Cases - Rule 2, Civpro

G.R. No. 79903 July 23, 1992CONTECH CONSTRUCTION vs. CA

This is a petition for certiorari and prohibition with preliminary injunction to annul and set aside the decision dated July 24, 1987 of the Court of Appeals 1 directing the Regional Trial Court of Pasig, Branch CLXIV in Civil Case No. 45321 to admit the amended complaint of respondent Greenbelt Square, Inc. and to proceed with the trial of said case.

It appears on record that on August 8, 1980, petitioner Contech Construction Technology & Development Corporation, as contractor, and private respondent Greenbelt Square, Inc., as owner, entered into an Agreement whereby the former undertook the construction, equipping, furnishing and supplying of materials for a theater and restaurant building for a consideration of P20,069,694.00. 2

Pursuant to said Agreement, petitioners secured from the Philippine British Assurance Co., Inc. (Phil-British for brevity), a bond of P2,000.000.00 under Bond No. 0746 to guarantee the payment of the labor and materials used in connection with the construction project, 3 from the Metropolitan Insurance Co. (Metropolitan for brevity); P4,000,000.00 under Surety No. 80/G(13)00853 to secure the full and faithful performance of the petitioners 4 and Surety No. 80/G(10)00457 for P2,000,000.00 to guarantee the supply of cement and steel bars needed for said project. 5

On October 21, 1981, respondent Corporation terminated the Agreement upon petitioners' failure to comply with the terms and conditions of said Agreement. 6 Respondent Corporation, likewise, sent Phil-British and Metropolitan notices of claim for petitioners' failure to perform their part of the Agreement.

Petitioners, thereafter, withdrew their men and equipments from the construction site and respondent Corporation contracted the services of R.N. Construction Co., Inc. to finish the building project. However, upon petitioners' refusal to pay their obligation to respondent Corporation, the latter, on March 24, 1982, simultaneously filed with the Court of First Instance of Rizal two separate complaints against petitioners and their sureties for breach of contract.

In the first complaint which was docketed as Civil Case No. 45321, respondent Corporation had petitioners and Phil-British as party defendants for the collection of a sum of money, while the second complaint which was docketed as Civil Case No. 45322, petitioners and Metropolitan were also party defendants for the collection of a sum of money.

On June 3, 1982, petitioners filed a motion to dismiss the second complaint on the ground of the pendency of the first complaint likewise between the same parties for the same cause, which motion was denied by the trial court. However, upon appeal to the Intermediate Appellate Court, 7 the appellate court on May 4, 1984 held that there was a

splitting of a cause of action when the two complaints were filed simultaneously, hence, the orders of the trial court dated May 17, 1983 and July 25, 1983 denying the motion to dismiss and the motion for reconsideration were nullified. Said decision of the appellate court became final on August 2, 1984.

On August 8, 1984, respondent Corporation filed before the lower court where the first complaint was pending, a motion for leave to amend its complaint and to consolidate the two cases, which motion was denied on October 3, 1984. Accordingly, respondent Corporation filed a motion for reconsideration on October 29, 1984, which was also denied on January 13, 1987.

Thereafter, respondent Corporation filed a petition for certiorari and mandamus with the appellate court alleging grave abuse of discretion on the part of the trial court in denying its motion to amend the complaint.

The appellate court, on July 24, 1987, rendered a decision giving due course to respondent Corporation's petition and directed the trial court to admit the amended complaint of the respondent corporation. Consequently, petitioner filed a motion for reconsideration on August 11, 1987 which was denied on August 27, 1987.

Hence, this petition.

Petitioners contend that the appellate court acted without jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction in admitting the amended complaint of the respondent Corporation, considering that the previous dismissal of the second complaint for violating the rule against splitting a cause of action barred its reinstitution by the amendment of the first complaint.

Section 2, Rule 10 of the Revised Rules of Court provides that:

A party may amend his pleading once as a matter of course at any time before a responsive pleading is served or, if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, he may so amend it at any time within ten (10) days after it is served.

Under this rule, a party is given a right to file an amended pleading within the time and upon the conditions specified in the rule and without the necessity of obtaining leave of court since a party may amend his pleading once as a matter of course at any time before a responsive pleading is served. This rule expressly authorizes the amendment of pleadings in order that all matters in the action in dispute between the parties may be completely determined in a single proceeding. The amended complaint, in the instant case, was filed not to delay nor alter the cause of action of the first complaint but rather to obviate the splitting of the cause of action and to obtain a speedy determination of the controversy in one proceeding without regard to technicality. The amended complaint merely impleaded Metropolitan as a party defendant in the first complaint and included in said complaint the cause of action alleged in the second complaint which was already dismissed. Furthermore, petitioners had not yet filed any responsive pleading to the first

complaint when respondent corporation filed the motion to amend its complaint. As correctly held by the appellate court:

It is a recognized rule of procedure that pleadings shall be construed liberally so as to render substantial justice to the parties and in order that actual merits of the controversy may speedily be determined without regard to technicalities and in the most expeditious and inexpensive manner. The judicial attitude has always been favorable and liberal in allowing amendments to a pleading. The rationale behind the rule is to avoid multiplicity of suits and in order that the real controversies between the parties are presented, their rights are determined and the case decided on the merits without unnecessary delay. When the situation is such that if the proposed amendment is not allowed, another action would be instituted, thus making two actions, two trials, and two appeals possible and probable, the said amendment should be admitted. Hence, should the trial court find the allegations in the pleadings to be inadequate, it should allow the party concerned to file proper amendments to pleadings in accordance with the mandate of the Rules of Court that amendments to pleadings are favored and should be liberally allowed.

Applying the foregoing principles to the instant case, there is no doubt that the respondent Court committed a grave and serious abuse of discretion in not admitting the amended complaint. The records of the case indicate that the motion for leave to admit the amended complaint was filed before a responsive pleading was filed. In fact, no responsive pleading has yet been filed by the private respondents. Their opposition filed on August 15, 1984 is not a responsive pleading within the contemplation of the rule. Consequently, the filing by the petitioner of an amended complaint was erroneously denied by the respondent Court, the same being a matter of right. Indeed, in such a situation, an error of the trial court in refusing such amendment is controllable by mandamus.

Moreover, the Court, after assiduously examining and comparing the original and amended complaint, is of the opinion that the amendment sought to be included did not in any manner change the cause of action nor was it intended for delay, which considerations appear to be the only ground for denying a motion for leave to amend under section 3 of Rule 10 of the Rules of Court. 8

Petitioners also contend that the rule of conclusiveness of judgment is applicable in this case in view of the finality of the judgment of the appellate court dismissing the second complaint which was being reintroduced by a mere amendment of the first complaint. In said judgment, it was held that there was a splitting of a cause of action in the first and second complaint, therefore the rule against splitting of a cause of action barred the second complaint as enunciated in the cases of Jimenez vs. Camara 9 and City of Bacolod vs. San Miguel Brewery, 10 resulting in an outright denial of the amended complaint.

We do not agree.

The rulings in the aforementioned cases are not applicable in the case at bar since both cases refer to a situation wherein the second complaint, which cause of action should be included in the first complaint, was filed after a final decision was rendered on the merits. In this case, the first and second complaint were not yet set for pre-trial or trial because petitioners had not yet filed any responsive pleading to both complaints,

therefore the amendment should be allowed since said amendment will not delay the proceeding and there was no change in respondent Corporation's cause of action.

WHEREFORE, the petition for certiorari and prohibition with preliminary injunction is hereby DENIED for lack of merit.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-14718 March 30, 1960

VICENTE JIMENEZ, ET AL., plaintiffs-appellants, vs.CARMELO S. CAMARA, ET AL., defendants-appellees.

Enrique F. Marino for appellants.Benedicto, Sumbingco and Associates, for appellees.

BARRERA, J.:

This is an appeal, certified to this Court by the Court of Appeals, from the order of the Court of First Instance of Negros Occidental (in Civil Case No. 3364), dismissing plaintiffs' complaint to compel defendant Carmelo S. Camara to execute the necessary deeds of conveyance of 17 parcels of land in favor of plaintiffs.

Plaintiffs Vicente Jimenez, Arturo Jimenez and Filomeno Jimenez, together with four others were originally the registered co-owners of 24 lots, situated in Isabela, Bago and La Carlota, Negros Occidental. All 24 lots were mortgaged to the Philippine National Bank. Due to the owners mortgagors' failure to pay their indebtedness on time, the said bank foreclosed the mortgage and acquired the said properties in public auction, subject to redemption. The mortgagors renounced their right of redemption in favor of one Adriano Golez, who appointed Vicente Jimenez, one of herein plaintiffs, as his attorney-in-fact.

In order to redeem said properties from the Philippine National Bank, Adriano Golez and said Vicente Jimenez obtained the intervention and services of defendant Carmelo S. Camara, and on December 29, 1931, a document entitled "Escritura de Compromiso de Venta" (Annex A) was duly executed by said bank in favor of Camara, wherein the former promised to sell to the latter all its rights and interests in the mortgaged properties for the sum of P55,160.00. To give effectivity to said contract, the conformity of the judgment debtors was necessary; and this conformity was given, subject to the condition that defendant Camara should reconvey to

Adriano Golez whatever rights and interests Camara may acquire from the Philippine National Bank over said properties.

Simultaneously with the execution of said contract (Annex A), the previous owners-mortgagors ceded and renounced all their rights, interests, and participations on the redemption of said properties in favor of Adriano Golez. On December 31, 1931, Golez and his attorney-in-fact Vicente Jimenez, with the conformity of the previous owners-mortgagors executed a contract of lease known as "Escritura de Arrendamiento" (Annex B), in favor of defendant Camara over seven (7) of the 24 lots for a period of 8 agricultural years, with 2 years option, and ending with agricultural year 1941-1942. With the execution of the aforementioned contracts (Annexes A and B), the possession, control, use and enjoyment of the 7 the leased lots comprising Haciendas Buenavista and Aurelia were delivered to Camara. The other properties (17 lots) situated in Bago and La Carlota remained in possession of plaintiffs.

By virtue of said contracts (Annexes A and B), Camara, on January 25, 1945, paid the entire obligation of the mortgaged properties to the Philippine National Bank, in the amount of P34,541.18 as the balance of said debt, plus interests. As a consequence of said debt, plus interests. As a consequence of said payment (totalling P55,160.00), said bank, on January 3, 1946, executed a document of absolute sale known as "Escritura de Venta Definitiva" on all of the aforesaid properties in favor of Camara. Thereafter, Camara caused to be registered in his name all the said 24 lots in the Office of the Register of Deeds, without notice to plaintiffs, notwithstanding his commitment under said contracts, Annexes A and B to re-transfer and reconvey all said properties to Adriano Golez, or to his assigns, successors-in-interests and/or cessioners, the contract of lease (Annex B) having terminated on November 1, 1942.

Because of Camara's refusal to relinquish possession of the 7 lots comprising Haciendas Buenavista and Aurelia notwithstanding the expiration of the lease, a complaint was filed with the Court of First Instance of Negros Occidental on March 16, 1946, docketed in said court as Civil Case No. 306, entitled "Adriano Golez, plaintiff vs. Carmelo S. Camara, defendant." In this case, the true import of the lease contract as well as the resulting relationship between the parties, was put in issue. From the decision of the lower court in that case, plaintiff appealed to this Court (G. R. No. L-4460, Golez vs. Camara, 93 Phil., 1081), and on October 31, 1953, we promulgated a decision in which we said:

From all the circumstances and equities of the case, we are led to the conclusion that the relation between the appellant and the appellee was in effect one whereby the appellee accommodated the appellant in the sense that he assumed the obligation of paying the price necessary to redeem the undivided portions of Haciendas Aurelia and Buenavista from the Philippine National Bank, under the terms herein before already noted, namely, that P5,516.00 was the down payment and the balance was payable by annual installments of 1,000 piculs of sugar to the bank. The appellee, in return, was given by the appellant a leasehold over the latter's undivided portions of the two farms, in addition to the possession of the portions already acquired by the bank, with the right of course to receive and enjoy the produce thereof, after deducting only 1,000 piculs of sugar to be delivered to the bank yearly beginning with the crop year 1932-1933. No other rental was paid to the owners. Besides, the appellant admits his obligation to pay compound interest

of twelve per cent on the sum of P5,516.00, representing the down payment made by the appellee to the bank and on other amounts paid upon account of the purchase price.

x x x x x x x x x

There is now no question as to the right of the appellant to redeem the properties in question from the appellee, the latter not having appealed, and the only point that arises refers to the amount which the appellant has to pay. From the foregoing observations we are inclined to hold that the appellant should pay to the appellee the sum of P5,516.00 less P3,560.00 already paid on said item, or P1,956.00, with 12 per cent interest compounded annually from January, 1932, (it being admitted under appellants' evidence — transcript, pp. 37-388 — that the sum of P3,560 was paid at the commencement of the lease contract executed on December 31, 1931), plus the sum of P55,541.18. The latter amount which was paid by the appellee on January 24, 1945, in Japanese Military notes must be reduced to actual Philippine currency under the Ballantyne Scale, since said disbursement could have been repaid in the same currency by the appellant during the Japanese occupation. After being so reduced, it shall also bear compound interest of twelve per cent per annum from January 24, 1945.

x x x x x x x x x

Wherefore, it being understood that the appellant is indebted to the appellee upon account of the repurchase price of the land in question only in the sums of P1,956.00, with twelve per cent compound interest from January, 1932, and P296.18 with compound interest of twelve per cent from January 24, 1945, which indebtedness should first be settled by the appellant before he is entitled to a conveyance of the land in question, the appealed judgment is in all other respects affirmed, except further that the 90-day period fixed therein shall be computed from the date this decision becomes final.

So ordered without costs.

In compliance with said decision of this Court, Adriano Golez, on March 26, 1954, through his attorney-in-fact Vicente Jimenez, deposited with the Clerk of Court of the Court of First Instance of Negros Occidental the sum of P386.33 in cash, and P25,000.00 in P.N. 13. Cashier's check or a total of P25,386.33. Thereupon, two questions arose again in the lower court (1) whether the deposit in check was valid, and (2) whether Camara was under obligation to reconvey to Golez only the 7 lots under lease or all the 24 lots acquired by him from the Philippine National Bank in virtue of the contracts Annexes A and B. The trial court sustained the validity of the deposit and also ordered the reconveyance of the 24 lots. Camara appealed from this order and again the case reached this Court.

Pending this appeal in this Court, (in G. R. No. L-9160)* the present plaintiffs-appellants, as assignees of Golez, filed the instant case (No. 3364) on March 12, 1955, in the Court of First Instance of Occidental Negros against the same Camara, praying, inter alia, that defendant be ordered to execute the necessary deeds of conveyance in their favor of the remaining 17 lots acquired by Camara from the Philippine National Bank in the manner already narrated. On

August 8, 1955, defendant filed a motion to dismiss, on the grounds that (1) the complaint states no cause of action, and (2) the action is violative of the rule on splitting a cause of action under Sections 3 and 4, Rule 2 of the Rules of Court.

Resolving said motion to dismiss and the opposition thereto filed by defendant on August 18, 1955, the court, on August 31, 1955, issued an order dismissing plaintiffs' complaint, sustaining the view that since plaintiffs' predecessor-in-interest (Adriano Golez), in the previous case No. 306 against the same defendant, sought the recovery of 7 of the lots mentioned in Annex B in pursuance to the terms thereof, where he (Golez) could have also demanded the conveyance of the other 17 lots covered by the same contract Annex B relied upon by the plaintiffs in the present case, the instant action constitutes but a part of the former and, consequently, violates the rule against splitting a cause of action. From this order of dismissal, the plaintiffs have taken the appeal now before us.

We do not believe the lower court committed an error in dismissing the complaint upon the ground stated by it. The cause of action in the previous case No. 306 arose out of the violation of the terms of the contract Annex B by the defendant Camara. Plaintiffs' cause of action in this case No. 3364 is predicated likewise in the alleged infringement of the same Annex B by the same defendant Camara. Present plaintiffs are successors-in-interest of Golez, plaintiff in the first case. There is only one delict or wrong upon which both complaints are based.

Plaintiffs, however, argue that there is no splitting of a cause of action because the issue involved in said Civil Case No. 306 was recovery of possession of Haciendas Buenavista and Aurelia, after the lease contract (Annex B) expired which defendant refused to surrender to Adriano Golez, whereas the issue in the present case is the reconveyance of the titles of the 17 lots mentioned in the "Escritura de Compromiso de Venta" (Annex A). This is not exactly the case. The two contracts are not separate from or independent of each other. They are both part of a single transaction: to carry out and facilitate the redemption from the Philippine National Bank of the mortgaged properties. The lease contract was resorted to provide a mode of payment to the bank by the delivery of 1,000 piculs of sugar a year, which is the agreed rental of 7 of the mortgaged lots. In fine, both actions are founded on one and the same contract, and the rule is that where the covenant or contract is entire and the breach total, there can be only one action. (Blossom & Co. vs. Manila Gas Corporation, 55 Phil., 226.). When a trial is had, it is intended that all matters growing out of the controversy are to be finally determined in one and the same suit. The object is to prevent a multiplicity of actions and to prevent the possibility of one part of the cause being tried before one judge which would unnecessarily harass the parties and produce needless litigations and accumulate costs. (Pascua vs. Sideco, 24 Phil., 26; Strong vs. Gutierrez Repide, 22 Phil., 9.)

There is another reason why the questioned order of the court a quo must be upheld. Earlier in this opinion, we adverted to the appeal taken by Camara from an order of the trial court in Case No. 306, directing him to reconvey to Golez all the 24 lots in question. That appeal (G. R. No. L-9160, entitled "Adriano Golez, plaintiff-appellee vs. Carmelo S. Camara, defendant-appellant", 101 Phil., 363), was decided by this Court on April 30, 1957, wherein we held that —

It is clear from the foregoing facts that Camara is bound to convey to Golez, not only the interest of Isidoro Jimenez, Aurelia Jimenez and Vicente Jimenez Yamson in the seven (7) lots constituting the Haciendas Aurelia and Buenavista, but, also, the other seventeen (17) lots described in the "promise to sell" and in the contract of lease above-mentioned.

It is true that the sale at public auction of the share of Isidoro Jimenez, Aurelia Jimenez and Vicente Jimenez Yamzon, in said haciendas, was the factor responsible for the intervention of Camara in the contracts already adverted to. This fact, and the circumstances that the property leased to Camara were said haciendas, explain the emphasis given thereto in the pleadings and in the former decisions of the Court of First Instance and of this Court. Again, the issues then submitted for determination revolved on the amount to be paid by Golez to Camara, which hinged primarily on the interpretation of said "escritura de arrendamiento" thus focussing attention on said contract of lease and on the property leased — Haciendas Aurelia and Buenavista.

However, neither said "compromiso de venta", nor the aforementioned "escritura de arrendamiento," was limited to a promise to sell or to a contract of lease. The former involved, also, a cession of the right of redemption, which, although ostensibly made (in the promise to sell) in favor of Camara, turns out, in the language of the contract of lease — which was part of the whole scheme agreed upon by the parties — to be "por y para el Sr. Adriano Golez". The latter (contract of lease) contained, also, a promise to assign or sell in favor of Golez. In any event, said "compromisio de venta" expressly referred, not only to said haciendas, but, also, to the seventeen (17) other lots therein described. Similarly, the aforementioned "escritura de arrendamiento" explicitly states that one of the considerations therefor is said "compromiso de venta" of twenty-four (24) lots, the identification number of, and the location, area, and the interest held in each of which are specified therein. Said deed of lease, moreover, stipulates clearly that "una vez hecho el pago de la cantidad dicha al citado Banco Nacional Filipino, dichas propiedatie cubiertas por dicha escritura de compromiso de, venta . . . estaran todas entregadas y en posesion del . . . Sr. Adriano Golez.' In the light of the foregoing, and considering that the decision of this Court of October 3, 1953 (Golez vs. Camara, 93 Phil., 1081), and that of the former decision of the lower court, fixing the amount to be paid by Golez, obviously regarded that payment thereof is a condition precedent to, or the consideration for the conveyance undertaken to he made by Camara, there is no doubt in our mind that the phrase "land in question" used in the dispositive part of our aforementioned decision, referred to the twenty-four (24) lots described in both deeds, and that Camara is bound to convey said twenty-four (24) lots to Golez. (Emphasis supplied.)

In the light of the above ruling by this Court, it is clear that the question involved in the instant case has become moot or res adjudicata.

Wherefore, finding no reversible error in the order of the court a quo, the same is hereby affirmed, with costs against the plaintiffs-appellants, without prejudice to their right, as assignees of Adriano Golez, to enforce decision of this Court in G. R. No. L-9160 above referred to.

So ordered.


Manila

SECOND DIVISION

G.R. No. 70640 June 29, 1988

INVESTORS' FINANCE CORPORATION, Doing Business Under The Name And Style "FNCB FINANCE," petitioner-appellant, vs.ROMEO EBARLE, HON. JOSE L. CASTIGADOR, Presiding Judge, RTC, Br. XXII, Pagadian City, The Deputy Provincial Sheriff of Zamboanga Del Sur, and the INTERMEDIATE APPELLATE COURT, respondents-appellees.

SARMIENTO, J.:

This is a Petition for Review on certiorari of the decision of the then respondent Intermediate Appellate Court* sustaining the order of the trial court.**

These are the facts:

On January 7, 1980, in Ozamis City, Flaviano Fucoy Jr., for value received, executed a promissory note 1 in favor of Lido Motor Sales Ozamis in the amount of P56,976.00 which he promised to pay in 48 equal, successive, monthly installments. Jose Mariano O. Tan signed the promissory note as a co-maker. On the same day, to guarantee the payment of the promissory note in accordance with its terms, the promissors executed a chattel mortgage 2 over the purchased car in favor of the promissee. Also, on the same date, mortgagee Lido Motor Sales Ozamis executed a Deed of Assignment 3 of all its title, rights, equities, and interests (excluding obligations to the buyers for services and warranties which the mortgagee-assignor retained) to, in, and/or arising out of the Deed of Chattel Mortgage with promissory note, in favor of Investors' Finance Corporation, the herein petitioner.

For non-payment of four (4) monthly installments the petitioner corporation, as mortgagee, filed a verified Complaint For Replevin With Damages 4 in the then Court of First Instance of Misamis Oriental, 15th Judicial District, Branch I (later became Regional Trial Court of Misamis Oriental, 15th Judicial Region, Branch XVII, Cagayan de Oro City, after the judicial reorganization of 1983) against Flaviano Fucoy Jr., Jose Mariano Tan, and a John Doe, docketed as CIVIL CASE No. 8782, with a prayer for the issuance of a writ of replevin for the seizure of the car "for the purpose of foreclosure and/or disposal in accordance with law to satisfy defendants obligation the plaintiff." 5 Additionally, the plaintiff, the petitioner herein prayed attorney's fees, liquidated damages, and costs. 6 There is no alternative prayer for the sum of money in this

complaint contrary to the finding of the respondent court. The plaintiff filed a good and sufficient bond, approved by the trial court, in the amount of P25,146.34, which is double the value of the car, the subject property. 7

On October 5, 1982, the then Court of First Instance of Misamis Oriental, 15th Judicial District, Branch 1, Cagayan de Oro City, issued the writ of replevin. 8 The writ could not be implemented because the car was not in the possession of the mortgagors-defendants. It was only more than a year later that the car was found in the possession of the herein private respondent, Romeo Ebarle, of Pagadian City. 9 Due to the difficulty, not to say danger, of getting the car from him because of his bodyguards, Romeo Ebarle being the son of former Provincial Governor Bienvenido Ebarle, a prominent political mogul not only in Pagadian City but also in the province of Zamboanga del Sur and in the entire Region IX, and the brother of the then incumbent Assemblyman representing Region IX, Renato Ebarle, 10 the petitioner filed a Motion For Approval To Deputize And Authorize A Military Personnel To Serve The Alias Writ Of Relevin And Alias Summons. 11 The motion was granted. 12

On October 17, 1983, the trial court appointed Technical Sergeant (TSgt., for short) Antonio Ibonia of the Philippine Constabulary as special deputy sheriff and authorized him "to serve the alias summons and alias writ of replevin issued in this case (C.C. No. 8782) on the defendants at their respective addresses." 13

On October 19, 1983, TSgt Ibonia, as special deputy Sheriff to serve the summons and implement the Alias Writ of Replevin, seized the car and placed it in the custody of the military authorities at Tubod Lanao del Norte for safekeeping. On the following day, as a result of a written agreement between the lawyers of the petitioner and the private respondent, stipulating payment by the latter of the balance of the mortgage indebtedness incurred originally by Flaviano Fucoy Jr. and Jose Mariano Tan, subject to verification by the petitioner's counsel as to the correctness of the amount, the car was returned to the private respondent. 14

Evidently, mortgagors Flaviano Fucoy Jr. and Jose Mariano Tan transferred the possession of the car to private respondent Romeo Ebarle without the consent of the petitioner. (The petitioner claims that it would "never agree" to such a transfer "because the credit standing of respondent Ebarle was no longer good due to previous account he had with petitioner which was delinquent forcing petitioner to foreclose on the mortgage" of two units of Isuzu dump trucks.) 15 Thus the car remained registered in the name Flaviano Fucoy Jr., even when it was seized by Special Deputy Sheriff Ibonia, under Registration Certificate No. RCM368382 of the Ozamiz LTC Office. 16

In the second week of November, 1983, the petitioner sent to the private respondent a computation of the unpaid balance due from the mortgagors, which turned out to be higher than the computation at Tubod Lanao del Norte. The private respondent refused to pay. 17

On December 13, 1983, the private respondent commenced a suit for Damages and Discharge of Chattel Mortgage with Preliminary Injunction in the Regional Trial Court, 9th Judicial Region, Branch XXII, Pagadian City, docketed as Civil Case No. 2312, against the petitioner, Investors' Finance Corporation, and Special Deputy Sheriff Antonio lbonia, who enforced the writ of replevin on October 19,1983. 18

In his complaint, the private respondent alleged that he was a well-known personality in Pagadian City, he being the son of the former govemor of the province and a brother of an assemblyman; that he had paid his obligations to the petitioner but it refused to issue a receipt; and that he was humiliated and embarrassed by the seizure of his car. He prayed "(T)hat pending hearing of the main case a writ of preliminary injunction be issued against the defendants' (herein petitioner and Special Deputy Sheriff lbonia), that "the chattel mortgage of the car be discharged," and for moral and corrective damages, attorney's fees, and a general prayer "for other remedies and relief provided for under the law under the present circumstance." 19

The petitioner, one of the two defendants in Civil Case No. 2312, filed its answer, dated February 21, 1984, in which the pendency of Civil Case No. 8782 in the Regional Trial Court of Misamis Oriental is averred with specificity, a copy of the complaint thereof having been attached thereto as Annexes 5, 5-A, 5-B, 5-C, 5-D and 5-E. In the said answer, the petitioner herein prayed for the dismissal of the case.20 In a subsequent Motion For Preliminary Hearing Of Affirmative Defense As If A Motion To Dismiss Have (Sic) Been Filed, 21 the petitioner reiterated in its answer the averment of the "pendency of another action involving the same parties, interests, rights and vehicle." And invoking Section 5 of Rule 16 of the Rules of Court, 22 it moved that a preliminary hearing be had as if a motion to dismiss had been filed and prayed for the dismissal of the complaint on the ground of litis pendentia provided in Section 1(e) of the same Rule 16. 23

After the filing of the Opposition and Rejoinder, on November 15, 1984, the respondent trial court issued a writ of preliminary mandatory injunction requiring the petitioner to return the car even while its motion to dismiss had not yet been resolved. 24

The petitioner filed a petition for certiorari with the respondent Intermediate Appellate Court questioning the denial of its Motion For Preliminary Hearing Of Affirmative Defense As If A Motion To Dismiss Have (Sic) Been Filed and the issuance in favor of Ebarle of a writ of preliminary mandatory injunction although the car was not in its possession." 25

The respondent Intermediate Appellate Court dismissed the petition stating thus:

We find the petition without merit. Since after all, petitioner claims it does not have the car, the writ of preliminary mandatory injunction cannot possibly be enforced. Petitioner, according to it simply does not have the car which thru the writ is sought to be returned. Now then with respect to the "motion to dismiss", We find no abuse, much less a grave abuse of discretion on the part of the respondent Judge for having denied the same: firstly, Civil Cases No. 2312, includes a contempt charge, one not found in Civil Case No. 8782; secondly, there is a defendant in Civil Case No. 2312, Antonio Ibonia, who is not a party in the other case. Certain requisites of litis pendentia are therefore absent. 26

The petitioner's Motion for Reconsideration was denied, 27 hence this petition.

We rule for the petitioner.

The respondent Intermediate Appellate Court committed a reversible error in denying the application of the principle of lis pendens duly invoked by the petitioner.

An action is dismissable on the ground that there is another action pending between the same parties for the same cause, if the following requisites concur:

a) identity of parties, or at least such as representing the same interests in both actions;

b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and

c) the identity in the two cases should be such that the judgment that may be rendered in one would, regardless of which party is successful amount to res judicata in the other. 28

Corollary to Section 1(e) of Rule 16 of the Rules of Court is the prohibition against splitting a single cause of action. Thus, under Section 4, Rule 2, ("I)f two or more complaints are brought for different parts of a single cause of action, the filing of the first may be pleaded in abatement of the other or others, in accordance with Section 1(e) of Rule 16, and a judgment upon the merits in any one is available as a bar in the others." The former is the principle of litis pendentia or lis pendens, while the latter is that of res judicata.

The doctrine of res judicata requires, among others, identity of parties as an indispensable condition. However, this Identity does not mean total identity of all parties. For we already had ruled on various occasions 29 that the inclusion of new parties in the second action does not remove the case from the operation of the doctrine of res judicata if the party against whom the judgment is offered in evidence was also the party in the first action. This rule would ward off the possibility of renewing the litigation between the same parties by the mere expedient of bringing in new parties in the second action.

Like res judicata as a doctrine, litis pendentia as a principle is also a sanction of the public policy against multiplicity of suits. This being so, the inclusion of another party does not by itself preclude the application of section 1(e) Rule 16 assuming that all the requisites are present. Otherwise stated, the inclusion of new parties in the second action does not remove the case from the operation of the rule of litis pendentia as long as the primary litigants are also parties in the first action. A different rule would render illusory the principle of litis pendentia. The facility of its circumvention is not difficult to imagine given the resourcefulness of lawyers.

In Civil Case No. 8782 before the then Court of First Instance of Misamis Oriental, 15th Judicial District, Branch XVII, Cagayan de Oro City, the plaintiff is the petitioner corporation and the defendants are Flaviano Fucoy Jr., Jose Mariano Tan, and a John

Doe. John Doe, later, turned out to be private respondent Romeo Ebarle who was the unauthorized transferee but in actual possession of the car. In Civil Case No. 2312 before the Regional Trial Court, 9th Judicial District, Branch XXII Pagadian City, the plaintiff is the same private respondent Romeo Ebarle while the defendants are the petitioner corporation and Antonio Ibonia the Special Deputy Sheriff, an officer of the law who enforced the writ of replevin in compliance with the order of the then Court of First Instance of Misamis Oriental, Branch XVII, at Cagayan de Oro City. It is clear that lbonia is not a real party in interest in the Pagadian case. There, the real parties in interest, the principal protagonists are Investors' Finance Corporation and Romeo Ebarle. They are the same Identical real parties in interest, the principal protagonists in the Cagayan de Oro case. This concurrence suffices to satisfy the requirement of Identity of parties in the principle of litis pendentia.

We also find identity of the rights asserted in both cases.

The contempt charge in the Pagadian City case deserves scant consideration. It is merely an incident of the alleged non-compliance of the preliminary mandatory injunction by the Branch Manager and lawyer of the petitioner as wen as the Special Deputy Sheriff.

The true subject matter of the controversy is the car (Corolla, 4-door de luxe Sedan, bearing Engine No. 4k-5021908). The primary objective of the plaintiff, the petitioner herein, in the Cagayan de Oro case is the enforcement of the chattel mortgage due to non-payment of the balance of the purchase price of the said car. On the other hand, the plaintiff, the private respondent herein, in the Pagadian case, seeks as his primordial relief, the discharge of the chattel mortgage over the same car due to alleged full payment of all the installments on the price of the same. By way of initial reliefs, the plaintiff in the Cagayan de Oro case (defendant in the Pagadian case and petitioner herein) prayed for the issuance of a writ of replevin to take possession of the car in order to foreclose the chattel mortgage thereon as the plaintiff in the Pagadian case (defendant in the Cagayan de Oro case and private respondent herein) sought an injunction to restrain the taking of the same car. The denial of the motion to dismiss filed by the herein petitioner before the Pagadian court, resulted to a chaotic as well as a ridiculous situation for the parties. As the Cagayan de Oro court issued, on March 30,1984, a Second Alias Writ Of Replevin 30 for the seizure of the car to be disposed of according to the Chattel Mortgage Law, the Pagadian court, also issued, more than seven months later, a preliminary mandatory injunction 31 ordering the Deputy Provincial Sheriff of Zamboanga del Sur "to take possession of the subject property (the car). . . and forthwith deliver it to the plaintiff' (private respondent herein). Before that, on May 9, 1984, the Pagadian court already issued a Temporary Restraining Order, 32 ordering the herein petitioner and its agents not to seize the said car. To all legal intents and purposes, the Pagadian court issued a second writ of replevin to counteract and to annul the writ of replevin validly issued seven and a half months earlier by a coordinate and co-equal tribunal — the Cagayan de Oro court-which has already taken jurisdiction. Worse, the Pagadian court practically dismissed the case pending in the Cagayan de Oro court, pronouncing that "the replevin case, Civil Case No. 8782, Regional Trial

Court, Cagayan de Oro City appears, to all practical intents and purposes to have been terminated." 33 We can not allow that. We can not countenance the spectacle of two co-equal courts racing with each other to pre-empt judgment over the same subject matter of the two pending actions. The resulting confusion in the event that the decisions, orders, or resolutions of the two courts contradict and conflict with each other would do great damage to the administration of justice.

An action for damages against the person obtaining the writ of replevin and the sheriff who enforced the writ of replevin, assuming that the seizure of the property was unlawful, should be litigated in the replevin suit and not by independent action. Thus, we ruled in Erlanger and Galinger Inc., et al. v. Villamor, et al. 34 that any claim for damages due to the seizing of property in replevin ', the action being still pending and undetermined, should be litigated in the replevin suit and not by independent action. The doctrine is undisputed that no court has the power to interfere by injunction with the judgment or orders of another court of concurrent or coordinate jurisdiction having power to grant the relief sought by injunction. 35

Moreover, under Section 2 of Rule 60 of the Revised Rules of Court, delivery of personal property subject matter of the controversy should be made on orders of the court only if the plaintiff puts up a bond double the value of the property as stated in his affidavit. This replevin bond answers for the damages that may be awarded to the defendant in case the action will not prosper. 36 In the Cagayan de Oro court, the petitioner filed a bond as required. 37

We take note that the filing of Civil Case No. 2312 before the Pagadian Court was a "specie of forum-shopping" 38 considering that the private respondent is an influential person in the locality. The respondent trial judge was not perspicacious enough to notice this unethical and contumacious act.

WHEREFORE, the Petition is hereby GRANTED. The Decision of the then Intermediate Appellate Court is REVERSED and Civil Case No. 2312 of the Regional Trial Court, 9th Judicial District, Branch XXII. Pagadian City is hereby ordered DISMISSED without prejudice to the prosecution of the claim for damages for wrongful replevin in Civil Case No. 8782 of the Regional Trial Court of Misamis Oriental, Branch XVII, Cagayan de Oro City.

This Decision is IMMEDIATELY EXECUTORY. No motion for extension of time to file a motion for reconsideration will be granted.

Costs against the private respondent.

SO ORDERED.

G.R. No. L-25134 October 30, 1969THE CITY OF BACOLOD vs. SAN MIGUEL BREWERY, INC. BARREDO

An appeal from the decision of the Court of First Instance of Negros Occidental in its Civil Case No. 7355, ordering the San Miguel Brewery, Inc. to pay to the City of Bacolod the sum of P36,519.10, representing surcharges on certain fees which, under existing ordinances of the City of Bacolod, the San Miguel Brewery should have paid quarterly to the treasurer of the said city for and/or during the period from July, 1959 to December, 1962, but which were paid only on April 23, 1963.

On February 17, 1949, the City Council of Bacolod passed Ordinance No. 66, series of 1949 imposing upon "any person, firm or corporation engaged in the manufacturer bottling of coca-cola, pepsi cola, tru orange, lemonade, and other soft drinks within the jurisdiction of the City of Bacolod, ... a fee of ONE TWENTY-FOURTH (1/24) of a centavo for every bottle thereof," plus "a surcharge of 2% every month, but in no case to exceed 24% for one whole year," upon "such local manufacturers or bottler above-mentioned who will be delinquent on any amount of fees due" under the ordinance.

In 1959, this ordinance was amended by Ordinance No. 150, series of 1959, by increasing the fee to "one-eighth (1/8) of a centavo for every bottle thereof." In other words, the fee was increased from P0.01 to P0.03 per case of soft drinks. Appellant refused to pay the additional fee and challenged the validity of the whole ordinance.

Under date of March 23, 1960, appellee sued appellant in Civil Case No. 5693 of the Court of First Instance of Negros Occidental, with the corresponding Complaint alleging, inter alia:

3. — That the defendant, Manager of the San Miguel Brewery, Bacolod Coca Cola Plant, Bacolod Branch since the approval of Ordinance No. 66, Series of 1949 as amended by Ordinance No. 150, Series of 1959, which took effect on July 1, 1959, only paid to the plaintiff herein the P0.01 bottling tax per case of soft drinks thereby refusing to pay the P0.03 bottling tax per case of soft drinks which amounted to P26,306.54 at P0.02 per case of soft drinks such as coca cola and tru orange manufactured or bottled by said company as per statement submitted by the Assistant City Treasurer of Bacolod City herewith attached as Annex "C" of this complaint;

and praying

... that judgment be rendered for the plaintiff:

"(a) Ordering the defendant to pay the plaintiff the bottling taxes of P0.03 per case of soft drinks as provided for in Section 1, Ordinance No. 66, Series of 1949, as amended by Ordinance No. 150, Series of 1959, as well as the sum of P26,306.54 representing unpaid bottling taxes due with legal rate of interest thereon from the date of the filing of this complaint until complete payment thereof; ... costs, etc."'

In due time, appellant filed its answer. This was followed by a stipulation of facts between the parties, whereupon, the court rendered judgment on November 12, 1960; with the following dispositive portion:

WHEREFORE, San Miguel Brewery Inc. is ordered to pay to the plaintiff the sum of P26,306.54 and the tax at the rate of three centavos per case levied in Ordinance No. 66 and 150 from March, 1960, and thereafter. Costs against the defendant.

Appellant appealed from the said decision to this Court where it pressed the question of the invalidity of the abovementioned taxing ordinances. In that appeal (G.R. No. L-18290), however, this Court affirmed the decision appealed from and upheld the constitutionality of the questioned ordinances and the authority of the appellee to enact the same. For reasons not extant in the record, it was already after this decision had become final when appellee moved for the reconsideration thereof, praying that the same be amended so as to include the penalties and surcharges provided for in the ordinances. Naturally, the said motion was denied, for the reason that "the decision is already final and may not be amended." When execution was had before the lower court, the appellee again sought the inclusion of the surcharges referred to; and once again the move was frustrated by the Court of First Instance of Negros Occidental which denied the motion, as follows:

Acting upon the motion dated October 24, 1963, filed by the Assistant City Fiscal, Raymundo Rallos, counsel for the plaintiff, and the opposition thereto filed by attorneys for the defendants dated November 9, 1963, as well as the reply to the opposition of counsel for the defendants dated December 5, 1963, taking into consideration that the decision of this Court as affirmed by the Supreme Court does not specifically mention the alleged surcharges claimed by the plaintiff-appellee, the Court hereby resolves to deny, as it hereby denies, the aforesaid motion, for not being meritorious.

Failing thus in its attempt to collect the surcharge provided for in the ordinances in question, appellee filed a second action (Civil Case No. 7355) to collect the said surcharges. Under date of July 10, 1964, it filed the corresponding complaint before the same Court of First Instance of Negros Occidental alleging, inter alia, that:

6. That soon after the decision of the Honorable Supreme Court affirming the decision of the Hon. Court, the defendant herein on April 23, 1963 paid to the City of Bacolod, the amount of ONE HUNDRED FIFTY SIX THOUSAND NINE HUNDRED TWENTY FOUR PESOS and TWENTY CENTAVOS (P156,924.20) as taxes from July, 1959 to December, 1962 in compliance with the provision of Section 1, Ordinance No. 66, Series of 1949, as amended by Ordinance No. 150, Series of 1959, which corresponds to the taxes due under said section in the amount of P0.03 per case of soft soft drinks manufactured by the defendant, but refused and still continued refusing to pay the surcharge as provided for under Section 4 of Ordinance No. 66, Series of 1949, as amended by Ordinance No. 150, Series of 1959, which reads as follows:

"SEC. 4 — A surcharge of 2% every month, but in no case to exceed 24% for one whole year, shall be imposed on such local manufacturer or bottlers above mentioned who will be delinquent on any amount of fees under the ordinance."

which up to now amounted to THIRTY SIX THOUSAND FIVE HUNDRED NINETEEN PESOS AND TEN CENTAVOS (P36,519.10), as shown by the certified statement of the office of the City Treasurer of Bacolod City herewith attached as Annex "E" and made an integral part of this complaint;

7. That the said interest and/or penalties to the said bottling taxes which defendant refused to pay have long been overdue;

and again praying

... that judgment be rendered for the plaintiff:

(a) Ordering the defendant to pay the penalty and/or interest therein Section 4 of Ordinance No. 66, Series of 1949, as amended by Ordinance No. 150, Series of 1959 the total amount of THIRTY SIX THOUSAND FIVE HUNDRED NINETEEN PESOS and TEN CENTAVOS (P36,519.10), representing the surcharges from August, 1959 to December, 1962, inclusive, and the 24% penalty computed as of June 30, 1964, from the amount of P152,162.90, with legal rate of interest thereon from the date of the filing of this complaint until complete payment thereof;" plus costs, etc.

On July 24, 1964, appellant filed a motion to dismiss the case on the grounds that: (1) the cause of action is barred by a prior judgment, and (2) a party may not institute more than one suit for a single cause of action. This motion was denied by the court a quo in its order dated August 22, 1964; so appellant filed its answer wherein it substantially reiterated, as affirmative defenses, the above-mentioned grounds of its motion to dismiss. Thereafter, the parties submitted the case for judgment on the pleadings, whereupon, the court rendered judgment on March 11, 1965 with the following dispositive portion: .

IN VIEW THEREOF, judgment is hereby rendered ordering the defendant San Miguel Brewery, Inc. to pay to the plaintiff the sum of P36,519.10 representing the surcharges as provided in section 4 of Ordinance 66, series of 1949 of the City of Bacolod. No costs.

Appellants moved for reconsideration but its motion was denied, hence, the instant appeal.

Appellant has only one assignment of error, to wit:

THE LOWER COURT ERRED IN FINDING THE APPELLANT LIABLE TO THE APPELLEE FOR THE SUM OF P36,519.10 REPRESENTING SURCHARGES AS PROVIDED IN TAX ORDINANCE NO. 66, SERIES OF 1949, AS AMENDED, OF THE CITY OF BACOLOD.

Under this, it argues that the action of appellee cannot be maintained because (1) a party may not institute more than one suit for a single cause of action; and (2) appellee's action for recovery of the surcharges in question is barred by prior judgment.

We find appellant's position essentially correct. There is no question that appellee split up its cause of action when it filed the first complaint on March 23, 1960, seeking the recovery of only the bottling taxes or charges plus legal interest, without mentioning in any manner the surcharges.

The rule on the matter is clear. Sections 3 and 4 of Rule 2 of the Rules of Court of 1940 which were still in force then provided:

SEC. 3. Splitting a cause of action, forbidden. — A single cause of action cannot be split up into two or more parts so as to be made the subject of different complaints. .

SEC. 4. Effect of splitting. — If separate complaints were brought for different parts of a single cause of action, the filing of the first may be pleaded in abatement of the others, and a judgment upon the merits in either is available as a bar in the others.

Indeed, this rule against the splitting up of a cause of action is an old one. In fact, it preceded the Rules of Court or any statutory provision. In Bachrach Motor Co., Inc. vs. Icarangal et al.,1 this Court already explained its meaning, origin and purpose, thus:

But, even if we have no such section 708 of our Code of Civil Procedure, or section 59 of the Insolvency Law, we have still the rule against splitting a single cause of action. This rule, though not contained in any statutory provision, has been applied by this court in all appropriate cases. Thus, in Santos vs. Moir (36 Phil. 350, 359), we said: "It is well recognized that a party cannot split a single cause of action into parts and sue on each part separately. A complaint for the recovery of personal property with damages for detention states a single cause of action which cannot be divided into an action for possession and one for damages; and if suit is brought for possession only a subsequent action cannot be maintained to recover the damages resulting from the unlawful detention." In Rubio de Larena vs. Villanueva (53 Phil. 923, 927), we reiterated the rule by stating that "... a party will not be permitted to split up a single cause of action and make it the basis for several suits" and that when a lease provides for the payment of the rent in separate installments, each installment constitutes an independent cause of action, but when, at the time the complaint is filed, there are several installments due, all of them constitute a single cause of action and should be included in a single complaint, and if some of them are not so included, they are barred. The same doctrine is stated in Lavarro vs. Labitoria (54 Phil. 788), wherein we said that "a party will not be permitted to split up a single cause of action and make it a basis for several suits" and that a claim for partition of real property as well as for improvements constitutes a single cause of action, and a complaint for partition alone bars a subsequent complaint for the improvements. And in Blossom & Co. vs. Manila Gas Corporation (55 Phil. 226-240), we held that "as a general rule a contract to do several things at several times is divisible in its nature, so as to authorize successive actions; and a judgment recovered for a single breach of a

continuing contract or covenant is no bar to suit for a subsequent breach thereof. But where the covenant or contract is entire, and the breach total, there can be only one action, and plaintiff must therein recover all his damages.

The rule against splitting a single cause of action is intended "to prevent repeated litigation between the same parties in regard to the same subject of controversy; to protect defendant from unnecessary vexation; and to avoid the costs and expenses incident to numerous suits." (1 C.J. 1107) It comes from that old maxim nemo debet bis vexare pro una et eadem causa (no man shall be twice vexed for one and the same cause). (Ex parte Lange, 18 Wall 163, 168; 21 Law Ed. 872; also U.S. vs. Throckmorton, 98 U.S. 61; 25 Law Ed. 93). And it developed, certainly not as an original legal right of the defendant, but as an interposition of courts upon principles of public policy to prevent inconvenience and hardship incident to repeated and unnecessary litigations. (1 C. J. 1107).

In the light of these precedents, it cannot be denied that appellant's failure to pay the bottling charges or taxes and the surcharges for delinquency in the payment thereof constitutes but one single cause of action which under the above rule can be the subject of only one complaint, under pain of either of them being barred if not included in the same complaint with the other. The error of appellee springs from a misconception or a vague comprehension of the elements of a cause of action. The classical definition of a cause of action is that it is "a delict or wrong by which the rights of the plaintiff are violated by the defendant." Its elements may be generally stated to be (1) a right existing in favor of the plaintiff; (2) a corresponding obligation on the part of the defendant to respect such right; and (3) an act or omission of the plaintiff which constitutes a violation of the plaintiff's right which defendant had the duty to respect. For purposes, however, of the rule against splitting up of a cause of action, a clearer understanding can be achieved, if together with these elements, the right to relief is considered.

In the last analysis, a cause of action is basically an act or an omission or several acts or omissions. A single act or omission can be violative of various rights at the same time, as when the act constitutes juridically a violation of several separate and distinct legal obligations. This happens, for example, when a passenger of a common carrier, such as a taxi, is injured in a collision thereof with another vehicle due to the negligence of the respective drivers of both vehicles. In such a case, several rights of the passenger are violated, inter alia, (1) the right to be safe from the negligent acts of either or both the drivers under the law on culpa-acquiliana or quasi-delict; (2) the right to be safe from criminal negligence of the said drivers under the penal laws; and (3) the right to be safely conducted to his destination under the contract of carriage and the law covering the same, not counting anymore the provisions of Article 33 of the Civil Code. The violation of each of these rights is a cause of action in itself. Hence, such a passenger has at least three causes of action arising from the same act. On the other hand, it can happen also that several acts or omissions may violate only one right, in which case, there would be only one cause of action. Again the violation of a single right may give rise to more than one relief. In other words, for a single cause of action or violation of a right, the plaintiff may be entitled to several reliefs. It is the filing of separate complaints for these several reliefs that constitutes splitting up of the cause of action. This is what is prohibited by the rule.

In the case at bar, when appellant failed and refused to pay the difference in bottling charges from July 1, 1959, such act of appellant in violation of the right of appellee to be paid said charges in full under the Ordinance, was one single cause of action, but under the Ordinance, appellee became entitled, as a result of such non-payment, to two reliefs, namely: (1) the recovery of the balance of the basic charges; and (2) the payment of the corresponding surcharges, the latter being merely a consequence of the failure to pay the former. Stated differently, the obligation of appellant to pay the surcharges arose from the violation by said appellant of the same right of appellee from which the obligation to pay the basic charges also arose. Upon these facts, it is obvious that appellee has filed separate complaints for each of two reliefs related to the same single cause of action, thereby splitting up the said cause of action.

The trial court held that inasmuch as there was no demand in the complaint in the first case for the payment of the surcharges, unlike in the case of Collector of Internal Revenue vs. Blas Gutierrez, et al., G.R. No. L-13819. May 25, 1960, wherein there was such a demand, there is no bar by prior judgment as to said surcharges, the same not having been "raised as an issue or cause of action in Civil Case No. 5693." This holding is erroneous.

Section 4 of Rule 2, above-quoted, is unmistakably clear as to the effect of the splitting up of a cause of action. It says, "if separate complaints are brought for different parts (reliefs) of a single cause of action, the filing of the first (complaint) may be pleaded in abatement of the others, and a judgment upon the merits in either is available as a bar in the others." In other words, whenever a plaintiff has filed more than one complaint for the same violation of a right, the filing of the first complaint on any of the reliefs born of the said violation constitutes a bar to any action on any of the other possible reliefs arising from the same violation, whether the first action is still pending, in which event, the defense to the subsequent complaint would be litis pendentia, or it has already been finally terminated, in which case, the defense would be res adjudicata.2 Indeed, litis pendentia and res adjudicata, on the one hand, and splitting up a cause of action on the other, are not separate and distinct defenses, since either of the former is by law only the result or effect of the latter, or, better said, the sanction for or behind it.

It thus results that the judgment of the lower court must be, as it is hereby, reversed and the complaint of appellee is dismissed. No costs.


Manila

EN BANC

G.R. No. L-23233 September 28, 1967

LUIS ENGUERRA, plaintiff -appellant, vs.ANTONIO DOLOSA, defendant-appellee.

Esteban Escalante, Jr. for plaintiff-appellant.Ruben M. Paps for defendant-appellee.

CONCEPCION, C.J.:

Appeal, by plaintiff Luis Enguerra, from an order of dismissal of the Court of First Instance of Sorsogon.

Plaintiff Enguerra was chief baker for the De Lux Bakery and Grocery, in Sorsogon, Sorsogon, from June 18, 1959 to October 8, 1961. On December 14, 1961, he filed, with the municipal court of Sorsogon, Sorsogon, a complaint, against defendant Antonio Dolosa, as owner of said establishment, to recover the sum of P4,056.00, for unpaid overtime services allegedly rendered during said period. The court having later dismissed said complaint, Enguerra appealed to the Court of First Instance of Sorsogon, where the case was docketed as Civil Case No. 1800.

Soon thereafter, or on January 24, 1963, Enguerra filed, with the same Court of First Instance, another complaint against Dolosa, which was docketed as Civil Case No. 1804, to recover the following:

1. Termination Pay P392.742. Underpayment of wages 64.903. Compensatory Damages,

unearned income from unjustified dismissal 6,363.22

4. Compensatory Damages, unpaid overtime 4,347.89

5. Moral Damages 5,000.00Exemplary Damages 2,500.00Attorney's fees 3,500.00

On motion of Dolosa, he was granted, on February 6, 1963, an extension of 30 days, "counted from to-day," to submit his answer. On March 8, 1963, he filed, instead, a motion to dismiss, upon the ground that said pending case No. 1800 is an action between the same parties for the same cause of action, and that the complaint in case No. 1804 violates "the rule against splitting a cause of action." Subsequently, or on March 12, 1963, Enguerra sought to have Dolosa declared in default, upon the ground that his motion to dismiss has been filed one (1) day late, and that it was merely pro forma, because of which it did not suspend the running of the period to file his answer. The Court of First Instance granted the motion to dismiss and denied the motion to declare Dolosa in default. A reconsideration of the orders to this effect having been denied, Enguerra interposed the present appeal, directly to the Supreme Court, alleging that the lower court had erred (a) in not declaring Dolosa in default; and (b) in dismissing the complaint herein.

As regards the first alleged error, Enguerra maintains that the extension of 30 days granted in the order of February 6, 1963, expired on March 7, 1963, because the order stated that said period should be "counted from today," which, Enguerra maintains, should be understood to mean from February 6 to March 7, 1963. An identical theory was rejected in Ulpiando vs. Court of Agrarian Relations,1 in the following language:

The petitioners raise procedural questions. On 2 August 1957 the respondents received a copy of the decision dated 22 July 1957 (See Annexes E & F). On 15 August they filed a "petition for extension of time to file motion for reconsideration," dated 13 August, because of lack of material time to read the voluminous transcript of stenographic notes and for that reason they could not readily formulate their arguments in support of the motion for reconsideration (Annex F). On the same day, 15 August, the Court entered an order granting the respondents "fifteen (15) days counted from today within which to file their motion for reconsideration of the decision rendered on July 29, 1957 (should be 22) in the instant case." (Italics supplied.) On August 30, the respondents mailed their motion for reconsideration in the post office of Cuyapo, Nueva Ecija. The petitioners claim that counting from 15 August, the day the 15-day period commenced to run, to 30 August, when the respondents mailed their motion for reconsideration, 16 days already had elapsed, and contend that the Court had already lost jurisdiction of the case and could no longer reconsider its decision dated 22 July.

x x x x x x x x x

Rule 28 of the Rules of Court provides:

"In computing any period of time prescribed or allowed by these rules, by order of court, or by any applicable statute, the day of the act, event, or default after which the designated period of time begins to run is not to be included. The last day of the period so computed is to be included, unless it is a Sunday or a legal holiday, in which event the time shall run until the end of the next day which is neither a Sunday nor a holiday."1awphîl.nèt

This rule adopts the exclude-the-first and include-the-last day method for computing any period of time. Therefore, excluding the day when the order granting their petition for extension of time to file motion for reconsideration was entered by the Court (15 August) and including the day the respondents mailed their motion for reconsideration (30 August), only 15 days had elapsed. Hence, the respondents' motion for reconsideration was filed within the extension of time granted by the Court.

No reason had been advanced, and we find none, to depart from this view, which is in line with the spirit and the letter of our laws and the Rules of Court, and is, accordingly, reiterated.

As regards the second procedural ground of the objection to the motion to dismiss, it should be noted that a motion is said to be pro forma when it is apparent therefrom that the movant has not endeavored to make it reasonably persuasive or convincing, his purpose being merely to gain time or to delay the proceedings. In the case at bar, the motion explicitly states

"that there is another action pending between the same parties for the same cause, namely: Luis Enguerra vs. Antonio Dolosa — Civil Case No. 1800, now pending before this Honorable Court;" and "that the filing of the above entitled case is a violation of the rule against splitting a cause of action."

Having thus expressed, not only the legal grounds for the motion, but, also the particular and concrete facts upon which said grounds rely — with specification of the title and number of the case on which the motion was based and of the court before which the case is pending, coupled with the other circumstances hereinafter adverted to and appearing in the records of both cases — said motion, manifestly, is not pro forma2 and its presentation suspended the running of the period for the filing of defendant's answer.

The next and most important question for determination is whether or not Civil Case No. 1800 is for the same cause of action as Civil Case No. 1804, both being admittedly between the same parties. In this connection, it should be noted that the basis of the complaints in both cases is the same, namely: that Enguerra's rights as Dolosa's chief baker, from June 18, 1959 to October 8, 1961, have been violated by the latter. The alleged violations may have several aspects, such as: 1) underpayment of wages; 2) nonpayment of overtime; 3) transfer, allegedly equivalent to unjustified dismissal, and, hence, the claim for separation pay; 4) damages (compensatory, moral and exemplary, and attorney's fees). Yet, the cause of action — the spring from which the right to sue emanates — was only one and the same breach of their contract of employment, without which none of the claims made by plaintiff would have no leg to stand on.

The statutory provisions regarding termination pay, minimum wage, overtime and damages are as much a part of said contract of employment as the pertinent provisions of the Civil Code on obligations and contracts, in general, and on lease of services, in particular. The difference between underpayment of wages on a given day and nonpayment of overtime for work done on the same day, is not — insofar as the cause of action therefore is concerned — materially at variance from that which exists between said underpayment of wages for the day given and the similar underpayment of wages for the next day. Indeed, if one month later, the aggrieved laborer should decide to sue the employer for breach of contract, it is obvious that the former cannot file a complaint for some effects of such breach, and another complaint for its other effects. He must include in the complaint his claim for the underpayment for the aforementioned two (2) days, both being overdue at the time of the commencement of the action.3 Similarly, if underpayment of the minimum wage for a given day or month were coupled with failure or refusal to pay overtime, for the same day or month, a complaint filed thereafter should include both, underpayment of wages and overtime pay. In other words, Courts should not sanction a complaint for one, and another action for the other. Hence, in his own complaint herein, plaintiff has, in fact, included his claims for alleged underpayment of wages, overtime, compensatory, moral, and exemplary damages, and attorney's fees, under one cause of action.

He is in estoppel, therefore, to deny that the cause of action asserted in both cases is one and the same. At any rate, it is clear that the overtime claimed in the present case is the very object of Case No. 1800. Moreover, it is well settled that damages incidental to a cause of action cannot be made the subject of a suit independent from the principal cause.4

WHEREFORE, the order appealed from should be, as it is hereby, affirmed, with costs against plaintiff, Luis Enguerra. It is so ordered.


Manila

THIRD DIVISION

G.R. No. 111401 October 17, 1996

ERIBERTO G. VALENCIA, substituted by his heirs: REBECCA S. VDA. DE VALENCIA, MA. CAROLINA S. VALENCIA, MA. ANTONETTE S. VALENCIA, PETER GELVIC S. VALENCIA, JOSE THERONE S. VALENCIA and MA. SOPHEA S. VALENCIA, petitioners, vs.COURT OF APPEALS, RICARDO BAGTAS and MIGUEL BUNYE, respondents.

PANGANIBAN, J.:p

Should the action for rescission of a lease contract (commenced by petitioner-lessor against private respondents-lessees) be deemed to bar — on the ground of litis pendentia — an action for damages brought by private respondents by reason of petitioner's violation of the restraining orders issued by the Court of Appeals which required the parties to maintain the status quo insofar as the lease relationship is concerned?

The Court answers this query in the negative while resolving the instant petition for review on certiorari, which assails the Decision 1 of the respondent Court of Appeals 2 promulgated on February 18, 1993 in CA-G.R. CV No. 27590, affirming the decision 3 of the trial court 4 awarding moral and exemplary damages plus attorney's fees to herein private respondents.

The Facts

The facts are not controverted by the parties, and therefore, the factual recitals in the trial court's decision, which were quoted by the respondent appellate court in its own Decision, are hereinbelow reproduced: 5

The evidence shows that (private respondents) were lessees of a 24-hectare fishpond owned by (petitioner as substituted by his heirs) located at Paombong, Bulacan. The lease is covered by a lease contract by and between the said parties (Exh. A). The lease [executed on March 1, 1982] was supposed to have expired on May 1987, but before the said date, (petitioner) filed [on June 25, 1984] a complaint against (private respondents) for the rescission of the lease contract. The Regional Trial Court of Malolos, Bulacan

which took cognizance of said case issued a writ of preliminary Mandatory Injunction ordering (private respondents) to surrender to the (petitioner) possession of the fishpond. In view whereof, (private respondents) filed a Petition for Certiorari with the Intermediate Appellate Court. The said court on September 21, 1984 issued a restraining order enjoining (petitioner) and the Regional Trial Court from enforcing the mandatory injunction (Exh. J of [private respondents] and Exh. 11 of [petitioner]).

At the hearing in the Intermediate Appellate Court the parties agreed to maintain a status quo and the fishpond hut would be utilized by (private respondents) until the case is resolved by the Regional Trial Court of Malolos (Exh. N). However, despite this order of the Appellate Court (petitioner) filed an ex-parte motion for the designation of a member of the Philippine Constabulary to maintain order in the place which the Regional Trial Court of Malolos granted. With said order (petitioner) with the aid of PC men was able to eject plaintiffs from the main hut. (Petitioner) and their men also dried up a portion of the leased property where (private respondents) have previously scattered chemicals and fertilizer to grow fish food. As a result no fish food grew causing damage to (private respondents).

(Private respondents) were also prevented from transferring the bigger fish to a more spacious portion of the fishpond resulting in death to many fishes which again caused damages to (private respondents). Subsequently another person came to the fishpond and introduced himself as the new lessee. The Regional Trial Court of Malolos then issued another order (Exh. 5-2) declaring that all the fishes located in the fishpond remain the properties of (private respondents) subject to their disposal, however the same was not honored by (petitioner).

(Private respondents) then appealed again to the IAC which issued a resolution enjoining (petitioner) to maintain and observe status quo (Exh. V-VI), and subsequently another resolution categorically declaring (petitioner) Valencia without right of possession under status quo, and to vacate the main hut of the fishpond (Exh. Y). It was only then that (private respondents) gained complete and total control of the subject fishpond including its huts.

(Private respondents) are now asking [the Regional Trial Court of Manila] for exemplary damages worth P400,000.00, moral damages of P400,000.00, attorney's fees of P100,000.00 and costs of suit.

A Motion to Dismiss was filed by (petitioner) on April 8, 1985 which was opposed by (private respondents). The Motion to Dismiss was denied by the court on March 4, 1986. A Motion for Reconsideration was filed by (petitioner) which was denied by the court.

After (petitioner) filed his Answer, pre-trial was set on November 14, 1986 and the same was terminated on February 26, 1987. Trial on the merits was held on April 3, 1987.

The evidence for the prosecution was brought forth through the testimonies of Ricardo Bagtas and Miguel Bunye and its Exhibits A to CC.

Instead of presenting evidence . . . , (petitioner) filed [on February 24, 1989] a Second Motion to Dismiss which was opposed by counsel for (private respondents). The Second Motion to Dismiss was denied by the court [on April 13, 1989]. 6

On August 31, 1989, the (petitioner) Eriberto Valencia testified, however his testimony was not terminated in view of the objection of counsel for the (private respondents) who

claimed that the questions propounded to the witness touched on matters which have been passed upon by the Regional Trial Court of Malolos.

(Petitioner) contended that proceedings in this court [RTC of Manila] should be suspended until after the case in the Regional Trial Court of Malolos which was appealed to the Court of Appeals is resolved, and filed a Motion to this effect, but the court denied the same.

The trial court gave counsel for petitioner time to file the necessary pleadings, as prayed for, but he failed to do so. During the subsequent hearing, neither petitioner nor his counsel appeared. The trial court thus deemed petitioner to have waived his right to present further evidence, and the case was considered submitted for decision. On March 23, 1990, the trial court ruled in favor of private respondents, the fallo of its decision reading as follows: 7

WHEREFORE, premises considered, the court orders defendant (petitioner herein) to pay the plaintiffs moral damages in the amount of P30,000.00, exemplary damages in the amount of P20,000.00 and to pay plaintiffs P10,000.00 as and for attorney's fees.

Petitioner and private respondents, being equally dissatisfied with the decision of the trial court, appealed to respondent Court. Petitioner alleged litis pendentia and contested the award of damages by the trial court; private respondents on the other hand were aggrieved that the trial court failed to award actual damages, and in addition sought an increase in the amount of moral and exemplary damages granted.

On appeal, respondent Court affirmed the decision of the Manila RTC, and held that there was no litis pendentia: 8

It is not disputed that there was another suit, Civil Case No. 7554-M, then pending before the Regional Trial Court in Bulacan between plaintiffs-appellants and defendant-appellant. To be sure, that case involved the same property. There, appellant Valencia sought the rescission of the lease contract he had entered into with plaintiffs on March 1, 1982. He based his claim upon the alleged failure of plaintiffs to abide by the stipulations of their agreement. In this case under consideration, plaintiffs Bagtas and Bunye are asking for compensation for the damages that they had sustained by reason of Valencia's violation of certain resolutions issued by this Court in (CA)-G.R. SP No. 04283 (Exhs. "J" & "N"). Clearly, the causes of action in the two cases are not the same; they are founded on different acts; the rights violated are different; and the reliefs sought are also different. Consequently, defendant-appellant's submission that lis pendens is a ground for dismissal of plaintiffs' suit is not valid.

The dispositive portion of the now-assailed Decision reads: 9

WHEREFORE, judgment is hereby rendered affirming the appealed decision with the modification that plaintiffs-appellants [private respondents herein] are hereby additionally awarded the sum of P50,000.00 as and for actual damages. Costs against defendant-appellant [herein petitioner].

Petitioner's motion for reconsideration dated March 9, 1993 was denied by respondent Court. Thus he comes to us seeking relief.

The Issue

Petitioner raises the following lone "legal issue:" 10

THE DENIAL ORDERS AND THE DECISION OF THE MANILA COURT IN CIVIL CASE NO. 85-29514 AND THE DECISION OF RESPONDENT COURT IN CA-G.R. CV NO. 27590 ARE NOT IN ACCORD WITH THE LAW AND THE DECISIONS ON LITIS PENDENTIA.

Petitioner contends that the error in the Decision lies in its failure to properly appreciate the complaint filed with the Manila court, which, when taken together with private respondents' documentary and testimonial evidence, discloses that the alleged wrongful acts for which they claimed damages arose out of, were connected with, and/or were incidents of the proceedings in the action for rescission before the Bulacan court. Petitioner claims that the action for damages commenced by private respondents constitutes splitting of a single cause of action which is prohibited by the Revised Rules of Court. 11

Petitioner argues that, for the aforesaid reasons, if indeed private respondents suffered any damage, they should have filed a compulsory counterclaim or supplemental pleading for the alleged acts of violation of restraining orders which are "transactions, occurrence or event which have happened since the date of the pleading sought to be supplemented. 12 He insists that the filing of a compulsory counterclaim is the proper recourse considering that petitioner had posted a bond in the rescission case to answer for damages that private respondents might suffer by reason of the issuance of the preliminary mandatory injunction. 13 He also ventures to say that the case filed with the Manila court can even be considered as a form of "forum shopping." 14

In fine, petitioner asserts that under the rule on litis pendentia the action for rescission filed with the Bulacan court bars the action for damages filed in Manila. It is interesting to note that petitioner does not contest the correctness of the award of damages made by respondent Court; he merely insists on the dismissal (?) of the case for damages on the ground of litis pendentia, there being a pending case for rescission in which private respondents could have asserted their claim for damages. This being his lone assigned issue, the clear and unavoidable implication is that if his contention is struck down, he is deemed to have waived any objection against the award of damages by respondent Court.

The Court's Ruling

Petitioner's arguments are legally tenuous and patently unmeritorious.

Litis Pendencia and Splitting of a Single Cause of Action

Before discussing the petition on the merits, it is well to clarify certain concepts at the outset. If a party-litigant splits his single cause of action, the other action or actions filed may be dismissed by invoking litis pendentia, pursuant to Section 1(e), Rule 16 of the

Revised Rules of Court. A party who splits his single cause of action cannot be accused of also "violating the rule against litis pendentia" as the former, a malpractice, gives rise to the latter, a ground for a motion to dismiss. This is made clear by Section 4, Rule 2 of the Rules, which speaks of cause and effect:

Sec. 4. Effect of splitting a single cause of action. — If two or more complaints are brought for different parts of a single cause of action, the filing of the first may be pleaded in abatement of the other or others, in accordance with section 1 (e) of Rule 16, and a judgment upon the merits in any one is available as a bar in the others.

Now, to the main issues.

No Litis Pendentia

This Court has consistently held, in a long line of cases, that the requisites for the existence of litis pendentia as a ground for dismissal of an action are as follows:

1) identity of parties, or at least such parties as represent the same interests in both actions;

2) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and

3) the identity with respect to the two preceding particulars in the two cases is such that any judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res adjudicata in the other case. 16

There may have been identity of parties in the two actions, but the other two requisites are not similarly satisfied. The case in Bulacan was of course founded upon alleged violations by the private respondents as lessees of certain stipulations in their lease contract with petitioner, and therefore, it cannot be gainsaid that the rights asserted (by petitioner as lessor) and relief sought therein (i.e., rescission of the lease contract) were entirely different from those asserted in Manila. The latter case stemmed from the prejudice suffered by private respondents due to petitioner's violation of the IAC's restraining orders for the observance of status quo between the parties, the relief demanded therein consisting of actual, moral and exemplary damages. Thus, the respondent Court committed no reversible error in holding that "the causes of action in the two cases are not the same; they are founded on different acts; the rights violated are different; and the reliefs sought are also different."

The third requisite constitutes the test of identity in the aforestated particulars, and in connection therewith, this Court quoted 1 Cyc., 28 17 thus

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

The res judicata test when applied to the two cases in question indicate in no uncertain terms that regardless of whoever will ultimately prevail in the Bulacan case, the final judgment therein — whether granting or denying rescission of the lease contract — will not be conclusive between the parties in the Manila case, and vice versa. In other words, to our mind, the outcome of the Bulacan case has nothing to do with whether petitioner should be held liable for the damage inflicted upon private respondents as a result of his violating the IAC restraining orders, the two cases having arisen from different acts and environmental circumstances.

No Forum-Shopping

Petitioner's allegations to the contrary notwithstanding, forum-shopping is not present in the case at bar. The established rule is that for forum-shopping to exist, both actions must involve the same transactions, same essential facts and circumstances and must raise identical causes of actions, subject matter, and issues. 18 As held by this Court in a recent case: 19

The test for determining whether a party violated the rule against forum shopping has been laid down in the 1986 case of Buan vs. Lopez (145 SCRA 34, October 13, 1986), also by Chief Justice Narvasa, and that is, forum shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other . . . (emphasis supplied)

We have already established that litis pendentia could not have been properly pleaded to abate the second action brought in Manila, and that a final judgment in either case would not be res judicata with respect to the other. Thus, the allegation of forum-shopping must fail.

In Jose Cuenco Borromeo, et al., vs. Hon. Intermediate Appellate Court, et al., 20 this Court capsulized the essence of what is abhorrent in the malpractice of forum-shopping, and the following excerpt shows why there can be no forum-shopping in this case:

Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different for a upon the same issue.

Claim for DamagesNot A Compulsory Counterclaim

Petitioner erroneously insists that private respondents' claim for damages should have been made through a compulsory counterclaim in the same action for rescission. This could not have been done as the same cannot be considered or treated as a compulsory counterclaim in the Bulacan case. This Court, in an early case, 21 stated certain criteria or tests by which the compulsory or permissive nature of specific counterclaims can be determined, summarized as follows:

1. Are the issues of fact and law raised by the claim and counterclaim largely the same?

2. Would res judicata bar a subsequent suit on defendant's claim absent the compulsory counterclaim rule?

3. Will substantially the same evidence support or refute plaintiffs claim as well as defendant's counterclaim?

4. Is there any logical relation between the claim and the counterclaim?

In this instance, the answers to all four queries are in the negative.

Was Injunction Bond Sufficient Protection?

Petitioner's argument that the bond he posted for the issuance by the Bulacan trial court of the writ of preliminary mandatory injunction could have answered for the damages claimed by private respondents is untenable. Such bond was required for a specific purpose, to wit: 22

(b) The plaintiff files with the clerk or judge of the court in which the action is pending a bond executed to the party enjoined, in an amount to be fixed by the court, to the effect that the plaintiff will pay to such party all damages which he may sustain by reason of the injunction if the court should finally decide that the plaintiff was not entitled thereto.

No further scrutiny is necessary. The said bond was supposed to answer only for damages which may be sustained by private respondents, against whom the mandatory injunction was issued, by reason of the issuance thereof, and not to answer for damages caused by the actuations of petitioner, which may or may not be related at all to the implementation of the mandatory injunction. The purpose of the injunction bond is to protect the defendant against loss or damage by reason of the injunction in case the court finally decides that the plaintiff was not entitled to it, and the bond is usually conditioned accordingly. Thus, the bondsmen are obligated to account to the defendant in the injunction suit for all damages, or costs and reasonable counsel's fees, incurred or sustained by the latter in case it is determined that the injunction was wrongfully issued. 23

In the case at bar, the damages and expenses sustained by private respondents were a result of the willful contravention by petitioner of the IAC restraining orders, and thus, outside the coverage of the injunction bond.

WHEREFORE, in view of the foregoing, the instant petition is hereby DENIED and the appealed Decision and Resolution are AFFIRMED. Costs against petitioner.

SO ORDERED.


Manila

SECOND DIVISION

G.R. No. L-59731 January 11, 1990

ALFREDO CHING, petitioner, vs.THE HONORABLE COURT OF APPEALS & PEDRO ASEDILLO, respondents.

Joaquin E. Chipeco & Lorenzo D. Fuggan for petitioners.

Edgardo Salandanan for private respondent.

PARAS, J.:

This is a petition for review on certiorari which seeks to nullify the decision of respondent Court of Appeals (penned by Hon. Rodolfo A. Nocon with the concurrence of Hon. Crisolito Pascual and Juan A. Sison) in CA-G.R. No. 12358-SP entitled Alfredo Ching v. Hon. M. V. Romillo, et al. which in effect affirmed the decision of the Court of First Instance of Rizal, now Regional Trial Court (penned by Judge Manuel V. Romillo, Jr. then District Judge, Branch XXVII Pasay City) granting ex-parte the cancellation of title registered in the name of Ching Leng in favor of Pedro Asedillo in Civil Case No. 6888-P entitled Pedro Asedillo v. Ching Leng and/or Estate of Ching Leng.

The facts as culled from the records disclose that:

In May 1960, Decree No. N-78716 was issued to spouses Maximo Nofuente and Dominga Lumandan in Land Registration Case No. N-2579 of the Court of First Instance of Rizal and Original Certificate of Title No. 2433 correspondingly given by the Register of Deeds for the Province of Rizal covering a parcel of land situated at Sitio of Kay-Biga Barrio of San Dionisio, Municipality of Paranaque, Province of Rizal, with an area of 51,852 square meters (Exhibit "7", p. 80, CA, Rollo).

In August 1960, 5/6 portion of the property was reconveyed by said spouses to Francisco, Regina, Perfects, Constancio and Matilde all surnamed Nofuente and Transfer Certificate of Title No. 78633 was issued on August 10, 1960 accordingly (Exhibit "8", pp. 81 and 82, Ibid.).

By virtue of a sale to Ching Leng with postal address at No. 44 Libertad Street, Pasay City, Transfer Certificate of Title No. 91137 was issued on September 18, 1961 and T.C.T. No. 78633 was deemed cancelled. (Exhibit "5-2", pp. 76-77 and 83, Ibid.).

On October 19, 1965, Ching Leng died in Boston, Massachusetts, United States of America. His legitimate son Alfredo Ching filed with the Court of First Instance of Rizal

(now RTC) Branch III, Pasay City a petition for administration of the estate of deceased Ching Leng docketed as Sp. Proc. No. 1956-P. Notice of hearing on the petition was duly published in the "Daily Mirror", a newspaper of general circulation on November 23 and 30 and December 7, 1965. No oppositors appeared at the hearing on December 16, 1965, consequently after presentation of evidence petitioner Alfredo Ching was appointed administrator of Ching Leng's estate on December 28, 1965 and letters of administration issued on January 3, 1966 (pp. 51-53, Rollo). The land covered by T.C.T. No. 91137 was among those included in the inventory submitted to the court (p. 75, Ibid.).

Thirteen (13) years after Ching Leng's death, a suit against him was commenced on December 27, 1978 by private respondent Pedro Asedillo with the Court of First Instance of Rizal (now RTC), Branch XXVII, Pasay City docketed as Civil Case No. 6888-P for reconveyance of the abovesaid property and cancellation of T.C.T. No. 91137 in his favor based on possession (p. 33, Ibid.). Ching Leng's last known address is No. 44 Libertad Street, Pasay City which appears on the face of T.C.T. No. 91137 (not No. 441 Libertad Street, Pasay City, as alleged in private respondent's complaint). (Order dated May 29, 1980, p. 55, Ibid.). An amended complaint was filed by private respondent against Ching Leng and/or Estate of Ching Leng on January 30, 1979 alleging "That on account of the fact that the defendant has been residing abroad up to the present, and it is not known whether the defendant is still alive or dead, he or his estate may be served by summons and other processes only by publication;" (p. 38, Ibid.). Summons by publication to Ching Leng and/or his estate was directed by the trial court in its order dated February 7, 1979. The summons and the complaint were published in the "Economic Monitor", a newspaper of general circulation in the province of Rizal including Pasay City on March 5, 12 and 19, 1979. Despite the lapse of the sixty (60) day period within which to answer defendant failed to file a responsive pleading and on motion of counsel for the private respondent, the court a quo in its order dated May 25, 1979, allowed the presentation of evidence ex-parte. A judgment by default was rendered on June 15, 1979, the decretal portion of which reads:

WHEREFORE, finding plaintiffs causes of action in the complaint to be duly substantiated by the evidence, judgment is hereby rendered in favor of the plaintiff and against the defendant declaring the former (Pedro Asedillo) to be the true and absolute owner of the property covered by T.C.T. No. 91137; ordering the defendant to reconvey the said property in favor of the plaintiff; sentencing the defendant Ching Leng and/or the administrator of his estate to surrender to the Register of Deeds of the Province of Rizal the owner's copy of T.C.T. No. 91137 so that the same may be cancelled failing in which the said T.C.T. No. 91137 is hereby cancelled and the Register of Deeds of the Province of Rizal is hereby ordered to issue, in lieu thereof, a new transfer certificate of title over the said property in the name of the plaintiff Pedro Asedillo of legal age, and a resident of Estrella Street, Makati, Metro Manila, upon payment of the fees that may be required therefor, including the realty taxes due the Government.

IT IS SO ORDERED. (pp. 42-44, Ibid.)

Said decision was likewise served by publication on July 2, 9 and 16, 1979 pursuant to Section 7 of Rule 13 of the Revised Rules of Court (CA Decision, pp. 83-84, Ibid.). The title over the property in the name of Ching Leng was cancelled and a new Transfer

Certificate of Title was issued in favor of Pedro Asedillo (p. 77, CA Rollo) who subsequently sold the property to Villa Esperanza Development, Inc. on September 3, 1979 (pp. 125-126, Ibid.).

On October 29, 1979 petitioner Alfredo Ching learned of the abovestated decision. He filed a verified petition on November 10, 1979 to set it aside as null and void for lack of jurisdiction which was granted by the court on May 29, 1980 (penned by Hon. Florentino de la Pena, Vacation Judge, pp. 54-59, Rollo).

On motion of counsel for private respondent the said order of May 29, 1980 was reconsidered and set aside, the decision dated June 15, 1979 aforequoted reinstated in the order dated September 2, 1980. (pp. 60-63, Ibid.)

On October 30, 1980, petitioner filed a motion for reconsideration of the said latter order but the same was denied by the trial court on April 12, 1981 (pp. 77-79, Ibid.)

Petitioner filed an original petition for certiorari with the Court of Appeals but the same was dismissed on September 30, 1981. His motion for reconsideration was likewise denied on February 10, 1982 (pp. 81-90, Ibid.)

Private respondent Pedro Asedillo died on June 7, 1981 at Makati, Metro Manila during the pendency of the case with the Court of Appeals (p. 106, CA Rollo).

Hence, the instant petition.

Private respondent's comment was filed on June 1, 1982 (p. 117, Ibid.) in compliance with the resolution dated April 26, 1982 (p. 109, Ibid.) Petitioner filed a reply to comment on June 18, 1982 (p. 159, Ibid ), and the Court gave due course to the petition in the resolution of June 28, 1982 (p. 191, Ibid.)

Petitioner raised the following:

ASSIGNMENTS OF ERROR

I

WHETHER OR NOT A DEAD MAN CHING LENG AND/OR HIS ESTATE MAY BE VALIDLY SERVED WITH SUMMONS AND DECISION BY PUBLICATION.

II

WHETHER OR NOT AN ACTION FOR RECONVEYANCE OF PROPERTY AND CANCELLATION OF TITLE IS IN PERSONAM, AND IF SO, WOULD A DEAD MAN AND/OR HIS ESTATE BE BOUND BY SERVICE OF SUMMONS AND DECISION BY PUBLICATION.

III

WHETHER OR NOT THE PROCEEDINGS FOR RECONVEYANCE AND CANCELLATION OF TITLE CAN BE HELD EX-PARTE.

IV

WHETHER OR NOT THE TRIAL COURT ACQUIRED JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES.

V

WHETHER OR NOT PRIVATE RESPONDENT IS GUILTY OF LACHES IN INSTITUTING THE ACTION FOR RECONVEYANCE AFTER THE LAPSE OF 19 YEARS FROM THE TIME THE DECREE OF REGISTRATION WAS ISSUED.

Petitioner's appeal hinges on whether or not the Court of Appeals has decided a question of substance in a way probably not in accord with law or with the applicable decisions of the Supreme Court.

Petitioner avers that an action for reconveyance and cancellation of title is in personam and the court a quo never acquired jurisdiction over the deceased Ching Leng and/or his estate by means of service of summons by publication in accordance with the ruling laid down in Ang Lam v. Rosillosa et al., 86 Phil. 448 [1950].

On the other hand, private respondent argues that an action for cancellation of title is quasi in rem, for while the judgment that may be rendered therein is not strictly a judgment in in rem, it fixes and settles the title to the property in controversy and to that extent partakes of the nature of the judgment in rem, hence, service of summons by publication may be allowed unto Ching Leng who on the face of the complaint was a non-resident of the Philippines in line with the doctrine enunciated in Perkins v. Dizon, 69 Phil. 186 [1939].

The petition is impressed with merit.

An action to redeem, or to recover title to or possession of, real property is not an action in rem or an action against the whole world, like a land registration proceeding or the probate of a will; it is an action in personam, so much so that a judgment therein is binding only upon the parties properly impleaded and duly heard or given an opportunity to be heard. Actions in personam and actions in rem differ in that the former are directed against specific persons and seek personal judgments, while the latter are directed against the thing or property or status of a person and seek judgments with respect thereto as against the whole world. An action to recover a parcel of land is a real action but it is an action in personam, for it binds a particular individual only although it concerns the right to a tangible thing (Ang Lam v. Rosillosa, supra).

Private respondent's action for reconveyance and cancellation of title being in personam, the judgment in question is null and void for lack of jurisdiction over the person of the deceased defendant Ching Leng. Verily, the action was commenced thirteen (13) years after the latter's death. As ruled by this Court in Dumlao v. Quality

Plastic Products, Inc. (70 SCRA 475 [1976]) the decision of the lower court insofar as the deceased is concerned, is void for lack of jurisdiction over his person. He was not, and he could not have been validly served with summons. He had no more civil personality. His juridical personality, that is fitness to be subject of legal relations, was lost through death (Arts. 37 and 42 Civil Code).

The same conclusion would still inevitably be reached notwithstanding joinder of Ching Leng's estate as co-defendant. it is a well-settled rule that an estate can sue or be sued through an executor or administrator in his representative capacity (21 Am. Jr. 872). Contrary to private respondent's claims, deceased Ching Leng is a resident of 44 Libertad Street, Pasay City as shown in his death certificate and T. C. T. No. 91137 and there is an on-going intestate proceedings in the same court, Branch III commenced in 1965, and notice of hearing thereof duly published in the same year. Such misleading and misstatement of facts demonstrate lack of candor on the part of private respondent and his counsel, which is censurable.

The complaint for cancellation of Ching Leng's Torrens Title must be filed in the original land registration case, RTC, Pasig, Rizal, sitting as a land registration court in accordance with Section 112 of the Land Registration Act (Act No. 496, as amended) not in CFI Pasay City in connection with, or as a mere incident in Civil Case No. 6888-P (Estanislao v. Honrado, 114 SCRA 748 [1982]).

Section 112 of the same law requires "notice to all parties in interest." Since Ching Leng was already in the other world when the summons was published he could not have been notified at all and the trial court never acquired jurisdiction over his person. The ex-parte proceedings for cancellation of title could not have been held (Estanislao v. Honrado, supra).

The cited case of Perkins v. Dizon, supra is inapplicable to the case at bar since petitioner Perkins was a non-resident defendant sued in Philippine courts and sought to be excluded from whatever interest she has in 52,874 shares of stocks with Benguet Consolidated Mining Company. The action being a quasi in rem summons by publication satisfied the constitutional requirement of due process.

The petition to set aside the judgment for lack of jurisdiction should have been granted and the amended complaint of private respondent based on possession and filed only in 1978 dismissed outrightly. Ching Leng is an innocent purchaser for value as shown by the evidence adduced in his behalf by petitioner herein, tracing back the roots of his title since 1960, from the time the decree of registration was issued.

The sole remedy of the landowner whose property has been wrongfully or erroneously registered in another's name—after one year from the date of the decree—is not to set aside the decree, but respecting the decree as incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of justice for damages if the property has passed unto the hands of an innocent purchaser for value (Sy, Sr. v.

Intermediate Appellate Court, G.R. No. 66742; Teoville Development Corporation v. IAC, et al., G.R. No. 75011, June 16, 1988).

Failure to take steps to assert any rights over a disputed land for 19 years from the date of registration of title is fatal to the private respondent's cause of action on the ground of laches. Laches is the failure or neglect, for an unreasonable length of time to do that which by exercising due diligence could or should have been done, earlier; it is negligence or omission to assert a right within a reasonable time warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it (Bailon-Casilao v. Court of Appeals, G.R. No. 78178, April 15, 1988; Villamor v. Court of Appeals, G.R. No. 41508, June 27, 1988).

The real purpose of the Torrens system is to quiet title to land and to stop forever any question as to its legality. Once a title is registered, the owner may rest secure, without the necessity of waiting in the portals of the court, or sitting on the "mirador su casa," to avoid the possibility of losing his land (National Grains Authority v. IAC, 157 SCRA 388 [1988]).

A Torrens title is generally a conclusive evidence of the ownership of the land referred to therein (Section 49, Act 496). A strong presumption exists that Torrens titles are regularly issued and that they are valid. A Torrens title is incontrovertible against any "information possessoria" or title existing prior to the issuance thereof not annotated on the title (Salamat Vda. de Medina v. Cruz, G.R. No. 39272, May 4, 1988).

PREMISES CONSIDERED, (1) the instant petition is hereby GRANTED; (2) the appealed decision of the Court of Appeals is hereby REVERSED and SET ASIDE; (3) the trial court's decision dated June 15, 1979 and the Order dated September 2, 1980 reinstating the same are hereby declared NULL and VOID for lack of jurisdiction and (4) the complaint in Civil Case No. 6888-P is hereby DISMISSED.

SO ORDERED.


Manila

FIRST DIVISION

G.R. No. L-82330 May 31, 1988

THE DIAL CORPORATION, C & T REFINERY INC., NALIN Sdn. Bhb. BERISFORD COMMODITIES, LTD., and PACIFIC MOLASSES COMPANY, petitioners, vs.THE HON. CLEMENTE M. SORIANO, Presiding Judge, Regional Trial Court, Branch 3, MANILA PUBLIC RESPONDENT and IMPERIAL VEGETABLE OIL COMPANY, INC., respondents.

Guerrero & Torres Law Office for petitioners.

Abad & Associates for respondents.

GRIÑO-AQUINO, J.:

The petitioners are foreign corporations organized and existing under the laws of the United States, the United Kingdom, and Malaysia, are not domiciled in the Philippines, nor do they have officers or agents, place of business, or property in the Philippines; they are not licensed to engage, and are not engaged, in business here. The respondent Imperial Vegetable Oil Company, Inc. (or "IVO" for brevity) is a Philippine corporation which through its president, Dominador Monteverde, had entered into several contracts for the delivery of coconut oil to the petitioners. Those contracts stipulate that any dispute between the parties will be settled through arbitration under the rules of either the Federation of Oils Seeds and Fats Association (FOSFA) or the National Institute of Oil Seed Products (NIOP). Because IVO defaulted under the contracts, the petitioners and 15 others, initiated arbitration proceedings abroad, and some have already obtained arbitration awards against IVO.

On April 8, 1987, IVO filed a complaint for injunction and damages against nineteen (19) foreign coconut oil buyers including the petitioners, with whom its president, Dominador Monteverde, had entered into contracts for the delivery of coconut oil (Civil Case No. 87-40166, RTC Manila entitled "Imperial Vegetable Oil Co., Inc. vs. Dial Corporation et al."). IVO repudiated Monteverde's contracts on the grounds that they were mere "paper trading in futures" as no actual delivery of the coconut oil was allegedly intended by the parties; that the Board of Directors of IVO convened in a special meeting on March 21, 1987 and removed Dominador Monteverde from his position as president of the corporation, named in his place, Rodrigo Monteverde, and disowned Dominador Monteverde's allegedly illegal and unauthorized acts; that the defendants have allegedly "harassed" IVO to comply with Dominador's contracts and to come to a settlement with them. IVO prayed for the issuance of a temporary restraining order or writ of preliminary injunction to stop the defendants from harassing IVO with their insistent demands to recognize the contracts entered into by Dominador Monteverde and from portraying the IVO as one that defaults on its contracts and obligations and has fallen into bad times and from interfering with IVO's normal conduct of business. IVO also prayed that the defendants pay it moral damages of P5 million, actual damages of P10 million, exemplary damages of P5 million, attorney's fees of P1 million, P3,000 per appearance of counsel, and litigation expenses.

On motion of IVO, respondent Judge authorized it to effect extraterritorial service of summons to all the defendants through DHL Philippines corporation (Annex B). Pursuant to that order, the petitioners were served with summons and copy of the complaint by DHL courier service.

On April 25, 1987, without submitting to the court's jurisdiction and only for the purpose of objecting to said jurisdiction over their persons, the petitioners filed motions to dismiss the complaint against them on the ground that the extraterritorial service of summons to them was improper and that hence the court did not acquire jurisdiction over them. On December 15, 1987, the court denied their motions to dismiss and upheld the validity of the extraterritorial service of summons to them on the ground that "the present action relates to property rights which lie in contracts within the Philippines, or which defendants claim liens or interests, actual or inchoate, legal or equitable (par. 2, complaint). And one of the reliefs demanded consists, wholly or in part, in excluding the defendants from any interest in such property for the reason that their transactions with plaintiff's former president are ultra vires." Furthermore, "as foreign corporations doing business in the Philippines without a license, they opened themselves to suit before Philippine courts, pursuant to Sec. 133 of the Corporation Code of the Philippines." (Annex H) The petitioners' motions for reconsideration of that order were also denied by the court (Annex M), hence this petition for certiorari with a prayer for the issuance of a temporary retraining order which We granted.

The petition is meritorious.

Section 17, Rule 14 of the Rules of Court provides:

Section 17. Extraterritorial service. — When the defendant does not reside and is not found in the Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under section 7; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shag not be less than sixty (60) days after notice, within which the defendant must answer.

Only in four (4) instances is extraterritorial service of summons proper, namely: "(1) when the action affects the personal status of the plaintiffs; (2) when the action 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; (3) when the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; and (4) when the defendant non-resident's property has been attached within the Philippines" (De Midgely vs. Fernandos, 64 SCRA 23).

The complaint in this case does not involve the personal status of the plaintiff, nor any property in the Philippines in which the defendants have or claim an interest, or which the plaintiff has attached. The action is purely an action for injunction to restrain the defendants from enforcing against IVO ("abusing and harassing") its contracts for the delivery of coconut oil to the defendants, and to recover from the defendants P21 million in damages for such "harassment." It is clearly a personal action as well as an action in

personam, not an action in rem or quasi in rem. "An action in personam is an action against a person on the basis of his personal liability, while an action in remedies is an action against the thing itself, instead of against the person." (Hernandez vs. Rural Bank of Lucena, Inc., 76 SCRA 85). A personal action is one brought for the recovery of personal property, for the enforcement of some contract or recovery of damages for its breach, or for the recovery of damages for the commission of an injury to the person or property (Hernandez vs. Development Bank of the Philippines, 71 SCRA 292).<äre||anº•1àw>

As Civil Case No. 87-40166 is a personal action, personal or substituted service of summons on the defendants, not extraterritorial service, is necessary to confer jurisdiction on the court. The rule is explained in Moran's Comments on the Rules of Court thus:

As a general rule, when the defendant is not residing and is not found in the Philippines, the Philippine courts cannot try any case against him because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court. But, when the action affects the personal status of the plaintiff residing in the Philippines, or is intended to seize or dispose of any property, real or personal, of the defendant located in the Philippines, it may be validly tried by the Philippine courts, for then, they have jurisdiction over the res, i.e., the personal status of the plaintiff or the property of the defendant and their jurisdiction over the person of the non-resident defendant is not essential. Venue in such cases may be laid in the province where the property of the defendant or a part thereof involved in the litigation is located. (5 Moran's Comments on the Rules of Court, 2nd Ed., p. 105.)

In an action for injunction, extraterritorial service of summons and complaint upon the non-resident defendants cannot subject them to the processes of the regional trial courts which are powerless to reach them outside the region over which they exercise their authority (Sec. 3-a, Interim Rules of Court; Sec. 21, subpar. 1, B.P. Blg. 129). Extraterritorial service of summons will not confer on the court jurisdiction or power to compel them to obey its orders.

Neither may the court by extraterritorial service of summons acquire jurisdiction to render and enforce a money judgment against a non-resident defendant who has no property in the Philippines for "the fundamental rule is that jurisdiction in personam over non-residents, so as to sustain a money judgment, must be based upon personal service within the state which renders the judgment "(Boudard vs. Tait, 67 Phil. 170, 174).

Respondents' contention that "the action below is related to property within the Philippines, specifically contractual rights that petitioners are enforcing against IVO" is specious for the "contractual rights" of the petitioners are not property found in the Philippines for the petitioners have not filed an action in the local courts to enforce said rights. They have not submitted to the jurisdiction of our courts.

The lower court invoked Section 33 of the Corporation Code which provides that a "foreign corporation transacting business in the Philippines without a license may be

sued or proceeded against before Philippine courts or administrative tribunal on any valid cause of action recognized under Philippine laws." It assumed that the defendants (herein petitioners) are doing business in the Philippines, which allegation the latter denied. Even if they can be considered as such, the Corporation Code did not repeal the rules requiring proper service of summons to such corporations as provided in Rule 14 of the Rules of Court and Section 128 of the Corporation Code.

The respondent court's finding that, by filing motions to dismiss, the petitioners hypothetically admitted the allegations of the complaint that they are doing business in the Philippines without any license, and that they may be served with summons and other court processes through their agents or representatives enumerated in paragraph 2 of the complaint, is contradicted by its order authorizing IVO to summon them by extraterritorial service, a mode of service which is resorted to when the defendant is not found in the Philippines, does not transact business here, and has no resident agent on whom the summons may be served.

WHEREFORE, We hold that the extraterritorial service of summons on the petitioners was improper, hence null and void. The petition for certiorari is granted.

The orders dated April 24, 1987 (Annex B) and December 15, 1987 (Annex H) of the respondent Judge are hereby set aside. The complaint in Civil Case No. 87-40166 is hereby dismissed as against the petitioners for failure of the court to acquire jurisdiction over them.

SO ORDERED.

G.R. No. L-31095 June 18, 1976JOSE M. HERNANDEZ vs. DEVELOPMENT BANK OF THE PHILIPPINES

This is a case which involves the question of proper venue in a real action.

Petitioner Jose M. Hernandez was an employee of private respondent Development Bank of the Philippines in its Legal Department for twenty-one (21) years until his retirement on February 28, 1966 due to illness. On August 12, 1964, in due recognition of his unqualified service as Assistant Attorney in its Legal Department, the private respondent awarded to the petitioner a lot, identified as Lot No. 15, Block No. W-21, in the private respondent's Housing Project at No. 1 West Avenue, Quezon City, containing an area of 810 square meters with a Type E house. On August 31, 1968, after the petitioner received from the private respondent's Housing Project Committee a statement of account of the purchase price of the said lot and house in the total amount of P21,034.56, payable on a monthly amortization of P153.32 for a term of fifteen (15) years, he sent to the said Committee a Cashier's Check No. 77089 CC, dated -October 21, 1968, issued by the Philippine Banking Corporation in the name of his wife in the sum of P21,500.00 to cover the cash and full payment of the purchase price of the lot and house awarded to him. However, more than a week thereafter, or on October 29, 1968, the Chief Accountant and Comptroller of the private respondent returned to the petitioner ,the aforementioned check, informing him that the private respondent, through its Committee on Organization, Personnel and Facilities, had cancelled the award of the lot and house previously awarded to him on the following grounds: (1) that he has already retired; (2) that he has only an option to purchase said house and lot; (3) that there are a big number of employees who have no houses or lots; (4) that he has been given his retirement gratuity; and (5) that the awarding of the aforementioned house and lot to an employee of the private respondent would better subserve the objective of its Housing Project. Petitioner protested against the cancellation of the award of the house and lot in his favor and demanded from private respondent the restoration of all his rights to said award. However, private respondent refused.

On May 15, 1969 the petitioner filed a complaint in the Court of First Instance of Batangas against the private respondent seeking the annulment of the cancellation of the award of the lot and house in his favor and the restoration of all his rights thereto. He contends that the cancellation of said award was unwarranted and illegal for he has already become the owner of said house and lot by virtue of said award on August 12, 1964 and has acquired a vested right thereto, which cannot be unilaterally cancelled without his consent; that he. had requested the private respondent to restore to him all his rights to said award but the latter refused and failed and still refuses and fails to comply with said request.

Private respondent filed a motion to dismiss the complaint on the ground of improper venue, contending that since the petitioner's action affects the title to a house and lot situated in Quezon City, the same should have been commenced in the Court of First Instance of Quezon City where the real property is located and not in the Court of First

Instance of Batangas where petitioner resides. On July 24, 1969, the respondent Court sustained the motion to dismiss filed by private respondent on the ground of improper venue.

Hence, the instant petition to review the order of respondent Court.

The only issue in this petition is whether the action of the petitioner was properly filed in the Court of First Instance of Batangas. It is a well settled rule that venue of actions or, more appropriately, the county where the action is triable 1 depends to a great extent on the nature of the action to be filed, whether it is real or personal. 2 A real action is one brought for the specific recovery of land, tenements, or hereditaments. 3 A personal action is one brought for the recovery of personal property, for the enforcement of some contract or recovery of damages for its breach, or for the recovery of damages for the commission of an injury to the person or property. 4 Under Section 2, Rule 4 of the Rules of Court, "actions affecting title to, or for recovery of possession, or for partition, or condemnation of , or foreclosure of mortgage in real property, shall be commenced and tried 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".

A close scrutiny of the essence of the petitioner's complaint in the court a quo would readily show that he seeks the annulment of the cancellation of the award of the Quezon City lot and house in his favor originally given him by respondent DBP in recognition of his twenty-one years of service in its Legal Department, in pursuance of his contention that he had acquired a vested right to the award which cannot be unilaterally cancelled by respondent without his consent.

The Court agrees that petitioner's action is not a real but a personal action. As correctly insisted by petitioner, his action is one to declare null and void the cancellation of the lot and house in his favor which does not involve title and ownership over said properties but seeks to compel respondent to recognize that the award is a valid and subsisting one which it cannot arbitrarily and unilaterally cancel and accordingly to accept the proffered payment in full which it had rejected and returned to petitioner.

Such an action is a personal action which may be properly brought by petitioner in his residence, as held in the case of Adamus vs. J.M. Tuason & Co., Inc. 5 where this Court speaking through former Chief Justice Querube C. Makalintal distinguished the case from an earlier line of J.M. Tuaxon & Co., Inc. cases involving lot purchasers from the Deudors 6, as follows:

... All the allegations as well as the prayer in the complaint show that this is not a real but a personal action — to compel the defendants to execute the corresponding purchase contracts in favor of the plaintiffs and to pay damages. The plaintiffs do not claim ownership of the lots in question: they recognize the title of the defendant J.M. Tuason & Co., Inc. They do not ask that possession be delivered to them, for they allege to be in possession. The case cited by the defendants (Abao, et al. vs. J. M. Tuason & Co., Inc. G.R. No. L-16796, Jan. 30, 1962) is therefore not in point. In that case, as stated by this Court in its decision, the 'plaintiffs' action is predicated on the theory that they are 'occupants, landholders,' and 'most' of them owners by purchase' of the residential lots in

question; that, in consequence of the compromise agreement adverted to above, between the Deudors; and defendant corporations, the latter had acknowledged the right and title of the Deudors in and to said lots; and hence, the right and title of the plaintiffs, as successors-in-interest of the Deudors; that, by entering into said agreement, defendant corporations had, also, waived their right to invoke the indefeasibility of the Torrens title in favor of J. M. Tuason & Co., Inc.; and that defendants have no right, therefore, to oust plaintiffs from the lots respectively occupied by them and which they claim to be entitled to hold. Obviously, this action affects, therefore, not only the possession of real property, but, also, the title thereto. Accordingly, it should have been instituted in the Court of First Instance of the Province of Rizal in which said property is situated (Section 3, Rule 5 of the Rules of Court).

WHEREFORE, the order of dismissal appealed from is set aside and the case is remanded for further proceedings and disposition on the merits. No costs.


Manila

SECOND DIVISION

G. R. No. 76431 October 16, 1989

FORTUNE MOTORS, (PHILS.) INC., petitioner, vs.THE HONORABLE COURT OF APPEALS, METROPOLITAN BANK and TRUST COMPANY, respondents.

Quirante & Associates Law Office for petitioner.

Bautista, Cruz & Associates Law Offices for private respondent.

PARAS, J.:

This is a petition for review on certiorari seeking the reversal of: (a) the July 30, 1986 decision of the Court of Appeals in AC-G.R. SP No. 09255 entitled "Metropolitan Bank & Trust Co. v. Hon. Herminio C. Mariano, et al." dismissing Civil Case No. 8533218 entitled "Fortune Motors (Phils.) Inc. v. Metropolitan Bank & Trust Co." filed in the Regional Trial Court of Manila, Branch IV for improper venue and (b) the resolution dated October 30, 1986 denying petitioner's motion for reconsideration.

The undisputed facts of the case are as follows:

On March 29,1982 up to January 6,1984, private respondent Metropolitan Bank extended various loans to petitioner Fortune Motors in the total sum of P32,500,000.00 (according to the borrower; or P34,150,000.00 according to the Bank) which loan was

secured by a real estate mortgage on the Fortune building and lot in Makati, Rizal. (Rollo, pp. 60-62)

Due to financial difficulties and the onslaught of economic recession, the petitioner was not able to pay the loan which became due. (Rollo, p. 62)

For failure of the petitioner to pay the loans, the respondent bank initiated extrajudicial foreclosure proceedings. After notices were served, posted, and published, the mortgaged property was sold at public auction for the price of P47,899,264.91 to mortgagee Bank as the highest bidder. (Rollo, p. 11)

The sheriff's certificate of sale was registered on October 24, 1984 with the one-year redemption period to expire on October 24,1985. (Rollo, p. 12)

On October 21, 1985, three days before the expiration of the redemption period, petitioner Fortune Motors filed a complaint for annulment of the extrajudicial foreclosure sale alleging that the foreclosure was premature because its obligation to the Bank was not yet due, the publication of the notice of sale was incomplete, there was no public auction, and the price for which the property was sold was "shockingly low". (Rollo, pp. 60-68)

Before summons could be served private respondent Bank filed a motion to dismiss the complaint on the ground that the venue of the action was improperly laid in Manila for the realty covered by the real estate mortgage is situated in Makati, therefore the action to annul the foreclosure sale should be filed in the Regional Trial Court of Makati. (Rollo, pp. 67-71-A )

The motion was opposed by petitioner Fortune Motors alleging that its action "is a personal action" and that "the issue is the validity of the extrajudicial foreclosure proceedings" so that it may have a new one year period to redeem. (Rollo, pp. 72-73)

On January 8, 1986 an order was issued by the lower court reserving the resolution of the Bank's motion to dismiss until after the trial on the merits as the grounds relied upon by the defendant were not clear and indubitable. (Rollo, p. 81)

The Bank filed a motion for reconsideration of the order dated January 8, 1986 but it was denied by the lower court in its order dated May 28, 1986. (Rollo, Annex "L" pp. 93-96; Annex "N" p. 99)

On June 11, 1986 the respondent Bank filed a petition for certiorari and prohibition in the Court of Appeals. (Rollo, Annex "O" pp. 100-115)

And on July 30, 1986, a decision was issued by the Court of Appeals, the dispositive part of which reads as follows:

WHEREFORE, the petition for certiorari and prohibition is granted. The complaint in the Civil Case No. 85-33218 is dismissed without prejudice to its being filed in the proper venue. Costs against the private respondent.

SO ORDERED. (Rollo, p. 15)

A motion for reconsideration was filed on August 11, 1986 on the said decision and on October 30, 1986 a resolution was issued denying such motion for reconsideration. (Rollo, Annex "O" pp. 121-123; Annex "S" p. 129)

Hence, the petition for review on certiorari.

On June 10, 1987 the Court gave due course to the petition, required the parties to file their respective memoranda within twenty (20) days from the notice hereof, and pay deposit for costs in the amount of P80.40.

Both parties have filed their respective memoranda, and the case was submitted for Court's resolution in the resolution dated December 14, 1987. (Rollo,Metrobank's Memorandum pp. 45-59; petitioner's memorandum pp.130-136; Res. p. 138)

The only issue in this case is whether petitioner's action for annulment of the real estate mortgage extrajudicial foreclosure sale of Fortune Building is a personal action or a real action for venue purposes.

In a real action, the plaintiff seeks the recovery of real property, or as indicated in Sec. 2 (a) of Rule 4, a real action is an action affecting title to real property, or for the recovery of possession, or for the partition or condemnation of, or foreclosure of a mortgage on real property. (Comments on the Rules of Court by Moran, Vol. 1, p. 122)

Real actions or actions affecting title to, or for the recovery of possession, or for the partition or condemnation of, or foreclosure of mortgage on real property, must be instituted in the Court of First Instance of the province where the property or any part thereof lies. (Enriquez v. Macadaeg, 84 Phil. 674,1949; Garchitorena v. Register of Deeds, 101 Phil. 1207, 1957)

Personal actions upon the other hand, may be instituted in the Court of First Instance 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 (Sec. 1, Rule 4, Revised Rules of Court).

A prayer for annulment or rescission of contract does not operate to efface the true objectives and nature of the action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)

An action for the annulment or rescission of a sale of real property is a real action. Its prime objective is to recover said real property. (Gavieres v. Sanchez, 94 Phil. 760,1954)

An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private sale of real property. (Munoz v. Llamas, 87 Phil. 737,1950)

While it is true that petitioner does not directly seek the recovery of title or possession of the property in question, his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which, under the law, is considered immovable property, the recovery of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real property. It is a real action. Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue (Sec. 2, Rule 4) which was timely raised (Sec. 1, Rule 16). (Punzalan, Jr. v. Vda. de Lacsamana, 121 SCRA 336, [1983]).

Thus, as aptly decided by the Court of Appeals in a decision penned by then Court of Appeals Associate Justice now Associate Justice of the Supreme Court Carolina C. Griño-Aquino, the pertinent portion reads: "Since an extrajudicial foreclosure of real property results in a conveyance of the title of the property sold to the highest bidder at the sale, an action to annul the foreclosure sale is necessarily an action affecting the title of the property sold. It is therefore a real action which should be commenced and tried in the province where the property or part thereof lies."

PREMISES CONSIDERED, the instant petition is DENIED for lack of merit and the assailed decision of the respondent Court of Appeals is AFFIRMED.

SO ORDERED.

G.R. No. L-49475 September 28, 1993JORGE C. PADERANGA vs. Hon. DIMALANES B. BUISSAN

We are called upon in this case to determine the proper venue of an action to fix the period of a contract of lease which, in the main, also prays for damages.

Sometime in 1973, petitioner JORGE C. PADERANGA and private respondent ELUMBA INDUSTRIES COMPANY, a partnership represented by its General Manager JOSE J. ELUMBA, entered into an oral contract of lease for the use of a commercial space within a building owned by petition in Ozamiz City. 1 The lease was for an indefinite period although the rent of P150.00 per month was paid on a month-to-month basis. ELUMBA INDUSTRIES COMPANY utilized the area under lease as the Sales Office of Allied Air Freight in Ozamiz City.

On 4 April 1977, PADERANGA subdivided the leased premises into two (2) by constructing a partition wall in between. He then took possession of the other half, which repossession was said to have been undertaken with the acquiescence of the local manager of ELUMBA, 2 although private respondent maintains that this is not the case. 3 At any rate, the validity of the repossession is not here in issue.

On 18 July 1977, private respondent instituted an action for damages 4 which, at the same time, prayed for the fixing of the period of lease at five (5) years, before the then court of First Instance of Zamboanga del Norte based in Dipolog City. 5 Petitioner, a resident of Ozamiz City, moved for its dismissal contending that the action was a real action which should have been filed with the Court of First Instance of Misamis Occidental stationed in Ozamiz City where the property in question was situated.

On 6 November 1978, respondent Judge Dimalanes B. Buissan denied the Motion to Dismiss and held that Civil Case No. 2901 merely involved the enforcement of the contract of lease, and while affecting a portion of real property, there was no question of ownership raised. 6 Hence, venue was properly laid.

Petitioner pleaded for reconsideration of the order denying his Motion to Dismiss. He contended that while the action did not involve a question of ownership, it was nevertheless seeking recovery of possession; thus, it was a real action which, consequently, must be filed in Ozamiz City. 7

On 4 December 1978, respondent judge denied reconsideration. 8 While admitting that Civil Case No. 2901 did pray for recovery of possession, he nonetheless ruled that this matter was not the main issue at hand; neither was the question of ownership raised. Not satisfied, petitioner instituted the present recourse.

PADERANGA argues that inasmuch as ELUMBA seeks to recover possession of the portion surrendered to him by the local manager of private respondent, as well as to fix the period of lease at five (5) years, Dipolog City could not be the proper venue of the

action. it being a real action, venue is laid in the court having jurisdiction over the territory in which the property lies.

ELUMBA counters that the present action is chiefly for damages arising from an alleged breach in the lease contract; hence, the issue of recovery of possession is merely incidental. ELUMBA further argues that the action is one in personam and not in rem. Therefore venue may be laid in the place where plaintiff or defendant resides at the option of plaintiff.

Private respondent appears to be confused over the difference between personal and real actions vis-a-vis actions in personam and in rem. The former determines venue; the latter, the binding effect of a decision the court may render over the party, whether impleaded or not.

In the case before us, it is indubitable that the action instituted by private respondent against petitioner affects the parties alone, not the whole world. Hence, it is an action in personam, i.e., any judgment therein is binding only upon the parties properly impleaded. 9 However, this does not automatically mean that the action for damages and to fix the period of the lease contract is also a personal action. For, a personal action may not at the same time be an action in rem. In Hernandez v. Rural Bank of Lucena, Inc., 10 we held thus —

In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or the recovery of damages. In a real action, the plaintiff seeks the recovery of real property, or, as indicated in section 2(a) of Rule 4, a real action is an action affecting title to real property or for the recovery of possession, or for partition or condemnation of, or foreclosure of a mortgage on, real property.

An action in personam is an action against a person on the basis of his personal liability, while an action in rem is an action against the thing itself, instead of against the person. Hence, a real action may at the same time be an action in personam and not necessarily an action in rem.

Consequently, the distinction between an action in personam and an action in rem for purposes of determining venue is irrelevant. Instead, it is imperative to find out if the action filed is a personal action or real action. After all, personal actions may be instituted in the Regional Trial Court (then Court of First Instance) 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. 11 On the other hand, real actions should be brought before the Regional Trial Court having jurisdiction over the territory in which the subject property or part thereof lies. 12

While the instant action is for damages arising from alleged breach of the lease contract, it likewise prays for the fixing of the period of lease at five (5) years. If found meritorious, private respondent will be entitled to remain not only as lessee for another five (5) years but also to the recovery of the portion earlier taken from him as well. This is because the leased premises under the original contract was the whole commercial space itself and not just the subdivided portion thereof.

While it may be that the instant complaint does not explicitly pray for recovery of possession, such is the necessary consequence thereof. 13 The instant action therefore does not operate to efface the fundamental and prime objective of the nature of the case which is to recover the one-half portion repossessed by the lessor, herein petitioner. 14 Indeed, where the ultimate purpose of an action involves title to or seeks recovery of possession, partition or condemnation of, or foreclosure of mortgage on, real property, 15 such an action must be deemed a real action and must perforce be commenced and tried in the province where the property or any part thereof lies.

Respondent judge, therefore, in denying petitioner's Motion to Dismiss gravely abused his discretion amounting to lack or excess of jurisdiction.

WHEREFORE, the Petition for Prohibition is GRANTED. The Orders of 6 November 1978 and 4 December 1978 of respondent Judge Dimalanes B. Buissan are SET ASIDE. The branch of the Regional Trial Court of Dipolog City where Civil Case No. 2901 may be presently assigned is DIRECTED to DISMISS the case for improper venue. This decision is immediately executory.

Costs against private respondent ELUMBA INDUSTRIES COMPANY.

SO ORDERED.

G.R. No. L-5402 January 28, 1911CAYETANO DE LA CRUZ vs.EL SEMINARIO DE LA ARCHIDIOCESIS DE MANILA, ET AL.

The appellee, Cayetano de la Cruz, was a member and the president of a Methodist Episcopal religious association at Dinalupijan, Province of Bataan, Philippine Islands. The members of this association, including Cayetano de la Cruz, having decided to lease a building site and erect thereon a chapel, made voluntary contributions for that purpose, Cayetano de la Cruz being among those who contributed. Cayetano de la Cruz, as such member and president, was then authorized by the association to lease a certain building site and to use the funds contributed for the purpose of constructing a chapel. So on the 17th of May, 1907, he leased from one J. C. Miller, the agent of the appellant, His Grace Jeremiah J. Harty, Archbishop of Manila and administrator of the hacienda of Dinalupijan, for a period of two years, a certain lot or parcel of land, being a part of that hacienda and which is fully described in the written contract of lease, agreeing to pay as rental P2 per year, the first year's rent to be paid in advance. On the execution of this lease Cayetano de la Cruz, as member and president of the Methodist Episcopal association, was placed in possession of this lot or building site and proceeded to construct thereon a chapel for the use of the said religious association. About the time this chapel was completed an action of forcible entry and detainer was commenced by one Raymundo Sinsuangco in the justice of the peace court of Dinalupijan, in which Cayetano de la Cruz, as lessee of the lot upon which the chapel was constructed, and J. C. Miller, as agent and representative of the appellants, who, in such capacity executed said lease, as lessor, were made defendants. Judgment was rendered against the defendants in the action. The appellants in the case at bar were duly notified of the judgment of the justice of the peace and were requested to appeal to the Court of First Instance. No appeal was taken and the judgment becoming final was executed in such a manner that the above-mentioned chapel was completely destroyed. Subsequently thereto, and on the 21st of October, 1907, Cayetano de la Cruz commenced this action in the Court of First Instance of the city of Manila against the appellants to recover the sum of P2,000 as damages for a breach of the rental contract. To this complaint the appellants, through their attorneys, presented a demurrer, based upon the following grounds: (1) That the Court of First Instance of the city of Manila was without jurisdiction to try and determine this action for the reason that damages for injuries caused to real property situated in the Province of Bataan is sought to be recovered; and (2) the complaint fails to allege facts sufficient to constitute a cause of action. This demurrer was overruled, the appellants duly noting their exception.

After all the evidence had been submitted by both parties, the appellee, after due notice to the appellants, presented an amended complaint, to conform, as he alleged, with the agreed statement of facts and the admissions made by the appellants in their answer. This amended complaint was admitted by the court without objection on the part of the appellants. The amended complaint is the same as the original complaint, with the following exceptions: (1) A number of unnamed person were made parties plaintiff; (2) in paragraph 2 of the amended

complaint it is alleged that Cayetano de la Cruz was the president, agent, and member of the Methodist Episcopal religious association: and (3) a judgment for only P402 was asked.

The court below on the 29th of March, 1909, rendered judgment in favor of the appellees and against the appellants for the sum of P402, P2 being the rent for the first year paid in advance, and the P400 being the agreed value of the chapel which was destroyed by the sheriff in executing the judgment rendered by the justice of the peace.

The appellants after noting their exception to the judgment and making a motion for a new trial, which motion was overruled and exception thereto noted, appealed to this court, and now insist:

1. That as this action is one for damages to real estate situated in the Province of Bataan, under the provisions of section 377 of the Code of Civil Procedure the Court of First Instance of the city of Manila had no jurisdiction;

2. The court below erred in admitting the amended complaint by which the other members of the religious association, jointly interested with Cayetano de la Cruz, were made parties plaintiff; and,

3. That the appellants are not liable for the consequences of the judgment of the justice of the peace.

The demurrer was properly overruled. This is not an action to recover damages to real estate; it is an action for breach of covenant in a lease. The fact that the damages to real estate are involved, as an incident to the breach of the contract, does not change the character of the action. Such an action is personal and transistory. The rule is well stated in the case of Neil vs. Owen (3 Tex., 145), wherein the court said (p. 146):

If the action is founded on privity of contract between the parties, then the action whether debt or covenant, is transitory. But if there is no privity of contract and the action is founded on privity of estate only, such a covenant that runs with the land in the hands of the remote grantees, then the action is local and must be brought in the country wherein the land lies.

In an action on a covenant contained in a lease, whether begun by the lessor against the lessee, or by the lessee against the lessor, the action is transitory because it is founded on a mere privity of contract. (Thursby vs. Plant, cited in vol. 5, Ency. Plead. & Prac., p. 362.)

In general, also, actions which are founded upon contracts are transitory. In an action upon a lease for nonpayment of rent or other breach of covenants, when the action is founded on the privity of contract it is transitory and the venue may laid in any county. (22 Ency. Plead. & Prac., pp. 782-783.)

Therefore, section 377 of the Code of Civil Procedure, which provides, among other things, that actions to recover damages for injuries to real estate shall be brought in the province where the

land, or a part thereof, is situated, is not applicable. (Molina vs. De la Riva, 6 Phil. Rep., 12.) The amended complaint clearly states facts sufficient to constitute a cause of action. (Sec. 90, Code of Civil Procedure.)

The defendants in the second assignment of error assert that the plaintiff ought not to have been allowed to amend his complaint so as to make him the representative of all the persons interested in the subject matter of this action. We are of the opinion that such amendment was properly allowed. Section 110 of the Code of Civil Procedure is exceedingly broad in its term and there is no disposition in this court to narrow its term or meaning. We are also of the opinion that this is particularly the class of action to which section 118 of the Code of Civil Procedure refers. It would be exceedingly difficult and expensive to require that all persons interested be made parties plaintiff. To avoid this was the very purpose in enacting section 118. The plaintiff, as appears from the record, is the person chosen by the members of the association in question to look after and represent their interest and it is correspondingly appropriate that he should represent and act for them in this action. In permitting this court is not thwarting their will or endangering their interest, but, rather, is carrying out their desires and purposes as they have already expressed them.

In the third assignment of error it is insisted that the appellants are not liable for the consequences of the judgment of the justice of the peace, for the reason that according to that judgment the plaintiff, in violation of the rights of Raymundo Sinsuangco, entered upon the lot in question. It is argued that the plaintiff should not have entered into possession of this lot in violation of the rights of Sinsuangco, but that he should have acquired possession by due judicial process, and that having entered into possession in this manner he must suffer the consequences of his illegal acts. In this we can not agree. When this rental contract was executed the lot in question was vacant. The agent, Miller, led the plaintiff to believe that he could place him in legal possession of the lot. It was upon this theory that the plaintiff entered into this contract and paid the rent for the first year. The record does not affirmatively show that Miller placed the plaintiff in possession of this lot, but in the absence of proof to the contrary we think it fair to presume that this occurred. Miller then placed the plaintiff in possession of this lot, but not in the legal possession of same. He himself did not have the legal possession as was shown by the proof before the justice of the peace. Sinsuangco was the person who was in the actual possession and Miller should have known this and he should have known at the time he entered into the contract with the plaintiff that he could not place the plaintiff in legal, peaceful, and quiet possession of this lot. The plaintiff took possession under these circumstances and proceeded to construct the chapel, which was afterwards destroyed in the execution of the judgment of the justice of the peace. In the contract entered into between Miller and the plaintiff, it was Miller's duty to place the plaintiff legally in possession of this lot and maintain him in the peaceful and quiet possession of the same during the entire period of the contract.

The rights and obligations of lessor and lessee are treated in articles 1554 to 1574, inclusive, of the Civil Code. Article 1554 provides:

The lessor is obligated:

xxx xxx xxx

3. To maintain the lessee in the peaceful enjoyment of the premises for the entire period of the contract.

Article 1568 is as follows:

If the thing leased is lost or any of the contracting parties do not comply with what has been stipulated, the provisions of article 1182 and 1183 shall be respectively observed.

Article 1101 provides:

Those who in fulfilling their obligations are guilty of fraud, negligence, or delay, and those who in any manner whatsoever act in contravention of the stipulations of the same, shall be subject to indemnify for the losses and damages caused thereby.

Under this contract of lease it was the duty of the defendants to give the plaintiff the legal possession of the premises. This they did not do.

The defendants failed in the performance of their contract, and, as we have seen by article 1101 of the Civil Code, the person who fails in the performance of his obligations shall be subject to indemnify for the losses and damages caused thereby. "The true measure of damages for the breach of such a contract is what the plaintiff has lost by the breach." (Lock vs. Furze, L. R. 1, C. P., 441; Dexter vs. Manley, 4 Cush. (Mass.), 14.)

The sum of P402, in our opinion, not being excessive damages for the injuries caused by the breach of contract on the part of the defendants, the judgment should be and the same is hereby affirmed, with costs against the appellants. So ordered.


Manila

THIRD DIVISION

G.R. No. 84628 November 16, 1989

HEIRS OF ILDEFONSO COSCOLLUELA, SR., INC., petitioner, vs.RICO GENERAL INSURANCE CORPORATION, COURT OF APPEALS (11th Division), and HON. ENRIQUE T. JOCSON, Judge, Regional Trial Court of Negros Occidental Branch, respondents.

Ildefonso S. Villanueva and Rolando N. Medalla for petitioner.

Limbaga, Bana-ag, Bana-ag & Associates for private respondent.

GUTIERREZ, JR., J.:

The main issues raised in this petition for review on certiorari are whether the Court of Appeals erred in: (1) affirming the dismissal by the trial court of the complaint for damages on the ground of lack of cause of action, and in (2) denying due course to a petition for certiorari on the ground that the remedy of the petitioner to assail said order is appeal.

Petitioner, Heirs of Ildefonso Coscoluella, Inc. is a domestic corporation and the registered owner of an Isuzu KBD Pick-up truck bearing Motor No. 663296 and Plate No. LTV-FAW-189. The vehicle was insured with the private respondent Rico General Insurance Corporation for a consideration of P100,000.00 excluding third party liability under Commercial Vehicle Policy No. CV-122415 per Renewal Certificate No. 02189. The premiums and other expenses for insurance paid covered the period from October 1, 1986 to October 1, 1987.

On August 28, 1987 and within the period covered by the insurance, the insured vehicle was severely damaged and rendered unserviceable when fired upon by a group of unidentified armed persons at Hacienda Puyas, Barangay Blumentritt, Murcia, Negros Occidental. In the same incident, four persons died.

Petitioner filed its claim of P80,000.00 for the repair of the vehicle but private respondent, in a letter dated October 8, 1987, refused to grant it. As a consequence, the petitioner was prompted to file a complaint with the Regional Trial Court, 6th Judicial Region, Branch 47 at Bacolod City, docketed as Civil Case No. 4707, to recover the claim of P80,000.00 plus interest and attorney's fees.

The private respondent filed a motion to dismiss alleging that the complaint lacks a cause of action because the firing by armed men is a risk excepted under the following provisions in the insurance policy:

The Company shall not be liable under any Section of the Policy in respect of:—

1. x x x x x

2. x x x x x

3. Except in respect of claims arising under Sections I and II of the policy, any accident, loss, damage or liability directly or indirectly, proximately or remotely occasioned by, contributed to by or traceable to, or arising out of, or in connection with flood, typhoon, hurricane, volcanic eruption, earthquake or other convulsion of nature, invasion, the act of foreign enemies, hostilities or warlike operations (whether war be declared or not), civil commotion, mutiny, rebellion, insurrection, military or usurped power, or by any direct or indirect consequences of any of the said occurrences and in the event of any claim hereunder, the insured shall prove that the accident, loss or damage or liability arose independently of, and was in no way connected with, or occasioned by, or contributed to, any of the said occurrences, or any consequence thereof, and in default of such proof, the Company shall not be liable to make any payment in respect of such claim. (Emphasis supplied; see Rollo, p. 33,71)

The private respondent alleged that the firing was "an indirect consequence of rebellion, insurrection or civil commotion." The petitioner opposed the motion, saying that the quoted provision does not apply in the absence of an official governmental proclamation of any of the above-enumerated conditions.

The trial court ordered the dismissal of the complaint for lack of cause of action stating that the damage arose from a civil commotion or was a direct result thereof. (Rollo, p. 37)

A motion for reconsideration filed by the petitioner was denied by the trial court which further noted that "Courts can take effective cognizance of the general civil disturbance in the country akin to civil war without any executive proclamation of the existence of such unsettling condition." (Rollo, p. 38)

A second motion for reconsideration was filed but was later withdrawn.

Petitioner filed a notice of appeal which was given due course. However, the trial court, stated in its order that "the records of the case will not be transmitted to the Court of Appeals, the appropriate remedy being (a) petition for review by way of certiorari." In that same order, the trial court took cognizance of the withdrawal of the second motion for reconsideration but noted the police blotter appended to said motion which showed that "other than M-16 Armalite Rifles (the number of which were not specified for unknown reasons), nothing else was taken by the attackers." (Rollo, p. 40)

Thereafter, the petitioner filed a petition for certiorari with the Court of Appeals. The appellate court denied the petition, affirmed the trial court's dismissal order, and also ruled that an appeal in the ordinary course of law, not a special civil action of certiorari, is the proper remedy for the petitioner in assailing the dismissal order.

Hence, this petition to review the respondent appellate court's decision.

Petitioner asserts that its complaint states a cause of action since ultimate facts were alleged as follows:

3.— That, on August 28, 1987, the ISUZU KBD PICK-UP referred to in the preceding paragraph was damaged as a result of an incident at Hda. Puyas, Barangay Blumentritt, Murcia, Negros Occidental, when it was fired upon by a group of unidentified armed persons causing even the death of four (4) persons and rendering the said vehicle almost totally damaged and unserviceable;

4.— That when the said incident occurred on August 28, 1987, the said ISUZU KBD PICK-UP was insured by the defendant for P100,000.00 excluding third-party liability under Commercial Vehicle Policy No. CV/122415 per Renewal Certificate No. 02189 a copy of which is herewith attached as Annex "B"; and with the premiums and other expenses thereon duly paid for under Official Receipt No. 691, dated September 8, 1986, covering the period from October 1, 1986 to October 1, 1987, a copy of the same being attached hereto as Annex "C";

5.— That, the damage on said motor vehicle being a "fait accompli" and that it was insured by the defendant at the time it was damaged, it is the obligation of the defendant to restore the said vehicle to its former physical and running condition when it was insured however defendant refused and still refuses and fails, despite demands in writing made by plaintiff and its counsel to that effect, copies of said letters attached hereto as Annexes "D" & "E";

6.— That, for purposes of restoring the ISUZU KBD PICK-UP insured by the defendant to its former physical and running condition when it was insured, as mentioned above, would cost P80,000.00, which will include repair, repainting, replacement of spare parts, labor, etc., the said amount having arrived at upon inspection and appraisal of the said motor vehicle by knowledgeable and technical people;

7.— That, as a consequence of defendant's refusal to settle or pay the just claim of plaintiff, plaintiff has been compelled to hire the legal services of counsel for the protection of its rights and interest at the agreed fee of P15,000.00, for and as attorney's fees, which sum plaintiff is claiming from the defendant. (At pp. 29-30, Rollo)

Petitioner further maintains that the order of dismissal was erroneous in that: it overlooked the principle that a motion to dismiss a complaint on the ground of failure to state a cause of action hypothetically admits the allegations in the complaint; no trial was held for the reception of proof that the firing incident was a direct or indirect result of a civil commotion, mutiny, insurrection or rebellion; private respondent had the burden of proof to show that the cause was really an excepted risk; and in any case, the nature of the incident as a "civil disturbance" must first be officially proclaimed by the executive branch of the government. Private respondent, on the other hand, argues that the accident was really a result of a civil commotion, one of the fatalities being a military officer. (Rollo, p. 59)

After a review of the records, the Court finds that the allegations set forth in the complaint sufficiently establish a cause of action. The following are the requisites for the existence of a cause of action: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect, or not to violate such right; and (3) an act or omission on the part of the said defendant constituting a violation of the plaintiff's right or a breach of the obligation of the defendant to the plaintiff. (Cole v. Vda. de Gregoria, 116 SCRA 670 [1982]; Baliwag Transit, Inc. v. Ople, G. R. No. 57642, March 16, 1989)

The facts as alleged clearly define the existence of a right of the petitioner to a just claim against the insurer for the payment of the indemnity for a loss due to an event against which the petitioner's vehicle was insured. The insurance contract mentioned therein manifests a right to pursue a claim and a duty on the part of the insurer or private respondent to compensate the insured in case of a risk insured against. The refusal of the insurer to satisfy the claim and the consequent loss to the petitioner in incurring the cost of acquiring legal assistance on the matter constitutes a violation or an injury brought to the petitioner.

There is, therefore, a sufficient cause of action upon which the trial court can render a valid judgment. (Tañedo v. Bernad, et al; G. R. No. 66520, August 30, 1988).

The Court is very much cognizant of the principle that a motion to dismiss on the ground of failure to state a cause of action stated in the complaint hypothetically admits the truth of the facts therein. The Court notes the following limitations on the hypothetical admission:

The hypothetical admission is however limited to the relevant and material facts well pleaded in the complaint and inferences fairly deducible therefrom. The admission does not extend to conclusions or interpretations of law: nor does it cover allegations of fact the falsity of which is subject to judicial notice. (U. Bañez Electric Light Co. v. Abra Electric Cooperative, Inc., 119 SCRA 90 [1982])

Applying the above principle, we hold that the private respondent's motion to dismiss hypothetically admits the facts alleged in the complaint. We do not find anything in the complaint which does not deserve admission by the motion since there are no "conclusions or interpretations of law" nor "allegations of fact the falsity of which is subject to judicial notice." It is clear that the complaint does no more and no less than state simply that the van was damaged due to the firing by unidentified armed men. Since the complaint does not explicitly state nor intimate civil strife which private respondent insists to be the cause of the damage, the motion to dismiss cannot go beyond the admission of the facts stated and inferences reasonably deducible from them. Any other assertion by the private respondent is subject to proof. Meanwhile, the sufficiency of the petitioner's cause of action has been shown since, admitting the facts alleged, a valid judgment can be rendered.

The private respondent's invocation of the exceptions clause in the insurance policy as the basis for its non-liability and the consequent dismissal of the complaint is without merit. We also reiterate the established rule that when the terms of an insurance contract contain limitations on liability, the court "should construe them in such a way as to preclude the insurer from non-compliance with his obligations." (Taurus Taxi Co. Inc. v. Capital Insurance and Surety Company, Inc., 24 SCRA 454 [l968]) A policy of insurance with a narration of exceptions tending to work a forfeiture of the policy shall be interpreted liberally in favor of the insured and strictly against the insurance company or the party for whose benefit they are inserted. (Eagle Star Insurance, Ltd. v. Chia Yu, 96 Phil. 696 [1955]; Trinidad v. Orient Protective Asso., 67 Phil. 181 [1939]; Serrano v. Court of Appeals, 130 SCRA 327 [1984]; and National Power Corp. v. Court of Appeals, 145 SCRA 533 [1986]).

The facts alleged in the complaint do not give a complete scenario of the real nature of the firing incident. Hence, it was incumbent upon the trial judge to have made a deeper scrutiny into the circumstances of the case by receiving evidence instead of summarily disposing of the case. Contrary to what the respondent appellate court says, this case does not present a pure question of law but demands a factual determination of whether the incident was a result of events falling under the exceptions to the liability of private respondent contained in the policy of insurance.

We agree with the petitioner's claim that the burden of proof to show that the insured is not liable because of an excepted risk is on the private respondent. The Rules of Court

in its Section 1, Rule 131 provides that "each party must prove his affirmative allegations." (Summit Guaranty and Insurance Co., Inc. vs. Court of Appeals, 110 SCRA 241 [1981]; Tai Tong Chuache & Co. v. Insurance Commissioner, 158 SCRA 366 [1988]; Paris-Manila Perfume Co. v. Phoenix Assurance Co., 49 Phil. 753 [1926]). Where the insurer denies liability for a loss alleged to be due to a risk not insured against, but fails to establish the truth of such fact by concrete proofs, the Court rules that the insurer is liable under the terms and conditions of the policy by which it has bound itself. In this case, the dismissal order without hearing and reception of evidence to prove that the firing incident was indeed a result of a civil commotion, rebellion or insurrection constitutes reversible error on the part of the trial court.

The Court stresses that it would be a grave and dangerous procedure for the courts to permit insurance companies to escape liability through a motion to dismiss without the benefit of hearing and evidence every time someone is killed, or as in this case,. property is damaged in an ambush. The question on the nature of the firing incident for the purpose of determining whether or not the insurer is liable must first be threshed out and resolved in a full-blown trial.

The evidence to be received does not even have to relate to the existence of an official government proclamation of the nature of the incident because the latter is not an explicit requirement in the exception clause resolved in a mere motion to dismiss and is, for purposes of this petition for review on certiorari, immaterial. This particular issue on when to take cognizance of a rebellion for purposes of the law on contracts and obligations should have been developed during the trial on the merits or may have to await remedial legislation in Insurance Law or a decision in a more appropriate case.

The petitioner also questions the reasoning of the Court of Appeals in denying due course to the petition for certiorari. The appellate court said that even assuming for the sake of argument that the dismissal order by the trial court was not procedurally correct for lack of hearing, there was only an "error of judgment or procedure" correctible only by appeal then available in the ordinary course of law and not by a special civil action of certiorari which cannot be a substitute for appeal.

The records show that the remedy of appeal was actually intended to be pursued by petitioner. However, the appeal was rendered unfeasible when the trial judge refused to transmit the records to the appellate court. (see Rollo, p. 40) The judge, in effect, ruled out the remedy of appeal which was supposed to be availed of as a matter of right. In filing a petition for certiorari, the petitioner was acting upon the instructions of the judge. Under a situation where there was no more plain, speedy and adequate remedy in the ordinary course of law, the only available recourse was to file a special civil action of certiorari to determine whether or not the dismissal order was issued with grave abuse of discretion.

It is apparent, moreover, that the respondent appellate court failed to appreciation the petitioner's predicament. The trial judge, aside from dismissing the complaint which we

now rule to have a sufficient cause of action, likewise prevented an ordinary appeal to prosper in contravention of what is provided for by the rules of procedure.

The April 6, 1988 order of the trial judge stating that the appropriate remedy was a petition for review by way of certiorari is deplorable. The lower court cannot even distinguish between an original petition for certiorari and a petition for review by way of certiorari. A petition for review before the Court of Appeals could have been availed of if what is challenged is an adverse decision of the Regional Trial Court in its appellate capacity affirming, modifying or reversing a decision of a municipal trial court or lower tribunal. (Section 22, Batas Pambansa Blg. 129 and Section 22 (6) of the Interim Rules). In this case, the petitioner assailed the dismissal order of the Regional Trial Court of a complaint originally filed with it. This adverse order which had the effect of a judgment on the merits, may be appealed to the Court of Appeals by filing a notice of appeal within fifteen (15) days from receipt of notice of the order both on questions of law and of fact. (Section 39, Batas Pambansa Blg. 129 and Section 19 (a) of the Interim Rules). This was exactly what petitioner did after its motion for reconsideration was denied. Unfortunately, the trial judge failed to see the propriety of this recourse. And the Court of Appeals compounded the problem when it denied the petitioner any remedy arising from the Judge's wrong instructions.

The filing of the petition for certiorari was proper. Petitioner has satisfactorily shown before the respondent appellate court that the trial judge "acted whimsically in total disregard of evidence material to and even decisive of the controversy". (Pure Foods Corp. v. National Labor Relations Commission, G. R. No. 78591, March 21, 1989).

The extraordinary writ of certiorari is always available where there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law. (Tropical Homes, Inc. v. National Housing Authority, 152 SCRA 540 [1987]; Pure Foods Corp. v. NLRC, supra)

Since the petitioner was denied the remedy of appeal, the Court deems that a certiorari petition was in order.

WHEREFORE, considering the foregoing, the petition is hereby GRANTED. The decision of the respondent Court of Appeals affirming the dismissal order by the Regional Trial Court is hereby REVERSED and SET ASIDE. Let the case be remanded to the lower court for trial on the merits.

SO ORDERED.


Manila

SECOND DIVISION

G.R. No. 85419 March 9, 1993DEVELOPMENT BANK OF RIZAL vs. SIMA WEI

On July 6, 1986, the Development Bank of Rizal (petitioner Bank for brevity) filed a complaint for a sum of money against respondents Sima Wei and/or Lee Kian Huat, Mary Cheng Uy, Samson Tung, Asian Industrial Plastic Corporation (Plastic Corporation for short) and the Producers Bank of the Philippines, on two causes of action:

(1) To enforce payment of the balance of P1,032,450.02 on a promissory note executed by respondent Sima Wei on June 9, 1983; and

(2) To enforce payment of two checks executed by Sima Wei, payable to petitioner, and drawn against the China Banking Corporation, to pay the balance due on the promissory note.

Except for Lee Kian Huat, defendants filed their separate Motions to Dismiss alleging a common ground that the complaint states no cause of action. The trial court granted the defendants' Motions to Dismiss. The Court of Appeals affirmed this decision, * to which the petitioner Bank, represented by its Legal Liquidator, filed this Petition for Review by Certiorari, assigning the following as the alleged errors of the Court of Appeals: 1

(1) THE COURT OF APPEALS ERRED IN HOLDING THAT THE PLAINTIFF-PETITIONER HAS NO CAUSE OF ACTION AGAINST DEFENDANTS-RESPONDENTS HEREIN.

(2) THE COURT OF APPEALS ERRED IN HOLDING THAT SECTION 13, RULE 3 OF THE REVISED RULES OF COURT ON ALTERNATIVE DEFENDANTS IS NOT APPLICABLE TO HEREIN DEFENDANTS-RESPONDENTS.

The antecedent facts of this case are as follows:

In consideration for a loan extended by petitioner Bank to respondent Sima Wei, the latter executed and delivered to the former a promissory note, engaging to pay the petitioner Bank or order the amount of P1,820,000.00 on or before June 24, 1983 with interest at 32% per annum. Sima Wei made partial payments on the note, leaving a balance of P1,032,450.02. On November 18, 1983, Sima Wei issued two crossed checks payable to petitioner Bank drawn against China Banking Corporation, bearing respectively the serial numbers 384934, for the amount of P550,000.00 and 384935, for the amount of P500,000.00. The said checks were allegedly issued in full settlement of the drawer's account evidenced by the promissory note. These two checks were not delivered to the petitioner-payee or to any of its authorized representatives. For reasons not shown, these checks came into the possession of respondent Lee Kian Huat, who deposited the checks without the petitioner-payee's indorsement (forged or otherwise) to the account of respondent Plastic Corporation, at the Balintawak branch, Caloocan City, of the Producers Bank. Cheng Uy, Branch Manager of the Balintawak branch of Producers Bank, relying on the assurance of respondent Samson Tung, President of Plastic Corporation, that the transaction was legal and regular, instructed the cashier of

Producers Bank to accept the checks for deposit and to credit them to the account of said Plastic Corporation, inspite of the fact that the checks were crossed and payable to petitioner Bank and bore no indorsement of the latter. Hence, petitioner filed the complaint as aforestated.

The main issue before Us is whether petitioner Bank has a cause of action against any or all of the defendants, in the alternative or otherwise.

A cause of action is defined as an act or omission of one party in violation of the legal right or rights of another. The essential elements are: (1) legal right of the plaintiff; (2) correlative obligation of the defendant; and (3) an act or omission of the defendant in violation of said legal right. 2

The normal parties to a check are the drawer, the payee and the drawee bank. Courts have long recognized the business custom of using printed checks where blanks are provided for the date of issuance, the name of the payee, the amount payable and the drawer's signature. All the drawer has to do when he wishes to issue a check is to properly fill up the blanks and sign it. However, the mere fact that he has done these does not give rise to any liability on his part, until and unless the check is delivered to the payee or his representative. A negotiable instrument, of which a check is, is not only a written evidence of a contract right but is also a species of property. Just as a deed to a piece of land must be delivered in order to convey title to the grantee, so must a negotiable instrument be delivered to the payee in order to evidence its existence as a binding contract. Section 16 of the Negotiable Instruments Law, which governs checks, provides in part:

Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. . . .

Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him. 3 Delivery of an instrument means transfer of possession, actual or constructive, from one person to another. 4 Without the initial delivery of the instrument from the drawer to the payee, there can be no liability on the instrument. Moreover, such delivery must be intended to give effect to the instrument.

The allegations of the petitioner in the original complaint show that the two (2) China Bank checks, numbered 384934 and 384935, were not delivered to the payee, the petitioner herein. Without the delivery of said checks to petitioner-payee, the former did not acquire any right or interest therein and cannot therefore assert any cause of action, founded on said checks, whether against the drawer Sima Wei or against the Producers Bank or any of the other respondents.

In the original complaint, petitioner Bank, as plaintiff, sued respondent Sima Wei on the promissory note, and the alternative defendants, including Sima Wei, on the two checks. On appeal from the orders of dismissal of the Regional Trial Court, petitioner Bank alleged that its cause of action was not based on collecting the sum of money evidenced by the negotiable instruments stated but on quasi-delict — a claim for

damages on the ground of fraudulent acts and evident bad faith of the alternative respondents. This was clearly an attempt by the petitioner Bank to change not only the theory of its case but the basis of his cause of action. It is well-settled that a party cannot change his theory on appeal, as this would in effect deprive the other party of his day in court. 5

Notwithstanding the above, it does not necessarily follow that the drawer Sima Wei is freed from liability to petitioner Bank under the loan evidenced by the promissory note agreed to by her. Her allegation that she has paid the balance of her loan with the two checks payable to petitioner Bank has no merit for, as We have earlier explained, these checks were never delivered to petitioner Bank. And even granting, without admitting, that there was delivery to petitioner Bank, the delivery of checks in payment of an obligation does not constitute payment unless they are cashed or their value is impaired through the fault of the creditor. 6 None of these exceptions were alleged by respondent Sima Wei.

Therefore, unless respondent Sima Wei proves that she has been relieved from liability on the promissory note by some other cause, petitioner Bank has a right of action against her for the balance due thereon.

However, insofar as the other respondents are concerned, petitioner Bank has no privity with them. Since petitioner Bank never received the checks on which it based its action against said respondents, it never owned them (the checks) nor did it acquire any interest therein. Thus, anything which the respondents may have done with respect to said checks could not have prejudiced petitioner Bank. It had no right or interest in the checks which could have been violated by said respondents. Petitioner Bank has therefore no cause of action against said respondents, in the alternative or otherwise. If at all, it is Sima Wei, the drawer, who would have a cause of action against herco-respondents, if the allegations in the complaint are found to be true.

With respect to the second assignment of error raised by petitioner Bank regarding the applicability of Section 13, Rule 3 of the Rules of Court, We find it unnecessary to discuss the same in view of Our finding that the petitioner Bank did not acquire any right or interest in the checks due to lack of delivery. It therefore has no cause of action against the respondents, in the alternative or otherwise.

In the light of the foregoing, the judgment of the Court of Appeals dismissing the petitioner's complaint is AFFIRMED insofar as the second cause of action is concerned. On the first cause of action, the case is REMANDED to the trial court for a trial on the merits, consistent with this decision, in order to determine whether respondent Sima Wei is liable to the Development Bank of Rizal for any amount under the promissory note allegedly signed by her.

SO ORDERED.


Manila

THIRD DIVISION

G.R. No. 94093 August 10, 1993

FAR EAST MARBLE (PHILS.), INC., LUIS R. TABUENA, JR. and RAMON A. TABUENA, petitioners, vs.HONORABLE COURT OF APPEALS and BANK OF PHILIPPINE ISLANDS, respondents.

Minerva C. genevea for petitioners.

Sabino B. Padilla IV for Bank of the Philippines Islands.

MELO, J.:

This has reference to a petition for review by certiorari seeking the reversal of the decision of the Court of Appeals dated June 26, 1990, in CA-G.R. CV No. 14404 (Bellosillo (P), Marigomen, Sempio-Diy, JJ.) which set aside the order of the Regional Trial Court of the National Capital Judicial Region (Manila, Branch XIV), dated June 1, 1987 and remanded the case to the court a quo for further proceedings on the grounds that the complaint for foreclosure of chattel mortgage with replevin had not prescribed and that, there being a cause of action, further proceedings, including the resolution of the motion for summary judgment may be pursued.

The antecedent facts of the case may be chronicled as follows:

On February 5, 1987, herein respondent Bank of the Philippines Islands (BPI) filed a complaint for foreclosure of chattel mortgage with replevin against petitioner Far East Marble (Phils.), Inc. (Far East), Ramon A. Tabuena and Luis R. Tabuena, Jr. which was docketed as Civil Case No. 87-39345 of Branch XIV of the Regional Trial Court of the National Capital Judicial Region stationed in Manila.

The complaint pertinently alleged:

FIRST CAUSE OF ACTION AGAINST FAR EAST

2. That on various dates and for valuable consideration, the defendant Far East received from Commercial Bank and Trust Company . . . now merged with and into the plaintiff

bank . . . several loans evidenced by promissory notes executed by said Far East, photo copies of which are attached hereto and made integral parts hereof as Annexes A, B and C.

3. That said promissory notes . . . .have long matured but despite repeated requests and demands for payment thereof with interests and related charges due, Far East has failed and refused to pay. The account due on said promissory notes with interests and related charges as of 10 September 1986 is P4,471,854.32 itemized in a statement of account, copy of which is attached hereto and made a part hereof as Annex D

4. That because of Far East's failure and refusal in bad faith to pay its long past due obligations under the promissory notes above alleged, plaintiff was constrained to file this suit . . .

SECOND CAUSE OF ACTION AGAINST FAR EAST

6. That on various dates and for valuable consideration, the defendant Far East received from and was extended by . . . plaintiff Bank . . . credit facilities in the form of Trust Receipts, photo copies of which are hereto attached and made integral parts hereof as Annexes E, F, G, H, I and J.

7. That said Trust Receipts . . . have long matured and despite repeated requests and demands for payment thereof with interests and related charges due Far East has failed and refused to pay. The amount due on said Trust Receipts with interests and related charges as of 10 September 1986 is P2,170,476.62 as itemized in a statement of account, copy of which is attached hereto and made an integral part hereof as Annex K.

8. That because of far East's failure and refusal to pay its long past due obligations under the Trust Receipts above alleged, plaintiff was constrained to file this suit . . .

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10. That in September 1976 Far East executed in favor of . . . plaintiff Bank . . . a Chattel Mortgage, photocopy of which is attached hereto and made an integral part hereof as Annex L, to secure the payment of its loan obligations including interests and related charges. . .

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CAUSE OF ACTION AGAINST INDIVIDUAL DEFENDANTS RAMON A. TABUENA AND LUIS R. TABUENA, JR.

13. That in September 1976, defendants Ramon A. Tabuena and Luis R. Tabuena, Jr. executed in favor of . . . plaintiff Bank . . . a "continuing guaranty" photocopy of which is attached hereto and made a part hereof as Annex M, whereby they bind themselves, jointly and severally, to answer for the loan obligations to the Bank of defendant Far East.

14. That despite requests and demands for their payment of Far East's long past due accounts, said defendants Ramon A. Tabuena and Luis R. Tabuena, Jr. have failed and refused to pay said Far East accounts and have already defaulted in their solidary obligation under said "continuing Guaranty."

15. That because of the failure and refusal of defendants Ramon A. Tabuena and Luis R. Tabuena, Jr. in bad faith to pay Far East's past due accounts under their solidary obligation stipulated in said "Continuing Guaranty,". . . plaintiff has been constrained to file suit against them . . .(pp. 32-36, Rollo.)

On March 10, 1987, Far East filed an answer with compulsory counterclaim admitting the genuineness and due execution of the promissory notes attached as Annexes A, B, and C to the complaint, but alleging further that said notes became due and demandable on November 19, 1976, respectively. On the basis of the maturity dates of the notes, Far East thereupon raised the affirmative defenses of prescription and lack of cause of action as it denied the allegation of the complaint that BPI had made previous repeated requests and demands for payment. Far East claimed that during the more than 10 years which elapsed from the dates of maturity of said obligations up to the time the action for foreclosure of the chattel mortgage securing said obligations was filed, it had not received from BPI or its predecessor any demand for payment and thus, it had "labored under the belief that they [the obligations] have already been written off" in the books of BPI. Moreover, Far East denied the genuineness and due execution of the trust receipts and of the Statement of Account (pp. 78-79, Rollo). A motion to hear affirmative defenses was attached to the answer.

On March 16, 1987, BPI filed an opposition to the motion to hear affirmative defenses, alleging that its cause of action against Far East have not prescribed, since within 10 years from the time its cause of action accrued, various written extrajudicial demands (attached thereto as Annexes "A" and "A-1") were sent by BPI and received by Far East. Moreover, BPI offered several written documents whereby Far East supposedly acknowledged its debt to BPI (Annexes "B" to "B-6). Withal, BPI maintained, the ten-years prescriptive period to enforce its written contract had not only been interrupted, but was renewed.

On the same date, BPI filed a motion for summary judgment on the ground that since Far East had admitted the genuineness and due execution of the promissory notes and the deed of chattel mortgage annexed to its complaint, there was no genuine issue as to any material fact, thus entitling BPI to a favorable judgment as a matter of law in regard to its causes of action and on its right to foreclose the chattel mortgage.

On June 1, 1987, the trial court issued an order to the following effect:

WHEREFORE, the Court issues this Order:

1 — Dismissing the complaint against the defendant Far East Marble (Phils.) Inc. for lack of cause of action and on grounds of pre[s]cription:

2 — Denying for lack of merit the Motion for Summary Judgment and the Supplemental Motion for Summary Judgment;

3 — Striking off from the records the order of March 6, 1987 and recalling the writ of replevin issued by this Court, and dismissing all the contempt charges;

4 — Ordering the Sheriff to desist permanently from enforcing the writ of seizure and to return all the property seized by him under the Writ of Replevin, to the defendant Far East Marble (Phils.) Inc. immediately from receipt of a copy of this order, and in case of his failure to do so, the value thereof shall be charged against the replevin bond. (pp. 89-90, Rollo.)

An appeal therefrom was forthwith interposed by BPI, assailing the findings of the trial court with respect to its finding that BPI's cause of action has prescribed and the consequent denial of the motion for summary judgment.

On June 26, 1990, the Court of Appeals rendered a decision setting aside the June 1, 1987 order of the court of origin and remanding the case to said court for further proceedings, "including the resolution anew of plaintiff's motion for summary judgment . . ., reception of the evidence of the parties and, thereafter, to decide the case as the facts may warrant." (pp. 98-99, Rollo.)

Hence, the instant petition for review on certiorari filed by Far East, anchored on the following assigned errors:

I

THE COURT OF APPEALS ERRED WHEN IT DISREGARDED THE FINDINGS OF THE TRIAL COURT THAT PRESCRIPTION HAS SET IN OBLIVIOUS OF THE FACT THAT THIS FINDING WAS REACHED AFTER DUE HEARING.

II

THE COURT OF APPEALS GRAVELY ERRED IN RULING FOR A REOPENING OF THE TRIAL FOR THE RECEPTION OF EVIDENCE ON BOTH ISSUES OF PRESCRIPTION AND SUMMARY JUDGMENT WHEN THESE WERE ALREADY TRIED AND WEIGHED BY THE TRIAL COURT.

III

THE COURT OF APPEALS ERRED IN ASSUMING JURISDICTION OVER THE CASE CONSIDERING THAT THE ISSUES RAISED THEREIN INVOLVE PURE QUESTIONS OF LAW. (p. 14, Rollo.)

The issue of jurisdiction being basis, we shall endeavor to dispose of it ahead of the other topics raised by petitioners

Petitioner Far East maintains the position that the Court of Appeals stepped beyond the limits of its authority when it assumed jurisdiction over the appeal filed by BPI inasmuch as said appeal raised only the pure questions of law or whether or not the trial court erred: (1) in dismissing BPI's complaint for lack of cause of action; (2) in finding that BPI's cause of action had prescribed; and (3) in ruling that BPI is not entitled to summary judgment on its causes of action against Far East. Consequently, Far East contends, BPI should have taken its case directly to this Court.

There is no dispute with respect to the fact that when an appeal raises only pure questions of law, it is only this Court which has jurisdiction to entertain the same (Article VIII, Section 5 (2) (e), 1987 Constitution; Rule 45, Rules of Court; see also Santos, Jr. vs. Court of Appeals, 152 SCRA 378 [1987]). On the other hand, appeals involving both questions of law and fact fall within the exclusive appellate jurisdiction of the Court of Appeals. At this point, there seems to be a need to distinguish a question of law from a question of fact.

It has been held in a number of cases (Medina vs. Asistio, Jr., 191 SCRA 218 [1990]; Gan vs. Licup Design Group, Inc., G.R. NO. 94264, July 24, 1990, En Banc, Minute Resolution; Pilar Development Corp. vs. Intermediate Appellate Court, et al., 146 SCRA 215 [1986]; Ramos vs. Pepsi-Cola Bottling Co., 19 SCRA 289 [1967]; Consolidated Mines, Inc. vs. Court of Tax Appeals, et al., 58 SCRA 618 [1974]), that there is a "question of law" when there is doubt or difference of opinion as to what the law is on certain state of facts and which does not call for an examination of the probative value of the evidence presented by the parties-litigants. On the other hand, there is a "question of fact" when the doubt or controversy arises as to the truth or falsity of the alleged facts. Simply put, when there is no dispute as to fact, the question of whether or not the conclusion drawn therefrom is correct is a question of law.

In the case at bar, BPI alleged in its complaint (Rollo, p. 42) that on various dates and for valuable consideration, it extended to Far East several loans, evidenced by promissory notes, and credit facilities in the form of trust receipts, and that despite repeated requests and demands for payment thereof, Far East had failed and refused to pay. Thus BPI sought foreclosure of the chattel mortgage securing such indebtedness.

In its answer (Rollo, p. 78), Far East admitted the genuineness and due execution of the promissory notes involved in the case, but denied BPI's allegation that repeated demands for payment were made by BPI on it. Far East then raised the affirmative defenses of prescription and lack of cause of action, arguing that since the promissory notes matured in 1976 while BPI filed its action to foreclose the chattel mortgage only in 1987 (or more than 10 years from the time its cause of action accrued), and there being no demand for payment which would interrupt the period of prescription for instituting said action, BPI's claims have prescribed.

BPI, however, countered that its allegation of repeated demands on Far East for payment sufficiently stated a cause of action; that within ten years from the time its cause of action accrued in 1976, it sent written extrajudicial demands on Far East requesting payment of its due and outstanding obligations; that within that 10-years period, it received written acknowledgments of debt from Far East; and, that these demands for payment and acknowledgments of debt effectively interrupted and renewed the prescriptive period. Worth noting is the fact that the acknowledgment of debt and the demands for payment, including the affidavits of BPI's counsel who prepared the demand letter and that of BPI's messenger who allegedly personally delivered said letters to Far East were duly annexed to BPI's pleadings.

From the foregoing exchange of pleading, the conflicting allegations of fact by the contending parties sprung forth. It is thus quite obvious that the controversy centered on, and the doubt arose with respect to, the very existence of previous demands for payment allegedly made by BPI on petitioner Far East, receipt of which was denied by the latter. This dispute or controversy inevitably raised a question of fact. Such being the case, the appeal taken by BPI to the Court of Appeals was proper.

We now come to petitioner's first two assigned errors.

The trial court's finding that BPI's claims due to prescription, can no longer prosper, is inextricably connected with, and underpinned by, its other conclusion that BPI's allegation that it made "repeated requests and demands for payment" is not sufficient to state a cause of action. Moreover, in its questioned Order (Rollo, p. 88) dated June 1, 1987, the trial court held that:

Apart from the fact that the complaint failed to allege that the period of prescription was interrupted, the phrase "repeated requests and demands for payment" is vague and incomplete as to establish in the minds of the defendant, or to enable the Court to draw a conclusion, that demands or acknowledgment [of debt] were made that could have interrupted the period of prescription. (p. 88, Rollo.).

Seemingly, therefore, the trial court believed that the interruption of the prescriptive period to institute an action is an ULTIMATE FACT which had to be expressly and indispensably pleaded by BPI in its complaint, and that failure to so alleged such circumstance is fatal to BPI's cause of action.

We believe and hold otherwise.

Section 3 of Rule 6 state that a "complaint is a concise statement of the ultimate facts constituting the plaintiff's cause or causes of action." Further elaborating thereon, Section 1 of Rule 8 declares that every pleading, including, of course, a complaint, "shall contain in a methodical and logical form, a plain, concise and direct statement of the ultimate facts . . . omitting the statement of mere evidentiary facts." "Ultimate facts" are the essential and substantial facts which either form the basis of the primary right and duty or which directly make up the wrongful acts or omissions of the defendant (Tantuico, Jr. vs. Republic of the Phil., et al., 204 SCRA 428 [1991]), while "evidentiary facts" are those which tend to prove or establish said ultimate facts.

What then are the ultimate facts which BPI had to allege in its complaint so as to sufficiently establish its cause of action?

Basically, a cause of action consists of three elements, namely: (1) the legal right of the plaintiff; (2) the correlative obligation of the defendant; and (3) the act or omission of the defendant in violation of said legal right (Nabus vs. Court of Appeals, et al., 193 SCRA 732 [1991]); Rebollido vs. Court of Appeals et al., 170 SCRA 800 [1989]). These elements are manifest in BPI's complaint, particularly when it was therein alleged that: (1) for valuable consideration, BPI granted several loans, evidenced by promissory

notes, and extended credit facilities in the form of trust receipts to Far East (photocopies of said notes and receipts were duly attached to the Complaint); (2) said promissory notes and trust receipts had matured; and (3) despite repeated requests and demands for payment thereof, Far East had failed and refused to pay.

Clearly then, the general allegation of BPI that "despite repeated requests and demands for payment, Far East has failed to pay" is sufficient to establish BPI's cause of action. Besides, prescription is not a cause of action; it is a defense which, having been raised, should, as correctly ruled by the Court of Appeals (DBP vs. Ozarraga, 15 SCRA 48 [1965]), be supported by competent evidence. But even as Far East raised the defense of prescription, BPI countered to the effect that the prescriptive period was interrupted and renewed by written extrajudicial demands for payment and acknowledgment by Far East of the debt.

A complaint is sufficient if it contains sufficient notice of the cause of action even though the allegation may be vague or indefinite, for in such case, the recourse of the defendant would be to file a motion for a bill of particulars (Ramos vs. Condez, 20 SCRA 1146 [1967]). It is indeed the better rule that, pleadings, as well as remedial laws, should be liberally construed so that the litigants may have ample opportunity to prove their respective claims so as to avoid possible denial of substantial justice due to legal technicalities (Adamo, et al. vs. Intermediate Appellate Court, et al., 191 SCRA 195 [1990]).

In the case at bar, the circumstances of BPI extending loans and credits to Far East and the failure of the latter to pay and discharge the same upon maturity are the only ultimate facts which have to be pleaded, although the facts necessary to make the mortgage valid enforceable must be proven during the trial (Ortiz v. Garcia, 15 Phil. 192 [1910]).

In fine, the finding of the trial court that prescription has set in is primarily premised on a misappreciation of the sufficiency of BPI's allegation as above discussed. The records will show that the hearing conducted by the trial court was merely pro forma and the trial judge did not sufficiently address the issue of whether or not a demand for payment in fact made by BPI and duly received by herein petitioner Far East.

WHEREFORE, the instant petition is hereby DENIED and the decision of the Court of Appeals hereby AFFIRMED. No special pronouncement is made as to costs.

SO ORDERED.


Manila

THIRD DIVISION

G.R. No. 74938-39 January 17, 1990

ANGELINA J. MALABANAN, petitioner, vs.GAW CHING and THE INTERMEDIATE APPELLATE COURT, respondents.

G.R. No. L-75524-25 January 17, 1990

LEONIDA CHY SENOLOS, LEONARD CHAN and LEONSO CHY CHAN, petitioners,

vs.INTERMEDIATE APPELLATE COURT and GAW CHING, respondents.

Puruganan, Chato, Chato, Chato & Tan and Romero, Lagman, Torres, Arrieta & Evangelista for petitioners in 75524-25.

Quiason, Makalintal, Barot & Torres for petitioners in 74938-39.

Limqueco & Macaraeg Law Office and Herminio T. Sugay for respondent Gaw Ching.

R E S O L U T I O N

FELICIANO, J.:

The two (2) Petitions before us — G.R. Nos. 74938-39 and 75524-25 — assail the decision of the then Intermediate Appellate Court in A.C.-G.R. CV Nos. 05136-05137 dated 31 January 1986, which reversed the decision of the Regional Trial Court in two (2) consolidated cases, namely: Civil Case No. R-81-416 and Civil Case No. R-82-6789. Upon motion of petitioners, we ordered the consolidation of the two (2) Petitions.

Respondent Gaw Ching instituted two (2) cases against petitioners Angelina Malabanan, Leonida Senolos, et al. in connection with the sale of piece of land located in Binondo, Manila. The first case, Civil Case No. R-81-416, sought to annul such sale and to enjoin the demolition of a building standing on that piece of land, and also prayed for the award of damages. The second case, Civil Case No. G.R. 82-6798, demanded damages from petitioner Senolos for bringing about the demolition of the building.

The following facts found by the trial court, and adopted and incorporated by the appellate court, are undisputed:

Evidence for plaintiff showed that Gaw Ching has been leasing the house and lot located [in] 697-699 Asuncion Street, Binondo, Manila from Mr. Jabit since 1951.

Plaintiff conducted his business (Victoria Blacksmith Shop) on the ground floor and lived on the second floor. When Mr. Jabit died, his daughter, defendant Malabanan continued to lease the premises to plaintiff but at an increased rental of P1,000.00 per month. Before the increase, Gaw Ching paid P700.00 per month, as evidenced by receipts of rentals. There was no written contract of lease between plaintiff and Mr. Jabit as to its duration but the rentals were evidently, paid monthly. On April 27, 1980, Angelina Malabanan told him that she was selling the house and lot for P5,000.00 per square meter. Plaintiff told her however, that the price is prohibitive. On May 13, 1980, defendant Malabanan wrote plaintiff, reiterating that she was selling the house and lot at P5,000.00 per square meter and that if he is not agreeable, she will sell it to another person. After receiving the letter, plaintiff turned over the letter to his counsel, Atty. Sugay. Gaw Ching claims that he is not in a position to buy the property at P5,000.00 per square meter because it was expensive. Subsequently, Gaw Ching tried to pay the rent for June, 1980, but Malabanan refused to accept it. Plaintiff's counsel advised him to deposit the rentals in a bank which he did, after which, his counsel wrote Malabanan informing her about the deposit (Exh. B). On October 2, 1980, plaintiff received another letter from defendant Malabanan which he gave to his counsel who told him that said defendant is offering the house and lot at P5,000.00 per square meter and that if he is not agreeable, she will sell the premises to another person at P4,000.00 per square meter. Plaintiff testified that he was willing to buy the subject property at P4,000.00 but hastened to add that it was still expensive and did not ask his counsel to write Malabanan about it. So, also, it was the opinion of his counsel that it was not necessary to reply because the context of the letter was invariably a threat. On November 3, 1980, plaintiff received another letter from Defendant Malabanan, informing him that the premises in question had already been sold to defendant Leonida Senolos. This time, Atty. Sugay sent a reply dated November 24, 1980, requesting that the pertinent documents of the sale be sent to them but according to plaintiff, they were not furnished a copy of said sale. Consequently, plaintiff received a letter from Atty. Techico dated December 5, 1980 demanding that he vacate the premises and to pay the arrearages in rentals from October to December, as they were more importantly, going to repair and convert the dwelling into a warehouse. Atty. Sugay sent a reply dated February 17, 1981 (Exh. C) requesting Atty. Techico to furnish them with the Deed of Sale and TCT because he doubted the veracity of the sale. It took a long time before Atty. Sugay's letter was answered and he was never furnished a copy of the Deed of Sale and Transfer Certificate of Title. After exerting all efforts, plaintiff finally was able to procure a copy of the Deed of Sale and TCT No. 14789 (Exh- A) which reflected that the date of entry of the Deed of Sale was December 9, 1980, whereas the Deed of Sale was dated August 23, 1979 (Exh. I). Plaintiff then told Atty. Sugay to file a civil case against defendants. On October 7, 1981, Atty. Techico sent a reply to Atty. Sugay's letter of February 17, 1981 (Exh K). Plaintiff presented the receipt of rentals he paid (Exhs. L to L-6). He deposited the monthly rentals which Malabanan refused to accept, with the Pacific Banking Corporation (Exh. M). At a later period, plaintiff had to move out of the premises when it was demolished by the defendant. Gaw Ching however, admitted that he was not yet a Filipino Citizen at the time the offer to sell was made, i.e., on April 27, 1980, May 13, 1980 and October 2, 1980 and that he became a Filipino citizen only on October 7, 1980, when he was issued a certificate of naturalization (Exh. 1-Malabanan). He did not, however, inform Malabanan on the matter of his newly acquired citizenship. Likewise, Gaw Ching admitted that he did not make any counter-offer in writing so as to price the property.

As to plaintiffs claim for damages, he testified, that this was motivated by the incident on November 16, 1981, while he was on the ground floor, when there was a sudden brownout, and around 50 people came thereat, climbed the roof with the

use of a ladder, cut the electric wires and started banging the roof. Plaintiff, his wife, and mother-in-law were in the house and about 7 laborers were in the shop when the incident happened. Plaintiff then immediately called up Atty. Sugay and told him that Leonida Senolos called some people to demolish the house. Plaintiff further testified that ... he was not notified of the demolition. . . . On that same day, Atty. Sugay arrived at about 10:00 a.m. and told plaintiff that he was going to the City Hall. When Atty. Sugay came back, he was with Roldan (Building Inspector), who ordered that the demolition be stopped, but Leonida Senolos refused to heed the order. Atty. Sugay and Roldan went back to the City Hall. . . . At about 3:00 p.m., Atty. Sugay came back with another person from the City Hall who presented a letter to Leonida Senolos to which defendant affixed her signature. The formal letter was dated November 6, 1981 addressed to Leonida Senolos by Romulo del Rosario, City Engineer and Building Officer. Upon receipt of the letter, the policeman remained but the demolition continued. Plaintiff together with Atty. Sugay, and the City Hall official, went to the police precinct where the City Hall Official talked with somebody in the precinct. It was only when they returned to the premises at about 4:00 p.m. with a policeman that the demolition was stopped. . . .

On cross examination, plaintiff admitted that he received a letter from the Office of the City Engineer dated July 29, 1981 (Exh. 1-Senolos) condemning the building. He also admitted that he was furnished a copy of the Demolition Order (Exh. 2-Senolos) to which he affixed his signature.

After receiving Exhibits "I" and "2," Gaw Ching still refused to vacate the premises because he was told that the building was still in good condition and he continued paying the monthly rental.

On redirect, plaintiff declared that after receiving the notice of the City Engineer, he filed a complaint with the Ministry of Public Works and Highways by reason of which, the MPWH issued an order that the demolition to be stopped. (Exh. 3).

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Another witness presented by plaintiff was Felix Tienzo, Actg. Chief of Enforcement Division, (Ministry of Public Works and Highways). . .

Mr. Felix Tienzo believes that the City of Manila was correct in ordering the demolition of the building but he intended to hold in abeyance the demolition of the building only in obedience to the order of the MPWH. However, both Mr. Tienzo and Mr. Roldan claim that they do not usually receive an order from the MPWH stopping the demolitions.

xxx xxx xxx 1

On 10 August 1984, the trial court rendered a decision which upheld the validity of the contract of sale between petitioner Malabanan and petitioner Senolos. The trial court declared that petitioner Malabanan had not violated Sections 4 and 6 of Presidential Decree No. 1517 in relation to Presidential Proclamation No. 1893 and Letter of Instruction (LOI) No. 935 which provide for a preemptive right on the part of a lessee over leased property. The trial court stressed that respondent Gaw Ching had been given ample opportunity to exercise any right of first refusal he might have had, but he had chosen not to do so.

Respondent Gaw Ching went on appeal to the then Intermediate Appellate Court. By a vote of three (3) to two (2), the appellate court voted to reverse the decision of the trial court and hence to nullify the contract of sale between petitioners Malabanan and Senolos inter se. 2 The majority also held that the transaction between petitioners was vitiated by fraud, deceit and bad faith allegedly causing damage to respondent Gaw Ching. Petitioners were held liable jointly and severally to respondent for moral, exemplary and actual damages in the amount of P350,000.00 and for attorney's fees in the amount of P20,000.00 —

for the indulgence in inequitous conduct to plaintiff-appellant's (respondent Gaw Ching) prejudice and for the unwarranted demolition of the building by defendants-appellees (petitioners herein) after the issuance of the cease-and-desist order on October 30, 1981.

While holding that the land in question was located outside the Urban Land Reform Zone declared by Proclamations Nos. 1767 and 1967, the majority ruled that circumstances surrounding the sale of the land to petitioner Senolos had rendered that sale null and void. The majority were here referring to the finding that when petitioner Malabanan offered in October 1980 to sell the land involved to respondent Gaw Ching at P5,000.00 per square meter, that land had already been sold to petitioner Senolos as early as August 1979 for only P1,176.48 per square meter. On the matter of the demolition of the building, the majority held that the same was unwarranted and that even if petitioner Senolos had a demolition order,

that order of demolition was valid only if there are no more tenants residing in the building. If there are tenants and they refused to vacate, the order of demolition is unavailing. It could not rise higher than the Civil Code and the Rules of Court. 3

In the instant Petitions for Certiorari, petitioners assail both the annulment of the deed of sale and the grant of P350,000.00 worth of "moral, exemplary and actual damages" to respondent Gaw Ching.

We believe that the Petitions must be granted.

I

The firmly settled rule is that strangers to a contract cannot sue either or both of the contracting parties to annul and set aside that contract. Article 1397 of the Civil Code embodies that rule in the following formulation:

Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract. (Emphasis supplied)

Article 1397 itself follows from Article 1311 of the Civil Code which establishes the fundamental rule that:

Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.

xxx xxx xxx

(Emphasis supplied)

As long ago as 1912, this Court in Ibanez v. Hongkong and Shanghai Bank, 4 pointed out that it is the existence of an interest in a particular contract that is the basis of one's right to sue for nullification of that contract and that essential interest in a given contract is, in general, possessed only by one who is a party to the contract. In Ibanez, Mr. Justice Torres wrote:

From these legal provisions it is deduced that it is the interest had in a given contract, that is the determining reason of the right which lies in favor of the party obligated principally or subsidiarily to enable him to bring an action for the nullity of the contract in which he intervened, and, therefore, he who has no right in a contract is not entitled to prosecute an action for nullity, for, according to the precedents established by the courts, the person who is not a party to a contract nor has any cause of action or representation from those who intervened therein, is manifestly without right of action and personality such as to enable him to assail the validity of the contract. (Decisions of the Supreme Court of Spain, of April 18, 1901, and November 23, 1903, pronounced in cases requiring an application of the preinserted article 1302 of the Civil Code. 5

Mr. Justice Torres went on to indicate a possible qualification to the above general principle, that is, a situation where a non-party to a contract could be allowed to bring an action for declaring that contract null:

He who is not the party obligated principally or subsidiarily in a contract may perhaps be entitled to exercise an action for nullity, if he is prejudiced in his rights with respect to one of the contracting parties; but, in order that such be the case, it is indispensable to show the detriment which positively would result to him from the contract in which he had no intervention

xxx xxx xxx

(Emphasis supplied)

There is an important and clear, albeit implicit, limitation upon the right of a person who is in fact injured by the very operation of a contract between two (2) third parties to sue to nullify that contract: that contract may be nullified only to the extent that such nullification is absolutely necessary to protect the plaintiff's lawful rights. It may be expected that in most instances, an injunction restraining the carrying out of acts in fact injurious

to the plaintiff's rights would be sufficient and that there should be no need to set aside the contract itself which is a res inter alios acta and which may have any number of other provisions, implementation of which might have no impact at all upon the plaintiff's rights and interests.

What is important for present purposes is that respondent Gaw Ching, admittedly a stranger to the contract of sale of a piece of land between petitioners Malabanan and Senolos inter se, does not fall within the possible exception recognized in Ibanez v. Hongkong & Shanghai Bank. In the first place, Gaw Ching had no legal right of preemption in respect of the house and lot here involved. The majority opinion of the appellate court itself explicitly found that the subject piece of land is located outside the Urban Land Reform Zones declared pursuant to P.D. No. 1517. 7 Even assuming for purposes of argument merely, that the land here involved was in fact embraced in a declared Urban Land Reform Zone (which it was not), Gaw Ching would still not have been entitled to a right of preemption in respect of the land sold. In Santos v. Court of Appeals, 8 this Court held that the preemptive or redemptive rights of a lessee under P.D. No. 1517 exists only in respect of the urban land under lease on which the tenant or lessee had built his home and in which he had resided for ten (10) years or more and that, in consequence, where both land and building belong to the lessor, that preemptive or redemptive right was simply not available under the law.

Finally, we are unable to understand the respondent appellate court's view that respondent Gaw Ching having been a long-time tenant of the property in question, had acquired a preferred right to purchase that property. This holding is simply bereft of any legal basis. We know of no law, outside the Urban Land Reform Zone or P.D. No. 1517, that grants such a right to a lessee no matter how long the period of the lease has been. If such right existed at all, it could only have been created by contract; 9 respondent Gaw Ching does not, however, pretend that there had been such a contractual stipulation between him and petitioners.

In the second place, assuming once again, for present purposes only, that respondent Gaw Ching did have a preemptive right to purchase the land from petitioner Malabanan (which he did not), it must be stressed that petitioner Malabanan did thrice offer the land to Gaw Ching but the latter had consistently refused to buy. Since Gaw Ching did not in fact accept the offer to sell and did not buy the land, he suffered no prejudice, and could not have suffered any prejudice, by the sale of the same piece of land to petitioner Senolos. No fraud was thus worked upon him notwithstanding his insinuation that the sale of the land to petitioner Senolos had preceded the offer of the same piece of land to himself.

In the third place, and contrary to the holding of the majority appellate court opinion, the fact that Gaw Ching had been lessee of the house and lot was simply not enough basis for a right to bring an action to set aside the contract of sale

between the petitioners inter se. A lessee, it is elementary, cannot attack the title of his lessor over the subject matter of the lease. 10 Moreover, the lease contract between petitioner Malabanan and respondent Gaw Ching must in any case be held to have lapsed when the leased house was condemned and the order of demolition issued.

II

We consider next petitioners' claim that the appellate court erred grievously in imposing upon them an award of P350,000.00 for "moral, exemplary and actual damages" not only because petitioners had "indulged in inequitous conduct to [respondent Gaw Ching's] prejudice" but also "for the unwarranted demolition of the building by [petitioners] after the issuance of the cease and desist order on October 30, 1981."

Here again, we are compelled to hold that the appellate court lapsed into reversible error. The relevant conclusions of fact which the trial court arrived at are set out in its decision in the following manner:

On the legality of the demolition necessarily raising the question: (3) whether or not plaintiff was notified within a reasonable period of time of the demolition, and a fortiori whether this admittedly exercise of police power, the validity of which was already being determined by the Court could be stopped by a pretenatural [sic] administrative order from the office of the Assistant Secretary for Operation of the MPWH brought about by an appeal by a person other than the owner of the building, which office had not done anything to immediately forestall the imminent injury to person and damage to property. (Please see P.D. 1096, Rule XII, Sec. 5 thereof).

In the first place, the claim of the plaintiff that the demolition of the house rented by him came as a surprise, is fiercely contradicted by his own evidence. A copy of the demolition order is attached to the complaint as Annex "L", now marked as Exhibit "9" for the defendant Senolos, unmistakably show that plaintiff received a copy of the order of demolition from the City Engineer's Office, approved by the Mayor, on October 5, 1981.

Verily, the present action before the Court is procedurally and substantially correct in abating a nuisance. This exercise of police power is not only being cordoned sanitaired [sic] by the doctrinal pronouncements, the provisions of Art. 482 in relation to Art. 436 of the Civil Code, Sections 275 and 276 of the compilation of ordinances of the City of Manila but also by Rule VII, par. 5 of the implementing Rules and Regulations of the National Building Code of the Philippines (P.D. 1096). Indeed, the latter law does not authorize any person other than the owner, to appeal the order of the City Engineer to the Ministry of Public Works and Highways. This is the position espoused by the City Legal Officer of Manila in defense of the City Engineer and the Mayor, in opposition to the move of the plaintiff to dismiss the order of demolition as improvidently issued.

The demolition was invariably a valid exercise of police power which may be ordered done by the authorities or caused to be done at the expense of the owner. The exigency is made more demanding especially, the demolition, when it was

ordered stopped thru an order inadvertently issued, as it was not as a consequence of an appeal by the owner of the building, but by the lessee, was during its last stages.

It therefore stands to reason that the order of demolition which is unquestionably legal could not be stopped by an inoperative administrative order, assuming that the appeal to the MPWH could validly be filed by the lessee, as it was filed only during the finishing touches of a demolition. Decidedly, the move exude physiological features of delay. This is compounded by the failure of the MPWH to act assertively, which in a sense, could be interpreted as an admission that the issuance of the order was inopportune.

On the claim for damages predicated on (4) whether or not there was an indscriminate careless handling and pilferage of the properties of the plaintiff, causing their loss or destruction:

It is readily explained that between October 5, 1981 to November 6,1981, plaintiff could have avoided the misplaced fear, but assuming without having necessarily to concede that he was not able to guard against an actual demolition on November 6, 1981, rendering him so helpless, and prompting him to just sit on the sidewalk and watch the demolition team wreck the building indiscriminately, thereby causing destruction and loss of his personal properties, such as: (a) office equipment; (b) assorted tools; (c) machines; (d) finished products; and (e) steel box containing jewelries. The claim is almost too good to be true, considering first, that these items were so huge that they could not be spirited away without being noticed and, secondly; it has been established that there was a policeman detailed to the demolition scene from the start of the said demolition, to whom he could have easily reported the matter, caused the apprehension of the culprits, and prevent the loss of his personal properties, thirdly, he could have grabbed the steel box containing jewelries if this were the last thing he would have done. Waiting idly by the sidewalk and watching your properties pilfered by persons whom you could have successfully identified at the time and referring the matter to the policeman on duty, which plaintiff did not do, is certainly against the natural order of things and the legal presumption that a person takes great care of his concern. Plaintiff strongly relies on the alleged illegal and indiscriminate destruction of his properties as basis for his claim for damages. Truth to tell, there was no suddenness or indiscriminate destruction of plaintiffs property nor pilferage thereof, as alleged, in the demolition of the house owned by the defendant. The order was lawful as it was an abatement of a nuisance and the dismantling of the house owned by defendant Senolos could only be conceived as having been carried out in a manner consistent only with utmost care. Conversely, its indiscriminate destruction is contrary to the interest of the defendant Senolos as it is a truism that every bit of useful material should be preserved either for use of, or for profit of the owner. It would be sheer folly to assume that the demolition team would have taken a selective method of care for the still serviceable materials of the house and a destructive stance for the properties of the occupants. Understandably, the unorthodox position taken by plaintiff would not only lose his residence but also his place of business.

By and large, the basis for the claim for damages do not physically nor imaginatively exist, for it has defied reason and common sense. 11

We note that the majority opinion chose to disregard the above conclusions of fact of the trial court and instead quoted extensively from

respondent Gaw Ching's brief and, presumably relied upon such brief The majority opinion, however, failed to indicate why it preferred Gaw Ching's version of the facts set out in his brief over the trial court's findings. No indication was offered where the trial court had fallen into error or what evidence had been misapprehended by it. In this situation, the Court considers that it must go back to the trial court's findings of fact in line with the time-honored rule that such findings are entitled to great respect from appellate courts since the trial court judge had the opportunity to examine the evidence directly and to listen to the witnesses and observe their demeanor while testifying.

It appears therefore that firstly, the order of condemnation or demolition had been issued by the proper authorities which order was valid and subsisting at the time the demolition was actually carried out. Secondly, under Section 5.3 of Rule VII entitled "Abandonment/Demolition of Buildings" of the Rules and Regulations Implementing the National Building Code of the Philippines (P.D. No. 1096, as amended dated 19 February 1977), an order for demolition may be appealed, by the owner of the building or installation to be demolished, to the Secretary of Public Works and Highways. In the case at bar, it was respondent Gaw Ching, a lessee merely of the building condemned that sought to block the implementation of the demolition order. It does not even appear from the record whether or not Gaw Ching actually filed a formal appeal to the Secretary, even though he was not entitled to do so. What does appear from the record 12 is that Gaw Ching's counsel, Atty. Sugay, was able to obtain a letter dated 6 November 1981 from the Office of the City Engineer and Building Official, enclosing a xerox copy of a letter from the Assistant Secretary for Operations, Ministry of Public Works and Highways, "directing this office to hold the demolition in abeyance." This letter, which did not purport to set aside the order of demolition, was served upon the demolition team on site while the demolition was in progress. After some hesitation, the demolition was in fact stopped. 13

It is worth noting that officials from the Office of the City Engineer, City of Manila, testified that it was not "normal practice to receive an order from the Ministry of Public Works and Highways stopping demolitions."

In the fourth place, respondent Gaw Ching, in the action that he had filed before the Regional Trial Court of Manila to set aside the contract of sale between petitioners Malabanan and Senolos, had sought preliminary injunction precisely to restrain the implementation of the order for demolition. That application for preliminary injunction was denied by the trial court and the order for demolition was implemented only after such denial. Thus, there was no subsisting court order restraining the demolition at the time such demolition was carried out.

In the fifth place, Gaw Ching had ample notice of the demolition order and had adequate time to remove his belongings from the premises if he was minded to obey the order for demolition. He chose not to obey that order. If he did suffer any

losses—the trial court did not believe his claims that he did—he had only himself to blame.

ACCORDINGLY, The Court Resolved to GRANT the Petition and to REVERSE and SET ASIDE the Decision of the then Intermediate Appellate Court dated 31 January 1986 and its Resolution dated 5 June 1986, in AC-G.R. CV Nos. 05136-05137. The Decision of the trial court dated 10 August 1984 in consolidated Civil Cases Nos. R-81-416 and R-82-6798, is hereby REINSTATED. No pronouncement as to costs.

Fernan C.J., Gutierrez, Jr. and Cortés, JJ., concur.

Bidin J., took no part.


Manila

EN BANC

G.R. No. L-24772 May 27, 1968

RUPERTO G. CRUZ, ET AL., plaintiffs-appellees, vs.FILIPINAS INVESTMENT and FINANCE CORPORATION, defendant-appellant.

Villareal, Almacen, Navarra and Associates for plaintiffs-appellees.Sycip, Salazar, Luna, Manalo and Feliciano for defendant-appellant.

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

Appeal interposed by Filipinas Investment & Finance Corporation from the decision of the Court of First Instance of Rizal (Quezon City) in Civil Case No. Q-7949.1ªvvphi1.nêt

In the action commenced by Ruperto G. Cruz and Felicidad V. Vda. de Reyes in the Court of First Instance of Rizal (Civil Case No. Q-7949), for cancellation of the real estate mortgage constituted on the land of the latter 1 in favor of defendant Filipinas Investment & Finance Corporation (as assignee of the Far East Motor Corporation), the parties submitted the case for decision on the following stipulation of facts:

1. Their personal circumstances and legal capacities to sue and be sued;

2. That on July 15, 1963, plaintiff Ruperto G. Cruz purchased on installments, from the Far East Motor Corporation, one (1) unit of Isuzu Diesel Bus, described in the complaint, for P44,616.24, Philippine Currency, payable in installments of P1,487.20 per month for thirty (30) months, beginning October 22, 1963, with 12 % interest per annum, until fully

paid. As evidence of said indebtedness, plaintiff Cruz executed and delivered to the Far East Motor Corporation a negotiable promissory note in the sum of P44,616.24, ...;

3. That to secure the payment of the promissory note, Annex "A", Cruz executed in favor of the seller, Far East Motor Corporation, a chattel mortgage over the aforesaid motor vehicle...;

4. That as no down payment was made by Cruz, the seller, Far East Motor Corporation, on the very improvements thereon, in San Miguel, Bulacan...; same date, July 15, 1963, required and Cruz agreed to give, additional security for his obligation besides the chattel mortgage, Annex "B"; that said additional security was given by plaintiff Felicidad Vda. de Reyes in the form of SECOND MORTGAGE on a parcel of land owned by her, together with the building and

5. That said land has an area of 68,902 square meters, more or less, and covered by Transfer Certificate of Title No. 36480 of the Registry of Deeds of Bulacan in the name of plaintiff Mrs. Reyes; and that it was at the time mortgaged to the Development Bank of the Philippines to secure a loan of P2,600.00 obtained by Mrs. Reyes from that bank;

6. That also on July 15, 1963, the Far East Motor Corporation for value received indorsed the promissory note and assigned all its rights and interest in the Deeds of Chattel Mortgage and in the Deed of Real Estate Mortgage (Annexes "A", "B" and "B-l") to the defendant, Filipinas Investment & Finance Corporation, with due notice of such assignment to the plaintiffs...;

7. That plaintiff Cruz defaulted in the payment of the promisory note (Annex "A") ; that the only sum ever paid to the defendant was Five Hundred Pesos (P500.00) on October 2, 1963, which was applied as partial payment of interests on his principal obligation; that, notwithstanding defendant's demands, Cruz made no payment on any of the installments stipulated in the promissory note;

8. That by reason of Cruz's default, defendant took steps to foreclose the chattel mortgage on the bus; that said vehicle had been damaged in an accident while in the possession of plaintiff Cruz;

9. That at the foreclosure sale held on January 31, 1964 by the Sheriff of Manila, the defendant was the highest bidder, defendant's bid being for Fifteen Thousand Pesos (P15,000.00)...;

10. That the proceeds of the sale of the bus were not sufficient to cover the expenses of sale, the principal obligation, interests, and attorney's fees, i.e., they were not sufficient to discharge fully the indebtedness of plaintiff Cruz to the defendant;

11. That on February 12, 1964, preparatory to foreclosing its real estate mortgage on Mrs. Reyes' land, defendant paid the mortgage indebtedness of Mrs. Reyes to the Development Bank of the Philippines, in the sum of P2,148.07, the unpaid balance of said obligation...;

12. That pursuant to a provision in the real estate mortgage contract, authorizing the mortgagee to foreclose the mortgage judicially or extra-judicially, defendant on February 29, 1964 requested the Provincial Sheriff of Bulacan to take possession of, and sell, the land subject of the Real Estate Mortgage, Annex "B-1", to satisfy the sum of P43,318.92, the total outstanding obligation of the plaintiffs to the defendant, as itemized in the Statement of Account, which is made a part hereof as Annex "F"...;

13. That notices of sale were duly posted and served to the Mortgagor, Mrs. Reyes, pursuant to and in compliance with the requirements of Act 3135...;

14. That on March 20, 1964, plaintiff Reyes through counsel, wrote a letter to the defendant asking for the cancellation of the real estate mortgage on her land, but defendant did not comply with such demand as it was of the belief that plaintiff's request was without any legal basis;

15. That at the request of the plaintiffs, the provincial Sheriff of Bulacan held in abeyance the sale of the mortgaged real estate pending the result of this action.

Passing upon the issues which, by agreement of the parties, were limited to — (1) "Whether defendant, which has already extrajudicially foreclosed the chattel mortgage executed by the buyer, plaintiff Cruz, on the bus sold to him on installments, may also extrajudicially foreclose the real estate mortgage constituted by plaintiff Mrs. Reyes on her own land, as additional security, for the payment of the balance of Cruz' Obligation, still remaining unpaid"; and (2) whether or not the contending parties are entitled to attorney's fees — the court below, in its decision of April 21, 1965, sustained the plaintiffs' stand and declared that the extrajudicial foreclosure of the chattel mortgage on the bus barred further action against the additional security put up by plaintiff Reyes. Consequently, the real estate mortgage constituted on the land of said plaintiff was ordered cancelled and defendant was directed to pay the plaintiffs attorney's fees in the sum of P200.00. Defendant filed the present appeal raising the same questions presented in the lower court.

There is no controversy that, involving as it does a sale of personal property on installments, the pertinent legal provision in this case is Article 1484 of the Civil Code of the Philippines, 2 which reads:

ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

The aforequoted provision is clear and simple: should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any one of these three remedies — either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as alternative, not cumulative, 3 that the exercise of one would bar the exercise of the others. 4 It may also be stated that the established rule is to the effect that the foreclosure and actual sale of a mortgaged chattel bars further recovery by the vendor of any balance on the purchaser's outstanding obligation not so satisfied by the sale. 5 And the reason for this doctrine was aptly stated in the case of Bachrach Motor Co. vs. Millan, supra, thus:

Undoubtedly the principal object of the above amendment 6 was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. Under this amendment the vendor of personal property, the purchase price of which is payable in installments, has the right to cancel the sale or foreclose the mortgage if one has been given on the property. Whichever right the vendor elects he need not return to the purchaser the amount of the installments already paid, "if there be in agreement to that effect". Furthermore, if the vendor avails himself of the right to foreclose the mortgage the amendment prohibits him from bringing an action against the purchaser for the unpaid balance.

It is here agreed that plaintiff Cruz failed to pay several installments as provided in the contract; that there was extrajudicial foreclosure of the chattel mortgage on the said motor vehicle; and that defendant-appellant itself bought it at the public auction duly held thereafter, for a sum less than the purchaser's outstanding obligation. Defendant-appellant, however, sought to collect the supported deficiency by going against the real estate mortgage which was admittedly constituted on the land of plaintiff Reyes as additional security to guarantee the performance of Cruz' obligation, claiming that what is being withheld from the vendor, by the proviso of Article 1484 of the Civil Code, is only the right to recover "against the purchaser", and not a recourse to the additional security put up, not by the purchaser himself, but by a third person.

There is no merit in this contention. To sustain appellant's argument is to overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil Code) ; so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned.

Neither is there validity to appellant's allegation that, since the law speaks of "action", the restriction should be confined only to the bringing of judicial suits or proceedings in court.

The word "action" is without a definite or exclusive meaning. It has been invariably defined as —

... the legal demand of one's right, or rights; the lawful demand of one's rights in the form given by law; a demand of a right in a court of justice; the lawful demand of one's right in a court of justice; the legal and formal demand of ones rights from another person or party, made and insisted on in a court of justice; a claim made before a tribunal; an assertion in a court of justice of a right given by law; a demand or legal proceeding in a court of justice to secure one's rights; the prosecution of some demand in a court of justice; the means by which men litigate with each other; the means that the law has provided to put the cause of action into effect;.... (Gutierrez Hermanos vs. De la Riva, 46 Phil. 827, 834-835).

Considering the purpose for which the prohibition contained in Article 1484 was intended, the word "action" used therein may be construed as referring to any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy. Certainly, an extrajudicial foreclosure of a real estate mortgage is one such proceeding.

The provision of law and jurisprudence on the matter being explicit, so that this litigation could have been avoided, the award by the lower court of attorney's fees to the plaintiff's in the sum of P200.00 is reasonable and in order.

However, we find merit in appellant's complaint against the trial court's failure to order the reimbursement by appellee Vda. de Reyes of the amount which the former paid to the Development Bank of the Philippines, for the release of the first mortgage on the land of said appellee. To the extent that she was benefited by such payment, plaintiff-appellee Vda. de Reyes should have been required to reimburse the appellant.

WHEREFORE, the decision appealed from is modified, by ordering plaintiff-appellee Felicidad Vda. de Reyes to reimburse to defendant-appellant Filipinas Investment & Finance Corporation the sum of P2,148.07, with legal interest thereon from the finality of this decision until it is fully paid. In all other respects, the judgment of the court below is affirmed, with costs against the defendant-appellant.


Manila

EN BANC

G.R. No. L-19827 April 6, 1923

GUTIERREZ HERMANOS, plaintiff-appellee, vs.ANTONIO DE LA RIVA, defendant-appellant.

Alfredo Chicote for appellant.Eduardo Gutierrez Repide and Felix Socias for appellee.

ROMUALDEZ, J.:

The point at issue in this case is whether or not the judgment rendered by this court on January 12, 1909,1 in the case R. G. No. 4604 and No. 4244 of the Court of First Instance of Manila is effective between the parties in that case. Said parties were notified of that judgment on February 13, 1909, and the record of the case was returned to the Court of First Instance of origin, the same having been recorded and filed in said court on the 15th of the same month and year (folio 485 of said record).

On the 25th of the same month and year, the plaintiff, winner in that case, presented his bill of costs in the Court of First Instance, to which the case had been returned.

On the 24th of February, 1914, the plaintiff moved the Court of First Instance to enter judgment in accordance with said decision of this court which modified the judgment involved in that appeal, sentencing the defendant to pay plaintiff, instead of P94,222.50, the sum of P93,963.30 with interest thereon at 8 per cent per annum from January 1, 1906 with costs. Granting this motion, the Court of First Instance rendered judgment in harmony with the opinion of this court.

On March 19, 1918, a writ of execution was issued upon that judgment, which was returned unsatisfied to the Court of First Instance, no property of the defendant having been found.

On the 5th of November of the same year a new execution was issued, of which no return appears to have been made.

On the 15th of February, 1922, the plaintiff brought suit against the same defendant, praying that judgment be rendered reviving, and giving effect to the judgment in question.

The first point that presents itself for our consideration is whether the period of five years fixed by section 443 of the Code of Civil Procedure within which an execution can be issued upon a judgment must be computed from February 26, 914, the date of the judgment entered by the Court of First Instance in accordance with the decision of this court, or from January 12, 1909, the date of the judgment of this court.

If the former proposition is correct then the writs of execution issued on the 19th of March, and 5th of November, 1918, were within the five-year period fixed by said section 443 of the Code of Civil Procedure. But if said period of five years begins to run not from February 26, 1914, but from January 12, 1909, then said executions issued in the year 1918 are of no legal effect.

To solve this question, it is necessary to determine the legal effect of the judgment entered by the Court of First Instance on February 26, 1914. The plaintiff alleges that such judgment was entered in accordance with the dispositive part of the decision of this court wherein, among other things, it is said:

Twenty days after notification of this decision, let judgment be entered in accordance herewith, and ten days thereafter, let the record be remanded to the court of origin for proper proceedings.

It is argued that as in this decision it is ordered that judgment be entered in accordance therewith, the Court of First Instance, at the instance of the plaintiff, entered such a judgment on February 26, 1914. But such an order of this court was not, and could have been, addressed to the Court of First Instance, because right after that order it was directed that, after the entry of such a judgment in accordance with the decision, the record be remanded to the court of origin for proper proceedings. Under these orders it was impossible for the Court of First Instance to enter judgment before the record of the case was remanded thereto.

This order of the Supreme Court, which is usually contained in its decisions, is in harmony with the provision of section 506 of the Code of Civil Procedure and rules 33 and 34 of the Rules of this court, which are as follows:

SEC. 506 (Code of Civil Procedure). — In all cases heard by the Supreme Court on bills of exception, its judgments shall be remitted to the Courts of First Instance from which the actions respectively came into the Supreme Court; and for this purpose it shall be the duty of the clerk of the Supreme Court, within ten days after the close of any term, to remit to the clerks of Courts of First Instance, notices of all judgments of the Supreme Court in actions brought from the Courts of First Instance respectively. Upon receiving the notice so remitted, the clerk of the Court of First Instance shall entered the same upon his docket and file the notice with the other papers in the action.

The judgment so remitted shall be executed by the Court of First Instance, in the same manner as though the action had not been carried to the Supreme Court. But the Supreme Court may, by special order, direct any particular judgment to be remitted to the proper Court of First Instance at any time, without awaiting the end of the term.

Art. 33 (Rules of the Supreme Court). — Upon the publication of the decision, the clerk shall mail notice thereof to the respective parties or their counsel, and judgment shall not be entered until ten days after such publication.

Art. 34 (Rules of the Supreme Court). — Five days after entry of judgment the clerk shall remand the case to the lower court, unless notice is given, pursuant to rule 40 of intention to petition the Supreme Court of the United State for a writ of certiorari, in which event the mittimus shall be stayed pending action by this court upon such notice.

The judgement that the Supreme Court ordered entered in accordance with its decision was the one to be entered by the clerk of said court before remanding the case to the court origin. And as the matter of fact, the clerk of the Supreme Court on February 3, 1909, entered the judgement required by said court to be entered, which is on folio 499 of the record of said civil case No. 4244, and which literally is as follows:

UNITED STATES OF AMERICA

SUPREME COURT OF THE PHILIPPINE ISLANDS

GUTIERREZ HERMANOS,Plaintiffs and appellee,

VERSUS

ANTONIO DE LA RIVA,Defendant and appellant.

JUDGMENTFebruary 3, 1909.16 Judgment BookRegister No. 4604.

This Court having regularly acquired jurisdiction for the trial of the above entitled cause, submitted by both parties for decision, after consideration thereof by the court upon the record, its decision and order for judgment having been filed on the 12th day of January, nineteen hundred and nine;

By virtue thereof the judgment of the Court of First Instance of Manila dated twenty-first day of May, nineteen hundred and seven, and from which this appeal was taken is hereby modified by changing the amount of P94,222.50 therein stated for P93,963.30, and as thus modified, said judgment is affirmed, and it is ordered that judgment be entered against the defendant for the sum of P93,963.30, with interest thereon at the rate of eight per centum per annum from January 1, 1906, with the costs in the court below, and without special pronouncement as to the costs on this appeal.

It is further ordered that . . . recover from . . . the sum of P as costs.

(Sgd.) J. E. BLANCOClerk of the Supreme Court of the

Philippine Islands

Therefore the judgment entered by the Court of First Instance on February 26, 1914, is not the judgment ordered by the Supreme Court to be entered, for such judgment had already been entered by the clerk of this court on February 3, 1909. Such a judgment of the Court of First Instance under date of February 26, 1914, was and is an unnecessary proceeding and has no legal effect.

The true and legally effective judgment is the one entered by the clerk of the Supreme Court on February 3, 1909. And from this date the five years mentioned in section 443 of the Code of Civil Procedure must be, and are computed, which section provides:

The party in whose favor judgment is given, may, at any time within five years after the entry thereof, have a writ of execution issued for its enforcement, as hereinafter provided.

Therefore the writs of execution issued in the year 1918 were issued long after the period of five years fixed by the legal provision just quoted and consequently they have no legal effect.

The other point remaining to be considered has reference to the action brought by the plaintiff by the filing of a complaint on February 15, 1922, from which this appeal originated. The question at issue is whether or not this action is tenable, taking into account the date it was filed. It is based on section 447 of the Code of Civil Procedure, the English and Spanish texts of which are as follows:

Enforcement of judgment after lapse of five years. — In all cases, a judgment may be enforced after the lapse of five years from the date of its entry, and before the same shall have been barred by any statute of limitation, by an action instituted in regular form, by complaint, as other actions are instituted.

Del cumplimiento de la sentencia despues de trancurridos cinco años. — En todos los casos puede exigirse el cumplimiento de una sentencia despues del vencimiento de cinco años desde la fecha de su inscripcion y antes que quede prescrita, por virtud de cualquier ley de prescripcion, mediante demanda interpuesta en la forma acostumbrada.

The question that presents itself for our consideration is whether or not the judgment under discussion has already prescribed, to solve which it would be necessary to determine when the period of prescription of said judgment has begun to run. If it began on the day it was rendered, that is to say, February 3, 1909, then the complaint which was filed on February 15, 1922, cannot prosper because the judgment has already prescribed, inasmuch as from the first to the last of said dates more than ten years have elapsed which is the period of prescription of judgment under section 43, No. 1, of the Code of Civil Procedure.

Civil actions other than for the recovery of real property can only be brought within the following periods after the right of action accrues:

1. Within ten years: An action upon agreement, contract, or promise in writing, or upon the judgment or decree of a court. . . .

But if the period of limitation did not begin to run on February 3, 1909, but after the lapse of the five years within which the plaintiff could get an execution upon said judgment, then under the section just quoted, the complaint by which this action was commenced was presented on time, having been filed before the expiration of the prescriptive period. But in adopting this view, we encounter a serious difficulty and that is the fact that section 447 of the Code of Civil Procedure above quoted provides that and before the same shall have been barred. So that the action provided in this section must be brought before the judgment prescribes. If the words we have underscored had not been added to this provision, it would not be difficult to hold that the action referred to in this section may be brought within ten years from the expiration of the five years within which execution can be issued upon the judgment, considerable, without admitting, that the action provided by law in said section accrues and exists only after the expiration of the five years fixed for the execution of the judgement. But it must be noted in the first place that in interpreting this section 447 of the Code of Civil Procedure, we must not, according to the maxim "noscitur a sociis," lose sight of the provisions concerning the prescription above-mentioned; and construing said section 447 in this way, the conclusion one arrives at is that after the expiration of the five years within which execution can be issued upon a judgment, the

winning party can revive it only in the manner therein provided so long as the period of ten years does not expire from the date of said judgment, according to section 43, No. 1, of the same Code.

In the second place, it cannot be said that the cause of action of the winning party to enforce a judgment accrues only after the expiration of the five years within which he may obtain an execution. The right of said winning party to enforce the judgment against the defeated party, begins to exist the moment the judgment is final; and this right, according to our Code of Procedure, consists in having an execution of the judgment issued during the first five years next following, and in commencing after that period the proceeding provided in section 447 to revive it, and this latter remedy can be pursued only before the judgment prescribed, that is to say, during the five years next following. It is so much an action to ask for an execution as it is to file a complaint for reviving it, because, as we know, by action is meant the legal demand of the right or rights one may have.

Many definitions of the term "action" have been given by the courts. It has been defined as the legal demand of one's right, or rights; the lawful demand of one's rights, or rights; the lawful demand of one's rights in the form given by law; a demand of a right in a court of justice; the lawful demand of one's right in a court of justice; the legal and formal demand of one's right from another person or party, made and insisted on in a court of justice; a claim made before a tribunal; an assertion in a court of justice of a right given by law; a demand or legal proceeding in a court of justice to secure one's rights; the prosecution of some demand in a court of justice; the means by which men litigate with each other; the means that the law has provided to put the cause of action into effect; the formal means or method of pursuing and recovering one's right in a court of justice; the rightful method of obtaining in court what is due to any one; the prescribed mode of enforcing a right in the proper tribunal; a remedial instrument of justice whereby redress is obtained for any wrong committed or right withheld; a proceeding in court, whether of equity or law; a suit or process by which a demand is made of a right, in a court of justice; a proceeding at law to enforce a private right or to redress a private wrong; a civil proceeding taken in a court of law to enforce a right; a judicial proceeding for the prevention or redress of a wrong; a proceeding by one party against another to try their mutual rights; an ordinarily proceeding in a court of Justice by which one party prosecutes another for the enforcement or protection of a right, the redress or prevention of a wrong, or the punishment of a public offense; a judicial proceeding which will, if prosecuted effectually, result in a judgment. (1 Corpus Juris, pp. 924, 925.)

As may be seen, this word action has many meanings among which is included not only the bringing of a suit in court, but also the claiming of a right one may have, such as the right to have an execution issued upon a favorable judgment.

The definition given by our Code of Civil Procedure of the word action has not escaped our attention, which definition describes an ordinarily action; but this narrow meaning of the word action is not the one to be given when it is desired to define what is the meant by cause of action in section 43 of said Code. This is the more true in this case because in the Spanish translation of said section 1, the word action in not defined, but instead the meaning of the word " juicio" is explained.

In the third place, if it is held that after the expiration of the five years within which execution can be issued upon a judgment, the winning party has still ten years within which to revive it, then the judgment would not prescribe until after fifteen years, which is against No. 1 of section 43 of the same Code.

And it cannot be said that such is the letter, and much less, the intention of the law, for there is nothing is section 447 of the said Code, making this new period different from the one prescribed in said section 43, No. 1, or reconciling these two provisions, there being no other way of reconciling them than to say that after the expiration of the first five years next following the judgment, there remain to the victorious party only another five years to revive it.

Prescription is a matter of positive legislation and cannot be established by mere implications or deductions.

The views of the courts as to the character of statutes of limitation have varied considerably. Originally such a statute was regarded as one of repose and not one of presumption. Subsequently the tendency of judicial opinions was that the statute was one of presumption rather than of repose. Following this the courts again viewed with favor the doctrine first advanced, and adopted the view, which prevails at the present day, to the effect that it is a statute or repose, the object of which is to suppress fraudulent and stale claims from springing up at great distances of time, and surprising the parties or their representatives, when all the proper vouchers and evidence are lost, or the facts have become obscure from the lapse of time, or the defective memory or death or removal of witnesses. . . . (17 R. C. L., 664, 665.)

As a consequence of all of the foregoing, the writs of execution issued in the year 1918 upon the judgment of February 3, 1909, are of no legal effect and the herein complaint filed February 15, 1922, was presented after said judgment has prescribed.

Wherefore the conclusion is inevitable that the plaintiff has no right to bring this action and its complaint must be dismissed.

For all of the foregoing the judgment appealed from is reversed, and the complaint dismissed, without express finding as to costs. So ordered.

Araullo, C.J., Street Malcolm and Villamor JJ., concur.

Separate Opinions

OSTRAND, J., dissenting:

I dissent. The action is brought under section 447 of the Code of Civil Procedure to revive a judgment and the limitation for such an action is ten years (subs. 1, sec. 43, Code of Civil Procedure). The statute of limitations does not begin to run before the cause of action accrues.

There can, of course, be no cause of action for revival of a live judgment and it stands to reason that an action cannot be brought until there is a cause of action, namely after the expiration of five years from the date of the entry of the judgment which it is sought to revive.

Assuming, therefore, that under the practice which, perhaps, has been generally followed here, the judgment in question might be considered entered as of the date of February 3, 1909, the cause of action for its revival did not accrue until February 4, 1914, and the ten years limitation did not begin to run until then and will not expire until February 3, 1924. It may be noted that we are dealing with a limitation of action and not with prescription of title.

With all due respect, I am unable to understand the argument that the word "action" in the chapter on limitation of actions in section 447 of the Code of Civil Procedure has a different meaning from the definition of the word given in section 1 of the same Code.

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