Civpro Digest-rule 1 to Rule 3

8/6/2019 Civpro Digest-rule 1 to Rule 3

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G.R. No. 131686 March 18, 2002

ROUEL AD. REYES,petitioner,vs.SPOUSES PEPITO and MARTA TORRES, HON. ELIEZER R. DELOS SANTOS,

Executive Judge, RTC, Angeles City, respondents.

YNARES-SANTIAGO, J.:

This petition forcertiorari originates from a case for ejectment with damages concerninga parcel of land1 located in Mabalacat, Pampanga. Sometime in 1993, petitioner RouelAD. Reyes purchased the subject property. At that time, the property was alreadyoccupied by several tenants who had constructed their homes and commercialestablishments thereon. These residents were informed that petitioner had acquired theproperty and were asked to vacate the same.1wphi1.nt

Respondent spouses Pepito and Marta Torres and Arcelli T. Manalo refused to vacate andremove their structure. Moreover, they erected one more structure and leased the same toLolita Ticse for a monthly rental of One Thousand Pesos (P1,000.00). Several writtendemands2 to vacate addressed to the Torres couple and Manalo went unheeded, whichprompted petitioner Reyes to file a complaint before the Barangay Lupon for conciliationproceedings. When no settlement was reached, a certificate to file action was issued topetitioner, who filed a case for ejectment3 against respondents and Manalo before theMunicipal Circuit Trial Court of Mabalacat and Magalang, Pampanga.

On May 29, 1997, the MCTC rendered a decision, disposing of the case as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and againstherein defendants by ordering the latter:

1. To vacate the premises and to surrender the same peacefully to the plaintiff orto any of his authorized representative/s;

2. To remove the structure/s standing on the premises;

3. To pay the plaintiff a rental of P1,000.00 a month commencing from the date offiling of the complaint on July 22, 1996, up to the time defendants finally vacatethe premises;

4. To pay the plaintiff the amount of P20,000.00 as attorney's fees and to pay thecost of this suit.

Plaintiff's claims for moral damages and defendants' counterclaim are herebydenied for lack of proof.

SO ORDERED.4


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The Torres couple and co-defendant Manalo appealed to the Regional Trial Court ofAngeles City and filed the required supersedeas bond. The case was docketed as CivilCase No. 8746. On September 18, 1997, the RTC dismissed the appeal for failure to paydocket and other legal fees.5

Respondents filed a motion for reconsideration,6

averring that they had paid the properdocket fees as early as August 27, 1997, annexing thereto the receipts. They manifestedthat it was the Clerk of Court of the MCTC of Mabalacat and Magalang who neglected toattach the said receipts to the records of the case. The motion for reconsideration was setfor hearing at 2:00 in the afternoon of October 3, 1997.

The day before the hearing, respondents filed a petition for certiorari and prohibition7

with Branch 62 of the Regional Trial Court of Angeles City, docketed as Civil Case No.8794. Respondents assailed the writ of execution issued by the MCTC on September 30,1997 despite their filing of the supersedeas bond to stay execution of judgment pendingappeal. Nevertheless, the sheriff executed the writ and demolished respondents' house

and other structure on the subject property.

Respondents failed to appear at the hearing of their motion for reconsideration beforeBranch 59 of the RTC. The motion for reconsideration was denied and its earlier orderdismissing the appeal was sustained.

The following day, respondents filed another motion for reconsideration8 of the orderdenying their first motion for reconsideration. They alleged that their counsel arrived lateat the hearing on October 3, 1997; that their counsel was at Branch 62 of the RTCAngeles City awaiting the issuance of a temporary restraining order in Civil Case No.8794, which was issued only a few minutes before 2:00 o'clock; that he thereafter rushed

to Branch 59to attend the hearing but was delayed by heavy traffic due to a vehicularaccident.

On November 17, 1997, the Regional Trial Court issued an Order,9 ruling as follows:

Without necessarily touching on the issue as to whether the appeal was filed ontime and it appearing that indeed there was payment of the appellate docket feesas evidenced by Official Receipt Nos. 5864393and 6674615, the Branch Clerk ofCourt of the Municipal Circuit Trial Court, Mabalacat-Magalang, Pampanga, ishereby ORDERED to immediately transmit the entire records of this case to thisCourt for inclusion in the raffle.

SO ORDERED.

Petitioner filed a motion for reconsideration.10 While his motion for reconsiderationremained unresolved, the case was raffled to Branch 57 of the Regional Trial Court ofAngeles City.11 On December 5,1997, said court issued an Order12 directing the parties tosubmit their respective memoranda, after which the case would be considered submittedfor decision.


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Hence, the instant petition for certiorari. Petitioner argues that respondent court had lostjurisdiction when it dismissed the appeal and returned the records of the case to theMunicipal Circuit Trial Court; that respondent court erred in reinstating the appealwithout first resolving the motion for reconsideration; that respondent court erred in notciting private respondents in contempt for forum-shopping; and that respondents' motion

for reconsideration of the dismissal order was bereft of merit.

We find no grave abuse of discretion on the part of respondent court.

This Court is fully aware that procedural rules are not to be belittled or simplydisregarded for these prescribed procedures insure an orderly and speedy administrationof justice. However, it is equally true that litigation is not merely a game of technicalities.Time and again, courts have been guided by the principle that the rules of procedure arenot to be applied in a very rigid and technical manner, as rules of procedure are used onlyto help secure and not to override substantial justice.13 The law and jurisprudence grant tocourts the prerogative to relax compliance with procedural rules of even the most

mandatory character,

14

mindful of the duty to reconcile both the need to put an end tolitigation speedily and the parties' right to an opportunity to be heard.15

A more lenient interpretation is appropriate in this case especially because the dismissalof respondents' appeal for failure to pay docket fees was manifestly erroneous. Throughno fault of respondents, the clerk of court of the Municipal Circuit Trial Court failed toinclude and transmit to respondent Regional Trial Court the receipts of payment. Therecords show that respondents paid to the Clerk of Court of the Municipal Circuit TrialCourt the corresponding amounts well within the five (5)days granted by the respondentcourt in its order requiring such payment.16

Contrary to petitioner's contention, there was nothing respondents could have done aboutthe situation since they had every right to rely on the presumption that the clerk of courtwould do her bounden duty. Rule 40, Section 5of the Rules of Court, as amended,provides:

Within the period for taking an appeal, the appellant shall pay to the clerk of thecourt which rendered the judgment or final order appealed from the full amount ofthe appellate court docket and other lawful fees. Proof of payment thereof shall betransmitted to the appellate court together with the original record or the record onappeal, as the case may be. (Underscoring ours)

Clearly then, it was the responsibility of the clerk of court to attach respondents' proof ofpayment to the original record. Respondent court's error in dismissing the appeal afterhaving been inadvertently misled to believe that respondents had failed to pay the docketfees was rectifiable. Respondents endeavored to set this right through their first motionfor reconsideration.


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It cannot be said that respondents' second motion is strictly prohibited by the rules for thematters raised in the first and second motions are not identical, since they challenged twodifferent orders of the respondent court.

To our mind, a strict application of the rule prohibiting a second motion for

reconsideration in this instance would be unreasonable. Both orders dismissing the appealwere based on technicalities and not on the merits of the case. Recognizing thatlitigations should, as much as possible, be resolved on the merits and not on technicality,the strict interpretation of this exclusionary rule in this case would amount to adeprivation of the petitioner's statutory right to appeal. The Court has in innumerableinstances held that the right of appeal is an essential part of the judicial system; hence,courts should proceed with caution so as not to unduly and hastily divest a party of theright to appeal.17

In the first place, were it not for the omission or negligence of the Clerk of the MunicipalCourt, the appeal would not have been dismissed, and the same would have been resolved

on the merits. The final resolution of this case has been delayed because of procedural ortechnical lapses. However, such procedural lapses on the part of respondents was neitherintended to delay nor did it result in prejudice to petitioner; hence, denying respondents'appeal under the circumstances would be putting a premium on technicalities at theexpense of a just resolution of the case.18

Whenever non-compliance with the rules is not intended to delay the final disposition ofthe case, nor to cause prejudice to the adverse party, we have repeatedly held that thedismissal of an appeal on mere technicalities may be stayed in the exercise of the court'sequity jurisdiction.19 Thus, when respondent court set aside its earlier dismissal ofrespondents' appeal, it did not do so with grave abuse of discretion amounting to excess

or lack of jurisdiction. Litigations should, as much as possible, be decided on the meritsand not on technicality.20 It is the court's policy to encourage hearings of appeals on themerits21 so that every party-litigant is afforded the amplest opportunity for the proper andjust disposition of his cause, unhampered by the constraints of technicalities.22

WHEREFORE, in view of all the foregoing, the petition is DISMISSED. The case isREMANDED to the Regional Trial Court of Angeles City, Pampanga, which is directedto resume proceedings in Civil Case No. 8746.1wphi1.nt

SO ORDERED.

Davide, Jr., C.J., Puno, and Kapunan, JJ., concur.


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G.R. No. 116695 June 20, 1997

VICTORIA G. GACHON and ALEX GUEVARA, petitioners,vs.HON. NORBERTO C. DEVERA, JR., Presiding Judge, Branch XXIV, RTC,

Iloilo City; HON. JOSE R. ASTORGA, Presiding Judge, Branch I, MunicipalTrial Court in Cities, Iloilo City; and SUSANA GUEVARA, represented byher attorney-in-fact, ROSALIE GUEVARA, respondents.

PANGANIBAN, J.:

May the Rule on Summary Procedure be interpreted liberally to allow theadmission of an answer filed out of time due to alleged "oversight"?

This is the main legal question raised in this petition for review assailing theDecision of the Regional Trial Court of Iloilo City, Branch 24, 1 which dismissed aspecial civil action forcertiorariand injunction filed by herein petitioners. Thedispositive portion of the assailed RTC Decision reads: 2

WHEREFORE premises considered, the prayer for the issuance of a writ ofpreliminary injunction is denied and, with respect to the merits, the instant case ishereby ordered dismissed.

Double costs against petitioners.

Facts

The factual antecedents of this case as found by the Regional Trial Court areundisputed and admitted as correct by the parties. A complaint for forcible entry 3

was filed by Private Respondent Susana Guevara against Patricio Guevara andPetitioners Victoria Gachon and Alex Guevara before the Municipal Trial Courtfor Cities (MTCC) of Iloilo City. Summons was served on and received bypetitioners on August 25, 1993, directing them to file an answer within thereglementary period of ten (10) days. Patricio Guevara was abroad at that time;hence, the MTCC did not acquire jurisdiction over him. On September 4, 1993,petitioners filed with the MTCC an urgent motion for extension of time to file ananswer. 4 On September 7, 1993, the MTCC denied the motion on the ground

that it was a prohibited pleading under the Rule on Summary Procedure. 5 OnSeptember 8, 1993, or more than ten days from their receipt of the summons,petitioner submitted an urgent motion praying for the admission of their answer, 6

which was attached thereto. Two days later, petitioners filed another motionpleading for the admission of an amended answer. On September 23, 1993, theMTCC denied the motions and considered the case submitted for resolution. 7 OnOctober 27, 1993, the MTCC also denied the petitioners' motion forreconsideration. 8 Thereafter, on November 26, 1993, the MTCC 9issued a


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decision 10 resolving the complaint for forcible entry in favor of herein privaterespondents.

Instead of filing an appeal, petitioners filed a petition forcertiorariand injunctionbefore the Regional Trial Court (RTC) of Iloilo City, 11Branch 24, praying mainly

that the MTCC be ordered to admit the amended answer and to conduct furtherproceedings in the civil case for forcible entry. As prayed for, a temporaryrestraining order was issued by the RTC.

Thereafter, the RTC issued the assailed Decision 12 dismissing the petition.Respondent Judge Norberto E. Devera, Jr. ratiocinated: 13

Section 36 of Batas Pambansa Blg. 129, otherwise known as The JudiciaryReorganization Act of 1980 provides, among others, as follows:

Sec. 36 Summary Procedures in Special Cases . . . TheSupreme Court shall adopt special rules or procedures

applicable to such cases in order to achieve an expeditions (sic)and inexpensive determination thereof without regard totechnical rules. Such simplified procedures may provide thataffidavits and counter-affidavits may be admitted in lieu of oraltestimony and that the periods for filing pleadings shall be non-extendible.

Pursuant to the aforequoted legislative mandate, the Supreme Courtpromulgated the Rule on Summary Procedure, the pertinent provisions of which,as related to the issues raised in this case, are hereunder set forth

II Civil Cases

Sec. 3. Pleadings

A. (P)leadings allowed The only pleadings allowed to be filedare the complaints, compulsory counter-claims and cross-claimspleaded in the answer, and the answers thereto

xxx xxx xxx

Sec. 5. Answer Within ten (10) days from service of summons, the defendantshall file his answer to the complaint and serve a copy thereof on the plaintiff . . .

Sec. 6. Effect of Failure to answer Should the defendant fail to answer thecomplaint within the period above provided, the Court, motu proprio, or on motionof the plaintiff, shall render judgment as may be warranted by the facts alleged inthe complaint and limited to what is prayed for therein: . . .

xxx xxx xxx

Sec. 19. Prohibited Pleadings and Motions The following pleadings, motions,or petitions shall not be allowed in the cases covered by this Rule:


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(a) Motion for extension of time to file pleadings, affidavits or any other paper.

xxx xxx xxx

The foregoing should underscore quite clearly the reality that the ten-day-periodto file an answer reckoned from the date of the receipt of the summons is

mandatory and no reason of any kind is acceptable to operate as an excuse. Therule is explicit. It is addressed more, being one of procedure, to counsels than tolitigants. Counsels, therefore cannot assert the validity of their client's cause toevade the mandate of the law.

Accordingly, the Court cannot fault the respondent judge [referring to Judge JoseR. Astorga] in acting the way he did in Civil Case No. 130 (93) taking intoaccount the admitted facts and circumstances.

Hence, this petition directly filed before this Court.

The Issues

Petitioners submit for resolution the following questions of law: 14

I. Are the provisions of the Rules on Summary Procedure on the period ofpleadings to be applied STRICTLY or LIBERALLY.

II. What is the legal effect of a belated answer under the Rules on SummaryProcedure.

Petitioners argue that the "technical rules of procedure must yield to the higherinterest of justice." Petitioners explain that they filed the motion for extension oftime to file an answer, a prohibited pleading under the Rule on Summary

Procedure, because of "oversight. That was why immediately upon receipt of thedenial of that motion, petitioners filed their motion to admit answer which waslater verified and had to be amended. All these (actions) were done in a period offive (5) days from the lapse of the reglementary period to file an answer." 15

Furthermore, petitioners contend that "no prejudice to private respondent hasbeen claimed or alleged by reason of the delay" in filing an answer. 16 Petitionersalso argue that their defense in the action for forcible entry is based onsubstantial grounds, because they "were in prior physical possession of thepremises subject of the action and that their houses have long been standing onthe land in question because the land on which said houses are standing are(sic)the common properties of the parties."

CitingSection 2, Rule 1 17 of the Rules of Court, petitioners pray that theprovisions in the Rule on Summary Procedure regarding prohibited pleadingsand the period for filing an answer be given liberal interpretation. Petitionersconcede that said provisions appear to be couched in mandatory language. Theycontend, however, that other similarly worded provisions in the Rules of Courthave nonetheless been liberally applied by this Court to promote substantial

justice. 18


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Private respondent, on the other hand, submits that the provisions in questionhave to be strictly construed in order to avoid delay, considering that the Rule onSummary Procedure is aimed at inexpensive, expeditious and summarydetermination of cases. 19 Private respondent adds that the petition can also bedismissed on the ground of violation of Revised Circular 28-91 on forum

shopping, because three (3) months after the rendition of the assailed Decision,a "petition for quieting of title and partition, and damages, involving the sameparcel of residential land (Cadastral Lot No. 709 . . . ), was filed . . . docketed asCivil Case No. 21618, by (Petitioner) Victoria Guevara-Gachon(. . .), Patricio Guevara (father of Petitioner Alex Guevara), Lilia Guevara-Dorezaand Fe Guevara-Burgos against herein private respondent." Private respondentcontends that the subsequent case is the appropriate forum where ownership ofthe property in question may be threshed out. 20

As observed at the outset, the issue to be resolved is whether, under theundisputed facts of this case, the Rule on Summary Procedure may be liberally

construed in order to allow the admission of petitioners' answer whichunquestionably was filed beyond the reglementary period.

Preliminary Matter

It bears noting that petitioners filed directly before this Court a petition for reviewassailing the RTC Decision. This remedy is allowed under paragraph 2 ofCircular 2-90 21 which provides:

Sec. 2.Appeals from Regional Trial Courts to the Supreme Court. Except incriminal cases where the penalty imposed is life imprisonment orreclusion

perpetua, judgments of regional trial courts may be appealed to the Supreme

Court only by petition for review on certiorariin accordance with Rule 45 of theRules of Court in relation to Section 17 of the Judiciary Act of 1948, as amended,22 this being the clear intendment of the provision of the Interim Rules that"(a)ppeals to the Supreme Court shall be taken by petition forcertiorariwhichshall be governed by Rule 45 of the Rules of Court.

Petitioners ask the Court to interpret a provision of the Rule on SummaryProcedure. This is a pure question of law that may be properly raised in thispetition for review.

The Court's Ruling

The petition has no merit.

First Issue: Interpretation of the Period

The pertinent provisions of the Rule on Summary Procedure are as follows:

Sec. 5.Answer. Within ten (10) days from service of summons, the defendantshallfile his answer to the complaint and serve a copy thereof on the plaintiff . . .


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Sec. 6. Effect of failure to answer. Should the defendant fail to answer thecomplaint within the period above provided, the Court, motu proprio, or on motionof the plaintiff, shallrender judgment as may be warranted by the facts alleged inthe complaint and limited to what is prayed for therein: . . .

xxx xxx xxx

Sec. 19. Prohibited pleadings and motions. The following pleadings, motions,or petitions shallnot be allowed in the cases covered by this Rule:

(a) Motion for extension of time to file pleadings, affidavits or any other paper.

xxx xxx xxx

(Emphasis supplied.)

The word "shall" ordinarily connotes an imperative and indicates the mandatorycharacter of a statute. 23 This, however, is not an absolute rule in statutory

construction. The import of the word ultimately depends upon a consideration ofthe entire provision, its nature, object and the consequences that would followfrom construing it one way or the other. 24

As a general principle, rules prescribing the time within which certain acts mustbe done, or certain proceedings taken, are considered absolutely indispensableto the prevention of needless delays and to the orderly and speedy discharge of

judicial business. By their very nature, these rules are regarded as mandatory. 25

The Rule on Summary Procedure, in particular, was promulgated forthe purpose of achieving "an expeditious and inexpensive determination of

cases." 26 For this reason, the Rule frowns upon delays and prohibits altogetherthe filing of motions for extension of time. Consistent with this reasoning isSection 6 of the Rule which allows the trial court to render judgment, even motu

proprio, upon the failure of a defendant to file an answer within the reglementaryperiod.

Indeed, the Judiciary Reorganization Act of 1980, mandating the promulgation ofthe Rule on Summary Procedure, authorizes the Court to stipulate that the periodfor filing pleadings in cases covered by the Rule on Summary Procedure shall be"non-extendible." 27

Furthermore, speedy resolution of unlawful detainer cases is a matter of publicpolicy, 28 and this rule should equally apply with full force in forcible entry caseswhere the possession of the premises at the start is already illegal.

From the foregoing, it is clear that the use of the word "shall" in the Rule onSummary Procedure underscores the mandatory character of the challengedprovisions. Giving the provisions a directory application would subvert the natureof the Rule on Summary Procedure and defeat its objective of expediting the


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adjudication of suits. Indeed, to admit a late answer, as petitioners suggest, is toput premium on dilatory maneuvers the very mischief that the Rule seeks toredress. In this light, petitioners' invocation of the general principle in Rule 1,Section 2 of the Rules of Court is misplaced.

Other than a plea for the liberal interpretation of the Rule on SummaryProcedure, petitioners do not provide an adequate justification for the admissionof their late answer. "Oversight," which they candidly cite as the reason for theirfiling a motion for extension of time to file an answer, is not a justification.Oversight, at best, implies negligence; at worst, ignorance. The negligencedisplayed by petitioners is clearly inexcusable; ignorance of so basic a rule, onthe other hand, can never be condoned. In either case, the directory applicationof the questioned provision is not warranted.

Petitioners also cite Rosales vs. Court of Appeals29 and Co Keng Kian vs.Intermediate Appellate Court, 30 but these cases do not support their position.

In Rosales vs. Court of Appeals, 31 this Court applied the Rule on SummaryProcedure liberally when the defendant, instead of filing an answer, filed withinthe reglementary period a pleading labeled as a motion to dismiss. In treating themotion to dismiss as an answer, the Court ruled: 32

Parenthetically, petitioner argues in the present petition that, notwithstanding itsbeing labeled as a motion to dismiss, said pleading should have been consideredas his answer pursuant to the liberal interpretation accorded the rules andinasmuch as the grounds involved therein also qualify as defenses proper in ananswer. In this instance the Court agrees. Indeed, the rule on summaryprocedure was conceptualized to facilitate the immediate resolution of casessuch as the present one. Well-settled is the rule that forcible entry and detainercases being summary in nature and involving disturbance of social order,procedural technicalities should be carefully avoided and should not be allowedto override substantial justice. With this premise in mind and having insisted,however erroneously, on its jurisdiction over the case, it certainly would havebeen more prudent for the lower court to have treated the motion to dismiss asthe answer of petitioner and examined the case on its merits. As will be shownshortly, the long drawn out proceedings that took place would have beenavoided.

Furthermore, the said case did not involve the question of extension in the periodfor filing pleadings under the Rule on Summary Procedure.

In Co Keng Kian vs. Intermediate Appellate Court, 33 this Court allowed the noticeto vacate, served upon the tenant, by registered mail instead of personal serviceas required by the Rules of Court. We thus ruled: 34

At this juncture it bears repeating that actions for forcible entry and unlawfuldetainer are summary in nature because they involve a disturbance a socialorder which must be abated as promptly as possible without any undue relianceon technical and procedural rules which only cause delays. In the ultimateanalysis, it matters not how the notice to vacate was conveyed, so long as the


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lessee or his agent has personally received the written demand, whether handedto him by the lessor, his attorney, a messenger or even a postman. Theundisputed facts in the instant case show that the Manila Times PublishingCompany, through its manager, had informed petitioner that Plaza Arcade Inc.was the new owner of the subject building; that on October 18, 1979, a demandletter was sent to petitioner advising him to leave the premises but petitionerrefused to receive the letter; that a second demand on January 12, 1981 elicitedthe same reaction; that a final demand dated November 16, 1981 was sent topetitioner by registered mail which he again refused. And even on thesupposition that there was no personal service as claimed by petitioner, thiscould only be due to petitioner's blatant attempts at evasion which compelled thenew landlord to resort to registered mail. The Court cannot countenance anunfair situation where the plaintiff in an eviction case suffers further injustice bythe unwarranted delay resulting from the obstinate refusal of the defendant toacknowledge the existence of a valid demand.

In both cases, there was substantial compliance with the law, something thatcannot be said of herein petitioners.

Second Issue: Forum-Shopping

Private respondent assails petitioners for engaging in forum-shopping bypursuing the present ejectment suit, notwithstanding the pendency of an actionfor quieting of title involving the same property and parties. We are unable to findbasis for this charge.

For forum-shopping to exist, both actions must involve the same transactions,essential facts and circumstances; and the actions must raise identical causes ofaction, subject matter, and issues. 35 Suffice it to say that an action for quieting oftitle and partition has a different cause of action than that in an ejectment suit. As

private respondent herself contended, ownership of a certain portion of theproperty which is determined in a case of partition does not necessarily meanthat the successful litigant has the right to possess the property adjudged in hisfavor. In ejectment cases, the only issue for resolution is physical or materialpossession of the property involved, independent of any claim of ownership setforth by any of the party litigants. Anyone of them who can prove priorpossession de facto may recover such possession even from the owner himself.This rule holds true regardless of the character of a party's possession, providedthat he has in his favor priority of time which entitles him to stay on the propertyuntil he is lawfully ejected by a person having a better right by eitheraccion

publiciana oraccion reivindicatoria. 36 It has even been ruled that the institution of

a separate action for quieting of title is not a valid reason for defeating theexecution of the summary remedy of ejectment. 37

WHEREFORE, in view of the foregoing, the petition is DENIED and the assailedDecision is AFFIRMED in toto. Double costs against petitioners.

SO ORDERED.


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[G.R. No. 161135. April 8, 2005]

SWAGMAN HOTELS AND TRAVEL, INC.,petitioner, vs. HON. COURT OFAPPEALS, and NEAL B. CHRISTIAN, respondents.

D E C I S I O N

DAVIDE, JR., C.J.:

May a complaint that lacks a cause of action at the time it was filed be cured by theaccrual of a cause of action during the pendency of the case? This is the basic issueraised in this petition for the Courts consideration.

Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty.Leonor L. Infante and Rodney David Hegerty, its president and vice-president,respectively, obtained from private respondent Neal B. Christian loans evidenced by

three promissory notes dated 7 August 1996, 14 March 1997, and 14 July 1997. Each ofthe promissory notes is in the amount of US$50,000 payable after three years from itsdate with an interest of 15% per annum payable every three months.[1] In a letter dated 16December 1998, Christian informed the petitioner corporation that he was terminating theloans and demanded from the latter payment in the total amount of US$150,000 plusunpaid interests in the total amount of US$13,500.[2]

On 2 February 1999, private respondent Christian filed with the Regional Trial Court ofBaguio City, Branch 59, a complaint for a sum of money and damages against thepetitioner corporation, Hegerty, and Atty. Infante. The complaint alleged as follows: On7 August 1996, 14 March 1997, and 14 July 1997, the petitioner, as well as its president

and vice-president obtained loans from him in the total amount of US$150,000 payableafter three years, with an interest of 15% per annum payable quarterly or every threemonths. For a while, they paid an interest of 15% per annum every three months inaccordance with the three promissory notes. However, starting January 1998 untilDecember 1998, they paid him only an interest of 6% per annum, instead of 15% perannum, in violation of the terms of the three promissory notes. Thus, Christian prayedthat the trial court order them to pay him jointly and solidarily the amount of US$150,000representing the total amount of the loans; US$13,500 representing unpaid interests fromJanuary 1998 until December 1998; P100,000 for moral damages; P50,000 for attorneysfees; and the cost of the suit.[3]

The petitioner corporation, together with its president and vice-president, filed an Answerraising as defenses lack of cause of action and novation of the principal obligations.According to them, Christian had no cause of action because the three promissory noteswere not yet due and demandable. In December 1997, since the petitioner corporationwas experiencing huge losses due to the Asian financial crisis, Christian agreed (a) towaive the interest of 15% per annum, and (b) accept payments of the principal loans ininstallment basis, the amount and period of which would depend on the state of businessof the petitioner corporation. Thus, the petitioner paid Christian capital repayment in the
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amount of US$750 per month from January 1998 until the time the complaint was filed inFebruary 1999. The petitioner and its co-defendants then prayed that the complaint bedismissed and that Christian be ordered to pay P1 million as moral damages; P500,000 asexemplary damages; and P100,000 as attorneys fees.[4]

In due course and after hearing, the trial court rendered a decision[5]on 5 May 2000declaring the first two promissory notes dated 7 August 1996 and 14 March 1997 asalready due and demandable and that the interest on the loans had been reduced by theparties from 15% to 6% per annum. It then ordered the petitioner corporation to payChristian the amount of $100,000 representing the principal obligation covered by thepromissory notes dated 7 August 1996 and 14 March 1997, plus interest of 6% permonth thereon until fully paid, with all interest payments already paid by the defendant tothe plaintiff to be deducted therefrom.

The trial court ratiocinated in this wise:

(1) There was no novation of defendants obligation to the plaintiff. Under Article 1292of the Civil Code, there is an implied novation only if the old and the new obligation beon every point incompatible with one another.

The test of incompatibility between the two obligations or contracts, according to animminent author, is whether they can stand together, each one having an independentexistence. If they cannot, they are incompatible, and the subsequent obligation novatesthe first (Tolentino, Civil Code of the Philippines, Vol. IV, 1991 ed., p. 384). Otherwise,the old obligation will continue to subsist subject to the modifications agreed upon by theparties. Thus, it has been written that accidental modifications in an existing obligationdo not extinguish it by novation. Mere modifications of the debt agreed upon between the

parties do not constitute novation. When the changes refer to secondary agreement andnot to the object or principal conditions of the contract, there is no novation; suchchanges will produce modifications of incidental facts, but will not extinguish theoriginal obligation. Thus, the acceptance of partial payments or a partial remission doesnot involve novation (id., p. 387). Neither does the reduction of the amount of anobligation amount to a novation because it only means a partial remission or condonationof the same debt.

In the instant case, the Court is of the view that the parties merely intended to change therate of interest from 15% per annum to 6% per annum when the defendant started paying$750 per month which payments were all accepted by the plaintiff from January 1998onward. The payment of the principal obligation, however, remains unaffected whichmeans that the defendant should still pay the plaintiff $50,000 on August 9, 1999, March14, 2000 and July 14, 2000.

(2) When the instant case was filed on February 2, 1999, none of the promissory noteswas due and demandable. As of this date however, the first and the second promissorynotes have already matured. Hence, payment is already due.
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Under Section 5 of Rule 10 of the 1997 Rules of Civil Procedure, a complaint whichstates no cause of action may be cured by evidence presented without objection. Thus,even if the plaintiff had no cause of action at the time he filed the instant complaint, asdefendants obligation are not yet due and demandable then, he may nevertheless recoveron the first two promissory notes in view of the introduction of evidence showing that the

obligations covered by the two promissory notes are now due and demandable.

(3) Individual defendants Rodney Hegerty and Atty. Leonor L. Infante can not be heldpersonally liable for the obligations contracted by the defendant corporation it being clearthat they merely acted in representation of the defendant corporation in their capacity asGeneral Manager and President, respectively, when they signed the promissory notes asevidenced by Board Resolution No. 1(94) passed by the Board of Directors of thedefendant corporation (Exhibit 4).[6]

In its decision[7] of 5 September 2003, the Court of Appeals denied petitioners appealand affirmed intoto the decision of the trial court, holding as follows:

In the case at bench, there is no incompatibility because the changes referred to byappellant Swagman consist only in the manner of payment. . . .

Appellant Swagmans interpretation that the three (3) promissory notes have beennovated by reason of appellee Christians acceptance of the monthly payments ofUS$750.00 as capital repayments continuously even after the filing of the instant case is alittle bit strained considering the stiff requirements of the law on novation that theintention to novate must appear by express agreement of the parties, or by their acts thatare too clear and unequivocal to be mistaken. Under the circumstances, the morereasonable interpretation of the act of the appellee Christian in receiving the monthly

payments of US$750.00 is that appellee Christian merely allowed appellant Swagman topay whatever amount the latter is capable of. This interpretation is supported by the letterof demand dated December 16, 1998 wherein appellee Christian demanded fromappellant Swagman to return the principal loan in the amount of US$150,000 plus unpaidinterest in the amount of US$13,500.00

. . .

Appellant Swagman, likewise, contends that, at the time of the filing of the complaint,appellee Christian ha[d] no cause of action because none of the promissory notes was dueand demandable.

Again, We are not persuaded.

. . .

In the case at bench, while it is true that appellant Swagman raised in its Answer the issueof prematurity in the filing of the complaint, appellant Swagman nonetheless failed to


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object to appellee Christians presentation of evidence to the effect that the promissorynotes have become due and demandable.

The afore-quoted rule allows a complaint which states no cause of action to be curedeither by evidence presented without objection or, in the event of an objection sustained

by the court, by an amendment of the complaint with leave of court (Herrera, RemedialLaw, Vol. VII, 1997 ed., p. 108).[8]

Its motion for reconsideration having been denied by the Court of Appeals in itsResolution of 4 December 2003,[9] the petitioner came to this Court raising the followingissues:

I. WHERE THE DECISION OF THE TRIAL COURT DROPPING TWODEFENDANTS HAS BECOME FINAL AND EXECUTORY, MAY THERESPONDENT COURT OF APPEALS STILL STUBBORNLY CONSIDER THEMAS APPELLANTS WHEN THEY DID NOT APPEAL?

II. WHERE THERE IS NO CAUSE OF ACTION, IS THE DECISION OF THELOWER COURT VALID?

III. MAY THE RESPONDENT COURT OF APPEALS VALIDLY AFFIRM ADECISION OF THE LOWER COURT WHICH IS INVALID DUE TO LACK OFCAUSE OF ACTION?

IV. WHERE THERE IS A VALID NOVATION, MAY THE ORIGINAL TERMSOF CONTRACT WHICH HAS BEEN NOVATED STILL PREVAIL?[10]

The petitioner harps on the absence of a cause of action at the time the privaterespondents complaint was filed with the trial court. In connection with this, thepetitioner raises the issue of novation by arguing that its obligations under the threepromissory notes were novated by the renegotiation that happened in December 1997wherein the private respondent agreed to waive the interest in each of the threepromissory notes and to accept US$750 per month as installment payment for theprincipal loans in the total amount of US$150,000. Lastly, the petitioner questions theact of the Court of Appeals in considering Hegerty and Infante as appellants when theyno longer appealed because the trial court had already absolved them of the liability ofthe petitioner corporation.

On the other hand, the private respondent asserts that this petition is a mere ploy tocontinue delaying the payment of a just obligation. Anent the fact that Hegerty andAtty. Infante were considered by the Court of Appeals as appellants, the privaterespondent finds it immaterial because they are not affected by the assailed decisionanyway.
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Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil Procedure, isthe act or omission by which a party violates the right of another. Its essential elementsare as follows:

1. A right in favor of the plaintiff by whatever means and under whatever law it arises or

is created;

2. An obligation on the part of the named defendant to respect or not to violate suchright; and

3. Act or omission on the part of such defendant in violation of the right of the plaintiffor constituting a breach of the obligation of the defendant to the plaintiff for which thelatter may maintain an action for recovery of damages or other appropriate relief.[11]

It is, thus, only upon the occurrence of the last element that a cause of action arises,giving the plaintiff the right to maintain an action in court for recovery of damages or

other appropriate relief.

It is undisputed that the three promissory notes were for the amount of P50,000 each anduniformly provided for (1) a term of three years; (2) an interest of 15 % per annum,payable quarterly; and (3) the repayment of the principal loans after three years from theirrespective dates. However, both the Court of Appeals and the trial court found that arenegotiation of the three promissory notes indeed happened in December 1997 betweenthe private respondent and the petitioner resulting in the reduction not waiver of theinterest from 15% to 6% per annum, which from then on was payable monthly, instead ofquarterly. The term of the principal loans remained unchanged in that they were still duethree years from the respective dates of the promissory notes. Thus, at the time the

complaint was filed with the trial court on 2 February 1999, none of the three promissorynotes was due yet; although, two of the promissory notes with the due dates of 7 August1999 and 14 March 2000 matured during the pendency of the case with the trial court.Both courts also found that the petitioner had been religiously paying the privaterespondent US$750 per month from January 1998 and even during the pendency of thecase before the trial court and that the private respondent had accepted all these monthlypayments.

With these findings of facts, it has become glaringly obvious that when the complaint fora sum of money and damages was filed with the trial court on 2 February 1999, no causeof action has as yet existed because the petitioner had not committed any act in violation

of the terms of the three promissory notes as modified by the renegotiation in December1997. Without a cause of action, the private respondent had no right to maintain anaction in court, and the trial court should have therefore dismissed his complaint.

Despite its finding that the petitioner corporation did not violate the modified terms of thethree promissory notes and that the payment of the principal loans were not yet due whenthe complaint was filed, the trial court did not dismiss the complaint, citing Section 5,Rule 10 of the 1997 Rules of Civil Procedure, which reads:
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Section 5.Amendment to conform to or authorize presentation of evidence. Whenissues not raised by the pleadings are tried with the express or implied consent of theparties, they shall be treated in all respects as if they had been raised in the pleadings.Such amendment of the pleadings as may be necessary to cause them to conform to theevidence and to raise these issues may be made upon motion of any party at any time,

even after judgment; but failure to amend does not affect the result of the trial of theseissues. If evidence is objected to at the trial on the ground that it is not within the issuesmade by the pleadings, the court may allow the pleadings to be amended and shall do sowith liberality if the presentation of the merits of the action and the ends of substantialjustice will be subserved thereby. The court may grant a continuance to enable theamendment to be made.

According to the trial court, and sustained by the Court of Appeals, this Section allows acomplaint that does not state a cause of action to be cured by evidence presented withoutobjection during the trial. Thus, it ruled that even if the private respondent had no causeof action when he filed the complaint for a sum of money and damages because none of

the three promissory notes was due yet, he could nevertheless recover on the first twopromissory notes dated 7 August 1996 and 14 March 1997, which became due during thependency of the case in view of the introduction of evidence of their maturity during thetrial.

Such interpretation of Section 5, Rule 10 of the 1997 Rules of Civil Procedure iserroneous.

Amendments of pleadings are allowed under Rule 10 of the 1997 Rules of CivilProcedure in order that the actual merits of a case may be determined in the mostexpeditious and inexpensive manner without regard to technicalities, and that all other

matters included in the case may be determined in a single proceeding, thereby avoidingmultiplicity of suits.[12] Section 5 thereof applies to situations wherein evidence notwithin the issues raised in the pleadings is presented by the parties during the trial, and toconform to such evidence the pleadings are subsequently amended on motion of a party.Thus, a complaint which fails to state a cause of action may be cured by evidencepresented during the trial.

However, the curing effect under Section 5 is applicable only if a cause of action in factexists at the time the complaint is filed, but the complaint is defective for failure to allege

the essential facts. For example, if a complaint failed to allege the fulfillment of acondition precedent upon which the cause of action depends, evidence showing that suchcondition had already been fulfilled when the complaint was filed may be presentedduring the trial, and the complaint may accordingly be amended thereafter.[13] Thus, inRoces v. Jalandoni,[14]this Court upheld the trial court in taking cognizance of anotherwise defective complaint which was later cured by the testimony of the plaintiffduring the trial. In that case, there was in fact a cause of action and the only problem wasthe insufficiency of the allegations in the complaint. This ruling was reiterated inPascuav. Court of Appeals.[15]
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It thus follows that a complaint whose cause of action has not yet accrued cannot becured or remedied by an amended or supplemental pleading alleging the existence oraccrual of a cause of action while the case is pending.[16] Such an action is prematurelybrought and is, therefore, a groundless suit, which should be dismissed by the court uponproper motion seasonably filed by the defendant. The underlying reason for this rule is

that a person should not be summoned before the public tribunals to answer forcomplaints which are immature. As this Court eloquently said in Surigao MineExploration Co., Inc. v. Harris:[17]

It is a rule of law to which there is, perhaps, no exception, either at law or in equity, thatto recover at all there must be some cause of action at the commencement of the suit.As observed by counsel for appellees, there are reasons of public policy why there shouldbe no needless haste in bringing up litigation, and why people who are in no default andagainst whom there is yet no cause of action should not be summoned before the publictribunals to answer complaints which are groundless. We say groundless because if theaction is immature, it should not be entertained, and an action prematurely brought is a

groundless suit.

It is true that an amended complaint and the answer thereto take the place of the originalswhich are thereby regarded as abandoned (Reynes vs. Compaa General de Tabacos[1912], 21 Phil. 416; Ruyman and Farris vs. Director of Lands [1916], 34 Phil., 428) andthat the complaint and answer having been superseded by the amended complaint andanswer thereto, and the answer to the original complaint not having been presented inevidence as an exhibit, the trial court was not authorized to take it into account. (Bastidavs. Menzi & Co. [1933], 58 Phil., 188.) But in none of these cases or in any other casehave we held that if a right of action did not exist when the original complaint was filed,one could be created by filing an amended complaint. In some jurisdictions in the United

States what was termed an imperfect cause of action could be perfected by suitableamendment (Brown vs. Galena Mining & Smelting Co., 32 Kan., 528; Hooper vs. City ofAtlanta, 26 Ga. App., 221) and this is virtually permitted in Banzon and Rosauro vs.Sellner ([1933], 58 Phil., 453); Asiatic Potroleum [sic] Co. vs. Veloso ([1935], 62 Phil.,683); and recently in Ramos vs. Gibbon (38 Off. Gaz., 241). That, however, which is nocause of action whatsoever cannot by amendment or supplemental pleading beconverted into a cause of action:Nihil de re accrescit ei qui nihil in re quando jusaccresceret habet.

We are therefore of the opinion, and so hold, that unless the plaintiff has a valid andsubsisting cause of action at the time his action is commenced, the defect cannot be

cured or remedied by the acquisition or accrual of one while the action is pending,

and a supplemental complaint or an amendment setting up such after-accrued cause

of action is not permissible. (Emphasis ours).

Hence, contrary to the holding of the trial court and the Court of Appeals, the defect oflack of cause of action at the commencement of this suit cannot be cured by the accrualof a cause of action during the pendency of this case arising from the alleged maturity oftwo of the promissory notes on 7 August 1999 and 14 March 2000.


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Anent the issue of novation, this Court observes that the petitioner corporation argues theexistence of novation based on its own version of what transpired during therenegotiation of the three promissory notes in December 1997. By using its own versionof facts, the petitioner is, in a way, questioning the findings of facts of the trial court andthe Court of Appeals.

As a rule, the findings of fact of the trial court and the Court of Appeals are final andconclusive and cannot be reviewed on appeal to the Supreme Court[18] as long as they areborne out by the record or are based on substantial evidence.[19]The Supreme Court is nota trier of facts, its jurisdiction being limited to reviewing only errors of law that may havebeen committed by the lower courts. Among the exceptions is when the finding of fact ofthe trial court or the Court of Appeals is not supported by the evidence on record or isbased on a misapprehension of facts. Such exception obtains in the present case.[20]

This Court finds to be contrary to the evidence on record the finding of both the trialcourt and the Court of Appeals that the renegotiation in December 1997 resulted in the

reduction of the interest from 15% to 6% per annum and that the monthly payments ofUS$750 made by the petitioner were for the reduced interests.

It is worthy to note that the cash voucher dated January 1998[21] states that the payment ofUS$750 represents INVESTMENT PAYMENT. All the succeeding cash vouchersdescribe the payments from February 1998 to September 1999 as CAPITALREPAYMENT.[22] All these cash vouchers served as receipts evidencing privaterespondents acknowledgment of the payments made by the petitioner: two of whichwere signed by the private respondent himself and all the others were signed by hisrepresentatives. The private respondent even identified and confirmed the existence ofthese receipts during the hearing. [23]Significantly, cognizant of these receipts, the private

respondent applied these payments to the three consolidated principal loans in thesummary of payments he submitted to the court.[24]

Under Article 1253 of the Civil Code, if the debt produces interest, payment of theprincipal shall not be deemed to have been made until the interest has been covered. Inthis case, the private respondent would not have signed the receipts describing thepayments made by the petitioner as capital repayment if the obligation to pay theinterest was still subsisting. The receipts, as well as private respondents summary ofpayments, lend credence to petitioners claim that the payments were for the principalloans and that the interests on the three consolidated loans were waived by the privaterespondent during the undisputed renegotiation of the loans on account of the businessreverses suffered by the petitioner at the time.

There was therefore a novation of the terms of the three promissory notes in that theinterest was waived and the principal was payable in monthly installments of US$750.Alterations of the terms and conditions of the obligation would generally result only inmodificatory novation unless such terms and conditions are considered to be the essenceof the obligation itself.[25] The resulting novation in this case was, therefore, of the
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modificatory type, not the extinctive type, since the obligation to pay a sum of moneyremains in force.

Thus, since the petitioner did not renege on its obligation to pay the monthly installmentsconformably with their new agreement and even continued paying during the pendency

of the case, the private respondent had no cause of action to file the complaint. It is onlyupon petitioners default in the payment of the monthly amortizations that a cause ofaction would arise and give the private respondent a right to maintain an action againstthe petitioner.

Lastly, the petitioner contends that the Court of Appeals obstinately included its PresidentInfante and Vice-President Hegerty as appellants even if they did not appeal the trialcourts decision since they were found to be not personally liable for the obligation of thepetitioner. Indeed, the Court of Appeals erred in referring to them as defendants-appellants; nevertheless, that error is no cause for alarm because its ruling was clear thatthe petitioner corporation was the one solely liable for its obligation. In fact, the Court of

Appeals affirmed intoto the decision of the trial court, which means that it also upheldthe latters ruling that Hegerty and Infante were not personally liable for the pecuniaryobligations of the petitioner to the private respondent.

In sum, based on our disquisition on the lack of cause of action when the complaint forsum of money and damages was filed by the private respondent, the petition in the case atbar is impressed with merit.

WHEREFORE, the petition is hereby GRANTED. The Decision of 5 September 2003of the Court of Appeals in CA-G.R. CV No. 68109, which affirmed the Decision of 5May 2000 of the Regional Trial Court of Baguio, Branch 59, granting in part private

respondents complaint for sum of money and damages, and its Resolution of 4December 2003, which denied petitioners motion for reconsideration are herebyREVERSED and SET ASIDE. The complaint docketed as Civil Case No. 4282-R ishereby DISMISSED for lack of cause of action.

No costs.

SO ORDERED.


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G.R. No. 166302. July 28, 2005

LOTTE PHIL. CO., INC., Petitioners,vs.ERLINDA DELA CRUZ, LEONOR MAMAUAG, LOURDES CAUBA,

JOSEPHINE DOMANAIS, ARLENE CAGAYAT, AMELITA YAM, VIVIANDOMARAIS, MARILYN ANTALAN, CHRISTOPHER RAMIREZ, ARNOLD

SAN PEDRO, MARISSA SAN PEDRO, LORELI JIMENEZ, JEFFREY BUENO,

CHRISTOPHER CAGAYAT, GERARD CABILES, JOAN ENRIQUEZ, JOSEPH

DE LA CRUZ, NELLY CLERIGO, DULCE NAVARETTE, ROWENA BELLO,

DANIEL RAMIREZ, AILEEN BAUTISTA and BALTAZAR FERRERA,

Respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition for review on certiorari1 assails the July 9, 2004 decision2of the Court ofAppeals in CA-G.R. SP No. 72732 and its November 26, 2004 resolution3 denyingreconsideration thereof.

The established facts of this case are as follows:

Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a domestic corporation.Petitioners (respondents herein) are among those who were hired and assigned to theconfectionery facility operated by private respondent.

On December 14, 1995 and yearly thereafter until the year 2000 7J Maintenance andJanitorial Services ("7J") entered into a contract with private respondent to providemanpower for needed maintenance, utility, janitorial and other services to the latter. Incompliance with the terms and conditions of the service contract, and to accommodatethe needs of private respondent for personnel/workers to do and perform "piece works,"petitioners, among others, were hired and assigned to private respondent as repackers orsealers.

However, either in October, 1999 or on February 9, 2000, private respondent dispensedwith their services allegedly due to the expiration/termination of the service contract byrespondent with 7J. They were either told "hwag muna kayong pumasok at tatawagan na

lang kung may gawa"; or were asked to wait "pag magrereport sila sa trabaho."Unfortunately, petitioners were never called back to work again.

Aggrieved, petitioners lodged a labor complaint against both private respondent Lotte and7J, for illegal dismissal, regularization, payment of corresponding backwages and relatedemployment benefits, 13th month pay, service incentive leave, moral and exemplarydamages and attorneys fees based on total judgment award.4
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On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr., rendered judgment5

declaring 7J as employer of respondents.6 The arbiter also found 7J guilty of illegaldismissal7and ordered to reinstate respondents,8 pay P2,374,710.00 as backwages,P713,648.00 as 13th month pay and P117,000.00 as service incentive leave pay.9

Respondents appealed to the National Labor Relations Commission (NLRC) praying thatLotte be declared as their direct employer because 7J is merely a labor-only contractor. Inits decision10dated April 24, 2002, the NLRC found no cogent reason to disturb thefindings of the labor arbiter and affirmed its ruling that 7J is the employer of respondentsand solely liable for their claims.

Respondents motion for reconsideration was denied by the NLRC in a resolution datedJune 18, 2002.

Undaunted, they filed a petition forcertiorari in the Court of Appeals11 against the NLRCand Lotte, insisting that their employer is Lotte and not 7J.

Lotte, however, denied that respondents were its employees. It prayed that the petition bedismissed for failure to implead 7J who is a party interested in sustaining the proceedingsin court, pursuant to Section 3, Rule 46 of the Revised Rules of Civil Procedure.

On July 9, 2004, the Court of Appeals reversed and set aside the rulings of the LaborArbiter and the NLRC. In its decision, the Court of Appeals declared Lotte as the realemployer of respondents and that 7J who engaged in labor-only contracting was merelythe agent of Lotte. Respondents who performed activities directly related to Lottesbusiness were its regular employees under Art. 280 of the Labor Code. As such, theymust be accorded security of tenure and their services terminated only on "just" and

"authorized" causes.

Lottes motion for reconsideration was denied, hence this petition, on the followingissues:

8. Whether or not petitioner herein had the burden of proof to establish before theproceedings in the Court of Appeals that 7J Maintenance and Janitorial Service was not alabor-only contractor.

8.1. Whether or not the Petition in CA-G.R. SP No. 72732 is dismissible for failure tocomply with Section 3, Rule 46 in relation to Section 5, Rule 65 of the 1997 Rules of

Civil Procedure.

12

We first resolve the procedural issue raised by petitioner. Lotte asserts that 7J is anindispensable party and should have been impleaded in respondents petition in the Courtof Appeals. It claims that the petition before the Court of Appeals was dismissible forfailure to comply with Section 3,13 Rule 46 in relation to Section 514 of Rule 65 of theRevised Rules of Civil Procedure.
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Petitioners contention is tenable.

An indispensable party is a party in interest without whom no final determination can behad of an action,15 and who shall be joined either as plaintiffs or defendants.16 The joinderof indispensable parties is mandatory.17 The presence of indispensable parties is

necessary to vest the court with jurisdiction, which is "the authority to hear and determinea cause, the right to act in a case".18 Thus, without the presence of indispensable parties toa suit or proceeding, judgment of a court cannot attain real finality.19 The absence of anindispensable party renders all subsequent actions of the court null and void for want ofauthority to act, not only as to the absent parties but even as to those present.20

In the case at bar, 7J is an indispensable party. It is a party in interest because it will beaffected by the outcome of the case. The Labor Arbiter and the NLRC found 7J to besolely liable as the employer of respondents. The Court of Appeals however renderedLotte jointly and severally liable with 7J who was not impleaded by holding that theformer is the real employer of respondents. Plainly, its decision directly affected 7J.

InDomingo v. Scheer,21 we held that the non-joinder of indispensable parties is not aground for the dismissal of an action22 and the remedy is to implead the non-partyclaimed to be indispensable.23 Parties may be added by order of the court on motion ofthe party or on its own initiative at any stage of the action and/or such times as are just. Ifthe petitioner refuses to implead an indispensable party despite the order of the court, thelatter may dismiss the complaint/petition for the petitioner/plaintiffs failure to complytherefor.24

Although 7J was a co-party in the case before the Labor Arbiter and the NLRC,respondents failed to include it in their petition forcertiorari in the Court of Appeals.

Hence, the Court of Appeals did not acquire jurisdiction over 7J. No final ruling on thismatter can be had without impleading 7J, whose inclusion is necessary for the effectiveand complete resolution of the case and in order to accord all parties with due process andfair play.

In light of the foregoing, the Court sees no need to discuss the second issue raised bypetitioner.

WHEREFORE, the July 9, 2004 decision of the Court of Appeals in CA-G.R. SP No.72732 and the November 26, 2004 resolution, are SET ASIDE. Let the case beREMANDED to the Court of Appeals to include 7J Maintenance and Janitorial Services

as an indispensable party to the case for further proceedings.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.
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G.R. No. 161955. August 31, 2005

CELEDONIO MOLDES, ROSITA MOLDES and CAROLINA CEDIA, Petitioners,

vs.TIBURCIO VILLANUEVA, APOLONIO VILLANUEVA, MANUELVILLANUEVA, MARIANO DULLAVIN, RONALDO DULLAVIN and

TEODORA DULLAVIN, Respondent.

D E C I S I O N

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA)and its Resolution2in CA-G.R. CV No. 47518.

The Antecedents

The spouses Juan Mollet and Silvina Del Monte were the owners of three parcels of landthen located in the Municipality of Taguig (now a part of Muntinlupa City) identified asLot Nos. 589, 590 and 591. The lots had a total area of 3,600 square meters, covered byTransfer Certificate of Title (TCT) No. 2180 issued by the Register of Deeds of Rizal.Their daughter, Josefa, died intestate on November 24, 1918 at the age of 25. Juan Molletdied intestate on January 30, 1934 and his widow died also, intestate, on March 22, 1948.They were survived by their daughter Romana Mollet, who married Andres Gelardo.3

Romana and Andres were blessed with five children, namely, Flaviana, Brigida, Maria,

Isaac and Leonila, all surnamed Gelardo.

4

Flaviana married Manuel Villanueva, and theirmarriage produced four offsprings, namely, Apolinario, Tiburcio, Manuel and Juanita(now deceased), all surnamed Villanueva.5 Juanita married Cornelio Maritana. Thecouple begot five children, namely, Luis, Orlando, Normita, Diego, and Julieta, allsurnamed Maritima.

Brigida married Mariano Dullavin and they had two children, Rolando and Teodora, bothsurnamed Dullavin.6Maria married Primo Tolentino and the couple had two children,Hermino and Carolyn.7Leonila married Delfin Malacca and they had two sons, Gelardoand Marcial.8Isaac died a bachelor and without any issue.9

On March 17, 1965, a document denominated as Deed of Extrajudicial Settlement withQuitclaim10 covering Lot Nos. 589, 590 and 591 was executed by Maria and Leonila,surnamed Gelardo, Mariano Dullavin, Manuel, Juanita, Tiburcio and Apolonio, allsurnamed Villanueva, and Emeterio, Celedonio, Domingo, Rosita and Carolina, allsurnamed Moldes.

Lot 589 was divided as follows: Maria Gelardo, share; Emeterio Moldes, DomingoMoldes, Celedonio Moldes, Rosita Moldes, and Carolina Moldes Cedia, share. It
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appears that the Villanueva siblings (Manuel, Tiburcio, Apolonio and Juanita) waivedtheir share in favor of the Moldeses and Carolina.

Lot 590 was adjudicated as follows: Lot 590-B entirely to Leonila Gelardo; Lot 590-Cwas allotted to Emeterio Moldes, Domingo Moldes, Celedonio Moldes, Rosita Moldes,

and Carolina Moldes Cedia; Lot 590-D was given to Maria Gelardo, Leonila Gelardo,Mariano Dullavin, Emeterio Moldes, Domingo Moldes, Celedonio Moldes, RositaMoldes, and Carolina Moldes Cedia.

It appears that Mariano Dullavin and the Villanueva siblings waived their respectiveshares in Lot 590-B in favor of Leonila Gelardo; in Lot 590-C, to Emeterio Moldes,Domingo Moldes, Celedonio Moldes, Rosita Moldes, and Carolina Moldes Cedia; and,again in Lot D in favor of Maria Gelardo, Leonila Gelardo, Emeterio Moldes, DomingoMoldes, Celedonio Moldes, Rosita Moldes, and Carolina Moldes Cedia.

Lot 591 was partitioned as follows: share of Lot 591-A to Leonila Gelardo; share of

Lot 591-A to Maria Gelardo; and Lot Nos. 591-B and 591-C to Celedonio Moldes.

It appears that Emeterio Moldes, Domingo Moldes, Rosita Moldes, Apolonio Moldes andCarolina Moldes Cedia, the Villanueva siblings, and Mariano Dullavin waived all theirrespective rights to the share of Lot 591-A given to Leonila Gelardo; to the share ofLot 591-A given to Maria Gelardo; and to Lot Nos. 591-B and 591-C awarded toCeledonio Moldes.

On January 26, 1987, Manuel Villanueva and his children, namely, Tiburio andApolonio, and Mariano Dullavin and his children, namely, Rolando and Teodora, filed aComplaint with the Regional Trial Court (RTC) of Makati against Celedonio, Rosita and

Carolina Cedia, all surnamed Moldes, to annul the Deed of Extrajudicial Settlement withQuitclaim. The complaint contained the following prayer:

WHEREFORE, it is most respectfully prayed of this Honorable Court to:

1. Order the rescission of the Extrajudicial Settlement with Quitclaim (Annex "B");

2. Order the defendants to pay plaintiffs the following:

a) Moral damages in the sum of P100,000;

b) Exemplary damages in the sum of P50,000;

c) Attorneys fee of P60,000 plus P450 per court appearance; and,

d) To pay the costs of suit.

Plaintiffs further pray for such other reliefs and remedies which are just and equitableunder premises.11
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Plaintiffs Rolando and Teodora Dullavin also alleged that they never knew of anydocument wherein they repudiated their share in the estate of their great-grandparents. Infact, in the past, they had wanted to eject the Moldeses but their case was dismissedbecause of the questioned deed, which incidentally was the very first time they saw it.They pointed out that by reckoning, they were still minor when their father, Mariano,

signed the questioned deed. Be that as it may, it was of no moment, because their fatherhad nothing to repudiate as he was not given any share in the estate of the spousesMollet.12

Plaintiffs Tiburio and Apolonio Villanueva alleged that they and their sister Juanita wereentrusted by their father to their aunt, Leonila Gelardo, when they were eight years old,six years old and one year old, respectively; they lived with her until 1938 when theywere married; as a result, they developed a deep respect for their aunt, so much so thatthey signed the deed believing that they would be getting their inheritance under the deedmore expeditiously, not knowing that because of their illiteracy, they had relinquishedtheir rights over their inheritance.

Plaintiffs Tiburcio, Apolonio and Manuel further alleged that they were hoodwinked bytheir aunt Leonila as well as Celedonio in parting with their inheritance. They claimedthat being illiterate and unlettered, they did not understand the contents and the legaleffects of the questioned deed. They explained that they signed the deed upon Leonilasrepresentation and that what they were signing was just a partition of the estate of theirgreat-grandparents. As it turned out and was revealed later, they were surprised to beexcluded therefrom.13

The plaintiffs alleged, inter alia, that the deed was tainted with fraud because it includedCeledonio, Rosita and Carolina, who were not heirs of the spouses Mollet (whose estate

was partitioned). They denied the defendants allegation that they were Josefasdescendants, the latter having died single at the age of 25 and without issue.

In their answer, the defendants specifically denied that there was fraud or undue pressurein the execution of the questioned deed. They maintained that they were the directdescendants of the spouses Mollet, and successors-in-interest of Josefa Mollet fromwhom they derived their rights. According to them, long before she died, theirgrandmother Josefa married one Florencio Diaz. This matrimonial union begot DomingoDiaz and their mother, Dolores Diaz, who, in turn, married their father, EmeterioMoldes.14

By way of special and affirmative defense, the defendants averred that the action hadprescribed because more than 20 years had elapsed from execution of the questioneddeed.15 As counterclaim, they prayed that the plaintiffs be adjudged to pay them theamounts of P100,000.00 for moral damages; P50,000.00, for exemplary damages; andP30,000.00, for attorneys fees.16

The Ruling of the Regional Trial Court
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On May 16, 1994, the RTC rendered a decision declaring that the Deed of Extra-judicialSettlement with Quitclaim was void. The dispositive portion thereof, reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of theplaintiffs. It is the findings of this Court that since the consent of the plaintiffs were not

freely given when they signed the document of the parties which they did not understand,but was obtained thru fraud, the Deed of Partition with Quitclaim is hereby orderedrescinded and voided.

The other great grandchildren, particularly the children of Brigida Mollet Gelardo,married to Mariano Dullavin, being Rolando Dullavin and Teodora Dullavin, includingthe children of Maria Mollet Gelardo married to Primo Tolentino, being Hermino andCarolyn, were not given their share of their inheritance, all the more reason that this Deedof Partition with Waiver and Quitclaim should be rescinded and partition effected amongall of the Plaintiffs as they probably are the only true heirs of spouses Juan Mollet andSilvina Del Monte.

Accordingly, the property should remain as the Estate of the late Spouses Juan Molletand Silvina Del Monte Mollet.

As plaintiffs were force to litigate, all Defendants are, jointly and solidarily, directed topay the Plaintiffs actual damages in the sum of P100,000.00.

Defendants, jointly and solidarily, must pay moral damages for the trouble and anxietycaused to plaintiffs in the sum of P100,000.00 and as a deterrent to their propensity tocovet what do not belong to them, Defendants must, jointly and solidarily, pay Plaintiffsexemplary damages of P100,000.00.

As Plaintiffs were forced to litigate thru counsel, Defendants must, jointly and in solidum,pay Attorneys fees in the sum of P50,000.00, and,

The cost of this proceedings.

It is SO ORDERED.17

The RTC held that the Deed of Extrajudicial Settlement with Quitclaim was a sham.Through deceit and machinations, the plaintiffs, being illiterate at that, were "mislead,duped, railroaded and bamboozled" by the defendants in signing the deed and waiving

their respective shares. In fact, the defendants never filed it in the Office of the Registerof Deeds, an act "[giving] doubt to [its] existence and validity."

The RTC further ruled that the evidence showed that the defendants were not heirs of thespouses Mollet, whose estate was partitioned. According to the trial court, thedefendants own evidence belied their claim of heirship.
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The defendants appealed the decision to the CA where they alleged, inter alia, that theRTC erred (1) in ruling that they were not heirs of the spouses Juan Mollet and SilvinaDel Monte Mollet; (2) in voiding the Deed of Extrajudicial Settlement with Quitclaim onthe ground of fraud; and (3) in awarding damages against them.18

The Ruling of the Court of Appeals

On January 30, 2003, the CA affirmed with modification the decision of the RTC withthisfallo:

WHEREFORE, the assailed decision dated 16 May 1994 is hereby AFFIRMED withMODIFICATION deleting the award of damages and attorneys fees.

SO ORDERED.19

The CA affirmed the findings of the RTC that the plaintiffs-appellees were duped by the

defendants-appellants in signing the fraudulent deed. It amplified that the waivers, havingno consideration, were wangled from the very much gullible plaintiffs-appellees, whowere not given a copy by the defendants-appellants. In fact, the latter refused to give theplaintiffs-appellees a copy of the deed when they requested one.

The appellate court further ratiocinated that as the subject deed included persons whowere not heirs of the person whose estate was partitioned, such deed is governed byArticle 1105 of the Civil Code.20Thus, since the partition deemed inexistent and voidfrom the beginning, the action seeking a declaration of its nullity could not prescribe.

The appellate court denied the motion for reconsideration of the defendants-appellants21

who, forthwith, filed the instant petition. They made the following allegations:

I. The Court of Appeals disregarded the basic rule that the respondents were the plaintiffswho had the burden of proving the rescissability (sic) of the notarial deed in favor of thepetitioners.

II. The Court of Appeals disregarded the incontestable and uncontested fact thatpetitioners have been in possession of the property in the concept of owners fifty (50)years prior to the execution of the deed that respondents sought to rescind.

III. The Court of Appeals disregarded the basic principle in the adjudication that when

the evidence of the parties in a civil case are in equipoise, the complaint must bedismissed for failure of the plaintiff to prove his case by preponderant evidence.

IV. The Court of Appeals based its decision on evidence it itself pronounce asimprobable, compounding the error by completely disregarding the nature andconsequence of a notarial document.22

The Ruling of the Court
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