties in the civil case, nor affect the trial court's resolution on the merits of the aforesaid civil case. WHEREFORE, premises considered, the petition is DENIED. The September 14, 2005 Decision and the January 6, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 90130 are AFFIRMED. G.R. No. 166759 November 25, 2009

SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR RESOURCES, INC., Petitioners, vs. NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and NIKKI NORLIN SATSATIN,Respondents. DECISION PERALTA, J.: This is a petition for review on certiorari assailing the Decision 1 dated November 23, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 83595, and its Resolution2 dated January 18, 2005, denying petitioners motion for reconsideration. The factual and procedural antecedents are as follows: The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario Torres (Mario) each own adjacent 20,000 square meters track of land situated at Barrio Lankaan, Dasmarias, Cavite, covered by Transfer Certificate of Title (TCT) Nos. 251267,3 251266,4 and 251265,5 respectively. Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners mother, Agripina Aledia, if she wanted to sell their lands. After consultation with her daughters, daughter-in-law, and grandchildren, Agripina agreed to sell the properties. Petitioners, thus, authorized Nicanor, through a Special Power of Attorney, to negotiate for the sale of the properties.6 Sometime in 1999, Nicanor offered to sell the properties to Solar Resources, Inc. (Solar). Solar allegedly agreed to purchase the three parcels of land, together with the 10,000-square-meter property owned by a certain Rustica Aledia, forP35,000,000.00. Petitioners alleged that Nicanor was supposed to remit to them the total amount of P28,000,000.00 orP9,333,333.00 each to Sofia, Fructosa, and the heirs of Mario.

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Petitioners claimed that Solar has already paid the entire purchase price of P35,000,000.00 to Nicanor in Thirty-Two (32) post-dated checks which the latter encashed/deposited on their respective due dates. Petitioners added that they also learned that during the period from January 2000 to April 2002, Nicanor allegedly acquired a house and lot at Vista Grande BF Resort Village, Las Pias City and a car, which he registered in the names of his unemployed children, Nikki Normel Satsatin and Nikki Norlin Satsatin. However, notwithstanding the receipt of the entire payment for the subject property, Nicanor only remitted the total amount of P9,000,000.00, leaving an unremitted balance of P19,000,000.00. Despite repeated verbal and written demands, Nicanor failed to remit to them the balance of P19,000,000.00. Consequently, on October 25, 2002, petitioners filed before the regional trial court (RTC) a Complaint7 for sum of money and damages, against Nicanor, Ermilinda Satsatin, Nikki Normel Satsatin, and Nikki Norlin Satsatin. The case was docketed as Civil Case No. 2694-02, and raffled to RTC, Branch 90, Dasmarias, Cavite. On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ of Attachment,8 alleging among other things: that respondents are about to depart the Philippines; that they have properties, real and personal in Metro Manila and in the nearby provinces; that the amount due them is P19,000,000.00 above all other claims; that there is no other sufficient security for the claim sought to be enforced; and that they are willing to post a bond fixed by the court to answer for all costs which may be adjudged to the respondents and all damages which respondents may sustain by reason of the attachment prayed for, if it shall be finally adjudged that petitioners are not entitled thereto. On October 30, 2002, the trial court issued an Order directing the petitioners to post a bond in the amount ofP7,000,000.00 before the court issues the writ of attachment, the dispositive portion of which reads as follows: WHEREFORE, premises considered, and finding the present complaint and motion sufficient in form and substance, this Court hereby directs the herein plaintiffs to post a bond, pursuant to Section 3, Rule 57 of the 1997 Rules of Civil Procedure, in the amount of Seven Million Pesos (P7,000,000.00), before the Writ of Attachment issues.10 On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff, informing the court that they have already filed an attachment bond. They also prayed that a sheriff be deputized to serve the writ of attachment that would be issued by the court. In the Order12 dated November 15, 2002, the RTC granted the above motion and deputized the sheriff, together with police security assistance, to serve the writ of attachment. Thereafter, the RTC issued a Writ of Attachment13 dated November 15, 2002, directing the sheriff to attach the estate, real or personal, of the respondents, the decretal portion of which reads:
11 9

WE, THEREFORE, command you to attach the estate, real or personal, not exempt from execution, of the said defendants, in your province, to the value of said demands, and that you safely keep the same according to the said Rule, unless the defendants give security to pay such judgment as may be recovered on the said action, in the manner provided by the said Rule, provided that your legal fees and all necessary expenses are fully paid. You shall return this writ with your proceedings indorsed hereon within twenty (20) days from the date of receipt hereof. GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day of November, 2002, at Imus for Dasmarias, Cavite, Philippines.14 On November 19, 2002, a copy of the writ of attachment was served upon the respondents. On the same date, the sheriff levied the real and personal properties of the respondent, including household appliances, cars, and a parcel of land located at Las Pias, Manila.15 On November 21, 2002, summons, together with a copy of the complaint, was served upon the respondents.16 On November 29, 2002, respondents filed their Answer.17 On the same day respondents filed their answer, they also filed a Motion to Discharge Writ of Attachment18 anchored on the following grounds: the bond was issued before the issuance of the writ of attachment; the writ of attachment was issued before the summons was received by the respondents; the sheriff did not serve copies of the application for attachment, order of attachment, plaintiffs affidavit, and attachment bond, to the respondents; the sheriff did not submit a sheriffs return in violation of the Rules; and the grounds cited for the issuance of the writ are baseless and devoid of merit. In the alternative, respondents offered to post a counter-bond for the lifting of the writ of attachment.19 On March 11, 2003, after the parties filed their respective pleadings, the RTC issued an Order20 denying the motion, but at the same time, directing the respondents to file a counter-bond, to wit: WHEREFORE, premises considered, after the pertinent pleadings of the parties have been taken into account, the herein defendants are hereby directed to file a counterbond executed to the attaching party, in the amount of Seven Million Pesos (P7,000,000.00), to secure the payment of any judgment that the attaching party may recover in the action, with notice on the attaching party, whereas, the Motion to Discharge Writ of Attachment is DENIED. SO ORDERED.21

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Thereafter, respondents filed a motion for reconsideration and/or motion for clarification of the above order. On April 3, 2003, the RTC issued another Order22 which reads: In view of the Urgent Motion For Reconsideration And/Or Motion For Clarification of the Order of this Court dated March 11, 2003, denying their Motion to Discharge Writ of Attachment filed by the defendants through counsel Atty. Franco L. Loyola, the Motion to Discharge Writ of Attachment is denied until after the defendants have posted the counter-bond in the amount of Seven Million Pesos (P7,000,000.00). The defendants, once again, is directed to file their counter-bond of Seven Million Pesos (P7,000,000.00), if it so desires, in order to discharge the Writ of Attachment. SO ORDERED. On December 15, 2003, respondents filed an Urgent Motion to Lift/Set Aside Order Dated March [11], 2003,23 which the RTC denied in an Order24 of even date, the dispositive portion of which reads: WHEREFORE, premises considered, defendants Urgent Motion to Lift/Set Aside Order Dated March 23, 2003 (With Manifestation to Dissolve Writ of Attachment) is hereby DENIED for lack of Merit. SO ORDERED.

the respondents. They maintained that the writ of attachment was implemented without serving upon them the summons together with the complaint. They also argued that the bond issued in favor of the petitioners was defective, because the bonding company failed to obtain the proper clearance that it can transact business with the RTC of Dasmarias, Cavite. They added that the various clearances which were issued in favor of the bonding company were applicable only in the courts of the cities of Pasay, Pasig, Manila, and Makati, but not in the RTC, Imus, Cavite.29 On November 23, 2003, the CA rendered the assailed Decision in favor of the respondents, finding grave abuse of discretion amounting to lack of or in excess of jurisdiction on the part of the RTC in issuing the Orders dated December 15, 2003 and March 3, 2004. The decretal portion of the Decision reads: WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed Orders are hereby nullified and set aside. The levy on the properties of the petitioners pursuant to the Writ of Attachment issued by the lower court is hereby LIFTED. SO ORDERED.30 Petitioners filed a Motion for Reconsideration,31 but it was denied in the Resolution32 dated January 18, 2005. Hence, this petition assigning the following errors: I.

Respondents filed an Urgent Motion for Reconsideration,25 but it was denied in the Order26 dated March 3, 2004. Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and Prohibition with Preliminary Injunction and Temporary Restraining Order27 under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 83595, anchored on the following grounds: (1) public respondents committed grave abuse of discretion amounting to lack of or in excess of jurisdiction in failing to notice that the lower court has no jurisdiction over the person and subject matter of the complaint when the subject Writ of Attachment was issued; (2) public respondents committed grave abuse of discretion amounting to lack of or in excess of jurisdiction in granting the issuance of the Writ of Attachment despite non-compliance with the formal requisites for the issuance of the bond and the Writ of Attachment.28 Respondents argued that the subject writ was improper and irregular having been issued and enforced without the lower court acquiring jurisdiction over the persons of

THE HONORABLE COURT OF APPEALS ERRED IN ORDERING THE LIFTING OF THE WRIT OF ATTACHMENT PURSUANT TO SECTION 13, RULE 57 OF THE REVISED RULES OF CIVIL PROCEDURE. II. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN GRANTING THE WRIT OF ATTACHMENT DESPITE THE BOND BEING INSUFFICIENT AND HAVING BEEN IMPROPERLY ISSUED. III. THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING THE PETITION BY REASON OF ESTOPPEL, LACHES AND PRESCRIPTION AND IN HOLDING THAT THE WRIT OF ATTACHMENT WAS IMPROPERLY AND IRREGULARLY ENFORCED IN VIOLATION OF SECTION 5, RULE 57 OF THE REVISED RULES OF COURT.

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IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRINCIPLE OF ESTOPPEL WILL NOT LIE AGAINST RESPONDENTS. Petitioners maintain that in the case at bar, as in the case of FCY Construction Group, Inc. v. Court of Appeals,33 the only way the subject writ of attachment can be dissolved is by a counter-bond. They claim that the respondents are not allowed to file a motion to dissolve the attachment under Section 13, Rule 57 of the Rules of Court. Otherwise, the hearing on the motion for the dissolution of the writ would be tantamount to a trial on the merits, considering that the writ of preliminary attachment was issued upon a ground which is, at the same time, the applicants cause of action. Petitioners insist that the determination of the existence of grounds to discharge a writ of attachment rests in the sound discretion of the lower court. They argue that the Certification34 issued by the Office of the Administrator and the Certifications35 issued by the clerks of court of the RTCs of Dasmarias and Imus, Cavite, would show that the bonds offered by Western Guaranty Corporation, the bonding company which issued the bond, may be accepted by the RTCs of Dasmarias and Imus, Cavite, and that the said bonding company has no pending liability with the government. Petitioners contend that respondents are barred by estoppel, laches, and prescription from questioning the orders of the RTC issuing the writ of attachment. They also maintain that the issue whether there was impropriety or irregularity in the issuance of the orders is moot and academic, considering that the attachment bond questioned by the respondent had already expired on November 14, 2003 and petitioners have renewed the attachment bond covering the period from November 14, 2003 to November 14, 2004, and further renewed to cover the period of November 14, 2004 to November 14, 2005. The petition is bereft of merit. A writ of preliminary attachment is defined as a provisional remedy issued upon order of the court where an action is pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by the sheriff as security for the satisfaction of whatever judgment that might be secured in the said action by the attaching creditor against the defendant.36 In the case at bar, the CA correctly found that there was grave abuse of discretion amounting to lack of or in excess of jurisdiction on the part of the trial court in approving the bond posted by petitioners despite the fact that not all the requisites for its approval were complied with. In accepting a surety bond, it is necessary that all the requisites for its approval are met; otherwise, the bond should be rejected. 37 Every bond should be accompanied by a clearance from the Supreme Court showing that the company concerned is qualified to transact business which is valid only for

thirty (30) days from the date of its issuance.38 However, it is apparent that the Certification39 issued by the Office of the Court Administrator (OCA) at the time the bond was issued would clearly show that the bonds offered by Western Guaranty Corporation may be accepted only in the RTCs of the cities of Makati, Pasay, and Pasig. Therefore, the surety bond issued by the bonding company should not have been accepted by the RTC of Dasmarias, Branch 90, since the certification secured by the bonding company from the OCA at the time of the issuance of the bond certified that it may only be accepted in the above-mentioned cities. Thus, the trial court acted with grave abuse of discretion amounting to lack of or in excess of jurisdiction when it issued the writ of attachment founded on the said bond. Moreover, in provisional remedies, particularly that of preliminary attachment, the distinction between the issuance and the implementation of the writ of attachment is of utmost importance to the validity of the writ. The distinction is indispensably necessary to determine when jurisdiction over the person of the defendant should be acquired in order to validly implement the writ of attachment upon his person. This Court has long put to rest the issue of when jurisdiction over the person of the defendant should be acquired in cases where a party resorts to provisional remedies. A party to a suit may, at any time after filing the complaint, avail of the provisional remedies under the Rules of Court. Specifically, Rule 57 on preliminary attachment speaks of the grant of the remedy "at the commencement of the action or at any time before entry of judgment."40 This phrase refers to the date of the filing of the complaint, which is the moment that marks "the commencement of the action." The reference plainly is to a time before summons is served on the defendant, or even before summons issues.41 In Davao Light & Power Co., Inc. v. Court of Appeals,42 this Court clarified the actual time when jurisdiction should be had: It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of defendant x x x issuance of summons, order of attachment and writ of attachment x x x these do not and cannot bind and affect the defendant until and unless jurisdiction over his person is eventually obtained by the court, either by service on him of summons or other coercive process or his voluntary submission to the courts authority. Hence, when the sheriff or other proper officer commences implementation of the writ of attachment, it is essential that he serve on the defendant not only a copy of the applicants affidavit and attachment bond, and of the order of attachment, as explicitly required by Section 5 of Rule 57, but also the summons addressed to said defendant as well as a copy of the complaint x x x. (Emphasis supplied.) In Cuartero v. Court of Appeals,43 this Court held that the grant of the provisional remedy of attachment involves three stages: first, the court issues the order granting the application; second, the writ of attachment issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the defendant be first obtained. However, once the implementation of the writ commences, the court must have

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acquired jurisdiction over the defendant, for without such jurisdiction, the court has no power and authority to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant.44 Thus, it is indispensable not only for the acquisition of jurisdiction over the person of the defendant, but also upon consideration of fairness, to apprise the defendant of the complaint against him and the issuance of a writ of preliminary attachment and the grounds therefor that prior or contemporaneously to the serving of the writ of attachment, service of summons, together with a copy of the complaint, the application for attachment, the applicants affidavit and bond, and the order must be served upon him. In the instant case, assuming arguendo that the trial court validly issued the writ of attachment on November 15, 2002, which was implemented on November 19, 2002, it is to be noted that the summons, together with a copy of the complaint, was served only on November 21, 2002. At the time the trial court issued the writ of attachment on November 15, 2002, it can validly to do so since the motion for its issuance can be filed "at the commencement of the action or at any time before entry of judgment." However, at the time the writ was implemented, the trial court has not acquired jurisdiction over the persons of the respondent since no summons was yet served upon them. The proper officer should have previously or simultaneously with the implementation of the writ of attachment, served a copy of the summons upon the respondents in order for the trial court to have acquired jurisdiction upon them and for the writ to have binding effect. Consequently, even if the writ of attachment was validly issued, it was improperly or irregularly enforced and, therefore, cannot bind and affect the respondents. Moreover, although there is truth in the petitioners contention that an attachment may not be dissolved by a showing of its irregular or improper issuance if it is upon a ground which is at the same time the applicants cause of action in the main case, since an anomalous situation would result if the issues of the main case would be ventilated and resolved in a mere hearing of a motion. However, the same is not applicable in the case bar. It is clear from the respondents pleadings that the grounds on which they base the lifting of the writ of attachment are the irregularities in its issuance and in the service of the writ; not petitioners cause of action.1avvphi1 Further, petitioners contention that respondents are barred by estoppel, laches, and prescription from questioning the orders of the RTC issuing the writ of attachment and that the issue has become moot and academic by the renewal of the attachment bond covering after its expiration, is devoid of merit. As correctly held by the CA: There are two ways of discharging the attachment. First, to file a counter-bond in accordance with Section 12 of Rule 57. Second[,] [t]o quash the attachment on the ground that it was irregularly or improvidently issued, as provided for in Section 13 of the same rule. Whether the attachment was discharged by either of the two ways indicated in the law, the attachment debtor cannot be deemed to have waived any

defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. The filing of a counter-bond is merely a speedier way of discharging the attachment writ instead of the other way. 45 Moreover, again assuming arguendo that the writ of attachment was validly issued, although the trial court later acquired jurisdiction over the respondents by service of the summons upon them, such belated service of summons on respondents cannot be deemed to have cured the fatal defect in the enforcement of the writ. The trial court cannot enforce such a coercive process on respondents without first obtaining jurisdiction over their person. The preliminary writ of attachment must be served after or simultaneous with the service of summons on the defendant whether by personal service, substituted service or by publication as warranted by the circumstances of the case. The subsequent service of summons does not confer a retroactive acquisition of jurisdiction over her person because the law does not allow for retroactivity of a belated service.46 WHEREFORE, premises considered, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated November 23, 2004 and January 18, 2005, respectively, in CA-G.R. SP No. 83595 are AFFIRMED. PRELIMINARY INJUNCTION G.R. No. 141853 February 7, 2001

TERESITA V. IDOLOR, petitioner, vs. HON. COURT OF APPEALS, SPS. GUMERSINDO DE GUZMAN and ILUMINADA DE GUZMAN and HON. PRUDENCIO A. CASTILLO, JR., Presiding Judge, Regional Trial Court, National Capital Judicial Region, Branch 220, Quezon City, respondents. GONZAGA-REYES, J.: This is a petition for review on certiorari filed by petitioner Teresita Idolor which seeks to set aside the decision1 of the respondent Court of Appeals which reversed the Order2 of the Regional Trial Court of Quezon City3 granting Idolor's prayer for the issuance of a writ of preliminary injunction and the resolution denying petitioner's motion for reconsideration.4 On March 21, 1994, to secure a loan of P520,000.00, petitioner Teresita Idolor executed in favor of private respondent Gumersindo De Guzman a Deed of Real Estate Mortgage with right of extra-judicial foreclosure upon failure to redeem the mortgage on or before September 20, 1994. The object of said mortgage is a 200square meter property with improvements located at 66 Ilocos Sur Street, Barangay Ramon Magsaysay, Quezon City covered by TCT No. 25659.

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On September 21, 1996, private respondent Iluminada de Guzman, wife of Gumersindo de Guzman, filed a complaint against petitioner Idolor before the Office of the Barangay Captain of Barangay Ramon Magsaysay, Quezon City, which resulted in a "Kasunduang Pag-aayos" which agreement is quoted in full5: "Kami, ang (mga) may sumbong at (mga) ipinagsusumbong sa usaping binabanggit sa itaas, ay nagkakasundo sa pamamagitan nito na ayusin ang aming alitan gaya ng sumusunod: Na ako si Teresita V. Idolor of legal age ay nakahiram ng halagang P520,000.00 noong September 20, 1994. Na ang nasabing halaga ay may nakasanlang titulo ng lupa (TCT No. 25659) under Registry receipt 3420 dated July 15, 1996. Na ako si Teresita V. Idolor ay humihingi ng 90 days palugit (grace period) to settle the said amount. Failure to settle the above account on or before December 21, 1996, I agree to execute a deed of sale with the agreement to repurchase without interest within one year. Total amount of P1,233,288.23 inclusive of interest earned. At nangangako kami na tutupad na tunay at matapat sa mga katakdaan ng pag-aayos na inilahad sa itaas." Petitioner failed to comply with her undertaking; thus private respondent Gumersindo filed a motion for execution before the Office of the Barangay captain who subsequently issued a certification to file action. On March 21, 1997, respondent Gumersindo De Guzman filed an extra judicial foreclosure of the real estate mortgage pursuant to the parties agreement set forth in the real estate mortgage dated March 21, 1994. On May 23, 1997, the mortgaged property was sold in a public auction to respondent Gumersindo, as the highest bidder and consequently, the Sheriff's Certificate of Sale was registered with the Registry of Deeds of Quezon City on June 23, 1997. On June 25, 1998, petitioner filed with the Regional Trial Court of Quezon City, Branch 220, a complaint for annulment of Sheriff's Certificate of Sale with prayer for the issuance of a temporary restraining order (TRO) and a writ of preliminary injunction against private respondents, Deputy Sheriffs Marino Cachero and Rodolfo Lescano and the Registry of Deeds of Quezon City alleging among others alleged irregularity and lack of notice in the extra-judicial foreclosure proceedings subject of

the real estate mortgage. In the meantime, a temporary restraining order was issued by the trial court. 1wphi1.nt On July 28, 1998, the trial court issued a writ of preliminary injunction enjoining private respondents, the Deputy Sheriffs and the Registry of Deeds of Quezon City from causing the issuance of a final deed of sale and consolidation of ownership of the subject property in favor of the De Guzman spouses. The trial court denied the motion for reconsideration filed by the de Guzman spouses. Spouses de Guzman filed with the respondent Court of Appeals a petition for certiorari seeking annulment of the trial court's order dated July 28, 1998 which granted the issuance of a preliminary injunction. On September 28, 1999, the respondent court granted the petition and annulled the assailed writ of preliminary injunction. Teresita Idolor filed her motion for reconsideration which was denied in a resolution dated February 4, 2000. Hence this petition for review on certiorari filed by petitioner Teresita V. Idolor. The issues raised by petitioner are: whether or not the respondent Court of Appeals erred in ruling (1) that petitioner has no more proprietary right to the issuance of the writ of injunction, (2) that the "Kasunduang Pag-aayos" did not ipso facto result innovation of the real estate mortgage, (3) that the "Kasunduang Pag-aayos" is merely a promissory note of petitioner to private respondent spouses; and (4) that the questioned writ of preliminary injunction was issued with grave abuse of discretion. The core issue in this petition is whether or not the respondent Court erred in finding that the trial court committed grave abuse of discretion in enjoining the private and public respondents from causing the issuance of a final deed of sale and consolidation of ownership of the subject parcel of land in favor of private respondents. Petitioner claims that her proprietary right over the subject parcel of land was not yet lost since her right to redeem the subject land for a period of one year had neither lapsed nor run as the sheriff's certificate of sale was null and void; that petitioner and the general public have not been validly notified of the auction sale conducted by respondent sheriffs; that the newspaper utilized in the publication of the notice of sale was not a newspaper of general circulation. We do not agree. Injunction is a preservative remedy aimed at protecting substantive rights and interests.6 Before an injunction can be issued, it is essential that the following requisites be present: 1) there must be aright in esse or the existence of a right to be protected; 2) the act against which the injunction is to be directed is a violation of such right.7 Hence the existence of a right violated, is a prerequisite to the granting of an injunction. Injunction is not designed to protect contingent or future rights. Failure to establish either the existence of a clear and positive right which should be judicially

23

protected through the writ of injunction or that the defendant has committed or has attempted to commit any act which has endangered or tends to endanger the existence of said right, is a sufficient ground for denying the injunction.8 The controlling reason for the existence of the judicial power to issue the writ is that the court may thereby prevent a threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly investigated and advisedly adjudicated.9 It is to be resorted to only when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard of compensation.10 In the instant case, we agree with the respondent Court that petitioner has no more proprietary right to speak of over the foreclosed property to entitle her to the issuance of a writ of injunction. It appears that the mortgaged property was sold in a public auction to private respondent Gumersindo on May 23, 1997 and the sheriff's certificate of sale was registered with the Registry of Deeds of Quezon City on June 23, 1997. Petitioner had one year from the registration of the sheriff's sale to redeem the property but she failed to exercise her right on or before June 23, 1998, thus spouses de Guzman are now entitled to a conveyance and possession of the foreclosed property. When petitioner filed her complaint for annulment of sheriff's sale against private respondents with prayer for the issuance of a writ of preliminary injunction on June 25, 1998, she failed to show sufficient interest or title in the property sought to be protected as her right of redemption had already expired on June 23, 1998, i.e. two (2) days before the filing of the complaint. It is always a ground for denying injunction that the party seeking it has insufficient title or interest to sustain it, and no claim to the ultimate relief sought - in other words, that she shows no equity.11 The possibility of irreparable damage without proof of actual existing right is not aground for an injunction.12 Petitioner's allegation regarding the invalidity of the sheriff's sale dwells on the merits of the case; We cannot rule on the same considering that the matter should be resolved during the trial on the merits. Petitioner next contends that the execution of the "Kasunduang Pag-aayos" dated September 21, 1996 between her and spouses de Guzman before the Office of the Lupon Tagapamayapa showed the express and unequivocal intention of the parties to novate or modify the real estate mortgage; that a comparison of the real estate mortgage dated March 21, 1994 and the "Kasunduang Pag-aayos" dated September 21, 1996 revealed the irreconciliable incompatibility between them, i.e., that under the first agreement, the amount due was five hundred twenty thousand (P520,000) pesos only payable by petitioner within six (6) months, after which it shall earn interest at the legal rate per annum and non-payment of which within the stipulated period, private respondents have the right to extra-judicially foreclose the real estate mortgage while under the second agreement, the amount due was one million two hundred thirty three thousand two hundred eighty eight and 23/100 (P1,233,288.23) inclusive of interest, payable within 90 days and in. case of non payment of the same on or before December 21, 1996, petitioner should execute a deed of sale with right to repurchase within one year without interest; that the second agreement "Kasunduang Pag-aayos" was a valid new contract as it was duly executed by the parties and it changed the principal conditions of petitioner's original obligations. Petitioner insists that the "Kasunduang Pag-aayos" was not a mere promissory note contrary to respondent

court's conclusion since it was entered by the parties before the Lupon Tagapamayapa which has the effect of a final judgment.13 We are not persuaded. Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which terminates it, either by changing its objects or principal conditions, or by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor.14 Under the law, novation is never presumed. The parties to a contract must expressly agree that they are abrogating their old contract in favor of a new one.15 Accordingly, it was held that no novation of a contract had occurred when the new agreement entered into between the parties was intended to give life to the old one.16 A review of the "Kasunduang Pag-aayos" which is quoted earlier does not support petitioner's contention that it novated the real estate mortgage since the will to novate did not appear by express agreement of the parties nor the old and the new contracts were incompatible in air points. In fact, petitioner expressly recognized in the Kasunduan the existence and the validity of the old obligation where she acknowledged her long overdue account since September 20, 1994 which was secured by a real estate mortgage and asked for a ninety (90) days grace period to settle her obligation on or before December 21, 1996 and that upon failure to do so, she will execute a deed of sale with a right to repurchase without interest within one year in favor of private respondents. Where the parties to the new obligation expressly recognize the continuing existence and validity of the old one, where, in other words, the parties expressly negated the lapsing of the old obligation, there can be no novation.17 We find no cogent reason to disagree with the respondent court's pronouncement as follows: "In the present case. there exists no such express abrogation of the original undertaking. The agreement adverted to (Annex 2 of Comment, p.75 Rollo) executed by the parties on September 21, 1996 merely gave life to the March 21, 1994 mortgage contract which was then more than two years overdue. Respondent acknowledged therein her total indebtedness in the sum of P1,233,288.23 including the interests due on the unpaid mortgage loan which amount she promised to liquidate within ninety (90) days or until December 21, 1996, failing which she also agreed to execute in favor of the .mortgagee a deed of sale of the mortgaged property for the same amount w1thout interest. Evidently, it was executed to facilitate easy compliance by respondent mortgagor with her mortgage obligation. It (the September 21, 1996 agreement) is not incompatible and can stand together with the mortgage contract of March 21, 1994. A compromise agreement clarifying the total sum owned by a buyer with the view that he would find it easier to comply with his obligations under the Contract to Sell does not novate said Contract to Sell (Rillo v. Court ofAppeals, 274 SCRA 461 [1997]).

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Respondent correctly argues that the compromise agreement has the force and effect of a final judgment. That precisely is the reason why petitioner resorted to the foreclosure of the mortgage on March 27, 1997, after her failure to comply with her obligation which expired on December 21, 1996. Reliance by private respondent upon Section 417 of the New Local Government Code of 1991, which requires the lapse of six (6) months before the amicable settlement may be, enforced, is misplaced. The instant case deals with extra judicial foreclosure governed by ACT No. 3135 as amended." Notably, the provision in the "Kasunduang Pag-aayos" regarding the execution of a deed of sale with right to repurchase within one year would have the same effect as the extra-judicial foreclosure of the real estate mortgage wherein petitioner was given one year from the registration of the sheriff's sale in the Registry of property to redeem the property, i.e., failure to exercise the right of redemption would entitle the purchaser to possession of the property. It is not proper to consider an obligation novated by. unimportant modifications which do not alter its essence.18 It bears stress that the period to pay the total amount of petitioner's indebtedness inclusive of interest amounted to P1,233,288.23 expired on December 21, 1996 and petitioner failed to execute a deed of sale with right to repurchase on the said date up to the time private respondents filed their petition for extra-judicial foreclosure of real estate mortgage. The failure of petitioner to comply with her undertaking in the "kasunduan" to settle her obligation effectively delayed private respondents' right to extra-judicially foreclose the real estate mortgage which right accrued as far back as 1994. Thus, petitioner has not shown that she is entitled to the equitable relief of injunction. 1wphi1.nt WHEREFORE, the petition is DENIED. The decision of the respondent Court of Appeals dated September 28, 1999 is hereby AFFIRMED. RIMEO S. GUSTILO, complainant, vs. HON. RICARDO S. REAL, SR., Presiding Judge, 2nd Municipal Circuit Trial Court of Victorias- Manapla, Negros Occidental, respondent. RESOLUTION QUISUMBING, J.: In a verified complaint[1] dated June 15, 1997, Rimeo S. Gustilo charged respondent Judge Ricardo S. Real, Sr., of the Municipal Circuit Trial Court of Victorias-Manapla, Negros Occidental with gross misconduct, gross incompetence, gross ignorance of the law, and violation of the Anti-Graft and Corrupt Practices Act relative to Civil Case No. 703-M entitled Weddy C. Libo-on v. Rimeo S. Gustilo, et al. for recounting of ballots of Precinct Nos. 27 and 27-A, Barangay Punta Mesa, Manapla, Negros Occidental. Complainant avers that he was a candidate for punong barangay of Barangay Punta Mesa, Manapla, Negros Occidental in the May 12, 1997 elections. His lone

opponent was Weddy C. Libo-on, then the incumbent punong barangay and the representative of the Association of Barangay Captains (ABC) to the Sangguniang Bayan of Manapla and the Sangguniang Panlalawigan of Negros Occidental. Both complainant and Libo-on garnered eight hundred nineteen (819) votes during the elections, resulting in a tie. The breaking of the tie by the Board of Canvassers was in complainants favor and he was proclaimed duly elected punong barangay of Punta Mesa, Manapla.[2] On May 20, 1997, his opponent filed an election protest case, docketed as Civil Case No. 703-M, before the MCTC of Victorias-Manapla, Negros Occidental. Libo-on sought the recounting of ballots in two precincts, preliminary prohibitory injunction, and damages. On May 21, 1997, respondent ordered the issuance of summons to the parties and set the hearing on June 6, 1997.[3] On May 27, 1997, however, Libo-on filed a motion to advance the hearing to May 29 and 30, 1997. The next day, respondent granted Libo-ons motion. The hearing was advanced to May 29 and 30, 1997 cancelling the hearing for June 6, 1997.[4] Complainant avers that he was not furnished a copy of this Order dated May 28, 1997. On May 29, 1997, respondent judge issued a temporary restraining order (TRO) and annulled the proclamation of complainant as the duly elected punong barangay of Punta Mesa, Manapla.[5]Complainant declares that no copy of this Order dated May 29, 1997 was served on him. That same day, however, he was able to secure copies of the orders of respondent dated May 28 and May 29, 1997 from the COMELEC Registrar of Manapla, Negros Occidental and the Department of Interior and Local Government (DILG). Moreover, it was only in the afternoon of May 29, 1997 that complainant received a copy of Libo-ons petition in Civil Case No. 703-M and respondents Order dated May 21, 1997. On May 30, 1997, complainant took his oath of office as punong barangay. That same day, he also filed a petition for certiorari before the Regional Trial Court of Silay City, Negros Occidental, Branch 69 docketed as Special Civil Action No. 1936-69.
[6]

On June 5, 1997, the RTC lifted the TRO issued by respondent and declared as null and void the order nullifying complainants proclamation as duly elected punong barangay.[7] Believing that respondent could not decide Civil Case No. 703-M impartially, complainant moved for his inhibition. On June 11, 1997, respondent denied complainants motion for inhibition and after hearing Libo-ons motion for permanent injunction, issued a second TRO to maintain the status quo between the contending parties.[8] Complainant argues that by issuing the second TRO, respondent reversed the order of the RTC of Silay City dated June 5, 1997. He also claims that by preventing him from assuming office, he was excluded by the DILG from participating in the election of the Liga ng Mga Barangay on June 14, 1997.

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In his Comment, respondent denied the allegations. He claimed that when Liboon filed his motion to advance the hearing of the prayer for injunction on May 27, 1997 in Civil Case No. 703-M, complainant was served a copy by registered mail as shown by the registry receipts attached to said motion. Considering the urgency of the matter and since there was substantial compliance with due process, he issued the Order of May 28, 1997 which cancelled the hearing set for June 6, 1997 and advanced it to May 29 and 30, 1997. Respondent claims that on May 29, 1997, Libo-on and his counsel appeared but complainant did not, despite due notice. The hearing then proceeded, with Libo-on presenting his evidence. As a result, he issued the TRO prayed for and annulled complainants proclamation. Respondent admits that the Order of May 29, 1997, particularly the annulment of complainants proclamation, was outside the jurisdiction of his court. But since the COMELEC ignored Libo-ons petition for correction of erroneous tabulation and Libo-on had no other remedy under the law, he was constrained to annul complainants proclamation, which from the very beginning was illegal. He justified his action by our rulings in Bince, Jr. v. COMELEC, 312 Phil. 316 (1995) and Tatlonghari v. COMELEC, 199 SCRA 849 (1991), which held that a faulty tabulation cannot be the basis of a valid proclamation. Respondent also faults the RTC of Silay City for issuing the Order dated June 5, 1997, which lifted the TRO he issued and declared void his nullification of complainants proclamation. Respondent contends that complainant should first have exhausted all remedies in his court before resorting to the special civil action for certiorari with the RTC. The latter court, in turn, should have dismissed the action for certiorari for failure to exhaust judicial remedies. With respect to his Order of June 11, 1997, respondent explains that it was never meant to reverse the Order of the RTC of Silay City dated June 5, 1997. He points out that both parties in Civil Case No. 703-M were present during the hearing after due notice. After receiving their evidence, he found that unless a TRO was issued, Libo-on would suffer a grave injustice and irreparable injury. He submits that absent fraud, dishonesty, or corruption, his acts, even if erroneous, are not the subject of disciplinary action. In its evaluation and recommendation report dated November 29, 1999, the Office of the Court Administrator (OCA) found that respondents errors were not honest mistakes in the performance of his duties. Rather, his actions showed a bias in favor of Libo-on and evinced a pattern to prevent the complainant from assuming office as the duly elected punong barangay despite his having been proclaimed as such by the Board of Canvassers. The OCA recommends that respondent be fined P20,000.00 and warned that a repetition of similar acts in the future will be dealt with more severely. Supreme Court Administrative Circular No. 20-95 provides: 2. The application for a TRO shall be acted upon only after all parties are heard in a summary hearing conducted within twenty-four (24) hours after the records are transmitted to the branch selected by raffle. The records shall be transmitted immediately after raffle (Emphasis supplied).

xxx 4. With the exception of the provisions which necessarily involve multiple-sala stations, these rules shall apply to single-sala stations especially with regard to immediate notice to all parties of all applications for TRO. The foregoing clearly show that whenever an application for a TRO is filed, the court may act on the application only after all parties have been notified and heard in a summary hearing. In other words, a summary hearing may not be dispensed with.[9] In the instant case, respondent admits that he issued the injunctive writ sought on May 29, 1997 after receiving the applicants evidence ex parte. His failure to abide by Administrative Circular No. 20-95 in issuing the first TRO is grave abuse of authority, misconduct, and conduct prejudicial to the proper administration of justice. Worse, he compounded the infraction by annulling complainants proclamation as the duly elected punong barangay of Punta Mesa, Manapla and prohibiting him from assuming office. Respondent admits that his court was not vested with the power or jurisdiction to annul the proclamation, but seeks to justify his action on the ground that the proclamation was void ab initio. In so doing, respondent wantonly usurped a power exclusively vested by law in the COMELEC.[10] A judge is expected to know the jurisdictional boundaries of courts and quasi-judicial bodies like the COMELEC as mapped out by the Constitution and statutes and to act only within said limits. A judge who wantonly arrogates unto himself the authority and power vested in other agencies not only acts in oppressive disregard of the basic requirements of due process, but also creates chaos and contributes to confusion in the administration of justice. Respondent, in transgressing the jurisdictional demarcation lines between his court and the COMELEC, clearly failed to realize the position that his court occupies in the interrelation and operation of the countrys justice system. He displayed a marked ignorance of basic laws and principles. Rule 3.01 of the Code of Judicial Conduct provides that a judge shall be faithful to the law and maintain professional competence. By annulling complainants proclamation as the duly elected punong barangay, despite being aware of the fact that his court had no power to do so, not only is respondent guilty of grave abuse of authority, he also manifests unfaithfulness to a basic legal rule as well as injudicious conduct. Moreover, in willfully nullifying complainants proclamation despite his courts want of authority, respondent knowingly issued an unjust order. Note that the RTC of Silay City corrected respondents errors by declaring null and void his Order dated May 29, 1997. Nonetheless, he compounded his previous errors of judgment by proceeding to hear Libo-ons motion for permanent injunction and issuing a second TRO on June 11, 1997 on the ground that extreme urgency and grave injustice and irreparable injury will arise if no injunctive remedy were granted. Respondent insists that his act did not reverse the Order of the RTC in Special Civil Action No. 1936-69, since the second TRO he issued satisfied the notice and hearing requirements of Circular No. 20-95. Before an injunctive writ can be issued, it is essential that the following requisites be present: (1) there must be a right in esse or the existence of a right to be protected; and (2) the act against which injunction to be directed is a violation of such

26

right.[11] The onus probandi is on movant to show that there exists a right to be protected, which is directly threatened by the act sought to be enjoined. Further, there must be a showing that the invasion of the right is material and substantial and that there is an urgent and paramount necessity for the writ to prevent a serious damage. [12] In this case, complainant had been duly proclaimed as the winning candidate for punong barangay. He had taken his oath of office. Unless his election was annulled, he was entitled to all the rights of said office. We do not see how the complainants exercise of such rights would cause an irreparable injury or violate the right of the losing candidate so as to justify the issuance of a temporary restraining order to maintain the status quo. We see no reason to disagree with the finding of the OCA that the evident purpose of the second TRO was to prevent complainant from participating in the election of the Liga ng mga Barangay. Respondent must be held liable for violating Rule 3.02 of the Code of Judicial Conduct which provides that, In every case, a judge shall endeavor diligently to ascertain the facts and the applicable law unswayed by partisan interests, public opinion, or fear of criticism. In a similar case, a judge was fined P5,000.00 for failure to observe the requirements of Administrative Circular No. 20-95 when he issued a TRO enjoining a duly proclaimed barangay captain from participating in the elections of officers of the ABC of Taft, Eastern Samar.[13] Note, however, that in the instant case, the respondents infractions are not limited to the mere issuance of a restraining order without conducting the summary conference required by Administrative Circular No. 20-95. He also annulled the proclamation of the complainant knowing very well that he had no such authority. When his first restraining order was set aside and nullification of complainants proclamation was declared null and void by the RTC of Silay City, a superior court, he again issued a TRO, which showed his partiality to complainants political rival. Respondent is thus guilty of violating Rules 3.01 and 3.02 of the Code of Judicial Conduct; knowingly rendering an unjust order; gross ignorance of the law or procedure; as well as bias and partiality. All of the foregoing are serious charges under Rule 140, Section 3 of the Rules of Court. We agree with the sanction recommended by the OCA, finding it to be in accord with Rule 140, Section 10 (A) of the Rules of Court. WHEREFORE, this COURT finds respondent judge GUILTY of violating Rules 3.01 and 3.02 of the Code of Judicial Conduct, knowingly rendering an unjust order, gross ignorance of the law and procedure, and bias and partiality. Accordingly, a fine of Twenty Thousand Pesos (P20,000.00) is hereby imposed upon respondent with a STERN WARNING that a repetition of the same or similar acts will be dealt with more severely. SO ORDERED.

Petitioner, - versus -

Present: Quisumbing, J., Chairperson,

BRISTOL-MYERS SQUIBB (PHIL.), INC./MEAD JOHNSON PHIL., Carpio Morales, RICHARD SMYTH as General Manager and FERDIE SARFATI, as Medical Sales Director, Tinga, Respondents. x- - - - - - - - - - - - - - - - - - - - - - - - - -x BRISTOL-MYERS SQUIBB (PHIL.), INC./MEAD JOHNSON PHIL., Petitioner, - versus COURT OF APPEALS and MICHAEL J. LAGROSAS, Respondents. VELASCO, JR., and BRION, JJ. G.R. No. 170684

Promulgated: September 12, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION QUISUMBING, J.: Before this Court are two consolidated petitions. The first petition, docketed as G.R. No. 168637, filed by Michael J. Lagrosas, assails the Decision1 dated January 28, 2005 and the Resolution2 dated June 23, 2005 of the Court of Appeals in CA-G.R. SP No. 83885. The second petition, docketed as G.R. No. 170684, filed by Bristol-Myers Squibb (Phil.), Inc./Mead Johnson Phil., assails the Resolutions3 dated August 12, 2005 and October 28, 2005 of the Court of Appeals in CA-G.R. SP No. 83885. The facts are undisputed. Michael J. Lagrosas was employed by Bristol-Myers Squibb (Phil.), Inc./Mead Johnson Phil. from January 6, 1997 until March 23, 2000 as Territory Manager in its Medical Sales Force Division.4 On February 4, 2000, Ma. Dulcinea S. Lim, also a Territory Manager and Lagrosas former girlfriend, attended a district meeting of territory managers at McDonalds

MICHAEL J. LAGROSAS,

G.R. No. 168637

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Alabang Town Center. After the meeting, she dined out with her friends. She left her car at McDonalds and rode with Cesar R. Menquito, Jr. When they returned to McDonalds, Lim saw Lagrosas car parked beside her car. Lim told Menquito not to stop his car but Lagrosas followed them and slammed Menquitos car thrice. Menquito and Lim alighted from the car. Lagrosas approached them and hit Menquito with a metal steering wheel lock. When Lim tried to intervene, Lagrosas accidentally hit her head. Upon learning of the incident, Bristol-Myers required Lagrosas to explain in writing why he should not be dismissed for assaulting a co-employee outside of business hours. While the offense is not covered by the Code of Discipline for Territory Managers, the Code states that "other infractions not provided for herein shall be penalized in the most appropriate manner at the discretion of management."5 In his memo, Lagrosas admitted that he accidentally hit Lim when she tried to intervene. He explained that he did not intend to hit her as shown by the fact that he never left the hospital until he was assured that she was all right.6 In the disciplinary hearing that followed, it was established that Lagrosas and Lim had physical confrontations prior to the incident. But Lagrosas denied saying that he might not be able to control himself and hurt Lim and her boyfriend if he sees them together. On March 23, 2000, Bristol-Myers dismissed Lagrosas effective immediately.7 Lagrosas then filed a complaint8 for illegal dismissal, non-payment of vacation and sick leave benefits, 13th month pay, attorneys fees, damages and fair market value of his Team Share Stock Option Grant. On February 28, 2002, Labor Arbiter Renaldo O. Hernandez rendered a Decision9 in NLRC NCR Case No. 00-03-02821-99, declaring the dismissal illegal. He noted that while Lagrosas committed a misconduct, it was not connected with his work. The incident occurred outside of company premises and office hours. He also observed that the misconduct was not directed against a co-employee who just happened to be accidentally hit in the process. Nevertheless, Labor Arbiter Hernandez imposed a penalty of three months suspension or forfeiture of pay to remind Lagrosas not to be carried away by the mindless dictates of his passion. Thus, the Arbiter ruled: WHEREFORE, premises considered, judgment is hereby [rendered] finding that respondent company illegally dismissed complainant thus, ORDERING it: 1) [t]o reinstate him to his former position without loss of seniority rights, privileges and benefits and to pay him full backwages reckoned from [the] date of his illegal dismissal on 23 March 2000 including the monetary value of his vacation/sick leave of 16 days per year reckoned from July 1, 2000 until actually reinstated, less three (3) months salary as penalty for his infraction; 2) to pay him the monetary equivalent of his accrued and unused combined

sick/vacation leaves as of June 30, 2000 of 16 days x 3 years and 4 months 10 days x P545.45 = P23,636.16 and the present fair market value of his Team Share stock option grant for eight hundred (800) BMS common shares of stock listed in the New York Stock Exchange which vested in complainant as of 01 July 1997, provisionally computed as 90% (800 shares x US$40.00 per share x P43.20/US$ = P1,244,160.00). 3) to pay him Attorneys fee of 10% on the entire computable amount. All other claims of complainant are dismissed for lack of merit. SO ORDERED.10 On appeal, the National Labor Relations Commission (NLRC) set aside the Decision of Labor Arbiter Hernandez in its Decision11 dated September 24, 2002. It held that Lagrosas was validly dismissed for serious misconduct in hitting his co-employee and another person with a metal steering wheel lock. The gravity and seriousness of his misconduct is clear from the fact that he deliberately waited for Lim and Menquito to return to McDonalds. The NLRC also ruled that the misconduct was committed in connection with his duty as Territory Manager since it occurred immediately after the district meeting of territory managers. Lagrosas moved for reconsideration. On May 7, 2003, the NLRC issued a Resolution12 reversing its earlier ruling. It ratiocinated that the incident was not workrelated since it occurred only after the district meeting of territory managers. It emphasized that for a serious misconduct to merit dismissal, it must be connected with the employees work. The dispositive portion of the Resolution states: WHEREFORE, premises considered, We find this time no reason to alter the Labor Arbiters Decision of February 28, 2002 and hereby affirm the same in toto. We vacate our previous Decision of September 24, 2002. SO ORDERED.13 Bristol-Myers filed a motion for reconsideration which the NLRC denied in an Order dated February 4, 2004 in NLRC NCR Case No. 00-03-02821-99 (NLRC NCR CA No. 031646-02).14 Later, Labor Arbiter Hernandez issued a writ of execution. 15 Notices of garnishment were then served upon the Philippine British Assurance Co., Inc. for the supersedeas bond posted by Bristol-Myers and the Bank of the Philippine Islands for the balance of the judgment award.16 Bristol-Myers moved to quash the writ of execution contending that it timely filed a petition for certiorari with the Court of Appeals. The appellate court gave due course to Bristol-Myers petition and issued a temporary restraining order (TRO)17 enjoining the enforcement of the writ of execution and notices of garnishment. Upon the expiration of

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the TRO, the appellate court issued a writ of preliminary injunction dated September 17, 2004.18 Bristol-Myers then moved to discharge and release the TRO cash bond. It argued that since it has posted an injunction cash bond, the TRO cash bond should be legally discharged and released. On January 28, 2005, the appellate court rendered the following Decision: WHEREFORE, the petition is GRANTED. The Resolution of May 7, 2003 and the Order of February 4, 2004 in NLRC NCR Case No. [00-03-02821-99] (NLRC NCR CA No. [031646-02]), are REVERSED and SET ASIDE. The public respondent NLRCs Decision dated September 24, 2002 which reversed the Labor Arbiters decision and in effect sustained the legality of the private respondents termination and the dismissal of his claim for the fair market value of the [Team Share] stock option grant is REINSTATED and AFFIRMED, with MODIFICATION that the petitioner shall pay the private respondent the monetary equivalent of his accrued and unused combined sick/vacation leave plus ten (10%) percent thereof, as attorneys fees. The injunction bond and the TRO bond previously posted by the petitioner are DISCHARGED. SO ORDERED.19 The appellate court considered the misconduct as having been committed in connection with Lagrosas duty as Territory Manager since it occurred immediately after the district meeting of territory managers. It also held that the gravity and seriousness of the misconduct cannot be denied. Lagrosas employed such a degree of violence that caused damage not only to Menquitos car but also physical injuries to Lim and Menquito. Lagrosas filed a motion for reconsideration which the appellate court denied.

SO ORDERED.21 The appellate court held that upon the expiration of the TRO, the cash bond intended for it also expired. Thus, the discharge and release of the cash bond for the expired TRO is proper. But the appellate court disallowed the discharge of the injunction cash bond since the writ of preliminary injunction was issued pendente lite. Since there is a pending appeal with the Supreme Court, the Decision dated January 28, 2005 is not yet final and executory. Hence, the instant petitions. In G.R. No. 168637, Lagrosas assigns the following errors: I. the Honorable Court of Appeals in declaring that the termination of employment of the petitioner-appellant was legal had decided a question of substance in a way not in accord with the labor laws and jurisprudence and departed from the accepted and usual course of judicial proceedings, as to call for the exercise of this Honorable Courts power of review and/or supervision. II. the Honorable Court of Appeals in imposing the penalty of dismissal, being a penalty too harsh in this case, decided a question of substance in a way not in accord with the labor laws and jurisprudence and departed from the accepted and usual course of judicial proceedings, as to call for the exercise of this Honorable Courts power of review and/or supervision.22 In G.R. No. 170684, Bristol-Myers raises the following issue:

In the meantime, Bristol-Myers moved to release the TRO cash bond and injunction cash bond in view of the Decision dated January 28, 2005. On August 12, 2005, the appellate court denied the motion as premature since the decision is not yet final and executory due to Lagrosas appeal to this Court.20 Bristol-Myers filed a motion for reconsideration. On October 28, 2005, the appellate court resolved: WHEREFORE, the petitioners Motion [f]or Reconsideration dated September 6, 2005 is PARTIALLY GRANTED and the Resolution of August 12, 2005 is RECONSIDERED and SET ASIDE. The temporary restraining order cash bond in the amount of SIX HUNDRED THOUSAND PESOS (P600,000.00) which was posted by the petitioners on July 19, 2004 is ordered DISCHARGED and RELEASED to the petitioners.

[Whether or not the Honorable] Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in disallowing the release and discharge of petitioners injunction bond.23 Simply put, the basic issues in the instant petitions are: (1) Did the Court of Appeals err in finding the dismissal of Lagrosas legal? and (2) Did the Court of Appeals err in disallowing the discharge and release of the injunction cash bond? On the first issue, serious misconduct as a valid cause for the dismissal of an employee is defined simply as improper or wrong conduct. It is a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error of judgment. To be serious

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within the meaning and intendment of the law, the misconduct must be of such grave and aggravated character and not merely trivial or unimportant. However serious such misconduct, it must, nevertheless, be in connection with the employees work to constitute just cause for his separation. The act complained of must be related to the performance of the employees duties such as would show him to be unfit to continue working for the employer.24 Thus, for misconduct or improper behavior to be a just cause for dismissal, it (a) must be serious; (b) must relate to the performance of the employees duties; and (c) must show that the employee has become unfit to continue working for the employer.25 Tested against the foregoing standards, it is clear that Lagrosas was not guilty of serious misconduct. It may be that the injury sustained by Lim was serious since it rendered her unconscious and caused her to suffer cerebral contusion that necessitated hospitalization for several days. But we fail to see how such misconduct could be characterized as work-related and reflective of Lagrosas unfitness to continue working for Bristol-Myers. Although we have recognized that fighting within company premises may constitute serious misconduct, we have also held that not every fight within company premises in which an employee is involved would automatically warrant dismissal from service.26 More so, in this case where the incident occurred outside of company premises and office hours and not intentionally directed against a co-employee, as hereafter explained. First, the incident occurred outside of company premises and after office hours since the district meeting of territory managers which Lim attended at McDonalds had long been finished. McDonalds may be considered an extension of Bristol-Myers office and any business conducted therein as within office hours, but the moment the district meeting was concluded, that ceased too. When Lim dined with her friends, it was no longer part of the district meeting and considered official time. Thus, when Lagrosas assaulted Lim and Menquito upon their return, it was no longer within company premises and during office hours. Second, Bristol-Myers itself admitted that Lagrosas intended to hit Menquito only. In the Memorandum27 dated March 23, 2000, it was stated that "You got out from your car holding an umbrella steering wheel lock and proceeded to hit Mr. Menquito. Dulce tried to intervene, but you accidentally hit her on the head, knocking her unconscious."28 Indeed, the misconduct was not directed against a co-employee who unfortunately got hit in the process. Third, Lagrosas was not performing official work at the time of the incident. He was not even a participant in the district meeting. Hence, we fail to see how his action could have reflected his unfitness to continue working for Bristol-Myers. In light of Bristol-Myers failure to adduce substantial evidence to prove that Lagrosas was guilty of serious misconduct, it cannot use this ground to justify his dismissal. Thus, the dismissal of Lagrosas employment was without factual and legal basis.

On the second issue, it is settled that the purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and adjudicated. Its sole aim is to preserve the status quo until the merits of the case can be heard fully.29 A preliminary injunction may be granted only when, among other things, the applicant, not explicitly exempted, files with the court where the action or proceeding is pending, a bond executed to the party or person enjoined, in an amount to be fixed by the court, to the effect that the applicant will pay such party or person all damages which he may sustain by reason of the injunction or temporary restraining order if the court should finally decide that the applicant was not entitled thereto. Upon approval of the requisite bond, a writ of preliminary injunction shall be issued.30 The injunction bond is intended as a security for damages in case it is finally decided that the injunction ought not to have been granted. Its principal purpose is to protect the enjoined party against loss or damage by reason of the injunction, and the bond is usually conditioned accordingly.31 In this case, the Court of Appeals issued the writ of preliminary injunction to enjoin the implementation of the writ of execution and notices of garnishment "pending final resolution of this case or unless the [w]rit is sooner lifted by the Court."32 By its Decision dated January 28, 2005, the appellate court disposed of the case by granting Bristol-Myers petition and reinstating the Decision dated September 24, 2002 of the NLRC which dismissed the complaint for dismissal. It also ordered the discharge of the TRO cash bond and injunction cash bond. Thus, both conditions of the writ of preliminary injunction were satisfied. Notably, the appellate court ruled that Lagrosas had no right to the monetary awards granted by the labor arbiter and the NLRC, and that the implementation of the writ of execution and notices of garnishment was properly enjoined. This in effect amounted to a finding that Lagrosas did not sustain any damage by reason of the injunction. To reiterate, the injunction bond is intended to protect Lagrosas against loss or damage by reason of the injunction only. Contrary to Lagrosas claim, it is not a security for the judgment award by the labor arbiter.33 Considering the foregoing, we hold that the appellate court erred in disallowing the discharge and release of the injunction cash bond. WHEREFORE, the two consolidated petitions are GRANTED. In G.R. No. 168637, filed by Michael J. Lagrosas, the Decision dated January 28, 2005, and the Resolution dated June 23, 2005 of the Court of Appeals in CA-G.R. SP No. 83885 are REVERSED. The Resolution dated May 7, 2003, and the Order dated February 4, 2004 of the NLRC in NLRC NCR Case No. 00-03-02821-99 (NLRC NCR CA No.

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The Facts 031646-02) are REINSTATED and hereby AFFIRMED. In G.R. No. 170684, filed by Bristol-Myers Squibb (Phil.), Inc./Mead Johnson Phil., the Resolutions dated August 12, 2005 and October 28, 2005 of the Court of Appeals in CA-G.R. SP No. 83885 are REVERSED. The injunction cash bond in the amount of SIX HUNDRED THOUSAND PESOS (P600,000) which was posted by Bristol-Myers Squibb (Phil.), Inc./Mead Johnson Phil. on September 17, 2004 is hereby ordered DISCHARGED and RELEASED to it. No pronouncement as to costs. SO ORDERED. G.R. No. 172138 September 8, 2010 On 22 November 2002, some students of the University, among them petitioners Nio Carlo Jenosa, Patrick Canto, Cyndy Apalisok, Clint Eduard Vargas, and Nonell Gregory Duro (petitioner students), were caught engaging in hazing outside the school premises.1awphi1 The hazing incident was entered into the blotter of the Iloilo City Police.4 Thereafter, dialogues and consultations were conducted among the school authorities, the apprehended students and their parents. During the 28 November 2002 meeting, the parties agreed that, instead of the possibility of being charged and found guilty of hazing, the students who participated in the hazing incident as initiators, including petitioner students, would just transfer to another school, while those who participated as neophytes would be suspended for one month. The parents of the apprehended students, including petitioners, affixed their signatures to the minutes of the meeting to signify their conformity.5 In view of the agreement, the University did not anymore convene the Committee on Student Discipline (COSD) to investigate the hazing incident. On 5 December 2002, the parents of petitioner students (petitioner parents) sent a letter to the University President urging him not to implement the 28 November 2002 agreement.6 According to petitioner parents, the Principal, without convening the COSD, decided to order the immediate transfer of petitioner students. On 10 December 2002, petitioner parents also wrote a letter to Mrs. Ida B. Endonila, School Division Superintendent, Department of Education (DepEd), Iloilo City, seeking her intervention and prayed that petitioner students be allowed to take the home study program instead of transferring to another school.7 The DepEd asked the University to comment on the letter.8 The University replied and attached the minutes of the 28 November 2002 meeting.9 On 3 January 2003, petitioners filed a complaint for injunction and damages with the Regional Trial Court, Branch 29, Iloilo City (trial court) docketed as Civil Case No. 0327460.10 Petitioners assailed the Principals decision to order the immediate transfer of petitioner students as a violation of their right to due process because the COSD was not convened. On 5 February 2003, the trial court issued a writ of preliminary injunction and directed respondents to admit petitioner students during the pendency of the case.11 The 5 February 2003 Order reads: WHEREFORE, let [a] Writ of Preliminary Mandatory Injunction issue. The defendants are hereby directed to allow the plaintiffs minor children to attend their classes during the pendency of this case, without prejudice to any disciplinary proceeding to which any or all of them may be liable.

NELSON JENOSA and his son NIO CARLO JENOSA, SOCORRO CANTO and her son PATRICK CANTO, CYNTHIA APALISOK and her daughter CYNDY APALISOK, EDUARDO VARGAS and his son CLINT EDUARD VARGAS, and NELIA DURO and her son NONELL GREGORY DURO, Petitioners, vs. REV. FR. JOSE RENE C. DELARIARTE, O.S.A., in his capacity as the incumbent Principal of the High School Department of the University of San Agustin, and the UNIVERSITY OF SAN AGUSTIN, herein represented by its incumbent President REV. FR. MANUEL G. VERGARA, O.S.A., Respondents. DECISION CARPIO, J.: The Case This is a petition for review1 of the 16 June 2005 Decision2 and 22 March 20063 Resolution of the Court of Appeals in CA-G.R. SP No. 78894. In its 16 June 2005 Decision, the Court of Appeals granted the petition of respondents University of San Augustin (University), represented by its incumbent President Rev. Fr. Manuel G. Vergara, O.S.A. (University President), and Rev. Fr. Jose Rene C. Delariarte, O.S.A. (Principal), in his capacity as the incumbent Principal of the High School Department of the University (respondents) and ordered the dismissal of Civil Case Nos. 03-27460 and 03-27646 for lack of jurisdiction over the subject matter. In its 22 March 2006 Resolution, the Court of Appeals denied the motion for reconsideration of petitioners Nelson Jenosa and his son Nio Carlo Jenosa, Socorro Canto and her son Patrick Canto, Cynthia Apalisok and her daughter Cyndy Apalisok, Eduardo Vargas and his son Clint Eduard Vargas, and Nelia Duro and her son Nonell Gregory Duro (petitioners).

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SO ORDERED.12 Respondents filed a motion for reconsideration and asked for the dissolution of the writ. The trial court denied respondents motion. Respondents complied but with reservations. On 25 March 2003, respondents filed a motion to dismiss. Respondents alleged that the trial court had no jurisdiction over the subject matter of the case and that petitioners were guilty of forum shopping. On 19 May 2003, the trial court denied respondents motion. Respondents filed a motion for reconsideration. On 21 April 2003, petitioners wrote the DepEd and asked that it direct the University to release the report cards and other credentials of petitioner students.13 On 8 May 2003, the DepEd sent a letter to the University advising it to release petitioner students report cards and other credentials if there was no valid reason to withhold the same.14 On 14 May 2003, the DepEd sent another letter to the University to follow-up petitioners request.15 On 20 May 2003, the University replied that it could not release petitioner students report cards due to their pending disciplinary case with the COSD.16 On 28 May 2003, petitioners filed another complaint for mandatory injunction praying for the release of petitioner students report cards and other credentials docketed as Civil Case No. 03-27646.17 The trial court consolidated the two cases.18 On 17 June 2003, the trial court issued a writ of preliminary injunction and directed the University to release petitioner students report cards and other credentials.19 Respondents filed a motion for reconsideration. Respondents alleged that they could not comply with the writ because of the on-going disciplinary case against petitioner students. On 26 June 2003, the COSD met with petitioners for a preliminary conference on the hazing incident. On 7 July 2003, the University, through the COSD, issued its report finding petitioner students guilty of hazing. The COSD also recommended the exclusion of petitioner students from its rolls effective 28 November 2002. On 14 July 2003, the trial court issued an Order denying both motions for reconsideration.20 On 1 September 2003, respondents filed a special civil action for certiorari with the Court of Appeals. Respondents insisted that the trial court had no jurisdiction over the subject matter of Civil Case Nos. 03-27460 and 03-27646. Respondents also alleged that petitioners were guilty of forum shopping.

The Ruling of the Court of Appeals In its 16 June 2005 Decision, the Court of Appeals granted respondents petition and ordered the trial court to dismiss Civil Case Nos. 03-27460 and 03-27646 for lack of jurisdiction over the subject matter because of petitioners failure to exhaust administrative remedies or for being premature. According to the Court of Appeals, petitioners should have waited for the action of the DepEd or of the University President before resorting to judicial action. The Court of Appeals held: From the foregoing, it is clear that the court a quo committed grave [abuse] of discretion amounting to LACK OF JURISDICTION in INTERFERING, pre-maturely, with the exclusive and inherent authority of educational institutions to discipline. In directing herein petitioners [respondents in this case] to re-admit herein private respondents [petitioners in this case] and eventually, to release the report cards and other school credentials, prior to the action of the President of USA and of the recommendation of the COSD, the court a quo is guilty of improper judicial intrusion by encroaching into the exclusive prerogative of educational institutions. 21 Petitioners filed a motion for reconsideration.22 In its 22 March 2006 Resolution, the Court of Appeals denied petitioners motion for lack of merit. The Issues Petitioners raise the following issues: 1. Was the Court of Appeals correct in holding that Branch 29 of the Regional Trial Court of Iloilo City in Civil Case Nos. 03-27460 and 03-27646 did not acquire jurisdiction over the subject matter of this case for failure of petitioners to exhaust administrative remedies? 2. Was the recommendation/report/order of the Committee on Student Discipline dated 7 July 2003 valid, and did it justify the order of exclusion of petitioner students retroactive to 28 November 2002?23 The Ruling of the Court The petition has no merit. Discipline in education is specifically mandated by the 1987 Constitution which provides that all educational institutions shall "teach the rights and duties of citizenship, strengthen ethical and spiritual values, develop moral character and personal discipline."24 Schools and school administrators have the authority to maintain school discipline25 and the right to impose appropriate and reasonable disciplinary measures.26 On the other hand, students have the duty and the

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responsibility to promote and maintain the peace and tranquility of the school by observing the rules of discipline.27 In this case, we rule that the Principal had the authority to order the immediate transfer of petitioner students because of the 28 November 2002 agreement.28 Petitioner parents affixed their signatures to the minutes of the 28 November 2002 meeting and signified their conformity to transfer their children to another school. Petitioners Socorro Canto and Nelia Duro even wrote a letter to inform the University that they would transfer their children to another school and requested for the pertinent papers needed for the transfer.29 In turn, the University did not anymore convene the COSD. The University agreed that it would no longer conduct disciplinary proceedings and instead issue the transfer credentials of petitioner students. Then petitioners reneged on their agreement without any justifiable reason. Since petitioners present complaint is one for injunction, and injunction is the strong arm of equity, petitioners must come to court with clean hands. InUniversity of the Philippines v. Hon. Catungal, Jr.,30 a case involving student misconduct, this Court ruled: Since injunction is the strong arm of equity, he who must apply for it must come with equity or with clean hands. This is so because among the maxims of equity are (1) he who seeks equity must do equity, and (2) he who comes into equity must come with clean hands. The latter is a frequently stated maxim which is also expressed in the principle that he who has done inequity shall not have equity. It signifies that a litigant may be denied relief by a court of equity on the ground that his conduct has been inequitable, unfair and dishonest, or fraudulent, or deceitful as to the controversy in issue.31 Here, petitioners, having reneged on their agreement without any justifiable reason, come to court with unclean hands. This Court may deny a litigant relief if his conduct has been inequitable, unfair and dishonest as to the controversy in issue.1avvphi1 Since petitioners have come to court with inequitable and unfair conduct, we deny them relief. We uphold the validity of the 28 November 2002 agreement and rule that the Principal had the authority to order the immediate transfer of petitioner students based on the 28 November 2002 agreement. WHEREFORE, we DENY the petition. We AFFIRM the 16 June 2005 Decision and the 22 March 2006 Resolution of the Court of Appeals. G.R. No. 161338 April 27, 2007

DECISION AUSTRIA-MARTINEZ, J.: Assailed in the present Petition for Review on Certiorari is the Decision 1 of the Court of Appeals (CA) dated September 18, 2002 nullifying the Resolution dated July 11, 2000 of the Securities and Exchange Commission (SEC) En Banc and reinstating the Order dated March 13, 2000 of the SEC Securities Investigation and Clearing Departments (SICDs) Hearing Panel (Hearing Panel). Also assailed is the CA Resolution dated December 18, 2003, denying petitioners motion for reconsideration. The petition stemmed from a dispute between two groups of shareholders within the Mabini College, Inc. (Mabini), with petitioners comprising the Garcia-Lukban group, and respondents, the Adeva group. Sometime in 1995, petitioners filed SEC LEO Case No. 95-0005 (EB 496), a petition for Annual Elections of Stockholders and SEC Supervision in the Procedural Matter of Corporate Inspection with Mandatory Injunction, wherein a committee was composed for the reconstitution of Mabinis stock and transfer books. On July 2, 1999, the incumbent Board of Trustees passed a resolution authorizing the sale through bidding of 106 treasury shares of stock of Mabini by its Pre-qualification, Bids and Award Committee (PBAC) on August 9, 1999. 2 The Board agreed during its Special Meeting held on July 13, 1999 to direct the PBAC to send out to all known stockholders invitations to bid for the entire 106 treasury shares for a minimum bulk bid of One Million Eighty One Thousand Two Hundred (P1,081,200.00) Pesos or Ten Thousand Two Hundred (P10,200.00) Pesos per share. 3 The bidding, however, was deferred to September 4, 1999. 4 Thus, petitioners filed on August 31, 1999, SEC Case No. 08-99-6398 seeking to enjoin the scheduled sale, alleging that since 1983, respondent Romulo Adeva (Adeva) intentionally failed to call a stockholders meeting for the election of Mabinis Board of Trustees on the pretext that its stock and transfer books are missing, ensuring his indefinite tenure as President of the corporation. Petitioners prayed that the impending sale be enjoined on the grounds that the authority given by the Board of Trustees to the PBAC contravenes Section 9 of the Corporation Code which gives the Board of Directors or Trustees the right to dispose said shares for a reasonable price fixed by the Board; that the scheme to bid out the shares is violative of the stockholders preemptive right to purchase treasury shares; 5 that the stock and transfer book of Mabini has yet to be reconstituted; that as of the date of filing of the petition, there is no official list of stockholders of Mabini; and, that two members of the PBAC, namely: Cesar F. Echano (Echano) and Librado Guerra (Guerra) are not registeredstockholders of Mabini. 6 Then SEC Chairman Perfecto Yasay, Jr. issued a temporary restraining order (TRO) on September 2, 1999 which was extended until September 22, 1999. Hearing on the

LUZ GARCIA, JUSTO LUKBAN, ALICE ADEVA, MARCEL LUKBAN, WAVA ANN BAYLON, PAMELA ROSANNA APUYA, ALBERTO GARCIA, JR., AIDA FERRER and JANET VENIDA, Petitioners, vs. ROMULO M. ADEVA, CEZAR E. ECHANO and LIBRADO GUERRA, Respondents. *

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application for the issuance of a preliminary injunction was set on September 20 and 21, 1999. On September 23, 1999, after the expiration of the TRO, the PBAC re-scheduled the sale of the shares on September 28, 1999 at 1:00 to 3:00 p.m. 7 But before said date came, the Hearing Panel issued an Order dated September 27, 1999 granting the issuance of a writ of preliminary injunction, and enjoining the sale of the treasury shares, subject to the posting of an injunction bond in the amount of P50,000.00. 8 Attempt was made to serve a copy of the SEC Order in the morning of September 28, 1999, but it was refused by respondents counsel for the reason that the order was not signed by the majority of the Hearing Panel. 9 The matter was subsequently rectified and at 3:30 p.m. of the same day, the Hearing Panel telefaxed a copy of the signed order but respondents counsel still refused to receive the same on the ground that petitioners did not post an injunction bond and that the bidding had already commenced at 1:00 p.m. that day and was already finished, 10 with respondent Guerra as the winning bidder. As a result, petitioners filed an Omnibus Motion praying that the sale of the treasury shares be nullified and that respondents be cited in indirect contempt. 11 The Hearing Panel denied petitioners Omnibus Motion per its Order dated March 13, 2000, finding that there is no ground to nullify the sale or hold respondents in indirect contempt since at the time the sale was held, petitioners had yet to post an injunction bond which was done only on October 8, 1999, or 10 days after the scheduled sale. 12 Petitioners appealed to the SEC En Banc, and in its Resolution dated July 11, 2000, it affirmed the Hearing Panels finding that respondents may not be held in indirect contempt as the injunction order was released "with some defects," but it nullified the sale of the treasury shares based on the Hearing Panels "prima facie" finding that it lacked authority from Mabinis Board of Trustees. 13 This prompted respondents to file a petition for review with the CA. On September 18, 2002, the CA issued the herein assailed Resolution, granting the petition. It nullified the SEC En Bancs Resolution dated July 11, 2000 and reinstated the Hearing Panels Order dated March 13, 2000. 14 In sustaining the sale of the treasury shares, the CA found that the SEC En Banc went beyond the issue of the propriety of granting the writ of preliminary injunction when it annulled the Mabinis board resolution authorizing the sale of the treasury shares. According to the CA, the SEC En Banc delved on matters that were not before it when it ruled that the board of trustees lacked the authority to dispose of the shares, instead of just ruling on whether the Hearing Panel abused its discretion in denying petitioners Omnibus Motion. The CA further stated that it does not concur with the SEC En Bancs ruling that the sale lacked authority from Mabinis board, as it was the board itself which authorized the sale through the PBAC. Lastly, the CA sustained the Hearing Panels denial of petitioners Omnibus Motion due to their failure to timely post an injunction bond. 15

The CA denied petitioners motion for reconsideration per Resolution dated December 18, 2003. 16 Petitioners are now before the Court alleging that: I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE SEC DELVED ON MATTERS WHICH WERE NOT LAID BEFORE IT IN THE PETITION FOR CERTIORARI. II. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR WHEN IT FOUND THAT THE SALE OF TREASURY SHARES DID NOT LACK AUTHORITY FROM THE BOARD OF TRUSTEES III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT UPHELD THE HEARING PANELS FINDING THAT THERE IS NO GROUND TO NULLIFY THE BIDDING AND AWARD OF TREASURY SHARES SINCE NO WRIT HAS BEEN ISSUED PREVENTING SUCH BIDDING. 17 The Petition must be denied. However, it must first be made clear whether the petition filed by petitioners docketed as SEC Case No. 08-99-6398 is one which seeks only an ancillary remedy or one for Injunction, as a principal action. The prayer of the Petition reads: PRAYER WHEREFORE, the foregoing premises considered, it is most respectfully prayed of this Honorable Commission that: 1. Upon the filing of this petition, a Temporary Restraining Order (TRO) be issued directing respondents, their agents or representatives to cease and desist from offering for sale the treasury shares of Mabini College, Inc. in a bidding to be held for the purpose, on 4 September 1999, at 12:00 noon, at the Case Room of the Mabini College, Daet Camarines Norte. 2. After due proceedings, said injunction be made permanent.1awphi1.nt OTHER RELIEFS, just and equitable under the premises are likewise prayed for.
18

At first glance, it seems obvious that petitioners action is only to enjoin respondents Adeva, in his capacity as member of the Board of Trustees and President of Mabini,

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Echano, Lydia E. Cacawa, and Guerra, as Chairmen and Members, respectively of the PBAC of Mabini, "from offering for sale the treasury shares of Mabini College in a bidding to be held for the purpose, on September 4, 1999 at 12:00 noon." Garayblas v. Atienza, Jr. 19 is instructive, to wit: Injunction is a judicial writ, process or proceeding whereby a party is ordered to do or refrain from doing a certain act. It may be the main action or merely a provisional remedy for and as an incident in the main action. The Court has distinguished the main action for injunction from the provisional or ancillary remedy of preliminary injunction, thus: The main action for injunction is distinct from the provisional or ancillary remedy of preliminary injunction which cannot exist except only as part or an incident of an independent action or proceeding. As a matter of course, in an action for injunction, the auxiliary remedy of preliminary injunction, whether prohibitory or mandatory, may issue. Under the law, the main action for injunction seeks a judgment embodying a final injunction which is distinct from, and should not be confused with, the provisional remedy of preliminary injunction, the sole object of which is to preserve the status quo until the merits can be heard. A preliminary injunction is granted at any stage of an action or proceeding prior to the judgment or final order. It persists until it is dissolved or until the termination of the action without the court issuing a final injunction. 20 Considering the fact that in this case petitioners also prayed that the injunction be made permanent; and considering the allegations in the petition that under Section 9 of the Corporation Code, the power to dispose treasury shares is given to the Board of Directors or Trustees and not to any other Committee created by the Board; that the bidding of treasury shares is a plot by the incumbent President Adeva to corner treasury shares in order to secure majority shareholdings for purposes of corporate control; and that the right of respondents Echano and Guerra to act as Members of the Board of the PBAC is "very dubious" because their names, as subsequent buyers of shares, are not recorded in the Stock and Transfer Book of Mabini which has been declared missing and has yet to be reconstituted, 21 the Court is convinced that SEC Case No. 08-99-6398 is a principal action for Injunction, not merely for an ancillary remedy of writ of preliminary injunction, wherein the main issues involved, among others, are: (1) whether the creation of the PBAC by the Board of Trustees is valid under the Corporation Code; (2) whether there was a quorum when the Board of Trustees authorized the sale of the treasury shares; and (3) whether respondents Echano and Guerra are bona fide shareholders. These issues are not involved in SEC LEO Case No. 95-0005 (EB 496). The latter case is a separate action which involves the annual elections of stockholders and SEC supervision in the procedural matter of corporate injunction as well as the reconstitution of Mabinis stock and transfer books; and the reconstitution is still being undertaken at the time that SEC Case No. 08-996398 was filed by petitioners. Thus, SEC Case No. 08-99-6398 cannot even be referred to or consolidated with SEC LEO Case No. 95-0005 (EB 496). It is for the Hearing Panel in SEC Case No. 08-99-6398 to determine whether a final injunction may be issued under the facts and the law of the case.

The issue in the present Petition for Review by Certiorari is whether the CA erred in sustaining the Hearing Panels Order dated March 13, 2000 which denied for lack of merit petitioners Omnibus Motion to nullify the sale of the subject treasury sales in a bidding conducted by respondents on September 28, 1999. Attacking the CA Decision, petitioners claim that the CA erred in finding that the SEC En Banc delved on matters which were not laid before it in the Petition for Certiorari brought by petitioners questioning the denial of the Omnibus Motion by the Hearing Panel. To know whether the SEC En Banc went beyond the issue of the propriety of granting the writ of preliminary injunction in annulling the sale of the treasury shares, a look into the Omnibus Motion filed by petitioners with the Hearing Panel must be made as the Order dated March 13, 2000, denying the Omnibus Motion, is the precursor of the dispute at hand. It is from said motion where it can be determined what were the issues brought up to the SEC En Banc for resolution. Petitioners Omnibus Motion sought the nullity of the sale of the treasury shares in a bidding conducted by the PBAC and to hold respondents in contempt. The only reason given by petitioners in claiming that the award of the treasury shares to the winning bidder was null and void is that the bidding was made despite the issuance of a writ of preliminary injunction by the Hearing Panel per its Order dated September 27, 1999. 22 Petitioners also contended that respondents were guilty of indirect contempt for defying said Order. 23 Thus, it is only on these grounds that the Hearing Panel resolved the Omnibus Motion per its Order dated March 13, 2000, to wit: In the record however, is the petitioners bond in the amount of P50,000.00 pesos posted only on October 08, 1999, or ten (10) days after the scheduled bidding of the shares of stock on September 28, 1999. Indeed, the injunction bond was lately filed rendering the same as moot and academic to enjoin the bidding. Hence, there is no ground to nullify the said proceedings and the result since no writ has been issued preventing such bidding. Similarly, and since no bond was immediately posted and no writ was issued, the respondents cannot be charged of committing any act constituting indirect contempt of the Commission. The fact that the September 27, 1999 Order was released with some defects would normally put the respondents and their lawyers on guard, and to then scrutinize the regularity and validity of issuance is just a normal prudence [sic] for every litigants to do. And when the process server finally have [sic] a fax copy of the Order which was validly issued, the same was a fait accompli as the bidding was already done. 24 (Emphasis supplied) Consequently, it was an error for the SEC En Banc to delve into the question whether the sale of the treasury shares lacked authority from the Board of Trustees, and to further flog the Hearing Panel for allegedly disregarding said issue in resolving the Omnibus Motion.

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The Court does not subscribe to petitioners argument that a resolution on the issue of the legality of the corporate act authorizing the bidding sought to be enjoined is essential in the appeal taken by them from the Hearing Panel Resolution dated July 11, 2000 25 to the SEC En Banc. True, as stated by the SEC En Banc, that the Order dated September 29, 1999 granting petitioners application for the issuance of a writ of preliminary injunction made mention that the sale lacked authority from the Board of Trustees. 26However, as stated by the SEC En Banc, it was merely a "prima facie finding," 27 i.e., subject to contradiction by other evidence that may be presented during the trial on the merits of the main injunction case. It cannot be over emphasized that the lone ground relied upon by the Hearing Panel in denying petitioners motion to nullify the sale by PBAC of the treasury shares and to hold respondents in indirect contempt is petitioners failure to timely post a bond. Thus, any conclusive reliance on the alleged lack of authority of the Board of Trustees will, in effect, dispose of the case on the merits and would prematurely prejudge SEC Case No. 08-99-6398 without affording the parties the opportunity to rebut such prima facie finding. Any discussion on the validity of the authority to sell the treasury shares by PBAC is premature. At best, the Hearing Panels finding on this score is merely preliminary, subject to a final ruling on the main case. It is in this context that the Court finds that the CA should have refrained from dealing with the validity of the authority to sell the treasury shares. In the assailed Decision, the CA opined that it "cannot subscribe to the view that the sale of treasury shares lacked authority from the board of trustees x x x because it was precisely the board of trustees themselves that authorized the sale of the treasury shares through the PBAC." 28 In effect, the CA went against its own previous ruling that it was grave abuse of discretion on the part of the SEC En Banc to resolve the matter. The Court sustains the reinstatement of the Hearing Panels Order dated March 13, 2000. The absence of an injunction bond at the time that the bidding was conducted negates the petitioners demand for the invalidity of the sale of the treasury shares and to hold petitioners in indirect contempt of court. Sec. 4, Rule 58 of the 1997 Rules of Civil Procedure states: Sec. 4. Verified application and bond for preliminary injunction or temporary restraining order. - A preliminary injunction or temporary restraining order may be granted only when: (a) The application in the action or proceeding is verified, and shows facts entitling the applicant to the relief demanded; and

(b) Unless exempted by the court, the applicant files with the court where the action or proceeding is pending, a bond executed to the party or person enjoined, in an amount to be fixed by the court, to the effect that the applicant will pay to such party or person all damages which he may sustain by reason of the injunction or temporary restraining order if the court should finally decide that the applicant was not entitled thereto. Upon approval of the requisite bond, a writ of preliminary injunction shall be issued. x x x x (Emphasis supplied).1awphi1.nt Also, as stated by the Hearing Panel, the posting of the injunction bond is required by the SEC New Rules of Procedure, to wit: SECTION 1. Issuance of Preliminary Injunction. - A preliminary injunction may be granted by the Hearing Officer, upon bond filed with the Commission to be fixed by the Hearing Officer, at any time after the commencement of the action and before judgment when it is established after notice and hearing: x x x x (Emphasis supplied). A preliminary injunction or TRO may be granted only when, among others, the applicant, unless exempted by the court, files with the court where the action or proceeding is pending, a bond executed to the party or person enjoined, in an amount to be fixed by the court, to the effect that the applicant will pay such party or person all damages which he may sustain by reason of the injunction or TRO if the court should finally decide that the applicant was not entitled thereto. Upon approval of the requisite bond, a writ of preliminary injunction shall be issued. 29 It has been ruled that the posting of a bond is a condition sine qua non in order that the writ of preliminary injunction may issue. 30 Furthermore, respondents cannot be faulted for pushing through with the bidding and sale of the treasury shares. As the facts have it, the Order dated September 27, 1999 granting the issuance of a writ of preliminary injunction and enjoining the sale of the treasury shares was served on respondents counsel in the morning of the scheduled bidding date, September 28, 1999. Respondents counsel, however, rightly refused to receive the order due to the apparent lack of signatures of the majority of the Hearing Panel. By the time the defect was rectified and the order served on respondents counsel at 3:30 p.m. of the same day, the bidding had already commenced at 1:00 p.m., as scheduled, and the treasury shares sold to respondent Guerra. 31 Consequently, the CA is correct in nullifying the SEC En Banc Decision and in reinstating the Order dated March 13, 2000 of the Hearing Panel. WHEREFORE, the petition is DENIED for lack of merit.

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RECIEVERSHIP

On October 9, 1995, petitioners were dismissed for violation of Chapter II, Section 6, Article 46 (Violation of Law/Government Regulations) and Chapter II, Section 6, Article 48 (Prohibited Drugs) of the PAL Code of Discipline.5 Both simultaneously filed a case for illegal dismissal and damages. August 29, 2007 In the meantime, the Securities and Exchange Commission (SEC) placed PAL under an Interim Rehabilitation Receiver due to severe financial losses. On January 11, 1999, the Labor Arbiter rendered a decision6 in petitioners favor: WHEREFORE, conformably with the foregoing, judgment is hereby rendered finding the respondents guilty of illegal suspension and illegal dismissal and ordering them to reinstate complainants to their former position without loss of seniority rights and other privileges. Respondents are hereby further ordered to pay jointly and severally unto the complainants the following: Alberto J. Dumago - P409,500.00 backwages as of 1/10/99 34,125.00 for 13th month pay Juanito A. Garcia - P1,290,744.00 backwages as of 1/10/99

G.R. No. 164856

JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners, vs. PHILIPPINE AIRLINES, INC., Respondent. DECISION QUISUMBING, J.: This petition for review assails both the Decision1 dated December 5, 2003 and the Resolution2 dated April 16, 2004 of the Court of Appeals in CA-G.R. SP No. 69540, which had annulled the Resolutions3 dated November 26, 2001 and January 28, 2002 of the National Labor Relations Commission (NLRC) in NLRC Injunction Case No. 0001038-01, and also denied the motion for reconsideration, respectively. The antecedent facts of the case are as follows:

107,562.00 for 13th month pay Petitioners Alberto J. Dumago and Juanito A. Garcia were employed by respondent Philippine Airlines, Inc. (PAL) as Aircraft Furnishers Master "C" and Aircraft Inspector, respectively. They were assigned in the PAL Technical Center. On July 24, 1995, a combined team of the PAL Security and National Bureau of Investigation (NBI) Narcotics Operatives raided the Toolroom Section Plant Equipment Maintenance Division (PEMD) of the PAL Technical Center. They found petitioners, with four others, near the said section at that time. When the PAL Security searched the section, they found shabu paraphernalia inside the company-issued locker of Ronaldo Broas who was also within the vicinity. The six employees were later brought to the NBI for booking and proper investigation. On July 26, 1995, a Notice of Administrative Charge4 was served on petitioners. They were allegedly "caught in the act of sniffing shabu inside the Toolroom Section," then placed under preventive suspension and required to submit their written explanation within ten days from receipt of the notice. Petitioners vehemently denied the allegations and challenged PAL to show proof that they were indeed "caught in the act of sniffing shabu." Dumago claimed that he was in the Toolroom Section to request for an allen wrench to fix the needles of the sewing and zigzagger machines. Garcia averred he was in the Toolroom Section to inquire where he could take the Tracksters tire for vulcanizing. The amounts of P100,000.00 and P50,000.00 to each complainant as and by way of moral and exemplary damages; and The sum equivalent to ten percent (10%) of the total award as and for attorneys fees. Respondents are directed to immediately comply with the reinstatement aspect of this Decision. However, in the event that reinstatement is no longer feasible, respondent[s] are hereby ordered, in lieu thereof, to pay unto the complainants their separation pay computed at one month for [e]very year of service. SO ORDERED.7 Meanwhile, the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver. On appeal, the NLRC reversed the Labor Arbiters decision and dismissed the case for lack of merit.8 Reconsideration having been denied, an Entry of Judgment9 was issued on July 13, 2000.

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On October 5, 2000, the Labor Arbiter issued a Writ of Execution10 commanding the sheriff to proceed: xxxx 1. To the Office of respondent PAL Building I, Legaspi St., Legaspi Village, Makati City or to any of its Offices in the Philippines and cause reinstatement of complainants to their former position and to cause the collection of the amount of [P]549,309.60 from respondent PAL representing the backwages of said complainants on the reinstatement aspect; 2. In case you cannot collect from respondent PAL for any reason, you shall levy on the office equipment and other movables and garnish its deposits with any bank in the Philippines, subject to the limitation that equivalent amount of such levied movables and/or the amount garnished in your own judgment, shall be equivalent to [P]549,309.60. If still insufficient, levy against immovable properties of PAL not otherwise exempt from execution. x x x x11 Although PAL filed an Urgent Motion to Quash Writ of Execution, the Labor Arbiter issued a Notice of Garnishment12addressed to the President/Manager of the Allied Bank Head Office in Makati City for the amount of P549,309.60. PAL moved to lift the Notice of Garnishment while petitioners moved for the release of the garnished amount. PAL opposed petitioners motion. It also filed an Urgent Petition for Injunction which the NLRC resolved as follows: WHEREFORE, premises considered, the Petition is partially GRANTED. Accordingly, the Writ of Execution dated October 5, 2000 and related [N]otice of Garnishment [dated October 25, 2000] are DECLARED valid. However, the instant action is SUSPENDED and REFERRED to the Receiver of Petitioner PAL for appropriate action. SO ORDERED.13 PAL appealed to the Court of Appeals on the grounds that: (1) by declaring the writ of execution and the notice of garnishment valid, the NLRC gave petitioners undue advantage and preference over PALs other creditors and hampered the task of the Permanent Rehabilitation Receiver; and (2) there was no longer any legal or factual basis to reinstate petitioners as a result of the reversal by the NLRC of the Labor Arbiters decision.

The appellate court ruled that the Labor Arbiter issued the writ of execution and the notice of garnishment without jurisdiction. Hence, the NLRC erred in upholding its validity. Since PAL was under receivership, it could not have possibly reinstated petitioners due to retrenchment and cash-flow constraints. The appellate court declared that a stay of execution may be warranted by the fact that PAL was under rehabilitation receivership. The dispositive portion of the decision reads: WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE. The assailed November 26, 2001 Resolution, as well as the January 28, 2002 Resolution of public respondent National Labor Relations Commission is hereby ANNULLED and SET ASIDE for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice of Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE. SO ORDERED.14 Hence, the instant petition raising a single issue as follows: WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE PETITIONERS ARE ENTITLED TO THEIR ACCRUED WAGES DURING THE PENDENCY OF PALS APPEAL.15 Simply put, however, there are really two issues for our consideration: (1) Are petitioners entitled to their wages during the pendency of PALs appeal to the NLRC? and (2) In the light of new developments concerning PALs rehabilitation, are petitioners entitled to execution of the Labor Arbiters order of reinstatement even if PAL is under receivership? We shall first resolve the issue of whether the execution of the Labor Arbiters order is legally possible even if PAL is under receivership. We note that during the pendency of this case, PAL was placed by the SEC first, under an Interim Rehabilitation Receiver and finally, under a Permanent Rehabilitation Receiver. The pertinent law on this matter, Section 5(d) of Presidential Decree (P.D.) No. 902-A, as amended, provides that: SECTION 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: xxxx

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d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses property to cover all of its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the [management of a rehabilitation receiver or] Management Committee created pursuant to this Decree. The same P.D., in Section 6(c) provides that: SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxxx c) To appoint one or more receivers of the property, real or personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the investing public and creditors:Provided, finally, That upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. xxxx Worth stressing, upon appointment by the SEC of a rehabilitation receiver, all actions for claims against the corporation pending before any court, tribunal or board shall ipso jure be suspended. The purpose of the automatic stay of all pending actions for claims is to enable the rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the rescue of the corporation.16 More importantly, the suspension of all actions for claims against the corporation embraces all phases of the suit, be it before the trial court or any tribunal or before this Court.17 No other action may be taken, including the rendition of judgment during the state of suspension. It must be stressed that what are automatically stayed or suspended are the proceedings of a suit and not just the payment of claims during the execution stage after the case had become final and executory.18 Furthermore, the actions that are suspended cover all claims against the corporation whether for damages founded on a breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary nature.19 No exception in favor of labor claims is mentioned in the law.201avvphi1

This Courts adherence to the above-stated rule has been resolute and steadfast as evidenced by its oft-repeated application in a plethora of cases involving PAL, the most recent of which is Philippine Airlines, Inc. v. Zamora.21 Since petitioners claim against PAL is a money claim for their wages during the pendency of PALs appeal to the NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving petitioners case for illegal dismissal and should instead have directed them to lodge their claim before PALs receiver.22 However, to still require petitioners at this time to re-file their labor claim against PAL under the peculiar circumstances of the case that their dismissal was eventually held valid with only the matter of reinstatement pending appeal being the issue this Court deems it legally expedient to suspend the proceedings in this case. WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is hereby DIRECTED to quarterly update the Court as to the status of its ongoing rehabilitation. No costs. SO ORDERED. LEONARDO A. QUISUMBING Associate Justice

G.R. No. 135706

October 1, 2004

SPS. CESAR A. LARROBIS, JR. and VIRGINIA S. LARROBIS, petitioners, vs. PHILIPPINE VETERANS BANK, respondent. DECISION AUSTRIA-MARTINEZ, J.: Before us is a petition for review of the decision of the Regional Trial Court (RTC), Cebu City, Branch 24, dated April 17, 1998,1 and the order denying petitioners motion for reconsideration dated August 25, 1998, raising pure questions of law.2

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The following facts are uncontroverted: On March 3, 1980, petitioner spouses contracted a monetary loan with respondent Philippine Veterans Bank in the amount of P135,000.00, evidenced by a promissory note, due and demandable on February 27, 1981, and secured by a Real Estate Mortgage executed on their lot together with the improvements thereon. On March 23, 1985, the respondent bank went bankrupt and was placed under receivership/liquidation by the Central Bank from April 25, 1985 until August 1992.3 On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand letter for "accounts receivable in the total amount of P6,345.00 as of August 15, 1984,"4 which pertains to the insurance premiums advanced by respondent bank over the mortgaged property of petitioners.5 On August 23, 1995, more than fourteen years from the time the loan became due and demandable, respondent bank filed a petition for extrajudicial foreclosure of mortgage of petitioners property.6 On October 18, 1995, the property was sold in a public auction by Sheriff Arthur Cabigon with Philippine Veterans Bank as the lone bidder. On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare the extra-judicial foreclosure and the subsequent sale thereof to respondent bank null and void.7 In the pre-trial conference, the parties agreed to limit the issue to whether or not the period within which the bank was placed under receivership and liquidation was a fortuitous event which suspended the running of the ten-year prescriptive period in bringing actions.8 On April 17, 1998, the RTC rendered its decision, the fallo of which reads: WHEREFORE, premises considered judgment is hereby rendered dismissing the complaint for lack of merit. Likewise the compulsory counterclaim of defendant is dismissed for being unmeritorious.9 It reasoned that: defendant bank was placed under receivership by the Central Bank from April 1985 until 1992. The defendant bank was given authority by the Central Bank to operate as a private commercial bank and became fully operational only on August 3, 1992. From April 1985 until July 1992,

defendant bank was restrained from doing its business. Doing business as construed by Justice Laurel in 222 SCRA 131 refers to: ".a continuity of commercial dealings and arrangements and contemplates to that extent, the performance of acts or words or the exercise of some of the functions normally incident to and in progressive prosecution of the purpose and object of its organization." The defendant banks right to foreclose the mortgaged property prescribes in ten (10) years but such period was interrupted when it was placed under receivership. Article 1154 of the New Civil Code to this effect provides: "The period during which the obligee was prevented by a fortuitous event from enforcing his right is not reckoned against him." In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131, the Supreme Court said. "Having arrived at the conclusion that a foreclosure is part of a banks activity which could not have been pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the Monetary Board against petitioner from transacting business, until the directive of the Board was nullified in 1981. Indeed, the period during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned against him. (Art. 1154, NCC) When prescription is interrupted, all the benefits acquired so far from the possession cease and when prescription starts anew, it will be entirely a new one. This concept should not be equated with suspension where the past period is included in the computation being added to the period after the prescription is presumed (4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines 1991 ed. pp. 18-19), consequently, when the closure of the petitioner was set aside in 1981, the period of ten years within which to foreclose under Art. 1142 of the N.C.C. began to run and, therefore, the action filed on August 21, 1986 to compel petitioner to release the mortgage carried with it the mistaken notion that petitioners own suit for foreclosure has prescribed." Even assuming that the liquidation of defendant bank did not affect its right to foreclose the plaintiffs mortgaged property, the questioned extrajudicial foreclosure was well within the ten (10) year prescriptive period. It is noteworthy to mention at this point in time, that defendant bank through authorized Deputy Francisco Go made the first extrajudicial demand to the plaintiffs on August 1985. Then on March 24, 1995 defendant bank through its officer-in-charge Llanto made the second extrajudicial demand. And we

40

all know that a written extrajudicial demand wipes out the period that has already elapsed and starts anew the prescriptive period. (Ledesma vs. C.A., 224 SCRA 175.)10 Petitioners filed a motion for reconsideration which the RTC denied on August 25, 1998.11 Thus, the present petition for review where petitioners claim that the RTC erred: I IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS PUT UNDER RECEIVERSHIP AND LIQUIDATION WAS A FORTUITOUS EVENT THAT INTERRUPTED THE RUNNING OF THE PRESCRIPTIVE PERIOD. II IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY RESPONDENT ON PETITIONERS WIPED OUT THE PERIOD THAT HAD ALREADY ELAPSED. III IN DENYING PETITIONERS MOTION FOR RECONSIDERATION OF ITS HEREIN ASSAILED DECISION.12 Petitioners argue that: since the extra-judicial foreclosure of the real estate mortgage was effected by the bank on October 18, 1995, which was fourteen years from the date the obligation became due on February 27, 1981, said foreclosure and the subsequent sale at public auction should be set aside and declared null and void ab initio since they are already barred by prescription; the court a quo erred in sustaining the respondents theory that its having been placed under receivership by the Central Bank between April 1985 and August 1992 was a fortuitous event that interrupted the running of the prescriptive period;13 the court a quos reliance on the case of Provident Savings Bank vs. Court of Appeals14 is misplaced since they have different sets of facts; in the present case, a liquidator was duly appointed for respondent bank and there was no judgment or court order that would legally or physically hinder or prohibit it from foreclosing petitioners property; despite the absence of such legal or physical hindrance, respondent banks receiver or liquidator failed to foreclose petitioners property and therefore such inaction should bind respondent bank;15 foreclosure of mortgages is part of the receivers/liquidators duty of administering the banks assets for the benefit of its depositors and creditors, thus, the ten-year prescriptive period which started on February 27, 1981, was not interrupted by the time during which the respondent bank was placed under receivership; and the Monetary Boards prohibition from doing business should not be construed as barring any and all business dealings and transactions by the bank,

otherwise, the specific mandate to foreclose mortgages under Sec. 29 of R.A. No. 265 as amended by Executive Order No. 65 would be rendered nugatory.16Said provision reads: Section 29. Proceedings upon Insolvency Whenever, upon examination by the head of the appropriate supervising or examining department or his examiners or agents into the condition of any bank or non-bank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts. The Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and designate the official of the Central Bank or a person of recognized competence in banking or finance, as receiver to immediately take charge its assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank. Petitioners further contend that: the demand letter, dated March 24, 1995, was sent after the ten-year prescriptive period, thus it cannot be deemed to have revived a period that has already elapsed; it is also not one of the instances enumerated by Art. 1115 of the Civil Code when prescription is interrupted;17 and the August 23, 1985 letter by Francisco Go demanding P6,345.00, refers to the insurance premium on the house of petitioners, advanced by respondent bank, thus such demand letter referred to another obligation and could not have the effect of interrupting the running of the prescriptive period in favor of herein petitioners insofar as foreclosure of the mortgage is concerned.18 Petitioners then prayed that respondent bank be ordered to pay them P100,000.00 as moral damages, P50,000.00 as exemplary damages and P100,000.00 as attorneys fees.19 Respondent for its part asserts that: the period within which it was placed under receivership and liquidation was a fortuitous event that interrupted the running of the prescriptive period for the foreclosure of petitioners mortgaged property; within such period, it was specifically restrained and immobilized from doing business which includes foreclosure proceedings; the extra-judicial demand it made on March 24, 1995 wiped out the period that has already lapsed and started anew the prescriptive period; respondent through its authorized deputy Francisco Go made the first extrajudicial demand on the petitioners on August 23, 1985; while it is true that the first demand letter of August 1985 pertained to the insurance premium advanced by it over the mortgaged property of petitioners, the same however formed part of the latters

41

total loan obligation with respondent under the mortgage instrument and therefore constitutes a valid extra-judicial demand made within the prescriptive period.20 In their Reply, petitioners reiterate their earlier arguments and add that it was respondent that insured the mortgaged property thus it should not pass the obligation to petitioners through the letter dated August 1985.21 To resolve this petition, two questions need to be answered: (1) Whether or not the period within which the respondent bank was placed under receivership and liquidation proceedings may be considered a fortuitous event which interrupted the running of the prescriptive period in bringing actions; and (2) Whether or not the demand letter sent by respondent banks representative on August 23, 1985 is sufficient to interrupt the running of the prescriptive period. Anent the first issue, we answer in the negative. One characteristic of a fortuitous event, in a legal sense and consequently in relations to contract, is that its occurrence must be such as to render it impossible for a party to fulfill his obligation in a normal manner.22 Respondents claims that because of a fortuitous event, it was not able to exercise its right to foreclose the mortgage on petitioners property; and that since it was banned from pursuing its business and was placed under receivership from April 25, 1985 until August 1992, it could not foreclose the mortgage on petitioners property within such period since foreclosure is embraced in the phrase "doing business," are without merit. While it is true that foreclosure falls within the broad definition of "doing business," that is: a continuity of commercial dealings and arrangements and contemplates to that extent, the performance of acts or words or the exercise of some of the functions normally incident to and in progressive prosecution of the purpose and object of its organization.23 it should not be considered included, however, in the acts prohibited whenever banks are "prohibited from doing business" during receivership and liquidation proceedings. This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the Philippines24where we explained that: Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that when a bank is forbidden to do business in the Philippines and placed under receivership, the person designated as receiver shall immediately take charge of the banks assets and liabilities,

as expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank.25 This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and preserve the assets of the bank in substitution of its former management, and prevent the dissipation of its assets to the detriment of the creditors of the bank.26 When a bank is declared insolvent and placed under receivership, the Central Bank, through the Monetary Board, determines whether to proceed with the liquidation or reorganization of the financially distressed bank. A receiver, who concurrently represents the bank, then takes control and possession of its assets for the benefit of the banks creditors. A liquidator meanwhile assumes the role of the receiver upon the determination by the Monetary Board that the bank can no longer resume business. His task is to dispose of all the assets of the bank and effect partial payments of the banks obligations in accordance with legal priority. In both receivership and liquidation proceedings, the bank retains its juridical personality notwithstanding the closure of its business and may even be sued as its corporate existence is assumed by the receiver or liquidator. The receiver or liquidator meanwhile acts not only for the benefit of the bank, but for its creditors as well.27 In Provident Savings Bank vs. Court of Appeals,28 we further stated that: When a bank is prohibited from continuing to do business by the Central Bank and a receiver is appointed for such bank, that bank would not be able to do new business, i.e., to grant new loans or to accept new deposits. However,the receiver of the bank is in fact obliged to collect debts owing to the bank, which debts form part of the assets of the bank. The receiver must assemble the assets and pay the obligation of the bank under receivership, and take steps to prevent dissipation of such assets. Accordingly, the receiver of the bank is obliged to collect pre-existing debts due to the bank, and in connection therewith, to foreclose mortgages securing such debts.29 (Emphasis supplied.) It is true that we also held in said case that the period during which the bank was placed under receivership was deemedfuerza mayor which validly interrupted the prescriptive period.30 This is being invoked by the respondent and was used as basis by the trial court in its decision. Contrary to the position of the respondent and court a quo however, such ruling does not find application in the case at bar. A close scrutiny of the Provident case, shows that the Court arrived at said conclusion, which is an exception to the general rule, due to the peculiar circumstances of Provident Savings Bank at the time. In said case, we stated that:

42

Having arrived at the conclusion that a foreclosure is part of a banks business activity which could not have been pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the Monetary Board against petitioner from transacting business, until the directive of the Board was nullified in 1981.31 (Emphasis supplied.) Further examination of the Central Bank case reveals that the circumstances of Provident Savings Bank at the time were peculiar because after the Monetary Board issued MB Resolution No. 1766 on September 15, 1972, prohibiting it from doing business in the Philippines, the banks majority stockholders immediately went to the Court of First Instance of Manila, which prompted the trial court to issue its judgment dated February 20, 1974, declaring null and void the resolution and ordering the Central Bank to desist from liquidating Provident. The decision was appealed to and affirmed by this Court in 1981. Thus, the Superintendent of Banks, which was instructed to take charge of the assets of the bank in the name of the Monetary Board, had no power to act as a receiver of the bank and carry out the obligations specified in Sec. 29 of the Central Bank Act.32 In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the Monetary Board of the Central Bank by virtue of Resolution No. 364 on April 25, 1985, pursuant to Section 29 of the Central Bank Act on insolvency of banks.33 Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein respondent to deter its receiver and liquidator from performing their obligations under the law. Thus, the ruling laid down in the Provident case cannot apply in the case at bar. There is also no truth to respondents claim that it could not continue doing business from the period of April 1985 to August 1992, the time it was under receivership. As correctly pointed out by petitioner, respondent was even able to send petitioners a demand letter, through Francisco Go, on August 23, 1985 for "accounts receivable in the total amount ofP6,345.00 as of August 15, 1984" for the insurance premiums advanced by respondent bank over the mortgaged property of petitioners. How it could send a demand letter on unpaid insurance premiums and not foreclose the mortgage during the time it was "prohibited from doing business" was not adequately explained by respondent. Settled is the principle that a bank is bound by the acts, or failure to act of its receiver.34 As we held in Philippine Veterans Bank vs. NLRC,35 a labor case which also involved respondent bank, all the acts of the receiver and liquidator pertain to petitioner, both having assumed petitioners corporate existence. Petitioner cannot disclaim liability

by arguing that the non-payment of MOLINAs just wages was committed by the liquidators during the liquidation period.36 However, the bank may go after the receiver who is liable to it for any culpable or negligent failure to collect the assets of such bank and to safeguard its assets.37 Having reached the conclusion that the period within which respondent bank was placed under receivership and liquidation proceedings does not constitute a fortuitous event which interrupted the prescriptive period in bringing actions, we now turn to the second issue on whether or not the extra-judicial demand made by respondent bank, through Francisco Go, on August 23, 1985 for the amount of P6,345.00, which pertained to the insurance premiums advanced by the bank over the mortgaged property, constitutes a valid extra-judicial demand which interrupted the running of the prescriptive period. Again, we answer this question in the negative. Prescription of actions is interrupted when they are filed before the court, when there is a written extra-judicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.38 Respondents claim that while its first demand letter dated August 23, 1985 pertained to the insurance premium it advanced over the mortgaged property of petitioners, the same formed part of the latters total loan obligation with respondent under the mortgage instrument, and therefore, constitutes a valid extra-judicial demand which interrupted the running of the prescriptive period, is not plausible. The real estate mortgage signed by the petitioners expressly states that: This mortgage is constituted by the Mortgagor to secure the payment of the loan and/or credit accommodation granted to the spouses Cesar A. Larrobis, Jr. and Virginia S. Larrobis in the amount of ONE HUNDRED THIRTY FIVE THOUSAND (P135,000.00) PESOS ONLY Philippine Currency in favor of the herein Mortgagee.39 The promissory note, executed by the petitioners, also states that: FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO PAY THE PHILIPPINE VETERANS BANK, OR ORDER, AT ITS OFFICE AT CEBU CITY THE SUM OF ONE HUNDRED THIRTY FIVE THOUSAND PESOS (P135,000.00), PHILIPPINE CURRENCY WITH INTEREST AT THE RATE OF FOURTEEN PER CENT (14%) PER ANNUM FROM THIS DATE UNTIL FULLY PAID.40 Considering that the mortgage contract and the promissory note refer only to the loan of petitioners in the amount ofP135,000.00, we have no reason to hold that the insurance premiums, in the amount of P6,345.00, which was the subject of the August

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1985 demand letter, should be considered as pertaining to the entire obligation of petitioners. In Quirino Gonzales Logging Concessionaire vs. Court of Appeals,41 we held that the notices of foreclosure sent by the mortgagee to the mortgagor cannot be considered tantamount to written extrajudicial demands, which may validly interrupt the running of the prescriptive period, where it does not appear from the records that the notes are covered by the mortgage contract.42 In this case, it is clear that the advanced payment of the insurance premiums is not part of the mortgage contract and the promissory note signed by petitioners. They pertain only to the amount of P135,000.00 which is the principal loan of petitioners plus interest. The arguments of respondent bank on this point must therefore fail. As to petitioners claim for damages, however, we find no sufficient basis to award the same. For moral damages to be awarded, the claimant must satisfactorily prove the existence of the factual basis of the damage and its causal relation to defendants acts.43 Exemplary damages meanwhile, which are imposed as a deterrent against or as a negative incentive to curb socially deleterious actions, may be awarded only after the claimant has proven that he is entitled to moral, temperate or compensatory damages.44 Finally, as to attorneys fees, it is demanded that there be factual, legal and equitable justification for its award.45 Since the bases for these claims were not adequately proven by the petitioners, we find no reason to grant the same. WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch 24, dated April 17, 1998, and the order denying petitioners motion for reconsideration dated August 25, 1998 are hereby REVERSED and SET ASIDE. The extra-judicial foreclosure of the real estate mortgage on October 18, 1995, is hereby declared null and void and respondent is ordered to return to petitioners their owners duplicate certificate of title.

The sad and lamentable spectacle that this case presents, that is, the execution of a final and executory decision forestalled by perpetual dilatory tactics employed by a litigant, makes a blatant mockery of justice. The Court cannot countenance, and in fact, condemns, the outrageous abuse of the judicial process by Spouses Manuel A. Aguilar and Yolanda C. Aguilar (petitioners) and their counsel. Before the Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the Decision1 dated October 29, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 71849 which dismissed petitioners' Petition for Certiorari, and the CA Resolution2 dated April 29, 2003 which denied petitioners' Motion for Reconsideration. The procedural antecedents and factual background of the case are as follows: Sometime in 1979, petitioners obtained a P600,000.00 loan from the Manila Banking Corporation (respondent), secured by a real estate mortgage over their 419-square meter property located at No. 8 Pia St., Valle Verde, Pasig City, covered by Transfer Certificate of Title (TCT) No. 11082. When petitioners failed to pay their obligation, the mortgaged property was extra-judicially foreclosed. Respondent was the winning bidder at public auction sale on May 20, 1982. Consequently, a Certificate of Sale was issued in its favor on June 23, 1982. Subsequently, on May 30, 1983, instead of redeeming the property, petitioners filed a complaint for annulment of the foreclosure sale of the property before the Regional Trial Court, Branch 165, Pasig City (RTC Branch 165), docketed as Civil Case No. 49793. While the case was pending, the parties entered into a compromise agreement.3 Under the Compromise Agreement dated January 23, 1987, the petitioners admitted the validity of the extra-judicial foreclosure and agreed to purchase the property from respondent for P2,548,000.00. Parties agreed that the amount ofP100,000.00 shall be payable upon execution of the agreement and the balance of P2,448,000.00, which shall earn twenty-six per cent (26%) interest per annum, shall be payable in eighteen installments from February 23, 1987 to July 27, 1988. They further agreed that in case of default: (a) all outstanding installments and/or interest thereon shall be immediately due; (b) petitioners shall immediately vacate the property and deliver possession thereof to respondent; (c) respondent shall be entitled to register all documents needed to transfer title over the property in their favor; and, (d) respondent shall be entitled to ask for the execution of the judgment or an ancillary remedy necessary to place it in possession of the property. On January 30, 1987, RTC Branch 165 adopted and approved the Compromise Agreement.4 Petitioners failed to pay the balance of P2,448,000.00 within the eighteen-installment period from February 23, 1987 to July 27, 1988. A year and three months later, or on October 20, 1989, respondent filed a Motion for Issuance of Writ of Execution to enforce the Decision dated January 30, 1987.5

G.R. No. 157911

September 19, 2006

SPOUSES MANUEL A. AGUILAR and YOLANDA C. AGUILAR, petitioners, vs. THE MANILA BANKING CORPORATION, respondent. DECISION AUSTRIA-MARTINEZ, J.:

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On November 28, 1989, RTC Branch 165 issued an Order granting the motion and issuing a writ of execution: (a) directing petitioners to immediately vacate the property and surrender possession to the respondent; (b) directing the Register of Deeds of Metro Manila, District II to register any and all documents needed to transfer title over the property to respondent and to issue a new certificate of title respondent's favor free from any liens, adverse claims and/or encumbrances; (c) issuing a writ of possession in respondent's favor to place it in possession of the property.6 However, on January 22, 1990, petitioners filed a Manifestation praying for deferment of the enforcement of the writ of execution until July 31, 1990 because petitioners have a pending proposal for the settlement of their judgment debt.7 The manifestation was with the conformity of respondents.8 On January 24, 1990, RTC Branch 165 issued an Order granting the motion and holding in abeyance the enforcement of the writ of execution until July 31, 1990.9 However, no settlement was reached by the parties during the period. One year and four months later, petitioners still failed to settle their judgment debt. Consequently, respondent filed on December 2, 1991 a Manifestation reiterating its motion for the issuance of a writ of execution.10 On December 5, 1991, RTC Branch 165 issued an Order granting the manifestation and directing the issuance of a writ of execution to enforce the Decision dated January 30, 1987.11 To evade the implementation of the writ, petitioners filed on December 20, 1991 an Ex-Parte Motion to Recall the Court's Order dated December 5, 1991 claiming that their obligation was novated by the Letter dated June 7, 1991 from respondent's Statutory Receiver.12 In said letter, respondent's Statutory Receiver approved the purchase of the property on installment basis over a three-year period at an interest rate of twelve per cent (12%) with P481,265.00 due on September 30, 1991, P481,265.00 due on September 30, 1992, and P724,064.79 due on September 30, 1993.13 On December 2, 1992, respondent filed a Manifestation and Motion for Issuance of Alias Writ of Execution manifesting that the Letter dated June 7, 1991 did not novate the Decision dated January 30, 1987 but was a mere accommodation of the petitioners' request for a liberal mode of payment of their account and petitioners still failed to comply with such approved mode of payment.14 On December 14, 1992, petitioners filed their Comment and Manifestation praying for a humanitarian and liberal judicial dispensation since that they have been paying their obligations to respondent despite delay due to "financial restraints for family subsistence and their children's educational expenses".15 On February 1, 2000, respondent filed an Urgent Ex-Parte Manifestation praying for resolution of the pending incidents.16On March 3, 2000, petitioners filed their Opposition claiming that Section 6, Rule 39 of the Rules of Court bars execution, by mere motions, of judgment which is more than five years old. On March 14, 2000,

respondent filed its Reply stating that the peculiar circumstances of the case warrant its exclusion from the scope of said Rule. On March 20, 2000, RTC Branch 165 issued its Order which resolved the pending motions with the Court. With respect to petitioner's ex-parte motion to recall, the Court said that for failure to comply with Sections 4, 5 and 6 of Rule 15 of the Revised Rules of Court and considering the nature of petitioners' motion, it treated petitioner's motion as a mere scrap of paper.17 As to respondent's motion for issuance of a writ of execution, it granted the same, holding that Section 6, Rule 39 of the Rules of Court does not apply since the delay in the execution of the judgment was due to petitioners who made several alternative payment proposals, requested several extensions of time to pay their account, filed dilatory motions and pleadings and it would be a blatant injustice to allow them to profit from the delays they deliberately caused to escape completely and absolutely the satisfaction of their admitted and confessed obligation by sheer literal adherence to technicality.18 On March 30, 2000, petitioners filed their Motion for Reconsideration 19 but RTC Branch 165 denied it in its Order dated May 30, 2000.20 On June 20, 2000, petitioners filed a Notice of Appeal21 but RTC Branch 165 denied it in its Order dated August 21, 2000 on the ground that an order of execution is not appealable.22 Thereafter, petitioners filed a six-page Petition for Review on Certiorari with this Court, docketed as G.R. No. 144719, reiterating that the Decision dated January 30, 1987 can no longer be executed on mere motion since it is more than five years old. 23 In a Resolution dated October 11, 2000, the First Division of this Court denied the petition for violation of the rule on hierarchy of courts and failure to show special and important reasons or exceptional and compelling circumstances that justify a disregard of the rule.24 Petitioners filed a Motion for Reconsideration but the Court denied it with finality in its Resolution dated December 11, 2000.25 Since the Resolution in G.R. No. 144719 became final and executory on January 16, 2001, RTC Branch 165 issued a writ of execution on February 19, 2001 to enforce the Decision dated January 30, 1987.26 On February 23, 2001, the Sheriff issued a Notice for Compliance of the said writ.27 Undaunted by their previous setbacks, petitioners filed on March 6, 2001 in RTC Branch 165 an Omnibus Motion to quash the Writ of Execution insisting anew on their novation and prescription theories.28 They also moved for consignation of the amount of their obligation under the Letter dated June 7, 1991 of respondent's Statutory Receiver. On March 14, 2001, respondent filed an Ex-Parte Motion for Order to Divest Plaintiffs' Title and to Direct the Register of Deeds to Transfer Title to Defendant29 based on

45

Section 10, Rule 39 of the 1997 Rules of Civil Procedure. On March 19, 2001, respondent filed its Opposition (to petitioners' Omnibus Motion) and Motion to Cite Plaintiffs in Contempt claiming that the Omnibus Motion is nothing but petitioners' desperate attempt to thwart or delay the payment of their obligations and they should be declared guilty of indirect contempt for their improper conduct calculated to impede, obstruct and degrade the administration of justice.30 On May 2, 2001, petitioners filed an Urgent Motion for Inhibition.31 While RTC Branch 165 Presiding Judge Marietta A. Legaspi denied the motion for inhibition in her Order dated June 5, 2001, she voluntarily inhibited herself from further participating in the case to show that she has no interest therein.32 Respondent filed a Motion for Partial Reconsideration33to no avail.34 The case was re-raffled and was assigned to Branch 268 presided by Judge Amelia C. Manalastas. On September 17, 2001 and January 4, 2002, respondent filed two Motions to Resolve Pending Incidents.35 Despite the fact that Judge Manalastas has not actively participated in the case since she has not acted on the pending incidents, petitioners filed on February 5, 2002 a Motion for Inhibition.36 A day later, on February 6, 2002, Judge Manalastas granted the motion for inhibition.37 Thus, the case was again reraffled and was assigned to Branch 167 presided by Judge Jesus G. Bersamira. On February 13, 2002, respondent filed again a Motion to Resolve Pending Incidents.38 On March 22 and 26, 2002, both parties filed separate Urgent Motions to Resolve the case.39 Subsequently, petitioners filed a Manifestation and Motion that the Letter dated June 7, 1991 be marked as their exhibit.40 RTC Branch 167 in its Order dated April 30, 2002 admitted the exhibit over the objections of respondent.41 On May 24, 2002, RTC Branch 167 rendered its Omnibus Order denying the Omnibus Motion to quash the writ of execution and for consignation, as well as the motion to cite petitioners in contempt and the ex parte motion for an order to divest petitioners' title to respondent. It held that there was no novation because there was no incompatibility between the Letter dated June 7, 1991 and the Decision dated January 30, 1987 with the former only providing for a more liberal scheme of payment and grant of reduced interest; that petitioners' claim that respondent's receivership and the Letter dated June 7, 1991 are supervening events which rendered the execution unjust and impossible is unavailing since there is nothing on record to indicate that such circumstances resulted in unfairness and injustice to petitioners if execution of judgment is carried out; that petitioner's claim that the judgment could no longer be executed by mere motion after the five-year period had elapsed from its finality is specious since any interruption or delay occasioned by petitioners will extend the time within which the judgment may be executed by motion.42 No motion for reconsideration was filed by the petitioners. Accordingly, RTC Branch 167 issued a Writ of Execution on July 4, 2002.43 On July 23, 2002, the Sheriff issued the Notice for Compliance of the said writ.44

Petitioners filed on July 26, 2002 a petition for certiorari with the CA, docketed as CAG.R. SP No. 71849.45 They reiterated that the Decision dated January 30, 1987 cannot be executed by mere motion filed on February 1, 2000 since more than five years have elapsed. On October 29, 2002, the CA denied the petition for certiorari.46 It held that since the delays were occasioned by petitioners' own initiative and for their own advantage, the five-year period allowed for the enforcement of the judgment by motion have been interrupted or suspended. On November 13, 2002, petitioners filed a Motion for Reconsideration47 but the CA denied it in its Resolution dated April 29, 2003.48 Hence, the present petition anchored on the following grounds: 1. THE HONORABLE COURT OF APPEALS ERRED IN NOT RECOGNIZING THAT PRESCRIPTION HAS SET IN IN THIS CASE CONSIDERING THAT MORE THAN FIVE (5) YEARS, NAY, MORE THAN TEN (10) YEARS, HAD ELAPSED SINCE THE DECISION BASED ON COMPROMISE AGREEMENT BECAME FINAL AND EXECUTORY. 2. THE HONORABLE COURT OF APPEALS ERRED IN NOT RECOGNIZING THAT EVENTS AND CIRCUMSTANCES IN THIS CASE HAVE TRANSPIRED AFTER THE DECISION HAD BECOME FINAL AND EXECUTORY THAT WARRANTS AND CALLS FOR STAY OR PRECLUSION OF EXECUTION, CONSIDERING THAT THE LETTERAPPROVAL OF THE STATUTORY RECEIVER OF RESPONDENT PARTAKES OF AN EXCEPTION TO THE GENERAL RULE WHICH HAS BEEN CONSISTENTLY UPHELD BY THIS HONORABLE SUPREME COURT. 3. THE HONORABLE COURT OF APPEALS ERRED IN NOT RECOGNIZING THAT THE LETTER APPROVAL OF THE STATUTORY RECEIVER NOVATED THE COMPROMISE AGREEMENT AND DECISION BASED ON COMPROMISE AGREEMENT. 4. THE HONORABLE COURT OF APPEALS ERRED IN NOT RECOGNIZING THAT THE EQUITIES OF THE CASE FAVOR HEREIN PETITIONERS.49 Anent the first ground, petitioners reiterate that under Section 6 of Rule 39, Rules of Court, the execution of the judgment by mere motion was barred by prescription, given that more than five years had lapsed since the Decision dated January 30, 1987 became final and executory and they cannot be faulted for the delay as they have done nothing that warrants the conclusion that they employed unscrupulous machinations and dilatory tactics.

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As to the second ground, petitioners argue that respondent's receivership is a supervening event that rendered execution of the Decision dated January 30, 1987 impossible, if not unjust; that since a bank under receivership is relieved of its obligation to pay interest on the deposits of its depositors, they (petitioners) are also not obliged to pay interest on a loan due it and interest shall commence again only after respondent's resumption of banking operations. On the third ground, petitioners maintain that the Letter dated June 7, 1991 of respondent's Statutory Receiver novated the Decision dated January 30, 1987 considering the substantial differences in their principal terms and conditions. On the fourth ground, petitioners aver that the acceleration clause provision of the Compromise Agreement is iniquitous and void for being violative of morals and public policy. In their Comment, respondent contends that the present petition should be dismissed outright because it is barred by res judicata or the final judgment of this Court in G.R. No. 144719 and petitioners engaged in forum-shopping by deliberately failing to state that they previously filed G.R. No. 144719 where the issue of prescription was raised. Even if the petition is given due course, respondent argues that execution of the Decision dated January 30, 1987 is not barred by prescription; that respondent's receivership and the Letter dated June 7, 1991 of respondent's Statutory Receiver are not circumstances that would render the execution of the judgment unjust, inequitable or even merit a stay of execution; that the Letter dated June 7, 1991 of respondent's Statutory Receiver did not novate the Decision dated January 30, 1987 since there was no intent to novate petitioners' judgment obligation.50 In Reply, petitioners argue that res judicata is not applicable since the minute Resolution of the Court in G.R. No. 144719: (a) does not operate as adjudication on the merits, (b) was not rendered with jurisdiction over the parties; and (c) involved different subject matters and causes of action.51 In the Resolution dated May 15, 2003, upon motion of petitioner, the Court directed the parties to maintain the status quountil further orders from this Court.52 The petition is bereft of merit. Prefatorily, the Court notes that the petition for certiorari before the CA should have been dismissed outright since petitioners failed to file a motion for reconsideration from the RTC Omnibus Order dated May 24, 2002. Section 1 of Rule 65 of the 1997 Rules of Civil Procedure provides: SECTION 1. Petition for certiorari. When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of his jurisdiction, or with grave abuse of discretion amounting to lack of or excess of jurisdiction, and there is no appeal, or any plain, speedy, and

adequate remedy in the ordinary course of the law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require. (Emphasis supplied) The plain and adequate remedy referred to in the rule is a motion for reconsideration of the assailed decision or order. The purpose for this requirement is to grant an opportunity for the court or agency to correct any actual or perceived error attributed to it by the re-examination of the legal and factual circumstances of the case53 without the intervention of a higher court.54 Thus, the filing of a motion for reconsideration is a condition sine qua non to the institution of a special civil action for certiorari. While jurisprudence has recognized several exceptions to the rule, such as: (a) where the order is a patent nullity, as where the court a quo has no jurisdiction; (b) where the questions raised in the certiorari proceedings have been duly raised and passed upon by the lower court, or are the same as those raised and passed upon in the lower court; (c) where there is an urgent necessity for the resolution of the question and any further delay would prejudice the interests of the Government or of the petitioner or the subject matter of the action is perishable; (d) where, under the circumstances, a motion for reconsideration would be useless; (e) where petitioner was deprived of due process and there is extreme urgency for relief; (f) where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial court is improbable; (g) where the proceedings in the lower court are a nullity for lack of due process; (h) where the proceedings was ex parte or in which the petitioner had no opportunity to object; and (i) where the issue raised is one purely of law or where public interest is involved,55 none of these exceptions apply here. In the present case, the petitioners not only failed to explain their failure to file a motion for reconsideration before the RTC, they also failed to show sufficient justification for dispensing with the requirement. A motion for reconsideration is not only expected to be but would actually have provided an adequate and more speedy remedy than the petition for certiorari.56Certiorari cannot be resorted to as a shield from the adverse consequences of petitioners' own omission to file the required motion for reconsideration.57 In any case, even if petitioners' procedural faux pas is ignored, their contentions on the substantive aspect of the case fail to invite judgment in their favor. Petitioners are barred from raising the issue on the prescription of execution of the decision by mere motion under the principle of the "law of the case," which is the practice of courts in refusing to reopen what has been decided. It means thatwhatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court.58

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The law of the case on the issue of prescription of the execution of the decision by mere motion or applicability of Section 6, Rule 39 of the Rules of Court has been settled in the Order dated March 20, 2000 of RTC Branch 165. Upon denial of petitioner's motion for reconsideration, they erroneously sought review with this Court which dismissed their petition for review on certiorari for violation of the rule on hierarchy of courts and for failure to show special and important reasons or exceptional and compelling circumstances that justify a disregard of the rule. 59 This Court's Resolution became final and executory on January 16, 2001. Thus, petitioners are bound thereby. The question of prescription has been settled with finality and may no longer be resurrected by petitioners. It is not subject to review or reversal in any court, even this Court. The CA failed to consider this principle of law of the case, which is totally different from the concept of res judicata. InPadillo v. Court of Appeals,60 the Court distinguished the two as follows: x x x Law of the case does not have the finality of the doctrine of res judicata, and applies only to that one case, whereas res judicata forecloses parties or privies in one case by what has been done in another case. In the 1975 case of Comilang v. Court of Appeals (Fifth Division.), a further distinction was made in this manner: The doctrine of law of the case is akin to that of former adjudication, but is more limited in its application. It relates entirely to questions of law, and is confined in its operation to subsequent proceedings in the same case. The doctrine of res judicata differs therefrom in that it is applicable to the conclusive determination of issues of fact, although it may include questions of law, and although it may apply to collateral proceedings in the same action or general proceeding, it is generally concerned with the effect of an adjudication in a wholly independent proceeding.61 To elucidate further, res judicata or bar by prior judgment is a doctrine which holds that a matter that has been adjudicated by a court of competent jurisdiction must be deemed to have been finally and conclusively settled if it arises in any subsequent litigation between the same parties and for the same cause.62 The four requisites for res judicata to apply are: (a) the former judgment or order must be final; (b) it must have been rendered by a court having jurisdiction over the subject matter and the parties; (c) it must be a judgment or an order on the merits; and (d) there must be, between the first and the second actions, identity of parties, of subject matter and of cause of action.63 The fourth requisite is wanting in the present case. There is only one case involved. There is no second independent proceeding or subsequent litigation between the parties. The present petition concerns subsequent proceedings in the same case, with petitioners raising the same issue long settled by a prior appeal. On the matter of forum shopping, while the Court has held that forum shopping exists only where the elements of litis pendentia are present or where a final judgment in one

case will amount to res judicata in another,64 it must be recalled that the doctrines of law of the case and res judicata are founded on a public policy against reopening that which has previously been decided.65 Both doctrines share the policy consideration of putting an end to litigation.66 Thus, the principle of forum shopping should apply by analogy to a case involving the principle of law of the case. Moreover, although forum shopping exists when, as a result of an adverse opinion in one forum, a party seeks a favorable opinion, other than by appeal or certiorari, in another, or when a party institutes two or more suits in different courts, either simultaneously or successively, in order to ask the courts to rule on the same or related causes and/or to grant the same or substantially the same reliefs on the supposition that one or the other court would make a favorable disposition or increase a party's chances of obtaining a favorable decision or action,67 the peculiar circumstances attendant in this case bate out a situation akin to forum shopping there is only one court involved, RTC Pasig City, but the issue of prescription was ultimately resolved by two different branches thereof Branches 165 and 167. Petitioners first raised before RTC Branch 165 the issue of prescription of the execution of the decision by mere motion. Said RTC Branch 165 ruled against petitioners and the court's order thereon became final and executory. Petitioners raised the issue again in an Omnibus Motion with the same RTC Branch 165. However, they moved for the inhibition of the presiding judge hearing the issue not only once, but twice, both motions granted in their favor and the case was successively raffled and assigned to two different branches of RTC Pasig, first to Branch 268 and then to Branch 167, which ruled against petitioners. Through the motions for inhibition of the presiding judges and the assignment of the case to different branches of the same court, petitioners sought to obtain from one branch a ruling more favorable than the ruling of another branch. They deliberately sought a friendly branch of the same court to grant them the relief that they wanted, despite the finality of the resolution of one branch on the matter. This is a permutation of forum shopping. It trifles with the courts, abuses their processes, degrades the administration of justice, and congests court dockets.68 Be it remembered that the grave evil sought to be avoided by the rules against forum shopping is the rendition by two competent tribunals of two separate, and contradictory decisions. Unscrupulous party-litigants, taking advantage of a variety of competent tribunals, may repeatedly try their luck in several different fora until a favorable result is reached. This would make a complete mockery of the judicial system.69 As to petitioners' arguments on the inequity of the acceleration clause of the Compromise Agreement, respondent's receivership as a supervening event, and novation of the Compromise Agreement by the Letter dated June 7, 1991, the Court holds that these were raised as mere afterthought. If petitioners sincerely believed in

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the merits of their arguments, they should have raised them at the earliest opportunity and pursued their ultimate resolution. However, petitioners did not. Petitioners are barred from raising arguments concerning the inequity of the acceleration clause of the Compromise Agreement since they only raised it for the first time before the CA in their Petition for Certiorari70 in CA-G.R. SP No. 71849. To consider the argument raised belatedly in a pleading filed in the appellate court, especially in the executory stage of the proceedings, would amount to trampling on the basic principles of fair play, justice and due process. In addition, after adopting and agreeing to the terms and conditions of the Compromise Agreement, petitioners cannot be permitted to subsequently make a complete volte face and attack the validity of the said agreement when they miserably failed to comply with its provisions. Our law and policy do not sanction such a somersault. What's more, petitioners also failed to comply with the reduced purchase amount and interest rate granted in the Letter dated June 7, 1991. They can hardly evoke judicial compassion. On the arguments relating to the effect of respondent's receivership, petitioners brought this matter for the first time in RTC Branch 165 in their Omnibus Motion dated March 5, 2001, fourteen years after respondent was placed under receivership and was ordered to close operation in 1987. The belated invocation of such circumstance speaks strongly of the staleness of their claim. Besides, it would be absurd to adopt petitioners' position that they are not obliged to pay interest on their obligation when respondent was placed under receivership. When a bank is placed under receivership, it would only not be able to do new business, that is, to grant new loans or to accept new deposits. However, the receiver of the bank is in fact obliged to collect debts owing to the bank, which debts form part of the assets of the bank.71 Thus, petitioners' obligation to pay interest subsists even when respondent was placed under receivership. The respondent's receivership is an extraneous circumstance and has no effect on petitioners' obligation. On the claim of novation, petitioners raised it for the first time before RTC Branch 165 in their Ex-Parte Motion to Recall the Court's Order dated December 5, 199172 but they did not pursue the matter after their ex-parte motion was denied. They did not raise said issue in their motion for reconsideration or in their first petition for review on certiorari with this Court in G.R. No. 144719. Thus, they are deemed to have abandoned their claim of novation. They cannot be allowed to revive the issue as it is offensive to basic rules of fair play, justice and due process. Moreover, the Court cannot see how novation can take place considering that the surrounding circumstances negate the same. The established rule is that novation is never presumed; it must be clearly and unequivocally shown.73 Novation will not be allowed unless it is clearly shown by express agreement, or by acts of equal import. Thus, to effect an objective novation it is imperative that the new obligation expressly

declares that the old obligation is thereby extinguished or that the new obligation be on every point incompatible with the new one.74 In the present case, there is no clear intent of the parties to make the Letter dated June 7, 1991 completely supersede and abolish the Compromise Agreement adopted and approved by the RTC in its Decision dated January 30, 1987. Petitioners were merely granted a more liberal scheme of payment and reduced rate of interest but the conditions relating to the consequences of default in payment remained, such that when petitioners' failed to comply with the approved mode of payment in the Letter dated June 7, 1991, respondents were entitled to call for enforcement of the Decision dated January 30, 1987 and eject petitioners from the property. The well-settled rule is that, with respect to obligations to pay a sum of money, the obligation is not novated by an instrument that expressly recognizes the old, changes only the terms of payment, adds other obligations not incompatible with the old ones, or the new contract merely supplements the old one.75Hence, there is no merit to petitioners' claim of novation. Without a doubt, the present case is an instance where the due process routine vigorously pursued by petitioners is but a clear-cut devise meant to perpetually forestall execution of an otherwise final and executory decision. Aside from clogging court dockets, the strategy is deplorably a common course resorted to by losing litigants in the hope of evading manifest obligations. The Court condemns this outrageous abuse of the judicial process by the petitioners and their counsels. It is an important fundamental principle in the judicial system that every litigation must come to an end. Access to the courts is guaranteed. But there must be a limit thereto. Once a litigant's rights have been adjudicated in a valid and final judgment of a competent court, he should not be granted an unbridled license to come back for another try. The prevailing party should not be harassed by subsequent suits. For, if endless litigations were to be encouraged, then unscrupulous litigants will multiply to the detriment of the administration of justice.76 The Court reminds petitioners' counsel of the duty of lawyers who, as officers of the court, must see to it that the orderly administration of justice must not be unduly impeded. It is the duty of a counsel to advise his client, ordinarily a layman on the intricacies and vagaries of the law, on the merit or lack of merit of his case. If he finds that his client's cause is defenseless, then it is his bounden duty to advise the latter to acquiesce and submit, rather than traverse the incontrovertible. A lawyer must resist the whims and caprices of his client, and temper his client's propensity to litigate. A lawyer's oath to uphold the cause of justice is superior to his duty to his client; its primacy is indisputable.77 There should be a greater awareness on the part of litigants and counsels that the time of the judiciary, much more so of this Court, is too valuable to be wasted or frittered away by efforts, far from commendable, to evade the operation of a decision final and executory, especially so, where, as shown in the present case, the clear and manifest absence of any right calling for vindication, is quite obvious and indisputable.

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Verily, by the undue delay in the execution of a final judgment in their favor, respondents have suffered an injustice. The Court views with disfavor the unjustified delay in the enforcement of the final decision and orders in the present case. Once a judgment becomes final and executory, the prevailing party should not be denied the fruits of his victory by some subterfuge devised by the losing party. 78 Unjustified delay in the enforcement of a judgment sets at naught the role of courts in disposing justiciable controversies with finality. WHEREFORE, the present petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 71849 are AFFIRMED. The status quo order issued by this Court on May 15, 2003 is LIFTED. The Regional Trial Court, Branch 167, Pasig City, is directed to issue the corresponding writ of execution and the Sheriff of the court is ordered to enforce the same to its ultimate conclusion. Triple costs against petitioners. G.R. No. 174356 January 20, 2010

Court (RTC) of Bulan, Sorsogon.1 In their answer, Evelina and Aida claimed that the RTC did not have jurisdiction over the subject matter of the case since it actually involved an agrarian dispute. After hearing, the RTC dismissed the complaint for lack of jurisdiction based on Fidelas admission that Evelina and Aida were tenants who helped plant coconut seedlings on the land and supervised the harvest of coconut and palay. As tenants, the defendants also shared in the gross sales of the harvest. The court threw out Fidelas claim that, since Evelina and her family received the land already planted with fruit-bearing trees, they could not be regarded as tenants. Cultivation, said the court, included the tending and caring of the trees. The court also regarded as relevant Fidelas pending application for a five-hectare retention and Evelinas pending protest relative to her three-hectare beneficiary share.2 Dissatisfied, Fidela appealed to the CA. She also filed with that court a motion for the appointment of a receiver. On April 12, 2006 the CA granted the motion and ordained receivership of the land, noting that there appeared to be a need to preserve the property and its fruits in light of Fidelas allegation that Evelina and Aida failed to account for her share of such fruits.3 Parenthetically, Fidela also filed three estafa cases with the RTC of Olongapo City and a complaint for dispossession with the Department of Agrarian Reform Adjudication Board (DARAB) against Evelina and Aida. In all these cases, Fidela asked for the immediate appointment of a receiver for the property. The Issues Presented Petitioners present the following issues: 1. Whether or not respondent Fidela is guilty of forum shopping considering that she had earlier filed identical applications for receivership over the subject properties in the criminal cases she filed with the RTC of Olongapo City against petitioners Evelina and Aida and in the administrative case that she filed against them before the DARAB; and 2. Whether or not the CA erred in granting respondent Fidelas application for receivership. The Courts Ruling One. By forum shopping, a party initiates two or more actions in separate tribunals, grounded on the same cause, trusting that one or the other tribunal would favorably dispose of the matter.4 The elements of forum shopping are the same as inlitis pendentia where the final judgment in one case will amount to res judicata in the other. The elements of forum shopping are: (1) identity of parties, or at least such parties as would represent the same interest in both actions; (2) identity of rights

EVELINA G. CHAVEZ and AIDA CHAVEZ-DELES, Petitioners, vs. COURT OF APPEALS and ATTY. FIDELA Y. VARGAS, Respondents. DECISION ABAD, J.: This case is about the propriety of the Court of Appeals (CA), which hears the case on appeal, placing the property in dispute under receivership upon a claim that the defendant has been remiss in making an accounting to the plaintiff of the fruits of such property. The Facts and the Case Respondent Fidela Y. Vargas owned a five-hectare mixed coconut land and rice fields in Sorsogon. Petitioner Evelina G. Chavez had been staying in a remote portion of the land with her family, planting coconut seedlings on the land and supervising the harvest of coconut and palay. Fidela and Evelina agreed to divide the gross sales of all products from the land between themselves. Since Fidela was busy with her law practice, Evelina undertook to hold in trust for Fidela her half of the profits. But Fidela claimed that Evelina had failed to remit her share of the profits and, despite demand to turn over the administration of the property to Fidela, had refused to do so. Consequently, Fidela filed a complaint against Evelina and her daughter, Aida C. Deles, who was assisting her mother, for recovery of possession, rent, and damages with prayer for the immediate appointment of a receiver before the Regional Trial

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asserted and relief prayed for, the relief being founded on the same facts; and (3) identity of the two preceding particulars such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration.5 Here, however, the various suits Fidela initiated against Evelina and Aida involved different causes of action and sought different reliefs. The present civil action that she filed with the RTC sought to recover possession of the property based on Evelina and Aidas failure to account for its fruits. The estafa cases she filed with the RTC accused the two of misappropriating and converting her share in the harvests for their own benefit. Her complaint for dispossession under Republic Act 8048 with the DARAB sought to dispossess the two for allegedly cutting coconut trees without the prior authority of Fidela or of the Philippine Coconut Authority. The above cases are similar only in that they involved the same parties and Fidela sought the placing of the properties under receivership in all of them. But receivership is not an action. It is but an auxiliary remedy, a mere incident of the suit to help achieve its purpose. Consequently, it cannot be said that the grant of receivership in one case will amount to resjudicata on the merits of the other cases. The grant or denial of this provisional remedy will still depend on the need for it in the particular action. Two. In any event, we hold that the CA erred in granting receivership over the property in dispute in this case. For one thing, a petition for receivership under Section 1(b), Rule 59 of the Rules of Civil Procedure requires that the property or fund subject of the action is in danger of being lost, removed, or materially injured, necessitating its protection or preservation. Its object is the prevention of imminent danger to the property. If the action does not require such protection or preservation, the remedy is not receivership.6 Here Fidelas main gripe is that Evelina and Aida deprived her of her share of the lands produce. She does not claim that the land or its productive capacity would disappear or be wasted if not entrusted to a receiver. Nor does Fidela claim that the land has been materially injured, necessitating its protection and preservation. Because receivership is a harsh remedy that can be granted only in extreme situations,7 Fidela must prove a clear right to its issuance. But she has not. Indeed, in none of the other cases she filed against Evelina and Aida has that remedy been granted her.8 Besides, the RTC dismissed Fidelas action for lack of jurisdiction over the case, holding that the issues it raised properly belong to the DARAB. The case before the CA is but an offshoot of that RTC case. Given that the RTC has found that it had no jurisdiction over the case, it would seem more prudent for the CA to first provisionally determine that the RTC had jurisdiction before granting receivership which is but an incident of the main action.1 a vv p h i 1

WHEREFORE, the Court GRANTS the petition. The Resolutions dated April 12, 2006 and July 7, 2006 of the Court of Appeals in CA-G.R. CV 85552, are REVERSED and SET ASIDE. The receivership is LIFTED and the Court of Appeals is directed to resolve CA-G.R. CV 85552 with utmost dispatch. REPLEVIN G.R. No. 111080 April 5, 2000

JOSE S. OROSA and MARTHA P. OROSA, petitioners, vs. HON. COURT OF APPEALS and FCP CREDIT CORPORATION, respondents.

YNARES-SANTIAGO, J.: On December 6, 1984, private respondent FCP Credit Corporation filed a complaint for replevin and damages 1 in the Regional Trial Court of Manila against petitioner Jose S. Orosa and one John Doe to recover possession of a 1983 Ford Laser 1.5 Sedan with Motor and Serial No. SUNKBT-14584. The complaint alleged that on September 28, 1983, petitioner purchased the subject motor vehicle on installment from Fiesta Motor Sales Corporation. He executed and delivered to Fiesta Motor Sales Corp. a promissory note in the sum of P133,824.00 payable in monthly installments. 2 To secure payment, petitioner executed a chattel mortgage over the subject motor vehicle in favor of Fiesta Motor Sales Corp. On September 28, 1983, Fiesta Motor Sales assigned the promissory note and chattel mortgage to private respondent FCP Credit Corporation. The complaint further alleged that petitioner failed to pay part of the installment which fell due on July 28, 1984 as well as three (3) consecutive installment which fell due on August 28, September 28, and October 28, 1984. Consequently, private respondent FCP Credit Corporation demanded from petitioner payment of the entire outstanding balance of the obligation amounting to P106,154.48 with accrued interest and to surrender the vehicle which petitioner was allegedly detaining. After trial, the lower court dismissed private respondent's complaint in a Decision dated March 25, 1988, the decretal portion of which reads: WHEREFORE, judgment is rendered for the defendant, and against the plaintiff: 1) Dismissing the complaint for lack of merit;

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2) Declaring that the plaintiff was not entitled to the Writ of Replevin, issued on January 7, 1985, and is now liable to the defendant for actual damages under the Replevin bond it filed; 3) On defendant's counter-claim, ordering the plaintiff to pay the defendant the sum of P400,000.00 as moral damages, P100,000.00 as exemplary damages, and P50,000.00 as, and for, attorney's fees; 4) Ordering the plaintiff to return to the defendant the subject 1983 Ford Laser Sedan, with Motor or Serial No. SUNKBT-14584, or its equivalent, in kind or value, in cash, as of this date, and to pay the costs. SO ORDERED. The trial court ruled that private respondent FCP had no reason to file the present action since petitioner already paid the installments for the months of July to November 1984, which are the sole bases of the complaint. The lower court declared that private respondent was not entitled to the writ of replevin, and was liable to petitioner for actual damages under the replevin bond it filed. 3 Ruling on petitioner's counterclaim, the trial court stated that there was no legal or factual basis for the writ of replevin and that its enforcement by the sheriff was "highly irregular, and unlawful, done, as it was, under shades of extortion, threats and force." 4 The trial court ordered private respondent to pay the sum of P400,000.00 as moral damages; P100,000.00 as exemplary damages and P50,000.00 as attorney's fees. Private respondent was also ordered to return to petitioner the 1983 Ford Laser 1.5 Sedan, or its equivalent, in kind or value in cash, as of date of judgment and to pay the costs of the suit. 5 On June 7, 1988, a "Supplemental Decision" was rendered by the trial court ordering private respondent's surety, Stronghold Insurance Co., Inc. to jointly and severally [with private respondent] return to petitioner the 1983 Ford Laser 1.5 Sedan or its, equivalent in kind or in cash and to pay the damages specified in the main decision to the extent of the value of the replevin bond in the amount of P210,000.00. 6 The surety company filed with the Court of Appeals a petition for certiorari to annul the Order of the trial court denying its motion for partial reconsideration, as well as the Supplemental Decision. On the other hand, private respondent appealed the decision of the RTC Manila to the Court of Appeals. The surety company's petition for certiorari, docketed as CA-G.R. SP No. 14938, was dismissed by the Court of Appeals' First Division which upheld the trial court's order of execution pending appeal. 7 On November 6, 1989, this Court affirmed the Court of Appeals decision, but deleted the order for the issuance of a writ of execution pending appeal. 8

Meanwhile, in private respondent's appeal, the Court of Appeals' Eighth Division partially affirmed the ruling of the trial court, in a Decision dated April 19, 1993, the dispositive portion of which reads: 9 WHEREFORE, the Decision of 25 March 1988 of the Regional Trial Court, Branch 3, Manila is hereby AFFIRMED with the following modifications: (1) The award of moral damages, exemplary damages and attorney's fees is DELETED; (2) The order directing plaintiff-appellant FCP Credit Corporation to return to defendant-appellee Jose S. Orosa the subject 1983 Ford Laser Sedan, with Motor and Serial No. SUNKBT-14584, its equivalent, in kind or value in cash, as of 25 March 1988, and to pay the costs is DELETED; and; (3) Plaintiff-appellant FCP Credit Corporation is ordered to pay defendant-appellee Jose S. Orosa the amount equivalent to the value of the fourteen (14) monthly installments made by the latter to the former on the subject motor vehicle, with interest from the time of filing of the complaint or from 6 December 1984. No costs. SO ORDERED. Hence, this petition for review, on the following assignments of error:
10

(1) The Hon. Court of Appeals (former Eighth Division) acted without or in excess of jurisdiction when reversed a final decision dated September 9, 1988, of a co-equal division of the Hon. Court of Appeals (Special First Division) promulgated in CA. G.R. No. 14938, and which was sustained by the Hon. Supreme Court in a final decision promulgated in G.R. No. 84979 dated November 6, 1989 which cases have the same causes of actions, same set of facts, the same parties and the same relief. (2) The Hon. Court of Appeals (former Eighth Division) acted with grave abuse of discretion and authority when it considered causes of actions not alleged in the complaint and which were raised for the first time on appeal in deciding this case. (3) The Hon. Court of Appeals (former Eighth Division) committed serious error in applying the cause of Filinvest Credit Corporation vs. Ivans Mendez, 152 SCRA 598, as basis in deciding this case when said case has a different set of facts from this case.

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In its first assignment of error, petitioner alleges that the Eighth Division of the Court of Appeals had no jurisdiction to review the present case since the First Division of the Court of Appeals already passed upon the law and the facts of the same. Petitioner alleges that the present appeal involves the same causes of action, same parties, same facts and same relief involved in the decision rendered by the First Division and affirmed by this Court in G.R. No. 84979. 11 Petitioner's argument is untenable. Jurisdiction is simply the power or authority to hear a case. The appellate jurisdiction of the Court of Appeals to review decisions and orders of lower courts is conferred by Batas Pambansa Blg. 129. More importantly, petitioner cannot now assail the Court of Appeals' jurisdiction after having actively participated in the appeal and after praying for affirmative relief. 12 Neither can petitioner argue that res judicata bars the determination of the present case. The two cases involve different subject matters, parties and seek different reliefs. The petition docketed as CA-G.R. SP No. 14938 was for certiorari with injunction, brought by Stronghold Insurance Company, Inc. alleging that there was grave abuse of discretion when the trial court adjudged it liable for damages without due process, in violation of Rule 60, Section 10 in relation to Rule 57, Section 20, of the Rules of Court. The surety also questioned the propriety of the writ of execution issued by the trial court pending appeal. 13 On the other hand, CA-G.R. CV No. 25929 was filed by petitioner Orosa under Rule 45 of the Revised Rules of Court raising alleged errors of law on the part of the trial court. The subject of the appeal was the main decision, while the subject of the petition in CA-G.R. SP No. 14938 was the Supplemental Decision. We agree with the Court of Appeals that: 14 The decisions of the Court of Appeals in CA-G.R. SP No. 14938 and the Supreme Court in G.R. No. 84979 did not pass on the merits of this case. It merely ruled on the issues of whether the surety, Stronghold Insurance, Co., Inc., can be held jointly and solidarily liable with plaintiff-appellant and whether execution pending appeal is proper under the facts and circumstances of this case. Consequently, this Court is not estopped from reviewing the conclusions reached by the court a quo. (emphasis ours) In its second assigned error, petitioner posits that the Court of Appeals committed grave abuse of discretion when it considered causes of actions which were raised for the first time on appeal. 15 True, private respondent submitted issues to the Court of Appeals which were not raised in the original complaint. Private respondent belatedly pointed out that: 16

1.1. It is pertinent to note that Defendant-Appellee has waived prior notice and demand in order to be rendered in default, as in fact the Promissory Note expressly stipulates that the monthly installments shall be paid on the date they fall due, without need of prior notice or demand. 1.2. Said Promissory Note likewise expressly stipulates that a late payment charge of 2% per month shall be added on each unpaid installment from maturity thereof until fully paid. 1.3. Of equal significance is the Acceleration Clause in the Promissory Note which states that if default be made in the payment of any of the installments or late payment charges thereon when the same became due and payable, the total principle sum then remaining unpaid, together with the agreed late payment charges thereon, shall at oncebecome due and payable. Private respondent argued that based on the provisions of the Promissory Note itself, petitioner incurred in default since, even though there was actual payment of the installments which fell due on July 28, 1984, as well as the three installments on August 28 to October 28, 1984, the payments were all late and irregular. 17 Private respondent also argued that petitioner assigned the subject car to his daughter without the written consent of the obligee, and hence, violated the terms of the chattel mortgage. 18 Meritorious as these arguments are, they come too late in the day. Basic is the rule that matters not raised in the complaint cannot be raised for the first time on appeal. Contrary to petitioner's accusation, the Court of Appeals restricted the determination of the case to matters alleged in the complaint and raised during trial. 19 Citing jurisprudence, 20 the Court of Appeals held that "it would be offensive to the basic rule of fair play, justice and due process" if it considered issues raised for the first time on appeal. 21 The Court of Appeals' statement that "under the terms and conditions of the chattel mortgage, defendant-appellee Jose S. Orosa was already in default," was made only to justify the deletion of the trial court's award of moral, exemplary damages and attorney's fees, in consonance with its finding that private respondent was motivated by a sincere belief that it had sufficient basis and acted in good faith when it filed the claim. 22 We now come to the matter of moral damages. Petitioner insists that he suffered untold embarrassment when the complaint was filed against him. According to petitioner, the car subject of this case was being used by his daughter, married to Jose Concepcion III, a scion of a prominent family. Petitioner laments that he assigned the car to his daughter so that she could "approximate without equaling the status of her in-laws." This being the case, petitioner experienced anguish and unquantifiable humiliation when he had to face his daughter's wealthy in-laws to explain the "why and the whats of the subject case." Petitioner further insists that an

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award of moral damages is especially justified since he is no ordinary man, but a businessman of high social standing, a graduate of De La Salle University and belongs to a well known family of bankers. 23 We must deny the claim. The law clearly states that one may only recover moral damages if they are the proximate result of the, other party's wrongful act or omission. 24 Two elements are required. First, the act or omission must be the proximate result of the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury. Second, the act must be wrongful. Petitioner maintains that embarrassment resulted when he had to explain the suit to his daughter's in-laws.1a\^/phi1 However, that could have been avoided had he not assigned the car to his daughter and had he been faithful and prompt in paying the installments required. Petitioner brought the situation upon himself and cannot now complain that private respondent is liable for the mental anguish and humiliation he suffered. Furthermore, we agree with the appellate court that when private respondent brought the complaint, it did so only to exercise a legal right, believing that it had a meritorious cause of action clearly borne out by a mere perusal of the promissory note and chattel mortgage. To constitute malicious prosecution, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person, and that it was initiated deliberately, knowing that the charges were false and groundless. 25 Such was not the case when the instant complaint was filed. The rule has always been that moral damages cannot be recovered from a person who has filed a complaint against another in good faith. 26 The law always presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving that the latter acted in bad faith or with ill motive. 27 Anent the award of exemplary damages, jurisprudence provides that where a party is not entitled to actual or moral damages, an award of exemplary damages is likewise baseless. 28 In the matter of attorney's fees, petitioner avers that to prosecute and defend this case in the lower court and in the appellate court, he incurred expenses amounting to P50,000.00, 29 and as such, attorney's fees should be granted. We deny the claim. No premium should be placed on the right to litigate and not every winning party is entitled to an automatic grant of attorney's fees. 30 The party must show that he falls under one of the instances enumerated in Article 2208 of the Civil Code. 31 This, petitioner failed to do. Furthermore, where the award of moral and exemplary damages is eliminated, so must the award for attorney's fees be deleted. 32 We also agree with the Court of Appeals that the trial court erred when it ordered private respondent to return the subject car or its equivalent considering that petitioner had not yet fully paid the purchase price. Verily, to sustain the trial court's decision would amount to unjust enrichment. The Court of Appeals was correct when it instead

ordered private respondent to return, not the car itself, but only the amount equivalent to the fourteen installments actually paid with interest. 33 WHEREFORE, above premises considered, the petition is DENIED, and the Court of Appeals' Decision of April 19, 1993 and its Resolution of July 22, 1993 are AFFIRMED in toto. G.R. No. 148132 January 28, 2008

SMART COMMUNICATIONS, INC., petitioner, vs. REGINA M. ASTORGA, respondent. x---------------------------------------------------x G.R. No. 151079 January 28, 2008

SMART COMMUNICATIONS, INC., petitioner, vs. REGINA M. ASTORGA, respondent. x---------------------------------------------------x G.R. No. 151372 January 28, 2008

REGINA M. ASTORGA, petitioner, vs. SMART COMMUNICATIONS, INC. and ANN MARGARET V. SANTIAGO, respondents. DECISION NACHURA, J.: For the resolution of the Court are three consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. G.R. No. 148132 assails the February 28, 2000 Decision1 and the May 7, 2001 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question the June 11, 2001 Decision3 and the December 18, 2001 Resolution4 in CA-G.R. SP. No. 57065. Regina M. Astorga (Astorga) was employed by respondent Smart Communications, Incorporated (SMART) on May 8, 1997 as District Sales Manager of the Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a monthly salary of P33,650.00. As District Sales Manager, Astorga enjoyed additional

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benefits, namely, annual performance incentive equivalent to 30% of her annual gross salary, a group life and hospitalization insurance coverage, and a car plan in the amount of P455,000.00.5 In February 1998, SMART launched an organizational realignment to achieve more efficient operations. This was made known to the employees on February 27, 1998.6 Part of the reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work, SMART abolished the CSMG/FSD, Astorgas division. To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would be recommended by SMART. SMART then conducted a performance evaluation of CSMG personnel and those who garnered the highest ratings were favorably recommended to SNMI. Astorga landed last in the performance evaluation, thus, she was not recommended by SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care Department, but she refused the offer because the position carried lower salary rank and rate. Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3, 1998, SMART issued a memorandum advising Astorga of the termination of her employment on ground of redundancy, effective April 3, 1998. Astorga received it on March 16, 1998.7 The termination of her employment prompted Astorga to file a Complaint8 for illegal dismissal, non-payment of salaries and other benefits with prayer for moral and exemplary damages against SMART and Ann Margaret V. Santiago (Santiago). She claimed that abolishing CSMG and, consequently, terminating her employment was illegal for it violated her right to security of tenure. She also posited that it was illegal for an employer, like SMART, to contract out services which will displace the employees, especially if the contractor is an in-house agency.9 (a) Astorga

SMART responded that there was valid termination. It argued that Astorga was dismissed by reason of redundancy, which is an authorized cause for termination of employment, and the dismissal was effected in accordance with the requirements of the Labor Code. The redundancy of Astorgas position was the result of the abolition of CSMG and the creation of a specialized and more technically equipped SNMI, which is a valid and legitimate exercise of management prerogative.10 In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay the current market value of the Honda Civic Sedan which was given to her under the companys car plan program, or to surrender the same to the company for proper disposition.11 Astorga, however, failed and refused to do either, thus prompting SMART to file a suit for replevin with the Regional Trial Court of Makati (RTC) on August 10, 1998. The case was docketed as Civil Case No. 98-1936 and was raffled to Branch 57.12 Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to state a cause of action; (iii) litis pendentia; and (iv) forum-shopping. Astorga posited that the regular courts have no jurisdiction over the complaint because the subject thereof pertains to a benefit arising from an employment contract; hence, jurisdiction over the same is vested in the labor tribunal and not in regular courts. 13 Pending resolution of Astorgas motion to dismiss the replevin case, the Labor Arbiter rendered a Decision14 dated August 20, 1998, declaring Astorgas dismissal from employment illegal. While recognizing SMARTs right to abolish any of its departments, the Labor Arbiter held that such right should be exercised in good faith and for causes beyond its control. The Arbiter found the abolition of CSMG done neither in good faith nor for causes beyond the control of SMART, but a ploy to terminate Astorgas employment. The Arbiter also ruled that contracting out the functions performed by Astorga to an in-house agency like SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code.

BACKWAGES; (P33,650.00 x 4 months) UNPAID SALARIES (February 15, 1998-April 3, 1998 February 15-28, 1998 March 1-31, [1998] April 1-3, 1998 CAR MAINTENANCE ALLOWANCE (P2,000.00 x 4) FUEL ALLOWANCE (300 liters/mo. x 4 mos. at P12.04/liter) TOTAL Accordingly, the Labor Arbiter ordered:

= P134,600.00 = P 16,823.00 = P 33,650.00 = P 3,882.69 = P 8,000.00 = P 14,457.83 = P211,415.52

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WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be illegal and unjust. [SMART and Santiago] are hereby ordered to: 1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position, without loss of seniority rights and other privileges, with full backwages, inclusive of allowances and other benefits from the time of [her] dismissal to the date of reinstatement, which computed as of this date, are as follows: xxxx 3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and exemplary damages in the amount of P300,000.00. x x x 4. Jointly and severally pay 10% of the amount due as attorneys fees. SO ORDERED.15 Subsequently, on March 29, 1999, the RTC issued an Order16 denying Astorgas motion to dismiss the replevin case. In so ruling, the RTC ratiocinated that: Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss. As correctly pointed out, this case is to enforce a right of possession over a company car assigned to the defendant under a car plan privilege arrangement. The car is registered in the name of the plaintiff. Recovery thereof via replevin suit is allowed by Rule 60 of the 1997 Rules of Civil Procedure, which is undoubtedly within the jurisdiction of the Regional Trial Court. In the Complaint, plaintiff claims to be the owner of the company car and despite demand, defendant refused to return said car. This is clearly sufficient statement of plaintiffs cause of action. Neither is there forum shopping. The element of litis penden[t]ia does not appear to exist because the judgment in the labor dispute will not constitute res judicata to bar the filing of this case. WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit. SO ORDERED.17

Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.18 Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28, 2000 Decision,19 reversed the RTC ruling. Granting the petition and, consequently, dismissing the replevin case, the CA held that the case is intertwined with Astorgas complaint for illegal dismissal; thus, it is the labor tribunal that has rightful jurisdiction over the complaint. SMARTs motion for reconsideration having been denied,20 it elevated the case to this Court, now docketed as G.R. No. 148132. Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal dismissal case to the National Labor Relations Commission (NLRC). In its September 27, 1999 Decision,21 the NLRC sustained Astorgas dismissal. Reversing the Labor Arbiter, the NLRC declared the abolition of CSMG and the creation of SNMI to do the sales and marketing services for SMART a valid organizational action. It overruled the Labor Arbiters ruling that SNMI is an in-house agency, holding that it lacked legal basis. It also declared that contracting, subcontracting and streamlining of operations for the purpose of increasing efficiency are allowed under the law. The NLRC further found erroneous the Labor Arbiters disquisition that redundancy to be valid must be impelled by economic reasons, and upheld the redundancy measures undertaken by SMART. The NLRC disposed, thus: WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside. [Astorga] is further ordered to immediately return the company vehicle assigned to her. [Smart and Santiago] are hereby ordered to pay the final wages of [Astorga] after [she] had submitted the required supporting papers therefor. SO ORDERED.22 Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999.23 Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a Decision24 affirming with modification the resolutions of the NLRC. In gist, the CA agreed with the NLRC that the reorganization undertaken by SMART resulting in the abolition of CSMG was a legitimate exercise of management prerogative. It rejected Astorgas posturing that her non-absorption into SNMI was tainted with bad faith. However, the CA found that SMART failed to comply with the mandatory one-month notice prior to the intended termination. Accordingly, the CA imposed a penalty equivalent to Astorgas one-month salary for this non-compliance. The CA also set aside the NLRCs order for the return of the company vehicle holding that this issue is not essentially a labor concern, but is civil in nature, and thus, within the competence of the regular court to decide. It added that the matter had not been fully ventilated before the NLRC, but in the regular court.

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Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of the Decision. On December 18, 2001, the CA resolved the motions, viz.: WHEREFORE, [Astorgas] motion for reconsideration is hereby PARTIALLY GRANTED. [Smart] is hereby ordered to pay [Astorga] her backwages from 15 February 1998 to 06 November 1998. [Smarts] motion for reconsideration is outrightly DENIED. SO ORDERED.25 Astorga and SMART came to us with their respective petitions for review assailing the CA ruling, docketed as G.R Nos. 151079 and 151372. On February 27, 2002, this Court ordered the consolidation of these petitions with G.R. No. 148132.26 In her Memorandum, Astorga argues:

WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY. II WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF LABOR AND EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE REQUIREMENTS BEFORE TERMINATION. III

I THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGAS DISMISSAL DESPITE THE FACT THAT HER DISMISSAL WAS EFFECTED IN CLEAR VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE, CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR HER DISMISSAL. II SMARTS REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE APPEAL AS REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES DURING THE PENDENCY OF THE APPEAL. III THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER THE COMPLAINT FOR RECOVERY OF A CAR WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.27 On the other hand, Smart in its Memoranda raises the following issues: I VI WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS COMMISSION FINDS APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL.28 IV WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT THE REGIONAL TRIAL COURT DOES NOT HAVE JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN COMPANY VEHICLE FROM A FORMER EMPLOYEE WHO WAS LEGALLY DISMISSED. V WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT THE SUBJECT OF THE REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A COMPANY CAR.

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WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT ASTORGA CAN NO LONGER BE CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE LABOR CODE. 29 The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC of Makati City allegedly for lack of jurisdiction, which is the issue raised in G.R. No. 148132. Replevin is an action whereby the owner or person entitled to repossession of goods or chattels may recover those goods or chattels from one who has wrongfully distrained or taken, or who wrongfully detains such goods or chattels. It is designed to permit one having right to possession to recover property in specie from one who has wrongfully taken or detained the property.30 The term may refer either to the action itself, for the recovery of personalty, or to the provisional remedy traditionally associated with it, by which possession of the property may be obtained by the plaintiff and retained during the pendency of the action.31 That the action commenced by SMART against Astorga in the RTC of Makati City was one for replevin hardly admits of doubt. In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the CA made the following disquisition, viz.: [I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the employment package. We doubt that [SMART] would extend [to Astorga] the same car plan privilege were it not for her employment as district sales manager of the company. Furthermore, there is no civil contract for a loan between [Astorga] and [Smart]. Consequently, We find that the car plan privilege is a benefit arising out of employer-employee relationship. Thus, the claim for such falls squarely within the original and exclusive jurisdiction of the labor arbiters and the NLRC. 32 We do not agree. Contrary to the CAs ratiocination, the RTC rightfully assumed jurisdiction over the suit and acted well within its discretion in denying Astorgas motion to dismiss. SMARTs demand for payment of the market value of the car or, in the alternative, the surrender of the car, is not a labor, but a civil, dispute. It involves the relationship of debtor and creditor rather than employee-employer relations.33 As such, the dispute falls within the jurisdiction of the regular courts. In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the RTC over the replevin suit, explained: Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The primary relief sought therein is the return of the property in specie wrongfully detained by another person. It is an ordinary statutory proceeding to adjudicate rights to the title or possession of personal

property. The question of whether or not a party has the right of possession over the property involved and if so, whether or not the adverse party has wrongfully taken and detained said property as to require its return to plaintiff, is outside the pale of competence of a labor tribunal and beyond the field of specialization of Labor Arbiters. xxxx The labor dispute involved is not intertwined with the issue in the Replevin Case. The respective issues raised in each forum can be resolved independently on the other. In fact in 18 November 1986, the NLRC in the case before it had issued an Injunctive Writ enjoining the petitioners from blocking the free ingress and egress to the Vessel and ordering the petitioners to disembark and vacate. That aspect of the controversy is properly settled under the Labor Code. So also with petitioners right to picket. But the determination of the question of who has the better right to take possession of the Vessel and whether petitioners can deprive the Charterer, as the legal possessor of the Vessel, of that right to possess in addressed to the competence of Civil Courts. In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of jurisdiction as laid down by pertinent laws. The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered the dismissal of the replevin case for lack of jurisdiction. Having resolved that issue, we proceed to rule on the validity of Astorgas dismissal. Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal of an employee. The nature of redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire File Co., Inc. v. National Labor Relations Commission,35 viz: x x x redundancy in an employers personnel force necessarily or even ordinarily refers to duplication of work. That no other person was holding the same position that private respondent held prior to termination of his services does not show that his position had not become redundant. Indeed, in any well organized business enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one person. We believe that redundancy, for purposes of the Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.

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The characterization of an employees services as superfluous or no longer necessary and, therefore, properly terminable, is an exercise of business judgment on the part of the employer. The wisdom and soundness of such characterization or decision is not subject to discretionary review provided, of course, that a violation of law or arbitrary or malicious action is not shown.36 Astorga claims that the termination of her employment was illegal and tainted with bad faith. She asserts that the reorganization was done in order to get rid of her. But except for her barefaced allegation, no convincing evidence was offered to prove it. This Court finds it extremely difficult to believe that SMART would enter into a joint venture agreement with NTT, form SNMI and abolish CSMG/FSD simply for the sole purpose of easing out a particular employee, such as Astorga. Moreover, Astorga never denied that SMART offered her a supervisory position in the Customer Care Department, but she refused the offer because the position carried a lower salary rank and rate. If indeed SMART simply wanted to get rid of her, it would not have offered her a position in any department in the enterprise. Astorga also states that the justification advanced by SMART is not true because there was no compelling economic reason for redundancy. But contrary to her claim, an employer is not precluded from adopting a new policy conducive to a more economical and effective management even if it is not experiencing economic reverses. Neither does the law require that the employer should suffer financial losses before he can terminate the services of the employee on the ground of redundancy. 37 We agree with the CA that the organizational realignment introduced by SMART, which culminated in the abolition of CSMG/FSD and termination of Astorgas employment was an honest effort to make SMARTs sales and marketing departments more efficient and competitive. As the CA had taken pains to elucidate: x x x a careful and assiduous review of the records will yield no other conclusion than that the reorganization undertaken by SMART is for no purpose other than its declared objective as a labor and cost savings device. Indeed, this Court finds no fault in SMARTs decision to outsource the corporate sales market to SNMI in order to attain greater productivity. [Astorga] belonged to the Sales Marketing Group under the Fixed Services Division (CSMG/FSD), a distinct sales force of SMART in charge of selling SMARTs telecommunications services to the corporate market. SMART, to ensure it can respond quickly, efficiently and flexibly to its customers requirement, abolished CSMG/FSD and shortly thereafter assigned its functions to newly-created SNMI Multimedia Incorporated, a joint venture company of SMART and NTT of Japan, for the reason that CSMG/FSD does not have the necessary technical expertise required for the value added services. By transferring the duties of CSMG/FSD to SNMI, SMART has created a more competent and specialized organization to perform the work required for corporate accounts. It is also relieved SMART of all administrative costs management, time and money-needed in maintaining the CSMG/FSD. The determination to outsource the duties of the CSMG/FSD to SNMI was, to Our mind, a sound business judgment based

on relevant criteria and is therefore a legitimate exercise of management prerogative. Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined towards the worker and upheld his cause in most of his conflicts with his employer. This favored treatment is consonant with the social justice policy of the Constitution. But while tilting the scales of justice in favor of workers, the fundamental law also guarantees the right of the employer to reasonable returns for his investment.38 In this light, we must acknowledge the prerogative of the employer to adopt such measures as will promote greater efficiency, reduce overhead costs and enhance prospects of economic gains, albeit always within the framework of existing laws. Accordingly, we sustain the reorganization and redundancy program undertaken by SMART. However, as aptly found by the CA, SMART failed to comply with the mandated one (1) month notice prior to termination. The record is clear that Astorga received the notice of termination only on March 16, 199839 or less than a month prior to its effectivity on April 3, 1998. Likewise, the Department of Labor and Employment was notified of the redundancy program only on March 6, 1998.40 Article 283 of the Labor Code clearly provides: Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof x x x. SMARTs assertion that Astorga cannot complain of lack of notice because the organizational realignment was made known to all the employees as early as February 1998 fails to persuade. Astorgas actual knowledge of the reorganization cannot replace the formal and written notice required by the law. In the written notice, the employees are informed of the specific date of the termination, at least a month prior to the effectivity of such termination, to give them sufficient time to find other suitable employment or to make whatever arrangements are needed to cushion the impact of termination. In this case, notwithstanding Astorgas knowledge of the reorganization, she remained uncertain about the status of her employment until SMART gave her formal notice of termination. But such notice was received by Astorga barely two (2) weeks before the effective date of termination, a period very much shorter than that required by law. Be that as it may, this procedural infirmity would not render the termination of Astorgas employment illegal. The validity of termination can exist independently of the procedural infirmity of the dismissal.41 In DAP Corporation v. CA,42 we found the

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dismissal of the employees therein valid and for authorized cause even if the employer failed to comply with the notice requirement under Article 283 of the Labor Code. This Court upheld the dismissal, but held the employer liable for noncompliance with the procedural requirements. The CA, therefore, committed no reversible error in sustaining Astorgas dismissal and at the same time, awarding indemnity for violation of Astorga's statutory rights. However, we find the need to modify, by increasing, the indemnity awarded by the CA to Astorga, as a sanction on SMART for non-compliance with the one-month mandatory notice requirement, in light of our ruling in Jaka Food Processing Corporation v. Pacot,43 viz.: [I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee, and (2) if the dismissal is KENNETH HAO,

cases, the burden of proving payment of monetary claims rests on the employer.44 SMART failed to discharge the onus probandi. Accordingly, it must be held liable for Astorgas salary from February 15, 1998 until the effective date of her termination, on April 3, 1998. However, the award of backwages to Astorga by the CA should be deleted for lack of basis. Backwages is a relief given to an illegally dismissed employee. Thus, before backwages may be granted, there must be a finding of unjust or illegal dismissal from work.45 The Labor Arbiter ruled that Astorga was illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiters ruling and categorically declared Astorgas dismissal valid. This ruling was affirmed by the CA in its assailed Decision. Since Astorgas dismissal is for an authorized cause, she is not entitled to backwages. The CAs award of backwages is totally inconsistent with its finding of valid dismissal. WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The February 28, 2000 Decision and the May 7, 2001 Resolution of the Court of Appeals in CA-G.R. SP. No. 53831 are SET ASIDE. The Regional Trial Court of Complainant, A.M. No. P-07-2384 Present:

- versus -

QUISUMBING, J., Chairperson, TINGA, REYES,* LEONARDO-DE CASTRO,** and BRION, JJ. Promulgated: June 18, 2008

ABE C. ANDRES, Sheriff IV, Regional Trial Court, Branch 16,Davao City, Respondent. based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employers exercise of his management prerogative. We deem it proper to increase the amount of the penalty on SMART to P50,000.00. As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay equivalent to at least one (1) month salary or to at least one (1) months pay for every year of service, whichever is higher. The records show that Astorgas length of service is less than a year. She is, therefore, also entitled to separation pay equivalent to one (1) month pay. Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This assertion was never rebutted by SMART in the proceedings a quo. No proof of payment was presented by SMART to disprove the allegation. It is settled that in labor

Makati City, Branch 57 is DIRECTED to proceed with the trial of Civil Case No. 981936 and render its Decision with reasonable dispatch. On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and 151372 are DENIED. The June 11, 2001 Decision and the December 18, 2001 Resolution in CA-G.R. SP. No. 57065, are AFFIRMED withMODIFICATION. Astorga is declared validly dismissed. However, SMART is ordered to pay Astorga P50,000.00 as indemnity for its non-compliance with procedural due process, her separation pay equivalent to one (1) month pay, and her salary from February 15, 1998 until the effective date of her termination on April 3, 1998. The award of backwages isDELETED for lack of basis. SO ORDERED.

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

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accompanied by unidentified armed personnel on board a military vehicle which was RESOLUTION QUISUMBING, J.: excessive since there were no resistance from them. Hao also discovered that the compound where the seized motor vehicles were placed is actually owned by Silver. [7] Before us is an administrative complaint for gross neglect of duty, grave abuse of authority (oppression) and violation of Republic Act No. 3019[1] filed by complainant Kenneth Hao against respondent Abe C. Andres, Sheriff IV of the Regional Trial Court (RTC) of Davao City, Branch 16. On October 21, 2005, in view of the approval of the complainants counterreplevin bond, Judge Emmanuel C. Carpio[8] ordered Andres to immediately cease and desist from further implementing the order of seizure, and to return the seized motor vehicles including its accessories to their lawful owners.[9] The antecedent facts are as follows: However, on October 24, 2005, eight of the nine seized motor vehicles were Complainant Hao is one of the defendants in a civil case for replevin docketed as Civil Case No. 31, 127-2005[2] entitled Zenaida Silver, doing trade and business under the name and style ZHS Commercial v. Loreto Hao, Atty. Amado Cantos, Kenneth Hao and John Does, pending before the RTC of Davao City, Branch 16. reported missing. In his report,[10] Andres stated that he was shocked to find that the motor vehicles were already missing when he inspected it on October 22, 2005. He narrated that on October 21, 2005, PO3 Rodrigo Despe, one of the policemen guarding the subject motor vehicles, reported to him that a certain Nonoy entered the compound and caused the duplication of the vehicles keys.[11] But Andres claimed On October 17, 2005, Judge Renato A. Fuentes[3] issued an Order of Seizure[4] against 22 motor vehicles allegedly owned by the complainant. On the strength of the said order, Andres was able to seize two of the subject motor vehicles on October 17, 2005; four on October 18, 2005, and another three on October 19, 2005, or a total of nine motor vehicles.[5] Subsequently, Hao reported that three of the carnapped vehicles were recovered by the police.[12] He then accused Andres of conspiring and conniving with Atty. Oswaldo Macadangdang (Silvers counsel) and the policemen in the carnapping of the motor vehicles. Hao also accused Andres of concealing the In his Affidavit-Complaint[6] against Andres before the Office of the Court Administrator (OCA), Hao alleged that Andres gave undue advantage to ZenaidaSilver in the implementation of the order and that Andres seized the nine motor vehicles in an oppressive manner. Hao also averred that Andres was depository receipts from them and pointed out that the depository receipts show that Silver and Atty. Macadangdang were the ones who chose the policemen who will guard the motor vehicles. the motor vehicles were still intact when he inspected it on October 21, 2005.

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In his Comment[13] dated March 3, 2006, Andres vehemently denied violating Rep. Act No. 3019 and committing gross neglect of duty.

As to the allegation of undisclosed depository receipts, Andres maintained that he never denied the existence of the depository receipts. He said the existence of the depository receipts was immediately made known on the same day that the subject motor

Andres denied implementing the Order of Seizure in an oppressive manner. He said he took the vehicles because they were the specific vehicles ordered to be seized after checking their engine and chassis numbers. Andres likewise denied that he was accompanied by military personnel in the implementation of the order. He claimed that he was merely escorted by policemen pursuant to the directive of Police Senior Supt. Catalino S. Cuy, Chief of the Davao City Police Office. Andres also maintained that no form of harassment or oppression was committed during the implementation of the order, claiming that the presence of the policemen was only for the purpose of preserving peace and order, considering there were 22 motor vehicles specified in the Order of Seizure. Andres added that he exercised no discretion in the selection of the policemen who assisted in the implementation of the order, much less of those who will guard the seized motor vehicles.

vehicles were discovered missing. He even used the same in the filing of the carnapping case against Silver and her co-conspirators.

Finally, Andres insisted that the guarding of properties under custodia legis by policemen is not prohibited, but is even adopted by the court. Hence, he prays that he be held not liable for the loss of the vehicles and that he be relieved of his duty to return the vehicles.[15]

After the OCA recommended that the matter be investigated, we referred the case to Executive Judge Renato A. Fuentes for investigation, report and recommendation.[16]

In his Investigation Report[17] dated September 21, 2006, Judge Fuentes found Andres disputed the allegation that he neglected his duty to safeguard the seized vehicles by pointing out that he placed all the motor vehicles under police watch. He added that the policemen had control of the compound where the seized motor vehicles were kept. Judge Fuentes found numerous irregularities in the implementation of the writ of replevin/order of seizure, to wit: (1) at the time of the implementation of the writ, Andres likewise contended that after the unauthorized duplication of the vehicles keys was reported to him, he immediately advised the policemen on duty to watch the motor vehicles closely.
[14]

Andres guilty of serious negligence in the custody of the nine motor vehicles. He recommended that Andres be suspended from office.

Andres knew that the vehicles to be seized were not in the names of any of the parties to the case; (2) one vehicle was taken without the knowledge of its owner, a certain Junard Escudero; (3) Andres allowed Atty. Macadangdang to get a keymaster to duplicate the vehicles keys in order to take one motor vehicle; and (4) Andres admitted that prior to the implementation of the writ of seizure, he consulted

He negated the speculations that he was involved

in the disappearance of the seized motor vehicles as he claims to be the one who reported the incident to the court and the police.

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Silver and Atty. Macadangdang regarding the implementation of the writ and was accompanied by the latter in the course of the implementation. Judge Fuentes observed that the motor vehicles were speedily seized without strictly observing fairness and regularity in its implementation.[18]

inconsistent testimonies as to whether he has in his possession the depository receipts.[20]

The OCA disagreed with the observations of Judge Fuentes. It recommended that Andres be held liable only for simple neglect of duty and be suspended for one (1)

Anent the safekeeping of the seized motor vehicles, Judge Fuentes pointed out several instances where Andres lacked due diligence to wit: (1) the seized motor vehicles were placed in a compound surrounded by an insufficiently locked seethrough fence; (2) three motor vehicles were left outside the compound; (3) Andres turned over the key of the gate to the policemen guarding the motor vehicles; (4) Andres does not even know the full name of the owner of the compound, who was merely known to him as Gloria; (5) except for PO3 Despe and SPO4 Nelson Salcedo, the identities of the other policemen tapped to guard the compound were unknown to Andres; (6) Andres also admitted that he only stayed at least one hour each day from October 19-21, 2005 during his visits to the compound; and (7) even after it was reported to him that a certain Nonoy entered the compound and duplicated the keys of the motor vehicles, he did not exert his best effort to look for that Nonoy and to confiscate the duplicated keys.[19]

month and one (1) day.[21]

We adopt the recommendation of the investigating judge.

Being an officer of the court, Andres must be aware that there are well-defined steps provided in the Rules of Court regarding the proper implementation of a writ of replevin and/or an order of seizure. The Rules, likewise, is explicit on the duty of the sheriff in its implementation. To recapitulate what should be common knowledge to sheriffs, the pertinent provisions of Rule 60, of the Rules of Court are quoted hereunder: SEC. 4. Duty of the sheriff.Upon receiving such order, the sheriff must serve a copy thereof on the adverse party, together with a copy of the application, affidavit and bond, andmust forthwith take the property, if it be in the possession of the adverse party, or his agent, and retain it in his custody. If the property or any part thereof be concealed in a building or enclosure, the sheriff must demand its delivery, and if it be not delivered, he must cause the building or enclosure to be broken open and take the property into his possession. After the sheriff has taken possession of the property as herein provided, he must keep it in a secure place and shall be responsible for its delivery to the party entitled thereto upon receiving his fees and necessary expenses for taking and keeping the same. (Emphasis supplied.) SEC. 6. Disposition of property by sheriff.If within five (5) days after the taking of the property by the sheriff, the adverse party does not object to the sufficiency of the bond, or of the surety or sureties thereon; or if the adverse party so objects and the court affirms its approval of the applicants bond or approves a new bond,

Judge Fuentes also observed that Andres appeared to be more or less accommodating to Silver and her counsel but hostile and uncooperative to the complainant. He pointed out that Andres depended solely on Silver in the selection of the policemen who would guard the seized motor vehicles. He added that even the depository receipts were not turned over to the defendants/third-party claimants in the replevin case but were in fact concealed from them. Andres also gave

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or if the adverse party requires the return of the property but his bond is objected to and found insufficient and he does not forthwith file an approved bond, the property shall be delivered to the applicant. If for any reason the property is not delivered to the applicant, the sheriff must return it to the adverse party. (Emphasis supplied.)

delivering the seized vehicles immediately after seizure to Silver for whatever purpose, without observing the five-day requirement finds no legal justification.

In Pardo v. Velasco,[24] this Court held that First, the rules provide that property seized under a writ of replevin is not to be delivered immediately to the plaintiff.[22] In accordance with the said rules, Andres should have waited no less than five days in order to give the complainant an opportunity to object to the sufficiency of the bond or of the surety or sureties thereon, or require the return of the seized motor vehicles by filing a counter-bond. This, he failed to do. Respondent as an officer of the Court is charged with certain ministerial duties which must be performed faithfully to the letter. Every provision in the Revised Rules of Court has a specific reason or objective. In this case, the purpose of the five (5) days is to give a chance to the defendant to object to the sufficiency of the bond or the surety or sureties thereon or require the return of the property by filing a counterbond.[25] (Emphasis supplied.)

Records show that Andres took possession of two of the subject motor vehicles on October 17, 2005, four on October 18, 2005, and another three on October 19, 2005. Simultaneously, as evidenced by the depository receipts, on October 18, 2005, Silver received from Andres six of the seized motor vehicles, and three more motor vehicles on October 19, 2005. Consequently, there is no question that Silver was already in possession of the nine seized vehicles immediately after seizure, or no more than three days after the taking of the vehicles. Thus, Andres committed a clear violation of Section 6, Rule 60 of the Rules of Court with regard to the proper disposal of the property.

In Sebastian v. Valino,[26] this Court reiterated that Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the plaintiff. The sheriff must retain it in his custody for five days and he shall return it to the defendant, if the latter, as in the instant case, requires its return and files a counterbond.[27] (Emphasis supplied.)

Likewise, Andres claim that he had no knowledge that the compound is owned by Silver fails to convince us. Regardless of who actually owns the compound, the fact remains that Andres delivered the vehicles to Silver prematurely. It violates the rule requiring him to safekeep the vehicles in his custody.[28] The alleged lack of facility to store the seized vehicles is unacceptable considering that he should have

It matters not that Silver was in possession of the seized vehicles merely for safekeeping as stated in the depository receipts. The rule is clear that the property seized should not be immediately delivered to the plaintiff, and the sheriff must retain custody of the seized property for at least five days.[23] Hence, the act of Andres in

deposited the same in a bonded warehouse. If this was not feasible, he should have sought prior authorization from the court issuing the writ before delivering the vehicles to Silver.

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Second, it must be stressed that from the moment an order of delivery in replevin is executed by taking possession of the property specified therein, such property is in custodia legis. As legal custodian, it is Andres duty to safekeep the seized motor vehicles. Hence, when he passed his duty to safeguard the motor vehicles to Silver, he committed a clear neglect of duty.

motor vehicles rendered the order to return the seized vehicles ineffectual to the prejudice of the complaining owners.

It must be stressed that as court custodian, it was Andres responsibility to ensure that the motor vehicles were safely kept and that the same were readily available upon order of the court or demand of the parties concerned. Specifically,

Third, we are appalled that even after PO3 Despe reported the unauthorized duplication of the vehicles keys, Andres failed to take extra precautionary measures to ensure the safety of the vehicles. It is obvious that the vehicles were put at risk by the unauthorized duplication of the keys of the vehicles. Neither did he immediately report the incident to the police or to the court. The loss of the motor vehicles could have been prevented if Andres immediately asked the court for an order to transfer the vehicles to another secured place as soon as he discovered the unauthorized duplication. Under these circumstances, even an ordinary prudent man would have exercised extra diligence. His warning to the policemen to closely watch the vehicles was insufficient. Andres cannot toss back to Silver or to the policemen the responsibility for the loss of the motor vehicles since he remains chiefly responsible for their safekeeping as legal custodian thereof. Indeed, Andres failure to take the necessary precaution and proper monitoring of the vehicles to ensure its safety constitutes plain negligence.

sheriffs, being ranking officers of the court and agents of the law, must discharge their duties with great care and diligence. In serving and implementing court writs, as well as processes and orders of the court, they cannot afford to err without affecting adversely the proper dispensation of justice. Sheriffs play an important role in the administration of justice and as agents of the law, high standards of performance are expected of them.[29] Hence, his failure to return the motor vehicles at the time when its return was still feasible constitutes another instance of neglect of duty.

Fifth, as found by the OCA, we agree that Andres also disregarded the provisions of Rule 141[30] of the Rules of Court with regard to payment of expenses.

Under Section 9,[31] Rule 141 of the Rules of Court, the procedure for the execution of writs and other processes are: First, the sheriff must make an estimate of the expenses to be incurred by him; Second, he must obtain court approval for such estimated expenses; Third, the approved estimated expenses shall be deposited by the interested party with the Clerk of Court and ex officio sheriff; Fourth, the Clerk of

Fourth, despite the cease and desist order, Andres failed to return the motor vehicles to their lawful owners. Instead of returning the motor vehicles immediately as directed, he opted to write Silver and demand that she put up an indemnity bond to secure the third-party claims. Consequently, due to his delay, the eventual loss of the

Court shall disburse the amount to the executing sheriff; and Fifth, the executing sheriff shall liquidate his expenses within the same period for rendering a return on the writ.

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In this case, no estimate of sheriffs expenses was submitted to the court by Andres. Without approval of the court, he also allowed Silver to pay directly to the policemen the expenses for the safeguarding of the motor vehicles including their meals.
[32]

that being an officer of the court tasked therefor, it behooves him to make due compliance. He is expected to live up to the exacting standards of his office and his conduct must at all times be characterized by rectitude and forthrightness, and so above suspicion and mistrust as well.[35] Thus, an act of gross neglect resulting in loss of properties in custodia legis ruins the confidence lodged by the parties to a suit or the citizenry in our judicial process. Those responsible for such act or omission

Obviously, this practice departed from the accepted procedure provided in

the Rules of Court.

In view of the foregoing, there is no doubt that Andres failed to live up to the standards required of his position. The number of instances that Andres strayed from the regular course observed in the proper implementation of the orders of the court cannot be countenanced. Thus, taking into account the numerous times he was found negligent and careless of his duties coupled with his utter disregard of legal procedures, he cannot be considered guilty merely of simple negligence. His acts constitute gross negligence.

cannot escape the disciplinary power of this Court.

Anent the allegation of grave abuse of authority (oppression), we likewise agree with the observations of the investigating judge. Records show that Andres started enforcing the writ of replevin/order of seizure on the same day that the order of seizure was issued. He also admitted that he took the vehicles of persons who are not parties to the replevin case.[36] He further admitted that he took one vehicle belonging to a certain Junard Escudero without the latters knowledge and even

As we have previously ruled: Gross negligence refers to negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally, with a conscious indifference to consequences in so far as other persons may be affected. It is the omission of that care which even inattentive and thoughtless men never fail to take on their own property.[33] (Emphasis supplied.) Gross neglect, on the other hand, is such neglect from the gravity of the case, or the frequency of instances, becomes so serious in its character as to endanger or threaten the public welfare. The term does not necessarily include willful neglect or intentional official wrongdoing.[34] (Emphasis supplied.)

caused the duplication of its keys in order that it may be taken by Andres. [37] Certainly, these are indications that Andres enforced the order of seizure with undue haste and without giving the complainant prior notice or reasonable time to deliver the motor vehicles. Hence, Andres is guilty of grave abuse of authority (oppression).

When a writ is placed in the hands of a sheriff, it is his duty, in the absence of any instructions to the contrary, to proceed with reasonable celerity and promptness to execute it according to its mandate. However, the prompt implementation of an order of seizure is called for only in instances where there is no question regarding the right of the plaintiff to the property.[38] Where there is such a question, the prudent

Good faith on the part of Andres, or lack of it, in proceeding to properly execute his mandate would be of no moment, for he is chargeable with the knowledge

recourse for Andres is to desist from executing the order and convey the information to his judge and to the plaintiff.

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True, sheriffs must comply with their mandated ministerial duty to implement writs promptly and expeditiously, but equally true is the principle that sheriffs by the nature of their functions must at all times conduct themselves with propriety and decorum and act above suspicion. There must be no room for anyone to conjecture that sheriffs and deputy sheriffs as officers of the court have conspired with any of the parties to a case to obtain a favorable judgment or immediate execution. The sheriff is at the front line as representative of the judiciary and by his act he may build or destroy the institution.[39]

to consider that Andres is a first-time offender; hence, a lighter penalty than dismissal from the service would suffice. Consequently, instead of imposing the penalty of dismissal, the penalty of suspension from office for one (1) year without pay is proper for gross neglect of duty, and another six (6) months should be added for the aggravating circumstance of grave abuse of authority (oppression).

WHEREFORE, the Court finds Abe C. Andres, Sheriff IV, RTC of Davao City, Branch 16, GUILTY of gross neglect of duty and grave abuse of

However, as to the charge of graft and corruption, it must be stressed that the same is criminal in nature, thus, the resolution thereof cannot be threshed out in the instant administrative proceeding. We also take note that there is a pending criminal case for carnapping against Andres;
[40]

authority(oppression) and is SUSPENDED for one (1) year and six (6) months without pay. He is also hereby WARNED that a repetition of the same or similar offenses in the future shall be dealt with more severely. SUPPORT G.R. No. 153788 November 27, 2009

hence, with more reason that we

cannot rule on the allegation of graft and corruption as it may preempt the court in its resolution of the said case.

We come to the matter of penalties. The imposable penalty for gross neglect of duty is dismissal. While the penalty imposable for grave abuse of authority (oppression) is suspension for six (6) months one (1) day to one (1) year. [41] Section 55, Rule IV, of the Uniform Rules on Administrative Cases in the Civil Serviceprovides that if the respondent is found guilty of two or more charges or counts, the penalty to be imposed should be that corresponding to the most serious charge or count and the rest shall be considered as aggravating circumstances.

ROGER V. NAVARRO, Petitioner, vs. HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN T. GO, doing business under the name KARGO ENTERPRISES, Respondents. DECISION BRION, J.: This is a petition for review on certiorari1 that seeks to set aside the Court of Appeals (CA) Decision2 dated October 16, 2001 and Resolution3 dated May 29, 2002 in CAG.R. SP. No. 64701. These CA rulings affirmed the July 26, 20004 and March 7, 20015 orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarros (Navarro) motion to dismiss. BACKGROUND FACTS On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first complaint)6 and 98-598 (second complaint),7 before the

In the instant case, the penalty for the more serious offense which is dismissal should be imposed on Andres. However, following Sections 53
[43] [42]

and 54,

Rule IV of the Uniform Rules on Administrative Cases in the Civil Service, we have

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RTC for replevin and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarros possession. The first complaint stated: 1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City and doing business under the trade name KARGO ENTERPRISES, an entity duly registered and existing under and by virtue of the laws of the Republic of the Philippines, which has its business address at Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he may be served with summons and other processes of the Honorable Court; that defendant "JOHN DOE" whose real name and address are at present unknown to plaintiff is hereby joined as party defendant as he may be the person in whose possession and custody the personal property subject matter of this suit may be found if the same is not in the possession of defendant ROGER NAVARRO; 2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles, including hauling trucks and other heavy equipment; 3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle which is more particularly described as follows Make/Type FUSO WITH MOUNTED CRANE Serial No. FK416K-51680 Motor No. 6D15-338735 Plate No. GHK-378 as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and between KARGO ENTERPRISES, then represented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER NAVARRO xxx; that in accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND THREE HUNDRED THIRTYTHREE & 33/100 PESOS (P66,333.33) which were supposedly in payment of the agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF COMMUNICATIONS CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively dated January 8, 1998 and February 8, 1998, were presented for payment and/or credit, the same were dishonored and/or returned by the drawee bank for the common reason that the current deposit account against which the said checks

were issued did not have sufficient funds to cover the amounts thereof; that the total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66) therefore represents the principal liability of defendant ROGER NAVARRO unto plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH RIGHT TO PURCHASE; that demands, written and oral, were made of defendant ROGER NAVARRO to pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in vain to the great damage and injury of herein plaintiff; xxx 4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law, or seized under an execution or an attachment as against herein plaintiff; xxx 8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the above-described motor vehicle from defendants unto plaintiff pending the final determination of this case on the merits and, for that purpose, there is attached hereto an affidavit duly executed and bond double the value of the personal property subject matter hereof to answer for damages and costs which defendants may suffer in the event that the order for replevin prayed for may be found out to having not been properly issued. The second complaint contained essentially the same allegations as the first complaint, except that the Lease Agreement with Option to Purchase involved is dated October 1, 1997 and the motor vehicle leased is described as follows: Make/Type FUSO WITH MOUNTED CRANE Serial No. FK416K-510528 Motor No. 6D14-423403 The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount of P100,000.00, to Karen Go in payment of the agreed rentals; however, the third check was dishonored when presented for payment.8 On October 12, 19989 and October 14, 1998,10 the RTC issued writs of replevin for both cases; as a result, the Sheriff seized the two vehicles and delivered them to the possession of Karen Go. In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the lease agreements) the actionable documents on which the complaints were based.

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On Navarros motion, both cases were duly consolidated on December 13, 1999. In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of action. In response to the motion for reconsideration Karen Go filed dated May 26, 2000,11 the RTC issued another order dated July 26, 2000 setting aside the order of dismissal. Acting on the presumption that Glenn Gos leasing business is a conjugal property, the RTC held that Karen Go had sufficient interest in his leasing business to file the action against Navarro. However, the RTC held that Karen Go should have included her husband, Glenn Go, in the complaint based on Section 4, Rule 3 of the Rules of Court (Rules).12 Thus, the lower court ordered Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff.1avvphi1 When the RTC denied Navarros motion for reconsideration on March 7, 2001, Navarro filed a petition for certiorari with the CA, essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of the case and directed Karen Go to amend her complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a complaint which failed to state a cause of action could not be converted into one with a cause of action by mere amendment or supplemental pleading. On October 16, 2001, the CA denied Navarros petition and affirmed the RTCs order.13 The CA also denied Navarros motion for reconsideration in its resolution of May 29, 2002,14 leading to the filing of the present petition. THE PETITION Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the requisite juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was Karen Go who filed the complaints and not Glenn Go, she was not a real party-in-interest and the complaints failed to state a cause of action. Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-plaintiff, instead of dismissing the complaint outright because a complaint which does not state a cause of action cannot be converted into one with a cause of action by a mere amendment or a supplemental pleading. In effect, the lower court created a cause of action for Karen Go when there was none at the time she filed the complaints. Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed that the leased vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of the complaint are her paraphernal

properties and the RTC gravely erred when it ordered the inclusion of Glenn Go as a co-plaintiff. Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to amend her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules. Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were premature because no prior demand was made on him to comply with the provisions of the lease agreements before the complaints for replevin were filed. Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were illegally seized from his possession and should be returned to him immediately. Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the subject of the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of Kargo Enterprises and Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarros insistence that Kargo Enterprises is Karen Gos paraphernal property is without basis. Based on the law and jurisprudence on the matter, all property acquired during the marriage is presumed to be conjugal property. Finally, Karen Go insists that her complaints sufficiently established a cause of action against Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff, this was merely to comply with the rule that spouses should sue jointly, and was not meant to cure the complaints lack of cause of action. THE COURTS RULING We find the petition devoid of merit. Karen Go is the real party-in-interest The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real party-in-interest, i.e., the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.15 Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he still insists that Karen Go is not a real party-ininterest in the case. According to Navarro, while the lease contracts were in Kargo Enterprises name, this was merely a trade name without a juridical personality, so the actual parties to the lease agreements were Navarro and Glenn Go, to the exclusion of Karen Go.

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As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was none. We do not find Navarros arguments persuasive. The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name appears in the title of the Complaint where the plaintiff was identified as "KAREN T. GO doing business under the name KARGO ENTERPRISES," and this identification was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant "leased from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the Complaint specifies and attaches as its integral part the Lease Agreement that underlies the transaction between the plaintiff and the defendant. Again, the name KARGO ENTERPRISES entered the picture as this Lease Agreement provides: This agreement, made and entered into by and between: GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the LESSOR-SELLER; representing KARGO ENTERPRISES as its Manager, xxx thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by the express terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises and the latter is clearly the real party to the lease agreements. As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a juridical person, as defined by Article 44 of the Civil Code: Art. 44. The following are juridical persons: (1) The State and its political subdivisions; (2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins as soon as they have been constituted according to law; (3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member.

Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises cannot be a party to a civil action. This legal reality leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo Enterprises? We faced a similar question in Juasing Hardware v. Mendoza,17 where we said: Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual, and requires the proprietor or owner thereof to secure licenses and permits, register the business name, and pay taxes to the national government. It does not vest juridical or legal personality upon the sole proprietorship nor empower it to file or defend an action in court. Thus, the complaint in the court below should have been filed in the name of the owner of Juasing Hardware. The allegation in the body of the complaint would show that the suit is brought by such person as proprietor or owner of the business conducted under the name and style Juasing Hardware. The descriptive words "doing business as Juasing Hardware" may be added to the title of the case, as is customarily done.18 [Emphasis supplied.] This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states: SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest. As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a judgment in this case. Thus, contrary to Navarros contention, Karen Go is the real party-in-interest, and it is legally incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease Agreement that her husband signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease Agreement in his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, as this is a matter for the trial court to consider in a trial on the merits. Glenn Gos Role in the Case We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go,19 who described herself in the Complaints to be "a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing business under the trade name KARGO ENTERPRISES." 20 That Glenn Go and Karen Go are married to each other is a fact never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of a married woman, a fact

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material to the side issue of whether Kargo Enterprises and its properties are paraphernal or conjugal properties. To restate the parties positions, Navarro alleges that Kargo Enterprises is Karen Gos paraphernal property, emphasizing the fact that the business is registered solely in Karen Gos name. On the other hand, Karen Go contends that while the business is registered in her name, it is in fact part of their conjugal property. The registration of the trade name in the name of one person a woman does not necessarily lead to the conclusion that the trade name as a property is hers alone, particularly when the woman is married. By law, all property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved.21 Our examination of the records of the case does not show any proof that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all, only the bare allegation of Navarro to this effect exists in the records of the case. As we emphasized in Castro v. Miat:22 Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife." This article does not require proof that the property was acquired with funds of the partnership. The presumption applies even when the manner in which the property was acquired does not appear.23 [Emphasis supplied.] Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is conjugal or paraphernal property, we hold that it is conjugal property. Article 124 of the Family Code, on the administration of the conjugal property, provides: Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision. xxx This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before performing an act of administration or any act that does not dispose of or encumber their conjugal property. Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements. In other

words, the property relations of the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family Code and, suppletorily, by the spouses marriage settlement and by the rules on partnership under the Civil Code. In the absence of any evidence of a marriage settlement between the spouses Go, we look at the Civil Code provision on partnership for guidance. A rule on partnership applicable to the spouses circumstances is Article 1811 of the Civil Code, which states: Art. 1811. A partner is a co-owner with the other partners of specific partnership property. The incidents of this co-ownership are such that: (1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes; xxx Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered under this name; hence, both have an equal right to seek possession of these properties. Applying Article 484 of the Civil Code, which states that "in default of contracts, or special provisions, co-ownership shall be governed by the provisions of this Title," we find further support in Article 487 of the Civil Code that allows any of the co-owners to bring an action in ejectment with respect to the co-owned property. While ejectment is normally associated with actions involving real property, we find that this rule can be applied to the circumstances of the present case, following our ruling in Carandang v. Heirs of De Guzman.24 In this case, one spouse filed an action for the recovery of credit, a personal property considered conjugal property, without including the other spouse in the action. In resolving the issue of whether the other spouse was required to be included as a co-plaintiff in the action for the recovery of the credit, we said: Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses Carandang, seems to be either an indispensable or a necessary party. If she is an indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is not warranted, whether or not there was an order for her inclusion in the complaint pursuant to Section 9, Rule 3. Article 108 of the Family Code provides: Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements.

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This provision is practically the same as the Civil Code provision it superseded: Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter. In this connection, Article 1811 of the Civil Code provides that "[a] partner is a coowner with the other partners of specific partnership property." Taken with the presumption of the conjugal nature of the funds used to finance the four checks used to pay for petitioners stock subscriptions, and with the presumption that the credits themselves are part of conjugal funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit. Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-ownership, co-owners may bring actions for the recovery of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the benefit of his co-owners. In the latter case and in that ofDe Guia v. Court of Appeals, we also held that Article 487 of the Civil Code, which provides that any of the co-owners may bring an action for ejectment, covers all kinds of action for the recovery of possession. In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is presumed to have been filed for the benefit of all co-owners.25 [Emphasis supplied.] Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo Enterprises-leased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code, supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the property in question without the other spouses consent. On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the Rules, which states: Section 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided by law.

Non-joinder of indispensable parties not ground to dismiss action Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases26 that the misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated in Macababbad v. Masirag:27 Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the dismissal of an action, thus: Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately. In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable party at any stage of the action. The court, either motu proprio or upon the motion of a party, may order the inclusion of the indispensable party or give the plaintiff opportunity to amend his complaint in order to include indispensable parties. If the plaintiff to whom the order to include the indispensable party is directed refuses to comply with the order of the court, the complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only upon unjustified failure or refusal to obey the order to include or to amend is the action dismissed. In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is fully in order. Demand not required prior to filing of replevin action In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a replevin action to an unlawful detainer. For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2, Rule 60 of the Rules, which states: Sec. 2. Affidavit and bond. The applicant must show by his own affidavit or that of some other person who personally knows the facts: (a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof;

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(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof according to the best of his knowledge, information, and belief; (c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of execution or preliminary attachment, or otherwise placed under custodia legis, or if so seized, that it is exempt from such seizure or custody; and (d) The actual market value of the property. The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the affidavit aforementioned, for the return of the property to the adverse party if such return be adjudged, and for the payment to the adverse party of such sum as he may recover from the applicant in the action. We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action for a writ of replevin. More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already admitted in his Answers that he had received the letters that Karen Go sent him, demanding that he either pay his unpaid obligations or return the leased motor vehicles. Navarros position that a demand is necessary and has not been made is therefore totally unmeritorious. WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs against petitioner Roger V. Navarro.

Petition for certiorari under Rule 65 oft he Revised Rules of Court seeking to nullify the decision of the Court of Appeals which affirmed the trial court's Orders, dated November 25, 1993 and February 4, 1994, respectively, denying petitioner's Motion to Dismiss the Complaint in Civil Case No. C-16107, entitled "Glen Camil Andres de Asis, etc. vs. Manuel de Asis", and the motion for reconsideration. The pertinent facts leading to the filing of the petition at bar are as follows: On October 14, 1988, Vircel D. Andres, (the herein private respondent) in her capacity as the legal guardian of the minor, Glen Camil Andres de Asis, brought an action for maintenance and support against Manuel de Asis, docketed as Civil Case No. Q-88935 before the Regional Trial Court of Quezon City, Branch 94, alleging that the defendant Manuel de Asis (the petitioner here) is the father of subject minor Glen Camil Andres de Asis, and the former refused and/or failed to provide for the maintenance of the latter, despite repeated demands. In his Answer, petitioner denied his paternity of the said minor and theorized that he cannot therefore be required to provide support for him. On July 4, 1989, private respondent Vircel D. Andres, through counsel, sent in a manifestation the pertinent portion of which, reads; 1. That this proposed Amended Answer, defendant (herein petitioner) has made a judicial admission/declaration that "1). defendant denies that the said minor child (Glen Camil) is his child 2) he (petitioner) has no obligation to the plaintiff Glen Camil . . . 2. That with the aforesaid judicial admission/declarations by the defendant, it seems futile and a useless exercise to claim support from said defendant. 3. That under the foregoing circumstances it would be more practical that plaintiff withdraws the complains against the defendant subject to the condition that the defendant should not pursue his counterclaim in the above-entitled case, . . . 1 By virtue of the said manifestation, both the plaintiff and the defendant agreed to move for the dismissal of the case. Acting thereupon, the Regional Trial Court a quo issued the following Order of August 8, 1989, dismissing Civil Case No. Q-88-935 with prejudice, to wit: Acting on the manifestation of Atty. Romualdo C. delos Santos, counsel for the defendant, that counsel for the plaintiff Atty. Ismael J. Andres has no objection that this case be withdrawn

G.R. No. 127578 February 15, 1999 MANUEL DE ASIS, petitioner, vs. COURT OF APPEALS, HON. JAIME T. HAMOY, Branch 130, RTC, Kalookan City and GLEN CAMIL ANDRES DE ASIS represented by her mother/guardian VIRCEL D. ANDRES, respondents.

PURISIMA, J.:

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provided that the defendant will withdraw the counterclaim, as prayed for, let the case be dismissed with prejudice. SO ORDERED. 2 On September 7, 1995, another Complaint for maintenance and support was brought against Manuel A. de Asis, this time in the name of Glen Camil Andres de Asis, represented by her legal guardian/mother, Vircel D. Andres. Docketed as Civil Case No. C-16107 before Branch 130 of the Regional Trial Court of Kalookan, the said Complaint prayed, thus: WHEREFORE, premises considered, it is respectfully prayed that judgment be rendered ordering defendant: 1. To pay plaintiff the sum of not less than P2,000.00 per month for every month since June 1, 1987 as support in arrears which defendant failed to provide plaintiff shortly after her birth in June 1987 up to present; 2. To give plaintiff a monthly allowance of P5,000.00 to be paid in advance on or before the 5th of each and every month. 3. To give plaintiff by way of support pendente lite a monthly allowance of P5,000.00 per month, the first monthly allowance to start retroactively from the first day of this month and the subsequent ones to be paid in advance on or before the 5th of each succeeding month. 4. To pay the costs of suit. Plaintiff prays for such other relief just and equitable under the premises. 3 On October 8, 1993, petitioner moved to dismiss the Complaint on the ground of res judicata, alleging that Civil Case C-16107 is barred by the prior judgment which dismissed with prejudice Civil Case Q -88-935. In the Order dated November 25, 1993 denying subject motion to dismiss, the trial court ruled that res judicata is inapplicable in an action for support for the reason that renunciation or waiver of future support is prohibited by law. Petitioner's motion for reconsideration of the said Order met the same fate. It was likewise denied. Petitioner filed with the Court of Appeals a Petition for Certiorari. But on June 7, 1996, the Court of Appeals found that the said Petition devoid of merit and dismissed the same.

Undaunted, petitioner found his way to this court via the present petition, posing the question whether or not the public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction in upholding the denial of the motion to dismiss by the trial court, and holding that an action for support cannot be barred by res judicata. To buttress his submission, petitioner invokes the previous dismissal of the Complaint for maintenance and support, Civil Case Q-88-935, filed by the mother and guardian of the minor, Glen Camil Andres de Asis, (the herein private respondent). In said case, the complainant manifested that because of the defendant's judicial declaration denying that he is the father of subject minor child, it was "futile and a useless exercise to claim support from defendant". Because of such manifestation, and defendant's assurance that he would not pursue his counterclaim anymore, the parties mutually agreed to move for the dismissal of the complaint. The motion was granted by the Quezon City Regional Trial Court, which then dismissed the case with prejudice. Petitioner contends that the aforecited manifestation, in effect admitted the lack of filiation between him and the minor child, which admission binds the complainant, and since the obligation to give support is based on the existence of paternity and filiation between the child and the putative parent, the lack thereof negates the right to claim for support. Thus, petitioner maintains that the dismissal of the Complaint by the lower court on the basis of the said manifestation bars the present action for support, especially so because the order of the trial court explicitly stated that the dismissal of the case was with prejudice. The petition is not impressed with merit. The right to receive support can neither be renounced nor transmitted to a third person. Article 301 of the Civil Code, the law in point, reads: Art. 301. The right to receive support cannot be renounced, nor can it be transmitted to a third person. Neither can it be compensated with what the recipient owes the obligor. . . . Furthermore, future support cannot be the subject of a compromise. Art. 2035, ibid, provides, that: No compromise upon the following questions shall be valid: (1) The civil status of persons; (2) The validity of a marriage or legal separation;

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(3) Any ground for legal separation (4) Future support; (5) The jurisdiction of courts; (6) Future legitime. The raison d' etre behind the proscription against renunciation, transmission and/or compromise of the right to support is stated, thus: The right to support being founded upon the need of the recipient to maintain his existence, he is not entitled to renounce or transfer the right for this would mean sanctioning the voluntary giving up of life itself. The right to life cannot be renounce; hence, support which is the means to attain the former, cannot be renounced. xxx xxx xxx To allow renunciation or transmission or compensation of the family right of a person to support is virtually to allow either suicide or the conversion of the recipient to a public burden. This is contrary to public policy. 4 In the case at bar, respondent minor's mother, who was the plaintiff in the first case, manifested that she was withdrawing the case as it seemed futile to claim support from petitioner who denied his paternity over the child. Since the right to claim for support is predicated on the existence of filiation between the minor child and the putative parent, petitioner would like us to believe that such manifestation admitting the futility of claiming support from him puts the issue to rest and bars any and all future complaint for support. The manifestation sent in by respondent's mother in the first case, which acknowledged that it would be useless to pursue its complaint for support, amounted to renunciation as it severed the vinculum that gives the minor, Glen Camil, the right to claim support from his putative parent, the petitioner. Furthermore, the agreement entered into between the petitioner and respondent's mother for the dismissal of the complaint for maintenance and support conditioned upon the dismissal of the counterclaim is in the nature of a compromise which cannot be countenanced. It violates the prohibition against any compromise of the right to support. Thus, the admission made by counsel for the wife of the facts alleged in a motion of the husband, in which the latter prayed that his obligation to support be extinguished cannot be considered as

an assent to the prayer, and much less, as a waiver of the right to claim for support. 5 It is true that in order to claim support, filiation and/or paternity must first be shown between the claimant and the parent. However, paternity and filiation or the lack of the same is a relationship that must be judicially established and it is for the court to declare its existence or absence. It cannot be left to the will or agreement of the parties. The civil status of a son having been denied, and this civil status, from which the right to support is derived being in issue, it is apparent that no effect can be .given to such a claim until an authoritative declaration has been made as to the existence of the cause. 6 Although in the case under scrutiny, the admission may be binding upon the respondent, such an admission is at most evidentiary and does not conclusively establish the lack of filiation. Neither are we persuaded by petitioner's theory that the dismissal with prejudice of Civil Case Q-88-935 has the effect ofres judicata on the subsequent case for support. The case of Advincula vs. Advincula 7 comes to the fore. In Advincula, the minor, Manuela Advincula, instituted a case for acknowledgment and support against her putative father, Manuel Advincula. On motion of both parties and for the reason that the "plaintiff has lost interest and is no longer interested in continuing the case against the defendant and has no further evidence to introduce in support of the complaint", the case was dismissed. Thereafter, a similar case was instituted by Manuela, which the defendant moved to dismiss, theorizing that the dismissal of the first case precluded the filing of the second case. In disposing such case, this Court ruled, thus: The new Civil Code provides that the allowance for support is provisional because the amount may be increased or decreased depending upon the means of the giver and the needs of the recipient (Art. 297); and that the right to receive support cannot be renounced nor can it be transmitted to a third person neither can it be compensated with what the recipient owes the obligator (Art . 301). Furthermore, the right to support can not be waived or transferred to third parties and future support cannot be the subject of compromise (Art. 2035; Coral v. Gallego, 38 O.G. 3135, cited in IV Civil Code by Padilla, p. 648; 1956 Ed.). This being true, it is indisputable that the present action for support can be brought, notwithstanding the fact the previous case filed against the same defendant was dismissed. And it also appearing that the dismissal of Civil Case No. 3553, was not an adjudication upon the merits, as heretofore shown, the right of herein plaintiff-

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appellant to reiterate her suit for support and acknowledgment is available, as her needs arise. Once the needs of plaintiff arise, she has the right to bring an action for support, for it is only then that her cause for action is accrues.. . . xxx xxx xxx It appears that the former dismissal was predicated upon compromise. Acknowledgment, affecting as it does the civil status of a persons and future support, cannot be the subject of compromise (pars. 1 & 4, Art. 2035, Civil Code). Hence, the first dismissal cannot have force and effect and can not bar the filing of another action, asking for the same relief against the same defendant. (emphasis supplied). Conformably, notwithstanding the dismissal of Civil Case Q-88-935 and the lower court's pronouncement that such dismissal was with prejudice, the second action for support may still prosper. WHEREFORE, the petition under consideration is hereby DISMISSED and the decision of the Court of Appeals AFFIRMED. No pronouncement as to costs. G.R. No. 128157 September 29, 1999 PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. MANUEL MANAHAN, alias "Maning," defendant-appellant.

On 5 January 1995, at about two o'clock in the morning, Teresita who was asleep was suddenly awakened when she felt someone beside her. Upon opening her eyes she saw accused Manuel Manahan as he immediately placed himself on top of her. She tried to shout but the accused covered her mouth. He then forcibly spread her legs. She cried; she pushed and kicked him many times in an effort to free herself but the accused proved too strong for her. Soon enough she became weary and exhausted. Her condition enabled the accused to pursue his immoral intentions. He lifted her skirt, removed her panty and then inserted his penis into her vagina. He succeeded in having carnal knowledge of her. After satisfying his lust, the accused warned the victim not to report the incident to anyone and threatened her that should she squeal he would kill her and her family. Thereafter, he left her. She was terribly afraid and shaken and could do nothing but cry until dawn. 2 Within the month Teresita left the canteen and returned home to her parents in Mangaldan, Pangasinan. The sexual encounter resulted in her pregnancy. When her parents discovered it and learned of her story, they brought her to the hospital where she was examined by Dr. Casimero Bacugan. From there they proceeded to the police station where a statement of Teresita was taken by SPO1 Isagani L. Ico. Police Chief Inspector Wendy G. Rosario later endorsed the complaining witness to the Office of the City Prosecutor of Dagupan City for appropriate legal action. Thereafter, with the assistance of her mother, Teresita filed a criminal complaint accusing Manuel Manahan alias Maning of rape. 3 Meanwhile, on 2 October 1995, she gave birth to a healthy baby girl and christened her Melanie Tibigar. Accused Manuel Manahan has a different story. He denied having raped Teresita. He claimed they were lovers. According to him, he met Teresita at the Espiritu Canteen in August 1994 and began courting her. Subsequently, they became sweethearts and their first sexual intercourse occurred on 27 December 1994 followed by another on 28 December 1994. In the first week of January 1995 they again had a tryst in the house of Teresita's Aunt Fely, their last intercourse being on 7 May 1995 in the house of one Maura Manahan-Quinto, his sister. Manuel further alleged that even after Teresita left the Espiritu Canteen there were several occasions when they saw each other in front of the DBP in Dagupan City. In one of those assignations Teresita allegedly told him that she wanted to have the child aborted as her father might kill her if he discovered she was pregnant, but accused did not agree. In September 1995, the accused was arrested in connection with the case filed by Teresita but was later released. We fail to discern from the records the reason for his release. But on 15 March 1996 he was again arrested and detained at the Dagupan City Jail where Estrella, Teresita's mother, supposedly visited him at least five (5) times to ask about his condition and whether he was tortured in detention. The accused maintained that Estrella was trying to conceal Teresita's condition from her father. She purportedly proposed to the accused to sell his land and give the proceeds to Teresita's father as a form of settlement.

BELLOSILLO, J.: MANUEL MANAHAN alias Maning was found guilty of rape and sentenced to death by the court a quo. He was also ordered to indemnify the victim P50,000.00 as moral damages, pay the costs, and acknowledge and support the offspring of his indiscretion. 1 This case is now before us on automatic review. Complainant Teresita Tibigar, 16 years old, worked at the Espiritu Canteen in Dagupan City. As a stay-in waitress she slept at the second floor of the canteen. Manuel Manahan is the brother-in-law of Josefina Espiritu, owner of the canteen. His wife Primadonna is the sister of Josefina Espiritu. Manuel and Primadonna temporarily reside at the canteen together with the family of Josefina as Primadonna was then pregnant.1wphi1.nt

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The accused assails in his appeal brief the credibility of the complaining witness. He asserts that the prosecution failed to prove his guilt beyond reasonable doubt and reiterates that he and the complaining witness were lovers, and that their sexual congress was consensual. We have painstakingly reviewed the records and we sustain the conviction of the accused. The prosecution for rape almost always involves sharply contrasting and irreconcilable declarations of the victim and the accused. At the heart of almost all rape cases is the issue of credibility of the witnesses, to be resolved primarily by the trial court which is in a better position to decide the question, having heard the witnesses and observed their deportment and manner of testifying. Accordingly, its findings are entitled to the highest degree of respect and will not be disturbed on appeal in the absence of any showing that the trial court overlooked, misunderstood or misapplied some facts or circumstances of weight or substance which would otherwise affect the result of the case. The exception is nowhere perceivable in the present case. The accused banks heavily on his "sweetheart theory," a usual defense in rape cases, and vigorously maintains that the sexual intercourse between him and Teresita was but the culmination of a mutual passion. But we find otherwise primarily because the accused miserably failed to prove that he and the complaining witness indeed had a romantic liaison as this claim was categorically denied by her. Moreover, there was no substantial evidence, e.g., love notes, mementos or pictures, presented to support it. The testimony of defense witnesses Nelson de Venecia and Arvin Sereban that they used to see Manuel and Teresita together in front of the DBP in Dagupan City, even if true, did not confirm that there was indeed an amorous relationship between the two. 4 Likewise, the testimony of Isabel Remandaban, another defense witness, that she saw the accused and the complaining witness embracing each other in the house of Maura Manahan-Quinto can hardly be given weight. The trifling manner by which she answered the questions propounded to her at the witness stand even prompted the trial court to remark that she was not serious with her testimony. Thus COURT: This is not a joke. The penalty [for] the accused [if convicted] is death. Do not testify here as if you are joking, or you will be the one to [be] sen[t] to jail ahead of Manahan. You want to be sent to jail? WITNESS: No sir. COURT: Why are you smiling? This is a serious matter. Put that on record the witness is smiling. Not serious about her testimony (emphasis supplied).

Ultimately, the trial court disregarded altogether, and rightly so, the testimony of Isabel Remandaban. To emphasize, the task of assigning values to the testimonies of witnesses in the stand and weighing their credibility is best left to the trial court which forms first-hand impressions of the witnesses testifying before it, and therefore more competent to discriminate between the true and the false. 5 We find no trace of whim or arbitrariness on the court a quo in its assessment of the testimony of this witness. Also, Exh. "1" of the defense, a photograph showing Estrella talking to the accused while carrying Melanie, the offspring of Teresita and Manuel, does not establish anything. As Estrella explained, she visited the accused in jail not to show him Melanie but to ascertain that he was in fact incarcerated, 6 and that she only brought the child with her incidentally during her visit because Teresita was sick at that time and there was no one else to take care of the baby. 7 Even assuming ex gratia argumenti that the accused and the victim were really lovers, that fact alone would not negate the commission of rape. A sweetheart cannot be forced to have sex against her will. Definitely, a man cannot demand sexual gratification from a fiancee and, worse, employ violence upon her on the pretext of love. Love is not a license for lust. 8 Equally untenable is the accused's contention that there can be no rape since the prosecution failed to prove beyond reasonable doubt the element of intimidation. One of the modes of committing the crime of rape is by having carnal knowledge of a woman using force and intimidation. Even if we concede the absence of intimidation in this case, the fact remains that the accused employed force against his victim. Thus, testifying in a clear, definitive and convincing manner as concluded by the trial court, Teresita established beyond any scintilla of doubt the presence of force essential in rape Q: What were you doing then when Manuel Manahan accosted you? A: I was sleeping, then suddenly I felt somebody near me and when I opened my eyes I saw Manuel Manahan and then he immediately laid on top of me, sir. Q: How did you come to know that it was Manuel Manahan who went, who laid on top of you? A: I know him, sir. Q: What did you do when Manuel Manahan laid on top of you?

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A: I was about to shout but he covered my mouth and then he immediately spread my legs, sir. Q: What did you do when he did that to you? A: I cried, sir. Q: Before Manuel Manahan spread your legs, what did you do? Before he was able to spread your legs? A: I pushed him and I kicked him several times, sir. Q: What happened when you pushed him and kicked him several times ? A: I got weakened because he was strong that is why he was able to abuse me, sir. Q: After Manuel Manahan was able to spread your legs, what did he do? A: And then he inserted his penis, sir . . . . 9 Again, during the cross-examination the victim recounted how she was forced to have sexual intercourse with the accused, thus Q: Did you spread your legs voluntarily or did he force open your legs? A: He forced me, sir. Q: What did he do to force open your legs? A: By the use of his legs, sir. Q: He did that while he was on top of you? A: Yes, sir.

Q: What legs did he use, was it the right leg or both legs? A: Both legs, sir. Q: You mentioned about crossing his legs and then forced open your legs, will you please demonstrate how he forced open your legs by the use of this pencil and ballpen illustrate your legs with these two other ballpens where the legs of Manuel Manahan, will you please demonstrate how he forced open his legs when you said first he put together his legs and then open your legs, will you please do it? A: He went on top of me and he put his legs between my legs and also his legs, sir. INTERPRETER: Witness, demonstrating by spreading both ends of the ballpen. Q: And then by doing so, by spreading his legs between your legs, he was able to insert his penis? A: Yes, sir. Q: At that precise moment when he was on top of you and also your legs, where was the right hand of Manuel Manahan? A: He closed my mouth with his right hand. Q: What about his left hand? A: He used his left hand in pulling up my dress. Q: At that precise moment when he was doing the push and pull, was his right hand still with your mouth? A: Yes, sir.

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Q: What about his left hand after raising your skirt, what was his left hand doing? A: He was squeezing my neck, sir . . . . Q: During your direct testimony you mentioned about having resisted him, now, at what precise moment did you try to resist him? A: When he went on top of me I struggled, sir. Q: Were you able to dislodge him from being on top of you? A: Yes, sir. COURT: Then what did he do when you were able to dislodge him on top of you? A: He went again on top of me, sir. Q: Did you again struggle to resist him or no more? A: No more because I already felt weak, sir . . . . 10 Evidently, complainant offered a tenacious resistance to the criminal acts of the accused, but the serious determination of the latter to accomplish what he intended to do eventually weakened complainant and shocked her into insensibility. It is quite understandable that, at a tender age of 16 and innocent in the ways of the world, complainant is no match to the accused, a 28-year old married man endowed with physical strength she could not possibly overcome. Neither could she shout to alert the other occupants of the house as the accused prevented her by covering her mouth with his right hand. The accused however claims that complainant had the opportunity to shout for help at that precise moment he was removing his pants and brief, but she did not. Suffice it to say, in this connection, that not every victim of a crime can be expected to act reasonably and conformably with the expectations of mankind. Different people react to similar situations dissimilarity. While the normal response of a woman about to be defiled may be to shout and put up a wild struggle, others become virtually catatonic because of the mental shock they

experience and the fear engendered by the unexpected occurrence. Yet it can never be successfully argued that the latter are any less sexual victims than the former. 11 The failure of complainant to disclose the outrage on her person to anybody, including her parents, is due to the threats on her life and that of her family. Indeed, one cannot expect her to act like an adult or a mature experienced woman who would have the courage and intelligence to disregard the threat to her life and complain immediately that she had been sexually assaulted. It is not uncommon for young girls to conceal for sometime the assaults on their virtue because of the rapists' threats to their lives. Delay or vacillation in making a criminal accusation does not necessarily impair the credibility of the witness if such delay is satisfactorily explained, as in this case. 12 In the instant case, the complaining witness may not have even filed the rape charge had she not become pregnant. This Court has taken cognizance of the fact that many of the victims of rape never complain or file criminal charges against the rapists. They prefer to bear the ignominy in painful silence rather than reveal their shame to the world and risk the rapists' making good their threats to kill or hurt their victims. 13 That accused also asserts that the rape case is a mere face-saving device of the victim to escape the anger of her father. Again, we are not convinced. It taxes credulity that a simple barrio lass 14 like the victim, a minor and a mere elementary graduate at that, could contrive such an unthinkable solution to save herself from the imagined wrath of her father; what is more, concoct such a good rape story convincing enough to withstand the rigors of cross-examination, and sway the judge to impose on the accused the extreme penalty of death. Indeed, it is very unlikely that the victim would make up a story of rape with all its attendant scandal and humiliation. Considering the modesty and timidity of a typical Filipina, especially one from the rural areas, it is hard to accept that the victim would fabricate facts which would seriously cast dishonor on her maidenhood. No young Filipina of decent repute would publicly admit she had been raped unless that was the truth. It is her natural instinct to protect her honor. As we have long held, when a woman says that she has been raped, she says in effect all that is necessary to show that rape has been committed. Her testimony is credible where she has no motive to testify against the accused. 15 On the matter of acknowledgment and support of the child, a correction of the view of the court a quo is in order. Article 345 of The Revised Penal Code provides that persons guilty of rape shall also be sentenced to "acknowledge the offspring, unless the law should prevent him from doing so," and "in every case to support the offspring." In the case before us, compulsory acknowledgment of the child Melanie Tibigar is not proper there being a legal impediment in doing so as it appears that the accused is a married man. As pronounced by this Court in People v. Guerrero, 16 the rule is that if the rapist is a married man, he cannot be compelled to recognize the offspring of the crime, should there be any, as his child, whether legitimate or illegitimate." Consequently, that portion of the judgment under review is accordingly

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deleted. In any case, we sustain that part ordering the accused to support the child as it is in accordance with law. Finally, we do not agree with the trial court that the proper penalty to be imposed on the accused is death, it appearing that the crime committed was merely simple rape, i.e., not committed with or effectively qualified by any of the circumstances enumerated under Art. 335 of The Revised Penal Code, as amended by Sec. 11, RA 7659, under which the death penalty is authorized. 17 In this case, the proper imposable penalty should only be reclusion perpetua. WHEREFORE, the Decision of the Regional Trial Court of Dagupan City, Branch 40, dated 28 November 1996, convicting accused MANUEL MANAHAN alias Maning of the crime of rape is AFFIRMED subject however to the modification that the death sentence imposed on the accused is reduced to reclusion perpetua. The portion of the decision of the trial court ordering the accused, a married man, to acknowledge the child Melanie Tibigar is DELETED being contrary to law and jurisprudence.1wphi1.nt G.R. No. 148510 July 21, 2004

On February 12, 2001, petitioner paid before the RTC a total of Sixty (P60.00) Pesos as docket fees as shown by Official Receipt Nos. 12968987 and 13536702.5 For petitioners failure to pay the full amount of P520.00 docket fees, the Court of Appeals, by Resolution of March 19, 2001,6 dismissed his appeal. Petitioner filed a Motion for Reconsideration7 of the appellate courts March 19, 2001 Resolution, but it was denied by Resolution of April 26, 20018 on the grounds that the motion did not contain an affidavit or proof of service and that it did not state on its face the material dates determinative of its timeliness. Petitioner filed a Motion for Reconsideration of the April 26, 2001 Resolution which was denied by Resolution9 of June 8, 2001 on the ground that no second motion by the same party can be entertained. Since petitioner assails final resolutions of the Court of Appeals, he should have filed a petition for review on certiorari under Rule 45, instead of a petition for certiorari under Rule 65. On this score alone, the petition should be dismissed. Remedial faux pas aside, even if a petition for certiorari under Rule 65 were to be, in the greater interest of justice, allowed, the petition just the same is dismissable for having been filed out of time. As petitioners motion for reconsideration of the questioned March 19, 2001 Resolution of the appellate court did not contain an affidavit or proof of service as required by Section 6, Rule 15 of the Rules of Civil Procedure nor did it state the material dates in order to determine its timeliness, it is considered a mere scrap of paper, and did not thus toll the running of the period to file the motion.10 In fact, petitioner did not even state when he received the said resolution, hence, it can not even be determined when the reglementary period expired. Assuming that petitioner received the March 19, 2001 Resolution on the same date it was promulgated, petitioner had 60 days or until May 18, 2001 to file the present petition.11 He filed it, however, only on July 4, 2001. En passant, the dismissal of the petition notwithstanding, petitioner is not without remedy. For as what he seeks to assail is the amount of support he was adjudged to provide, he can file a motion with the trial court for its modification since a judgment granting support never becomes final.12 WHEREFORE, the instant petition is DISMISSED. G.R. No. 124518 December 27, 2007

ALBERTO LOPEZ a.k.a. CESAR A. LOPEZ, petitioner, vs. HON. COURT OF APPEALS, HON. BENJAMIN ANTONIO, Presiding Judge of RTC, Branch 170, Malabon, Metro Manila and CHERRY PIE LOPEZ, respondents. Sought to be nullified via petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure are the March 19, 2001, April 26, 2001, and June 8, 2001 Resolutions of the Court of Appeals in CA-G.R. CV No. 6014-UDK, "Cherry Pie Lopez v. Alberto Lopez a.k.a. Cesar Lopez". The antecedents of the case are as follows: The Regional Trial Court (RTC) of Malabon rendered on June 15, 2000 a decision in Civil Case No. 3023-MN declaring the nullity of marriage between Cherry Pie Lopez and Alberto Lopez a.k.a Cesar Lopez (petitioner). The decision became final and executory based on a certification1 dated January 5, 2001. Petitioner moved to reconsider2 the support aspect of the decision but was denied by Order of January 26, 2001.3 On February 8, 2001, the RTC, acting on petitioners Notice of Appeal4 filed on February 7, 2001, gave it due course and directed the transmittal of the records of the case to the Court of Appeals "as soon as possible."

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WILSON SY, Petitioner, vs. COURT OF APPEALS, Regional Trial Court of Manila, Branch 48, and MERCEDES TAN UY-SY, Respondents. DECISION TINGA, J.: In this Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure, petitioner Wilson Sy assails the Decision2 dated 29 February 1996 of the Court of Appeals in C.A. G.R. SP No. 38936 and its Resolution3 dated 15 April 1996 denying his motion for reconsideration. The following are the antecedents: On 19 January 1994, respondent Mercedes Tan Uy-Sy filed a petition for habeas corpus against petitioner Wilson Sy before the Regional Trial Court of Manila, Branch 48, docketed as Special Proceeding No. 94-69002. Respondent prayed that said writ be issued ordering petitioner to produce their minor children Vanessa and Jeremiah before the court and that after hearing, their care and custody be awarded to her as their mother.4 In his answer, petitioner prayed that the custody of the minors be awarded to him instead. Petitioner maintained that respondent was unfit to take custody of the minors. He adduced the following reasons: firstly, respondent abandoned her family in 1992; secondly, she is mentally unstable; and thirdly, she cannot provide proper care to the children.5 After trial, the trial court caused the issuance of a writ of habeas corpus and awarded custody of the children to respondent, to wit: WHEREFORE, judgment is hereby rendered maintaining to the petitioner the custody of the minors Vanessa and Jeremiah, all surnamed Uy-Sy, without, however, prejudice to the visitorial rights of the father, herein respondent, and the temporary arrangement of the custody made by the parties during pendency of this proceeding is hereby revoked, and without any further effect. The Court further orders the respondent to pay by way of monthly support for the minors, the amount of P50,000.00 payable to petitioner from [the] date of judgment for failure on the part of respondent to show by preponderance of evidence that the petitioner is unfit to the custody of the minor children who are only 6 and 4 years old.6 Petitioner appealed the order of the trial court to the Court of Appeals. Before the appellate court, he alleged that the trial court erred: (1) in awarding the custody of the minor children solely to respondent; and (2) in ordering him to provide respondent support in the amount of P50,000.00 per month.7

The Court of Appeals found no merit in the appeal and affirmed the decision of the trial court. The Court of Appeals did not find any reason to disturb the conclusions of the trial court, particularly petitioners failure to prove by preponderance of evidence that respondent was unfit to take custody over the minor children. The Court of Appeals held that petitioner was not able to substantiate his contention that respondent was unfit to have custody of the children. On respondents supposed abandonment of the family, the appellate court found instead that respondent had been driven away by petitioners family because of religious differences. Respondents stay in Taiwan likewise could hardly be called abandonment as she had gone there to earn enough money to reclaim her children. Neither could respondents act of praying outdoors in the rain be considered as evidence of insanity as it may simply be an expression of ones faith. Regarding the allegation that respondent was unable to provide for a decent dwelling for the minors, to the contrary, the appellate court was satisfied with respondents proof of her financial ability to provide her children with the necessities of life.8 As to the second assignment of error, the Court of Appeals held that questions as to care and custody of children may be properly raised in a petition for writ of habeas corpus. Moreover, petitioner was properly heard on the matter relative to the issue of support. He was questioned about his sources of income for the purpose of determining his ability to give support. As to the propriety of the amount awarded, the appellate court was unwilling to alter the trial courts conclusion for petitioner did not forthrightly testify on his actual income. Neither did he produce income tax returns or other competent evidence, although within his power to do so, to provide a fair indication of his resources. At any rate, the appellate court declared that a judgment of support is never final and petitioner is not precluded at any time from seeking a modification of the same and produce evidence of his claim.9 Petitioner filed a motion for reconsideration of the Court of Appeals decision but the same was denied.10 Hence, this appeal by certiorari wherein petitioner asserts that: (1) the Court of Appeals erred in awarding the custody of the minor children solely to respondent; (2) the Court of Appeals had no jurisdiction to award support in a habeas corpus case as: (a) support was neither alleged nor prayed for in the petition; (b) there was no express or implied consent on the part of the parties to litigate the issue; and (c) Section 6, Rule 99 of the Rules of Court does not apply because the trial court failed to consider the Civil Code provisions on support; and (3) the award of P50,000.00 as support is arbitrary, unjust, unreasonable and tantamount to a clear deprivation of property without due process of law.11 For her part, respondent claims that petitioner had lost his privilege to raise the first issue, having failed to raise it before the appellate court. Anent the second issue, respondent takes refuge in the appellate courts statement that the questions regarding the care and custody of children may properly be adjudicated in a habeas corpus case. Regarding the third issue, respondent maintains that the amount of support awarded is correct and proper.12

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There is no merit in the petition regarding the question of care and custody of the children. The applicable provision is Section 213 of the Family Code which states that: Section 213. In case of separation of the parents, parental authority shall be exercised by the parent designated by the Court. The Court shall take into account all relevant considerations, especially the choice of the child over seven years of age, unless the parent is unfit. No child under seven years of age shall be separated from the mother, unless the court finds compelling reasons to order otherwise. In case of legal separation of the parents, the custody of the minor children shall be awarded to the innocent spouse, unless otherwise directed by the court in the interest of the minor children.13 But when the husband and wife are living separately and apart from each other, without decree of the court, the court shall award the care, custody, and control of each child as will be for his best interest, permitting the child to choose which parent he prefers to live with if he is over seven (7) years of age unless the parent so chosen be unfit to take charge of the child by reason of moral depravity, habitual drunkenness or poverty.14 In all controversies regarding the custody of minors, the sole and foremost consideration is the physical, educational, social and moral welfare of the child concerned, taking into account the respective resources and social and moral situations of the contending parents.15 However, the law favors the mother if she is a fit and proper person to have custody of her children so that they may not only receive her attention, care, supervision but also have the advantage and benefit of a mothers love and devotion for which there is no substitute.16 Generally, the love, solicitude and devotion of a mother cannot be replaced by another and are worth more to a child of tender years than all other things combined.17 The Civil Code Commission, in recommending the preference for the mother, explained, thus: The general rule is recommended in order to avoid many a tragedy where a mother has seen her baby torn away from her. No man can sound the deep sorrows of a mother who is deprived of her child of tender age. The exception allowed by the rule has to be for "compelling reasons" for the good of the child: those cases must indeed be rare, if the mothers heart is not to be unduly hurt. If she has erred, as in cases of adultery, the penalty of imprisonment and the (relative) divorce decree will ordinarily be sufficient punishment for her. Moreover, her moral dereliction will not have any effect upon the baby who is as yet unable to understand the situation.18

This preference favoring the mother over the father is even reiterated in Section 6, Rule 99 of the Rules of Court (the Rule on Adoption and Custody of Minors) underscoring its significance, to wit: SEC. 6. Proceedings as to child whose parents are separated. Appeal. When husband and wife are divorced or living separately and apart from each other, and the question as to the care, custody and control of a child or children of their marriage is brought before a Regional Trial Court by petition or as an incident to any other proceeding, the court, upon hearing the testimony as may be pertinent, shall award the care, custody and control of each such child as will be for its best interest, permitting the child to choose which parent it prefers to live with if it be over ten years of age, unless the parent so chosen be unfit to take charge of the child by reason of moral depravity, habitual drunkenness, incapacity, or poverty. If upon such hearing, it appears that both parents are improper persons to have the care, custody, and control of the child, the court may either designate the paternal or maternal grandparent of the child, or his oldest brother or sister, or some reputable and discreet person to take charge of such child, or commit it to any suitable asylum, childrens home, or benevolent society. The court may in conformity with the provisions of the Civil Code order either or both parents to support or help support said child, irrespective of who may be its custodian, and may make any order that is just and reasonable permitting the parent who is deprived of its care and custody to visit the child or have temporary custody thereof. Either parent may appeal from an order made in accordance with the provisions of this section. No child under seven years of age shall be separated from its mother, unless the court finds there are compelling reasons therefor. (Emphasis supplied) The above-quoted provision expressly acknowledges and authorizes that the matter of care and custody of the children may be raised and adjudicated as an incident to any proceeding, such as a case for habeas corpus. Evidently, absent any compelling reason to the contrary, the trial court was correct in restoring the custody of the children to the mother, herein respondent, the children being less than seven years of age, at least at the time the case was decided. Moreover, petitioners contention that respondent is unfit to have custody over the minor children has not been substantiated as found by both courts below. Thus, it is already too late for petitioner to reiterate the assertion for only questions of law may be raised before this Court. Furthermore, the determination of whether the mother is fit or unfit to have custody over the children is a matter well within the sound discretion of the trial court, and unless it is shown that said discretion has been abused the selection will not be interfered with.19 Consequently, the Court affirms the award of custody in respondents favor. Now, the issue of support. Article 203 of the Family Code states that the obligation to give support is demandable from the time the person who has a right to receive the same needs it for

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maintenance, but it shall not be paid except from the date of judicial or extrajudicial demand. The case of Jocson v. The Empire Ins. Co. and Jocson Lagniton20 explains the rationale for this rule: x x x Support does include what is necessary for the education and clothing of the person entitled thereto (Art. 290, New Civil Code). But support must be demanded and the right to it established before it becomes payable (Art. 298, New Civil Code; Marcelo v. Estacio, 70 Phil. 215). For the right to support does not arise from the mere fact of relationship, even from the relationship of parents and children, but "from imperative necessity without which it cannot be demanded, and the law presumes that such necessity does not exist unless support is demanded (Civil Code of the Philippines, Annotated, Tolentino, Vol. 1, p. 181, citing 8 Manresa 685). In the present case, it does not appear that support for the minors, be it only for their education and clothing, was ever demanded from their father and the need for it duly established. The need for support, as already stated, cannot be presumed, and especially must this be true in the present case where it appears that the minors had means of their own.21 As intimated earlier, the Court agrees with the courts below that Section 6, Rule 9922 of the Rules of Court permits the ventilation of the question regarding the care and custody of the children as an incident to any proceeding, even a habeas corpus proceeding. Petitioner would have us believe, however, that since respondents petition did not include a prayer23for support of the children in accordance with the above-quoted Family Code provision, the trial court was not justified in awarding support in respondents favor. In addition, petitioner claims that he did not give consent to the trial and the threshing out of the issue as it was not raised in the pleadings.24 He claims that in fact, he testified on his financial status only to prove that he is financially able to provide for his children and not for the purpose of determining the amount of support.25 Besides, he contends that the trial court did not order the amendment of the pleadings to conform to the evidence presented pursuant to Section 526 Rule 10 of the 1997 Rules of Civil Procedure, an aspect that supports his contention that the parties never consented, expressly or impliedly, to try the issue of support.27 The Court is not convinced. Contrary to petitioners assertions, respondent testified during trial, without any objection on petitioners part, regarding the need for support for the childrens education and other necessities, viz: ADDL DIRECT EXAMINATION OF THE WITNESS MERCEDES TAN UY-SY Q: With the kind permission of this Honorable Court. Q: Ms. Sy, the custody of the two minors[,] of course[,] require some expenses on your part notwithstanding that you said you have savings intended for them, is it not?

A: Yes, sir. Q: And what is the nature of these expenses that you expect to disburse for the children? A: For the medicine or health care. Q: What else? A: For education, for emergency expenses, for basically for food. Q: In your estimate, how much would these expenses be per month? A: Well, I think, perhaps P50,000.00, sir. Q: Which the respondent should furnish? A: Yes, sir. ATTY. CORTEZ That is all for the witness, Your Honor.28 Moreover, based on the transcript of stenographic notes, petitioner was clearly made aware that the issue of support was being deliberated upon, to wit: WITNESS: WILSON SY: will be testifying under the same oath.29 xxxx ATTY. ALBON: Q: In the hearing of July 23, 1994 as appearing on page 3, Mercedes Sy testified that she would be needingP50,000.00 a month expenses for her children, what can you say about that? A: That is a dillusion [sic] on her part.30

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The trial court judge even propounded questions to petitioner regarding his sources of income for the purpose of determining the amount of support to be given to the children: COURT: I want to find out how much his income now for the purposes of giving support to the children. Please answer the question. WITNESS: A: Shares of stocks. ATTY. CORTEZ: Q: A shares [sic] of stock is the evidence of your investment in the corporation. My question is: What investment did you put in to enable you to get a share, was it money or property? A: There is no money but it was given by my father. COURT: Q: Upon the death of your father you just inherited it?

ATTY. CORTEZ: Q: How many shares do you have in the corporation? A: Right now I have only ten (10) shares. Q: What is the value of that [sic] shares? A: I [do not] give any importance. COURT Q: For purposes of this case, the Court is asking you how much is your share? A: I [do not ] how to appraise. Q: More or less, how much? Use the word more or less, is that one million more or less, 2 million, more or less, 10 million, more or less? Anyway, this is not a BIR proceeding, this is a Court proceeding? A: I want to speak the truth but I [do not] know. I did not even see the account. COURT:

A: Before. Proceed. Q: After the death, did you not acquire some of the shares of your father? ATTY. CORTEZ A: No, your Honor. xxxx Q: What happened to the shares of your father? A: It is with my mother. xxxx COURT: Never mind the share of the mother. What is material is his share. Q: At that time of your fathers death[,] you were [sic]already holding ten (10) shares or was it less? A: More. Q: More than ten (10) shares? A: Yes, sir.

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COURT Q: What is the par value of that one (1) share? A: I [do not] know, your Honor. xxxx COURT: Let it remain that he owns ten (10) shares. ATTY. CORTEZ: xxxx A: Yes, 10 shares. The other shares I already sold it. Q: How many shares did you sell? A: I only have 10 shares now. I dont know how many shares that I have left. I only know the 20 shares.31 Applying Section 5,32 Rule 10 of the 1997 Rules of Civil Procedure, since the issue of support was tried with the implied consent of the parties, it should be treated in all respects as if it had been raised in the pleadings. And since there was implied consent, even if no motion had been filed and no amendment had been ordered, the Court holds that the trial court validly rendered a judgment on the issue.33 Significantly, in the case of Bank of America v. American Realty Corporation,34 the Court stated: There have been instances where the Court has held that even without the necessary amendment, the amount proved at the trial may be validly awarded, as in Tuazon v. Bolanos (95 Phil. 106), where we said that if the facts shown entitled plaintiff to relief other than that asked for, no amendment to the complaint was necessary, especially where defendant had himself raised the point on which recovery was based. The appellate court could treat the pleading as amended to conform to the evidence although the pleadings were actually not amended. Amendment is also unnecessary when only clerical error or non substantial matters are involved, as we held in Bank of the Philippine Islands vs. Laguna (48 Phil. 5). In Co Tiamco v. Diaz (75 Phil. 672), we stressed that the rule on amendment need not be applied rigidly, particularly where no surprise or prejudice is caused the objecting party. And in the recent case of National Power Corporation v. Court of Appeals (113 SCRA 556), we held that where there is a variance in the defendants pleadings and the evidence adduced by it at the trial, the Court may treat the pleading as amended to conform with the evidence.35

The Court likewise affirms the award of P50,000.00 as support for the minor children. As found by both courts, petitioners representations regarding his familys wealth and his capability to provide for his family more than provided a fair indication of his financial standing even though he proved to be less than forthright on the matter.36 In any event, this award of support is merely provisional as the amount may be modified or altered in accordance with the increased or decreased needs of the needy party and with the means of the giver.37 WHEREFORE, the Decision dated 29 February 1996 of the Eleventh Division of the Court of Appeals in C.A. G.R. SP No. 38936 and its Resolution38 dated 15 April 1996 are AFFIRMED. Costs against petitioner.

G.R. No. 165016

June 17, 2008

DOLORES MONTEFALCON & LAURENCE MONTEFALCON, petitioners, vs. RONNIE S. VASQUEZ, respondent. DECISION QUISUMBING, J.: This petition for review assails the September 29, 2003 Decision1 and the July 19, 2004 Resolution2 of the Court of Appeals in CA-G.R. CV No. 71944, which had reversed the May 28, 2001 Decision3 of the Regional Trial Court (RTC), Branch 19, of Naga City in Civil Case No. RTC '99-4460. The facts culled from the records are as follows. In 1999, petitioner Dolores P. Montefalcon filed a Complaint4 for acknowledgment and support against respondent Ronnie S. Vasquez before the RTC of Naga City. Alleging that her son Laurence is the illegitimate child of Vasquez, she prayed that Vasquez be obliged to give support to co-petitioner Laurence Montefalcon, whose certificate of live birth he signed as father.5 According to petitioners, Vasquez only gave a total of P19,000 as support for Laurence since Laurence was born in 1993. Vasquez allegedly also refused to give him regular school allowance despite repeated demands. Petitioner Dolores added that she and Vasquez are not legally married, and that Vasquez has his own family. A sheriff tried to serve the summons and complaint on Vasquez in Aro-aldao, Nabua, Camarines Sur. Vasquez's grandfather received them as Vasquez was in Manila.

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Vasquez's mother returned the documents to the clerk of court, who informed the court of the non-service of summons.6 Petitioners then filed a motion to declare Vasquez in default. The court denied it for lack of proper service of summons.7 In 2000, the court issued an alias summons on Vasquez at "10 Int. President Garcia St., Zone 6, Signal Village, Taguig, Metro Manila" upon petitioners' motion. Albeit a Taguig deputy sheriff served it by substituted service on Vasquez's caretaker Raquel Bejer, the sheriff's return incorrectly stated "Lazaro" as Vasquez's surname.8 Another alias summons9 was issued, also received by Bejer. The second sheriff's return states: THIS IS TO CERTIFY THAT on the 19th day of July 2000 the undersigned sheriff caused the service of summons issued by the court in the aboveentitled case together with the copy of the complaint and annexes attached thereon upon defendant RONNIE S. VASQUEZ, by substituted service, thru his caretaker, RAQUEL BEJER, a person of sufficient discretion, who acknowledged the receipt thereof at No. 10 Int. President Garcia St. Zone 6, Signal Village, Taguig, Metro Manila, as evidenced by her signature appearing at the lower portion of the original copy of summons. WHEREFORE, said summons is hereby returned to the court of origin DULY SERVED for its records and information. Taguig for Naga City, July 19, 2000 (SGD.) ERNESTO G. RAYMUNDO, JR., Deputy Sheriff MTC BR 74 Taguig, Metro Manila10 On petitioners' motion, the trial court declared Vasquez in default for failure to file an answer despite the substituted service of summons. Vasquez was furnished with court orders and notices of the proceedings at his last known address, but these were returned as he had allegedly moved to another place and left no new address.11 In 2001, the court granted petitioners' prayers, explaining that they had no ill-motive and that Dolores gave a truthful testimony. The court added that Vasquez admitted the truth of the allegations by his silence. It further explained that Laurence's certificate of live birth, being a public document, is irrefutably a prima facie evidence of illegitimate filiation. The trial court decreed:

WHEREFORE, by preponderant evidence, judgment is hereby rendered in favor of the plaintiffs Dolores Montefalcon and her minor child Laurence Montefalcon and against defendant Ronnie S. Vasquez who is hereby ordered to: 1. Acknowledge plaintiff Laurence Montefalcon as his illegitimate child with Dolores Montefalcon; 2. Give support to the said minor in the amount of FIVE THOUSAND (P5,000.00) PESOS monthly commencing on June 1, 1993, the past support for eight (8) years in the amount of FOUR HUNDRED EIGHTY THOUSAND (P480,000.00) PESOS less the amount of NINETEEN THOUSAND (P19,000.00) PESOS previously given, shall be paid promptly and the monthly support of FIVE THOUSAND (P5,000.00) PESOS shall be paid not later than the end of each month beginning on July 31, 2001 and every end of the month thereafter as prayed for in the complaint; and 3. Pay the sum of TEN THOUSAND (P10,000.00) PESOS and THREE THOUSAND (P3,000.00) PESOS as attorney's and appearance fees, respectively, and litigation expenses of ONE THOUSAND (P1,000.00) PESOS. SO ORDERED.12 In the same year, Vasquez surfaced. He filed a notice of appeal to which petitioners opposed. Appeal was granted by the court.13 Before the appellate court, he argued that the trial court erred in trying and deciding the case as it "never" acquired jurisdiction over his person, as well as in awarding P5,000-per-month support, which was allegedly "excessive and exorbitant." The appellate court noted that the service of summons on Vasquez was "defective" as there was no explanation of impossibility of personal service and an attempt to effect personal service, and decreed as follows: WHEREFORE, based on the foregoing premises, the instant appeal is GRANTED. The appealed May 28, 2001 Decision of the Regional Trial Court of Naga City in Civil Case No. RTC '99-4460 is hereby NULLIFIED and SET ASIDE. Accordingly, let this case be REMANDED to the court a quo for further proceedings. SO ORDERED.14 Petitioners argued in their motion for reconsideration15 that any attempt at personal service of summons was needless as Vasquez already left for abroad. The appellate court, however, denied the motion. Hence, this petition. Petitioners assign two appellate court errors:

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I. THE COURT OF APPEALS ERRED IN HOLDING THAT THE RESPONDENT IN THIS CASE WAS NOT VALIDLY SERVED WITH THE SUMMONS AND COMPLAINT IN CIVIL CASE NO. RTC '99-4460; AND THAT II. THE COURT OF APPEALS ERRED IN ANNUL[L]ING AND SETTING ASIDE THE TRIAL COURT'S DECISION (ANNEX "B") FOR LACK OF JURISDICTION.16 Petitioners justify the validity of substituted service as Vasquez had left as overseas seafarer when the sheriff served the summons on July 19, 2000 in Taguig. Noting that Vasquez's seaman's book indicated that he left the country on January 24, 2000 and came back on October 12, 2000, they criticize the appellate court for anchoring its rulings on mere technicality. Vasquez counters that because he was abroad, service of summons should have been personal or by publication as substituted service is proper only if a defendant is in the country. Vasquez also added that the sheriff's return did not state that he exerted efforts to personally serve the summons.17 In their reply, petitioners insist that a substituted service is the normal method if one is temporarily away from the country as personal service abroad or by publication are not ordinary means of service.18 Simply put, the issues now for resolution are: (1) whether there is a valid substituted service of summons on Vasquez to clothe the trial court with jurisdiction over his person; and (2) whether he is obliged to give support to co-petitioner Laurence. To acquire jurisdiction over the person of a defendant, service of summons must be personal,19 or if this is not feasible within a reasonable time, then by substituted service.20 It is of judicial notice that overseas Filipino seafarers are contractual employees. They go back to the country once their contracts expire, and wait for the signing of another contract with the same or new manning agency and principal if they wish. It is therefore common knowledge that a Filipino seaman often has a temporary residence in the urban areas like Metro Manila, where majority of the manning agencies hold offices, aside from his home address in the province where he originates. In this case, respondent Vasquez hails from Camarines Sur but he has lived in Taguig City when the complaint was filed. Notice may then be taken that he has established a residence in either place. Residence is a place where the person named in the summons is living at the time when the service was made, even though he was temporarily abroad at the time. As an overseas seafarer, Vasquez was a

Filipino resident temporarily out of the country. Hence, service of summons on him is governed by Rule 14, Section 16 of the Rules of Court: SEC. 16. Residents temporarily out of the Philippines. When any action is commenced against a defendant who ordinarily resides within the Philippines, but who is temporarily out of it, service may, by leave of court, be alsoeffected out of the Philippines, as under the preceding section. (Emphasis supplied.) The preceding section referred to states: SEC. 15. Extraterritorial service. When the defendant does not reside and is not found in the Philippines, and the action affects the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under section 6; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer. Because Section 16 of Rule 14 uses the words "may" and "also," it is not mandatory. Other methods of service of summons allowed under the Rules may also be availed of by the serving officer on a defendant-seaman. Ideally, Vasquez must be personally served summons. But was personal service of summons practicable? Conversely, was substituted service of summons justified? Obviously, personal service of summons was not practicable since the defendant was temporarily out of the country. To proceed with personal service of summons on a defendant-seaman who went on overseas contract work would not only be impractical and futile it would also be absurd. The impossibility of prompt personal service was shown by the fact that the Naga Citybased sheriff purposely went to a barrio in Camarines Sur to serve the summons personally on Vasquez. When service of summons failed, said sheriff ascertained the whereabouts of Vasquez. Upon being informed that Vasquez was in Manila, the Naga court commissioned a Taguig City-based sheriff to serve the summons. Both the Naga and Taguig sheriffs inquired about Vasquez's whereabouts, signifying that they did not immediately resort to substituted service. There was no undue haste in effecting substituted service. The fact that the Naga court allowed a reasonable time to locate

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Vasquez to as far as Taguig shows that there was indeed no precipitate haste in serving the summons. In this case, we agree that the substituted service in Taguig was valid and justified because previous attempts were made by the sheriffs to serve the summons, but to no avail. Diligent efforts were evidently exerted in the conduct of the concerned sheriffs in the performance of their official duty. Also, the person who received the alias summons was of suitable age and discretion, then residing at Vasquez's dwelling. There is no quarrel that it was really Vasquez's residence, as evidenced by his employment contract, executed under the supervision and authority of the Philippine Overseas Employment Administration (POEA). Vasquez cannot deny that in his contract of employment and seafarer's information sheet, both bearing POEA's letterhead, his address in Metro Manila was what was correctly mentioned in the alias summons that Bejer received. She must have informed Vasquez one way or another of the suit upon his return in October 2000 after finishing his nine-month contract with Fathom Ship Management. Thus, it is reasonable to conclude that he had enough time to have the default order set aside. The default judgment was rendered on May 28, 2001. He also had enough time to file a motion for reconsideration. But he did nothing. The interregnum between the first but failed attempt at personal service by the RTC of Naga City in Vasquez's place in Camarines Sur to the final substituted service in Metro Manila by a Taguig RTC sheriff was almost eight months, a reasonable time long enough to conclude that personal service had failed and was futile. Montalban v. Maximo21 offers a rational and logical solution of the issue. We held in said case that the normal method of service of summons on one temporarily absent is by substituted service because personal service abroad and service by publication are not ordinary means of summoning defendants. Summons in a suit in personam against a temporarily absent resident may be by substituted service as domiciliaries of a State are always amenable to suits in personamtherein.22 "Residence" is the place where the person named in the summons is living at the time when the service is made, even though he may be temporarily out of the country at the time. A plaintiff is merely required to know the defendant's residence, office or regular business place. He need not know where a resident defendant actually is at the very moment of filing suit. He is not even duty-bound to ensure that the person upon whom service was actually made delivers the summons to the defendant or informs him about it. The law presumes that for him. It is immaterial that defendant does not receive actual notice. As well said in Montalban: . . . A man temporarily absent from this country leaves a definite place of residence, a dwelling where he lives, a local base, so to speak, to which any inquiry about him may be directed and where he is bound to return. Where one temporarily absents himself, he leaves his affairs in the hands of one

who may be reasonably expected to act in his place and stead; to do all that is necessary to protect his interests; and to communicate with him from time to time any incident of importance that may affect him or his business or his affairs. It is usual for such a man to leave at his home or with his business associates information as to where he may be contacted in the event a question that affects him crops up. If he does not do what is expected of him, and a case comes up in court against him, he cannot in justice raise his voice and say that he is not subject to the processes of our courts. He cannot stop a suit from being filed against him upon a claim that he cannot be summoned at his dwelling house or residence or his office or regular place of business. Not that he cannot be reached within a reasonable time to enable him to contest a suit against him. There are now advanced facilities of communication. Long distance telephone calls and cablegrams make it easy for one he left behind to communicate with him.23 Aside from, at present, various forms of texting and short message services by the ubiquitous cellular phones. More importantly, the letter of the law must yield to its spirit. The absence in the final sheriff's return of a statement about the impossibility of personal service does not conclusively prove that the service is invalid. Such failure should not unduly prejudice petitioners if what was undisclosed was in fact done. Proof of prior attempts at personal service may have been submitted by the plaintiff during the hearing of any incident assailing the validity of the substituted service24 had Vasquez surfaced when the case was heard. In fact, he was declared in default. It was only when a judgment against him was rendered by the trial court that he questioned the validity of service of summons before the appellate court. Such failure to appear, and then later to question the court's jurisdiction over his person, should not be taken against herein petitioners. Between Vasquez's self-serving assertion that he only came to know of the case when his mother told him about the trial court's decision and the sheriff's return on the substituted service which carries a presumption of regularity, the latter is undoubtedly deserving of more faith and credit. The sheriff's certificate of service of summons is prima facie evidence of the facts set out in it. Only clear and convincing evidence may overcome its presumption of regularity. Given the circumstances in the present case, we agree that the presumption of regularity in the performance of duty on the part of the sheriff stands.25 On the second issue, the trial court's order must also be sustained. Co-petitioner Laurence is legally entitled to support from the respondent, and the amount of P5,000 monthly set by the trial court is neither excessive nor unreasonable. Article 17526 of the Family Code of the Philippines mandates that illegitimate filiation may be established in the same way and on the same evidence as legitimate children. Under Article 172,27 the filiation of legitimate children is established by any of the

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following: (1) through record of birth appearing in the civil register or a final order; or (2) by admission of filiation in a public document or private handwritten instrument and signed by the parent concerned; or in default of these two, by open and continuous possession of the status of a legitimate child or by any other means allowed by the Rules of Court and special laws. Laurence's record of birth is an authentic, relevant and admissible piece of evidence to prove paternity and filiation. Vasquez did not deny that Laurence is his child with Dolores. He signed as father in Laurence's certificate of live birth, a public document. He supplied the data entered in it. Thus, it is a competent evidence of filiation as he had a hand in its preparation. In fact, if the child had been recognized by any of the modes in the first paragraph of Article 172, there is no further need to file any action for acknowledgment because any of said modes is by itself a consummated act.28 As filiation is beyond question, support follows as matter of obligation. Petitioners were able to prove that Laurence needs Vasquez's support and that Vasquez is capable of giving such support. Dolores testified that she spent around P200,000 for Laurence; she spends P8,000 a month for his schooling and their subsistence. She told the lower court Vasquez was earning US$535 monthly based on his January 10, 2000 contract of employment29 with Fathom Ship Management and his seafarer information sheet.30 That income, if converted at the prevailing rate, would be more than sufficient to cover the monthly support for Laurence. Under Article 195 (4)31 of the Family Code, a parent is obliged to support his illegitimate child. The amount is variable. There is no final judgment thereof as it shall be in proportion to the resources or means of the giver and the necessities of the recipient.32 It may be reduced or increased proportionately according to the reduction or increase of the necessities of the recipient and the resources or means of the person obliged to support.33 Support comprises everything indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation, in keeping with the financial capacity of the family.34 Under the premises, the award of P5,000 monthly support to Laurence is reasonable, and not excessive nor exorbitant. In sum, we rule that the Court of Appeals erred in invalidating the substituted service of summons and remanding the case. As there was valid substituted service of summons under the circumstances of this case, the lower court acquired jurisdiction over his person and correctly ordered him to pay past and present monthly support to his illegitimate child as well as attorney's fees and litigation expenses to petitioners. WHEREFORE, the petition is GRANTED. The Decision dated September 29, 2003 and Resolution dated July 19, 2004 of the Court of Appeals in CA-G.R. CV No. 71944 are REVERSED and SET ASIDE. The Decision dated May 28, 2001 of the Regional Trial Court, Branch 19, Naga City in Civil Case No. RTC '99-4460 is hereby REINSTATED. G.R. No. 163209 October 30, 2009

SPOUSES PRUDENCIO and FILOMENA LIM, Petitioners, vs. MA. CHERYL S. LIM, for herself and on behalf of her minor children LESTER EDWARD S. LIM, CANDICE GRACE S. LIM, and MARIANO S. LIM, III, Respondents. DECISION CARPIO, J.: The Case For review1 is the Decision2 of the Court of Appeals, dated 28 April 2003, ordering petitioners Prudencio and Filomena Lim (petitioners) to provide legal support to respondents Cheryl, Lester Edward, Candice Grace and Mariano III, all surnamed Lim (respondents). The Facts In 1979, respondent Cheryl S. Lim (Cheryl) married Edward Lim (Edward), son of petitioners. Cheryl bore Edward three children, respondents Lester Edward, Candice Grace and Mariano III. Cheryl, Edward and their children resided at the house of petitioners in Forbes Park, Makati City, together with Edwards ailing grandmother, Chua Giak and her husband Mariano Lim (Mariano). Edwards family business, which provided him with a monthly salary of P6,000, shouldered the family expenses. Cheryl had no steady source of income. On 14 October 1990, Cheryl abandoned the Forbes Park residence, bringing the children with her (then all minors), after a violent confrontation with Edward whom she caught with the in-house midwife of Chua Giak in what the trial court described "a very compromising situation."3 Cheryl, for herself and her children, sued petitioners, Edward, Chua Giak and Mariano (defendants) in the Regional Trial Court of Makati City, Branch 140 (trial court) for support. The trial court ordered Edward to provide monthly support ofP6,000 pendente lite.4 The Ruling of the Trial Court On 31 January 1996, the trial court rendered judgment ordering Edward and petitioners to "jointly" provide P40,000 monthly support to respondents, with Edward shouldering P6,000 and petitioners the balance of P34,000 subject to Chua Giaks subsidiary liability.5 The defendants sought reconsideration, questioning their liability. The trial court, while denying reconsideration, clarified that petitioners and Chua Giak were held jointly

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liable with Edward because of the latters "inability x x x to give sufficient support x x x."6 Petitioners appealed to the Court of Appeals assailing, among others, their liability to support respondents. Petitioners argued that while Edwards income is insufficient, the law itself sanctions its effects by providing that legal support should be "in keeping with the financial capacity of the family" under Article 194 of the Civil Code, as amended by Executive Order No. 209 (The Family Code of the Philippines). 7 The Ruling of the Court of Appeals In its Decision dated 28 April 2003, the Court of Appeals affirmed the trial court. On the issue material to this appeal, that is, whether there is basis to hold petitioners, as Edwards parents, liable with him to support respondents, the Court of Appeals held: The law on support under Article 195 of the Family Code is clear on this matter. Parents and their legitimate children are obliged to mutually support one another and this obligation extends down to the legitimate grandchildren and great grandchildren. In connection with this provision, Article 200 paragraph (3) of the Family Code clearly provides that should the person obliged to give support does not have sufficient means to satisfy all claims, the other persons enumerated in Article 199 in its order shall provide the necessary support. This is because the closer the relationship of the relatives, the stronger the tie that binds them. Thus, the obligation to support is imposed first upon the shoulders of the closer relatives and only in their default is the obligation moved to the next nearer relatives and so on.8 Petitioners sought reconsideration but the Court of Appeals denied their motion in the Resolution dated 12 April 2004. Hence, this petition. The Issue The issue is whether petitioners are concurrently liable with Edward to provide support to respondents. The Ruling of the Court We rule in the affirmative. However, we modify the appealed judgment by limiting petitioners liability to the amount of monthly support needed by respondents Lester Edward, Candice Grace and Mariano III only. Petitioners Liable to Provide Support but only to their Grandchildren

By statutory9 and jurisprudential mandate,10 the liability of ascendants to provide legal support to their descendants is beyond cavil. Petitioners themselves admit as much they limit their petition to the narrow question of when their liability is triggered, not if they are liable. Relying on provisions11 found in Title IX of the Civil Code, as amended, on Parental Authority, petitioners theorize that their liability is activated only upon default of parental authority, conceivably either by its termination12 or suspension13 during the childrens minority. Because at the time respondents sued for support, Cheryl and Edward exercised parental authority over their children,14 petitioners submit that the obligation to support the latters offspring ends with them. Neither the text of the law nor the teaching of jurisprudence supports this severe constriction of the scope of familial obligation to give support. In the first place, the governing text are the relevant provisions in Title VIII of the Civil Code, as amended, on Support, not the provisions in Title IX on Parental Authority. While both areas share a common ground in that parental authority encompasses the obligation to provide legal support,15 they differ in other concerns including theduration of the obligation and its concurrence among relatives of differing degrees.16 Thus, although the obligation to provide support arising from parental authority ends upon the emancipation of the child,17 the same obligation arising from spousal and general familial ties ideally lasts during the obligee's lifetime.. Also, while parental authority under Title IX (and the correlative parental rights) pertains to parents, passing to ascendants only upon its termination or suspension, the obligation to provide legal support passes on to ascendants not only upon default of the parents but also for the latters inability to provide sufficient support. As we observed in another case raising the ancillary issue of an ascendants obligation to give support in light of the fathers sufficient means: Professor Pineda is of the view that grandchildren cannot demand support directly from their grandparents if they have parents (ascendants of nearest degree) who are capable of supporting them. This is so because we have to follow the order of support under Art. 199. We agree with this view. xxxx There is no showing that private respondent is without means to support his son; neither is there any evidence to prove that petitioner, as the paternal grandmother, was willing to voluntarily provide for her grandson's legal support. x x x18(Emphasis supplied; internal citations omitted) Here, there is no question that Cheryl is unable to discharge her obligation to provide sufficient legal support to her children, then all school-bound. It is also undisputed that the amount of support Edward is able to give to respondents, P6,000 a month, is insufficient to meet respondents basic needs. This inability of Edward and Cheryl to sufficiently provide for their children shifts a portion of their obligation to the ascendants in the nearest degree, both in the paternal (petitioners) and maternal19 lines, following the ordering in Article 199. To hold otherwise, and thus subscribe to petitioners theory, is to sanction the anomalous scenario of tolerating extreme material deprivation of children because of parental inability to give adequate

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support even if ascendants one degree removed are more than able to fill the void.1avvphi1 However, petitioners partial concurrent obligation extends only to their descendants as this word is commonly understood to refer to relatives, by blood of lower degree. As petitioners grandchildren by blood, only respondents Lester Edward, Candice Grace and Mariano III belong to this category. Indeed, Cheryls right to receive support from the Lim family extends only to her husband Edward, arising from their marital bond.20 Unfortunately, Cheryls share from the amount of monthly support the trial court awarded cannot be determined from the records. Thus, we are constrained to remand the case to the trial court for this limited purpose. 21 Petitioners Precluded from Availing of the Alternative Option Under Article 204 of the Civil Code, as Amended As an alternative proposition, petitioners wish to avail of the option in Article 204 of the Civil Code, as amended, and pray that they be allowed to fulfill their obligation by maintaining respondents at petitioners Makati residence. The option is unavailable to petitioners. The application of Article 204 which provides that The person obliged to give support shall have the option to fulfill the obligation either by paying the allowance fixed, or by receiving and maintaining in the family dwelling the person who has a right to receive support. The latter alternative cannot be availed of in case there is a moral or legal obstacle thereto. (Emphasis supplied) is subject to its exception clause. Here, the persons entitled to receive support are petitioners grandchildren and daughter-in-law. Granting petitioners the option in Article 204 will secure to the grandchildren a well-provided future; however, it will also force Cheryl to return to the house which, for her, is the scene of her husbands infidelity. While not rising to the level of a legal obstacle, as indeed, Cheryls charge against Edward for concubinage did not prosper for insufficient evidence, her steadfast insistence on its occurrence amounts to a moral impediment bringing the case within the ambit of the exception clause of Article 204, precluding its application. WHEREFORE, we DENY the petition. We AFFIRM the Decision of the Court of Appeals, dated 28 April 2003, and its Resolution dated 12 April 2004 with the MODIFICATION that petitioners Prudencio and Filomena Lim are liable to provide support only to respondents Lester Edward, Candice Grace and Mariano III, all surnamed Lim. We REMAND the case to the Regional Trial Court of Makati City, Branch 140, for further proceedings consistent with this ruling.

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