||| (Republic v. Tuvera, G.R. No. 148246, February 16, 2007)

TINGA, J p:

The long-term campaign for the recovery of ill-gotten wealth of former President Ferdinand E. Marcos, his wife Imelda, and their associates, has been met with many impediments, some of which are featured in this case, that have led to doubts whether there is still promise in that enterprise. Yet even as the prosecution of those cases have drudged on and on, the era of their final reckoning is just beginning before this Court. The heavy hammer of the law is just starting to fall.

The instant action originated from a civil complaint for restitution and damages filed by the Republic of the Philippines against Marcos and his longtime aide Juan Tuvera, as well as Tuvera's son Victor and a corporation the younger Tuvera had controlled. Trial on the case against the Tuveras proceeded separately before the Sandiganbayan. After the Republic had presented its evidence, the Tuveras successfully moved for the dismissal of the case on demurrer to evidence. The demurrer was sustained, and it falls upon this Court to ascertain the absence or existence of sufficient proof to support the relief sought by the Republic against the Tuveras.

I.

We begin with the facts.

Twin Peaks Development Corporation (Twin Peaks) was organized on 5 March 1984 as a corporation with a principal purpose of engaging in the real estate business. There were five incorporating stockholders, including respondent Victor Tuvera (Victor) 1 who owned 48% of the shares of the fledgling corporation. Victor was the son of respondent Juan Tuvera, who was then Presidential Executive Assistant of President Marcos. HSDIaC

Acting on a letter dated 31 May 1984 of Twin Peaks' Vice-President and Treasurer Evelyn Fontanilla in behalf of the corporation, President Marcos granted the award of a Timber License Agreement (TLA), more specifically TLA No. 356, in favor of Twin Peaks to operate on 26,000 hectares of forest land with an annual allowable cut of 60,000 cubic meters of timber and to export 10,000 cubic meters of mahogany of the narra species. 2 As a result, Twin Peaks was able to engage in logging operations.

On 25 February 1986, President Marcos was ousted, and Corazon C. Aquino assumed the presidency. Among her first acts as President was to establish the Philippine Commission on Good Government (PCGG), tasked with tracking down the ill-gotten wealth procured by Marcos, his family, and associates during his 20-year rule. Among the powers granted to the PCGG was the power to issue writs of sequestration. 3 On 13 June 1988, the PCGG issued a Writ of Sequestration on all assets, properties, records, documents, and shares of stock of Twin Peaks on the ground that all the assets of the corporation are ill-gotten wealth for having been acquired directly or indirectly through fraudulent and illegal means. 4 This was followed two days later by Mission Order No. MER-88 (Mission Order), also issued by the PCGG, implementing the aforementioned Writ of Sequestration. 5

On 9 December 1988, the PCGG, in behalf of the Republic, filed the Complaint now subject of this Petition. 6 Impleaded as defendants in the Complaint 7 were Juan and Victor Tuvera, as well as the then-exiled President Marcos. Through the Complaint, the Republic sought to recover funds allegedly

acquired by said parties in flagrant breach of trust and fiduciary obligations with grave abuse of right and power in violation of the Constitution and the laws of the Republic of the Philippines. 8

In particular, the Complaint alleged that Juan Tuvera, as Presidential Executive Assistant of President Marcos, took advantage of his relationship to influence upon and connection with the President by engaging in a scheme to unjustly enrich himself at the expense of the Republic and of the Filipino people. This was allegedly accomplished on his part by securing TLA No. 356 on behalf of Twin Peaks despite existing laws expressly prohibiting the exportation of mahogany of the narra species 9 and Twin Peaks' lack of qualification to be a grantee thereof for lack of sufficient logging equipment to engage in the logging business. 10 The Complaint further alleged that Twin Peaks exploited the country's natural resources by engaging in large-scale logging and the export of its produce through its Chinese operators whereby respondents obtained a revenue of approximately P45 million. EHaCID

The Complaint prayed that (1) TLA No. 356 be reverted to the State or cancelled; (2) respondents be jointly and severally ordered to pay P48 million 11 as actual damages; and (3) respondents pay moral, temperate and exemplary damages, litigation expenses, and treble judicial costs. 12 It cited as grounds for relief, gross abuse of official position and authority, breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, and violation of the Constitution. 13

In their Answer, 14 respondents Victor Tuvera and Twin Peaks claimed that Twin Peaks was awarded TLA No. 356 only after its articles of incorporation had been amended enabling it to engage in logging operations, 15 that the Republic's reference to Chinese operations and revenue of approximately P45 million were merely imagined, 16 and that the PCGG has no statutory authority to institute the action. 17 By way of counterclaim, respondents asked that the Republic be ordered to pay Victor Tuvera moral damages and to pay both Victor Tuvera and Twin Peaks exemplary damages, and to reimburse their attorney's fees. 18

Anent the allegation that Twin Peaks sold about P3 million worth of lumber despite the Writ of Sequestration issued by the PCGG, respondents stressed that the Director of Forest Development acted within the scope of his authority and the courts have no supervising power over the actions of the Director of Forest Development and the Secretary of the Department of Environment and Natural Resources (DENR) in the performance of their official duties. 19

As an affirmative and special defense, respondents Victor Tuvera and Twin Peaks alleged that after Twin Peaks was granted TLA No. 356 in 24 August 1984, Felipe Ysmael, Jr. and Co., Inc. had filed a motion for the cancellation of the same with the DENR Secretary. When respondents submitted their Answer, the denial by the DENR of the Ysmael motion was under review before the Court. 20

Juan Tuvera, who was abroad when the case was filed on 9 December 1988, later submitted his own Answer on 6 December 1989. 21 He also denied the allegations of the Republic and alleged that as Presidential Executive Assistant of then President Marcos, he acted within the confines of his duties and had perpetrated no unlawful acts. He merely transmitted communications of approval in the course of his duties and had nothing to do with the decisions of then President Marcos. 22 He denied having anything to do with Twin Peaks.

Juan Tuvera filed a compulsory counterclaim on the ground that the instant action had besmirched his reputation and caused serious anxiety and mental anguish thus entitling him to moral and exemplary damages and litigation expenses. 23

On 3 May 1989, respondents filed an Omnibus Motion to Nullify Writ of Sequestration and/or the Mission Order. 24 The Sandiganbayan issued a Temporary Restraining Order against the PCGG requiring it to cease, refrain and desist from further implementing the Writ of Sequestration and the Mission Order. 25 Subsequently, on motion of respondents, the Sandiganbayan granted a Writ of Preliminary Injunction covering the Mission Order. The Sandiganbayan deferred its resolution on the Motion to Lift the Writ of Sequestration. 26

From 1988 to 1993, the proceedings before the Sandiganbayan were delayed owing to the difficulty of acquiring jurisdiction over the person of President Marcos, who was by then already in exile. Thus, upon motion by respondents, the Sandiganbayan granted them a separate pre-trial/trial from President Marcos. 27

Respondents submitted their documentary evidence in the Pre-Trial Conference while the Republic reserved to present the same during trial. After the pre-trial conference, the Sandiganbayan issued a Pre-Trial Order 28 dated 3 November 1993, which presented the issues for litigation as follows:

Whether or not defendant Juan C. Tuvera who was a Presidential Executive Assistant at the time material to this case, by himself and in concert with his co-defendants Ferdinand E. Marcos and Victor Tuvera, took advantage of his relation and connection with the late Marcos, secure (sic) a timber concession for Twin Peaks Development Corporation and, engage (sic) in a scheme to unjustly enrich himself at the expense of the Republic and the Filipino People. 29

The Pre-Trial Order also indicated that the Republic admitted the exhibits by respondents, subject to the presentation of certified true copies thereof. Respondents' exhibits were as follows: 30

Exhibit Nos. Description

1 Amended Articles of Incorporation dated 31 July 1984

2 TLA No. 356

3 Order, Minister Ernesto M. Maceda, 22 July 1986

3-A Order, Minister Ernesto M. Maceda, 10 October 1986

3-B Order, Minister Ernesto M. Maceda, 26 November 1986, O.P. Case No. 3521

3-C Resolution, Office of the President, 6 July 1987, O.P. Case No. 3521

3-D Order, Office of the President, 14 August 1987, I.S. No. 66

3-E Complaint, PCGG, dated 20 July 1988

3-E-1, 3-E-2, I.S. No. 66 Affidavit, PCGG, Almario F. Mendoza, Ltv.

3-E-3 Mendoza and Affidavit, Isidro Santiago

3-F Counter-Affidavit, Juan C. Tuvera, 17 August 1989

3-F-1 PCGG, Motion to Withdraw, Jose Restituto F. Mendoza, 10 May 1989

3-F-2 Decision, Supreme Court, 18 October 1990

3-G Resolution, Supreme Court, 5 June 1991

4 Complaint, DENR, Almario F, Mendoza, 9 March 1990

4-A Answer/Comment, DENR, Almario F. Mendoza, dated 20 April 1990

4-B Decision, DENR, dated 28 August 1990

5 Complaint, Ombudsman, etc., Case No. 0-90-0708, 9 March 1990

6, 6-A Answer/Counter-Affidavit, etc.

6-B Decision, Ombudsman Case No. 0-90-0708, dated 8 August 1990

The Republic presented three (3) witnesses during the trial. The first witness was Joveniana M. Galicia, Chief of the National Forest Management Division of the Forest Management Bureau. She identified TLA No. 356 of Twin Peaks dated 20 August 1984 and a Memorandum dated 18 July 1984. She testified that TLA No. 356 covers 26,000 hectares of forest land located in the Municipality of Isabela, Province of Quirino. 31 The Memorandum dated 18 July 1984 addressed to Director Edmundo Cortez recited then President Marcos' grant of the timber concession to Twin Peaks. Identified and marked in the same memorandum were the name and signature of Juan Tuvera. 32 Upon cross-examination, Galicia stated that she was not yet the chief of the Division when the documents she identified were submitted to the Bureau. She further stated it was her first time to see the aforementioned documents when she was asked to bring the same before the trial court. 33

The next witness was Fortunato S. Arcangel, Regional Technical Director III of the DENR. He testified that he is a Technical Director under the Forest Management Services of the DENR. 34 He identified Forestry Administration Order (FAO) No. 11 dated 1 September 1970. He said he was aware of TLA No. 356 of Twin Peaks 35 because at the time it was issued, he was the chief of the Forestry Second Division and his duties included the evaluation and processing of applications for licenses and permits for the disposition and distribution of timber and other forest products. 36 Consequently, he was aware of the process by which TLA No. 356 was issued to Twin Peaks. 37 According to him, they processed the application insofar as they evaluated the location of the area concerned and its present vegetative state, examined the records, and determined the annual allowable land. After the examination, the license agreement was prepared and submitted for approval. 38 He continued that under FAO No. 11, a public bidding is required before any license agreement or permit for the utilization of timber within the forestry land is

issued 39 but no public bidding was conducted for TLA No. 356. 40 He explained that no such bidding was conducted because of a Presidential Instruction not to accept any application for timber licensing as a consequence of which bidding procedures were stopped. 41 Upon cross-examination, Arcangel said that at the time TLA No. 356 was issued, the Revised Forestry Code of the Philippines 42 was already in effect but there were still provisions in FAO No. 11 that remained applicable such as the terms and conditions of granting a license. He also stated that the issuance of the license to Twin Peaks emanated from the President of the Philippines. 43

The Republic's third and last witness was Teresita M. Zuñiga, employee of the Bureau of Internal Revenue. She identified the 1986 Income Tax Returns of Victor P. Tuvera, Evelyn Fontanilla and Feliciano O. Salvana, stockholders of Twin Peaks. 44

On 24 June 1994, the Republic rested its case after its formal offer of evidence, as follows: 45

Exhibits Documents Purpose

A Timber License Agreement To prove that the Timber License No. 356 of Twin Peaks Realty Agreement was executed prior Development Corp. dated 20 to the amendment of the Articles August 1984 of Incorporation of Twin Peaks Realty Development Corp.

B Memorandum dated 18 To prove the participation July 1984 of Juan C. of Juan C. Tuvera in the grant Tuvera, Presidential of the timber concession of Executive Secretary Twin Peaks Realty Development Corp.

C Forestry Administrative To prove that Twin Peaks Order No. 11 (Revised) Realty Development Corp. was granted a timber license agreement without following the procedure outlined in the forestry rules and regulation and in violation of law.

D Income Tax Return of To prove that Victor Tuvera was Victor Tuvera not a legitimate stockholder of Twin Peaks Realty Development Corp.

E Income Tax Return of To prove that Evelyn Fontanilla Evelyn Fontanilla was not a legitimate stockholder of Twin Peaks Realty Development Corp.

F Income Tax Return of To prove that Feliciano Salvana Feliciano Salvana was not a legitimate stockholder

of Twin Peaks Realty Development Corp.

G Articles of Incorporation To prove that Twin Peaks of Twin Peaks Realty Realty Development Corp. Development Corp. (original) was organized to engage in the real estate business and not in the logging industry.

H Timber Manifestation Report To show that Twin Peaks Realty of [Twin Peaks Realty Development Corp. lacks Development Corp.] equipment to process logs. consigned to Scala Sawmill 46

I Timber Manifestation To show that Twin Peaks Realty Report of Twin Peaks Development Corp. lacks consigned to La Peña equipment to process logs. Sawmill 47

Respondents subsequently submitted certified true copies of the exhibits they had presented during the pre-trial conference. 48

With leave of court, respondents filed a Demurrer to Evidence. Respondents argued that the Republic failed to present sufficient legal affirmative evidence to prove its claim. In particular, respondents' demurrer contends that the memorandum (Exh. B) and TLA No. 356 are not "legal evidence" because "legal evidence" is not meant to raise a mere suspicion or doubt. Respondents also claim that income tax returns are not sufficient to show one's holding in a corporation. Respondents also cited the factual antecedents culminating with the Court's decision in Felipe Ysmael, Jr. & Corp., Inc. v. Sec. of Environment and Natural Resources. 49

The Republic filed a Manifestation, contending that the demurrer is not based on the insufficiency of its evidence but on the strength of the evidence of respondents as shown by their own exhibits. The Republic claimed that the Revised Forestry Code of the Philippines does not dispense with the requirement of public bidding. The Republic added that Sec. 5 of said law clearly provides that all applications for a timber license agreement must be filed before the Bureau of Forest Development and that respondents still have to prove compliance with the requirements for service contracts. 50

Respondents opposed the Manifestation, maintaining that since the Republic admitted the exhibits of respondents during the pre-trial, it is bound by its own admission. Further, these same exhibits contain uncontroverted facts and laws that only magnify the conclusion that the Republic has no right to relief. 51

In its Resolution dated 23 May 2001, 52 the Sandiganbayan sustained the demurrer to evidence and referred to the decision of this Court in Ysmael in holding that res judicata applies. The Anti-Graft Court also did not give credence to the Republic's allegations concerning respondents' abuse of power and/or public trust and consequent liability for damages in view of its failure to establish any violation of Arts. 19, 20 and 21 of the Civil Code. DAHCaI

In essence, the Sandiganbayan held that the validity of TLA No. 356 was already fully adjudicated in a Resolution/Order issued by the Office of the President on 14 August 1987, which had become final and executory with the failure of the aggrieved party to seek a review thereof. The Sandiganbayan continued that the above pronouncement is supported by this Court in Ysmael. Consequently, the Sandiganbayan concluded, the Republic is barred from questioning the validity of TLA No. 356 in consonance with the principle of res judicata.

The Republic now questions the correctness of the Sandiganbayan's decision to grant the demurrer to evidence because it was not based solely on the insufficiency of its evidence but also on the evidence of respondent mentioned during the pre-trial conference. The Republic also challenges the applicability of res judicata.

II.

Preliminarily, we observe that respondents had filed before the Sandiganbayan a pleading captioned Motion to Dismiss or Demurrer to Evidence, thus evincing that they were seeking the alternative reliefs of either a motion to dismiss or a demurrer to evidence. However, the Sandiganbayan, in resolving this motion, referred to it as Motion to Dismiss on Demurrer to Evidence, a pleading of markedly different character from a Motion to Dismiss or Demurrer to Evidence. Still, a close reading of the Sandiganbayan Resolution reveals clearly that the Sandiganbayan was treating the motion as a demurrer, following Rule 33, Section 1 of the Rules of Court, rather than a motion to dismiss under Rule 16, Section 1.

This notwithstanding, the Sandiganbayan justified the grant of demurrer with res judicata as rationale. Res judicata is an inappropriate ground for sustaining a demurrer to evidence, even as it stands as a proper ground for a motion to dismiss. A demurrer may be granted if, after the presentation of plaintiff's evidence, it appears upon the facts and the law that the plaintiff has shown no right to relief. In contrast, the grounds for res judicata present themselves even before the presentation of evidence, and it should be at that stage that the defense of res judicata should be invoked as a ground for dismissal. Properly speaking, the movants for demurral who wish to rely on a controlling value of a settled case as a ground for demurrer should invoke the ground of stare decisis in lieu of res judicata. CAHTIS

In Domondon v. Lopez, 53 we distinguished a motion to dismiss for failure of the complainant to state a cause of action from a motion to dismiss based on lack of cause of action. The first is governed by Rule 16, Section 1 (g), 54 while the second by Rule 33 55 of the Rules of Court, to wit:

. . . The first [situation where the complaint does not alleged cause of action] is raised in a motion to dismiss under Rule 16 before a responsive pleading is filed and can be determined only from the allegations in the initiatory pleading and not from evidentiary or other matter aliunde. The second [situation where the evidence does not sustain the cause of action alleged] is raised in a demurrer to evidence under Rule 33 after the plaintiff has rested his case and can be resolved only on the basis of the evidence he has presented in support of his claim. The first does not concern itself with the truth and falsity of the allegations while the second arises precisely because the judge has determined the truth and falsity of the allegations and has found the evidence wanting.

Hence, a motion to dismiss based on lack of cause of action is filed by the defendant after the plaintiff has presented his evidence on the ground that the latter has shown no right to the relief sought. While a

motion to dismiss under Rule 16 is based on preliminary objections which can be ventilated before the beginning of the trial, a motion to dismiss under Rule 33 is in the nature of a demurrer to evidence on the ground of insufficiency of evidence and is presented only after the plaintiff has rested his case. 56 [Emphasis supplied]

III .

We shall first discuss the question of whether or not a demurrer to evidence may be granted based on the evidence presented by the opposing parties.

An examination of the Sandiganbayan's Resolution shows that dismissal of the case on demurrer to evidence was principally anchored on the Republic's failure to show its right to relief because of the existence of a prior judgment which consequently barred the relitigation of the same issue. In other words, the Sandiganbayan did not dismiss the case on the insufficiency of the Republic's evidence nor on the strength of respondents' evidence. Rather, it based its dismissal on the existence of the Ysmael case which, according to it, would render the case barred by res judicata. EaHATD

Prescinding from this procedural miscue, was the Sandiganbayan correct in applying res judicata to the case at bar? To determine whether or not res judicata indeed applies in the instant case, a review of Ysmael is proper.

In brief, Felipe Ysmael, Jr. & Co., Inc. was a grantee of a timber license agreement, TLA No. 87. Sometime in August 1983, the Bureau of Forest Development cancelled TLA No. 87 despite the company's letter for the reconsideration of the revocation. Barely one year thereafter, one-half (or 26,000 hectares) of the area formerly covered by TLA No. 87 was re-awarded to Twin Peaks under TLA No. 356.

In 1986, Felipe Ysmael, Jr. & Co., Inc. sent separate letters to the Office of the President and the Ministry of Natural Resources primarily seeking the reinstatement of TLA No. 87 and the revocation of TLA No. 356. Both offices denied the relief prayed for. Consequently, Felipe Ysmael, Jr. & Co., Inc. filed a petition for review before this Court.

The Court, through the late Justice Irene Cortes, held that Ysmael's letters to the Office of the President and to the Ministry of Natural Resources in 1986 sought the reconsideration of a memorandum order by the Bureau of Forest Development canceling their timber license agreement in 1983 and the revocation of TLA No. 356 subsequently issued by the Bureau in 1984. Ysmael did not attack the administrative actions until after 1986. Since the decision of the Bureau has become final, it has the force and effect of a final judgment within the purview of the doctrine of res judicata. These decisions and orders, therefore, are conclusive upon the rights of the affected parties as though the same had been rendered by a court of general jurisdiction. The Court also denied the petition of Ysmael because it failed to file the special civil action for certiorari under Rule 65 within a reasonable time, as well as in due regard for public policy considerations and the principle of non-interference by the courts in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies.

In Sarabia and Leido v. Secretary of Agriculture and Natural Resources, et al., 57 the Court discussed the underlying principle for res judicata, to wit:

The fundamental principle upon which the doctrine of res judicata rests is that parties ought not to be permitted to litigate the same issue more than once; that, when a right or fact has been judicially tried and determined by a court of competent jurisdiction, or an opportunity for such trial has been given, the judgment of the court, so long as it remains unreversed, should be conclusive upon the parties and those in privity with them in law or estate.

For res judicata to serve as an absolute bar to a subsequent action, the following requisites must concur: (1) the former judgment or order must be final; (2) the judgment or order must be on the merits; (3) it must have been rendered by a court having jurisdiction over the subject matter and parties; and (4) there must be between the first and second actions, identity of parties, of subject matter, and of causes of action. 58 When there is only identity of issues with no identity of causes of action, there exists res judicata in the concept of conclusiveness of judgment. 59

In Ysmael, the case was between Felipe Ysmael Jr. & Co., Inc. and the Deputy Executive Secretary, the Secretary of Environment and Natural Resources, the Director of the Bureau of Forest Development and Twin Peaks Development and Realty Corporation. The present case, on the other hand, was initiated by the Republic of the Philippines represented by the Office of the Solicitor General. No amount of imagination could let us believe that there was an identity of parties between this case and the one formerly filed by Felipe Ysmael Jr. & Co., Inc. EacHCD

The Sandiganbayan held that despite the difference of parties, res judicata nevertheless applies on the basis of the supposed sufficiency of the "substantial identity" between the Republic of the Philippines and Felipe Ysmael, Jr. Co., Inc. We disagree. The Court in a number of cases considered the substantial identity of parties in the application of res judicata in instances where there is privity between the two parties, as between their successors in interest by title 60 or where an additional party was simply included in the subsequent case 61 or where one of the parties to a previous case was not impleaded in the succeeding case. 62

The Court finds no basis to declare the Republic as having substantial interest as that of Felipe Ysmael, Jr. & Co., Inc. In the first place, the Republic's cause of action lies in the alleged abuse of power on respondents' part in violation of R.A. No. 3019 63 and breach of public trust, which in turn warrants its claim for restitution and damages. Ysmael, on the other hand, sought the revocation of TLA No. 356 and the reinstatement of its own timber license agreement. Indeed, there is no identity of parties and no identity of causes of action between the two cases.

IV.

What now is the course of action to take since we cannot affirm the Sandiganbayan's grant of the demurrer to evidence? Rule 33, Sec. 1 reads:

Sec. 1. Effect of judgment on demurrer to evidence. — After the plaintiff has completed the presentation of his evidence, the defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. If his motion is denied, he shall have the right to present evidence. If the motion is granted but on appeal the order of dismissal is reversed he shall have be deemed to have waived the right to present evidence.

The general rule is that upon the dismissal of the demurrer in the appellate court, the defendant loses the right to present his evidence and the appellate court shall then proceed to render judgment on the

merits on the basis of plaintiff's evidence. As the Court explained in Generoso Villanueva Transit Co., Inc. v. Javellana: 64

The rationale behind the rule and doctrine is simple and logical. The defendant is permitted, without waiving his right to offer evidence in the event that his motion is not granted, to move for a dismissal (i.e., demur to the plaintiff's evidence) on the ground that upon the facts as thus established and the applicable law, the plaintiff has shown no right to relief. If the trial court denies the dismissal motion, i.e., finds that plaintiff's evidence is sufficient for an award of judgment in the absence of contrary evidence, the case still remains before the trial court which should then proceed to hear and receive the defendant's evidence so that all the facts and evidence of the contending parties may be properly placed before it for adjudication as well as before the appellate courts, in case of appeal. Nothing is lost. The doctrine is but in line with the established procedural precepts in the conduct of trials that the trial court liberally receive all proffered evidence at the trial to enable it to render its decision with all possibly relevant proofs in the record, thus assuring that the appellate courts upon appeal have all the material before them necessary to make a correct judgment, and avoiding the need of remanding the case for retrial or reception of improperly excluded evidence, with the possibility thereafter of still another appeal, with all the concomitant delays. The rule, however, imposes the condition by the same token that if his demurrer is granted by the trial court, and the order of dismissal is reversed on appeal, the movant loses his right to present evidence in his behalf and he shall have been deemed to have elected to stand on the insufficiency of plaintiff's case and evidence. In such event, the appellate court which reverses the order of dismissal shall proceed to render judgment on the merits on the basis of plaintiff's evidence. 65

It thus becomes the Court's duty to rule on the merits of the complaint, duly taking into account the evidence presented by the Republic, and without need to consider whatever evidence the Tuveras have, they having waived their right to present evidence in their behalf. aDHCEA

V.

Executive Order No. 14-A 66 establishes that the degree of proof required in cases such as this instant case is preponderance of evidence. Section 3 thereof reads:

SEC. 3. The civil suits to recover unlawfully acquired property under Republic Act No. 1379 or for restitution, reparation of damages, or indemnification for consequential and other damages or any other civil actions under the Civil Code or other existing laws filed with the Sandiganbayan against Ferdinand E. Marcos, Imelda R. Marcos, members of their immediate family, close relatives, subordinates, close and/or business associates, dummies, agents and nominees, may proceed independently of any criminal proceedings and may be proved by a preponderance of evidence. [Emphasis supplied.]

Thus, the Court recently held in Yuchengco v. Sandiganbayan, 67 that in establishing the quantum of evidence required for civil cases involving the Marcos wealth held by their immediate family, close relatives, subordinates, close and/or business associates, dummies, agents and nominees filed before the Sandiganbayan, that "the Sandiganbayan, . . . was not to look for proof beyond reasonable doubt,

but to determine, based on the evidence presented, in light of common human experience, which of the theories proffered by the parties is more worthy of credence."

In order that restitution may be proper in this case, it must be first established that the grant of the TLA to Twin Peaks was illegal. With the illegality of the grant established as fact, finding Victor Tuvera, the major stockholder of Twin Peaks, liable in this case should be the ineluctable course. In order that Juan Tuvera may be held answerable as well, his own participation in the illegal grant should also be substantiated.

Regarding the first line of inquiry, the Complaint adverted to several provisions of law which ostensibly were violated by the grant of the TLA in favor of Twin Peaks. These include R.A. No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, and Articles 19, 20 and 21 of the Civil Code.

Still, the most organic laws that determine the validity or invalidity of the TLA are those that governed the issuance of timber license agreements in 1984. In that regard, the Republic argues that the absence of a bidding process is patent proof of the irregularity of the issuance of the TLA in favor of Twin Peaks.

A timber license agreement authorizes a person to utilize forest resources within any forest land with the right of possession and exclusion of others. 68 The Forestry Reform Code prohibits any person from utilizing, exploiting, occupying, possessing or conducting any activity within any forest land unless he had been authorized to do so under a license agreement, lease, license or permit. 69 The Code also mandates that no timber license agreement shall be issued unless the applicant satisfactorily proves that he has the financial resources and technical capability not only to minimize utilization, but also to practice forest protection, conservation and development measures to insure the perpetuation of said forest in productive condition. 70 However, the Code is silent as to the procedure in the acquisition of such timber license agreement. Such procedure is more particularly defined under FAO No. 11, dated 1 September 1970, which provides for the "revised forestry license regulations."

FAO No. 11 establishes that it is the Director of Forestry who has the power "to grant timber licenses and permits." 71 It also provides as a general policy that timber license agreements shall be granted through no other mode than public bidding. 72 However, Section 24 of FAO No. 11 does admit that a timber license agreement may be granted through "negotiation," as well as through "public bidding."

26. When license may be issued. — A license under this Regulations may be issued or granted only after an application and an award either through bidding or by negotiation has been made and the Director of Forestry is satisfied that the issuance of such license shall not be inconsistent with existing laws and regulations or prejudicial to public interest, and that the necessary license fee, bond deposit and other requirements of the Bureau of Forestry have been paid and complied with. 73 [Emphasis supplied.]

However, even a person who is granted a TLA through "negotiation" is still required to submit the same requirements and supporting papers as required for public bidding. The pertinent provisions of FAO No. 11 state:

18. Requirements and supporting papers to be submitted. — The following requirements with accompanying supporting papers or documents shall be submitted in addition to the requirements of Section 12:

a. With bid application:

The applicant shall support his bid application with the required application fee duly paid and proofs of the following:

(1) Capitalization. — Cash deposits and established credit line by applicant in domestic bank certified to by the bank President or any of its authorized officials, duly attested by depositor as his own to be used exclusively in logging and wood processing operations if awarded the area. The bank certificate shall be accompanied by a written consent by the applicant-depositor for the Director of Forestry or his authorized representative to verify such cash deposit with bank authorities. HIDCTA

Capitalization and financial statements. — A minimum capitalization of P20.00 per cubit meter in cash and an established credit line of P150.00 per cubic meter based on the allowable annual cut are required. Financial statements certified by the independent and reputable certified public accountants must accompany the application as proof of the necessary capitalization.

Additional capitalization, Real Estate. — In the event that the capitalization of the applicant is less than the minimum or less than that set by the Director of Forestry for the area, the applicant bidder may be asked to submit an affidavit signifying his readiness, should the area be awarded to him, to convert within a specified time any specified unencumbered and titled real estate into cash for use in operating and developing the area. Presentation of real estate should show location by municipality and province, hectarage, title number, latest land tax declaration, assessed value of land and improvements (stating kind of improvements), and encumbrances if any.

(2) Logging machinery and equipment. — Evidence of ownership or capacity to acquire the requisite machinery or equipment shall accompany the bid application. The capacity or ability to acquire machineries and equipments shall be determined by the committee on award. Leased equipment or machineries may be considered in the determination by the Committee if expressly authorized in writing by the Director of Forestry.

(3) Technical know-how. — To assure efficient operation of the area or concession, the applicant shall submit proof of technical competence and know-how and/or his ability to provide hired services of competent personnel.

(4) Operation or development plan. — An appropriate plan of operation and development of the forest area applied for shall be submitted, including phasing plans and the fund requirements therefor, consistent with selective logging methods and the sustained yield policy of the Bureau of Forestry. This plan must be in general agreement with the working unit plan for the area as contained in Chapter III, Section 6(a) hereinabove. acCTIS

(5) Processing plant. — The bidder or applicant shall show evidence of ownership of, or negotiation to acquire, a wood processing plant. The kind and type of plant, such as plywood, veneer, bandmill, etc. shall be specified. The plant should be capable of processing at least 60% of the allowable annual cut.

(6) Forestry Department. — The applicant shall submit assurance under oath that he shall put a forestry department composed of trained or experienced foresters to carry out forest management activities such as selective logging, planting of denuded or logged-over areas within the concessions as specified by the Director of Forestry and establish a forest nursery for the purpose.

(7) Statement on sustained yield operations, reforestation, and protection under management plans. — The bidder or applicant shall submit a sworn statement of his agreement and willingness to operate the area under sustained yield to reforest cleared areas and protect the concession or licensed area and under the approved management plan, and to abide with all existing forestry laws, rules and regulations and those that may hereafter be promulgated; and of his agreement that any violation of these conditions shall be sufficient cause for the cancellation of the licenses.

(8) Organization plan. — Other important statement connected with sound management and operation of the area, such as the submission among others, of the organizational plan and employment of concession guards, shall be submitted. In this connection, the applicant shall submit a sworn statement to the effect no alien shall be employed without prior approval of proper authorities.

(9) Unauthorized use of heave equipment. — The applicant shall give his assurance that he shall not introduce into his area additional heave equipment and machinery without approval of the Director of Forestry.

(10) Such other inducements or considerations to the award as will serve public interest may also be required from time to time.

xxx xxx xxx

d) With applications for areas to be negotiated. — All the foregoing requirements and supporting papers required for bidding under Section 18(a) hereinabove and of Section 20(b) hereinbelow shall also apply to all areas that may be granted through negotiation. In no case shall an area exceeding 100,000 hectares be granted thru negotiation. 74

The rationale underlying the very elaborate procedure that entails prior to the grant of a timber license agreement is to avert the haphazard exploitation of the State's forest resources as it provides that only the most qualified applicants will be allowed to engage in timber activities within the strict limitations of the grant and that cleared forest areas will have to be renewed through reforestation. Since timber is not a readily renewable natural resource, it is essential and appropriate that the State serve and act as a jealous and zealous guardian of our forest lands, with the layers of bureaucracy that encumber the grant of timber license agreements effectively serving as a defensive wall against the thoughtless ravage of our forest resources. TECIaH

There is no doubt that no public bidding occurred in this case. Certainly, respondents did not raise the defense in their respective answers. The absence of such bidding was testified on by prosecution witness Arcangel. Yet even if we consider that Twin Peaks could have acquired the TLA through "negotiation," the prescribed requirements for "negotiation" under the law were still not complied with.

It is evident that Twin Peaks was of the frame of mind that it could simply walk up to President Marcos and ask for a timber license agreement without having to comply with the elaborate application procedure under the law. This is indicated by the letter dated 31 May 1984 75 signed by Twin Peaks' Vice President and Treasurer Evelyn Fontanilla, addressed directly to then President Marcos, wherein Twin Peaks expressed that "we would like to request a permit to export 20,000 cubic meters of logs and to cut and process 10,000 cubic meters of the narra species in the same area." 76 A marginal note

therein signed by Marcos indicates an approval thereof. Neither the Forestry Reform Code nor FAO No. 11 provide for the submission of an application directly to the Office of the President as a proper mode for the issuance of a TLA. Without discounting the breadth and scope of the President's powers as Chief Executive, the authority of the President with respect to timber licenses is, by the express terms of the Revised Forestry Code, limited to the amendment, modification, replacement or rescission of any contract, concession, permit, license or any other form of privilege granted by said Code. 77

There are several factors that taint this backdoor application for a timber license agreement by Twin Peaks. The forest area covered by the TLA was already the subject of a pre-existing TLA in favor of Ysmael. The Articles of Incorporation of Twin Peaks does not even stipulate that logging was either a principal or secondary purpose of the corporation. Respondents do allege that the Articles was amended prior to the grant in order to accommodate logging as a corporate purpose, yet since respondents have waived their right to present evidence by reason of their resort to demurrer, we cannot consider such allegation as proven.

Sec. 18 (a) (1) of FAO No. 11 requires that an applicant must have a minimum capitalization of P20.00 per cubic meter in cash and an established credit line of P150.00 per cubic meter based on the allowable annual cut. TLA No. 356 allowed Twin Peaks to operate on 26,000 hectares of forest land with an annual allowable cut of 60,000 cubic meters of timber. With such annual allowable cut, Twin Peaks, therefore, must have at least P1,200,000.00 in cash as its minimum capitalization, following FAO No. 11. An examination of Twin Peaks' Articles of Incorporation shows that its paid-up capital was only P312,500.00. 78 Clearly, Twin Peaks' paid-up capital is way below the minimum capitalization requirement.

Moreover, Sec. 18 (5) provides that the bidder or applicant shall show evidence of ownership of, or negotiation to acquire, a wood processing plant. However, although TLA No. 356 was issued to Twin Peaks in 1984, it continued to engage the services of at least two sawmills 79 as late as 1988. Four (4) years from the issuance of the license, Twin Peaks remained incapable of processing logs.

What could have made Twin Peaks feel emboldened to directly request President Marcos for the grant of Timber License Agreement despite the obvious problems relating to its capacity to engage in timber activities? The reasonable assumption is that the official and personal proximity of Juan Tuvera to President Marcos was a key factor, considering that he was the father of Twin Peaks' most substantial stockholder. cDECIA

The causes of action against respondents allegedly arose from Juan Tuvera's abuse of his relationship, influence and connection as Presidential Executive Assistant of then President Marcos. Through Juan Tuvera's position, the Republic claims that Twin Peaks was able to secure a Timber License Agreement despite its lack of qualification and the absence of a public bidding. On account of the unlawful issuance of a timber license agreement, the natural resources of the country were unlawfully exploited at the expense of the Filipino people. Victor Tuvera, as son of Juan Tuvera and a major stockholder of Twin Peaks, was included as respondent for having substantially benefited from this breach of trust. The circumstance of kinship alone may not be enough to disqualify Victor Tuvera from seeking a timber license agreement. Yet the basic ethical principle of delicadeza should have dissuaded Juan Tuvera from any official or unofficial participation or intervention in behalf of the "request" of Twin Peaks for a timber license.

Did Juan Tuvera do the honorable thing and keep his distance from Twin Peaks' "request"? Apparently not. Instead, he penned a Memorandum dated 18 July 1984 in his capacity as Presidential Executive Assistant, directed at the Director of Forestry, the official who, under the law, possessed the legal authority to decide whether to grant the timber license agreements after deliberating on the application and its supporting documents. The Memorandum reads in full:

Office of the Presidentof the PhilippinesMalacañang

18 July 1984

74-84MEMORANDUM to

Director Edmundo CortesBureau of Forest Development

I wish to inform you that the President has granted the award to the Twin Peaks Realty Development Corporation, of the concession to manage, operate and develop in accordance with existing policies and regulations half of the timber area in the Province of Quirino covered by TLA No. 87, formerly belonging to the Felipe Ysmael, Jr. & Company and comprising 54,920 hectares, and to export half of the requested 20,000 cubic meters of logs to be gathered from the area. IDScTE

Herewith is a copy of the letter concering (sic) this matter of Ms. Evelyn F. Fontanilla, Vice-President and Treasurer of the Twin Peaks Realty Development Corporation, on which the President indicated such approval in his own hand, which I am furnishing you for your information and appropriate action.

(signed)

JUAN C. TUVERA

Presidential Executive Assistant 80

The Memorandum establishes at the very least that Tuvera knew about the Twin Peaks "request," and of President Marcos's favorable action on such "request." The Memorandum also indicates that Tuvera was willing to convey those facts to the Director of Forestry, the ostensible authority in deciding whether the Twin Peaks "request" should have been granted. If Juan Tuvera were truly interested in preventing any misconception that his own position had nothing to do with the favorable action on the "request" lodged by the company controlled by his son, he would not have prepared or signed the Memorandum at all. Certainly, there were other officials in Malacañang who could have performed that role had the intent of the Memorandum been merely to inform the Director of Forestry of such Presidential action.

Delicadeza is not merely a stentorian term evincing a bygone ethic. It is a legal principle as embodied by certain provisions of the Anti-Graft and Corrupt Practices Act. Section 3 of R.A. No. 3019 states in part:

Sec. 3. Corrupt practices of public officers. — In addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:

(a) Persuading, inducing or influencing another public officer to perform an act constituting a violation of rules and regulations duly promulgated by competent authority or an offense in connection with the official duties of the latter, or allowing himself to be persuaded, induced or influenced to commit such violation or offense. STHAID

xxx xxx xxx

(h) Directly or indirectly having financial or pecuniary interest in any business, contract or transaction in connection with which he intervenes or takes part in his official capacity, or in which he is prohibited by the Constitution or by any law from having any interest.

The Memorandum signed by Juan Tuvera can be taken as proof that he "persuaded, induced or influenced" the Director of Forestry to accommodate a timber license agreement in favor of Twin Peaks, despite the failure to undergo public bidding, or to comply with the requisites for the grant of such agreement by negotiation, and in favor of a corporation that did not appear legally capacitated to be granted such agreement. The fact that the principal stockholder of Twin Peaks was his own son establishes his indirect pecuniary interest in the transaction he appears to have intervened in. It may have been possible on the part of Juan Tuvera to prove that he did not persuade, induce or influence the Director of Forestry or any other official in behalf of the timber license agreement of Twin Peaks, but then again, he waived his right to present evidence to acquit himself of such suspicion. Certainly, the circumstances presented by the evidence of the prosecution are sufficient to shift the burden of evidence to Tuvera in establishing that he did not violate the provisions of the Anti-Graft and Corrupt Practices Act in relation to the Twin Peaks "request." Unfortunately, having waived his right to present evidence, Juan Tuvera failed to disprove that he failed to act in consonance with his obligations under the Anti-Graft and Corrupt Practices Act.

In sum, the backdoor recourse for a hugely priced favor from the government by itself, and more in tandem with other brazen relevant damning circumstances, indicates the impudent abuse of power and the detestable misuse of influence that homologously made the acquisition of ill-gotten wealth a reality. Upon the facts borne out by the evidence for the Republic and guideposts supplied by the governing laws, the Republic has a clear right to the reliefs it seeks.

VI.

If only the Court's outrage were quantifiable in sums of money, respondents are due for significant pecuniary hurt. Instead, the Court is forced to explain in the next few paragraphs why respondents could not be forced to recompensate the Filipino people in appropriate financial terms. The fault lies with those engaged by the government to litigate this case in behalf of the State. EIDATc

It bears to the most primitive of reasons that an action for recovery of sum of money must prove the amount sought to be recovered. In the case at bar, the Republic rested its case without presenting any evidence, documentary or testimonial, to establish the amount that should be restituted to the State by reason of the illegal acts committed by the respondents. There is the bare allegation in the complaint that the State is entitled to P48 million by way of actual damages, but no single proof presented as to why the State is entitled to such amount.

Actual damages must be proven, not presumed. 81 The Republic failed to prove damages. It is not enough for the Republic to have established, as it did, the legal travesty that led to the wrongful obtention by Twin Peaks of the TLA. It should have established the degree of injury sustained by the State by reason of such wrongful act.

We fail to comprehend why the Republic failed to present any proof of actual damages. Was it the inability to obtain the necessary financial documents that would establish the income earned by Twin Peaks during the period it utilized the TLA, despite the presence of the discovery processes? Was it mere indolence or sheer incompetence? Whatever the reason, the lapse is inexcusable, and the injury ultimately conduces to the pain of the Filipino people. If the litigation of this case is indicative of the mindset in the prosecution of ill-gotten wealth cases, it is guaranteed to ensure that those who stole from the people will be laughing on their way to the bank.

The claim for moral damages deserves short shrift. The claimant in this case is the Republic of the Philippines, a juridical person. We explained in Filipinas Broadcasting v. Ago Medical & Educational Center-Bicol Christian College of Medicine (AMEC-BCCM): 82

A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. The Court of Appeals cites Mambulao Lumber Co. v. PNB, et al. to justify the award of moral damages. However, the Court's statement in Mambulao that "a corporation may have a good reputation which, if besmirched, may also be a ground for the award of moral damages" is an obiter dictum. EcHTCD

Nevertheless, AMEC's claim for moral damages falls under item 7 of Article 2219 of the Civil Code. This provision expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. Article 2219(7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as a corporation can validly complain for libel or any other form of defamation and claim for moral damages. 83

As explained, a juridical person is not entitled to moral damages under Article 2217 of the Civil Code. It may avail of moral damages under the analogous cases listed in Article 2219, such as for libel, slander or any other form of defamation. Suffice it to say that the action at bar does not involve any of the analogous cases under Article 2219, and indeed upon an intelligent reading of Article 2219, it is difficult to see how the Republic could sustain any of the injuries contemplated therein. Any lawyer for the Republic who poses a claim for moral damages in behalf of the State stands in risk of serious ridicule.

However, there is sufficient basis for an award of temperate damages, also sought by the Republic notwithstanding the fact that a claim for both actual and temperate damages is internally inconsistent. Temperate or moderate damages avail when "the court finds that some pecuniary loss has been suffered but its amount can not from the nature of the case, be proved with certainty." 84 The textual language might betray an intent that temperate damages do not avail when the case, by its nature, is susceptible to proof of pecuniary loss; and certainly the Republic could have proved pecuniary loss herein. 85 Still, jurisprudence applying Article 2224 is clear that temperate damages may be awarded even in instances where pecuniary loss could theoretically have been proved with certainty.

In a host of criminal cases, the Court has awarded temperate damages to the heirs of the victim in cases where the amount of actual damages was not proven due to the inadequacy of the evidence presented by the prosecution. These cases include People v. Oliano, 86 People v. Suplito, 87 People v. De la Tongga, 88 People v. Briones, 89 and People v. Plazo. 90 In Viron Transportation Co., Inc. v. Delos Santos, 91 a civil action for damages involving a vehicular collision, temperate damages were awarded for the resulting damage sustained by a cargo truck, after the plaintiff had failed to submit competent proof of actual damages.

We cannot discount the heavy influence of common law, and its reliance on judicial precedents, in our law on tort and damages. Notwithstanding the language of Article 2224, a line of jurisprudence has emerged authorizing the award of temperate damages even in cases where the amount of pecuniary loss could have been proven with certainty, if no such adequate proof was presented. The allowance of temperate damages when actual damages were not adequately proven is ultimately a rule drawn from equity, the principle affording relief to those definitely injured who are unable to prove how definite the injury. There is no impediment to apply this doctrine to the case at bar, which involves one of the most daunting and noble undertakings of our young democracy-the recovery of ill-gotten wealth salted away during the Marcos years. If the doctrine can be justified to answer for the unlawful damage to a cargo truck, it is a compounded wrath if it cannot answer for the unlawful exploitation of our forests, to the injury of the Filipino people. The amount of P1,000,000.00 as temperate damages is proper. CAcEaS

The allowance of temperate damages also paves the way for the award of exemplary damages. Under Article 2234 of the Civil Code, a showing that the plaintiff is entitled to temperate damages allows for the award of exemplary damages. Even as exemplary damages cannot be recovered as a matter of right, the courts are empowered to decide whether or not they should be adjudicated. Ill-gotten wealth cases are hornbook demonstrations where damages by way of example or correction for the public good should be awarded. Fewer causes of action deserve the stigma left by exemplary damages, which "serve as a deterrent against or as a negative incentive to curb socially deleterious actions." 92 The obtention of the timber license agreement by Twin Peaks through fraudulent and illegal means was highlighted by Juan Tuvera's abuse of his position as Presidential Executive Assistant. The consequent exploitation of 26 hectares of forest land benefiting all respondents is a grave case of unjust enrichment at the expense of the Filipino people and of the environment which should never be countenanced. Considering the expanse of forest land exploited by respondents, the volume of timber that was necessarily cut by virtue of their abuse and the estimated wealth acquired by respondents through grave abuse of trust and public office, it is only reasonable that petitioner be granted the amount of P1,000,000.00 as exemplary damages.

The imposition of exemplary damages is a means by which the State, through its judicial arm, can send the clear and unequivocal signal best expressed in the pithy but immutable phrase, "never again." It is severely unfortunate that the Republic did not exert its best efforts in the full recovery of the actual damages caused by the illegal grant of the Twin Peaks TLA. To the best of our ability, through the appropriate vehicle of exemplary damages, the Court will try to fill in that deficiency. For if there is a lesson that should be learned from the national trauma of the rule of Marcos, it is that kleptocracy cannot pay. As those dark years fade into the backburner of the collective memory, and a new generation emerges without proximate knowledge of how bad it was then, it is useful that the Court serves a reminder here and now.

WHEREFORE, the petition is GRANTED. The Resolution of the Sandiganbayan dated 23 May 2001 is REVERSED. Respondents Juan C. Tuvera, Victor P. Tuvera and Twin Peaks Development Corporation are hereby ordered to jointly and severally pay to the Republic of the Philippines One Million (P1,000,000.00) Pesos, as and for temperate damages, and One Million (P1,000,000.00) Pesos, as and for exemplary damages, plus costs of suit.

SO ORDERED.

||| (Manila Banking Corp. v. University of Baguio, Inc., G.R. No. 159189, February 21, 2007)

QUISUMBING, J p:

On appeal is the Order 1 dated April 11, 2002 of the Regional Trial Court (RTC) of Makati City, Branch 61, in Civil Case No. 90-389, dismissing petitioner's amended complaint for a sum of money with application for preliminary attachment. In the appeal under Section 2, Rule 41, on a pure question of law, petitioner alleges that the assailed Order of the RTC was manifestly not in accord with law and jurisprudence. Also assailed is the trial court's June 27, 2003 Order 2 denying the motion for reconsideration.

The facts are culled from the records.

On November 26, 1981, petitioner Manila Banking Corporation granted a P14 million credit line 3 to respondent University of Baguio, Inc. for the construction of additional buildings and purchase of new equipment. 4 On behalf of the university, then Vice-Chairman Fernando C. Bautista, Jr. 5 signed Promissory Note (PN) Nos. 10660, 10672, 10687, and 10708 6 and executed a continuing suretyship agreement. 7 However, Bautista, Jr. diverted the net proceeds of the loan. He endorsed and delivered the four checks representing the net proceeds to respondent Group Developers, Inc. (GDI). 8 The loan was not paid.

On February 12, 1990, the bank filed a complaint for a sum of money with application for preliminary attachment 9 against the university, Bautista, Jr. and his wife Milagros, before the RTC of Makati City. Five years later, on March 31, 1995, the bank amended the complaint and impleaded GDI as additional defendant. CITaSA

In the amended complaint, 10 the bank alleged that it was unaware and did not approve the diversion of the loan to GDI; that it granted the loan without collateral upon the university's undertaking that it would construct new buildings; and that GDI connived with the university and Bautista, Jr. in fraudulently contracting the debt.

In its Answer, the university claimed that the bank and GDI approved the diversion. Allegedly, Victor G. Puyat, then GDI's President, and Vicente G. Puyat, then the bank's President, decided to use the proceeds of the loan. The university stated that Vicente G. Puyat and Victor G. Puyat even assured the university, in separate letters 11 both dated October 22, 1981, that it would be relieved of any liability from the loan. Consequently, even if the loan was overdue, the bank did not demand payment until February 8, 1989. By way of cross-claim, the university prayed that GDI be ordered to pay the university the amount it would have to pay the bank. In addition, the university filed a third-party complaint against Victor G. Puyat and the heirs of Vicente G. Puyat.

On December 14, 1995, the bank and GDI executed a deed of dacion en pago. 12 As attorney-in-fact of Batulao Bio-Loop Farms, Inc., GDI ceded and transferred to the bank a parcel of land consisting of 210,000 square meters located in Nasugbu, Batangas and covered by Transfer Certificate of Title No. T-70784. The dacion en pago was for a consideration of P78 million and in full settlement of the loan under PN Nos. 10660, 10672, 10687, and 10708, subject of Civil Case No. 90-389. 13

In an Omnibus Order 14 dated April 21, 1997, the trial court dismissed the third-party complaint against the heirs of Vicente G. Puyat for being premature since the bank's cause of action was against the university as a "dummy" of GDI. The trial court also dismissed the case as to Fernando Bautista, Jr. and

his wife upon Fernando's death. The trial court further ruled that the university's motion to implead GDI as third-party defendant, and GDI's motions to dismiss the amended complaint and cross-claim, had been mooted by the dacion en pago. EaHcDS

On March 19, 1998, the university moved to dismiss the amended complaint on the grounds that: (1) there was "no more cause of action" against it since the loan had been settled by GDI; and (2) the bank "failed to prosecute the action for an unreasonable length of time." 15 In an Order 16 dated August 17, 1999, the trial court denied the motion since the "matters relied upon by the university were evidentiary in nature."

On October 14, 1999, the university moved to set the case for pre-trial on December 2, 1999. 17

On August 3, 2000, the trial court resolved GDI's motion to resolve the motions to dismiss and defer pre-trial; expunged from the record the deed of dacion en pago; and reinstated GDI's motions to dismiss the amended complaint and cross-claim on the ground that no compromise agreement was submitted for its approval. 18

On August 29, 2001, the university filed a manifestation with motion for reconsideration of the August 17, 1999 Order denying the university's motion to dismiss the amended complaint. The university argued that the grounds for its motion to dismiss were not evidentiary as the deed of dacion en pago and the bank's judicial admission thereof were on record.

The bank opposed the motion on the ground that the motion for reconsideration of the August 17, 1999 Order was filed after more than two years. The bank noted that it was the university which moved to set the case for pre-trial; thus, its claim of not seeking reconsideration of the August 17, 1999 Order because of the scheduled pre-trial was preposterous. The bank concluded that the motion to dismiss lacked basis since the deed of dacion en pago had already been expunged.

In the appealed Order of April 11, 2002, the trial court ruled that the bank had no cause of action against the defendants because its claim for a sum of money had been paid through the dacion en pago. The trial court noted that the bank even admitted the settlement. It disposed of the case as follows:

WHEREFORE, in view of the foregoing, defendant [respondent herein] University of Baguio's Motion to Dismiss Amended Complaint is herein GRANTED and this complaint for collection of sum of money is herein DISMISSED.

Defendant UBI [respondent university] shall file the appropriate Manifestation in Court specifying the dates in June when it will be available to present evidence on its counterclaim. DcTaEH

SO ORDERED. 19

Hence, this appeal where petitioner alleges:

I.

THE RTC SERIOUSLY ERRED IN GRANTING THE MOTION TO DISMISS OF RESPONDENT UBI ON THE BASIS OF A DOCUMENT THAT HAS ALREADY BEEN INDISPUTABLY STRICKEN OFF FROM (sic) THE RECORDS OF THE CASE.

II.

THE RTC SERIOUSLY ERRED IN GRANTING UBI'S MOTION TO DISMISS WHEN THE ISSUES RAISED THEREIN ARE EVIDENTIARY IN NATURE AND DID NOT REFER TO THE ALLEGATIONS IN THE COMPLAINT.

III.

THE RTC SERIOUSLY ERRED IN RULING, WITHOUT TRIAL, THAT THE DEED OF DACION EN PAGO BETWEEN PETITIONER AND RESPONDENT UBI [SHOULD BE GDI] HAS NOT BEEN RESCINDED.

IV.

THE RTC SHOULD HAVE DENIED UBI'S MANIFESTATION (WITH MOTION FOR RECONSIDERATION) AS THE FILING OF THE MOTION TO DISMISS AFTER RESPONDENT UBI FILED ITS ANSWER VIOLATED THE RULES OF COURT.

V.

THE RTC, WITHOUT JUSTIFIABLE NOR LEGAL BASIS, ADOPTED DIFFERENT POLICIES TO PARTIES SIMILARLY SITUATED.

VI.

THE RTC, WITHOUT JUSTIFIABLE NOR LEGAL BASIS, RESOLVED FOR THE SECOND TIME A MOTION TO DISMISS WHICH IT HAS EARLIER DENIED INSTEAD OF RESOLVING THE MANIFESTATION (WITH MOTION FOR RECONSIDERATION OF SAID DENIAL) WHICH IT WAS BEING ASKED TO RESOLVE. 20

In essence, the issue for our resolution is, did the trial court err in dismissing the amended complaint, without trial, upon motion of respondent university?

Petitioner argues that the university's motion to dismiss on alleged lack of cause of action because of the deed of dacion en pago, an evidence aliunde, was improper since petitioner has yet to present its evidence. Petitioner also argues that the April 11, 2002 appealed Order was flawed because it was based on evidence expunged from the record.

Respondent university counters that the amended complaint deserved dismissal because petitioner admitted the dacion en pago and stated its lack of interest to pursue the case against respondent university. The university contends that petitioner's acceptance of the Batangas property, as equivalent of performance, extinguished the obligation under the four promissory notes. Thus, the university concludes that no more cause of action lies against it.

For its part, respondent GDI maintains that the dacion en pago has no "legal effect" but also avers that the dacion en pagoeffectively paid the loan warranting dismissal of the complaint, cross-claim and counterclaim against it.

Prefatorily, we note the trial court's inconsistent rulings in this case. To recall, the Omnibus Order dated April 21, 1997 appeared to have considered the dacion en pago as full settlement of the case. The trial court thus ruled that the dacion en pago mooted the motion to implead GDI as third-party defendant, and GDI's motions to dismiss amended complaint and third-party cross-claim. 21 Yet, in the same order, the trial court dismissed the case against the heirs of Vicente G. Puyat on the ground of prematurity, since petitioner's cause of action was against respondent university as "dummy" of GDI, implying that the case was not yet actually settled. Recall also that the August 17, 1999 Order ruled that the payment

of the loan through the dacion en pago was "evidentiary" 22 or had to be proved. The order was silent on whether it reversed the trial court's earlier statement that the dacion en pago settled the loan and the case. IHEAcC

A year later, on August 3, 2000, the trial court expunged the deed of dacion en pago and reinstated GDI's motions to dismiss the amended complaint and cross-claim. 23 Then, the appealed Order of April 11, 2002 ruled that petitioner had "no cause of action" against the defendants since the loan was settled by the dacion en pago, 24 despite the order which expunged the deed.

In Domondon v. Lopez, 25 we distinguished a motion to dismiss for failure of the complaint to state a cause of action from a motion to dismiss based on lack of cause of action. The first is governed by Section 1 (g), 26 Rule 16, while the second by Rule 33, 27 of the Rules of Court, to wit:

. . . The first [situation where the complaint does not allege a sufficient cause of action] is raised in a motion to dismiss under Rule 16 before a responsive pleading is filed and can be determined only from the allegations in the initiatory pleading and not from evidentiary or other matters aliunde. The second [situation where the evidence does not sustain the cause of action alleged] is raised in a demurrer to evidence under Rule 33 after the plaintiff has rested his case and can be resolved only on the basis of the evidence he has presented in support of his claim. The first does not concern itself with the truth and falsity of the allegations while the second arises precisely because the judge has determined the truth and falsity of the allegations and has found the evidence wanting.

Hence, a motion to dismiss based on lack of cause of action is filed by the defendant after the plaintiff has presented his evidence on the ground that the latter has shown no right to the relief sought. While a motion to dismiss under Rule 16 is based on preliminary objections which can be ventilated before the beginning of the trial, a motion to dismiss under Rule 33 is in the nature of a demurrer to evidence on the ground of insufficiency of evidence and is presented only after the plaintiff has rested his case. 28 (Emphasis supplied.)

In this case, the university's March 19, 1998 motion to dismiss the amended complaint was improper under Rule 16 because it was filed after respondent university filed its responsive pleading, its Answer. Also, the motion's merit could not be determined based solely on the allegations of the initiatory pleading, the amended complaint, since the motion was based on the deed of dacion en pago, which was not even alleged in the complaint. And since the deed of dacion en pago had been expunged from the record, the trial court erred in its finding of payment and lack of cause of action based on the deed. In fact, on January 11, 2002 or just three months before it dismissed the amended complaint, the trial court had even noted petitioner counsel's manifestation regarding the parties' initial efforts to enter into a "dacion en pago but not based on the previous offer made but on a new proposal involving new properties" 29 and urged them to pursue further settlement discussions. 30

In addition, the motion alleged that petitioner had "no more cause of action" or lacked a cause of action against the university. Following Domondon, that motion was a motion to dismiss under Rule 33 in the nature of demurrer to evidence and would be proper only after petitioner had presented its evidence and rested its case. In the case at bar, there had been no presentation of evidence yet and petitioner

had not rested its case. Therefore, the August 17, 1999 Order properly denied the motion to dismiss for being improper under either Rule 16 or 33. DHCcST

The trial court had also made a premature statement in its Omnibus Order dated April 21, 1997 that the dacion en pago settled the loan and the case, even as it also stated that respondent university was used as a "dummy" of GDI. If indeed there was fraud, considering the uncollateralized loan, its diversion, nonpayment, absence of demand although overdue, and the dacion en pago where title of the property accepted as payment cannot be transferred, the fraud should be uncovered to determine who are liable to pay the loan. We note too that the April 11, 2002 Order was unclear if it ruled again on the university's March 19, 1998 motion to dismiss or acted on its August 29, 2001 manifestation with motion for reconsideration of the two-year old August 17, 1999 Order. To reiterate, the August 17, 1999 Order aptly denied the motion. Thus, we reverse the April 11, 2002 and June 27, 2003 assailed Orders.

Lastly, it must be pointed out that while the Court allows a relaxation in the application of procedural rules in some instances, courts and litigants are enjoined to follow rules strictly because they are designed to facilitate the adjudication of cases. 31 Instead of rules being followed, however, we find their misapplication in this case resulting to inconsistent rulings, confusion and delay. Had the trial court exercised its inherent power to control its proceedings, 32 it would not have taken this long to reach pre-trial, which had been first set on December 2, 1999 through respondent university's motion. Significantly, even the trial court had tentatively set the pre-trial on June 7, 2002 33 but erroneously dismissed the amended complaint on April 11, 2002.

WHEREFORE, we GRANT the petition and SET ASIDE the trial court's April 11, 2002 and June 27, 2003 Orders. The trial court is ORDERED to proceed with the pre-trial and hear this case with dispatch. No pronouncement as to costs.

SO ORDERED.

||| (Meneses v. Secretary of Agrarian Reform, G.R. No. 156304, October 23, 2006)

AUSTRIA-MARTINEZ, J p:

Petitioners were co-owners pro-indiviso of an irrigated rice land in Barangay Batasan, San Miguel, Bulacan, measuring 60.8544 hectares and registered in the name of their grandparents, the spouses Ramon Meneses and Carmen Rodriguez-Meneses. On October 21, 1972, the property was distributed to farmer-beneficiaries by virtue of Presidential Decree No. 27 (P.D. No. 27).

On July 16, 1993, petitioners filed with the Regional Trial Court (RTC) of Bulacan, Branch 13, a complaint for determination and payment of just compensation. Petitioners alleged that from the time the land was distributed to farmer-beneficiaries in 1972 up to the time of the filing of the complaint, no payment or rentals has been made, and titles have already been issued to the farmer-beneficiaries. Petitioners also alleged that the fair market value of the property is P6,000,000.00. 1

The farmer-beneficiaries, the Land Bank of the Philippines-Land Valuation and Landowners' Compensation III (LBP-LVLCO III), the Department of Agrarian Reform (DAR) Secretary, and the DAR all filed their respective Answers. For their part, the farmer-beneficiaries alleged that the land valuation establishing the average gross production per hectare by the Barangay Committee on Land Production (BCLP) based on three normal crop years before P.D. No. 27 is in accordance with the existing guidelines and procedure on Operation Land Transfer; they have no unpaid rentals; and jurisdiction over the case lies with the Department of Agrarian Reform Adjudication Board (DARAB). 2

Meanwhile, the LBP-LVLCO III averred that it has been acting in good faith in discharging its obligations, and that the computation was obtained through the valuation processes of the DAR on lands covered by P.D. No. 27 and Executive Order No. 228 (E.O. No. 228). The LBP-LVLCO III likewise alleged that jurisdiction over the case lies with the DARAB. 3

The DAR Secretary, on the other hand, alleged that the valuation of the property was pursuant to the Operation Land Transfer under P.D. No. 27 and the reckoning date should be at the time of the taking of the property, i.e., October 21, 1972. 4

Lastly, the DAR claimed that the filing of the case is premature since there is no valuation yet made by the DAR based on E.O. No. 228, and petitioners must cooperate with the DAR by submitting all the necessary papers for proper valuation and expeditious payment of the land. The DAR also claimed that it must first determine the valuation before resort to the court can be made. 5

Thereafter, in an Order dated June 22, 1994, the RTC dismissed the complaint for lack of cause of action. According to the RTC, the determination of just compensation must first be filed with the DAR and not the Special Agrarian Court. 6

Petitioners filed a motion for reconsideration, which was partially granted by the RTC in its Order dated September 7, 1994, setting aside its order of dismissal, ordering the suspension of the proceedings and archiving the case until primary determination has been made on the issue of just compensation. 7

On October 5, 1994, petitioners filed a complaint for determination and payment of just compensation with the DARAB. The DARAB, however, dismissed the complaint on the ground that it has no jurisdiction to hear and decide valuation cases covered by P.D. No. 27, as the same is within the exclusive

administrative powers of the Office of the Secretary. 8 Because of the foregoing dismissal, petitioners filed with the RTC a motion to re-open and calendar case for hearing, 9 which was granted by the RTC.

In an Order dated May 9, 1996, the RTC, with the agreement of the parties, constituted Commissioners to determine just compensation, 10 but the same was dissolved per its Report and Recommendation dated October 9, 1996, 11 as granted by the RTC in its Order dated October 11, 1996. 12

Pre-trial was terminated on July 10, 1997, and petitioners were scheduled to present their evidence. 13 During the hearing held on August 14, 1997, the parties agreed as to the issue to be resolved — "whether or not the plaintiffs [petitioners] are entitled to just compensation as provided for in Republic Act No. 6657 (R.A. No. 6657) and the Constitution of 1987 and not P.D. No. 27 which was the basis of valuation made by defendants Secretary of Agrarian Reform and the Land Bank of the Philippines of the subject parcel of land which was acquired in October 21, 1972." 14 The parties were then given a period within which to fie their respective motions for judgment on the pleadings and comment/opposition thereto, after which the case shall be deemed submitted for resolution. 15

On February 7, 1998, the RTC rendered its Decision dismissing the complaint. It was the RTC's ruling that since the subject property was taken from petitioners on October 21, 1972 under the DAR's Operation Land Transfer pursuant to P.D. No. 27, then just compensation must be based on the value of the property at the time of taking. IDATCE

Thus, petitioners filed an appeal with the Court of Appeals (CA), docketed as CA-G.R. CV No. 60355, where petitioners prayed for a remand of the case to the RTC for further proceedings and/or reception of evidence on the just and fair market value of the property.

On May 30, 2002, the CA 16 rendered its Decision dismissing the appeal. 17 Petitioners filed a motion for reconsideration, but the same was denied on the grounds that it was filed 44 days late and the CA found no cogent reason to reverse or modify its Decision. 18

Hence, this petition for review on certiorari based on the following reasons:

I - THAT THE APPEALED DECLISION (sic) IS RENDERED BY THE COURT OF APPEALS NOT IN ACCORDANCE WITH LAW OR WITH APPLICABLE DECISIONS OF THE SUPREME COURT. 19

II - THAT THE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS OR HAS SANCTIONED SUCH DEPARTURE BY THE LOWER COURT. 20

Petitioners argue that the CA erred in sustaining the propriety of the motion for judgment on the pleadings filed by respondents with the RTC. It was the CA's ruling that the motion for judgment on the pleadings was proper since respondents can be considered as plaintiffs in a counter-claim. Petitioners also impute error in the CA's ruling that the RTC properly dismissed the case since it appears that there was no initial valuation yet made by the DARAB.

Respondents, however, argue that the CA Decision dated May 30, 2002 is already final and executory due to petitioners' failure to seasonably file a motion for reconsideration. Respondents also argue, among others, that the applicable law in this case is P.D. No. 27 and E.O. No. 228, which provides for the formula for the determination of just compensation, as recognized in the cases of Land Bank of the Philippines v. Court of Appeals, 378 Phil. 1248 (1999), and Gabatin v. Land Bank of the Philippines, G.R. No. 148223, November 25, 2004, 444 SCRA 176.

The Courts finds merit in the petition.

It is true that petitioners' failure to file their motion for reconsideration within the reglementary period rendered the CA Decision dated May 30, 2002 final and executory. For all intents and purposes, said Decision should now be immutable and unalterable; however, the Court relaxes this rule in order to serve substantial justice considering (a) matters of life, liberty, honor or property, (b) the existence of special or compelling circumstances, (c) the merits of the case, (d) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules, (e) a lack of any showing that the review sought is merely frivolous and dilatory, and (f) the other party will not be unjustly prejudiced thereby. 21

The explanation of petitioners' counsel for the delayed filing of the motion for reconsideration was that their law firm secretary failed to inform the court of their change of address. 22 This, of course, is not a valid excuse. As a general rule, a client is bound by the acts of his counsel, including even the latter's mistakes and negligence. But where such mistake or neglect would result in serious injustice to the client, a departure from this rule is warranted. To cling to the general rule is to condone rather than rectify a serious injustice to petitioners whose only fault was to repose his faith and entrust his innocence to his lawyer. 23

In Ginete v. Court of Appeals, 24 the Court disregarded the failure of the petitioners to file a motion for reconsideration of the CA's dismissal, and instead, ruled that their counsel's negligence should not prejudice the merits of their case, as they were bound to lose their alleged rightful share in their inheritance to a 59-hectare property.

In Philippine Ports Authority v. Sargasso Construction & Development Corp., 25 the Court excused the Office of the Government Corporate Counsel's belated filing of the notice of appeal because sustaining the finality of the CA's dismissal of the appeal would leave the petitioner no other remedy to assail the decision of the trial court, and it would then have to implement the award of the reclamation project to the respondents for the enhancement of the San Fernando, La Union port for the price of P30,794,230.89 without the benefit of a public bidding, and sans the approval of its Board of Directors.

After reviewing the records of this case, the Court resolves to give due course to the case in order to put to rest the issues herein presented, specially in light of the Court's ruling in Solmayor v. Arroyo, 26 to wit:

Furthermore, we must bear in mind that procedural rules are intended to ensure the proper administration of law and justice. The rules of procedure ought not to be applied in a very rigid, technical sense, for they are adopted to help secure, not override, substantial justice. A deviation from its rigid enforcement may thus be allowed to attain its prime objective, for after all, the dispensation of justice is the core reason for the existence of courts. Moreover, we cannot shy away from our constitutionally mandated duty to questions of law set forth in this petition which hinges on the determination of the rights of herein litigants in the light of a very important piece of social legislation, Presidential Decree No. 27, which aims for the equitable distribution and ownership of land, without disregarding the property rights of landowners. Thus, for pragmatic reasons and

consideration of justice and equity, the Court must put to rest the issues presented before us. (Emphasis supplied)

If the Court sustains the CA Decision, which affirmed the RTC Decision, petitioners will be left holding an empty bag, so to speak. It should be noted that the property subject of this case has already been distributed to the farmer-beneficiaries way back in 1972, and up to now, 34 years later, petitioners have yet to enjoy the fruits of its value. Moreover, petitioners will be left without any recourse as regards the resolution of the issue of just compensation since both the RTC and the DARAB already dismissed the separate complaints for just compensation filed before them. Indeed, the "Court has the power to except a particular case from the operation of the rule whenever the purposes of justice requires it because what should guide judicial action is that a party is given the fullest opportunity to establish the merits of his action or defense rather than for him to lose life, honor, or property on mere technicalities." 27

On the propriety of the filing of a motion for judgment on the pleadings by the LBP and adopted by the DAR Secretary — the Court finds that the CA erred in sustaining its propriety.

Rule 34, Section 1 of the Rules of Court, 28 provides that a judgment on the pleadings is proper when an answer fails to render an issue or otherwise admits the material allegations of the adverse party's pleading. The essential question is whether there are issues generated by the pleadings. A judgment on the pleadings may be sought only by a claimant, who is the party seeking to recover upon a claim, counterclaim or cross-claim; or to obtain a declaratory relief. 29

In this case, the separate Answers filed by the respondents definitely tendered issues, as it made specific denials of the material allegations in the complaint and asserted affirmative defenses, which would bar recovery by petitioners. Moreover, it was erroneous for the RTC to require the filing of a motion for judgment on the pleadings and for the LBP and the DAR Secretary to file the same since in the first place, the latter are neither plaintiffs in the case nor counter-claimants or cross-claimants.

What the RTC obviously meant to be filed was a motion for summary judgment, a procedural device designed for the prompt disposition of actions, which may be rendered if the pleadings, supporting affidavits, depositions and admissions on file show that, after a summary hearing, there is no genuine issue regarding any material fact, except as to the amount of damages, and the moving party is entitled to a judgment as a matter of law, and which may be applied for by either a claimant or a defending party. 30 This is obvious from the fact that although the Answers raised issues, these were not factual ones requiring trial, nor were they genuine issues, 31 as the parties were able to agree to limit the same to whether petitioners are entitled to just compensation under R.A. No. 6657 and not P.D. No. 27. 32

The Court also finds that the CA erred in sustaining the RTC ruling that just compensation in this case should be based on the value of the property at the time of taking, October 21, 1972, which is the effectivity date of P.D. No. 27.

Respondent correctly cited the case of Gabatin v. Land Bank of the Philippines, 33 where the Court ruled that "in computing the just compensation for expropriation proceedings, it is the value of the land at the time of the taking [or October 21, 1972, the effectivity date of P.D. No. 27], not at the time of the rendition of judgment, which should be taken into consideration." Under P.D. No. 27 and E.O. No. 228, the following formula is used to compute the land value for palay:

LV (land value) = 2.5 x AGP x GSP x (1.06)n

It should also be pointed out, however, that in the more recent case of Land Bank of the Philippines vs. Natividad, 34 the Court categorically ruled: "the seizure of the landholding did not take place on the date of effectivity of P.D. No. 27 but would take effect on the payment of just compensation." Under Section 17 of R.A. No. 6657, the following factors are considered in determining just compensation, to wit:

Sec. 17. Determination of Just Compensation. — In determining just compensation, the cost of acquisition of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessment made by government assessors shall be considered: The social and economic benefits contributed by the farmers and the farm-workers and by the Government to the property as well as the non-payment of taxes or loans secured from any government financing institution on the said land shall be considered as additional factors to determine its valuation. (Emphasis supplied) SCaDAE

Consequently, the question that arises is which of these two rulings should be applied?

Under the circumstances of this case, the Court deems it more equitable to apply the ruling in the Natividad case. In said case, the Court applied the provisions of R.A. No. 6657 in computing just compensation for property expropriated under P.D. No. 27, stating, viz.:

Land Bank's contention that the property was acquired for purposes of agrarian reform on October 21, 1972, the time of the effectivity of PD 27, ergo just compensation should be based on the value of the property as of that time and not at the time of possession in 1993, is likewise erroneous. In Office of the President, Malacañang, Manila v. Court of Appeals, we ruled that the seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect on the payment of just compensation.

Under the factual circumstances of this case, the agrarian reform process is still incomplete as the just compensation to be paid private respondents has yet to be settled. Considering the passage of Republic Act No. 6657 (RA 6657) before the completion of this process, the just compensation should be determined and the process concluded under the said law. Indeed, RA 6657 is the applicable law, with PD 27 and EO 228 having only suppletory effect, conformably with our ruling in Paris v. Alfeche.

xxx xxx xxx

It would certainly be inequitable to determine just compensation based on the guideline provided by PD 27 and EO 228 considering the DAR's failure to determine the just compensation for a considerable length of time. That just compensation should be determined in accordance with RA 6657, and not PD 27 or EO 228, is especially imperative considering that just compensation should be the full and fair equivalent of the property taken from its owner by the expropriator, the equivalent being real, substantial, full and ample.

In this case, the trial court arrived at the just compensation due private respondents for their property, taking into account its nature as irrigated land, location along the highway, market value, assessor's value and the volume and value of its produce. This Court is convinced that the trial court correctly

determined the amount of just compensation due private respondents in accordance with, and guided by, RA 6657 and existing jurisprudence. 35 (Emphasis supplied)

As previously noted, the property was expropriated under the Operation Land Transfer scheme of P.D. No. 27 way back in 1972. More than 30 years have passed and petitioners are yet to benefit from it, while the farmer-beneficiaries have already been harvesting its produce for the longest time. Events have rendered the applicability of P.D. No. 27 inequitable. Thus, the provisions of R.A. No. 6657 should apply in this case.

Finally, the Court sustains petitioners' contention that the CA erred in ruling that the RTC correctly dismissed their complaint. Even assuming that the RTC was correct in holding that P.D. No. 27 applies, still it should not have simply dismissed the complaint after resolving the issue of which law should apply. Instead, it should have proceeded to determine the just compensation due to petitioners.

Records show that the complaint for just compensation was first filed in the RTC, but this was dismissed in the Order dated June 22, 1994, for the reason that the determination of just compensation must first be filed with the DAR. 36 Conformably with said ruling, petitioners filed the complaint with the DAR, which dismissed the same on the ground that it has no jurisdiction to hear and decide valuation cases covered by P.D. No. 27. 37 Because of said dismissal, petitioners went back to the RTC for the re-opening of the case. Petitioners' case was obviously thrown back and forth between the two venues, and with the RTC's second dismissal, they were left hanging and without any recourse, which, of course, is iniquitous considering that their property has already long been expropriated by the government and its fruits enjoyed by the farmer-beneficiaries.

Given the foregoing conclusion, this case should then be remanded to the Regional Trial Court (RTC) of Bulacan, Branch 13, for the final determination of just compensation.

WHEREFORE, the petition is GRANTED. The Decision dated May 30, 2002 and Resolution dated December 9, 2002 rendered by the Court of Appeals in CA-G.R. CV No. 60355 is REVERSED and SET ASIDE. The records of this case is ordered REMANDED to Regional Trial Court (RTC) of Bulacan, Branch 13, for further proceedings with deliberate dispatch and in accordance with the Court's discussion in this Decision. DcICEa

No costs.

SO ORDERED.

||| (Diman v. Alumbres, G.R. No. 131466, November 27, 1998)

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; MOTIONS; MOTION FOR EXTENSION OF TIME; GRANT THEREOF LIES IN THE SOUND DISCRETION OF THE COURT. — The Court admits the late comment, but takes this occasion to reiterate the familiar doctrine that no party has a right to an extension of time to comply with an obligation within the period set therefor by law; motions for extension are not granted as a matter of course; their concession lies in the sound discretion of the Court exercised in accordance with the attendant circumstances; the movant is not justified in assuming that the extension sought will be granted, or that it will be granted for the length of time suggested by him. It is thus incumbent on any movant for extension to exercise due diligence to inform himself as soon as possible of the Court's action on his motion, by timely inquiry of the Clerk of Court. Should he neglect to do so, he runs the risk of time running out on him, for which he will have nobody but himself to blame.

2 ID.; ID.; MODE OF DISCOVERY; ADMISSION BY ADVERSE PARTY; REQUEST FOR ADMISSION; EACH OF THE MATTERS LISTED THEREIN DEEMED ADMITTED BY PARTY SERVED THEREWITH FOR FAILURE TO RESPOND WITH A SWORN STATEMENT EITHER DENYING SPECIFICALLY OR SETTING FORTH THE REASONS WHY EITHER ADMISSION OR DENIAL CANNOT BE MADE. — A Trial Court has no discretion to determine what the consequences of a party's refusal to allow or make discovery should be; it is the law which makes that determination; and it is grave abuse of discretion for the Court to refuse to recognize and observe the effects of that refusal as mandated by law. Particularly as regards requests for admission under Rule 26 of the Rules of Court, the law ordains that when a party is served with a written request that he admit: (1) the genuineness of any material and relevant document described in and exhibited with the request, or (2) the truth of any material and relevant matter of fact set forth in the request, said party is bound within the period designated in the request, to file and serve on the party requesting the admission a sworn statement either (1) denying specifically the matters of which an admission is requested or (2) setting forth in detail the reasons why he cannot truthfully either admit or deny those matters. If the party served does not respond with such a sworn statement, each of the matters of which an admission is requested shall be deemed admitted.

3. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR — The Dimans' request for admission was duly served by registered mail on Jose Lacalle on February 6, 1995, and a copy thereof on his lawyer on February 4, 1995. Neither made any response whatever within the reglementary period. Nor did either of them do so even after receiving copy of the Dimans' "MANIFESTATION WITH MOTION TO REQUIRE PLAINTIFFS TO ANSWER REQUEST FOR ADMISSION," dated March 28, 1995. On account thereof, in legal contemplation, the Heirs impliedly admitted all the facts listed in the request for admission. These plain and simple legal .propositions were disregarded by His Honor.

4. ID.; ID.; ID.; ID.; ID.; FOR FAILURE TO REPLY THERETO, HEIRS IN CASE AT BAR DEEMED TO HAVE IMPLIEDLY ADMITTED THE FACTS ON WHICH ADMISSION HAS BEEN REQUESTED. — When the Heirs closed their evidence as party plaintiffs, and the Dimans moved to dismiss on ground of insufficiency of the Heirs' evidence, the Trial Judge was charged with the duty to assess the evidence to ascertain whether or not "upon the facts and the law the plaintiff(s) . . . (have) shown no right to relief." It was in the first place incumbent on His Honor to hold the Heirs bound to their admissions appearing in the record, express and implied. In accordance with Section 2, Rule 26 of the 1964 Rules of Court, the Heirs

were impliedly, but no less indubitably, deemed to have admitted the facts on which admissions had been duly requested by reason of their failure to reply thereto.

5. ID.; ID.; SUMMARY JUDGMENT; PROPRIETY THEREOF IS DETERMINED BY LAW. — It is also the law which determines when a summary judgment is proper. It declares that although the pleadings on their face appear to raise issues of fact — e.g., there are denials of, or a conflict in, factual allegations — if it is shown by admissions, depositions or affidavits, that those issues are sham, fictitious, or not genuine, or, in the language of the Rules, that "except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law," the Court shall render a summary judgment for the plaintiff or the defendant, as the case may be. aATHIE

6. ID.; ID.; ID.; DISTINGUISHED FROM JUDGMENT ON THE PLEADINGS. — The existence or appearance of ostensible issues in the pleadings, on the one hand, and their sham or fictitious character, on the other, are what distinguish a proper case for a summary judgment from one for a judgment on the pleadings under Rule 19 of the 1964 Rules. In the latter case, there is no ostensible issue at all, but the absence of any because of the failure of the defending party's answer to raise an issue. On the other hand, in the case of a summary judgment, issues apparently exist — i.e., facts are asserted in the complaint regarding which there is as yet no admission, disavowal or qualification; or specific denials or affirmative defenses are in truth set out in the answer — but the issues thus arising from the pleadings are sham, fictitious, not genuine, as shown by admissions, depositions or admissions. In other words, as a noted authority remarks, a judgment on the pleadings is a judgment on the facts as pleaded while a summary judgment is a judgment on the facts as summarily proven by affidavits, depositions or admissions. Another distinction is that while the remedy of a judgment on the pleadings may be sought only by a claimant (one seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief, supra), a summary judgment may be applied for by either a claimant or a defending party.

7. ID.; ID.; ID.; GROUNDS RELIED ON BY JUDGE IN CASE AT BAR, NOT PROPER FOR DENIAL THEREOF. — These basic distinctions escaped His Honor. He denied the Dimans' motion for summary judgment in his Order of June 14, 1995, opining that a "perusal of the Complaint and the Answer will clearly show that material issue is raised in that both plaintiffs and defendants claimed ownership over the land in dispute, presenting their respective titles thereto and accused each other of possessing false title to the land." He added, citing cases, that a summary judgment "is not proper where the defendant presented defenses tendering factual issues which call for the presentation of evidence." Such a ratiocination is grossly erroneous. Clearly, the grounds relied on by the Judge are proper for the denial of a motion for judgment on the pleadings — as to which the essential question, as already remarked, is: are there issues arising from or generated by the pleadings? — but not as regards a motion for summary judgment — as to which the crucial question is: issues having been raised by the pleadings, are those issues genuine, or sham or fictitious, as shown by affidavits, depositions or admissions accompanying the application therefor? Errors on principles so clear and fundamental as those herein involved cannot be deemed so egregious as to constitute grave abuse of discretion, being tantamount to whimsical or capricious exercise of judicial prerogative.

8. ID.; ID.; ID.; ID.; CIRCUMSTANCES IN CASE AT BAR WARRANT GRANT THEREOF OR A JUDGMENT ON DEMURRER TO EVIDENCE. — The Heirs had proven nothing whatever justify a judgment in their favor. They had not presented any copy whatever of the title they wished to be quieted. They had not adduced any proof worthy of the name to establish their predecessor's ownership of the land. On the contrary,

their own evidence, from whatever aspect viewed, more than persuasively, indicated their lack of title over the land, or the spuriousness of their claim of ownership thereof. The evidence on record could not be interpreted in any other way, and no other conclusion could be drawn therefrom except the unmeritoriousness of the complaint. The case at bar is a classic example of the eminent propriety of a summary judgment, or a judgment on demurrer to evidence.

9. ID.; ID.; SPECIAL CIVIL ACTION; CERTIORARI; TRIAL COURT'S REFUSAL TO RENDER A SUMMARY JUDGMENT OR DEMURRER TO EVIDENCE CONSTITUTES GRAVE ABUSE OF DISCRETION IN CASE AT BAR. — Considering these circumstances, including the outlandish grounds of opposition advanced by the Heirs against the Dimans' motions for summary judgment and for demurrer to evidence, no less than the obviously mistaken grounds cited by the Trial Court for denying said motions, this Court has no hesitation in declaring that it was indeed grave abuse of discretion on the part of the Trial Court to have refused to render a summary judgment or one on demurrer to evidence. In no sense may the Trial Court's errors be considered, as the Court of Appeals did in its judgment of September 9, 1997, as mere errors of judgment correctible by appeal, untarnished by any capriciousness or whimsicality.

D E C I S I O N

NARVASA, C .J p:

The petition for review on certiorari in this case was initially dismissed by Resolution dated January 14, 1998; but after deliberating on petitioners' Motion for reconsideration dated February 23, 1998, the private respondents' comment thereon, the reply to the comment, as well as the record of the case itself, the Court was convinced that the order of dismissal should be reconsidered and the petition reinstated. It accordingly promulgated a resolution to that effect on October 12, 1998, and required "respondents to file their Comment on the petition within ten (10) days from notice . . . ."

Notice of the Resolution was duly served on private respondents' attorney on October 21, 1998. The latter filed a motion for extension of time of thirty (30) days to file comment, counted from October 31. The Court granted the extension sought, but only for fifteen (15) days. cdphil

The comment was filed late, on November 20, 1998. Counsel's explanation is that he had sought an extension of 30 days "due to the other volume of legal works similarly situated and school work of the undersigned as professor of law and dean of the University of Manila," and had entertained "the honest belief" that it would be granted. However, he learn, belatedly that only a 15-day extension had been conceded. He forthwith completed the comment and filed it, albeit five days late. LLpr

The Court admits the late comment, but takes this occasion to reiterate the familiar doctrine that no party has a right to an extension of time to comply with an obligation within the period set therefor by law; motions for extension are not granted as a matter of course; their concession lies in the sound discretion of the Court exercised in accordance with the attendant circumstances; the movant is not justified in assuming that the extension sought will be granted, or that it will be granted for the length of time suggested by him. It is thus incumbent on any movant for extension to exercise due diligence to inform himself as soon as possible of the Court's action on his motion, by timely inquiry of the Clerk of Court. Should he neglect to do so, he runs the risk of time running out on him, for which he will have nobody but himself to blame.

Now, the petition for review on certiorari appends practically all the material pleadings, motions, orders and judgments in the Regional Trial Court and the Court of Appeals. The respondents' comment on the petition has been filed, as just mentioned, and opposes its material averments. There is now no impediment to the adjudication of petitioners' appeal on the merits on the basis of the record as it stands at this time. This, the Court will now proceed to do.

In 1991, more than fifty years after the effectivity of the Rules of Court 1 — containing provisions relative inter alia to the modes of discovery 2 — this Court had occasion to observe that "among far too many lawyers (and not a few judges), there is, if not a regrettable unfamiliarity and even outright ignorance about the nature, purposes and operation of the modes of discovery, at least a strong yet unreasoned and unreasonable disinclination to resort to them — which is a great pity for the intelligent and adequate use of the deposition-discovery procedure, could, as the experience of other jurisdictions convincingly demonstrates, effectively shorten the period of Litigation and speed up adjudication." 3

The case at bar deals with one of such modes of discovery — a request for admission under Rule 26 of the Rules of 1964; more particularly. the legal consequences of the failure to respond thereto in the manner indicated by law. It also treats of other adjective devices to expedite litigation: a summary judgment under Rule 34, 4 and a judgment on demurrer to evidence under Rule 35. 5 Had the principles involved been better understood and more faithfully observed, the case might have been more quickly decided. Cdpr

Actually, there are several adjective tools incorporated in the Rules of Court explicitly designed, like those just mentioned, to abbreviate litigation or abort it at certain stages. Their obvious purpose is to unmask as quickly as may be feasible, and give short shrift to, untenable causes of action or defenses and thus avoid waste of time, effort and money. 6 For reasons yet to be fathomed, these devices seem to be of scant familiarity and of infrequent availment, as above observed, with the result that the salutary objective of the Rules of bringing about a simple, inexpensive and expeditious system of litigation has not been fully achieved.

Now, to come to grips with the cage. There is no disagreement about the antecedents. The case began in the Regional Trial Court of Las Piñas (Branch 255), where a complaint for "Quieting of Title and Damages" was filed by the Heirs of Veronica V. Moreno Lacalle (represented by Jose Moreno Lacalle) against Cristina Diman, Clarissa Diman, George Diman. Felipe Diman and Florina Diman. 7 In their complaint, the Lacalle heirs claimed that:

a) their mother, the late Veronica V. Moreno Lacalle (who died in 1992), was the owner of a "parcel of land situated at Brgy. Pulang Lupa Uno, Las Piñas, . . . covered by Transfer Certificate of Title No. 273301 of the Registry of Deeds of the Province of Rizal;"

b) Veronica Lacalle had acquired the land in 1959 by virtue of a deed of absolute sale, and retained as caretakers the persons she found in occupancy of the lot at the time of the sale, namely: Julian Nario and his wife, Adelaida Legaspi, "with arrangement to share the agricultural fruits" until the former would have need of the property;

c) the caretakers of the lot were served with a notice for them to vacate the land (dated November 22, 1994) and an alias writ of demolition (dated June 7, 1994) issued by the Metropolitan Trial Court in Civil Case No. 2619 — a case for "ejectment with damages" filed by the Dimans against the Narios, judgment

in which, commanding the Nario's ouster, had supposedly been affirmed by the Makati Regional Trial Court (Branch No. 137);

d) neither the deceased Veronica nor any of her heirs had been made parties to said ejectment action;

e) the complaint for ejectment contains false assertions. and had caused them injury for which the Dimans should be made to pay damages. Cdpr

In their answer with counterclaim dated February 2, 1995, 8 the Dimans alleged that:

a) they are the registered and absolute owners of the land registered in their names under TCT Nos. 90628, 90629 and 58676 (Pasay City), and have no knowledge of the land claimed by the Lacalle Heirs;

b) they are entitled to eject from their land the Nario Spouses who were falsely claiming to be their lessees;

c) if the Heirs' theory is that the land in their title, No. 273301 is the same as that covered by the Dimans' titles, then said title No. 2733101 is spurious because:

(1) no less than three official agencies — (i) the Office of the Registrar of Deeds for Rizal and Regional Registrar for Region IV, (ii) the Register of Deeds of Pasay City, and (iii) the Pangasiwaan Pangtalaan ng Lupain (Land Registration Authority) — have certified to the absence of any entry in their records concerning TCT No. 273301 covering land with an area of 22,379 square meters in the name of Veronica Vda. de Moreno Lacalle;

(2) Decree No. N-11601 explicitly cited as basis by TCT No. 273301 refers to land in Mauban, Quezon Province, according to the records of the Land Registration Authority; and GLRO Record No. 14978 also expressly mentioned as basis for TCT No. 273301, refers to a registration case heard in Pangasinan;

and

d) they are entitled to damages on their counterclaim. cdrep

After joinder of the issues, the Dimans served on the Heirs on February 2, 1995, a REQUEST FOR ADMISSION (dated February 2, 199~) of the truth of the following specified matters of fact, to wit : 9

a) the Heirs' TCT 273301 (Rizal) is not recorded in the Registry of Rizal, or of Pasay City, or of Parañaque, or of Las Piñas;

b) the Dimans' transfer certificates of title are all duly registered in their names in Pasay City, as alleged in their answer;

c) in the Index Records of Registered Property Owners under Act No. 496 in the Office of the Land Registration Authority, there is no record of any property situated in Las Piñas in the name of Veronica Lacalle, more particularly described in TCT 273301;

* 4) the Heirs cannot produce a certified true copy of TCT 273301:

5) neither Veronica Lacalle nor any of her heirs ever declared the property under TCT 273301 for taxation purposes since its alleged acquisition on February 24, 1959 or since the issuance of said title on August 7, 1959;

6) not a single centavo has been paid by the Heirs as real estate taxes; and

7) no steps have been taken by the Heirs to ascertain the genuineness and authenticity of the conflicting titles. prLL

The REQUEST FOR ADMISSION was received by Jose Lacalle himself through registered mail on February 6, 1995, and copy thereof. by the latter's lawyer (Atty. Cesar T. Ching) on February 4, 1995. However no response whatever was made to the request by Lacalle, his lawyer. or anyone else, despite the lapse of the period therefor fixed by Section 2 of Rule 26 (not less than ten days after service). The Dimans thereupon filed with the Court, a "MANIFESTATION WITH MOTION TO REQUIRE PLAINTIFFS TO ANSWER REQUEST FOR ADMISSION," dated March 28, 1995, 10 giving the Heirs ten (10) more days to file their answer to the request for admission, a copy of which was personally delivered to the latter's lawyer; but again, no response whatever was made.

The Dimans then submitted a "MOTION FOR SUMMARY JUDGMENT" dated April 17, 1995. 11 In that motion they drew attention to the Heirs' failure to file any Pre-Trial Brief, and the several instances when the Heirs failed to appear at scheduled hearings resulting in the dismissal of their complaint, which was however later reinstated. They argued that because the Heirs had failed to respond to their REQUEST FOR ADMISSION, each of the matters of which an admission was requested, was deemed admitted pursuant to Section 2, Rule 26. On this basis, and on the basis of the joint affidavit of Clarissa Diman de los Reyes and Florina Diman Tan — attached to the motion and substantiating the facts recited in the request for admission — the Dimans asserted that no genuine issue existed and prayed that "a summary judgment be entered dismissing the case for lack of merit."

The Heirs' counsel filed a two-page opposition dated May 15. 1995 12 in which, betraying an unfortunate unfamiliarity with the concept of summary judgments, he asserted inter alia that:

"In order for defendants (Dimans) to successfully pray for judgment on the pleadings, they have to clearly allege in their permissive counterclaim their cause of action and if the answer of the plaintiffs (Heirs) to such kind of counterclaim admit (sic) it or the answer to the counterclaim is a sham, that is the time for the defendants to move for a judgment summarily.. . . (D)efendants have no cause of action for praying for summary judgment. It is the plaintiffs who will pray for that and not the defendants."

Subsequently, the Dimans submitted a reply dated May 23, 1995; 13 the Heirs, a rejoinder dated June 1, 1995; 14 and the Dimans, a pleading entitled "Exceptions and Comment to Plaintiffs' Rejoinder" dated June 8, 1995. 15

The Trial Court denied the Dimans' motion for summary judgment. In its Order of June 14, 1995, 16 the Court declared that a "perusal of the Complaint and the Answer will clearly show that material issue is raised in that both plaintiffs and defendants claimed ownership over the land in dispute, presenting their respective titles thereto and accused each other of possessing false title to the land." It stressed, citing jurisprudence. that a summary judgment "is not proper where the defendant presented defenses tendering factual issues which call for the presentation of evidence." cdrep

The case proceeded to trial in due course. At its start. the Heirs' counsel, Atty. Michael Moralde, responding to questions of the Court, admitted that his clients did not have the original copy of the title

which was the basis for their cause of action, but asserted that they were "still searching" for it since "(i)n every municipality there are several Registry of Deeds." He theorized that the word "title" . . . is a relative term . . .(and) does not only refer to a document but refers to ownership." 17

Only Jose Moreno Lacalle gave evidence for the plaintiff Heirs. Like Atty. Moralde, he admitted that he had no copy "of the document which says . . . . (his) mother is the registered owner;" that the deed of sale was not the only basis for his and his co-heirs' claim to the land, but also "a xerox copy of the " title . . . except that . . . (he) cannot find the original;" that "maybe" the original was in possession of the person who was his mother's agent in all her transactions, a certain Mr. Lopez, whom he could no longer locate; that he had tried to verify the existence of the title "from the Register of Deeds of Pasig and Pasay" without success; that he had not, however, gone to the Register of Deeds of Parañaque or Las Piñas. 18

The Heirs' documentary evidence consisted of (1) Veronica Lacalle's death certificate and special power of attorney authorizing Jose Lacalle to act for his brothers and sisters; and (3) the deed of absolute sale purportedly executed by Eusebio Mojica, Clara Mojica, Maria Mojica, Antonia Mojica. Amanda Mojica and Teodora Aranda which deeded over to Veronica Lacalle the "land 'known as Lot 1 PSU-151453,"' but which made no reference to any Torrens title over it.

Shortly after the Heirs rested their case, the Dimans filed a "Motion for Judgment on Demurrer to Evidence," dated June 25, 1996. 19 They summarized the Heirs' evidence — focusing attention on the Heirs' failure to present "even an unauthenticated photocopy of the title," and the absence of any proof that any proceedings for registration of the land under the Torrens Act had been instituted — and emphasized anew said Heirs' implied admissions resulting from their failure to answer their (the Dimans') request therefor as a mode of discovery. On these premises, the Dimans contended that a judgment on demurrer should be rendered, there being no genuine issue between the parties notwithstanding the ostensible conflict of averments in their basic pleadings.

The Heirs presented a three-page opposition, dated July 7 1996. 20 In it their counsel set out the startling contention that "(d)emurrer to evidence is violative to due process as the judgment be rendered without giving the plaintiff the opportunity to cross-examine the defendant," and petulantly inquired, "How could the truth come out without cross-examination of the defendants by the plaintiffs?" particularly, as regards "whether their (the Dimans') title is not fake." Said counsel also posited the amazing notion that "Demurrer to evidence may be correct only in criminal cases as it is the right of the accused to remain silent, and that includes his right to file demurrer for fear of cross-examination. But not in Civil Cases." Once more counsel regrettably exposed his ignorance of quite elementary legal principles. cdll

Again, the Dimans' efforts at expediting disposition of the litigation were unsuccessful. By Order dated December 2, 1996, 21 the Trial Court denied their motion to dismiss. Respecting the Heirs' omission to present in evidence any copy (even a photocopy) of TCT No. 273301, the Court remarked that "Not being able to prove the genuineness and authenticity of TCT No. 273301, it being only a mere xerox copy . . . (the Heirs) did not formally offer the same in evidence." However, the Court said, the deed of sale of the land in Veronica Lacalle's favor that was submitted instead — the "genuineness and authenticity . . . (of which had) been fully established" by the certificate of the Clerk of Court of the Manila RTC — was adequate for the purpose. According to the Court, "(e)xecution of a deed of conveyance in a certain prescribe form gave effect to the transfer of a title to the land conveyed . . . (and) without being

controverted by any convincing evidence to the contrary can be a sufficient basis in granting the plaintiffs' relief for quieting of their title." The Order passed sub silentio on the quaint; contentions in the Heirs' opposition.

The Dimans moved for reconsideration under date of January 2, 1997 22 inter alia (1) alleging that although the photocopy of TCT 2773301 annexed to the Heirs' complaint states that the "certificate is a transfer from T.C.T. No. 259150" (and this, presumably, would be the vendors' [the Mojicas'] title), no effort whatever was made to submit proof thereof and (2) reiterating the proposition that the Heirs were bound by their implied admissions under Rule 26.

The Dimans also submitted a "SUPPLEMENT TO MOTION FOR RECONSIDERATION" dated January 7, 1997 23 in which they invited attention to the identity of the technical description of the land contained in the deed of sale to Veronica Lacalle and that set out in TCT No. 273301. It must therefore have been Veronica Lacalle, they reasoned, who had instituted the registration proceedings leading to the supposed issuance of said TCT No. 273301. Yet the Heirs failed to present evidence of the record of any such registration proceedings, just as they failed to present evidence of any authentic copy of the title itself.

The Heirs filed a one-page "Vehement Opposition . . . " dated February 15, 1997. 24 Once again they reiterated the astounding argument that the Dimans' "insistence . . . (on the demurrer to evidence) is tantamount to suppression of their evidence as they are afraid of cross-examination"!

Again the Trial Court rebuffed the Dimans. In its Order of February 28, 1997, 25 the Court ruled that the issues raised in the motion for reconsideration and its supplement had already been passed upon in the Order of December 2, 1996. It then set the case "for the reception of defendants' evidence on April 22, 1997 . . .

What the Dimans did was to commence a special civil action of certiorari, mandamus and prohibition in the Court of Appeals praying (a) that it set aside the Orders of June 14, 1995 (denying summary judgment), of December 2 (denying demurrer to evidence), and of February 28. 1997 (denying reconsideration); (b) that the Trial Judge be commanded to dismiss the case before it; and (c) that said judge be prohibited from conducting further proceedings in the case. prLL

But once again their efforts met with failure. The Appellate Tribunal (Seventh Division) promulgated judgment on September 9, 1997 decreeing that their petition be "DENIED due course and DISMISSED." The Court of Appeals held that insofar as concerned the Order of June 14, 1995, the petition for its invalidation had not been filed within a reasonable time; and that as regards the Order of December 2, 1996, the remedy of certiorari was improper because: (1) said order was merely interlocutory, (2) any error therein constituted only an error of judgment correctible by appeal. and (3) there was no capriciousness or whimsicality attendant upon the order. The Dimans' motion for reconsideration was later denied by the Court of Appeals by Resolution dated November 5, 1997. 26

The Dimans thereupon filed with this Court a petition for review on certiorari of the Appellate Tribunal's Decision of September 9, 1997. But seemingly consistent with the pattern of judicial misfortune which they had theretofore been traversing, their petition for review was dismissed. by Resolution dated January 14, 1998. Their appeal was however subsequently reinstated, as earlier recounted.

Now, what first strikes the Court about the case at bar is the regrettable absence of familiarity, therein laid bare, with the rules of discovery and with the underlying philosophy and principles of the cognate remedy of summary judgment. That resulted in the undue protraction of the present action despite ample demonstration of the absence of any genuine issue — that is to say. that the issues ostensibly arising from the pleadings were sham or fictitious.

A Trial Court has no discretion to determine what the consequences of a party's refusal to allow or make discovery should be; it is the law which makes that determination; and it is grave abuse of discretion for the Court to refuse to recognize and observe the effects of that refusal as mandated by law. Particularly as regards requests for admission under Rule 26 of the Rules of Court, the law ordains that when a party is served with a written request that he admit: (1) the genuineness of any material and relevant document described in and exhibited with the request, or (2) the truth of any material and relevant matter of fact set forth in the request, said party is bound within the period designated in the request, 27 to file and serve on the party requesting the admission a sworn statement either (1) denying specifically the matters of which an admission is requested or (2) setting forth in detail the reasons why he cannot truthfully either admit or deny those matters. If the party served does not respond with such a sworn statement, each of the matters of which an admission is requested shall be deemed admitted. 28

In this case, the Dimans' request for admission was duly served by registered mail on Jose Lacalle on February 6, 1995, and a copy thereof on his lawyer on February 4, 1995. Neither made any response whatever within the reglementary period. Nor did either of them do so even after receiving copy of the Dimans' "MANIFESTATION WITH MOTION TO REQUIRE PLAINTIFFS TO ANSWER REQUEST FOR ADMISSION," dated March 28, 1995. On account thereof, in legal contemplation, the Heirs impliedly admitted all the facts listed in the request for admission. These plain and simple legal propositions were disregarded by His Honor. cdrep

It is also the law which determines when a summary judgment is proper. It declares that although the pleadings on their face appear to raise issues of fact — e.g., there are denials of, or a conflict in, factual allegations — if t is shown by admissions, depositions or affidavits, that those issues are sham, fictitious, or not genuine, or, in the language of the Rules, that "except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. 29 the Court shall render a summary judgment for the plaintiff 30 or the defendant, 31 as the case may be. 32

Parenthetically, the existence or appearance of ostensible issues in the pleadings, on the one hand, and their sham or fictitious character. on the other, are what distinguish a proper case for a summary judgment 33 from one for a judgment on the pleadings under Rule 19 of the 1964 Rules. 34 In the latter case, there is no ostensible issue at all, but the absence of any because of the failure of the defending party's answer to raise an issue. Rule 19 expresses the principle as follows:

"Where an answer fails to tender an issue, or otherwise admits the material allegations of the adverse party's pleading, the court may, on motion of that party, direct judgment on such pleading . . . 35

On the other hand, in the case of a summary judgment. issues apparently exist — i.e., facts are asserted in the complaint regarding which there is as yet no admission, disavowal or qualification; or specific

denials or affirmative defenses are in truth set out in the answer — but the issues thus arising from the pleadings are sham, fictitious, not genuine, as shown by admissions, depositions or admissions. In other words, as a noted authority remarks, a judgment on the pleadings is a judgment on the facts as pleaded, while a summary judgment is a judgment on the facts as summarily proven by affidavits, depositions or admissions. 36 Another distinction is that while the remedy of a judgment on the pleadings may be sought only by a claimant (one seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief, supra), a summary judgment may be applied for by either a claimant or a defending party.

These basic distinctions escaped His Honor. He denied the Dimans' motion for summary judgment in his Order of June 14, 1995, opining that a "perusal of the Complaint and the Answer will clearly show that material issue is raised in that both plaintiffs and defendants claimed ownership over the land in dispute, presenting their respective titles thereto and accused each other of possessing false title to the land." He added, citing cases. that a summary judgment "is not proper where the defendant presented defenses tendering factual issues which call for the presentation of evidence." Such a ratiocination is grossly erroneous. Clearly, the grounds relied on by the Judge are proper for the denial of a motion for judgment on the pleadings — as to which the essential question, as already remarked, is: are there issues arising from or generated by the pleadings? — but not as regards a motion for summary judgment — as to which the crucial question is: issues having been raised by the pleadings, are those issues genuine, or sham or fictitious as shown by affidavits, depositions or admissions accompanying the application therefor?

Errors on principles so clear and fundamental as those herein involved cannot be deemed so egregious as to constitute grave abuse of discretion being tantamount to whimsical or capricious exercise of judicial prerogative. LibLex

When the Heirs closed their evidence as party plaintiffs. and the Dimans moved to dismiss on ground of insufficiency of the Heirs' evidence, the Trial Judge was charged with the duty to assess the evidence to ascertain whether or not "upon the facts and the law the plaintiff(s) . . . (have) shown no right to relief." It was in the first place incumbent on His Honor to hold the Heirs bound to their admissions appearing in the record, express and implied. In accordance with Section 2, Rule 26 of the 1964 Rules of Court, the Heirs were impliedly, but no less indubitably, deemed to have admitted the facts on which admissions had been duly requested by reason of their failure to reply thereto. Said Section 2 reads as follows:

"SEC. 2. Implied admission. — Each of the matters of which an admission is requested shall be deemed admitted unless within a period designated in the request, which shall not be less than ten (10) days after service thereof, or within such further time as the court may allow on motion and notice, the party to whom the request is directed serves upon the party requesting the admission a sworn statement either denying specifically the matters on which an admission is requested or setting forth in detail the reasons why he cannot truthfully either admit or deny those matters.

Objections on the ground of irrelevancy or impropriety or the matter requested shall be promptly submitted to the court for resolution." 37

In determining the chief issue in the case, the Trial Judge should have taken due account of the following circumstances on record and obvious legal propositions:

1) the Heirs' admissions of the following facts, viz..

a) the Heirs' TCT 273301 (Rizal) is not recorded in the Registry of Rizal, or of Pasay City, or of Parañaque, or of Las Piñas;

b) on the other hand, the Dimans' transfer certificates of title are all duly registered in their names in Pasay City;

c) there is no record of any property situated in Las Piñas in the name of Veronica Lacalle — more particularly described in TCT 273301 — in the Index Records of Registered Property Owners under Act No. 496 in the Office of the Land Registration Authority;

d) the Heirs do not have and cannot produce even a certified true copy of TCT 273301;

e) neither Veronica Lacalle nor any of her heirs ever declared the property under TCT 273301 for taxation purposes since its alleged acquisition on February 24, 1959 or since the issuance of said title on August 7,195 ;

f) not a single centavo was ever paid by the Heirs as real estate taxes; and

g) no steps were ever taken by the Heirs to ascertain the genuineness and authenticity of the conflicting titles.

2) the statement in open Court of the Heirs' own counsel that his clients did not have the original copy of the title, that they were in fact "still searching for the title; 38

3) the testimony of Jose Moreno Lacalle that he had no copy "of the document which says . . . (his) mother is the registered owner" of the land in question; that he "cannot find the original" which "maybe" was in possession of his mother's agent, a certain Mr. Lopez, whom he could no longer locate: that he had tried to verify the existence of the title "from the Register of Deeds of Pasig and Pasay" without success; that he had not, however, gone to the Register of Deeds of Parañaque or Las Piñas; 39

4) that the only document bearing on the issue submitted by the Heirs, the deed of absolute sale purportedly executed by Eusebio Mojica. Clara Mojica, Maria Mojica, Antonia Mojica, Amanda Mojica and Teodora Aranda — which deeded over to Veronica Lacalle the "land 'known as Lot 1 PSU-151453,"' but which made no reference to any Torrens title over it — was not accompanied by proof of the vendors' ownership of the land in question;

5) that the land subject of the Heirs' action for quieting of title being registered land (being in fact registered in the Dimans' favor). the unregistered deed of sale relied upon by the Heirs cannot and does not affect said land, or bind any third party (including the Dimans) for the reason that as a matter of law:

" . . . (N)o deed, mortgage, lease or other voluntary instrument. except a will purporting to convey or affect registered land, shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration;" and it is the "act of registration (that) shall be the operative act to convey or affect the land in so far as third persons are concerned, "which" registration shall be made in the . . . Register of Deeds for the province or city where the land lies." 40

and

6) that there is no proof whatever of the ownership or character of the rights of the vendors (the Mojicas) over the property purportedly conveyed. cdll

In fine, the Heirs had proven nothing whatever to justify a judgment in their favor. They had not presented any copy whatever of the title they wished to be quieted. They did not adduced any proof worthy of the name to establish their predecessors' ownership of the land. On the contrary. their own evidence, from whatever aspect viewed, more than persuasively indicated their lack of title over the land, or the spuriousness of their claim of ownership thereof. The evidence on record could not be interpreted in any other way, and no other conclusion could be drawn therefrom except the unmeritoriousness of the complaint. The case at bar is a classic example of the eminent propriety of a summary judgment, or a judgment on demurrer to evidence.

Considering these circumstances, including the outlandish grounds of opposition advanced by the Heirs against the Dimans' motions for summary judgment and for demurrer to evidence, no less than the obviously mistaken grounds cited by the Trial Court for denying said motions, this Court has no hesitation in declaring that it was indeed grave abuse of discretion on the part of the Trial Court to have refused to render a summary judgment or one on demurrer to evidence. In no sense may the Trial Court's errors be considered, as the Court of Appeals did in its judgment of September 9, 1997 as mere errors of judgment correctible by appeal, untarnished by any capriciousness or whimsicality.

WHEREFORE, the challenged Decision of the Court of Appeals promulgated on September 9, 1997 is REVERSED and SET ASIDE: the Orders dated July 14, 1996 and December 2, 1996 rendered in the action for "Quieting of Title and Damages" — docketed as Civil Case No. 94-3085 of the Regional Trial Court at Las Piñas (Branch 255) and entitled "Heirs of Veronica V. Moreno Lacalle, represented by Jose Moreno Lacalle versus Cristina Diman, Clarissa Diman, George Diman, Felipe Diman and Florina Diman' — are annulled; and said Civil Case No. 94-3085 is DISMISSED. Costs against private respondents.

IT IS SO ORDERED. Cdrep

||| (Ontimare, Jr. v. Spouses Elep, G.R. No. 159224, January 20, 2006)

SYLLABUS

1.REMEDIAL LAW; CIVIL PROCEDURE; SUMMARY JUDGMENT; REQUISITES; CASE AT BAR. — For summary judgment to be proper, two (2) requisites must concur, to wit: (1) there must be no genuine issue on any material fact, except for the amount of damages; and (2) the moving party must be entitled to a judgment as a matter of law. When, on their face, the pleadings tender a genuine issue, summary judgment is not proper. An issue is genuine if it requires the presentation of evidence as distinguished from a sham, fictitious, contrived or false claim. In the instant case, the summary judgment was rendered after the presentation of evidence by both parties in a full blown trial. Records show that during the two-year trial of the case, Ontimare, Sr. had presented his own witnesses, all four of them, and had cross-examined the witnesses of the opposing party. The trial court's decision was merely denominated as summary judgment. But in essence, it is actually equivalent to a judgment on the merits, making the rule on summary judgment inapplicable in this case.

2.ID.; ID.; APPEAL; QUESTIONS OF FACT, NOT PROPER; EXCEPTIONS. — Except for the issue on exemplary damages, petitioners raise pure questions of fact, which may not be the subject of a petition for review on certiorari. Well-settled is the rule that the Supreme Court is not a trier of facts. When supported by substantial evidence, the findings of fact of the Court of Appeals are conclusive and binding on the parties and are not reviewable by this Court, unless the case falls under any of the following recognized exceptions: (1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures; (2) When the inference made is manifestly mistaken, absurd or impossible; (3) Where there is a grave abuse of discretion; (4) When the judgment is based on a misapprehension of facts; (5) When the findings of fact are conflicting; (6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) When the findings are contrary to those of the trial court; (8) When the findings of fact are conclusions without citation of specific evidence on which they are based; (9) When the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the respondents; and (10) When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record. Petitioners failed to show that their case falls under any of the above-quoted exceptions. Hence, we see no reason to disturb the findings of the Court of Appeals, which we find supported by evidence on record.

3.CIVIL LAW; DAMAGES; EXEMPLARY DAMAGES; PROPRIETY THEREOF. — Exemplary damages are imposed by way of example or correction for the public good. Ontimare, Sr.'s firing his shotgun at respondents' workers cannot be countenanced by this Court. Exemplary damages in the amount of P50,000 is proper.

D E C I S I O N

QUISUMBING, J p:

For review on certiorari is the Decision, 1 dated July 18, 2003, of the Court of Appeals in CA-G.R. CV No. 69138, affirming with modifications the Summary Judgment 2 dated July 11, 2000 of the Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-96-28991. The RTC ordered Jose M. Ontimare, Sr. to pay respondents actual and compensatory damages in the amount of P75,000 per month from July 1996

to September 1998, exemplary damages amounting to P50,000, attorney's fees in the amount of P30,000, and the sum of P150,000 as reimbursement for the damage on respondents' wood parquet floors, wall paintings and ceiling.

The facts, as borne by the records, are as follows:

Ontimare Sr. and respondents are neighbors in Hyacinth Street, Roxas District, Quezon City. Respondents wanted to build a four-door, two-storey apartment on their lot at No. 74 Hyacinth Street and applied for a building permit with the Building Official of Quezon City sometime in December 1995.

Ontimare Sr. owned the adjoining house and adjacent lot on No. 72 Hyacinth Street. His terrace extends to the boundary between his property and respondents'. On December 3, 1995, respondents wrote Ontimare Sr. a letter seeking his written consent to the construction of a firewall adjacent to his existing firewall.

Instead of consenting, on December 20, 1995, Ontimare Sr. filed a Complaint with the Building Official asking that the request for a building permit be withheld since a firewall would adversely affect the ventilation and market value of his property.

Despite a building permit issued to respondents on January 8, 1996, 3 a Cease and Desist Order 4 to stop the construction of the four-door apartment was issued on January 12, 1996, as a result of the Complaint of Ontimare Sr.

However, when respondents wrote the City Engineer and explained they were constructing a one-sided firewall within their property, the Cease and Desist Order was forthwith lifted on January 16, 1996.

On January 26, 1996, the complaint of Ontimare Sr. was dismissed. He appealed to the City Mayor, who ordered an investigation on the matter.

On February 2, 1996, Ontimare Sr. filed a Notarial Prohibition.

After hearings conducted on June 18 and 25, 1996, the Building Official dismissed the complaint on July 11, 1996 and ordered Ontimare Sr. to make the adjustments in the construction of his house. 5 Respondents were issued a new building permit on July 16, 1996. 6

Meanwhile, the day before, on July 15, 1996, while respondents' workers were plastering and water-proofing the firewall, Ontimare Sr. fired his shotgun, threatening to kill anyone who would enter his property and work on respondents' construction. 7 As a result, a portion of the firewall remained unfinished. According to respondents, water seeped in the building and damaged the sanding, the wood parquet floors and the ceiling. Respondents filed an action for damages with application for preliminary injunction and restraining order against Ontimare Sr. before the Regional Trial Court of Quezon City, Branch 77. DcaSIH

After trial, Ontimare Sr. moved for a summary judgment while the respondents moved for the resolution of the case on the merits. The RTC issued the summary judgment, the dispositive portion of which reads,

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs, and the defendant is hereby ordered to pay the plaintiffs:

1.Actual and compensatory damages in the form of unrealized income and bank amortization interest in the amount of P75,000.00 per month from July, 1996 to September, 1998;

2.The amount of P150,000.00 as reimbursement for the damage on the wood parquet floors, wall paintings and ceiling;

3.P50,000.00 as and by way of exemplary damages; and

4.P30,000.00 as and by way of attorney's fees.

SO ORDERED. 8

On appeal, the Court of Appeals affirmed the assailed summary judgment with modification,

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs, and the defendant is hereby ordered to pay the plaintiffs:

1.Compensatory damages in the form of unrealized income in the total amount of Two Hundred Eighty-eight Thousand Pesos (P288,000.00) for Apartments A, B and C, and bank amortization interest from July 1996 to July 1997 in the total amount of Three Hundred Forty-four Thousand Eight Hundred Seventy-five Pesos and 74/100 centavos (P344,875.74);

2.The amount of P150,000.00 as reimbursement for the damage on the wood parquet floors, wall paintings and ceiling;

3.P50,000.00 as and by way of exemplary damages; and

4.P30,000 as and by way of attorney's fees.

SO ORDERED. 9

Meanwhile, while the case was on appeal, Ontimare Sr. died. He was survived by his two sons, petitioners herein, who now come to us on a petition for review on certiorari on the ground that:

1.THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN MAINTAINING THE TRIAL COURT'S SUMMARY JUDGMENT AGAINST MOVANT DEFENDANT

2.THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN OVERLOOKING MATERIAL FACTS TO FIND DEFENDANT SOLELY LIABLE FOR THE DELAY IN THE PLASTERING OF THE FIREWALL

3.THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT HOLDING THAT THE LOWER COURT ERRED IN CONSIDERING DEFENDANT'S MOTION FOR RECONSIDERATION AS A MERE SCRAP OF PAPER WHICH COULD NOT BE ACTED UPON BY THE COURT

4.THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN AWARDING UNEARNED RENT AND REIMBURSEMENT OF BANK INTEREST AMORTIZATION FOR ANY PERIOD AFTER THE REWORK ON THE FIREWALL HAD BEEN COMPLETED IN SEPTEMBER 1996

5.THE COURT OF APPEALS COMMITTED A PATENT ERROR IN GRANTING DAMAGES EQUIVALENT TO ELEVEN MONTHS WHEN THE LIABILITY PERIOD IT COMPUTED ONLY ADDED UP TO TEN MONTHS

6.THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN AWARDING EXEMPLARY DAMAGES WITHOUT ANY BAD FAITH ON THE PART OF DEFENDANT 10

Simply put, there are two issues for resolution, namely (1) Is the summary judgment rendered by the trial court proper? (2) Are petitioners liable for the damages awarded?

Anent the first issue, petitioners argue that summary judgment may issue only in favor of a moving party and only when there is no genuine issue on any material fact, except for the amount of damages. Petitioners insist that the summary judgment in this case was rendered against the movant and despite the existence of disputed facts. aSTAcH

On the other hand, respondents counter that Ontimare Sr., in moving for summary judgment indicated that he did not want a de riguer trial. Further, respondents argue that he waived his right to question the said summary judgment when he did not object to respondents' motion that the case be resolved on its merits.

On this issue, Rule 34, Section 3 of the Rules of Court is pertinent. It provides:

SEC. 3.Motion and proceedings thereon. — . . . After the hearing, the judgment sought shall be rendered forthwith if the pleading, depositions, and admissions on file together with the affidavits, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Hence, for summary judgment to be proper, two (2) requisites must concur, to wit: (1) there must be no genuine issue on any material fact, except for the amount of damages; and (2) the moving party must be entitled to a judgment as a matter of law.

When, on their face, the pleadings tender a genuine issue, summary judgment is not proper. An issue is genuine if it requires the presentation of evidence as distinguished from a sham, fictitious, contrived or false claim. 11

In the instant case, the summary judgment was rendered after the presentation of evidence by both parties in a full blown trial. Records show that during the two-year trial of the case, Ontimare Sr. had presented his own witnesses, all four of them, and had cross-examined the witnesses of the opposing party.

The trial court's decision was merely denominated as summary judgment. But in essence, it is actually equivalent to a judgment on the merits, making the rule on summary judgment inapplicable in this case.

Anent the second issue, petitioners contend that respondents were issued locational clearance only on July 16, 1996 and hence, the start of the construction work should be reckoned not earlier than the said date. When the shotgun incident happened on July 15, 1996, respondents had no locational clearance.

Petitioners also argue that the unearned rent and reimbursement of bank interest amortization should be counted up to and not from the completion of the rework because the apartments could have been rented out and could have started to earn once the rework was completed. Petitioners insist the period for the computation of unrealized income should have been ten months.

Lastly, petitioners maintain that Ontimare Sr. did not act in bad faith nor abusively in the protection of his rights, thus no exemplary damages should be granted.

For their part, respondents counter that petitioners raise pure questions of fact already ruled upon by the Court of Appeals, hence, the instant petition should be denied outright. Granting arguendo that the petition should be given due course, respondents aver that Ontimare Sr., despite knowledge that respondents had already acquired a building permit, nevertheless, threatened bodily harm on workers of respondents to prevent the construction. He should thus be held liable for damages for abuse of his rights to the prejudice of respondents.

Respondents alleged that rework on the firewall started from September 1996, as evidenced by the receipts issued by the contractor. The compensatory damages in the form of unearned rent started to accrue on October 1, 1996 until the completion of the rework on August 1, 1997 for Apartment A (a total of eleven months) and until July 15, 1997 for Apartments B and C (a total of ten months and fifteen days). DACcIH

Lastly, respondents posit that Ontimare Sr.'s threats with use of a firearm constitute bad faith.

At the outset, it bears stressing that, except for the issue on exemplary damages, petitioners raise pure questions of fact, which may not be the subject of a petition for review on certiorari. 12 Well-settled is the rule that the Supreme Court is not a trier of facts. When supported by substantial evidence, the findings of fact of the Court of Appeals are conclusive and binding on the parties and are not reviewable by this Court, unless the case falls under any of the following recognized exceptions:

(1)When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;

(2)When the inference made is manifestly mistaken, absurd or impossible;

(3)Where there is a grave abuse of discretion;

(4)When the judgment is based on a misapprehension of facts;

(5)When the findings of fact are conflicting;

(6)When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee;

(7)When the findings are contrary to those of the trial court;

(8)When the findings of fact are conclusions without citation of specific evidence on which they are based;

(9)When the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the respondents; and

(10)When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record. 13

Petitioners failed to show that their case falls under any of the above-quoted exceptions. Hence, we see no reason to disturb the findings of the Court of Appeals, which we find supported by evidence on record.

We are likewise constrained from reversing the award of exemplary damages. Exemplary damages are imposed by way of example or correction for the public good. 14 Ontimare Sr.'s firing his shotgun at respondents' workers cannot be countenanced by this Court. Exemplary damages in the amount of P50,000 is proper.

WHEREFORE, the petition is DENIED. The assailed Decision, of the Court of Appeals dated July 18, 2003, in CA-G.R. CV No. 69138 is AFFIRMED. Costs against petitioners. THEDCA

SO ORDERED.

||| (Asian Construction and Development Corp. vs. PCI Bank, G.R. No. 153827, April 25, 2006)

GARCIA, J p:

In this petition for review under Rule 45 of the Rules of Court, petitioner Asian Construction and Development Corporation or "ASIAKONSTRUKT," seeks the reversal and setting aside of the decision 1 dated March 15, 2002 and the Resolution 2 dated June 3, 2002 of the Court of Appeals (CA) in CA-G.R. CV No. 68189. The assailed decision affirm with modification the Summary Judgment rendered by the Regional Trial Court (RTC) of Makati City in an action for a sum of money thereat commenced by the herein respondent, Philippine Commercial International Bank (PCIBANK) against the petitioner, while the challenged resolution denied petitioner's motion for reconsideration.

The facts:

On February 24, 1999, in the RTC of Makati City, respondent PCIBANK filed a complaint 3 for a sum of money with prayer for a writ of preliminary attachment against petitioner ASIAKONSTRUKT. Docketed as Civil Case No. 99-432, the complaint alleged, inter alia, as follows:

FIRST CAUSE OF ACTION

2.01 On various occasions, ASIAKONSTRUKT obtained U.S. dollar denominated credit accommodations from PCIBANK in the amount of Four Million Four Hundred Eighty Seven Thousand U.S. dollars (US$4,487,000.00), exclusive of interests, charges and fees thereon and the cost of collecting the same. These credit accommodations are covered by the following promissory notes:

xxx xxx xxx

2.02 Prompt and faithful payment of all the foregoing promissory notes was secured by the following deeds of assignment executed by ASIAKONSTRUKT in favor of PCIBANK:

(a) Deed of Assignment of Receivables/Contract Proceeds dated 20 July 1994 . . . where ASIAKONSTRUKT assigned its receivables from its Contract . . . with the National Power Corporation (NPC) in the amount of . . . P54,500,000;

(b) Deed of Assignment of Receivables . . . dated 28 June 1995 . . . where ASIAKONSTRUKT assigned its receivables from its Contract . . . with the NPC in the amount of . . . P26,281,000.00;

(c) Deed of Assignment of Receivables dated 28 August 1995 . . . where ASIAKONSTRUKT assigned its receivables from its Sub-Contract with ABB Power, Inc., in the amount of P43,000,000.00;

(d) Deed of Assignment of Contract Proceeds dated 27 March 1996 . . . where ASIAKONSTRUKT assigned its receivables from its contracts with PNOC . . . in the aggregate amount of P46,000,000.00; and cSHIaA

(e) Deed of Assignment of Contract Proceeds . . . dated 20 February 1997 . . . where ASIAKONSTRUKT assigned its receivables from the Ormat Philippines, Inc., in the aggregate amount of US$3,350,000.00;

2.03 All the foregoing deeds of assignments stipulate, among others, the following terms and conditions:

a) The assignment is for the purpose of securing payment of the principal amount and the interests and bank charges accruing thereon, the costs of collecting the same and all other expenses which PCIBANK may be put in connection with or as an incident of the assignment;

b) That the assignment secures also any extension or renewal of the credit which is the subject thereof as any and all other obligations of ASIAKONSTRUKT of whatever kind and nature as appear in the records of PCIBANK, which ASIAKONSTRUKT accepts as the final and conclusive evidence of such obligations to PCIBANK, "whether contracted before, during or after the constitution of [the assignment agreement]";

c) That PCIBANK authorizes ASIAKONSTRUKT, at the latter's expense, to "collect and receive for [PCIBANK] all the Receivables"; and

d) That ASIAKONSTRUKT "shall have no right, and agrees not to use any of the proceeds of any collections, it being agreed by the parties that [ASIAKONSTRUKT] divests itself of all the rights, title and interest in said Receivables and the proceeds of the collection received thereon."

2.04 The promissory notes have remained not fully paid despite their having become due and demandable. Repeated verbal and written demands were made upon ASIAKONSTRUKT, but to no avail. It has failed and refused, and continues to fail and refuse, to pay its outstanding obligations to PCIBANK. . .;

2.05 As a result of ASIAKONSTRUKT's refusal to pay its outstanding obligations, PCIBANK was constrained to refer the matter . . . to counsel and thus incur attorney's fees and legal costs.

2.06 The aggregate unpaid obligation of ASIAKONSTRUKT to PCIBANK, as of 31 December 1998, amounts to. . . US$4,553,446.06, broken down as follows:

Principal US$ 4,067,867.23

Interest US$ 291,263.27

Penalties US$ 194,315.56

TOTAL US$ 4,553,446.06

For its second cause of action, PCIBANK alleged in the same complaint as follows:

SECOND CAUSE OF ACTION

4.02 . . . as a result of the fraudulent acts of ASIAKONSTRUKT, PCIBANK suffered the following damages, all of which ASIAKONSTRUKT must be held to pay PCIBANK:

4.02.1 Exemplary damages, in the interest of public good and purposes of correction, in the amount of not less than . . . P50,000.00;

4.02.2 Attorney's fees in the amount of not less than . . . P1,800,000.00; and DHSaCA

4.02.3 Costs of suit.

In support of its prayer for a writ of preliminary attachment embodied in the complaint, plaintiff PCIBANK alleges the following:

3.02 . . . ASIAKONSTRUKT is guilty of fraud in contracting the debt, in the performance thereof, or both, . . . ;

303. PCIBANK agreed to enter into the above-mentioned credit accommodations primarily because of the existence of the deeds of assignment listed above. However, from telephone inquiries made with responsible officers of the National Power Corporation, ABB Power, Inc., PNOC and Ormat Philippines, Inc., PCIBANK was surprised to learn that ASIAKONSTRUKT had long ago collected the contract proceeds, or portions thereof, which were previously assigned to PCIBANK. However, to date, it has yet to turn over these proceeds to PCIBANK. Worse, PCIBANK learned that the contract proceeds were used by ASIAKONSTRUKT for its own purposes — clear evidence of fraud, which has deprived PCIBANK of its security. ASIAKONSTRUKT's unauthorized use of the contract proceeds for its own purposes was subsequently confirmed by Mr. Napoleon Garcia, Vice President for Finance of ASIAKONSTRUKT, in a telephone discussion on 12 January 1999 with Ms. Maricel E. Salaveria of PCIBANK. . . . Needless to say, ASIAKONSTRUKT has fraudulently collected such receivables to the prejudice of PCIBANK.

3.04 . . . it is evident that ASIAKONSTRUKT never had any intention of complying with the deeds of assignment. ASIAKONSTRUKT only misled PCIBANK into believing that it had sufficient security to ensure payment of its loan obligations.

3.05 Alternatively, granting, in argumenti gratia, that ASIAKONSTRUKT, at the time it executed the foregoing deeds of assignment, really intended to abide by their terms and conditions, it nevertheless committed manifest fraud when it collected the contract proceeds, and instead of remitting them to PCIBANK, used them for its own purposes.

In an order 4 dated April 13, 1999, the trial court, after receiving ex parte PCIBANK's evidence in support of its prayer for preliminary attachment, directed the issuance of the desired writ, thus:

WHEREFORE, let a writ of preliminary attachment issue against all the property of defendant not exempt from execution or so much thereof as may be sufficient to satisfy plaintiff's principal claim of US$4,553,446.06, representing the alleged unpaid obligation of defendant, inclusive of interest and penalty charges, as of December 31, 1998, which is equivalent to P174,260,380.72, upon plaintiff's filing of a bond in an equal amount to answer for all it may sustain by reason of the attachment if the Court shall finally adjudge that plaintiff was not entitled thereto.

SO ORDERED.

With plaintiff PCIBANK having posted the requisite bond, a writ of preliminary attachment was thereafter issued by the trial court. Per records, defendant ASIAKONSTRUKT did not file any motion for the quashal or dissolution of the writ.

Meanwhile, on August 27, 1999, defendant ASIAKONSTRUKT filed its Answer, 5 thereunder making admissions and denials. Defendant admits, subject to its defenses, the material allegations of the Complaint as regards its indebtedness to plaintiff PCIBANK and its execution of the various deeds of assignment enumerated therein. It, however, denies, for lack of knowledge sufficient to form a belief as to the truth thereof, the averments in the Complaint that it has not paid, despite demands, its due and demandable obligations, as well as the amounts due the plaintiff as itemized in paragraph 2.06, supra, of the Complaint. It likewise denies PCIBANK's allegations in the same Complaint in support of its prayer for a writ of preliminary attachment, particularly its having fraudulently misappropriated for its own use the contract proceeds/receivables under the contracts mentioned in the several deeds of assignments, claiming in this respect that it has still remaining receivables from those contracts. SEHaDI

By way of defenses, defendant pleads in its Answer the alleged "severe financial and currency crisis" which hit the Philippines in July 1997, which adversely affected and ultimately put it out of business. Defendant adds that the deeds of assignments it executed in favor of PCIBANK were standard forms proposed by the bank as pre-condition for the release of the loans and therefore partake of the nature of contracts of adhesion, leaving the defendant to the alternative of "taking it or leaving it." By way of counterclaim, defendant prayed for an award of P1,000,000.00 as and for attorney's fees and P200,000.00 as litigation expenses.

On January 24, 2000, plaintiff PCIBANK filed a verified Motion for Summary Judgment, 6 therein contending that the defenses interposed by the defendant are sham and contrived, that the alleged financial crisis pleaded in the Answer is not a fortuitous event that would excuse debtors from their loan obligations, nor is it an exempting circumstance under Article 1262 of the New Civil Code where, as here, the same is attended by bad faith. In the same motion, PCIBANK also asserts that the deeds of assignments executed in its favor are not contracts of adhesion, and even if they were, the same are valid.

To the Motion for Summary Judgment, defendant interposed an Opposition 7 insisting that its Answer tendered or raised genuine and substantial issues of material facts which require full-blown trial, namely:

1. Whether or not defendant received all or part of the proceeds/receivables due from the contracts mentioned in the deeds of assignment at the time the complaint was filed;

2. Granting that defendant received those proceeds/receivables, whether or not defendant fraudulently misappropriated the same;

3. Whether or not defendant is virtually insolvent as a result of the regionwide economic crisis that hit Asia, causing the Philippine peso to depreciate drastically; and

4. Whether the parties dealt with each other on equal footing with respect to the execution of the deeds of assignment as to give the defendant an honest opportunity to reject the onerous terms imposed therein.

Significantly, defendant did not append to its aforementioned Opposition any affidavit in support of the alleged genuine issues of material facts mentioned therein. AICTcE

Before the pending incident (motion for summary judgment) could be resolved by the trial court, plaintiff PCIBANK waived its claim for exemplary damages and agreed to reduce its claim for attorney's fees from P1,800,000.00 to P1,260,000.00, but made it clear that its waiver of exemplary damages and reduction of attorney's fees are subject to the condition that a full and final disposition of the case is obtained via summary judgment.

On May 16, 2000, the trial court, acting favorably on PCIBANK's motion for summary judgment, came out with its Summary Judgment, 8 the decretal portion of which reads:

WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff:

1. the sum of US$4,553,446.06, or its equivalent in Philippine currency at the time of payment, with interest thereon at the rate of 8.27% per annum from February 24, 1999 until fully paid;

2. P1,260,000.00 as and for attorney's fees; and

3. the costs of suit.

SO ORDERED.

Explains the trial court in rendering its Summary Judgment:

A thorough examination of the parties' pleadings and their respective stand in the foregoing motion, the court finds that indeed with defendant's admission of the first cause of action there remains no question of facts in issue. Further, the proffered defenses are worthless, unsubstantial, sham and contrived.

Considering that there is no more issue to be resolved, the court hereby grants plaintiff's Motion and renders Judgment in favor of the plaintiff against the defendant based on their respective pleadings in accordance with Section 4, Rule 35 of the Rules of Court.

In time, petitioner went to the CA whereat its appellate recourse was docketed as CA-G.R. CV No. 68189. As stated at the threshold hereof, the CA, in its decision 9 of May 15, 2002, affirmed with modification the Summary Judgment rendered by the trial court, the modification being as regards the award for attorney's fees which the CA reduced to P1,000,000.00, to wit:

IN THE LIGHT OF ALL THE FOREGOING, the appeal is PARTIALLY GRANTED. The "Decision" appealed from is AFFIRMED with the MODIFICATION THAT THE AWARD FOR ATTORNEY'S FEES is reduced to P1,000,000.00.

SO ORDERED.

With its motion for reconsideration having been denied by the CA in its Resolution 10 of June 3, 2002, petitioner is now with us via the present recourse, raising the following issues:

I WHETHER OR NOT THERE IS A GENUINE ISSUE AS TO A MATERIAL FACT WHICH RULES OUT THE PROPRIETY OF A SUMMARY JUDGMENT. caIEAD

II WHETHER OR NOT THE AWARD OF ATTORNEY'S FEES IS EXORBITANT OR UNCONSCIONABLE.

We DENY.

As in the two courts below, it is petitioner's posture that summary judgment is improper in this case because there are genuine issues of fact which have to be threshed out during trial, to wit: (a) whether or not petitioner was able to collect only a portion of the contract proceeds/receivables it was bound to deliver, remit and tender to respondent under the several deeds of assignment it executed in favor of the latter; and (b) whether or not petitioner fraudulently misappropriated and used for its benefit the said proceeds/receivables. Ergo, so petitioner maintains, genuine triable issues of fact are present in this case, which thereby precludes rendition of summary judgment.

We are not persuaded.

Under Rule 35 of the 1997 Rules of Procedure, as amended, except as to the amount of damages, when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law, summary judgment may be allowed. 11 Summary or accelerated judgment is a procedural technique aimed at weeding out sham claims or defenses at an early stage of litigation thereby avoiding the expense and loss of time involved in a trial. 12

Under the Rules, summary judgment is appropriate when there are no genuine issues of fact which call for the presentation of evidence in a full-blown trial. Even if on their face the pleadings appear to raise issues, when the affidavits, depositions and admissions show that such issues are not genuine, then summary judgment as prescribed by the Rules must ensue as a matter of law. The determinative factor, therefore, in a motion for summary judgment, is the presence or absence of a genuine issue as to any material fact.

A "genuine issue" is an issue of fact which requires the presentation of evidence as distinguished from a sham, fictitious, contrived or false claim. When the facts as pleaded appear uncontested or undisputed, then there is no real or genuine issue or question as to the facts, and summary judgment is called for. The party who moves for summary judgment has the burden of demonstrating clearly the absence of any genuine issue of fact, or that the issue posed in the complaint is patently unsubstantial so as not to constitute a genuine issue for trial. Trial courts have limited authority to render summary judgments and may do so only when there is clearly no genuine issue as to any material fact. When the facts as pleaded by the parties are disputed or contested, proceedings for summary judgment cannot take the place of trial. 13

The CA, in its challenged decision, stated and we are in full accord with it:

In the present recourse, the [petitioner] relied not only on the judicial admissions . . . in its pleadings, more specifically its "Answer" to the complaint, the testimony of Maricel Salaveria as well as Exhibits "A" to "T-3", adduced in evidence by the [respondent], during the hearing on its plea for the issuance, by the Court a quo, of a writ of preliminary attachment. Significantly, the [petitioner] did not bother filing a motion for the quashal of the "Writ" issued by the Court a quo. CIScaA

It must be borne in mind, too, that the [petitioner] admitted, in its "Answer" . . . the due execution and authenticity of the documents appended to the complaint . . . . The [petitioner] did not deny its liability for the principal amount claimed by the [respondent] in its complaint. The [petitioner] merely alleged, by way of defenses, that it failed to pay its account . . . because of the region-wide economic crisis that engulfed Asia, in July, 1997, and the "Deeds of Assignment" executed by it in favor of the [respondent] were contracts of adhesion:

xxx xxx xxx

The [petitioner] elaborated on and catalogued its defenses in its "Appellants Brief" what it believed, as "genuine issues".

"(i) Whether or not [petitioner] received all or part of the proceeds/receivables due from the construction contracts at the time the civil action was filed;

(ii) Granting that [petitioner] received the proceeds/receivables from the construction contracts, whether or not [petitioner] fraudulently misappropriated the same;

(iii) Whether or not [petitioner] had become virtually insolvent as a result of the region-wide economic crisis that hit Asia, causing the Philippine peso to depreciate dramatically; and

(iv) Whether or not [respondent] and [petitioner] dealt with each other on equal footing with respect to the execution of the deeds of assignment of receivables as to give [petitioner] an honest opportunity to reject the onerous terms imposed on it."

However, the [petitioner] failed to append, to its "Opposition" to the "Motion for Summary Judgment", . . . "Affidavits" showing the factual basis for its defenses of "extraordinary deflation," including facts, figures and data showing its financial condition before and after the economic crisis and that the crisis was the proximate cause of its financial distress. It bears stressing that the [petitioner] was burdened to demonstrate, by its "Affidavits" and documentary evidence, that, indeed, the Philippines was engulfed in an extraordinary deflation of the Philippine Peso and that the same was the proximate cause of the financial distress, it claimed, it suffered.

xxx xxx xxx

Where, on the basis of the records, inclusive of the pleadings of the parties, and the testimonial and documentary evidence adduced by the [respondent], supportive of its plea for a writ of preliminary attachment, the [respondent] had causes of action against the [petitioner], it behooved the [petitioner] to controvert the same with affidavits/documentary evidence showing a prima facie genuine defense. As the Appellate Court of Illinois so aptly declared:

The defendant must show that he has a bona fide defense to the action, one which he may be able to establish. It must be a plausible ground of defense, something fairly arguable and of a substantial character. This he must show by affidavits or other proof.

The trial court, of course, must determine from the affidavits filed whether the defendant has interposed a sufficiently good defense to entitle it to defend, but where defendant's affidavits present no substantial triable issues of fact, the court will grant the motion for summary judgment.

xxx xxx xxx

The failure of the [petitioner] to append to its "Opposition" any "Affidavits" showing that its defenses were not contrived or cosmetic to delay judgment . . . created a presumption that the defenses of the [petitioner] were not offered in good faith and that the same could not be sustained (Unites States versus Fiedler, et al., Federal Reported, 2nd, 578).

If, indeed, the [petitioner] believed it that was prevented from complying with its obligations to the [respondent], under its contracts, it should have interposed a counterclaims for rescission of contracts, conformably with the pronouncement of our Supreme Court, thus:

xxx xxx xxx

The [petitioner] did not. This only exposed the barrenness of the pose of the [petitioner]. CDAcIT

The [petitioner] may have experienced financial difficulties because of the "1997 economic crisis" that ensued in Asia. However, the same does not constitute a valid justification for the [petitioner] to renege

on its obligations to the [respondent]. The [petitioner] cannot even find solace in Articles 1266 and 1267 of the New Civil Code for, as declared by our Supreme Court:

It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations arising therefrom have the force of law between the parties and should be complied with in good faith. But the law recognizes exceptions to the principle of the obligatory force of contracts. One exception is laid down in Article 1266 of the Civil Code, which reads: 'The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.'

Petitioner cannot, however, successfully take refuge in the said article, since it is applicable only to obligations "to do," and not obligations "to give." An obligation "to do" includes all kinds of work or service; while an obligation "to give" is a prestation which consists in the delivery of a movable or an immovable thing in order to create a real right, or for the use of the recipient, or for its simple possession, or in order to return it to its owner.

xxx xxx xxx

In this case, petitioner wants this Court to believe that the abrupt change in the political climate of the country after the EDSA Revolution and its poor financial condition "rendered the performance of the lease contract impractical and inimical to the corporate survival of the petitioner." (Philippine National Construction Corporation versus Court of Appeals, et al., 272 SCRA 183, at pages 191-192, supra)

The [petitioner] even failed to append any "Affidavit" to its "Opposition" showing how much it had received from its construction contracts and how and to whom the said collections had been appended. The [petitioner] had personal and sole knowledge of the aforesaid particulars while the [respondent] did not.

In fine, we rule and so hold that the CA did not commit any reversible error in affirming the summary judgment rendered by the trial court as, at bottom, there existed no genuine issue as to any material fact. We also sustain the CA's reduction in the award of attorney's fees to only P1,000,000.00, given the fact that there was no full-blown trial. DaACIH

WHEREFORE, the assailed CA decision is AFFIRMED in toto and this petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.