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Republic of the Philippines SUPREME COURT

Baguio City

EN BANC

G.R. No. 166620 April 20, 2010

ATTY. SYLVIA BANDA, CONSORICIA O. PENSON, RADITO V. PADRIGANO, JEAN R. DE MESA, LEAH P. DELA CRUZ, ANDY V. MACASAQUIT, SENEN B. CORDOBA, ALBERT BRILLANTES, GLORIA BISDA, JOVITA V. CONCEPCION, TERESITA G. CARVAJAL, ROSANNA T. MALIWANAG, RICHARD ODERON, CECILIA ESTERNON, BENEDICTO CABRAL, MA. VICTORIA E. LAROCO, CESAR ANDRA, FELICISIMO GALACIO, ELSA R. CALMA, FILOMENA A. GALANG, JEAN PAUL MELEGRITO, CLARO G. SANTIAGO, JR., EDUARDO FRIAS, REYNALDO O. ANDAL, NEPHTALIE IMPERIO, RUEL BALAGTAS, VICTOR R. ORTIZ, FRANCISCO P. REYES, JR., ELISEO M. BALAGOT, JR., JOSE C. MONSALVE, JR., ARTURO ADSUARA, F.C. LADRERO, JR., NELSON PADUA, MARCELA C. SAYAO, ANGELITO MALAKAS, GLORIA RAMENTO, JULIANA SUPLEO, MANUEL MENDRIQUE, E. TAYLAN, CARMELA BOBIS, DANILO VARGAS, ROY-LEO C. PABLO, ALLAN VILLANUEVA, VICENTE R. VELASCO, JR., IMELDA ERENO, FLORIZA M. CATIIS, RANIEL R. BASCO, E. JALIJALI, MARIO C. CARAAN, DOLORES M. AVIADO, MICHAEL P. LAPLANA, GUILLERMO G. SORIANO, ALICE E. SOJO, ARTHUR G. NARNE, LETICIA SORIANO, FEDERICO RAMOS, JR., PETERSON CAAMPUED, RODELIO L. GOMEZ, ANTONIO D. GARCIA, JR., ANTONIO GALO, A. SANCHEZ, SOL E. TAMAYO, JOSEPHINE A.M. COCJIN, DAMIAN QUINTO, JR., EDLYN MARIANO, M.A. MALANUM, ALFREDO S. ESTRELLA, and JESUS MEL SAYO,Petitioners, vs. EDUARDO R. ERMITA, in his capacity as Executive Secretary, The Director General of the Philippine Information Agency and The National Treasurer, Respondents.

D E C I S I O N

LEONARDO-DE CASTRO, J.:

The present controversy arose from a Petition for Certiorari and prohibition challenging the constitutionality of Executive Order No. 378 dated October 25, 2004, issued by President Gloria Macapagal Arroyo (President Arroyo).

Petitioners characterize their action as a class suit filed on their own behalf and on behalf of all their co-employees at the National Printing Office (NPO).

The NPO was formed on July 25, 1987, during the term of former President Corazon C. Aquino (President Aquino), by virtue of Executive Order No. 2851 which provided, among others, the creation of the NPO from the merger of the Government Printing Office and the relevant printing units of the Philippine Information Agency (PIA). Section 6 of Executive Order No. 285 reads:

SECTION 6. Creation of the National Printing Office. – There is hereby created a National Printing Office out of the merger of the Government Printing Office and the relevant printing units of the Philippine Information Agency. The Office shall have exclusive printing jurisdiction over the following:

a. Printing, binding and distribution of all standard and accountable forms of national, provincial, city and municipal governments, including government corporations;

b. Printing of officials ballots;

c. Printing of public documents such as the Official Gazette, General Appropriations Act, Philippine Reports, and development information materials of the Philippine Information Agency.

The Office may also accept other government printing jobs, including government publications, aside from those enumerated above, but not in an exclusive basis.

The details of the organization, powers, functions, authorities, and related management aspects of the Office shall be provided in the implementing details which shall be prepared and promulgated in accordance with Section II of this Executive Order.

The Office shall be attached to the Philippine Information Agency.

On October 25, 2004, President Arroyo issued the herein assailed Executive Order No. 378, amending Section 6 of Executive Order No. 285 by, inter alia, removing the exclusive jurisdiction of the NPO over the printing services requirements of government agencies and instrumentalities. The pertinent portions of Executive Order No. 378, in turn, provide:

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SECTION 1. The NPO shall continue to provide printing services to government agencies and instrumentalities as mandated by law. However, it shall no longer enjoy exclusive jurisdiction over the printing services requirements of the government over standard and accountable forms. It shall have to compete with the private sector, except in the printing of election paraphernalia which could be shared with the Bangko Sentral ng Pilipinas, upon the discretion of the Commission on Elections consistent with the provisions of the Election Code of 1987.

SECTION 2. Government agencies/instrumentalities may source printing services outside NPO provided that:

2.1 The printing services to be provided by the private sector is superior in quality and at a lower cost than what is offered by the NPO; and

2.2 The private printing provider is flexible in terms of meeting the target completion time of the government agency.

SECTION 3. In the exercise of its functions, the amount to be appropriated for the programs, projects and activities of the NPO in the General Appropriations Act (GAA) shall be limited to its income without additional financial support from the government. (Emphases and underscoring supplied.)

Pursuant to Executive Order No. 378, government agencies and instrumentalities are allowed to source their printing services from the private sector through competitive bidding, subject to the condition that the services offered by the private supplier be of superior quality and lower in cost compared to what was offered by the NPO. Executive Order No. 378 also limited NPO’s appropriation in the General Appropriations Act to its income.

Perceiving Executive Order No. 378 as a threat to their security of tenure as employees of the NPO, petitioners now challenge its constitutionality, contending that: (1) it is beyond the executive powers of President Arroyo to amend or repeal Executive Order No. 285 issued by former President Aquino when the latter still exercised legislative powers; and (2) Executive Order No. 378 violates petitioners’ security of tenure, because it paves the way for the gradual abolition of the NPO.

We dismiss the petition.

Before proceeding to resolve the substantive issues, the Court must first delve into a procedural matter. Since petitioners instituted this case as a

class suit, the Court, thus, must first determine if the petition indeed qualifies as one. In Board of Optometry v. Colet,2 we held that "[c]ourts must exercise utmost caution before allowing a class suit, which is the exception to the requirement of joinder of all indispensable parties. For while no difficulty may arise if the decision secured is favorable to the plaintiffs, a quandary would result if the decision were otherwise as those who were deemed impleaded by their self-appointed representatives would certainly claim denial of due process."

Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:

Sec. 12. Class suit. – When the subject matter of the controversy is one of common or general interest to many persons so numerous that it is impracticable to join all as parties, a number of them which the court finds to be sufficiently numerous and representative as to fully protect the interests of all concerned may sue or defend for the benefit of all. Any party in interest shall have the right to intervene to protect his individual interest.

From the foregoing definition, the requisites of a class suit are: 1) the subject matter of controversy is one of common or general interest to many persons; 2) the parties affected are so numerous that it is impracticable to bring them all to court; and 3) the parties bringing the class suit are sufficiently numerous or representative of the class and can fully protect the interests of all concerned.

In Mathay v. The Consolidated Bank and Trust Company,3 the Court held that:

An action does not become a class suit merely because it is designated as such in the pleadings. Whether the suit is or is not a class suit depends upon the attending facts, and the complaint, or other pleading initiating the class action should allege the existence of the necessary facts, to wit, the existence of a subject matter of common interest, and the existence of a class and the number of persons in the alleged class, in order that the court might be enabled to determine whether the members of the class are so numerous as to make it impracticable to bring them all before the court, to contrast the number appearing on the record with the number in the class and to determine whether claimants on record adequately represent the class and the subject matter of general or common interest. (Emphases ours.)

Here, the petition failed to state the number of NPO employees who would be affected by the assailed Executive Order and who were allegedly represented by petitioners. It was the Solicitor General, as counsel for

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respondents, who pointed out that there were about 549 employees in the NPO.4 The 67 petitioners undeniably comprised a small fraction of the NPO employees whom they claimed to represent. Subsequently, 32 of the original petitioners executed an Affidavit of Desistance, while one signed a letter denying ever signing the petition,5 ostensibly reducing the number of petitioners to 34. We note that counsel for the petitioners challenged the validity of the desistance or withdrawal of some of the petitioners and insinuated that such desistance was due to pressure from people "close to the seat of power."6 Still, even if we were to disregard the affidavit of desistance filed by some of the petitioners, it is highly doubtful that a sufficient, representative number of NPO employees have instituted this purported class suit. A perusal of the petition itself would show that of the 67 petitioners who signed the Verification/Certification of Non-Forum Shopping, only 20 petitioners were in fact mentioned in the jurat as having duly subscribed the petition before the notary public. In other words, only 20 petitioners effectively instituted the present case.

Indeed, in MVRS Publications, Inc. v. Islamic Da’wah Council of the Philippines, Inc.,7 we observed that an element of a class suit or representative suit is the adequacy of representation. In determining the question of fair and adequate representation of members of a class, the court must consider (a) whether the interest of the named party is coextensive with the interest of the other members of the class; (b) the proportion of those made a party, as it so bears, to the total membership of the class; and (c) any other factor bearing on the ability of the named party to speak for the rest of the class.

Previously, we held in Ibañes v. Roman Catholic Church8 that where the interests of the plaintiffs and the other members of the class they seek to represent are diametrically opposed, the class suit will not prosper.

It is worth mentioning that a Manifestation of Desistance,9 to which the previously mentioned Affidavit of Desistance10 was attached, was filed by the President of the National Printing Office Workers Association (NAPOWA). The said manifestation expressed NAPOWA’s opposition to the filing of the instant petition in any court. Even if we take into account the contention of petitioners’ counsel that the NAPOWA President had no legal standing to file such manifestation, the said pleading is a clear indication that there is a divergence of opinions and views among the members of the class sought to be represented, and not all are in favor of filing the present suit. There is here an apparent conflict between petitioners’ interests and those of the persons whom they claim to represent. Since it cannot be said that petitioners sufficiently represent the interests of the entire class, the instant case cannot be properly treated as a class suit.

As to the merits of the case, the petition raises two main grounds to assail the constitutionality of Executive Order No. 378:

First, it is contended that President Arroyo cannot amend or repeal Executive Order No. 285 by the mere issuance of another executive order (Executive Order No. 378). Petitioners maintain that former President Aquino’s Executive Order No. 285 is a legislative enactment, as the same was issued while President Aquino still had legislative powers under the Freedom Constitution;11 thus, only Congress through legislation can validly amend Executive Order No. 285.

Second, petitioners maintain that the issuance of Executive Order No. 378 would lead to the eventual abolition of the NPO and would violate the security of tenure of NPO employees.

Anent the first ground raised in the petition, we find the same patently without merit.

It is a well-settled principle in jurisprudence that the President has the power to reorganize the offices and agencies in the executive department in line with the President’s constitutionally granted power of control over executive offices and by virtue of previous delegation of the legislative power to reorganize executive offices under existing statutes.

In Buklod ng Kawaning EIIB v. Zamora,12 the Court pointed out that Executive Order No. 292 or the Administrative Code of 1987 gives the President continuing authority to reorganize and redefine the functions of the Office of the President. Section 31, Chapter 10, Title III, Book III of the said Code, is explicit:

Sec. 31. Continuing Authority of the President to Reorganize his Office. – The President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President. For this purpose, he may take any of the following actions:

(1) Restructure the internal organization of the Office of the President Proper, including the immediate Offices, the President Special Assistants/Advisers System and the Common Staff Support System, by abolishing, consolidating or merging units thereof or transferring functions from one unit to another;

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(2) Transfer any function under the Office of the President to any other Department or Agency as well as transfer functions to the Office of the President from other Departments and Agencies; and

(3) Transfer any agency under the Office of the President to any other department or agency as well as transfer agencies to the Office of the President from other Departments or agencies. (Emphases ours.)

Interpreting the foregoing provision, we held in Buklod ng Kawaning EIIB, thus:

But of course, the list of legal basis authorizing the President to reorganize any department or agency in the executive branch does not have to end here. We must not lose sight of the very source of the power – that which constitutes an express grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise known as the Administrative Code of 1987), "the President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have the continuing authority to reorganize the administrative structure of the Office of the President." For this purpose, he may transfer the functions of other Departments or Agencies to the Office of the President. In Canonizado v. Aguirre [323 SCRA 312 (2000)], we ruled that reorganization "involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions." It takes place when there is an alteration of the existing structure of government offices or units therein, including the lines of control, authority and responsibility between them. The EIIB is a bureau attached to the Department of Finance. It falls under the Office of the President. Hence, it is subject to the President’s continuing authority to reorganize.13 (Emphasis ours.)

It is undisputed that the NPO, as an agency that is part of the Office of the Press Secretary (which in various times has been an agency directly attached to the Office of the Press Secretary or as an agency under the Philippine Information Agency), is part of the Office of the President.14

Pertinent to the case at bar, Section 31 of the Administrative Code of 1987 quoted above authorizes the President (a) to restructure the internal organization of the Office of the President Proper, including the immediate Offices, the President Special Assistants/Advisers System and the Common Staff Support System, by abolishing, consolidating or merging units thereof or transferring functions from one unit to another, and (b) to transfer functions or offices from the Office of the President to any other Department or Agency in the Executive Branch, and vice versa.

Concomitant to such power to abolish, merge or consolidate offices in the Office of the President Proper and to transfer functions/offices not only among the offices in the Office of President Proper but also the rest of the Office of the President and the Executive Branch, the President implicitly has the power to effect less radical or less substantive changes to the functional and internal structure of the Office of the President, including the modification of functions of such executive agencies as the exigencies of the service may require.

In the case at bar, there was neither an abolition of the NPO nor a removal of any of its functions to be transferred to another agency. Under the assailed Executive Order No. 378, the NPO remains the main printing arm of the government for all kinds of government forms and publications but in the interest of greater economy and encouraging efficiency and profitability, it must now compete with the private sector for certain government printing jobs, with the exception of election paraphernalia which remains the exclusive responsibility of the NPO, together with the Bangko Sentral ng Pilipinas, as the Commission on Elections may determine. At most, there was a mere alteration of the main function of the NPO by limiting the exclusivity of its printing responsibility to election forms.15

There is a view that the reorganization actions that the President may take with respect to agencies in the Office of the President are strictly limited to transfer of functions and offices as seemingly provided in Section 31 of the Administrative Code of 1987.

However, Section 20, Chapter 7, Title I, Book III of the same Code significantly provides:

Sec. 20. Residual Powers. – Unless Congress provides otherwise, the President shall exercise such other powers and functions vested in the President which are provided for under the laws and which are not specifically enumerated above, or which are not delegated by the President in accordance with law. (Emphasis ours.)

Pursuant to Section 20, the power of the President to reorganize the Executive Branch under Section 31 includes such powers and functions that may be provided for under other laws. To be sure, an inclusive and broad interpretation of the President’s power to reorganize executive offices has been consistently supported by specific provisions in general appropriations laws.

In the oft-cited Larin v. Executive Secretary,16 the Court likewise adverted to certain provisions of Republic Act No. 7645, the general appropriations law

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for 1993, as among the statutory bases for the President’s power to reorganize executive agencies, to wit:

Section 48 of R.A. 7645 provides that:

"Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the Executive Branch. — The heads of departments, bureaus and offices and agencies are hereby directed to identify their respective activities which are no longer essential in the delivery of public services and which may be scaled down, phased out or abolished, subject to civil [service] rules and regulations. x x x. Actual scaling down, phasing out or abolition of the activities shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President."

Said provision clearly mentions the acts of "scaling down, phasing out and abolition" of offices only and does not cover the creation of offices or transfer of functions. Nevertheless, the act of creating and decentralizing is included in the subsequent provision of Section 62, which provides that:

"Sec. 62. Unauthorized organizational changes. — Unless otherwise created by law or directed by the President of the Philippines, no organizational unit or changes in key positions in any department or agency shall be authorized in their respective organization structures and be funded from appropriations by this Act."

The foregoing provision evidently shows that the President is authorized to effect organizational changes including the creation of offices in the department or agency concerned.

The contention of petitioner that the two provisions are riders deserves scant consideration. Well settled is the rule that every law has in its favor the presumption of constitutionality. Unless and until a specific provision of the law is declared invalid and unconstitutional, the same is valid and binding for all intents and purposes.17 (Emphases ours)

Buklod ng Kawaning EIIB v. Zamora,18 where the Court upheld as valid then President Joseph Estrada’s Executive Order No. 191 "deactivating" the Economic Intelligence and Investigation Bureau (EIIB) of the Department of Finance, hewed closely to the reasoning in Larin. The Court, among others, also traced from the General Appropriations Act19 the President’s authority to effect organizational changes in the department or agency under the executive structure, thus:

We adhere to the precedent or ruling in Larin that this provision recognizes the authority of the President to effect organizational changes in the department or agency under the executive structure. Such a ruling further finds support in Section 78 of Republic Act No. 8760. Under this law, the heads of departments, bureaus, offices and agencies and other entities in the Executive Branch are directed (a) to conduct a comprehensive review of their respective mandates, missions, objectives, functions, programs, projects, activities and systems and procedures; (b) identify activities which are no longer essential in the delivery of public services and which may be scaled down, phased-out or abolished; and (c) adopt measures that will result in the streamlined organization and improved overall performance of their respective agencies. Section 78 ends up with the mandate that the actual streamlining and productivity improvement in agency organization and operation shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President. x x x.20 (Emphasis ours)

Notably, in the present case, the 2003 General Appropriations Act, which was reenacted in 2004 (the year of the issuance of Executive Order No. 378), likewise gave the President the authority to effect a wide variety of organizational changes in any department or agency in the Executive Branch. Sections 77 and 78 of said Act provides:

Section 77. Organized Changes. – Unless otherwise provided by law or directed by the President of the Philippines, no changes in key positions or organizational units in any department or agency shall be authorized in their respective organizational structures and funded from appropriations provided by this Act.

Section 78. Institutional Strengthening and Productivity Improvement in Agency Organization and Operations and Implementation of Organization/Reorganization Mandated by Law. The Government shall adopt institutional strengthening and productivity improvement measures to improve service delivery and enhance productivity in the government, as directed by the President of the Philippines. The heads of departments, bureaus, offices, agencies, and other entities of the Executive Branch shall accordingly conduct a comprehensive review of their respective mandates, missions, objectives, functions, programs, projects, activities and systems and procedures; identify areas where improvements are necessary; and implement corresponding structural, functional and operational adjustments that will result in streamlined organization and operations and improved performance and productivity: PROVIDED, That actual streamlining and productivity improvements in agency organization and operations, as authorized by the President of the Philippines for the purpose, including the utilization of savings generated from such activities, shall be in accordance with the rules and regulations to be issued by the DBM, upon consultation

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with the Presidential Committee on Effective Governance: PROVIDED, FURTHER, That in the implementation of organizations/reorganizations, or specific changes in agency structure, functions and operations as a result of institutional strengthening or as mandated by law, the appropriation, including the functions, projects, purposes and activities of agencies concerned may be realigned as may be necessary: PROVIDED, FINALLY, That any unexpended balances or savings in appropriations may be made available for payment of retirement gratuities and separation benefits to affected personnel, as authorized under existing laws. (Emphases and underscoring ours.)

Implicitly, the aforequoted provisions in the appropriations law recognize the power of the President to reorganize even executive offices already funded by the said appropriations act, including the power to implement structural, functional, and operational adjustments in the executive bureaucracy and, in so doing, modify or realign appropriations of funds as may be necessary under such reorganization. Thus, insofar as petitioners protest the limitation of the NPO’s appropriations to its own income under Executive Order No. 378, the same is statutorily authorized by the above provisions.

In the 2003 case of Bagaoisan v. National Tobacco Administration,21 we upheld the "streamlining" of the National Tobacco Administration through a reduction of its personnel and deemed the same as included in the power of the President to reorganize executive offices granted under the laws, notwithstanding that such streamlining neither involved an abolition nor a transfer of functions of an office. To quote the relevant portion of that decision:

In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D. Zamora, in his capacity as the Executive Secretary, et al., this Court has had occasion to also delve on the President’s power to reorganize the Office of the President under Section 31(2) and (3) of Executive Order No. 292 and the power to reorganize the Office of the President Proper. x x x

x x x x

The first sentence of the law is an express grant to the President of a continuing authority to reorganize the administrative structure of the Office of the President. The succeeding numbered paragraphs are not in the nature of provisos that unduly limit the aim and scope of the grant to the President of the power to reorganize but are to be viewed in consonance therewith. Section 31(1) of Executive Order No. 292 specifically refers to the President’s power to restructure the internal organization of the Office of the President Proper, by abolishing, consolidating or merging units hereof or

transferring functions from one unit to another, while Section 31(2) and (3) concern executive offices outside the Office of the President Proper allowing the President to transfer any function under the Office of the President to any other Department or Agency and vice-versa, and the transfer of any agency under the Office of the President to any other department or agency and vice-versa.

In the present instance, involving neither an abolition nor transfer of offices, the assailed action is a mere reorganization under the general provisions of the law consisting mainly of streamlining the NTA in the interest of simplicity, economy and efficiency. It is an act well within the authority of the President motivated and carried out, according to the findings of the appellate court, in good faith, a factual assessment that this Court could only but accept.22 (Emphases and underscoring supplied.)

In the more recent case of Tondo Medical Center Employees Association v. Court of Appeals,23 which involved a structural and functional reorganization of the Department of Health under an executive order, we reiterated the principle that the power of the President to reorganize agencies under the executive department by executive or administrative order is constitutionally and statutorily recognized. We held in that case:

This Court has already ruled in a number of cases that the President may, by executive or administrative order, direct the reorganization of government entities under the Executive Department. This is also sanctioned under the Constitution, as well as other statutes.

Section 17, Article VII of the 1987 Constitution, clearly states: "[T]he president shall have control of all executive departments, bureaus and offices." Section 31, Book III, Chapter 10 of Executive Order No. 292, also known as the Administrative Code of 1987 reads:

SEC. 31. Continuing Authority of the President to Reorganize his Office - The President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President. For this purpose, he may take any of the following actions:

x x x x

In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the rationale behind the President’s continuing authority under the Administrative Code to reorganize the administrative structure of the Office of the President. The law grants the President the power to reorganize the Office of the President in

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recognition of the recurring need of every President to reorganize his or her office "to achieve simplicity, economy and efficiency." To remain effective and efficient, it must be capable of being shaped and reshaped by the President in the manner the Chief Executive deems fit to carry out presidential directives and policies.

The Administrative Code provides that the Office of the President consists of the Office of the President Proper and the agencies under it. The agencies under the Office of the President are identified in Section 23, Chapter 8, Title II of the Administrative Code:

Sec. 23. The Agencies under the Office of the President.—The agencies under the Office of the President refer to those offices placed under the chairmanship of the President, those under the supervision and control of the President, those under the administrative supervision of the Office of the President, those attached to it for policy and program coordination, and those that are not placed by law or order creating them under any specific department.

x x x x

The power of the President to reorganize the executive department is likewise recognized in general appropriations laws. x x x.

x x x x

Clearly, Executive Order No. 102 is well within the constitutional power of the President to issue. The President did not usurp any legislative prerogative in issuing Executive Order No. 102. It is an exercise of the President’s constitutional power of control over the executive department, supported by the provisions of the Administrative Code, recognized by other statutes, and consistently affirmed by this Court.24 (Emphases supplied.)

Subsequently, we ruled in Anak Mindanao Party-List Group v. Executive Secretary25 that:

The Constitution’s express grant of the power of control in the President justifies an executive action to carry out reorganization measures under a broad authority of law.

In enacting a statute, the legislature is presumed to have deliberated with full knowledge of all existing laws and jurisprudence on the subject. It is thus reasonable to conclude that in passing a statute which places an agency

under the Office of the President, it was in accordance with existing laws and jurisprudence on the President’s power to reorganize.

In establishing an executive department, bureau or office, the legislature necessarily ordains an executive agency’s position in the scheme of administrative structure. Such determination is primary, but subject to the President’s continuing authority to reorganize the administrative structure. As far as bureaus, agencies or offices in the executive department are concerned, the power of control may justify the President to deactivate the functions of a particular office. Or a law may expressly grant the President the broad authority to carry out reorganization measures. The Administrative Code of 1987 is one such law.26

The issuance of Executive Order No. 378 by President Arroyo is an exercise of a delegated legislative power granted by the aforementioned Section 31, Chapter 10, Title III, Book III of the Administrative Code of 1987, which provides for the continuing authority of the President to reorganize the Office of the President, "in order to achieve simplicity, economy and efficiency." This is a matter already well-entrenched in jurisprudence. The reorganization of such an office through executive or administrative order is also recognized in the Administrative Code of 1987. Sections 2 and 3, Chapter 2, Title I, Book III of the said Code provide:

Sec. 2. Executive Orders. - Acts of the President providing for rules of a general or permanent character in implementation or execution of constitutional or statutory powers shall be promulgated in executive orders.

Sec. 3. Administrative Orders. - Acts of the President which relate to particular aspects of governmental operations in pursuance of his duties as administrative head shall be promulgated in administrative orders. (Emphases supplied.)

To reiterate, we find nothing objectionable in the provision in Executive Order No. 378 limiting the appropriation of the NPO to its own income. Beginning with Larin and in subsequent cases, the Court has noted certain provisions in the general appropriations laws as likewise reflecting the power of the President to reorganize executive offices or agencies even to the extent of modifying and realigning appropriations for that purpose.

Petitioners’ contention that the issuance of Executive Order No. 378 is an invalid exercise of legislative power on the part of the President has no legal leg to stand on.

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In all, Executive Order No. 378, which purports to institute necessary reforms in government in order to improve and upgrade efficiency in the delivery of public services by redefining the functions of the NPO and limiting its funding to its own income and to transform it into a self-reliant agency able to compete with the private sector, is well within the prerogative of President Arroyo under her continuing delegated legislative power to reorganize her own office. As pointed out in the separate concurring opinion of our learned colleague, Associate Justice Antonio T. Carpio, the objective behind Executive Order No. 378 is wholly consistent with the state policy contained in Republic Act No. 9184 or the Government Procurement Reform Act to encourage competitiveness by extending equal opportunity to private contracting parties who are eligible and qualified.271avvphi1

To be very clear, this delegated legislative power to reorganize pertains only to the Office of the President and the departments, offices and agencies of the executive branch and does not include the Judiciary, the Legislature or the constitutionally-created or mandated bodies. Moreover, it must be stressed that the exercise by the President of the power to reorganize the executive department must be in accordance with the Constitution, relevant laws and prevailing jurisprudence.

In this regard, we are mindful of the previous pronouncement of this Court in Dario v. Mison28 that:

Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. As a general rule, a reorganization is carried out in "good faith" if it is for the purpose of economy or to make bureaucracy more efficient. In that event, no dismissal (in case of a dismissal) or separation actually occurs because the position itself ceases to exist. And in that case, security of tenure would not be a Chinese wall. Be that as it may, if the "abolition," which is nothing else but a separation or removal, is done for political reasons or purposely to defeat security of tenure, or otherwise not in good faith, no valid "abolition" takes place and whatever "abolition" is done, is void ab initio. There is an invalid "abolition" as where there is merely a change of nomenclature of positions, or where claims of economy are belied by the existence of ample funds. (Emphasis ours.)

Stated alternatively, the presidential power to reorganize agencies and offices in the executive branch of government is subject to the condition that such reorganization is carried out in good faith.

If the reorganization is done in good faith, the abolition of positions, which results in loss of security of tenure of affected government employees, would be valid. In Buklod ng Kawaning EIIB v. Zamora,29 we even observed that

there was no such thing as an absolute right to hold office. Except those who hold constitutional offices, which provide for special immunity as regards salary and tenure, no one can be said to have any vested right to an office or salary.30

This brings us to the second ground raised in the petition – that Executive Order No. 378, in allowing government agencies to secure their printing requirements from the private sector and in limiting the budget of the NPO to its income, will purportedly lead to the gradual abolition of the NPO and the loss of security of tenure of its present employees. In other words, petitioners avow that the reorganization of the NPO under Executive Order No. 378 is tainted with bad faith. The basic evidentiary rule is that he who asserts a fact or the affirmative of an issue has the burden of proving it.31

A careful review of the records will show that petitioners utterly failed to substantiate their claim. They failed to allege, much less prove, sufficient facts to show that the limitation of the NPO’s budget to its own income would indeed lead to the abolition of the position, or removal from office, of any employee. Neither did petitioners present any shred of proof of their assertion that the changes in the functions of the NPO were for political considerations that had nothing to do with improving the efficiency of, or encouraging operational economy in, the said agency.

In sum, the Court finds that the petition failed to show any constitutional infirmity or grave abuse of discretion amounting to lack or excess of jurisdiction in President Arroyo’s issuance of Executive Order No. 378.

WHEREFORE, the petition is hereby DISMISSED and the prayer for a Temporary Restraining Order and/or a Writ of Preliminary Injunction is hereby DENIED. No costs.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO Associate Justice

WE CONCUR:

REYNATO S. PUNO Chief Justice

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Republic of the Philippines SUPREME COURT

Manila

G.R. No. 153788 November 27, 2009

ROGER V. NAVARRO, Petitioner, vs. HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN T. GO, doing business under the name KARGO ENTERPRISES, Respondents.

D E C I S I O N

BRION, J.:

This is a petition for review on certiorari1 that seeks to set aside the Court of Appeals (CA) Decision2 dated October 16, 2001 and Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26, 20004 and March 7, 20015 orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarro’s (Navarro) motion to dismiss.

BACKGROUND FACTS

On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first complaint)6 and 98-598 (second complaint),7 before the RTC for replevin and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarro’s possession.

The first complaint stated:

1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City and doing business under the trade name KARGO ENTERPRISES, an entity duly registered and existing under and by virtue of the laws of the Republic of the Philippines, which has its business address at Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he may be served with summons and other processes of the Honorable Court; that defendant "JOHN

DOE" whose real name and address are at present unknown to plaintiff is hereby joined as party defendant as he may be the person in whose possession and custody the personal property subject matter of this suit may be found if the same is not in the possession of defendant ROGER NAVARRO;

2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles, including hauling trucks and other heavy equipment;

3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle which is more particularly described as follows –

Make/Type FUSO WITH MOUNTED CRANE

Serial No. FK416K-51680 Motor No. 6D15-338735 Plate No. GHK-378

as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and between KARGO ENTERPRISES, then represented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER NAVARRO xxx; that in accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were supposedly in payment of the agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF COMMUNICATIONS – CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively dated January 8, 1998 and February 8, 1998, were presented for payment and/or credit, the same were dishonored and/or returned by the drawee bank for the common reason that the current deposit account against which the said checks were issued did not have sufficient funds to cover the amounts thereof; that the total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66) therefore represents the principal liability of defendant ROGER NAVARRO unto plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH RIGHT TO PURCHASE; that demands, written and oral, were made of defendant ROGER NAVARRO to pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided for in the LEASE

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AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in vain to the great damage and injury of herein plaintiff; xxx

4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law, or seized under an execution or an attachment as against herein plaintiff;

xxx

8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the above-described motor vehicle from defendants unto plaintiff pending the final determination of this case on the merits and, for that purpose, there is attached hereto an affidavit duly executed and bond double the value of the personal property subject matter hereof to answer for damages and costs which defendants may suffer in the event that the order for replevin prayed for may be found out to having not been properly issued.

The second complaint contained essentially the same allegations as the first complaint, except that the Lease Agreement with Option to Purchase involved is dated October 1, 1997 and the motor vehicle leased is described as follows:

Make/Type FUSO WITH MOUNTED CRANE Serial No. FK416K-510528 Motor No. 6D14-423403

The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount ofP100,000.00, to Karen Go in payment of the agreed rentals; however, the third check was dishonored when presented for payment.8

On October 12, 19989 and October 14, 1998,10 the RTC issued writs of replevin for both cases; as a result, the Sheriff seized the two vehicles and delivered them to the possession of Karen Go.

In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the lease agreements) – the actionable documents on which the complaints were based.

On Navarro’s motion, both cases were duly consolidated on December 13, 1999.

In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of action.

In response to the motion for reconsideration Karen Go filed dated May 26, 2000,11 the RTC issued another order dated July 26, 2000 setting aside the order of dismissal. Acting on the presumption that Glenn Go’s leasing business is a conjugal property, the RTC held that Karen Go had sufficient interest in his leasing business to file the action against Navarro. However, the RTC held that Karen Go should have included her husband, Glenn Go, in the complaint based on Section 4, Rule 3 of the Rules of Court (Rules).12 Thus, the lower court ordered Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff.1avvphi1

When the RTC denied Navarro’s motion for reconsideration on March 7, 2001, Navarro filed a petition for certiorari with the CA, essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of the case and directed Karen Go to amend her complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a complaint which failed to state a cause of action could not be converted into one with a cause of action by mere amendment or supplemental pleading.

On October 16, 2001, the CA denied Navarro’s petition and affirmed the RTC’s order.13 The CA also denied Navarro’s motion for reconsideration in its resolution of May 29, 2002,14 leading to the filing of the present petition.

THE PETITION

Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the requisite juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was Karen Go who filed the complaints and not Glenn Go, she was not a real party-in-interest and the complaints failed to state a cause of action.

Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-plaintiff, instead of dismissing the complaint outright because a complaint which does not state a cause of action cannot be converted into one with a cause of action by a mere amendment or a supplemental pleading. In effect, the lower court created a cause of action for Karen Go when there was none at the time she filed the complaints.

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Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed that the leased vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of the complaint are her paraphernal properties and the RTC gravely erred when it ordered the inclusion of Glenn Go as a co-plaintiff.

Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to amend her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules.

Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were premature because no prior demand was made on him to comply with the provisions of the lease agreements before the complaints for replevin were filed.

Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were illegally seized from his possession and should be returned to him immediately.

Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the subject of the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of Kargo Enterprises and Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarro’s insistence that Kargo Enterprises is Karen Go’s paraphernal property is without basis. Based on the law and jurisprudence on the matter, all property acquired during the marriage is presumed to be conjugal property. Finally, Karen Go insists that her complaints sufficiently established a cause of action against Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff, this was merely to comply with the rule that spouses should sue jointly, and was not meant to cure the complaints’ lack of cause of action.

THE COURT’S RULING

We find the petition devoid of merit.

Karen Go is the real party-in-interest

The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real party-in-interest, i.e., the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.15

Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he still insists that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts were in Kargo Enterprises’ name, this was merely a trade name without a juridical personality, so the actual parties to the lease agreements were Navarro and Glenn Go, to the exclusion of Karen Go.

As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was none.

We do not find Navarro’s arguments persuasive.

The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name appears in the title of the Complaint where the plaintiff was identified as "KAREN T. GO doing business under the name KARGO ENTERPRISES," and this identification was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant "leased from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the Complaint specifies and attaches as its integral part the Lease Agreement that underlies the transaction between the plaintiff and the defendant. Again, the name KARGO ENTERPRISES entered the picture as this Lease Agreement provides:

This agreement, made and entered into by and between:

GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the LESSOR-SELLER; representing KARGO ENTERPRISES as its Manager,

xxx

thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by the express terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises and the latter is clearly the real party to the lease agreements.

As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a juridical person, as defined by Article 44 of the Civil Code:

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Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins as soon as they have been constituted according to law;

(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member.

Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises cannot be a party to a civil action. This legal reality leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo Enterprises?

We faced a similar question in Juasing Hardware v. Mendoza,17 where we said:

Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual, and requires the proprietor or owner thereof to secure licenses and permits, register the business name, and pay taxes to the national government. It does not vest juridical or legal personality upon the sole proprietorship nor empower it to file or defend an action in court.

Thus, the complaint in the court below should have been filed in the name of the owner of Juasing Hardware. The allegation in the body of the complaint would show that the suit is brought by such person as proprietor or owner of the business conducted under the name and style Juasing Hardware. The descriptive words "doing business as Juasing Hardware" may be added to the title of the case, as is customarily done.18 [Emphasis supplied.]

This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:

SEC. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.

As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a judgment in this case. Thus, contrary to Navarro’s contention, Karen Go is the real party-in-interest, and it is legally incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease Agreement that her husband signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease Agreement in his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, as this is a matter for the trial court to consider in a trial on the merits.

Glenn Go’s Role in the Case

We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go,19 who described herself in the Complaints to be "a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing business under the trade name KARGO ENTERPRISES."20 That Glenn Go and Karen Go are married to each other is a fact never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of a married woman, a fact material to the side issue of whether Kargo Enterprises and its properties are paraphernal or conjugal properties. To restate the parties’ positions, Navarro alleges that Kargo Enterprises is Karen Go’s paraphernal property, emphasizing the fact that the business is registered solely in Karen Go’s name. On the other hand, Karen Go contends that while the business is registered in her name, it is in fact part of their conjugal property.

The registration of the trade name in the name of one person – a woman – does not necessarily lead to the conclusion that the trade name as a property is hers alone, particularly when the woman is married. By law, all property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved.21 Our examination of the records of the case does not show any proof that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all, only the bare allegation of Navarro to this effect exists in the records of the case. As we emphasized in Castro v. Miat:22

Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife." This article does not require proof that the property was acquired with funds of the partnership.The presumption applies even when the manner in which the property was acquired does not appear.23[Emphasis supplied.]

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Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is conjugal or paraphernal property, we hold that it is conjugal property.

Article 124 of the Family Code, on the administration of the conjugal property, provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision.

xxx

This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before performing an act of administration or any act that does not dispose of or encumber their conjugal property.

Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements. In other words, the property relations of the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family Code and, suppletorily, by the spouses’ marriage settlement and by the rules on partnership under the Civil Code. In the absence of any evidence of a marriage settlement between the spouses Go, we look at the Civil Code provision on partnership for guidance.

A rule on partnership applicable to the spouses’ circumstances is Article 1811 of the Civil Code, which states:

Art. 1811. A partner is a co-owner with the other partners of specific partnership property.

The incidents of this co-ownership are such that:

(1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes; xxx

Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered under this name; hence, both have an equal right to seek possession of these properties. Applying Article 484 of the Civil Code, which states that "in default of contracts, or special provisions, co-ownership shall be governed by the provisions of this Title," we find further support in Article 487 of the Civil Code that allows any of the co-owners to bring an action in ejectment with respect to the co-owned property.

While ejectment is normally associated with actions involving real property, we find that this rule can be applied to the circumstances of the present case, following our ruling in Carandang v. Heirs of De Guzman.24 In this case, one spouse filed an action for the recovery of credit, a personal property considered conjugal property, without including the other spouse in the action. In resolving the issue of whether the other spouse was required to be included as a co-plaintiff in the action for the recovery of the credit, we said:

Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses Carandang, seems to be either an indispensable or a necessary party. If she is an indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is not warranted, whether or not there was an order for her inclusion in the complaint pursuant to Section 9, Rule 3.

Article 108 of the Family Code provides:

Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements.

This provision is practically the same as the Civil Code provision it superseded:

Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter.

In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with the other partners of specific partnership property." Taken with the presumption of the conjugal nature of the funds used to finance the four checks used to pay for petitioners’ stock subscriptions, and with the presumption that the credits themselves are part of conjugal funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.

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Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-ownership, co-owners may bring actions for the recovery of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the benefit of his co-owners. In the latter case and in that of De Guia v. Court of Appeals, we also held that Article 487 of the Civil Code, which provides that any of the co-owners may bring an action for ejectment, covers all kinds of action for the recovery of possession.

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is presumed to have been filed for the benefit of all co-owners.25[Emphasis supplied.]

Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo Enterprises-leased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code, supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the property in question without the other spouse’s consent.

On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the Rules, which states:

Section 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided by law.

Non-joinder of indispensable parties not ground to dismiss action

Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases26 that the misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated in Macababbad v. Masirag:27

Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the dismissal of an action, thus:

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately.

In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable party at any stage of the action. The court, either motu proprio or upon the motion of a party, may order the inclusion of the indispensable party or give the plaintiff opportunity to amend his complaint in order to include indispensable parties. If the plaintiff to whom the order to include the indispensable party is directed refuses to comply with the order of the court, the complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only upon unjustified failure or refusal to obey the order to include or to amend is the action dismissed.

In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is fully in order.

Demand not required prior to filing of replevin action

In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a replevin action to an unlawful detainer.

For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2, Rule 60 of the Rules, which states:

Sec. 2. Affidavit and bond.

The applicant must show by his own affidavit or that of some other person who personally knows the facts:

(a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof;

(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof according to the best of his knowledge, information, and belief;

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(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of execution or preliminary attachment, or otherwise placed under custodia legis, or if so seized, that it is exempt from such seizure or custody; and

(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the affidavit aforementioned, for the return of the property to the adverse party if such return be adjudged, and for the payment to the adverse party of such sum as he may recover from the applicant in the action.

We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action for a writ of replevin.

More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already admitted in his Answers that he had received the letters that Karen Go sent him, demanding that he either pay his unpaid obligations or return the leased motor vehicles. Navarro’s position that a demand is necessary and has not been made is therefore totally unmeritorious.

WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs against petitioner Roger V. Navarro.

SO ORDERED.

ARTURO D. BRION Associate Justice

WE CONCUR:

ANTONIO T. CARPIO Associate Justice

Chairperson

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Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 173192 April 14, 2008

ROSENDO BACALSO, RODRIGO BACALSO, MARCILIANA B. DOBLAS, TEROLIO BACALSO, ALIPIO BACALSO, JR., MARIO BACALSO, WILLIAM BACALSO, ALIPIO BACALSO III and CRISTITA B. BAÑES,petitioners, vs. MAXIMO PADIGOS, FLAVIANO MABUYO, GAUDENCIO PADIGOS, DOMINGO PADIGOS, VICTORIA P. ABARQUEZ, LILIA P. GABISON, TIMOTEO PADIGOS, PERFECTO PADIGOS, PRISCA SALARDA, FLORA GUINTO, BENITA TEMPLA, SOTERO PADIGOS, ANDRES PADIGOS, EMILIO PADIGOS, DEMETRIO PADIGOS, JR., WENCESLAO PADIGOS, NELLY PADIGOS, EXPEDITO PADIGOS, HENRY PADIGOS and ENRIQUE P. MALAZARTE, respondents.

D E C I S I O N

CARPIO MORALES, J.:

The case at bar involves a parcel of land identified as Lot No. 3781 (the lot) located in Inayawan, Cebu, covered by Original Certificate of Title No. RO-2649 (0-9092)1 in the name of the following 13 co-owners, their respective shares of which are indicated opposite their names:

Fortunata Padigos (Fortunata) 1/8 Felix Padigos (Felix) 1/8 Wenceslao Padigos (Wenceslao) 1/8 Maximiano Padigos (Maximiano) 1/8 Geronimo Padigos (Geronimo) 1/8 Macaria Padigos 1/8 Simplicio Padigos (Simplicio) 1/8 Ignacio Padigos (Ignacio) 1/48 Matilde Padigos 1/48

Marcelo Padigos 1/48 Rustica Padigos 1/48 Raymunda Padigos 1/48 Antonino Padigos 1/48

Maximo Padigos (Maximo), Flaviano Mabuyo (Flaviano), Gaudencio Padigos (Gaudencio), Domingo Padigos (Domingo), and Victoria P. Abarquez (Victoria), who are among the herein respondents, filed on April 17, 1995, before the Regional Trial Court (RTC) of Cebu City, a Complaint,2 docketed as Civil Case No. CEB-17326, against Rosendo Bacalso (Rosendo) and Rodrigo Bacalso (Rodrigo) who are among the herein petitioners, for quieting of title, declaration of nullity of documents, recovery of possession, and damages.

The therein plaintiffs-herein respondents Maximo and Flaviano claimed that they are children of the deceased co-owner Simplicio; that respondents Gaudencio and Domingo are children of the deceased co-owner Ignacio; and that respondent Victoria and respondent Lilia P. Gabison (Lilia) are grandchildren of the late co-owner Fortunata.3

Respondents also alleged that the therein defendants-petitioners Rosendo and Rodrigo are heirs of Alipio Bacalso, Sr. (Alipio, Sr.) who, during his lifetime, secured Tax Declaration Nos. L-078-02223 and L-078-02224 covering the lot without any legal basis; that Rosendo and Rodrigo have been leasing portions of the lot to persons who built houses thereon, and Rosendo has been living in a house built on a portion of the lot;4 and that demands to vacate and efforts at conciliation proved futile,5 prompting them to file the complaint at the RTC.

In their Answer6 to the complaint, petitioners Rosendo and Rodrigo claimed that their father Alipio, Sr. purchased via deeds of sale the shares in the lot of Fortunata, Simplicio, Wenceslao, Geronimo, and Felix from their respective heirs, and that Alipio, Sr. acquired the shares of the other co-owners of the lot by extraordinary acquisitive prescription through continuous, open, peaceful, and adverse possession thereof in the concept of an owner since 1949.7

By way of Reply and Answer to the Defendants' Counterclaim,8 herein respondents Gaudencio, Maximo, Flaviano, Domingo, and Victoria alleged that the deeds of sale on which Rosendo and Rodrigo base their claim of ownership of portions of the lot are spurious, but assuming that

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they are not, laches had set in against Alipio, Sr.; and that the shares of the other co-owners of the lot cannot be acquired through laches or prescription.

Gaudencio, Maximo, Flaviano, Domingo, and Victoria, with leave of court,9 filed an Amended Complaint10impleading as additional defendants Alipio, Sr.'s other heirs, namely, petitioners Marceliana11 Doblas, Terolio Bacalso, Alipio Bacalso, Jr., Mario Bacalso, William Bacalso, Alipio Bacalso III, and Christine B. Bañes.12 Still later, Gaudencio et al. filed a Second Amended Complaint13 with leave of court,14 impleading as additional plaintiffs the other heirs of registered co-owner Maximiano, namely, herein respondents Timoteo Padigos, Perfecto Padigos, Frisca15 Salarda, Flora Quinto (sometimes rendered as "Guinto"), Benita Templa, Sotero Padigos, Andres Padigos, and Emilio Padigos.16

In their Answer to the Second Amended Complaint,17 petitioners contended that the Second Amended Complaint should be dismissed in view of the failure to implead other heirs of the other registered owners of the lot who are indispensable parties.18

A Third Amended Complaint19 was thereafter filed with leave of court20 impleading as additional plaintiffs the heirs of Wenceslao, namely, herein respondents Demetrio Padigos, Jr., Wenceslao Padigos, and Nelly Padigos, and the heirs of Felix, namely, herein respondents Expedito Padigos (Expedito), Henry Padigos, and Enrique P. Malazarte.21

After trial, Branch 16 of the Cebu City RTC decided22 in favor in the therein plaintiffs-herein respondents, disposing as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants.

1. Declaring the plaintiffs to be entitled to the ownership and possession of the lot in litigation;

2. Declaring as null and void the Deeds of Absolute Sale in question;

3. Ordering the defendants to pay plaintiffs the sum of P50,000.00 as actual and compensatory damages[,] the sum of P20,000.00 as attorney's fees, and P10,000.00 as litigation expenses.

4. Ordering the defendants to pay the costs of suit.

SO ORDERED.23 (Emphasis in the original; underscoring supplied)

The defendants-herein petitioners Bacalsos appealed.24 Meanwhile, the trial court, on respondents' Motion for Execution Pending Appeal,25 issued a writ of execution which was implemented by, among other things, demolishing the houses constructed on the lot.26

By Decision27 of September 6, 2005, the Court of Appeals affirmed the trial court's decision. Their Motion for Reconsideration28 having been denied,29 petitioners filed the present Petition for Review on Certiorari,30 faulting the Court of Appeals:

. . . when it ruled that the Second Amended Complaint is valid and legal, even if not all indispensable parties are impleaded or joined . . .

. . . when [it] wittingly overlooked the most potent, unescapable and indubitable fact or circumstance which proved the continuous possession of Lot No. 3781 by the defendants and their predecessors in interest, Alipio Bacalso [Sr.] and/or when it sanctioned impliedly the glaring arbitrary RTC order of the demolition of the over 40 years old houses, situated on Lot No. 3781 Cebu Cad., belonging to the old lessees, long allowed to lease or stay thereat for many years, by Alipio Bacalso [Sr.], father and [predecessor] in interest of the defendants, now the herein Petitioners. The said lessees were not even joined as parties in this case, much less were they given a chance to air their side before their houses were demolished, in gross violation of the due process clause provided for in Sec. 1[,] Art. III of the Constitution . . .

. . . in upholding as gospel truth the report and conclusion of Nimrod Vaño, the supposed handwriting expert[,] that signatures and thumb marks appearing on all documents of sale presented by the defendants are forgeries, and not mindful that Nimrod Vaño was not cross-examined thoroughly by the defense counsel as he was prevented from doing so by the trial judge, in violation of the law more particularly Sec. 6, Rule 132, Rules of Court

49  

and/or the accepted and usual course of judicial proceedings and is therefore not admissible in evidence.

. . . [when it] . . . wittingly or unwittingly, again overlooked the vital facts, the circumstances, the laws and rulings of the Supreme Court, which are of much weight, substance and influence which, if considered carefully, undoubtedly uphold that the defendants and their predecessors in interests, have long been in continuous, open, peaceful and adverse, and notorious possession against the whole world of Lot No. 3781, Cebu Cad., in concept of absolute owners for 46 years, a period more than sufficient to sustain or uphold the defense of prescription, provided for in Art. 1137 of the Civil Code even without good faith.31 (Emphasis and underscoring in the original; italics supplied)

Respondents admit that Teodulfo Padigos (Teodulfo), an heir of Simplicio, was not impleaded.32 They contend, however, that the omission did not deprive the trial court of jurisdiction because Article 487 of the Civil Code states that "[a]ny of the co-owners may bring an action in ejectment."33

Respondents' contention does not lie. The action is for quieting of title, declaration of nullity of documents, recovery of possession and ownership, and damages. Arcelona v. Court of Appeals34 defines indispensable parties under Section 7 of Rule 3, Rules of Court as follows:

[P]arties-in-interest without whom there can be no final determination of an action. As such, they must be joined either as plaintiffs or as defendants. The general rule with reference to the making of parties in a civil action requires, of course, the joinder of all necessary parties where possible, and the joinder of all indispensable parties under any and all conditions, their presence being a sine qua non for the exercise of judicial power. It is precisely "when an indispensable party is not before the court (that) the action should be dismissed." The absence of an indispensable party renders all subsequent actions of the court null and voidfor want of authority to act, not only as to the absent parties but even as to those present.

Petitioners are co-owners of a fishpond . . . The fishpond is undivided; it is impossible to pinpoint which specific portion of the property is owned by Olanday, et. al. and which portion belongs to petitioners. x x x Indeed, petitioners should have been properly impleaded as indispensable parties. x x x

x x x x35 (Underscoring supplied)

The absence then of an indispensable party renders all subsequent actions of a court null and void for want of authority to act, not only as to the absent party but even as to those present.36

Failure to implead indispensable parties aside, the resolution of the case hinges on a determination of the authenticity of the documents on which petitioners in part anchor their claim to ownership of the lot. The questioned documents are:

1. Exhibit "3" – a notarized Deed of Sale executed by Gaudencio, Domingo, a certain Hermenegilda Padigos, and the heirs of Fortunata, in favor of Alipio, Sr. on June 8, 1959;

2. Exhibit "4" – a notarized Deed of Sale executed on September 9, 1957 by Gavino Padigos (Gavino), alleged son of Felix, in favor of Alipio Gadiano;

3. Exhibit "5" – a private deed of sale executed in June 1957 by Macaria Bongalan, Marciano Padigos, and Dominga Padigos, supposed heirs of Wenceslao, in favor of Alipio, Sr.;

4. Exhibit "6" – a notarized deed of sale executed on September 9, 1957 by Gavino and Rodulfo Padigos, heirs of Geronimo, in favor of Alipio Gadiano;

5. Exhibit "7" – a notarized deed of sale executed on March 19, 1949 by Irenea Mabuyo, Teodulfo and Maximo, heirs of Simplicio;

6. Exhibit "8" – a private deed of sale executed on May 3, 1950 by Candido Padigos, one of Simplicio's children, in favor of Alipio, Sr.; and

7. Exhibit "9" – a notarized deed of sale executed on May 17, 1957 by Alipio Gadiano in favor of Alipio, Sr.

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Exhibits "3," "4," "6," "7," and "8," which are notarized documents, have in their favor the presumption of regularity.37

Forgery, as any other mechanism of fraud, must be proved clearly and convincingly, and the burden of proof lies on the party alleging forgery.38

The trial court and the Court of Appeals relied on the findings of Nimrod Bernabe Vaño (Vaño), expert witness for respondents, that Gaudencio's signature on Exhibit "3" (Deed of Absolute Sale covering Fortunata's share in the lot) and Maximo's thumbprint on Exhibit "7" (Deed of Sale covering Simplicio's share in the lot) are spurious.39Vaño's findings were presented by respondents to rebut those of Wilfredo Espina (Espina), expert witness for petitioners, that Gaudencio's signature and Maximo's thumbprint are genuine.40

Expert opinions are not ordinarily conclusive. They are generally regarded as purely advisory in character.41 The courts may place whatever weight they choose upon and may reject them, if they find them inconsistent with the facts in the case or otherwise unreasonable.42 When faced with conflicting expert opinions, courts give more weight and credence to that which is more complete, thorough, and scientific.43

The Court observes that in examining the questioned signatures of respondent Gaudencio, petitioners' expert witness Espina used as standards 15 specimen signatures which have been established to be Gaudencio's,44 and that after identifying similarities between the questioned signatures and the standard signatures, he concluded that the questioned signatures are genuine. On the other hand, respondents' expert witness Vaño used, as standards, the questioned signatures themselves.45 He identified characteristics of the signatures indicating that they may have been forged. Vaño's statement of the purpose of the examination is revealing:

x x x [t]o x x x discover, classify and determine the authenticity of every document that for any reason requires examination be [sic] scrutinized in every particular that may possibly throw any light upon its origin, its age or upon quality element or condition that may have a bearing upons [sic] its genuineness or spuriousness.46 (Emphasis supplied)

The Court also notes that Vaño also analyzed the signatures of the witnesses to the questioned documents, the absence of standard

specimens with which those signatures could be compared notwithstanding.47 On the other hand, Espina refrained from making conclusions on signatures which could not be compared with established genuine specimens.48

Specifically with respect to Vaño's finding that Maximo's thumbprint on Exhibit "7" is spurious, the Court is not persuaded, no comparison having been made of such thumbprint with a genuine thumbprint established to be Maximo's.49

Vaño's testimony should be received with caution, the trial court having abruptly cut short his cross-examination conducted by petitioners' counsel,50 thus:

COURT:

You are just delaying the proceedings in this case if you are going to ask him about the documents one by one. Just leave it to the Court to determine whether or not he is a qualified expert witness. The Court will just go over the Report of the witness. You do not have to ask the witness one by one on the document,51

thereby depriving this Court of the opportunity to determine his credibility. Espina, on the other hand, withstood thorough cross-examination, re-direct and re-cross examination.52

The value of the opinion of a handwriting expert depends not upon his mere statements of whether a writing is genuine or false, but upon the assistance he may afford in pointing out distinguishing marks, characteristics and discrepancies in and between genuine and false specimens of writing which would ordinarily escape notice or detection from an unpracticed observer.53 While differences exist between Gaudencio's signatures appearing on Exhibits "3"-"3-D" and his signatures appearing on the affidavits accompanying the pleadings in this case,54 the gap of more than 30 years from the time he affixed his signatures on the questioned document to the time he affixed his signatures on the pleadings in the case could explain the difference. Thus Espina observed:

x x x x

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4. Both questioned and standard signatures exhibited the same style and form of the movement impulses in its execution;

5. Personal habits of the writer were established in both questioned and standard signatures such as misalignment of the whole structure of the signature, heavy penpressure [sic] of strokes from initial to the terminal, formation of the loops and ovals, poor line quality and spacing between letters are all repeated;

6. Both questioned and standard signatures [show] no radical change in the strokes and letter formation in spite o[f] their wide difference in dates of execution considering the early writing maturity of the writer;

7. Variations in both writings questioned and standards were considered and properly evaluated.

x x x x

Fundamental similarities are observed in the following characteristics to wit:

x x x x

SIGNATURES

1. Ovals of "a" either rounded or angular at the base;

2. Ovals of "d" either narrow, rounded, or angular at the base;

3. Loop stems of "d" consistently tall and retraced in both specimens questioned and standards;

4. Base alignment of "e" and "i" are repeated with sameness;

5. Top of "c" either with a retrace, angular formation or an eyelet;

6. Terminal ending of "o" heavy with a short tapering formation;

7. Loop stem of "P" with wide space and angular;

8. Oval of "P" either rounded or multi-angular;

9. Base loop of "g" consistently short either a retrace, a blind loop or narrow space disproportionate to the top oval;

10. Angular top of "s" are repeated with sameness;

11. Terminal ending of "s" short and heavy with blind loop or retrace at the base. 55

And Espina concluded

x x x x

[t]hat the four (4) questioned signatures over and above the typewritten name and word GAUDENCIO PADIGOS Vendor on four copies of a DEED OF ABSOLUTE SALE (original and carbon) dated June 8, 1959 were written, signed, and prepared by the hand who wrote the standard specimens Exh. "G" and other specimen materials collected from the records of this case that were submitted or comparison; a product of one Mind and Brain hence GENUINE and AUTHENTIC.56 (Emphasis in the original; underscoring supplied)

Respondents brand Maximo's thumbmark on Exhibit "7" as spurious because, so they claim, Maximo did not affix his signature thru a thumbmark, he knowing how to write.57 Such conclusion is a non sequitur, however, for a person who knows how to write is not precluded from signing by thumbmark.

In affirming the nullification by the trial court of Exhibits "3," "4," "5," "6," "7," and "8," the Court of Appeals held:

x x x x

First of all, facts about pedigree of the registered owners and their lawful heirs were convincingly testified to by plaintiff-appellant Gaudencio Padigos and his testimony remained uncontroverted.

x x x x

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Giving due weight to his testimony, we find that x x x the vendors in the aforesaid Deeds of Sale x x x were not the legal heirs of the registered owners of the disputed land. x x x

x x x x

As for Exhibit "4," the vendor Gavino Padigos is not a legal heir of the registered owner Felix Padigos. The latter's heirs are plaintiff-appellants Expedito Padigos, Henry Padigos and Enrique P. Malazarte. Accordingly, Exhibit "4" is a patent nullity and did not vest title of Felix Padigos' share of Lot 3781 to Alipio [Gadiano].

As for Exhibit "6," the vendors Gavino and Rodulfo Padigos are not the legal heirs of the registered ownerGeronimo Padigos. Therefore, these fictitious heirs could not validly convey ownership in favor of Alipio [Gadiano].

x x x x

As for Exhibit "8," the vendor Candido Padigos is not a legal heir of Simplicio Padigos. Therefore, the former could not vest title of the land to Alipio Bacalso.

As for Exhibit "3," the vendors Gaudencio Padigos, Hermenegilda Padigos and Domingo Padigos are not the legal heirs of registered owner Fortunata Padigos. Hermenegilda Padigos is not a known heir of any of the other registered owners of the property.

On the other hand, plaintiffs-appellants Gaudencio and Domingo Padigos are only some of the collateral grandchildren of Fortunata Padigos. They could not by themselves dispose of the share of Fortunata Padigos.

x x x x

As for Exhibit "5," the vendors in Exhibit "5" are not the legal heirs of Wenceslao Padigos. The children of registered owner Wenceslao Padigos are: Wenceslao Padigos, Demetrio Padigos and Nelly Padigos. Therefore, Exhibit "5" is null and void and could not convey the shares of the registered owner Wenceslao Padigos in favor of Alipio Bacalso.

As for Exhibit "9," the Deed of Sale executed by Alipio [Gadiano] in favor of Alipio Bacalso is also void because the shares of the registered owners Felix and Geronimo Padigos were not validly conveyed to Alipio [Gadiano] because Exhibit "4" and "6" were void contracts. Thus, Exhibit "9" is also null and void.58(Italics in the original; underscoring supplied)

The evidence regarding the "facts of pedigree of the registered owners and their heirs" does not, however, satisfy this Court. Not only is Gaudencio's self-serving testimony uncorroborated; it contradicts itself on material points. For instance, on direct examination, he testified that Ignacio is his father and Fortunata is his grandmother.59 On cross-examination, however, he declared that his father Ignacio is the brother of Fortunata.60 On direct examination, he testified that his co-plaintiffs Victoria and Lilia are already dead.61 On cross-examination, however, he denied knowledge whether the two are already dead.62 Also on direct examination, he identified Expedito, Henry, and Enrique as the children of Felix.63 Expedito himself testified, however, that he is the son of a certain Mamerto Padigos, the son of a certain Apolonio Padigos who is in turn the son of Felix.64

At all events, respondents are guilty of laches – the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it has either abandoned it or declined to assert it.65While, by express provision of law, no title to registered land in derogation of that of the registered owner shall be acquired by prescription or adverse possession, it is an enshrined rule that even a registered owner may be barred from recovering possession of property by virtue of laches.66

Respondents insist, however, that they only learned of the deeds of sale in 1994, the year that Alipio, Sr. allegedly commenced possession of the property.67 The record shows, however, that although petitioners started renting out the land in 1994, they have been tilling it since the 1950s,68 and Rosendo's house was constructed in about 1985.69 These acts of possession could not have escaped respondents' notice given the following unassailed considerations, inter alia: Gaudencio testified that he lived on the lot from childhood until 1985, after which he moved to a place three kilometers away, and after he moved, a certain Vicente Debelos lived on the lot with his permission.70 Petitioners' witness Marina Alcoseba, their employee,71 testified that Gaudencio and Domingo used to cut kumpay planted by petitioners' tenant on the lot.72 The tax declarations in Alipio, Sr.'s name for the years 1967-1980 covering a

53  

portion of the lot indicate Fortunata's share to be the north and east boundaries of Alipio, Sr.'s;73 hence, respondents could not have been unaware of the acts of possession that petitioners exercised over the lot.

Upon the other hand, petitioners have been vigilant in protecting their rights over the lot, which their predecessor-in-interest Alipio, Sr. had declared in his name for tax purposes as early as 1960, and for which he had been paying taxes until his death in 1994, by continuing to pay the taxes thereon.74

Respondents having failed to establish their claim by preponderance of evidence, their action for quieting of title, declaration of nullity of documents, recovery of possession, and damages must fail.

A final word. While petitioners' attribution of error to the appellate court's "implied sanction" of the trial court's order for the demolition pending appeal of the houses of their lessees is well taken, the Court may not consider any grant of relief to them, they not being parties to the case.

WHEREFORE, the petition is GRANTED. The September 6, 2005 decision of the Court of Appeals is REVERSEDand SET ASIDE. Civil Case No. CEB-17326 of Branch 16 of the Regional Trial Court of Cebu City is DISMISSED.

SO ORDERED.

Quisumbing,Chairperson, Tinga, Velasco, Jr., Brion, JJ., concur.

54  

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 177429 November 24, 2009

ANICIA VALDEZ-TALLORIN, Petitioner, vs. HEIRS OF JUANITO TARONA, Represented by CARLOS TARONA, ROGELIO TARONA and LOURDES TARONA, Respondents.

D E C I S I O N

ABAD, J.:

This case is about a court’s annulment of a tax declaration in the names of three persons, two of whom had not been impleaded in the case, for the reason that the document was illegally issued to them.

The Facts and the Case

On February 9, 1998 respondents Carlos, Rogelio, and Lourdes Tarona (the Taronas) filed an action before the Regional Trial Court (RTC) of Balanga, Bataan,1 against petitioner Anicia Valdez-Tallorin (Tallorin) for the cancellation of her and two other women’s tax declaration over a parcel of land.

The Taronas alleged in their complaint that, unknown to them, in 1981, the Assessor’s Office of Morong in Bataan cancelled Tax Declaration 463 in the name of their father, Juanito Tarona (Juanito), covering 6,186 square meters of land in Morong, Bataan. The cancellation was said to be based on an unsigned though notarized affidavit that Juanito allegedly executed in favor of petitioner Tallorin and two others, namely, Margarita Pastelero Vda. de Valdez and Dolores Valdez, who were not impleaded in the action. In place of the cancelled one, the Assessor’s Office issued Tax Declaration 6164 in the names of the latter three persons. The old man Tarona’s affidavit had been missing and no copy could be found among the records of the Assessor’s Office.2

The Taronas further alleged that, without their father’s affidavit on file, it followed that his tax declaration had been illegally cancelled and a new one illegally issued in favor of Tallorin and the others with her. The unexplained disappearance of the affidavit from official files, the Taronas concluded, covered-up the falsification or forgery that caused the substitution.3 The Taronas asked the RTC to annul Tax Declaration 6164, reinstate Tax Declaration 463, and issue a new one in the name of Juanito’s heirs.

On March 6, 1998 the Taronas filed a motion to declare petitioner Tallorin in default for failing to answer their complaint within the allowed time.4 But, before the RTC could act on the motion, Tallorin filed a belated answer, alleging among others that she held a copy of the supposedly missing affidavit of Juanito who was merely an agricultural tenant of the land covered by Tax Declaration 463. He surrendered and waived in that affidavit his occupation and tenancy rights to Tallorin and the others in consideration of P29,240.00. Tallorin also put up the affirmative defenses of non-compliance with the requirement of conciliation proceedings and prescription.

On March 12, 1998 the RTC set Tallorin’s affirmative defenses for hearing5 but the Taronas sought reconsideration, pointing out that the trial court should have instead declared Tallorin in default based on their earlier motion.6 On June 2, 1998 the RTC denied the Taronas’ motion for reconsideration7 for the reasons that it received Tallorin’s answer before it could issue a default order and that the Taronas failed to show proof that Tallorin was notified of the motion three days before the scheduled hearing. Although the presiding judge inhibited himself from the case on motion of the Taronas, the new judge to whom the case was re-raffled stood by his predecessor’s previous orders.

By a special civil action for certiorari before the Court of Appeals (CA),8 however, the Taronas succeeded in getting the latter court to annul the RTC’s March 12 and June 2, 1998 orders.9 The CA ruled that the RTC gravely abused its discretion in admitting Tallorin’s late answer in the absence of a motion to admit it. Even if petitioner Tallorin had already filed her late answer, said the CA, the RTC should have heard the Taronas’ motion to declare Tallorin in default.

Upon remand of the case, the RTC heard the Taronas’ motion to declare Tallorin in default,10 granted the same, and directed the Taronas to present evidence ex parte.11

55  

On January 30, 2002 the RTC rendered judgment, a) annulling the tax declaration in the names of Tallorin, Margarita Pastelero Vda. de Valdez, and Dolores Valdez; b) reinstating the tax declaration in the name of Juanito; and c) ordering the issuance in its place of a new tax declaration in the names of Juanito’s heirs. The trial court also ruled that Juanito’s affidavit authorizing the transfer of the tax declaration had no binding force since he did not sign it.1avvphi1

Tallorin appealed the above decision to the CA,12 pointing out 1) that the land covered by the tax declaration in question was titled in her name and in those of her two co-owners; 2) that Juanito’s affidavit only dealt with the surrender of his tenancy rights and did not serve as basis for canceling Tax Declaration 463 in his name; 3) that, although Juanito did not sign the affidavit, he thumbmarked and acknowledged the same before a notary public; and 4) that the trial court erred in not dismissing the complaint for failure to implead Margarita Pastelero Vda. de Valdez and Dolores Valdez who were indispensable parties in the action to annul Juanito’s affidavit and the tax declaration in their favor.13

On May 22, 2006 the CA rendered judgment, affirming the trial court’s decision.14 The CA rejected all of Tallorin’s arguments. Since she did not assign as error the order declaring her in default and since she took no part at the trial, the CA pointed out that her claims were in effect mere conjectures, not based on evidence of record.15Notably, the CA did not address the issue Tallorin raised regarding the Taronas’ failure to implead Margarita Pastelero Vda. de Valdez and Dolores Valdez as indispensable party-defendants, their interest in the cancelled tax declarations having been affected by the RTC judgment.

Questions Presented

The petition presents the following questions for resolution by this Court:

1. Whether or not the CA erred in failing to dismiss the Taronas’ complaint for not impleading Margarita Pastelero Vda. de Valdez and Dolores Valdez in whose names, like their co-owner Tallorin, the annulled tax declaration had been issued;

2. Whether or not the CA erred in not ruling that the Taronas’ complaint was barred by prescription; and

3. Whether or not the CA erred in affirming the RTC’s finding that Juanito’s affidavit had no legal effect because it was unsigned; when at the hearing of the motion to declare Tallorin in default, it was shown that the affidavit bore Juanito’s thumbmark.

The Court’s Rulings

The first question, whether or not the CA erred in failing to dismiss the Taronas’ complaint for not impleading Margarita Pastelero Vda. de Valdez and Dolores Valdez in whose names, like their co-owner Tallorin, the annulled tax declaration had been issued, is a telling question.

The rules mandate the joinder of indispensable parties. Thus:

Sec. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs and defendants.16

Indispensable parties are those with such an interest in the controversy that a final decree would necessarily affect their rights, so that the courts cannot proceed without their presence.17 Joining indispensable parties into an action is mandatory, being a requirement of due process. Without their presence, the judgment of the court cannot attain real finality.

Judgments do not bind strangers to the suit. The absence of an indispensable party renders all subsequent actions of the court null and void. Indeed, it would have no authority to act, not only as to the absent party, but as to those present as well. And where does the responsibility for impleading all indispensable parties lie? It lies in the plaintiff.18

Here, the Taronas sought the annulment of the tax declaration in the names of defendant Tallorin and two others, namely, Margarita Pastelero Vda. de Valdez and Dolores Valdez and, in its place, the reinstatement of the previous declaration in their father Juanito’s name. Further, the Taronas sought to strike down as void the affidavit in which Juanito renounced his tenancy right in favor of the same three persons. It is inevitable that any decision granting what the Taronas wanted would necessarily affect the rights of such persons to the property covered by the tax declaration.

The Court cannot discount the importance of tax declarations to the persons in whose names they are issued. Their cancellation adversely

56  

affects the rights and interests of such persons over the properties that the documents cover. The reason is simple: a tax declaration is a primary evidence, if not the source, of the right to claim title of ownership over real property, a right enforceable against another person. The Court held in Uriarte v. People19 that, although not conclusive, a tax declaration is a telling evidence of the declarant’s possession which could ripen into ownership.

In Director of Lands v. Court of Appeals,20 the Court said that no one in his right mind would pay taxes for a property that he did not have in his possession. This honest sense of obligation proves that the holder claims title over the property against the State and other persons, putting them on notice that he would eventually seek the issuance of a certificate of title in his name. Further, the tax declaration expresses his intent to contribute needed revenues to the Government, a circumstance that strengthens his bona fide claim to ownership.21

Here, the RTC and the CA annulled Tax Declaration 6164 that belonged not only to defendant Tallorin but also to Margarita Pastelero Vda. de Valdez and Dolores Valdez, which two persons had no opportunity to be heard as they were never impleaded. The RTC and the CA had no authority to annul that tax declaration without seeing to it that all three persons were impleaded in the case.

But the Taronas’ action cannot be dismissed outright. As the Court held in Plasabas v. Court of Appeals,22 the non-joinder of indispensable parties is not a ground for dismissal. Section 11, Rule 3 of the 1997 Rules of Civil Procedure prohibits the dismissal of a suit on the ground of non-joinder or misjoinder of parties and allows the amendment of the complaint at any stage of the proceedings, through motion or on order of the court on its own initiative. Only if plaintiff refuses to implead an indispensable party, despite the order of the court, may it dismiss the action.

There is a need, therefore, to remand the case to the RTC with an order to implead Margarita Pastelero Vda. de Valdez and Dolores Valdez as defendants so they may, if they so desire, be heard.

In view of the Court’s resolution of the first question, it would serve no purpose to consider the other questions that the petition presents. The resolution of those questions seems to depend on the complete evidence

in the case. This will not yet happen until all the indispensable party-defendants are impleaded and heard on their evidence.

WHEREFORE, the Court GRANTS the petition and SETS ASIDE the decision of the Regional Trial Court of Balanga, Bataan in Civil Case 6739 dated January 30, 2002 and the decision of the Court of Appeals in CA-G.R. CV 74762 dated May 22, 2006. The Court REMANDS the case to the Regional Trial Court of Balanga, Bataan which is DIRECTED to have Margarita Pastelero Vda. de Valdez and Dolores Valdez impleaded by the plaintiffs as party-defendants and, afterwards, to hear the case in the manner prescribed by the rules.

SO ORDERED.

ROBERTO A. ABAD Associate Justice

WE CONCUR:

ANTONIO T. CARPIO Associate Justice

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Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 191336 January 25, 2012

CRISANTA ALCARAZ MIGUEL, Petitioner, vs. JERRY D. MONTANEZ, Respondent.

D E C I S I O N

REYES, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court. Petitioner Crisanta Alcaraz Miguel (Miguel) seeks the reversal and setting aside of the September 17, 2009 Decision1 and February 11, 2010 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 100544, entitled "Jerry D. Montanez v. Crisanta Alcaraz Miguel."

Antecedent Facts

On February 1, 2001, respondent Jerry Montanez (Montanez) secured a loan of One Hundred Forty-Three Thousand Eight Hundred Sixty-Four Pesos (P143,864.00), payable in one (1) year, or until February 1, 2002, from the petitioner. The respondent gave as collateral therefor his house and lot located at Block 39 Lot 39 Phase 3, Palmera Spring, Bagumbong, Caloocan City.

Due to the respondent’s failure to pay the loan, the petitioner filed a complaint against the respondent before the Lupong Tagapamayapa of Barangay San Jose, Rodriguez, Rizal. The parties entered into a Kasunduang Pag-aayos wherein the respondent agreed to pay his loan in installments in the amount of Two Thousand Pesos (P2,000.00) per month, and in the event the house and lot given as collateral is sold, the respondent would settle the balance of the loan in full. However, the respondent still failed to pay, and on December 13, 2004, the Lupong Tagapamayapa issued a certification to file action in court in favor of the petitioner.

On April 7, 2005, the petitioner filed before the Metropolitan Trial Court (MeTC) of Makati City, Branch 66, a complaint for Collection of Sum of Money. In his Answer with Counterclaim,3 the respondent raised the defense of improper venue considering that the petitioner was a resident of Bagumbong, Caloocan City while he lived in San Mateo, Rizal.

After trial, on August 16, 2006, the MeTC rendered a Decision,4 which disposes as follows:

WHEREFORE, premises considered[,] judgment is hereby rendered ordering defendant Jerry D. Montanez to pay plaintiff the following:

1. The amount of [Php147,893.00] representing the obligation with legal rate of interest from February 1, 2002 which was the date of the loan maturity until the account is fully paid;

2. The amount of Php10,000.00 as and by way of attorney’s fees; and the costs.

SO ORDERED. 5

On appeal to the Regional Trial Court (RTC) of Makati City, Branch 146, the respondent raised the same issues cited in his Answer. In its March 14, 2007 Decision,6 the RTC affirmed the MeTC Decision, disposing as follows:

WHEREFORE, finding no cogent reason to disturb the findings of the court a quo, the appeal is hereby DISMISSED, and the DECISION appealed from is hereby AFFIRMED in its entirety for being in accordance with law and evidence.

SO ORDERED.7

Dissatisfied, the respondent appealed to the CA raising two issues, namely, (1) whether or not venue was improperly laid, and (2) whether or not the Kasunduang Pag-aayos effectively novated the loan agreement. On September 17, 2009, the CA rendered the assailed Decision, disposing as follows:

WHEREFORE, premises considered, the petition is hereby GRANTED. The appealed Decision dated March 14, 2007 of the Regional Trial Court (RTC) of Makati City, Branch 146, is REVERSED and SET ASIDE. A new

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judgment is entered dismissing respondent’s complaint for collection of sum of money, without prejudice to her right to file the necessary action to enforce the Kasunduang Pag-aayos.

SO ORDERED.8

Anent the issue of whether or not there is novation of the loan contract, the CA ruled in the negative. It ratiocinated as follows:

Judging from the terms of the Kasunduang Pag-aayos, it is clear that no novation of the old obligation has taken place.1âwphi1 Contrary to petitioner’s assertion, there was no reduction of the term or period originally stipulated. The original period in the first agreement is one (1) year to be counted from February 1, 2001, or until January 31, 2002. When the complaint was filed before the barangay on February 2003, the period of the original agreement had long expired without compliance on the part of petitioner. Hence, there was nothing to reduce or extend. There was only a change in the terms of payment which is not incompatible with the old agreement. In other words, the Kasunduang Pag-aayos merely supplemented the old agreement.9

The CA went on saying that since the parties entered into a Kasunduang Pag-aayos before the Lupon ng Barangay, such settlement has the force and effect of a court judgment, which may be enforced by execution within six (6) months from the date of settlement by the Lupon ng Barangay, or by court action after the lapse of such time.10 Considering that more than six (6) months had elapsed from the date of settlement, the CA ruled that the remedy of the petitioner was to file an action for the execution of the Kasunduang Pag-aayos in court and not for collection of sum of money.11 Consequently, the CA deemed it unnecessary to resolve the issue on venue.12

The petitioner now comes to this Court.

Issues

(1) Whether or not a complaint for sum of money is the proper remedy for the petitioner, notwithstanding the Kasunduang Pag-aayos;13 and

(2) Whether or not the CA should have decided the case on the merits rather than remand the case for the enforcement of the Kasunduang Pag-aayos.14

Our Ruling

Because the respondent failed to comply with the terms of the Kasunduang Pag-aayos, said agreement is deemed rescinded pursuant to Article 2041 of the New Civil Code and the petitioner can insist on his original demand. Perforce, the complaint for collection of sum of money is the proper remedy.

The petitioner contends that the CA erred in ruling that she should have followed the procedure for enforcement of the amicable settlement as provided in the Revised Katarungang Pambarangay Law, instead of filing a collection case. The petitioner points out that the cause of action did not arise from the Kasunduang Pag-aayos but on the respondent’s breach of the original loan agreement.15

This Court agrees with the petitioner.

It is true that an amicable settlement reached at the barangay conciliation proceedings, like the Kasunduang Pag-aayos in this case, is binding between the contracting parties and, upon its perfection, is immediately executory insofar as it is not contrary to law, good morals, good customs, public order and public policy.16 This is in accord with the broad precept of Article 2037 of the Civil Code, viz:

A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in compliance with a judicial compromise.

Being a by-product of mutual concessions and good faith of the parties, an amicable settlement has the force and effect of res judicata even if not judicially approved.17 It transcends being a mere contract binding only upon the parties thereto, and is akin to a judgment that is subject to execution in accordance with the Rules.18 Thus, under Section 417 of the Local Government Code,19 such amicable settlement or arbitration award may be enforced by execution by the Barangay Lupon within six (6) months from the date of settlement, or by filing an action to enforce such settlement in the appropriate city or municipal court, if beyond the six-month period.

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Under the first remedy, the proceedings are covered by the Local Government Code and the Katarungang Pambarangay Implementing Rules and Regulations. The Punong Barangay is called upon during the hearing to determine solely the fact of non-compliance of the terms of the settlement and to give the defaulting party another chance at voluntarily complying with his obligation under the settlement. Under the second remedy, the proceedings are governed by the Rules of Court, as amended. The cause of action is the amicable settlement itself, which, by operation of law, has the force and effect of a final judgment.20

It must be emphasized, however, that enforcement by execution of the amicable settlement, either under the first or the second remedy, is only applicable if the contracting parties have not repudiated such settlement within ten (10) days from the date thereof in accordance with Section 416 of the Local Government Code. If the amicable settlement is repudiated by one party, either expressly or impliedly, the other party has two options, namely, to enforce the compromise in accordance with the Local Government Code or Rules of Court as the case may be, or to consider it rescinded and insist upon his original demand. This is in accord with Article 2041 of the Civil Code, which qualifies the broad application of Article 2037, viz:

If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand.

In the case of Leonor v. Sycip,21 the Supreme Court (SC) had the occasion to explain this provision of law. It ruled that Article 2041 does not require an action for rescission, and the aggrieved party, by the breach of compromise agreement, may just consider it already rescinded, to wit:

It is worthy of notice, in this connection, that, unlike Article 2039 of the same Code, which speaks of "a cause of annulment or rescission of the compromise" and provides that "the compromise may be annulled or rescinded" for the cause therein specified, thus suggesting an action for annulment or rescission, said Article 2041 confers upon the party concerned, not a "cause" for rescission, or the right to "demand" the rescission of a compromise, but the authority, not only to "regard it as rescinded", but, also, to "insist upon his original demand". The language of this Article 2041, particularly when contrasted with that of Article 2039, denotes that no action for rescission is required in said Article 2041, and that the party aggrieved by the breach of a compromise agreement may,

if he chooses, bring the suit contemplated or involved in his original demand, as if there had never been any compromise agreement, without bringing an action for rescission thereof. He need not seek a judicial declaration of rescission, for he may "regard" the compromise agreement already "rescinded".22 (emphasis supplied)

As so well stated in the case of Chavez v. Court of Appeals,23 a party's non-compliance with the amicable settlement paved the way for the application of Article 2041 under which the other party may either enforce the compromise, following the procedure laid out in the Revised Katarungang Pambarangay Law, or consider it as rescinded and insist upon his original demand. To quote:

In the case at bar, the Revised Katarungang Pambarangay Law provides for a two-tiered mode of enforcement of an amicable settlement, to wit: (a) by execution by the Punong Barangay which is quasi-judicial and summary in nature on mere motion of the party entitled thereto; and (b) an action in regular form, which remedy is judicial. However, the mode of enforcement does not rule out the right of rescission under Art. 2041 of the Civil Code. The availability of the right of rescission is apparent from the wording of Sec. 417 itself which provides that the amicable settlement "may" be enforced by execution by the lupon within six (6) months from its date or by action in the appropriate city or municipal court, if beyond that period. The use of the word "may" clearly makes the procedure provided in the Revised Katarungang Pambarangay Law directory or merely optional in nature.

Thus, although the "Kasunduan" executed by petitioner and respondent before the Office of the Barangay Captain had the force and effect of a final judgment of a court, petitioner's non-compliance paved the way for the application of Art. 2041 under which respondent may either enforce the compromise, following the procedure laid out in the Revised Katarungang Pambarangay Law, or regard it as rescinded and insist upon his original demand. Respondent chose the latter option when he instituted Civil Case No. 5139-V-97 for recovery of unrealized profits and reimbursement of advance rentals, moral and exemplary damages, and attorney's fees. Respondent was not limited to claiming P150,000.00 because although he agreed to the amount in the "Kasunduan," it is axiomatic that a compromise settlement is not an admission of liability but merely a recognition that there is a dispute and an impending litigation which the parties hope to prevent by making reciprocal concessions, adjusting their respective positions in the hope of gaining balanced by the danger of losing. Under the "Kasunduan," respondent was only required

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to execute a waiver of all possible claims arising from the lease contract if petitioner fully complies with his obligations thereunder. It is undisputed that herein petitioner did not.24 (emphasis supplied and citations omitted)

In the instant case, the respondent did not comply with the terms and conditions of the Kasunduang Pag-aayos. Such non-compliance may be construed as repudiation because it denotes that the respondent did not intend to be bound by the terms thereof, thereby negating the very purpose for which it was executed. Perforce, the petitioner has the option either to enforce the Kasunduang Pag-aayos, or to regard it as rescinded and insist upon his original demand, in accordance with the provision of Article 2041 of the Civil Code. Having instituted an action for collection of sum of money, the petitioner obviously chose to rescind the Kasunduang Pag-aayos. As such, it is error on the part of the CA to rule that enforcement by execution of said agreement is the appropriate remedy under the circumstances.

Considering that the Kasunduang Pag-aayos is deemed rescinded by the non-compliance of the respondent of the terms thereof, remanding the case to the trial court for the enforcement of said agreement is clearly unwarranted.

The petitioner avers that the CA erred in remanding the case to the trial court for the enforcement of the Kasunduang Pag-aayos as it prolonged the process, "thereby putting off the case in an indefinite pendency."25Thus, the petitioner insists that she should be allowed to ventilate her rights before this Court and not to repeat the same proceedings just to comply with the enforcement of the Kasunduang Pag-aayos, in order to finally enforce her right to payment.26

The CA took off on the wrong premise that enforcement of the Kasunduang Pag-aayos is the proper remedy, and therefore erred in its conclusion that the case should be remanded to the trial court. The fact that the petitioner opted to rescind the Kasunduang Pag-aayos means that she is insisting upon the undertaking of the respondent under the original loan contract. Thus, the CA should have decided the case on the merits, as an appeal before it, and not prolong the determination of the issues by remanding it to the trial court. Pertinently, evidence abounds that the respondent has failed to comply with his loan obligation. In fact, the Kasunduang Pag-aayos is the well nigh incontrovertible proof of the respondent’s indebtedness with the petitioner as it was executed precisely to give the respondent a second chance to make good on his

undertaking. And since the respondent still reneged in paying his indebtedness, justice demands that he must be held answerable therefor.

WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Appeals is SET ASIDE and the Decision of the Regional Trial Court, Branch 146, Makati City, dated March 14, 2007 is REINSTATED.

SO ORDERED.

BIENVENIDO L. REYES Associate Justice

WE CONCUR:

ANTONIO T. CARPIO Associate Justice