CIVIL PROCEDURE: BASIC CONCEPTS

G.R. No. L-2068 October 20, 1948

DOMINADOR B. BUSTOS, Petitioner, vs. ANTONIO G. LUCERO, Judge of First Instance of

Pampanga, Respondent. E.

The petitioner herein, an accused in a criminal case, filed a motion with the Court of First Instance of
Pampanga after he had been bound over to that court for trial, praying that the record of the case be
remanded to the justice of the peace court of Masantol, the court of origin, in order that the petitioner
might cross-examine the complainant and her witnesses in connection with their testimony, on the
strength of which warrant was issued for the arrest of the accused. The motion was denied and that
denial is the subject matter of this proceeding.

According to the memorandum submitted by the petitioner's attorney to the Court of First Instance in
support of his motion, the accused, assisted by counsel, appeared at the preliminary investigation. In
that investigation, the justice of the peace informed him of the charges and asked him if he pleaded
guilty or not guilty, upon which he entered the plea of not guilty. "Then his counsel moved that the
complainant present her evidence so that she and her witnesses could be examined and cross-examined
in the manner and form provided by law." The fiscal and the private prosecutor objected, invoking
section 11 of rule 108, and the objection was sustained. "In view thereof, the accused's counsel
announced his intention to renounce his right to present evidence," and the justice of the peace
forwarded the case to the court of first instance. Leaving aside the question whether the accused, after
renouncing his right to present evidence, and by reason of that waiver he was committed to the
corresponding court for trial, is estopped, we are of the opinion that the respondent judge did not act in
excess of his jurisdiction or in abuse of discretion in refusing to grant the accused's motion to return the
record for the purpose set out therein. In Dequito and Saling Buhay vs. Arellano, G.R. No. L-1336,
recently promulgated, in which case the respondent justice of the peace had allowed the accused, over
the complaint's objection, to recall the complainant and her witnesses at the preliminary investigation
so that they might be cross-examined, we sustained the justice of the peace's order. We said that
section 11 of Rule 108 does not curtail the sound discretion of the justice of the peace on the matter.
We said that "while section 11 of Rule 108 defines the bounds of the defendant's right in the preliminary
investigation, there is nothing in it or any other law restricting the authority, inherent in a court of
justice, to pursue a course of action reasonably calculated to bring out the truth."chanrobles virtual law
library

But we made it clear that the "defendant can not, as a matter of right, compel the complaint and his
witnesses to repeat in his presence what they had said at the preliminary examination before the
issuance of the order of arrest." We called attention to the fact that "the constitutional right of an
accused to be confronted by the witnesses against him does not apply to preliminary hearings' nor will
the absence of a preliminary examination be an infringement of his right to confront witnesses." As a
matter of fact, preliminary investigation may be done away with entirely without infringing the
constitutional right of an accused under the due process clause to a fair trial.

The foregoing decision was rendered by a divided court. The minority went farther than the majority
and denied even any discretion on the part of the justice of the peace or judge holding the preliminary
investigation to compel the complainant and his witnesses to testify anew Upon the foregoing
considerations, the present petition is dismissed with costs against the petitioner.
G.R. No. 192799 October 24, 2012

ROLEX RODRIGUEZ y OLAYRES, Petitioner, vs. PEOPLE OF THE PHILIPPINES and ALLIED DOMECQ
SPIRITS AND WINES, represented by ALLIED DOMECQ PHILS., INC., Respondents.

In this Petition for Review on Certiorari, petitioner assails the March 2, 2010 Decision1 and June 29, 2010
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 108789, which affirmed the April 14, 2009
Order3 of the Regional Trial Court (RTC), Branch 24 in Manila, denying due course to petitioners Notice
of Appeal in Criminal Case No. 02-206499.

The RTC convicted petitioner for Unfair Competition penalized under Sections 155, 168, 160 in relation
to Sec. 170 of Republic Act No. 8293 or the Intellectual Property Code of the Philippines, and sentenced
him to serve imprisonment of two (2) years, to pay a fine of PhP 50, 000 and actual damages of PhP
75,000.

The pertinent factual antecedents are undisputed.

After promulgation of the Decision in Criminal Case No. 02-206499 convicting him for unfair competition,
petitioner filed a motion for reconsideration before the RTC on the 15th or the last day of the
reglementary period to appeal. Fourteen (14) days after receipt of the RTC Order denying his motion for
reconsideration, petitioner filed his Notice of Appeal.4 Thus, the denial of his Notice of Appeal on the
ground of its being filed out of time under Sec. 6, Rule 122, Revised Rules of Criminal Procedure. Before
the RTC, the CA and now here, petitioner was unwavering in his assertion of the applicability of the
"fresh period rule" as laid down in Neypes v. Court of Appeals.5

The rationale of the "fresh period rule" is:

To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal
their cases, the Court deems it practical to allow a fresh period of 15 days within which to file the notice
of appeal in the Regional Trial Court, counted from receipt of the order dismissing a motion for a new
trial or motion for reconsideration.

Henceforth, this "fresh period rule" shall also apply to Rule 40 governing appeals from the Municipal
Trial Courts to the Regional Trial Courts; Rule 42 on petitions for review from the Regional Trial Courts to
the Court of Appeals; Rule 43 on appeals from quasi-judicial agencies to the Court of Appeals and Rule
45 governing appeals by certiorari to the Supreme Court. The new rule aims to regiment or make the
appeal period uniform, to be counted from receipt of the order denying the motion for new trial, motion
for reconsideration (whether full or partial) or any final order or resolution.6

Neypes elucidates that the "fresh period rule" applies to appeals under Rule 40 (appeals from the
Municipal Trial Courts to the RTC) and Rule 41 (appeals from the RTCs to the CA or this Court); Rule 42
(appeals from the RTCs to the CA); Rule 43 (appeals from quasi-judicial agencies to the CA); and Rule 45
(appeals by certiorari to this Court).7A scrutiny of the said rules, however, reveals that the "fresh period
rule" enunciated in Neypes need NOT apply to Rules 42, 43 and 45 as there is no interruption in the 15-
day reglementary period to appeal. It is explicit in Rules 42, 43 and 45 that the appellant or petitioner is
accorded a fresh period of 15 days from the notice of the decision, award, judgment, final order or
resolution or of the denial of petitioners motion for new trial or reconsideration filed.8
The pivotal question is whether the "fresh period rule" is applicable to appeals from conviction in
criminal cases governed by Sec. 6 of Rule 122 which pertinently provides:

Sec. 6. When appeal to be taken. An appeal must be taken within fifteen (15) days from promulgation
of the judgment or from notice of the final order appealed from. This period for perfecting an appeal
shall be suspended from the time a motion for new trial or reconsideration is filed until notice of the
order overruling the motion has been served upon the accused or his counsel at which time the balance
of the period begins to run. (Emphasis supplied.)

While Neypes was silent on the applicability of the "fresh period rule" to criminal cases, the issue was
squarely addressed in Yu v. Tatad,9 which expanded the scope of the doctrine in Neypes to criminal
cases in appeals of conviction under Sec. 6, Rule 122 of the Revised Rules of Criminal Procedure.1wphi1
Thus, the Court held in Yu:

While Neypes involved the period to appeal in civil cases, the Courts pronouncement of a "fresh period"
to appeal should equally apply to the period for appeal in criminal cases under Section 6 of Rule 122 of
the Revised Rules of Criminal Procedure x x x.10

Were we to strictly interpret the "fresh period rule" in Neypes and make it applicable only to the period
to appeal in civil cases, we shall effectively foster and encourage an absurd situation where a litigant in a
civil case will have a better right to appeal than an accused in a criminal casea situation that gives
undue favor to civil litigants and unjustly discriminates against the accused-appellants. It suggests a
double standard of treatment when we favor a situation where property interests are at stake, as
against a situation where liberty stands to be prejudiced.

We must emphatically reject this double and unequal standard for being contrary to reason.1wphi1
Over time, courts have recognized with almost pedantic adherence that what is contrary to reason is not
allowed in lawQuod est inconveniens, aut contra rationem non permissum est in lege.

Thus, we agree with the OSGs view that if a delay in the filing of an appeal may be excused on grounds
of substantial justice in civil actions, with more reason should the same treatment be accorded to the
accused in seeking the review on appeal of a criminal case where no less than the liberty of the accused
is at stake. The concern and the protection we must extend to matters of liberty cannot be overstated.11
(Emphasis supplied.)

It is, thus, now settled that the fresh period rule is applicable in criminal cases, like the instant case,
where the accused files from a judgment of conviction a motion for new trial or reconsideration which is
denied by the trial court. The accused will have a fresh 15-day period counted from receipt of such
denial within which to file his or her notice of appeal.

Verily, the application of the statutory privilege of appeal must not prejudice an accused who must be
accorded the same statutory privilege as litigants in civil cases who are granted a fresh 15-day period
within which to file an appeal from receipt of the denial of their motion for new trial or reconsideration.
It is indeed absurd and incongruous that an appeal from a conviction in a criminal case is more stringent
than those of civil cases. If the Court has accorded litigants in civil casesunder the spirit and rationale
in Neypesgreater leeway in filing an appeal through the "fresh period rule," with more reason that it
should equally grant the same to criminal cases which involve the accuseds "sacrosanct right to liberty,
which is protected by the Constitution, as no person should be deprived of life, liberty, or property
without due process of law."12

Consequently, in light of the foregoing, we hold that petitioner seasonably filed his notice of appeal on
February 2, 2009, within the fresh period of 15 days, counted from January 19, 2009, the date of receipt
of the RTC Order denying his motion for reconsideration.

WHEREFORE, the instant petition is GRANTED. Accordingly, the April 14, 2009 Order of the RTC, Branch
24 in Manila and the assailed March 2, 2010 Decision and June 29, 2010 Resolution of the CA in CA-G.R.
SP No. 108789 are REVERSED and SET ASIDE. The Notice of Appeal of petitioner Rolex Rodriguez y
Olayres dated January 29, 2009 is hereby GIVEN DUE COURSE. Let the case records be elevated by the
RTC to the CA for the review of petitioners appeal with dispatch. No costs.

SO ORDERED.
G.R. No. 194702, April 20, 2015

SAN LORENZO RUIZ BUILDERS AND DEVELOPERS GROUP, INC. AND OSCAR
VIOLAGO,Petitioners, v. MA. CRISTINA F. BAYANG, Respondent.

This is a petition for review on certiorari assailing the July 23, 2010 decision1 and the December 2, 2010
resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 100332. The CA affirmed the resolutions dated
November 17, 2006 and July 26, 2007 of the Office of President in O.P. Case No. 06-D-160, which
dismissed the appeal of petitioners San Lorenzo Ruiz Builders and Developers Group, Inc. (SLR Builders)
and Oscar Violago for having been filed out of time.

On April 15, 2000, petitioner SLR Builders (then known as Violago Builders, Inc), as seller, and
respondent Ma. Cristina F. Bayang (Cristina), as buyer, entered into a "contract to sell" of a sixty (60)-
square meter lot in Violago Homes Parkwoods Subdivision, located in Barangay Payatas, Quezon City.

Upon full payment of the monthly amortizations on the purchased lot, Cristina demanded from SLR
Builders the execution of the deed of absolute sale and the lot's certificate of title but the latter failed to
deliver, prompting Cristina to file a complaint for specific performance and damages against SLR Builders
and its President, Oscar Violago (petitioners) before the Housing and Land Use Regulatory Board
(HLURB).

In a decision3 dated February 16, 2004, Housing and Land Use Arbiter Atty. Joselito F. Melchor ruled in
Cristina's favor, to wit:
WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the respondents (referring to the petitioners) to execute the Deed of Absolute Sale of
the subject property in the name of the complainant (referring to the respondent) and deliver the
title thereof free from all liens and encumbrances;

2. In the alternative, in case of legal and physical impossibility of the respondents to perform the
aforementioned acts in the preceding paragraph, respondent San Lorenzo Ruiz Builders and
Developers Group, Incorporated is hereby ordered to reimburse to the complainant the amount
of THREE HUNDRED TWENTY FOUR THOUSAND EIGHT HUNDRED SIXTY FIVE PESOS & 16/100
(P324,865.16) with legal interest of twelve percent (12%) per annum to be computed from the
filing of the complaint on November 04, 2002 until fully paid; and

3. Ordering respondent San Lorenzo Ruiz Builders and Developers Group, Incorporated to pay the
following sums: FIVE THOUSAND PESOS (P5,000.00) as moral damages; FIVE THOUSAND
PESOS (P5,000.00) as exemplary damages; FIVE THOUSAND PESOS (P5,000.00) as attorney's
fees; An administrative fine of TEN THOUSAND PESOS (P10,000.00) payable to this Office fifteen
(15) days upon receipt of this decision, for violation of Section 18 in relation to Section 38 of PD
957. SO ORDERED.4

The petitioners appealed Arbiter Melchor's decision to the HLURB Board of Commissioners. The Board
dismissed5 and denied,6 respectively, the petitioners' appeal and subsequent motion for reconsideration.
The petitioners then brought their case to the Office of the President (OP), which was docketed as O.P.
Case No. 06-D-160.
In a resolution7 dated November 17, 2006, the OP dismissed the petitioners' appeal for having been filed
out of time. The OP's resolution stated:
A review of the records shows that the HLURB Decision affirming the Arbiter's decision was received by
the respondents/appellants (referring to the petitioners) on July 27, 2005. On that date, the 15-day
prescriptive period within which to file an appeal began to run. Instead of preparing an appeal,
respondents-appellants opted to file a Motion for Reconsideration on August 10, 2005. Their filing of the
said motion interrupted the period of appeal by that time, however, fourteen (14) days had already
elapsed.

On April 17, 2006, respondents-appellants received the Resolution denying their Motion for
Reconsideration. Following the above rules, respondents-appellants have only one (1) day left, or until
April 18, 2006, within which to file their notice of appeal to this Office. Unfortunately, they were able to
do so only on April 27, 2006, or nine (9) days late8

The petitioners moved to reconsider and argued that the "fresh period rule" enunciated in the case
ofDomingo Neypes, et at. v. Court of Appeals, et al.9 should be applied to their case.

The OP, in a resolution10 dated July 26, 2007, denied the petitioners' motion with finality, stating that
the "fresh period rule" applies only to judicial appeals and not to administrative appeals, such as in
petitioners' case. The petitioners then appealed to the CA via petition for revi ew under Rule 43 of the
Rules of Court.

In its assailed decision, the CA denied the petitioners' petition for review. The CA, likewise, denied the
petitioners' motion for reconsideration; hence, the filing of the present petition for review
oncertiorari with this Court.

Issue: Whether the "fresh period rule" in Neypes applies to administrative appeals, such as an appeal
filed from a decision of the HLURB Board of Commissioners to the Office to the President.

Our Ruling: We DENY the petition. It is settled that the "fresh period rule" in Neypes applies only to
judicial appeals and not to administrative appeals.

In Panolino v. Tajala,11 the Court was confronted with a similar issue of whether the "fresh period rule"
applies to an appeal filed from the decision or order of the DENR regional office to the DENR Secretary,
an appeal which is administrative in nature. We held in Panolino that the "fresh period rule" only covers
judicial proceedings under the 1997 Rules of Civil Procedure:
The "fresh period rule" in Neypes declares:
To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal
their cases, the Court deems it practical to allow a fresh period of 15 days within which to file the notice
of appeal in the Regional Trial Court, counted from receipt of the order dismissing a motion for a new
trial or motion for reconsideration.

Henceforth, this "fresh period rule" shall also apply to Rule 40 governing appeals from the Municipal
Trial Courts to the Regional Trial Courts; Rule 42 on petitions for review from the Regional Trial Courts to
the Court of Appeals; Rule 43 on appeals from quasi-judicial agencies to the Court of Appeals; and Rule
45 governing appeals by certiorari to the Supreme Court. The new rule aims to regiment or make the
appeal period uniform, to be counted from receipt of the order denying the motion for new trial, motion
for reconsideration (whether full or partial) or any final order or resolution.
As reflected in the above-quoted portion of the decision in Neypes, the "fresh period rule" shall apply to
Rule 40_(appeals from the Municipal Trial Courts to the Regional Trial Courts); Rule 41 (appeals from the
Regional Trial Courts to the Court of Appeals or Supreme Court); Rule 42 (appeals from the Regional
Trial Courts to the Court of Appeals); Rule 43 (appeals from quasi-judicial agencies to the Court of
Appeals); and Rule 45 (appeals by certiorari to the Supreme Court). Obviously, these Rules
cover judicial proceedings under the 1997 Rules of Civil Procedure.

Petitioner's present case is administrative in nature involving an appeal from the decision or order of the
DENR regional office to the DENR Secretary. Such appeal is indeed governed by Section 1 of
Administrative Order No. 87, Series of 1990. As earlier quoted, Section 1 clearly provides that if the
motion for reconsideration is denied, the movant shall perfect his appeal "during the remainder of the
period of appeal, reckoned from receipt of the resolution of denial;" whereas if the decision is reversed,
the adverse party has a fresh 15-day period to perfect his appeal. (Emphasis supplied.)

In this case, the subject appeal, i.e., appeal from a decision of the HLURB Board of Commissioners to the
OP, is not judicial but administrative in nature; thus, the "fresh period rule" in Neypes does not apply.

As aptly pointed out by the OP, the rules and regulations governing appeals from decisions of the HLURB
Board of Commissioners to the OP are Section 2, Rule XXI of HLURB Resolution No. 765, series of 2004,
in relation to Paragraph 2, Section 1 of Administrative Order No. 18, series of 1987:
Section 2, Rule XXI of the HLURB Resolution No. 765, series of 2004, prescribing the rules and
regulations governing appeals from decisions of the Board of Commissioners to the Office of the
President, pertinently reads:
Section 2. Appeal. - Any party may, upon notice to the Board and the other party, appeal a decision
rendered by the Board of Commissioners to the Office of the President within fifteen (15) days from
receipt thereof, in accordance with P.D. No. 1344 and A.O. No. 18 Series of 1987.

The pendency of the motion for reconsideration shall suspend the running of the period of appeal to the
Office of the President.
Corollary thereto, paragraph 2, Section 1 of Administrative Order No. 18, series of 1987, provides that in
case the aggrieved party files a motion for reconsideration from an adverse decision of any
agency/office, the said party has the only remaining balance of the prescriptive period within which to
appeal, reckoned from receipt of notice of the decision denying his/her motion for reconsideration.12

Thus, in applying the above-mentioned rules to the present case, we find that the CA correctly affirmed
the OP in dismissing the petitioners' appeal for having been filed out of time.

WHEREFORE, we DENY the present petition for review on certiorari and AFFIRM the decision dated July
23, 2010 and resolution dated December 2, 2010 of the Court of Appeals in CA-G.R. SP No. 100332. SO
ORDERED.
G.R. No. 201601 March 12, 2014

MARYLOU CABRERA, Petitioner, vs. FELIX NG, Respondent.

Before this Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision2 dated October 21, 2009 and the Resolution3 dated March 26, 2012 of
the Court of Appeals (CA) in CA-G.R. SP No. 03392. The CA denied the petition for certiorari filed by
Marylou Cabrera (petitioner), which assailed the Order4 dated December 19, 2007 of the Regional Trial
Court (RTC) of Mandaue City, Branch 56, in Civil Case No. MAN-4773.

The Facts

On February 14, 2004, Felix Ng (respondent) filed a complaint for sum of money with the RTC against
the petitioner and her husband Marionilo Cabrera (spouses Cabrera), alleging that the latter issued to
him the following: (1) Metrobank Check No. 0244694 dated June 30, 2002 for the amount of Thirty-One
Thousand Pesos (P31,000.00); (2) Metrobank Check No. 0244674 dated August 9, 2002 for the amount
of Thirty-Eight Thousand Seventy-Four Pesos and Seventy-Six Centavos (P38,074.76); and (3) Metrobank
Check No. 0244745 dated August 15, 2005 for Two Million Five Hundred Thousand Pesos
(P2,500,000.00). That when presented for payment, the said checks were all dishonored as the accounts
from which they had been drawn were already closed.

The spouses Cabrera admitted that they issued Metrobank Check No. 0244694 and Metrobank Check No.
0244674 to the respondent and that the same were dishonored when presented for payment. However,
they claimed that they paid the respondent the amount represented by the said checks through the
latters son Richard Ng. Further, they deny having issued Metrobank Check No. 0244745 to the
respondent, alleging that the said check was forcibly taken from them by Richard Ng.

On August 7, 2007, the RTC rendered a Decision,5 which ordered the spouses Cabrera to pay the
respondent the following: (1) Two Million Five Hundred Sixty-Nine Thousand Seventy-Four Pesos
(P2,569,074.00) plus legal interest from inception of the obligation until fully paid; (2) moral damages in
the amount of Fifty Thousand Pesos (P50,000.00); (3) attorneys fees of Twenty Thousand Pesos
(P20,000.00); and (4) litigation expenses in the amount of Ten Thousand Pesos (P10,000.00).

On August 8, 2007, the spouses Cabrera received a copy of the RTC Decision dated August 7, 2007. On
August 14, 2007, the spouses Cabrera filed with the RTC a motion for reconsideration,6 which they set
for hearing on August 17, 2007. On even date, the spouses Cabrera sent a copy of their motion for
reconsideration to the respondent thru registered mail; it was actually received by the respondent on
August 21, 2007.

The said motion for reconsideration, however, was not heard on August 17, 2007 as the new acting
presiding judge of the said court had just assumed office. On August 28, 2007, the RTC issued a
notice,7 which set the said motion for reconsideration for hearing on September 25, 2007.

On September 20, 2007, the respondent filed an opposition8 to the motion for reconsideration filed by
the spouses Cabrera. The respondent alleged that the said motion for reconsideration is a mere scrap of
paper since it violated the three-day notice requirement. The respondent pointed out that the spouses
Cabrera sent to him a copy of their motion for reconsideration, which was set for hearing on August 17,
2007, via registered mail on August 14, 2007; that he actually received a copy thereof only on August 21,
2007 four days after the scheduled hearing thereon.

It appears that the scheduled hearing of the spouses Cabreras motion for reconsideration on
September 25, 2007 did not push through. Consequently, on September 26, 2007, the RTC issued
another notice,9 which set the said motion for reconsideration for hearing on October 26, 2007.

On October 26, 2007, the RTC issued an Order,10 which directed the parties to file their additional
pleadings, after which the motion for reconsideration filed by the spouses Cabrera would be deemed
submitted for resolution.

On December 19, 2007, the RTC issued an Order11 which denied the motion for reconsideration filed by
the spouses Cabrera. The RTC pointed out that the spouses Cabrera violated Section 4, Rule 15 of the
Rules of Court, which mandates that every motion required to be heard should be served by the movant
in such a manner as to ensure its receipt by the other party at least three days before the date of
hearing. Thus:

After a meticulous scrutiny of the records of this case, the court opines that the motion was filed
beyond the reglementary three (3)[-]day period.

As the records bear out, the instant motion was mailed to the plaintiffs counsel on August 14[, 2007]
and was set for hearing on August 17, 2007. However, the copy of said motion had reached plaintiffs
side and a copy of which was received by plaintiffs counsel only on August 17, 2007[,] four (4) days late
after it was supposed to be heard. Hence, a clear blatant violations [sic] of the rule on notice and
hearing.12

The RTC further opined that a motion, which fails to comply with the three-day notice requirement is a
mere scrap of paper; it is not entitled to judicial cognizance and would not toll the running of the
reglementary period for filing the requisite pleadings. Accordingly, the RTC held, its Decision dated
August 7, 2007 had already become final for failure of the spouses Cabrera to comply with the three-day
notice requirement. The petitioner then filed a petition for certiorari13 with the CA, alleging that the RTC
gravely abused its discretion in denying her motion for reconsideration. The petitioner pointed out that
the RTC did not actually conduct a hearing on her motion for reconsideration on August 17, 2007;

that her motion for reconsideration was actually heard on October 26, 2007, after the respondent had
already filed his opposition thereto. Thus, the petitioner claimed, the issue of her failure to comply with
the three-day notice requirement had already been rendered moot. In any case, the petitioner asserted,
the RTC should have resolved her motion for reconsideration on its merits rather than simply denying it
on mere technicality. On October 21, 2009, the CA, by way of the assailed Decision,14 denied the petition
for certiorari filed by the petitioner. The CA opined that the RTC did not abuse its discretion in denying
the motion for reconsideration filed by the spouses Cabrera since it merely applied the three-day notice
requirement under Section 4, Rule 15 of the Rules of Court. Thus:

It appears that petitioners Motion for Reconsideration was set for hearing on 17 August 2007. A copy
thereof was mailed to private respondent on 14 August 2007, and private respondent actually received
his copy only on 21 August 2007 or four (4) days after the set date of hearing; and thus, depriving him of
the opportunity to oppose the motion. Respondent court, therefore, correctly held that such motion
violated the three (3)-day notice rule; the essence of due process. Respondent court had applied said
rule to the given situation, and of no doubt, mere adherence to the rules cannot be considered grave
abuse of discretion on the part of the respondent court. x x x.15 (Citation omitted)

The petitioner sought a reconsideration of the Decision dated October 21, 2009 but it was denied by the
CA in its Resolution16 dated March 26, 2012. Hence, the instant petition.

The Issue: The sole issue to be resolved by the Court is whether the CA erred in affirming the RTC Order
dated December 19, 2007, which denied the motion for reconsideration filed by the spouses Cabrera.

The Courts Ruling: The petition is meritorious.

Sections 4 and 5, Rule 15 of the Rules of Court provide that:

Sec. 4. Hearing of motion. Except for motions which the court may act upon without prejudicing the
rights of the adverse party, every written motion shall be set for hearing by the applicant.

Every written motion required to be heard and the notice of the hearing thereof shall be served in such
a manner as to ensure its receipt by the other party at least three (3) days before the date of hearing,
unless the court for good cause sets the hearing on shorter notice.

Sec. 5. Notice of hearing. The notice of hearing shall be addressed to all parties concerned, and shall
specify the time and date of the hearing which must not be later than ten (10) days after the filing of the
motion. (Emphasis ours)

The general rule is that the three-day notice requirement in motions under Sections 4 and 5 of the Rules
of Court is mandatory. It is an integral component of procedural due process.17 "The purpose of the
three-day notice requirement, which was established not for the benefit of the movant but rather for
the adverse party, is to avoid surprises upon the latter and to grant it sufficient time to study the motion
and to enable it to meet the arguments interposed therein."18

"A motion that does not comply with the requirements of Sections 4 and 5 of Rule 15 of the Rules of
Court is a worthless piece of paper which the clerk of court has no right to receive and which the court
has no authority to act upon."19 "Being a fatal defect, in cases of motions to reconsider a decision, the
running of the period to appeal is not tolled by their filing or pendency."20

Nevertheless, the three-day notice requirement is not a hard and fast rule. When the adverse party had
been afforded the opportunity to be heard, and has been indeed heard through the pleadings filed in
opposition to the motion, the purpose behind the three-day notice requirement is deemed realized. In
such case, the requirements of procedural due process are substantially complied with. Thus, in Preysler,
Jr. v. Manila Southcoast Development Corporation,21 the Court ruled that:

The three-day notice rule is not absolute. A liberal construction of the procedural rules is proper where
the lapse in the literal observance of a rule of procedure has not prejudiced the adverse party and has
not deprived the court of its authority. Indeed, Section 6, Rule 1 of the Rules of Court provides that the
Rules should be liberally construed in order to promote their objective of securing a just, speedy and
inexpensive disposition of every action and proceeding. Rules of procedure are tools designed to
facilitate the attainment of justice, and courts must avoid their strict and rigid application which would
result in technicalities that tend to frustrate rather than promote substantial justice.

In Somera Vda. De Navarro v. Navarro, the Court held that there was substantial compliance of the rule
on notice of motions even if the first notice was irregular because no prejudice was caused the adverse
party since the motion was not considered and resolved until after several postponements of which the
parties were duly notified.

Likewise, in Jehan Shipping Corporation v. National Food Authority, the Court held that despite the lack
of notice of hearing in a Motion for Reconsideration, there was substantial compliance with the
requirements of due process where the adverse party actually had the opportunity to be heard and had
filed pleadings in opposition to the motion. The Court held:

This Court has indeed held time and again, that under Sections 4 and 5 of Rule 15 of the Rules of Court,
mandatory is the requirement in a motion, which is rendered defective by failure to comply with the
requirement. As a rule, a motion without a notice of hearing is considered pro forma and does not affect
the reglementary period for the appeal or the filing of the requisite pleading.

As an integral component of the procedural due process, the three-day notice required by the Rules is
not intended for the benefit of the movant. Rather, the requirement is for the purpose of avoiding
surprises that may be sprung upon the adverse party, who must be given time to study and meet the
arguments in the motion before a resolution of the court.1wphi1 Principles of natural justice demand
that the right of a party should not be affected without giving it an opportunity to be heard.

The test is the presence of opportunity to be heard, as well as to have time to study the motion and
meaningfully oppose or controvert the grounds upon which it is based. x x x22

It is undisputed that the hearing on the motion for reconsideration filed by the spouses Cabrera was
reset by the RTC twice with due notice to the parties; it was only on October 26, 2007 that the motion
was actually heard by the RTC. At that time, more than two months had passed since the respondent
received a copy of the said motion for reconsideration on August 21, 2007. The respondent was thus
given sufficient time to study the motion and to enable him to meet the arguments interposed therein.
Indeed, the respondent was able to file his opposition thereto on September 20, 2007.

Notwithstanding that the respondent received a copy of the said motion for reconsideration four days
after the date set by the spouses Cabrera for the hearing thereof, his right to due process was not
impinged as he was afforded the chance to argue his position. Thus, the R TC erred in denying the
spouses Cabrera's motion for reconsideration based merely on their failure to comply with the three-
day notice requirement. WHEREFORE, in consideration of the foregoing disquisitions, the instant
petition is GRANTED. The Decision dated October 21, 2009 and the Resolution dated March 26, 2012 of
the Court of Appeals in CA-G.R. SP No. 03392, are hereby REVERSED and SET ASIDE. The case is hereby
REMANDED to the Regional Trial Court of Mandaue City, Branch 56, to resolve the Motion for
Reconsideration filed by the spouses Cabrera on the merits within five (5) days from the finality of this
Decision. SO ORDERED.
G.R. No. 187122 February 22, 2012

NEGROS SLASHERS, INC., RODOLFO C. ALVAREZ AND VICENTE TAN Petitioners,

vs. ALVIN L. TENG, Respondent.

Before us is a petition for review on certiorari assailing the Decision[1] dated September 17,
2008 and Resolution[2] dated February 11 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 00817. The
appellate court had reversed and set aside the September 10, 2004 Decision[3] and March 21, 2005
Resolution[4] of the National Labor Relations Commission (NLRC) and reinstated with modification the
Decision[5] of the Labor Arbiter finding respondent to have been illegally dismissed.

The facts are undisputed. Respondent Alvin Teng is a professional basketball player who started his
career as such in the Philippine Basketball Association and then later on played in the Metropolitan
Basketball Association (MBA).

On February 4, 1999, Teng signed a 3-year contract[6] (which included a side contract and
agreement for additional benefits and bonuses) with the Laguna Lakers. Before the expiration of his
contract with the Laguna Lakers on December 31, 2001, the Lakers traded and/or transferred Teng to
petitioner Negros Slashers, with the latter assuming the obligations of Laguna Lakers under Tengs
unexpired contract, including the monthly salary of P250,000, P50,000 of which remained to be the
obligation of the Laguna [Link] March 28, 2000, the management of the Laguna Lakers formally
informed Teng of his transfer to the Negros Slashers.[7] Teng executed with the Negros Slashers the
Players Contract of Employment.[8]

On Game Number 4 of the MBA Championship Round for the year 2000 season, Teng had a
below-par playing performance. Because of this, the coaching staff decided to pull him out of the
game. Teng then sat on the bench, untied his shoelaces and donned his practice jersey. On the following
game, Game Number 5 of the Championship Round, Teng called-in sick and did not play.

On November 21, 2000, Vicente Tan, Finance Head of Negros Slashers, wrote[9] Teng requiring
him to explain in writing why no disciplinary action should be taken against him for his precipitated
absence during the crucial Game 5 of the National Championship Round. He was further informed that a
formal investigation would be conducted on November 28, 2000. The hearing, however, did not push
through because Teng was absent on the said scheduled investigation. Hearing was rescheduled
for December 11, 2000. On said date, the investigation proceeded, attended by Tengs representatives,
Atty. Arsenio Yulo and Atty. Jose Aspiras.[10] A subsequent meeting was also conducted attended by the
management, coaching staff and players of the Negros Slashers team, wherein the team members and
coaching staff unanimously expressed their sentiments against Teng and their opposition against the
possibility of Teng joining back the team.[11]

On March 16, 2001, the management of Negros Slashers came up with a decision, and through
its General Manager, petitioner Rodolfo Alvarez, wrote[12] Teng informing him of his termination from
the team.
 On July 28, 2001, Teng filed a complaint before the Office of the Commissioner of the MBA
pursuant to the provision of the Uniform Players Contract which the parties had executed. Subsequently,
on November 6, 2001, Teng also filed an illegal dismissal case with the Regional Arbitration Branch No.
VI of the NLRC.[13]

On July 16, 2002, the Labor Arbiter issued a decision finding Tengs dismissal illegal and ordering
petitioner Negros Slashers, Inc. to pay Teng P2,530,000 representing his unpaid salaries, separation pay
and attorneys fees. The Labor Arbiter ruled that the penalty of dismissal was not justified since the
grounds relied upon by petitioners did not constitute serious misconduct or willful disobedience or
insubordination that would call for the extreme penalty of dismissal from service. The dispositive
portion of the Labor Arbiters decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal

of complainant illegal and respondents Negros Slashers, Inc. are hereby ordered
to PAY complainant the total sum of TWO MILLION FIVE HUNDRED THIRTY THOUSAND
(P2,530,000.00) PESOS representing complainants unpaid salaries, separation pay and
attorneys fee, the award to be deposited with this Office within ten (10) days from
receipt of this Decision.

All other claims are hereby DISMISSED for lack of merit. SO ORDERED.[14]

The case was then appealed to the NLRC. On September 10, 2004, the NLRC issued a Decision
setting aside the July 16, 2002 Decision of the Labor Arbiter and entering a new one dismissing the
complaint for being premature since the arbitration proceedings before the Commissioner of the MBA
were still pending when Teng filed his complaint for illegal dismissal. The dispositive portion of the NLRC
Decision reads:

WHEREFORE, premises considered, the decision of the Executive Labor Arbiter a

quo is hereby REVERSED and SET ASIDE. A new one is entered, dismissing the instant
case for being premature. SO ORDERED.[15]

Teng filed a motion for reconsideration, but it was denied for being filed beyond the ten-day
reglementary period provided for in Section 15,[16] Rule VII of the NLRC Rules of Procedure. Aggrieved,
Teng filed a petition for certiorari with the CA assailing the NLRC Decision dated September 10,
2004 and the Resolution dated March 21, 2005 denying his motion for reconsideration.

On September 17, 2008 the CA rendered the assailed Decision setting aside the September 10,
2004 Decision and March 21, 2005 Resolution of the NLRC and reinstating with modification the Labor
Arbiters Decision. The CA reinstated the findings of the Labor Arbiter that Teng was illegally dismissed
because the grounds relied upon by petitioners were not enough to merit the supreme penalty of
dismissal. The CA held that there was no serious misconduct or willful disobedience or insubordination
on Tengs part. On the issue of jurisdiction, the CA ruled that the Labor Arbiter had jurisdiction over the
case notwithstanding the pendency of arbitration proceedings in the Office of the Commissioner of the
MBA.
 Petitioners sought reconsideration of the above ruling, but their motion was denied by the CA in
a Resolution[17] dated February 11, 2009.

Petitioners now come to this Court assailing the Decision dated September 17, 2008 and
Resolution dated February 11, 2009 of the CA.

Firstly, petitioners argue that respondent Teng and his counsel committed a blatant violation of
the rule against forum shopping. Petitioners aver that on July 28, 2001, Teng filed a complaint before
the MBA pursuant to the voluntary arbitration provision of the Uniform Players Contract he executed
with Negros Slashers, Inc. During the pendency of said complaint, Teng filed another complaint for
illegal dismissal with the Labor Arbiter. It is petitioners position that Teng lied by certifying under oath
that there is no similar case pending between him and Negros Slashers, Inc., when in fact, months
before he had filed a complaint with the MBA alleging the same factual antecedents and raising the
same issues.

Secondly, petitioners argue that the CA erred in ruling that Tengs offenses were just minor
lapses and irresponsible action not warranting the harsh penalty of [Link] allege that the
CA paid scant attention to two very important pieces of evidence which would clearly show the gravity
and seriousness of the offenses committed by Teng. Petitioners claim that these two documents, i.e.,
the minutes of the meeting[18] of players, management, and coordinating staff, and a petition[19] by the
players to the management not to allow Teng to come back to the team, would show that Teng should
not have been treated as an ordinary working man who merely absented himself by feigning sickness
when called upon to work. Petitioners argue that the nature of the work and team atmosphere should
have been considered and given credence. By neglecting these two documents, the CA failed to
appreciate the gravity of the misconduct committed by Teng and the effects it had on the basketball
organization.

Petitioners also argue that respondents petition for certiorari with the CA should have been
dismissed outright because it was filed beyond the reglementary [Link] point out that Teng
received the NLRC Decision on October 15, 2004 and therefore had ten days[20] or until October 25,
2004 within which to file a motion for reconsideration. But he filed his motion for reconsideration only
on October 26, 2004 and said motion was denied[21] on March 21, 2005 for being filed late. Thereafter
he filed his petition for certiorari[22] with the CA on June 20, 2005. Petitioners contend that the petition
for certiorari was filed beyond the period allowed by the Rules of Court because the 60-day period to file
the petition for certiorari should have started to run from the receipt of the NLRC decision on October
15, 2004. And it should have expired onDecember 14, 2004 because it was as if no motion for
reconsideration was filed in the NLRC. Further, petitioners argue that the CA could not take cognizance
of the case because it is a settled rule that certiorari as a special civil action will not lie unless a motion
for reconsideration is first filed before the NLRC to allow it an opportunity to correct its errors. In this
case, since the motion for reconsideration was filed late, it should have been treated as if no motion for
reconsideration was filed.

Teng, on the other hand, maintains that there is no violation of the rule against forum
shopping. He submits that he indeed filed his complaint before the MBA as early asJuly 28,
2001. Unfortunately, for more than three months, the supposed voluntary arbitration failed to yield any
result until the MBA itself was dissolved. It was only on November 2001, after exhausting the arbitration
process, did he file his complaint before the Labor Arbiter. In other words, it was only after the MBA
failed to come up with a resolution on the matter did he opt to seek legal redress elsewhere.

On the merits, Teng relies on the reasoning of the Labor Arbiter in finding that his alleged lapses
and misconduct were too minor to justify the extreme penalty of dismissal from service. In large part, he
quotes the Labor Arbiters decision, and emphasizes the Labor Arbiters statements that (1) loosening of
the shoe laces and the donning of the practice jersey are not indicative of serious misconduct that would
justify dismissal from employment; (2) it cannot be concluded that he merely feigned sickness when he
informed the Coach of his inability to play during Game No. 5; and (3) there is no showing of any bad
faith or ill motive on his part that would qualify his actions as serious, severe and grave as to warrant
termination from service.

Teng also argues that the CA aptly clarified and explained the legal reason why the petition for
certiorari was given due course despite some procedural lapses regarding the motion for
reconsideration with the NLRC. Teng stresses that jurisprudence allows the relaxation of procedural
rules even of the most mandatory character in the interest of substantial justice. In this particular case,
justice and equity calls for the relaxation of the reglementary period for filing a motion for
reconsideration as well as the rule prohibiting the filing of a petition for certiorari without first filing a
motion for reconsideration.

Simply put, the basic issues for our resolution are as follows: (1) whether the CA erred in giving
due course to respondent Tengs petition for certiorari despite its late filing; (2) whether Teng violated
the rule on forum shopping when he filed a complaint for illegal dismissal with the Regional Arbitration
Branch of the NLRC while a similar complaint was pending in the Office of the Commissioner of the MBA;
and (3) whether the CA erred in ruling that Tengs dismissal from the Negros Slashers Team was
unjustified and too harsh considering his misconduct.

The petition is bereft of merit. On the first issue raised by petitioners, we rule that the CA did not
commit a reversible error in giving due course to Tengs petition for certiorari although said petition was
filed late. Ordinarily, rules of procedure are strictly enforced by courts in order to impart stability in the
legal system. However, in not a few instances, we relaxed the rigid application of the rules of procedure
to afford the parties the opportunity to fully ventilate their cases on the merits. This is in line with the
time honored principle that cases should be decided only after giving all the parties the chance to argue
their causes and defenses. In that way, the ends of justice would be better served. For indeed, the
general objective of procedure is to facilitate the application of justice to the rival claims of contending
parties, bearing always in mind that procedure is not to hinder but to promote the administration of
justice.[23] In Ong Lim Sing, Jr. v. FEB Leasing and Finance Corporation,[24] we ruled:

Courts have the prerogative to relax procedural rules of even the most mandatory character,
mindful of the duty to reconcile both the need to speedily put an end to litigation and the
parties right to due process. In numerous cases, this Court has allowed liberal construction of
the rules when to do so would serve the demands of substantial justice and equity.

Indeed the prevailing trend is to accord party litigants the amplest opportunity for the proper
and just determination of their causes, free from the constraints of needless technicalities.
 Here, besides the fact that a denial of the recourse to the CA would serve more to perpetuate
an injustice and violation of Tengs rights under our labor laws, we find that as correctly held by the CA,
no intent to delay the administration of justice could be attributed to Teng. The CA therefore did not
commit reversible error in excusing Tengs one-day delay in filing his motion for reconsideration and in
giving due course to his petition for certiorari.

As regards the second issue, we likewise find no merit in petitioners claim that respondents act
of filing a complaint with the Labor Arbiter while the same case was pending with the Office of the
Commissioner of the MBA constituted forum shopping.

For forum shopping to exist, it is necessary that (a) there be identity of parties or at least such
parties that represent the same interests in both actions; (b) there be identity of rights asserted and
relief prayed for, the relief being founded on the same facts; and (c) the identity of the two preceding
particulars is such that any judgment rendered in one action will, regardless of which party is successful,
amount to res judicata in the other action.[25]

Petitioners are correct as to the first two requisites of forum shopping. First, there is identity of
parties involved: Negros Slashers Inc. and respondent Teng. Second, there is identity of rights asserted
i.e., the right of management to terminate employment and the right of an employee against illegal
termination. However, the third requisite of forum shopping is missing in this case. Any judgment or
ruling of the Office of the Commissioner of the MBA will not amount to res judicata. As defined
in Agustin v. Delos Santos,[26]

Res Judicata is defined as a matter adjudged; a thing judicially acted upon or decided; a thing or
matter settled by judgment. According to the doctrine of res judicata, an existing final judgment
or decree rendered on the merits, and without fraud or collusion, by a court of competent
jurisdiction, upon any matter within its jurisdiction, is conclusive of the rights of the parties or
their privies, in all other actions or suits in the same or any other judicial tribunal of
concurrent jurisdiction on the points and matters in issue in the first suit. To state simply, a final
judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights
of the parties or their privies in all later suits on all points and matters determined in the former
suit.

To clarify, res judicata is defined in jurisprudence as to have four basic elements: (1) the
judgment sought to bar the new action must be final; (2) the decision must have been rendered
by a court having jurisdiction over the subject matter and the parties; (3) the disposition of the
case must be a judgment on the merits; and (4) there must be as between the first and second
action, identity of parties, subject matter, and causes of action.[27]

Here, although contractually authorized to settle disputes, the Office of the Commissioner of the
MBA is not a court of competent jurisdiction as contemplated by law with respect to the application of
the doctrine of res judicata. At best, the Office of the Commissioner of the MBA is a private mediator or
go-between as agreed upon by team management and a player in the MBA Players Contract of
Employment.[28] Any judgment that the Office of the Commissioner of the MBA may render will not
result in a bar for seeking redress in other legal venues. Hence, respondents action of filing the same
complaint in the Regional Arbitration Branch of the NLRC does not constitute forum shopping.
 On the third issue, we find that the penalty of dismissal handed out against Teng was indeed too
harsh. We understand petitioners in asserting that a basketball organization is a team-based enterprise
and that a harmonious working relationship among team players is essential to the success of the
organization. We also take into account the petition of the other team members voicing out their desire
to continue with the team without Teng. We note likewise the sentiments of the players and coaching
staff during the meeting of February 4, 2001 stating how they felt when Teng abandoned them during a
crucial Game Number5 in the MBA championship round.

Petitioners rely heavily on the alleged effects of Tengs actions on the rest of the team. However,
such reaction from team members is expected after losing a game, especially a championship game. It is
also not unlikely that the team members looked for someone to blame after they lost the championship
games and that Teng happened to be the closest target of the teams frustration and disappointment. But
all these sentiments and emotions from Negros Slashers players and staff must not blur the eyes of the
Court from objectively assessing Tengs infraction in order to determine whether the same constitutes just
ground for dismissal. The incident in question should be clear: Teng had a below-par performance during
Game Number 4 for which he was pulled out from the game, and then he untied his shoelaces and donned
his practice jersey. In Game Number 5, he did not play. As an employee of the Negros Slashers, Teng was
expected to report for work regularly. Missing a team game is indeed a punishable offense. Untying of
shoelaces when the game is not yet finished is also irresponsible and unprofessional. However, we agree
with the Labor Arbiter that such isolated foolishness of an employee does not justify the extreme
penalty of dismissal from service. Petitioners could have opted to impose a fine or suspension on Teng
for his unacceptable conduct. Other forms of disciplinary action could also have been taken after the
incident to impart on the team that such misconduct will not be tolerated.

In Sagales v. Rustans Commercial Corporation,[29] this Court ruled: Truly, while the employer has the
inherent right to discipline, including that of dismissing its employees, this prerogative is subject to the
regulation by the State in the exercise of its police power.
In this regard, it is a hornbook doctrine that infractions committed by an employee should merit
only the corresponding penalty demanded by the circumstance. The penalty must
becommensurate with the act, conduct or omission imputed to the employee and must be
imposed in connection with the disciplinary authority of the employer. (Emphasis in the original.)
In the case at bar, the penalty handed out by the petitioners was the ultimate penalty of
dismissal. There was no warning or admonition for respondents violation of team rules, only
outright termination of his services for an act which could have been punished appropriately
with a severe reprimand or suspension.

WHEREFORE, the petition for review on certiorari is DENIED for lack of merit and the Decision of
the Court of Appeals dated September 17, 2008 and Resolution dated February 11, 2009, in CA-G.R. SP
No. 00817 are hereby AFFIRMED. With costs against the petitioners. SO ORDERED.
G.R. No. 154366 November 17, 2010

CEBU BIONIC BUILDERS SUPPLY, INC. and LYDIA SIA, Petitioners,

[Link] BANK OF THE PHILIPPINES, JOSE TO CHIP, PATRICIO YAP and ROGER
BALILA,Respondents.

This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the Resolution[2] dated
February 5, 2002 and the Amended Decision[3] dated July 5, 2002 of the Court of Appeals in CA-G.R. CV
No. 57216. In the Resolution dated February 5, 2002, the Court of Appeals admitted the Motion for
Reconsideration[4] of herein respondents Development Bank of the Philippines (DBP), Jose To Chip,
Patricio Yap and Roger Balila, notwithstanding the fact that the same was filed more than six months
beyond the reglementary period. Said motion prayed for the reversal of the Court of Appeals
Decision[5] dated February 14, 2001, which affirmed the Decision[6] dated April 25, 1997 of the Regional
Trial Court (RTC) of Cebu, Branch 8, in Civil Case No. CEB-10104 that ruled in favor of petitioners. In the
Amended Decision of July 5, 2002, the Court of Appeals reversed its previous Decision dated February 14,
2001 and dismissed the petitioners complaint for lack of merit.

The facts leading to the instant petition are as follows:

On June 2, 1981, the spouses Rudy R. Robles, Jr. and Elizabeth R. Robles entered into a mortgage
contract[7] with DBP in order to secure a loan from the said bank in the amount of P500,000.00. The
properties mortgaged were a parcel of land situated in Tabunoc, Talisay, Cebu, which was then covered
by Transfer Certificate of Title (TCT) No. T- 47783 of the Register of Deeds of Cebu, together with all the
existing improvements, and the commercial building to be constructed thereon[8] (subject
properties). Upon completion, the commercial building was named the State Theatre Building.

On October 28, 1981, Rudy Robles executed a contract of lease in favor of petitioner Cebu Bionic
Builders Supply, Inc. (Cebu Bionic), a domestic corporation engaged in the construction business, as well
as the sale of hardware materials. The contract pertinently provides:

CONTRACT OF LEASE

KNOW ALL MEN BY THESE PRESENTS:

This Lease Contract made and entered into, by and between:

RUDY ROBLES, JR., Filipino, of legal age, married and resident of 173 Maria Cristina Ext.,
Cebu City, hereinafter referred to as the LESSOR,

- and -

CEBU BIONIC BUILDER SUPPLY, represented by LYDIA SIA, Filipino, of legal age, married
and with address at 240 Magallanes St., Cebu City hereinafter known as the LESSEE;

WITNESSETH:
 The LESSOR is the owner of a commercial building along Tabunok, Talisay, Cebu, known
as the State Theatre Building.

The LESSOR agrees to lease unto the LESSEE and the LESSEE accepts the lease from the
LESSOR, a portion of the ground floor thereof, consisting of one (1) unit/store space
under the following terms and conditions:

1. The LESSEE shall pay a monthly rental of One Thousand (P1,000.00) Pesos,
Philippine Currency. The rental is payable in advance within the first five (5) days of the
month, without need of demand;

2. That the term of this agreement shall start on November 1, 1981 and shall
terminate on the last day of every month thereafter; provided however that this
contract shall be automatically renewed on a month to month basis if no notice, in
writing, is sent to the other party to terminate this agreement after fifteen (15) days
from receipt of said notice;

9. Should the LESSOR decide to sell the property during the term of this lease
contract or immediately after the expiration of the lease, the LESSEE shall have the first
option to buy and shall match offers from outside parties.[9] (Emphases ours.)

The above contract was not registered by the parties thereto with the Registry of Deeds of Cebu.

Subsequently, the spouses Robles failed to settle their loan obligation with DBP. The latter was,
thus, prompted to effect extrajudicial foreclosure on the subject properties.[10] On February 6, 1987, DBP
was the lone bidder in the foreclosure sale and thereby acquired ownership of the mortgaged subject
properties.[11] On October 13, 1988, a final Deed of Sale[12] was issued in favor of DBP.

Meanwhile, on June 18, 1987, DBP sent a letter to Bonifacio Sia, the husband of petitioner Lydia Sia who
was then President of Cebu Bionic, notifying the latter of DBPs acquisition of the State Theatre
Building. Said letter reads:

June 18, 1987

Mr. Bonifacio Sia

Bionic Builders Inc.
State Theatre Bldg.
Tabunok, Talisay, Cebu

Sir:

This refers to the commercial space you are occupying in the acquired property of the
Bank, formerly owned by Rudy Robles, Jr.
 Please be informed that said property has been acquired through foreclosure on
February 6, 1987. Considering thereat, we require you to remit the rental due for June
1987.

If you wish to continue on leasing the property, we request you to come to the Bank for
the execution of a Contract of Lease, the salient conditions of which are as follows:

1. The lease will be on month to month basis, for a maximum period of one (1)
year;

2. Deposit equivalent to two (2) months rental and advance of one (1) month
rental, and the remaining amount for one year period (equivalent to 9
months rental) shall be secured by either surety bond, cash bond or
assigned time deposit;

3. That in case there is a better offer or if the property will be subject of a

purchase offer, within the term, the lessor is given an option of first
refusal, otherwise he has to vacate the premises within thirty (30) days
from date of notice.

We consider, temporarily, the current monthly rental based on the six-month receipts,
which we require you to submit, until such time when we will fix the amount
accordingly.

If the contract of lease is not executed within thirty (30) days from date hereof, it is
construed that you are not interested in leasing the premises and will vacate within the
said period.

Please be guided accordingly.

Truly yours,

(SGD)LUCILO S. REVILLAS
Branch Head[13] (Emphases ours.)

On July 7, 1987, the counsel of Bonifacio Sia replied to the above letter, to wit:

July 7, 1987

Mr. Lucilo S. Revillas

Branch Head
Development Bank of the Philippines

Dear Mr. Revillas,

 This has reference to your letter of 18 June 1987 which you sent to my client, Mr.
Bonifacio Sia of Cebu Bionic Builders Supply the lessee of a commercial space of the
State Theatre Bldg., located at Tabunok, Talisay, Cebu.

My client is amenable to the terms contained in your letter except the following:

1. In lieu of item no. 2 thereof, my client will deposit with your bank the
amount of P10,000.00, as assigned time deposit;

2. The 30 days notice you mentioned in your letter, (3), is too short. My client
is requesting for at least 60 days notice.

I sincerely hope that you will give due course to this request.

Thank you.

Truly yours,

(SGD) ANASTACIO T. MUNTUERTO, JR.[14]

Thereafter, on November 14, 1989, a Certificate of Time Deposit[15] for P11,395.64 was issued in the
name of Bonifacio Sia and the same was allegedly remitted to DBP as advance rental deposit.

For reasons unclear, however, no written contract of lease was executed between DBP and Cebu Bionic.

In the meantime, subsequent to the acquisition of the subject properties, DBP offered the same
for sale along with its other assets. Pursuant thereto, DBP published a series of invitations to bid on such
properties, which were scheduled on January 19, 1989,[16] February 23, 1989,[17] April 13, 1989,[18] and
November 15, 1990.[19] As no interested bidder came forward, DBP publicized an Invitation on
Negotiated Sale/Offer, the relevant terms and conditions of which stated:

INVITATION ON NEGOTIATED SALE/OFFER

The DEVELOPMENT BANK OF THE PHILIPPINES, Cebu Branch, will receive SEALED
NEGOTIATED OFFERS/PURCHASE PROPOSALS tendered at its Branch Office, DBP
Building, Osmea Boulevard, Cebu City for the sale of its acquired assets mentioned
hereinunder within the 15-Day-Acceptance-Period starting from NOVEMBER 19, 1990
up to 12:00 oclock noon of DECEMBER 3, 1990. Sealed offers submitted shall be opened
by the Committee on Negotiated Offers at exactly 2:00 oclock in the afternoon of the
last day of the acceptance period in order to determine the highest and/or most
advantageous offer.

Item No. Description/Location Starting Price

xxxx

II Commercial land, Lot No. 3681-C-3, havingP1,838,100.00

 an area of 396 sq. m., situated in Tabunok,
Talisay, Cebu and covered by TCT No. T-
65199 (DBP), including the commercial
building thereon.

xxxx

A pre-numbered Acknowledgment Receipt duly signed by at least two (2) of the

Committee members shall be issued to the offeror acknowledging receipt of such offer.

Negotiated offers may be made in CASH or TERMS, the former requiring a deposit of
10% and the latter 20% of the starting price, either in the form of cash or
cashiers/managers check to be enclosed in the sealed offer.

xxxx

Interested negotiated offerors are requested to see Atty. Apolinar K. Panal, Jr., Acquired
Asset in Charge (Tel. No. 9-63-25), in order to secure copies of the Letter-Offer form and
Negotiated Sale Rules and Procedures.

NOTE: If no offer is received during the above stated acceptance period, the properties
described above shall be sold to the first offeror who submits an acceptable
proposal on a First-Come-First-Served basis.

City of Cebu, Philippines, November 16, 1990.

(SGD.) TIMOTEO P. OLARTE

Branch Head[20] (Emphases ours.)

In the morning of December 3, 1990, the last day for the acceptance of negotiated offers, petitioners
submitted through their representative, Judy Garces, a letter-offer form, offering to purchase the
subject properties for P1,840,000.00. Attached to the letter-offer was a copy of the Negotiated Sale
Rules and Procedures issued by DBP and a managers check for the amount of P184,000.00, representing
10% of the offered purchase price. This offer of petitioners was not accepted by DBP, however, as the
corresponding deposit therefor was allegedly insufficient.

After the lapse of the above-mentioned 15-day acceptance period, petitioners did not submit
any other offer/proposal to purchase the subject properties.

On December 17, 1990, respondents To Chip, Yap and Balila presented their letter-offer[21] to purchase
the subject properties on a cash basis for P1,838,100.00. Said offer was accompanied by a
downpayment of 10% of the offered purchase price, amounting to P183,810.00. On even date, DBP
acknowledged the receipt of and accepted their offer. On December 28, 1990, respondents To Chip, Yap
and Balila paid the balance of the purchase price and DBP issued a Deed of Sale[22] over the subject
properties in their favor.

On January 11, 1991, the counsel of respondents To Chip, Yap and Balila sent a letter[23] addressed to the
proprietor of Cebu Bionic, informing the latter of the transfer of ownership of the subject
properties. Cebu Bionic was ordered to vacate the premises within thirty (30) days from receipt of the
letter and directed to pay the rentals from January 1, 1991 until the end of the said 30-day period.

The counsel of Cebu Bionic replied[24] that his client received the above letter on January 11, 1991. He
stated that he has instructed Cebu Bionic to verify first the ownership of the subject properties since it
had the preferential right to purchase the same. He likewise requested that he be furnished a copy of
the deed of sale executed by DBP in favor of respondents To Chip, Yap and Balila.

On February 15, 1991, respondent To Chip wrote a letter[25] to the counsel of Cebu Bionic, insisting that
he and his co-respondents Yap and Balila urgently needed the subject properties to pursue their
business plans. He also reiterated their demand for Cebu Bionic to vacate the premises.

Shortly thereafter, on February 27, 1991, the counsel of respondents To Chip, Yap and Balila sent its final
demand letter[26] to Cebu Bionic, warning the latter to vacate the subject properties within seven (7)
days from receipt of the letter, otherwise, a case for ejectment with damages will be filed against it.[27]

Despite the foregoing notice, Cebu Bionic still paid[28] to DBP, on March 22, 1991, the amount
of P5,000.00 as monthly rentals on the unit of the State Theatre Building it was occupying for period of
November 1990 to March 1991.

On April 10, 1991, petitioners filed against respondents DBP, To Chip, Yap and Balila a complaint[29] for
specific performance, cancellation of deed of sale with damages, injunction with a prayer for the
issuance of a writ of preliminary injunction.[30] The complaint was docketed as Civil Case No. CEB-10104
in the RTC.

Petitioners alleged, inter alia, that Cebu Bionic was the lessee and occupant of a commercial
space in the State Theatre Building from October 1981 up to the time of the filing of the
complaint. During the latter part of 1990, DBP advertised for sale the State Theatre Building and the
commercial lot on which the same was situated. In the prior invitation to bid, the bidding was scheduled
on November 15, 1990; while in the next, under the 15-day acceptance period, the submission of
proposals was to be made from November 19, 1990 up to 12:00 noon of December 3, 1990. Petitioners
claimed that, at about 10:00 a.m. on December 3, 1990, they duly submitted to Atty. Apolinar Panal, Jr.,
Chief of the Acquired Assets of DBP, the following documents, namely:

6.1 Letter-offer form, offering to purchase the property advertised, for

the price of P1,840,000, which was higher than the starting price of P1,838,100.00
on cash basis. x x x;

6.2 Negotiated Sale Rules and Procedures, duly signed by plaintiff, x x x;

6.3 Managers check for the amount of P184,000 representing 10% of the
deposit dated December 3, 1990 and issued by Allied Banking Corp. in favor of the
Development Bank of the Philippines. x x x.[31] (Emphasis ours.)

Petitioners asserted that the above documents were initially accepted but later returned. DBP
allegedly advised petitioners that there was no urgent need for the same x x x, considering that the
property will necessarily be sold to [Cebu Bionic] for the reasons that there was no other interested
party and that [Cebu Bionic] was a preferred party being the lessee and present occupant of the
property subject of the lease[.][32] Petitioners then related that, without their knowledge, DBP sold the
subject properties to respondents To Chip, Yap and Balila. The sale was claimed to be simulated and
fictitious, as DBP still received rentals from petitioners until March 1991. By acquiring the subject
properties, petitioners contended that DBP was deemed to have assumed the contract of lease
executed between them and Rudy Robles. As such, DBP was bound by the provision of the lease
contract, which stated that:

9. Should the Lessor decide to sell the property during the term of this lease
contract or immediately after the expiration of the lease, the Lessee shall have the first
option to buy and shall match offers from outside parties.[33]

Petitioners sought the rescission of the contract of sale between DBP and respondents To Chip,
Yap and Balila. Petitioners also prayed for the issuance of a writ of preliminary injunction, restraining
respondents To Chip, Yap and Balila from registering the Deed of Sale in the latters favor and from
undertaking the ejectment of petitioners from the subject properties. Likewise, petitioners entreated
that DBP be ordered to execute a deed of sale covering the subject properties in their name and to pay
damages and attorneys fees.

In its answer,[34] DBP denied the existence of a contract of lease between itself and
petitioners. DBP countered that the letter-offer of petitioners was actually not accepted as their offer to
purchase was on a term basis, which therefore required a 20% deposit. The 10% deposit accompanying
the petitioners letter-offer was declared insufficient. DBP stated that the letter-offer form was not
completely filled out as the Term and Mode of Payment fields were left blank. DBP then informed
petitioner Lydia Sia of the inadequacy of her offer. After ascertaining that there was no other offeror as
of that time, Lydia Sia allegedly summoned back her representative who did not leave a copy of the
letter-offer and the attached documents. DBP maintained that petitioners documents did not show that
the same were received and approved by any approving authority of the bank. The letter-offer attached
to the complaint, which indicated that the mode of payment was on a cash basis, was allegedly not the
document shown to DBP. In addition, DBP argued that there was no assumption of the lease contract
between Rudy Robles and petitioners since it acquired the subject properties through the involuntary
mode of extrajudicial foreclosure and its request to petitioners to sign a new lease contract was simply
ignored. DBP, therefore, insisted that petitioners occupancy of the unit in the State Theatre Building was
merely upon its acquiescence. The petitioners payment of rentals on March 22, 1991 was supposedly
made in bad faith as they were made to a mere teller who had no knowledge of the sale of the subject
properties to respondents To Chip, Yap and Balila. DBP, thus, prayed for the dismissal of the complaint
and, by way of counterclaim, asked that petitioners be ordered to pay damages and attorneys fees.

Respondents To Chip, Yap and Balila no longer filed a separate answer, adopting instead the
answer of DBP.[35]

In an Order[36] dated July 31, 1991, the RTC granted the prayer of petitioners for the issuance of
a writ of preliminary injunction.[37]

On April 25, 1997, the RTC rendered judgment in Civil Case No. CEB-10104, finding meritorious
the complaint of the petitioners. Explained the trial court:
 It is a fact on record that [petitioners] complied with the requirements of deposit and
advance rental as conditions for constitution of lease between the parties. [Petitioners]
in complying with the requirements, issued a time deposit in the amount of P11,395.64
and remitted faithfully its monthly rentals until April, 1991, which monthly rental was no
longer accepted by the [Link] there was no formal written contract executed
between [respondent] DBP and the [petitioners], it is very clear that DBP opted to
continue the old and previous contract including the terms thereon by accepting the
requirements contained in paragraph 2 of its letter dated June 18, 1987. It is also a fact
on record that under the lease contract continued by the DBP on the [petitioners], it is
provided in paragraph 9 thereof that the lessee shall have the first option to buy and
shall match offers from outside parties. And yet, [respondent] DBP never gave
[petitioners] the first option to buy or to match offers from outside parties, more
specifically [respondents] To Chip, Balila and Yap. It is also a fact on record that
[respondent] DBP in its letter dated June 18, 1987 to [petitioners] wrote in paragraph 3
thereof, that in case there is better offer or if a property will be subject of purchase
offer, within the term, the lessee is given the option of first refusal, otherwise, he has to
vacate the premises within thirty (30) days. Yet, [respondent] DBP never informed
[petitioners] that there was an interested party to buy the property, meaning,
[respondents To Chip, Yap and Balila], thus depriving [petitioners] of the opportunity of
first refusal promised to them in its letter dated June 18, 1987. x x x.[38] (Emphases ours.)

As regards the offer of petitioners to purchase the subject properties from DBP, the RTC gave more
credence to the petitioners version of the facts, to wit:

It is also a fact on record that when [respondent] DBP offered the property for
negotiated sale under the 15-day acceptance period[, which] ended at noon of
December 3, 1991, [Cebu Bionic] submitted its offer, complete with [the required
documents.]

These requirements, however, were unceremoniously returned by [respondent] bank

with the assurance that since there was no other bidder of the said property, there was
no urgency for the same and that [Cebu Bionic] also, in all events, is entitled to first
option being the present lessee.

The declaration of Atty. Panal to the effect that Cebu Bionic wanted to buy the property
on installment terms, such that the deposit of P184,000.00 was insufficient being only
10% of the offer, could not be given much credence as it is refuted by Exh. H which is
the negotiated offer to purchase form under the 15-day acceptance period
accomplished by [petitioners] which shows clearly the written word Cash after the
printed words Term and Mode of Payment, Exhibit J, the Managers check issued by
Allied Banking Corporation dated December 3, 1990 in the amount of P184,000.00
representing 10% of the offer showing the mode of payment is for cash; Exhibit K which
is the application for Managers check in the amount of P184,000.00 dated December 3,
1990 showing the beneficiary as DBP. If it is true that the offer of [petitioners] was for
installment payments, then in the ordinary course of human behavior, it would not have
wasted effort in securing a Managers check in the amount of P184,000.00 which was
insufficient for 20% deposit as required for installment payments. More credible is the
explanation [given by] witness Judy Garces when she said that DBP through Atty. Panal
 returned the documents submitted by her, saying that there was no urgency for the
same as there was no other bidder of [the said] property and that Cebu Bionic was
entitled to a first option to buy being the present lessee. In the letter also of
[respondent] bank dated June 18, 1987, it is important to note that aside from requiring
Cebu Bionic to comply with certain requirements of time deposit and advance rental, as
condition for constitution of lease between the parties and which was complied by Cebu
Bionic[,] said letter further states in paragraph 3 thereof that in case there is [a] better
offer or if the property will be subject of a purchase offer, within the term, the lessee is
given the option of first refusal, otherwise, he has to vacate the premises within thirty
days. In answer to the Courts question, however, Atty. Panal admitted that he did not
tell [petitioners] that there was another party who was willing to purchase the property,
in violation of [petitioners] right of first refusal.[39] (Emphasis ours.)

Likewise, the RTC found that respondents To Chip, Yap and Balila were aware of the lease contract
involving the subject properties before they purchased the same from [Link]:

[Respondent] Jose To Chip lamely pretends ignorance that [petitioners] are lessees of
the property, subject matter of this case. He states that he and his partners, the other
[respondents], were given assurances by Atty. Panal of the DBP that [Lydia Sia] is not a
lessee, although he knew that [petitioners] were presently occupying the property and
that it was possessed by [petitioners] even before it was owned by the DBP. x x x.

xxxx

[Respondent] Roger Balila, in his testimony, likewise pretended ignorance that he knew
that [Lydia Sia] was a lessee of the property. x x x.

xxxx

Upon further questioning by the Court, he admitted that [Lydia Sia] was not possessing
the building freely; that she was a lessee of Rudy Robles, the former owner, but cleverly
insisted in disowning knowledge that [Lydia Sia] was a lessee, denying knowledge that
[Lydia Sia] was paying rentals to [respondent] bank. His pretended ignorance x x x was a
way of evading [Cebu Bionics] right of first priority to buy the property under the
contract of lease. x x x The Court is convinced that [respondents To Chip, Yap and Balila]
knew that [Cebu Bionic] was the present lessee of the property before they bought the
same from [respondent] bank. Common observation, knowledge and experience
dictates that as a prudent businessman, it was but natural that he ask Lydia Sia what her
status was in occupying the property when he went to talk to her, that he ask her if she
was a lessee. But he said, all he asked her was whether she was interested to buy the
property.

The trial court, therefore, concluded that:

From the foregoing facts on record, it is thus clear that [petitioner] Cebu Bionic is the
present lessee of the property, the lease contract having been continued by
[respondent] DBP when it received rental payments up to March of 1991 as well as the
advance rental for one year represented by the assigned time deposit which is still in
 [respondent] banks possession. The provision, therefore, in the lease contract, on the
right of first option to buy and the right of first refusal contained in [respondent] banks
letter dated June 18, 1987, are still subsisting and binding up to the present, not only on
[respondent] bank but also on [respondents To Chip, Yap and Balila].

WHEREFORE, THE FOREGOING PREMISES CONSIDERED, judgment is hereby rendered:

(1) Rescinding the Deed of Sale dated December 28, 1990 between
[respondent] Development Bank of the Philippines and [respondents] Roger
Balila, Jose To Chip and Patricio Yap;

(2) Ordering the [respondent] Development Bank of the Philippines to execute

a Deed of Sale over the property, subject matter of this case upon payment
by [petitioners] of the whole consideration involved and to complete all acts
or documents necessary to have the title over said property transferred to
the name of [petitioners];

(3) Costs against [respondents].[41]

DBP forthwith filed a Notice of Appeal.[42] Respondents To Chip, Yap and Balila filed a Motion for
Reconsideration[43] of the above decision, but the RTC denied the same in an Order[44] dated July 4,
1997. Said respondents then filed their Notice of Appeal.[45]

On February 14, 2001, the Court of Appeals promulgated its Decision,[46] pronouncing that:

We find nothing erroneous with the judgment rendered by the trial

court. Perforce, We sustain it and dismiss the [respondents] submission.

The RTC determined, upon evidence on record after a careful evaluation of the
witnesses and their testimonies during the trial that indeed [petitioners] right of first
option was violated and thus, rescission of the sale made by DBP to [respondents To
Chip, Yap and Balila] are in order.

Apparently, DBP accepted [the documents submitted by petitioners] and

thereafter, through Atty. Panal (of DBP), returned all of it to the [petitioners] with the
assurance that since there was no other bidder of the said property, there was no
urgency for the same and that [Cebu Bionic] also, in all events, is entitled to first option
being the present lessee.

[DBP] maintains that the return of the documents [submitted by petitioners]

was in order since the [petitioners] offered to buy the property in question on
installment basis requiring a higher 20% deposit. This, however, was correctly rejected
by the trial court[.]
 The binding effect of the lease agreement upon the [respondents To Chip, Yap
and Balila] must be sustained since from existing jurisprudence cited by the lower court,
it was determined during trial that:

... [respondents To Chip, Yap and Balila] knew that [Cebu Bionic]
was the present lessee of the property before they bought the same
from [respondent] [Link] observation, knowledge and
experience dictates that as a prudent businessman, it was but natural
that he ask Lydia Sia what her status was in occupying the property
when he went to talk to her, that he ask her if she was a lessee. But he
said, all he asked her was whether she was interested to buy the
property. x x x.

Moreover, We find that the submissions presented by the [respondents] in their

respective briefs argue against questions of facts as found and determined by the lower
court. The respondents contentions consist of crude attempts to question the
assessment and evaluation of testimonies and other evidence gathered by the trial
court.

It must be remembered that findings of fact as determined by the trial court are
entitled to great weight and respect from appellate courts and should not be disturbed
on appeal unless for [strong] and cogent reasons. These findings generally, so long as
supported by evidence on record, are not to be disturbed unless there are some facts or
evidence which the trial court has misappreciated or overlooked, and which if
considered would have altered the results of the entire case. Sad to say for the
[respondents], We see no reason to depart from this well-settled legal principle.

WHEREFORE, in view of the foregoing, the judgment of the Regional Trial Court
of Cebu City, Branch 8, in Civil Case No. 10104 is hereby AFFIRMED in toto.[47]

On October 1, 2001, petitioners filed a Motion for Issuance of Entry of Judgment.[48] Petitioners
stressed that, based on the records of the case, respondents were served a copy of the Court of Appeals
Decision dated February 14, 2001 sometime on March 7, 2001. However, petitioners discovered that
respondents have not filed any motion for reconsideration of the said decision within the reglementary
period therefor, nor was there any petition for certiorari or appeal filed before the Supreme Court.

In response to the above motion, respondents To Chip, Yap and Balila filed on October 8, 2001 a
Motion to Admit Motion for Reconsideration.[49] Atty. Francis M. Zosa, the counsel for respondents To
Chip, Yap and Balila, explained that he sent copies of the motion for reconsideration to petitioners and
DBP via personal delivery. On the other hand, the copies of the motion to be filed with the Court of
Appeals were purportedly sent to Mr. Domingo Tan, a friend of Atty. Zosa in Quezon City, who agreed to
file the same personally with the appellate court in Manila. When Atty. Zosa inquired if the motion for
reconsideration was accordingly filed, Mr. Tan allegedly answered in the affirmative. To his surprise,
Atty. Zosa received a copy of petitioners Motion for Issuance of Entry of Judgment. Atty. Zosa, thus,
attributed the failure of his clients to file a motion for reconsideration on the mistake, excusable
negligence and/or fraud committed by Mr. Tan.
 In the assailed Resolution dated February 5, 2002, the Court of Appeals granted the motion of
respondents To Chip, Yap and Balila and admitted the motion for reconsideration attached therewith in
the higher interest of substantial justice.[50]

On July 5, 2002, the Court of Appeals reversed its original Decision dated February 14, 2001,
reasoning thus:

After a judicious review and reevaluation of the evidence and facts on record,
we are convinced that DBP had terminated the Robles lease contract. From its letter of
June 18, 1987, DBP had expressly notified [petitioners] that (I)f they wish to continue on
leasing the property x x x to come to the Bank for the execution of a Contract of Lease,
the salient conditions of which are as follows:

1. The lease will be on a month to month basis for a maximum period of one (1)
year;

2. Deposit equivalent to two (2) months rental and advance of one (1) month
rental, and the remaining amount for one year (equivalent to 9 months rental) shall be
secured by either surety bond, cash bond or assigned time deposit;

3. That in case there is a better offer or if the property will be subject of a

purchase offer, within the term, the lessor is given an option of first refusal, otherwise
he has to vacate the premises within thirty (30) days from date of notice.

We consider, temporarily, the current monthly rental based on the six-month

receipts, which we require you to submit, until such time when we will fix the amount
accordingly.

Evidently, except for the remittance of the monthly rentals up to March 1991,
the conditions imposed by DBP have never been complied with. [Petitioners] did not go
to the Bank to sign any new written contract of lease with DBP. [Petitioners] also did not
put up a surety bond nor cash bond nor assign a time deposit to secure the payment of
rental for nine (9) months, although the [petitioners] opened a time deposit but did not
assign it to DBP.

But even with the remittance and acceptance of the deposit made by
[petitioners] equivalent to two (2) months rental and advance of one (1) month rental it
does not necessarily follow that DBP opted to continue with the Robles lease. This is
because the Robles contract provides:

That the term of the agreement shall start on November 1, 1981

and shall terminate on the last day of every month thereafter, provided
however, that this contract shall be automatically renewed on a month
to month basis if no notice in writing is sent to the other party to
determine to terminate this agreement after fifteen (15) days from the
receipt of said notice.
Here, a notice was sent to [petitioners] on June 18, 1987, informing them that if they
wish to continue on leasing the property, we request you to come to the Bank for the
execution of a Contract of Lease x x x.

[Petitioners] failed to enter into the contract of lease required by DBP for it to
continue occupying the leased premises.

Because of [petitioners] failure to comply with the conditions embodied in the

18 June 1987 letter, it cannot be said that [petitioners] entered into a new contract with
DBP where they were given the first option to buy the leased property and to match
offers from outside parties.

xxxx

Be that as it may, DBP continued to accept the monthly rentals based on the old
Robles contract despite the fact that the [petitioners] failed to enter into a written lease
contract with [Link], the relations between the parties is now governed by Article
1670 of the New Civil Code, thus:

Art. 1670. If at the end of contract the lessee should continue

enjoying the thing leased for fifteen days with the acquiescence of the
lessor, and unless a notice to the contrary by either party has previously
been given, it is understood that there is an implied new lease, not for
the period of the original contract, but for the time established in
Articles 1682 and 1687. The other terms of the original contract shall be
revived.

x x x [T]he acceptance by DBP of the monthly rentals does not mean that the
terms of the Robles contract were revived. In the case of Dizon vs. Court of Appeals, the
Supreme Court declared that:

The other terms of the original contract of lease which are

revived in the implied new lease under Article 1670 of the New Civil
Code are only those terms which are germane to the lessees right [of]
continued enjoyment of the property leased an implied new lease does
not ipso facto carry with it any implied revival of any option to purchase
the leased premises.

In view of the foregoing, it is clear that [petitioners] had no right to file a case
for rescission of the deed of sale executed by DBP in favor of [respondents To Chip, Yap
and Balila] because said deed of sale did not violate their alleged first option to buy or
match offers from outside parties which is legally non-existent and which was not
impliedly renewed under Article 1670 of the Civil Code.

WHEREFORE, premises considered, the 14 February 2001 Decision is

hereby RECONSIDERED and another one is issued REVERSING the 25 April 1997 Decision
of the Regional Trial Court, Branch 8, Cebu City in Civil Case No. CEB-10104 and the
complaint of [petitioners] is DISMISSED for lack of merit.[51]
 Without seeking a reconsideration of the above decision, petitioners filed the instant petition. In
their Comment, respondents opposed the petition on both procedural and substantive grounds.

In petitioners Memorandum, they summarized the issues to be resolved in the present case as
follows:

A) PRELIMINARY ISSUES:

I. WHETHER OR NOT THE VERIFICATION (AND CERTIFICATION OF NON-FORUM

SHOPPING) IN THE INSTANT PETITION WAS PROPER AND VALID DESPITE ITS BEING
SIGNED BY ONLY ONE OF THE TWO PETITIONERS.

II. WHETHER OR NOT ONLY QUESTIONS OF LAW AND NOT OF FACT CAN BE RAISED IN
THE INSTANT PETITION BEFORE THIS HON. SUPREME COURT.

B) MAIN AND PRINCIPAL ISSUES IN THE INSTANT PETITION:

I. WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN ADMITTING

RESPONDENTS MOTION FOR RECONSIDERATION DESPITE ITS BEING FILED OUT OF TIME

II. WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN DECLARING THAT
PETITIONERS DID NOT ENTER INTO CONTRACT WITH RESPONDENT DBP CONTINUING
THE TERMS OF THE ROBLES CONTRACT

III. WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT DECLARED THAT
THE CONTINUATION BY RESPONDENT DBP OF THE LEASE CONTRACT DID NOT CONTAIN
THE RIGHT OF FIRST REFUSAL

IV. WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT DECLARED THAT
THE LEASE CONTRACT IS GOVERNED BY ART. 1670 OF THE NEW CIVIL CODE

V. WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT FAILED TO

RECOGNIZE PETITIONERS RIGHT OF FIRST REFUSAL TO WHICH RESPONDENTS WERE
BOUND

VI. WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT FAILED TO
DECLARE THAT RESPONDENT DBP HAD VIOLATED PETITIONERS RIGHTS

VII. WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN REVERSING ITS OWN
JUDGMENT AND DISMISSING PETITIONERS CLAIM FOR RESCISSION[52]

We shall first resolve the preliminary issues.

Respondents To Chip, Yap and Balila argue that the instant petition should be dismissed outright as the
verification and certification of non-forum shopping was executed only by petitioner Lydia Sia in her
personal capacity, without the participation of Cebu Bionic.

The Court is not persuaded.

Except for the powers which are expressly conferred on it by the Corporation Code and those
that are implied by or are incidental to its existence, a corporation has no powers. It exercises its
powers through its board of directors and/or its duly authorized officers and agents. Thus, its power to
sue and be sued in any court is lodged with the board of directors that exercises its corporate
powers.[53] Physical acts, like the signing of documents, can be performed only by natural persons duly
authorized for the purpose by corporate by-laws or by a specific act of the board of directors.[54]

In this case, respondents To Chip, Yap and Balila obviously overlooked the Secretarys
Certificate[55] attached to the instant petition, which was executed by the Corporate Secretary of Cebu
Bionic. Unequivocally stated therein was the fact that the Board of Directors of Cebu Bionic held a
special meeting on July 26, 2002 and they thereby approved a Resolution authorizing Lydia Sia to elevate
the present case to this Court in behalf of Cebu Bionic, to wit:

Whereas, the board appointed LYDIA I. SIA to act and in behalf of the
corporation to file the CERTIORARI with the Supreme Court in relations to the decision
of the Court of Appeals dated July 5, 2002 which reversed its own judgment earlier
promulgated on February 14, 2001 entitled CEBU BIONIC BUILDERS SUPPLY, INC. and
LYDIA SIA, (Petitioners- Appellants) versus THE DEVELOPMENT BANK OF THE
PHILIPPINES, JOSE TO CHIP, PATRICIO YAP and ROGER BALILA (Respondents- Appelles),
docketed CA-G.R. NO. 57216.

Whereas, on mass unanimously motion of all members of directors present

hereby approved the appointment of LYDIA I. SIA to act and sign all papers in
connection of CA-G.R. NO. 57216.

Resolved and it is hereby resolve to appoint and authorized LYDIA I. SIA to sign
and file with the SUPREME COURT in connection to decision of the Court of Appeals as
above mention.[56]

Respondents To Chip, Yap and Balila next argue that the instant petition raises questions of fact,
which are not allowed in a petition for review on certiorari. They, therefore, submit that the factual
findings of the Court of Appeals are binding on this Court.

Section 1, Rule 45 of the Rules of Court categorically states that the petition filed thereunder
shall raise only questions of law, which must be distinctly set forth. A question of law arises when there
is doubt as to what the law is on a certain state of facts, while there is a question of fact when the doubt
arises as to the truth or falsity of the alleged [Link] a question to be one of law, the same must not
involve an examination of the probative value of the evidence presented by the litigants or any of
them. The resolution of the issue must rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of the evidence presented, the question
posed is one of fact.[57]
 The above rule, however, admits of certain exceptions,[58] one of which is when the findings of
the Court of Appeals are contrary to those of the trial court. As will be discussed further, this exception
is attendant in the case at bar.

We now determine the principal issues put forward by petitioners.

First off, petitioners fault the Court of Appeals for admitting the Motion for Reconsideration of
its Decision dated February 14, 2001, which was filed by respondents To Chip, Yap and Balila more than
six months after receipt of the said decision. The motion was eventually granted and the Court of
Appeals issued its assailed Amended Decision, ruling in favor of respondents.

Indeed, the appellate courts Decision dated February 14, 2001 would have ordinarily attained
finality for failure of respondents to seasonably file their Motion for Reconsideration thereon. However,
we agree with the Court of Appeals that the higher interest of substantial justice will be better served if
respondents procedural lapse will be excused.

Verily, we had occasion to apply this liberality in the application of procedural rules in Barnes v.
Padilla[59] where we aptly declared that

The failure of the petitioner to file his motion for reconsideration within the period fixed
by law renders the decision final and executory. Such failure carries with it the result
that no court can exercise appellate jurisdiction to review the case. Phrased elsewise, a
final and executory judgment can no longer be attacked by any of the parties or be
modified, directly or indirectly, even by the highest court of the land.

However, this Court has relaxed this rule in order to serve substantial justice
considering (a) matters of life, liberty, honor or property, (b) the existence of special or
compelling circumstances, (c) the merits of the case, (d) a cause not entirely attributable
to the fault or negligence of the party favored by the suspension of the rules, (e) a lack
of any showing that the review sought is merely frivolous and dilatory, and (f) the other
party will not be unjustly prejudiced thereby.[60]

In this case, what are involved are the property rights of the parties given that, ultimately, the
fundamental issue to be determined is who among the petitioners and respondents To Chip, Yap and
Balila has the better right to purchase the subject properties. More importantly, the merits of the case
sufficiently called for the suspension of the rules in order to settle conclusively the rights and obligations
of the parties herein.

In essence, the questions that must be resolved are: 1) whether or not there was a contract of
lease between petitioners and DBP; 2) if in the affirmative, whether or not this contract contained a
right of first refusal in favor of petitioners; and 3) whether or not respondents To Chip, Yap and Balila
are likewise bound by such right of first refusal.

Petitioners contend that there was a contract of lease between them and DBP, considering that
they had been allowed to occupy the premises of the subject property from 1987 up to 1991 and DBP
received their rental payments corresponding to the said period. Petitioners claim that DBP were aware
of their lease on the subject property when the latter foreclosed the same and the acquisition of the
subject properties through foreclosure did not terminate the lease. Petitioners subscribe to the ruling of
the RTC that even if there was no written contract of lease, DBP chose to continue the existing contract
of lease between petitioners and Rudy Robles by accepting the requirements set down by DBP on the
letter dated June 18, 1987. Petitioners likewise posit that the contract of lease between them and Rudy
Robles never expired, inasmuch as the contract did not have a definite term and none of the parties
thereto terminated the same. In view of the continuation of the lease contract between petitioners and
Rudy Robles, petitioners submit that Article 1670 of the Civil Code on implied lease is not applicable on
the instant case.

We are not persuaded.

In Uy v. Land Bank of the Philippines,[61] the Court held that [i]n respect of the lease on the
foreclosed property, the buyer at the foreclosure sale merely succeeds to the rights and obligations of
the pledgor-mortgagor subject to the provisions of Article 1676 of the Civil Code on its possible
termination. This article provides that [t]he purchaser of a piece of land which is under a lease that is
not recorded in the Registry of Property may terminate the lease, save when there is a stipulation to the
contrary in the contract of sale, or when the purchaser knows of the existence of the lease. In short, the
buyer at the foreclosure sale, as a rule, may terminate an unregistered lease except when it knows of
the existence of the lease.

In the instant case, the lease contract between petitioners and Rudy Robles was not
registered.[62] During trial, DBP denied having any knowledge of the said lease contract.[63] It asserted
that the lease was merely presumed in view of the existence of tenants in the subject
property.[64] Nevertheless, DBP recognized and acknowledged this lease contract in its letter dated June
18, 1987, which was addressed to Bonifacio Sia, then President of Cebu Bionic. DBP even required Sia to
pay the monthly rental for the month of June 1987, thereby exercising the right of the previous lessor,
Rudy Robles, to collect the rental payments from the lessee. In the same letter, DBP extended an offer
to Cebu Bionic to continue the lease on the subject property, outlining the provisions of the proposed
contract and specifically instructing the latter to come to the bank for the execution of the same. DBP
likewise gave Cebu Bionic a 30-day period within which to act on the said contract execution. Should
Cebu Bionic fail to do so, it would be deemed uninterested in continuing with the lease. In that
eventuality, the letter states that Cebu Bionic should vacate the premises within the said period.

Instead of acceding to the terms of the aforementioned letter, the counsel of Cebu Bionic sent a
counter-offer to DBP dated July 7, 1987, suggesting a different mode of payment for the rentals and
requesting for a 60-day period within which time the parties will execute a new contract of lease.

The parties, however, failed to execute a written contract of lease. Petitioners put the blame on
DBP, asserting that no contract was signed because DBP did not prepare it for them. DBP, on the other
hand, counters that it was petitioners who did not positively act on the conditions for the execution of
the lease contract. In view of the counter-offer of petitioners, DBP and respondents To Chip, Yap and
Balila argue that there was no meeting of minds between DBP and petitioners, which would have given
rise to a new contract of lease.

The Court rules that, indeed, no new contract of lease was ever perfected between petitioners
and DBP.
 In Metropolitan Manila Development Authority v. JANCOM Environmental Corporation,[65] we
emphasized that:

Under Article 1305 of the Civil Code, [a] contract is a meeting of minds between
two persons whereby one binds himself, with respect to the other, to give something or
to render some service. A contract undergoes three distinct stages preparation or
negotiation, its perfection, and finally, its consummation. Negotiation begins from the
time the prospective contracting parties manifest their interest in the contract and ends
at the moment of agreement of the parties. The perfection or birth of the contract takes
place when the parties agree upon the essential elements of the contract. The last stage
is the consummation of the contract wherein the parties fulfill or perform the terms
agreed upon in the contract, culminating in the extinguishment thereof (Bugatti vs. CA,
343 SCRA 335 [2000]). Article 1315 of the Civil Code, provides that a contract is
perfected by mere consent. Consent, on the other hand, is manifested by the meeting of
the offer and the acceptance upon the thing and the cause which are to constitute the
contract (See Article 1319, Civil Code). x x x.[66]

In the case at bar, there was no concurrence of offer and acceptance vis--vis the terms of the
proposed lease agreement. In fact, after the reply of petitioners counsel dated July 7, 1987, there was
no indication that the parties undertook any other action to pursue the execution of the intended lease
contract. Petitioners even admitted that they merely waited for DBP to present the contract to them,
despite being instructed to come to the bank for the execution of the same.[67]

Contrary to the ruling of the RTC, the Court is also not convinced that DBP opted to continue the
existing lease contract between petitioners and Rudy Robles.

The findings of the RTC that DBP supposedly accepted the requirements the latter set forth in its
letter dated June 18, 1987 is not well taken. To recapitulate, the third paragraph of the letter reads:

If you wish to continue on leasing the property, we request you to come to the Bank for
the execution of a Contract of Lease, the salient conditions of which are as follows:

1. The lease will be on month to month basis, for a maximum period of one (1)
year;

2. Deposit equivalent to two (2) months rental and advance of one (1) month
rental, and the remaining amount for one year period (equivalent to 9
months rental) shall be secured by either surety bond, cash bond or
assigned time deposit;

3. That in case there is a better offer or if the property will be subject

of a purchase offer, within the term, the lessor is given an option of first
refusal, otherwise he has to vacate the premises within thirty (30) days
from date of notice.[68]
 The so-called requirements enumerated in the above paragraph are not really requirements to
be complied with by the petitioners for the execution of the proposed lease contract, as apparently
considered by the RTC and the petitioners. A close reading of the letter reveals that the items
enumerated therein were in fact the salient terms and conditions of the proposed contract of lease,
which the DBP and the petitioners were to execute if the latter were so willing. Also, the Certificate of
Time Deposit in the amount of P11,395.64, which was allegedly paid to DBP as advance rental deposit
pursuant to the said requirements, was not even clearly established as such since it was neither secured
by a security bond or a cash bond, nor was it assigned to DBP.

The contention that the lease contract between petitioners and Rudy Robles did not expire,
given that it did not have a definite term and the parties thereto failed to terminate the same, deserves
scant consideration. To recall, the second paragraph of the terms and conditions of the contract of lease
between petitioners and Rudy Robles reads:

2. That the term of this agreement shall start on November 1, 1981 and shall terminate
on the last day of every month thereafter; provided however that this contract shall be
automatically renewed on a month to month basis if no notice, in writing, is sent to the
other party to terminate this agreement after fifteen (15) days from receipt of said
notice.[69] (Emphases ours.)

Crystal clear from the above provision is that the lease is on a month-to-month basis. Relevantly,
the well-entrenched principle is that a lease from month-to-month is with a definite period and expires
at the end of each month upon the demand to vacate by the lessor.[70] As held by the Court of Appeals in
the assailed Amended Decision, the above-mentioned lease contract was duly terminated by DBP by
virtue of its letter dated June 18, 1987. We reiterate that the letter explicitly directed the petitioners to
come to the office of the DBP if they wished to enter into a new lease agreement with the said
bank. Otherwise, if no contract of lease was executed within 30 days from the date of the letter,
petitioners were to be considered uninterested in entering into a new contract and were thereby
ordered to vacate the property. As no new contract was in fact executed between petitioners and DBP
within the 30-day period, the directive to vacate, thus, took effect. DBPs letter dated June 18, 1987,
therefore, constituted the written notice that was required to terminate the lease agreement between
petitioners and Rudy Robles. From then on, the petitioners continued possession of the subject property
could be deemed to be without the consent of DBP.

Thusly, petitioners assertion that Article 1670 of the Civil Code is not applicable to the instant
case is correct. The reason, however, is not that the existing contract was continued by DBP, but
because the lease was terminated by DBP, which termination was accompanied by a demand to
petitioners to vacate the premises of the subject property.

Article 1670 states that [i]f at the end of the contract the lessee should continue enjoying the
thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by
either party has previously been given, it is understood that there is an implied new lease, not for the
period of the original contract, but for the time established in Articles 1682 and 1687. The other terms
of the original contract shall be revived. In view of the order to vacate embodied in the letter of DBP
dated June 18, 1987 in the event that no new lease contract is entered into, the petitioners continued
possession of the subject properties was without the acquiescence of DBP, thereby negating the
constitution of an implied lease.
 Contrary to the ruling of the RTC, DBPs acceptance of petitioners rental payments of P5,000.00
for the period of November 1990 to March 1991 did not likewise give rise to an implied lease between
petitioners and DBP. In Tagbilaran Integrated Settlers Association (TISA) Incorporated v. Court of
Appeals,[71] we held that the subsequent acceptance by the lessor of rental payments does not, absent
any circumstance that may dictate a contrary conclusion, legitimize the unlawful character of their
possession. In the present case, the petitioners rental payments to DBP were made in lump sum on
March 22, 1991. Significantly, said payments were remitted only after petitioners were notified of the
sale of the subject properties to respondents To Chip, Yap and Balila and after the petitioners were
given a final demand to vacate the properties. These facts substantially weaken, if not controvert, the
finding of the RTC and the argument of petitioners that the latter were faithfully remitting their rental
payments to DBP until the year 1991.

Thus, having determined that the petitioners and DBP neither executed a new lease agreement,
nor entered into an implied lease contract, it follows that petitioners claim of entitlement to a right of
first refusal has no leg to stand on. Furthermore, even if we were to grant, for the sake of argument,
that an implied lease was constituted between petitioners and the DBP, the right of first refusal that was
contained in the prior lease contract with Rudy Robles was not renewed therewith. This is in accordance
with the ruling in Dizon v. Magsaysay,[72] which involved the issue of whether a provision regarding a
preferential right to purchase is revived in an implied lease under Article 1670, to wit:

[T]he other terms of the original contract which are revived in the implied new lease
under Article 1670 are only those terms which are germane to the lessees right of
continued enjoyment of the property leased. This is a reasonable construction of the
provision, which is based on the presumption that when the lessor allows the lessee to
continue enjoying possession of the property for fifteen days after the expiration of the
contract he is willing that such enjoyment shall be for the entire period corresponding
to the rent which is customarily paid in this case up to the end of the month because the
rent was paid monthly. Necessarily, if the presumed will of the parties refers to the
enjoyment of possession the presumption covers the other terms of the contract
related to such possession, such as the amount of rental, the date when it must be paid,
the care of the property, the responsibility for repairs, etc. But no such presumption
may be indulged in with respect to special agreements which by nature are foreign to
the right of occupancy or enjoyment inherent in a contract of lease.[73]

DBP cannot, therefore, be accused of violating the rights of petitioners when it offered the
subject properties for sale, and eventually sold the same to respondents To Chip, Yap and Balila, without
first notifying petitioners. Neither were the said respondents bound by any right of first refusal in favor
of petitioners. Consequently, the sale of the subject properties to respondents was valid. Petitioners
claim for rescission was properly dismissed.

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court
is DENIED. The Resolution dated February 5, 2002 and the Amended Decision dated July 5, 2002 of the
Court of Appeals in CA-G.R. CV No. 57216 are hereby AFFIRMED. No costs. SO ORDERED.
G.R. Nos. 158090 October 4, 2010

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner,

vs HEIRS OF FERNANDO F. CABALLERO, represented by his daughter, JOCELYN G.
CABALLERO,Respondents.

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set
aside the Decision[1] and the Resolution,[2] dated December 17, 2002 and April 29, 2003, respectively, of
the Court of Appeals (CA) in CA-G.R. CV. No. 49300.

The antecedents are as follows:

Respondent Fernando C. Caballero (Fernando) was the registered owner of a residential lot designated
as Lot No. 3355, Ts-268, covered by TCT No. T-16035 of the Register of Deeds of Cotabato, containing an
area of 800 square meters and situated at Rizal Street, Mlang, Cotabato. On the said lot, respondent
built a residential/commercial building consisting of two (2) stories.

On March 7, 1968, Fernando and his wife, Sylvia Caballero, secured a loan from petitioner Government
Service Insurance System (GSIS) in the amount of P20,000.00, as evidenced by a promissory
note. Fernando and his wife likewise executed a real estate mortgage on the same date, mortgaging the
afore-stated property as security.
Fernando defaulted on the payment of his loan with the GSIS. Hence, on January 20, 1973, the mortgage
covering the subject property was foreclosed, and on March 26, 1973, the same was sold at a public
auction where the petitioner was the only bidder in the amount of P36,283.00. For failure of Fernando
to redeem the said property within the designated period, petitioner executed an Affidavit of
Consolidation of Ownership on September 5, 1975. Consequently, TCT No. T-16035 was cancelled and
TCT No. T-45874 was issued in the name of petitioner.
On November 26, 1975, petitioner wrote a letter to Fernando, informing him of the consolidation of title
in its favor, and requesting payment of monthly rental in view of Fernando's continued occupancy of the
subject property. In reply, Fernando requested that he be allowed to repurchase the same through
partial payments. Negotiation as to the repurchase by Fernando of the subject property went on for
several years, but no agreement was reached between the parties.

On January 16, 1989, petitioner scheduled the subject property for public bidding. On the scheduled
date of bidding, Fernando's daughter, Jocelyn Caballero, submitted a bid in the amount of P350,000.00,
while Carmelita Mercantile Trading Corporation (CMTC) submitted a bid in the amount
of P450,000.00. Since CMTC was the highest bidder, it was awarded the subject property. On May 16,
1989, the Board of Trustees of the GSIS issued Resolution No. 199 confirming the award of the subject
property to CMTC for a total consideration of P450,000.00. Thereafter, a Deed of Absolute Sale was
executed between petitioner and CMTC on July 27, 1989, transferring the subject property to
[Link], TCT No. T-45874 in the name of GSIS was cancelled, and TCT No. T-76183 was
issued in the name of CMTC.

Due to the foregoing, Fernando, represented by his daughter and attorney-in-fact, Jocelyn Caballero,
filed with the Regional Trial Court (RTC) of Kabacan, Cotabato a Complaint[3] against CMTC, the GSIS and
its responsible officers, and the Register of Deeds of Kidapawan, Cotabato. Fernando prayed, among
others, that judgment be rendered: declaring GSIS Board of Trustees Resolution No. 199, dated May 16,
1989, null and void; declaring the Deed of Absolute Sale between petitioner and CMTC null and void ab
initio; declaring TCT No. 76183 of the Register of Deeds of Kidapawan, Cotabato, likewise, null and
void ab initio; declaring the bid made by Fernando in the amount ofP350,000.00 for the repurchase of
his property as the winning bid; and ordering petitioner to execute the corresponding Deed of Sale of
the subject property in favor of Fernando. He also prayed for payment of moral damages, exemplary
damages, attorney's fees and litigation expenses.

In his complaint, Fernando alleged that there were irregularities in the conduct of the bidding. CMTC
misrepresented itself to be wholly owned by Filipino citizens. It misrepresented its working capital. Its
representative Carmelita Ang Hao had no prior authority from its board of directors in an appropriate
board resolution to participate in the bidding. The corporation is not authorized to acquire real estate or
invest its funds for purposes other than its primary purpose. Fernando further alleged that the GSIS
allowed CMTC to bid despite knowledge that said corporation has no authority to do so. The GSIS also
disregarded Fernando's prior right to buy back his family home and lot in violation of the laws. The
Register of Deeds of Cotabato acted with abuse of power and authority when it issued the TCT in favor
of CMTC without requiring the CMTC to submit its supporting papers as required by the law.

Petitioner and its officers filed their Answer with Affirmative Defenses and Counterclaim.[4] The GSIS
alleged that Fernando lost his right of redemption. He was given the chance to repurchase the property;
however, he did not avail of such option compelling the GSIS to dispose of the property by public
bidding as mandated by law. There is also no prior right to buy back that can be exercised by
Fernando. Further, it averred that the articles of incorporation and other papers of CMTC were all in
order. In its counterclaim, petitioner alleged that Fernando owed petitioner the sum of P130,365.81,
representing back rentals, including additional interests from January 1973 to February 1987, and the
additional amount of P249,800.00, excluding applicable interests, representing rentals Fernando
unlawfully collected from Carmelita Ang Hao from January 1973 to February 1988.

After trial, the RTC, in its Decision[5] dated September 27, 1994, ruled in favor of petitioner and
dismissed the complaint. In the same decision, the trial court granted petitioner's counterclaim and
directed Fernando to pay petitioner the rentals paid by CMTC in the amount of P249,800.00. The
foregoing amount was collected by Fernando from the CMTC and represents payment which was not
turned over to petitioner, which was entitled to receive the rent from the date of the consolidation of its
ownership over the subject property.

Fernando filed a motion for reconsideration, which was denied by the RTC in an Order dated March 27,
1995.

Aggrieved by the Decision, respondent filed a Notice of Appeal.[6] The CA, in its Decision dated
December 17, 2002, affirmed the decision of the RTC with the modification that the portion of the
judgment ordering Fernando to pay rentals in the amount of P249,800.00, in favor of petitioner, be
deleted. Petitioner filed a motion for reconsideration, which the CA denied in a Resolution dated April
29, 2003. Hence, the instant petition.

An Ex Parte Motion for Substitution of Party,[7] dated July 18, 2003, was filed by the surviving heirs of
Fernando, who died on February 12, 2002. They prayed that they be allowed to be substituted for the
deceased, as respondents in this case.

Petitioner enumerated the following grounds in support of its petition:

 I. THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING
THAT GSIS' COUNTERCLAIM, AMONG OTHERS, OF P249,800.00 REPRESENTING RENTALS
COLLECTED BY PRIVATE RESPONDENT FROM CARMELITA MERCANTILE TRADING
CORPORATION IS IN THE NATURE OF A PERMISSIVE COUNTERCLAIM WHICH REQUIRED
THE PAYMENT BY GSIS OF DOCKET FEES BEFORE THE TRIAL COURT CAN ACQUIRE
JURISDICTION OVER SAID COUNTERCLAIM.

II. THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING

THAT GSIS' DOCUMENTARY EVIDENCE SUPPORTING ITS CLAIM OF P249,800.00 LACKS
PROPER IDENTIFICATION.[8]

The petition of the GSIS seeks the review of the CA's Decision insofar as it deleted the trial court's award
of P249,800.00 in its favor representing rentals collected by Fernando from the CMTC.

In their Memorandum, respondents claim that CMTC cannot purchase real estate or invest its funds in
any purpose other than its primary purpose for which it was organized in the absence of a corporate
board resolution; the bid award, deed of absolute sale and TCT No. T-76183, issued in favor of the CMTC,
should be nullified; the trial court erred in concluding that GSIS personnel have regularly performed
their official duty when they conducted the public bidding; Fernando, as former owner of the subject
property and former member of the GSIS, has the preemptive right to repurchase the foreclosed
property.

These additional averments cannot be taken cognizance by the Court, because they were substantially
respondents arguments in their petition for review on certiorari earlier filed before Us and docketed as
G.R. No. 156609. Records show that said petition was denied by the Court in a Resolution[9] dated April
23, 2003, for petitioners (respondents herein) failure to sufficiently show that the Court of Appeals
committed any reversible error in the challenged decision as to warrant the exercise by this Court of its
discretionary appellate jurisdiction.[10] Said resolution became final and executory on June 9,
2003.[11] Respondents attempt to re-litigate claims already passed upon and resolved with finality by the
Court in G.R. No. 156609 cannot be allowed.

Going now to the first assigned error, petitioner submits that its counterclaim for the rentals collected
by Fernando from the CMTC is in the nature of a compulsory counterclaim in the original action of
Fernando against petitioner for annulment of bid award, deed of absolute sale and TCT No. 76183.
Respondents, on the other hand, alleged that petitioner's counterclaim is permissive and its failure to
pay the prescribed docket fees results into the dismissal of its claim.
To determine whether a counterclaim is compulsory or not, the Court has devised the following tests: (a)
Are the issues of fact and law raised by the claim and by the counterclaim largely the same? (b)
Would res judicata bar a subsequent suit on defendants claims, absent the compulsory counterclaim
rule? (c) Will substantially the same evidence support or refute plaintiffs claim as well as the defendants
counterclaim? and (d) Is there any logical relation between the claim and the counterclaim? A positive
answer to all four questions would indicate that the counterclaim is compulsory.[12]

Tested against the above-mentioned criteria, this Court agrees with the CA's view that petitioner's
counterclaim for the recovery of the amount representing rentals collected by Fernando from the CMTC
is permissive. The evidence needed by Fernando to cause the annulment of the bid award, deed of
absolute sale and TCT is different from that required to establish petitioner's claim for the recovery of
rentals.

The issue in the main action, i.e., the nullity or validity of the bid award, deed of absolute sale and TCT in
favor of CMTC, is entirely different from the issue in the counterclaim,i.e., whether petitioner is entitled
to receive the CMTC's rent payments over the subject property when petitioner became the owner of
the subject property by virtue of the consolidation of ownership of the property in its favor.

The rule in permissive counterclaims is that for the trial court to acquire jurisdiction, the
counterclaimant is bound to pay the prescribed docket fees.[13] This, petitioner did not do, because it
asserted that its claim for the collection of rental payments was a compulsory counterclaim. Since
petitioner failed to pay the docket fees, the RTC did not acquire jurisdiction over its permissive
counterclaim. The judgment rendered by the RTC, insofar as it ordered Fernando to pay petitioner the
rentals which he collected from CMTC, is considered null and void. Any decision rendered without
jurisdiction is a total nullity and may be struck down at any time, even on appeal before this Court.[14]

Petitioner further argues that assuming that its counterclaim is permissive, the trial court has
jurisdiction to try and decide the same, considering petitioner's exemption from all kinds of fees.

In In Re: Petition for Recognition of the Exemption of the Government Service Insurance System from
Payment of Legal Fees,[15] the Court ruled that the provision in the Charter of the GSIS, i.e., Section 39 of
Republic Act No. 8291, which exempts it from all taxes, assessments, fees, charges or duties of all kinds,
cannot operate to exempt it from the payment of legal fees. This was because, unlike the 1935 and 1973
Constitutions, which empowered Congress to repeal, alter or supplement the rules of the Supreme
Court concerning pleading, practice and procedure, the 1987 Constitution removed this power from
Congress. Hence, the Supreme Court now has the sole authority to promulgate rules concerning
pleading, practice and procedure in all courts.

In said case, the Court ruled that:

The separation of powers among the three co-equal branches of our

government has erected an impregnable wall that keeps the power to promulgate rules
of pleading, practice and procedure within the sole province of this Court. The other
branches trespass upon this prerogative if they enact laws or issue orders that
effectively repeal, alter or modify any of the procedural rules promulgated by this Court.
Viewed from this perspective, the claim of a legislative grant of exemption from the
payment of legal fees under Section 39 of RA 8291 necessarily fails.

Congress could not have carved out an exemption for the GSIS from the
payment of legal fees without transgressing another equally important institutional
safeguard of the Court's independence fiscal autonomy. Fiscal autonomy recognizes
the power and authority of the Court to levy, assess and collect fees, including legal fees.
Moreover, legal fees under Rule 141 have two basic components, the Judiciary
Development Fund (JDF) and the Special Allowance for the Judiciary Fund (SAJF). The
laws which established the JDF and the SAJF expressly declare the identical purpose of
these funds to "guarantee the independence of the Judiciary as mandated by the
 Constitution and public policy." Legal fees therefore do not only constitute a vital source
of the Court's financial resources but also comprise an essential element of the Court's
fiscal independence. Any exemption from the payment of legal fees granted by Congress
to government-owned or controlled corporations and local government units will
necessarily reduce the JDF and the SAJF. Undoubtedly, such situation is constitutionally
infirm for it impairs the Court's guaranteed fiscal autonomy and erodes its
independence.

Petitioner also invoked our ruling in Sun Insurance Office, Ltd. v. Judge Asuncion,[16] where the Court
held that:

3. Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but, subsequently, the
judgment awards a claim not specified in the pleading, or if specified the same has been
left for determination by the court, the additional filing fee therefor shall constitute a
lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly
authorized deputy to enforce said lien and assess and collect the additional fee.
In Ayala Corporation v. Madayag,[17] the Court, in interpreting the third rule laid down in Sun
Insurance Office, Ltd. v. Judge Asuncion regarding awards of claims not specified in the pleading, held
that the same refers only to damages arising after the filing of the complaint or similar pleading as to
which the additional filing fee therefor shall constitute a lien on the judgment.

The amount of any claim for damages, therefore, arising on or before the filing
of the complaint or any pleading should be specified. While it is true that the
determination of certain damages as exemplary or corrective damages is left to the
sound discretion of the court, it is the duty of the parties claiming such damages to
specify the amount sought on the basis of which the court may make a proper
determination, and for the proper assessment of the appropriate docket fees. The
exception contemplated as to claims not specified or to claims although specified are
left for determination of the court is limited only to any damages that may arise after
the filing of the complaint or similar pleading for then it will not be possible for the
claimant to specify nor speculate as to the amount thereof. (Emphasis supplied.)

Petitioner's claim for payment of rentals collected by Fernando from the CMTC did not arise after the
filing of the complaint; hence, the rule laid down in Sun Insurance finds no application in the present
case.
Due to the non-payment of docket fees on petitioner's counterclaim, the trial court never acquired
jurisdiction over it and, thus, there is no need to discuss the second issue raised by petitioner.
WHEREFORE, the petition is DENIED. The Decision and the Resolution, dated December 17, 2002 and
April 29, 2003, respectively, of the Court of Appeals in CA-G.R. CV. No. 49300, are AFFIRMED. SO
ORDERED.
G.R. No. 153567 February 18, 2008

LIBRADA M. AQUINO, petitioner, vs. ERNEST S. AURE1, respondent.

Before this Court is a Petition for Review on Certiorari[2] under Rule 45 of the Revised Rules of Court filed
by petitioner Librada M. Aquino (Aquino), seeking the reversal and the setting aside of the
Decision[3] dated 17 October 2001 and the Resolution[4] dated 8 May 2002 of the Court of Appeals in CA-
G.R. SP No. 63733. The appellate court, in its assailed Decision and Resolution, reversed the
Decision[5] of the Regional Trial Court (RTC) of Quezon City, Branch 88, affirming the Decision[6] of the
Metropolitan Trial Court (MeTC) of Quezon City, Branch 32, which dismissed respondent Ernesto Aures
(Aure) complaint for ejectment on the ground, inter alia, of failure to comply with barangay conciliation
proceedings.

The subject of the present controversy is a parcel of land situated in Roxas District, Quezon City, with an
area of 449 square meters and covered by Transfer Certificate of Title (TCT) No. 205447 registered with
the Registry of Deeds of Quezon City (subject property).[7]

Aure and E.S. Aure Lending Investors, Inc. (Aure Lending) filed a Complaint for ejectment against Aquino
before the MeTC docketed as Civil Case No. 17450. In their Complaint, Aure and Aure Lending alleged
that they acquired the subject property from Aquino and her husband Manuel (spouses Aquino) by
virtue of a Deed of Sale[8]executed on 4 June 1996. Aure claimed that after the spouses Aquino received
substantial consideration for the sale of the subject property, they refused to vacate the same.[9]

In her Answer,[10] Aquino countered that the Complaint in Civil Case No. 17450 lacks cause of
action for Aure and Aure Lending do not have any legal right over the subject property. Aquino admitted
that there was a sale but such was governed by the Memorandum of Agreement[11] (MOA) signed by
Aure. As stated in the MOA, Aure shall secure a loan from a bank or financial institution in his own name
using the subject property as collateral and turn over the proceeds thereof to the spouses
Aquino. However, even after Aure successfully secured a loan, the spouses Aquino did not receive the
proceeds thereon or benefited therefrom.

On 20 April 1999, the MeTC rendered a Decision in Civil Case No. 17450 in favor of Aquino and
dismissed the Complaint for ejectment of Aure and Aure Lending for non-compliance with the barangay
conciliation process, among other grounds. The MeTC observed that Aure and Aquino are residents of
the same barangay but there is no showing that any attempt has been made to settle the case amicably
at the barangay level. The MeTC further observed that Aure Lending was improperly included as plaintiff
in Civil Case No. 17450 for it did not stand to be injured or benefited by the suit. Finally, the MeTC ruled
that since the question of ownership was put in issue, the action was converted from a mere detainer
suit to one incapable of pecuniary estimation which properly rests within the original exclusive
jurisdiction of the RTC. The dispositive portion of the MeTC Decision reads:

WHEREFORE, premises considered, let this case be, as it is, hereby ordered
DISMISSED. [Aquinos] counterclaim is likewise dismissed.[12]

On appeal, the RTC affirmed the dismissal of the Complaint on the same ground that the dispute
was not brought before the Barangay Council for conciliation before it was filed in court. In a Decision
dated 14 December 2000, the RTC stressed that the barangay conciliation process is a conditio sine qua
non for the filing of an ejectment complaint involving residents of the same barangay, and failure to
comply therewith constitutes sufficient cause for the dismissal of the action. The RTC likewise validated
the ruling of the MeTC that the main issue involved in Civil Case No. 17450 is incapable of pecuniary
estimation and cognizable by the RTC. Hence, the RTC ruled:

WHEREFORE, finding no reversible error in the appealed judgment, it is hereby

affirmed in its entirety.[13]

Aures Motion for Reconsideration was denied by the RTC in an Order[14] dated 27 February 2001.

Undaunted, Aure appealed the adverse RTC Decision with the Court of Appeals arguing that the
lower court erred in dismissing his Complaint for lack of cause of [Link] asserted that misjoinder of
parties was not a proper ground for dismissal of his Complaint and that the MeTC should have only
ordered the exclusion of Aure Lending as plaintiff without prejudice to the continuation of the
proceedings in Civil Case No. 17450 until the final determination thereof. Aure further asseverated that
mere allegation of ownership should not divest the MeTC of jurisdiction over the ejectment suit since
jurisdiction over the subject matter is conferred by law and should not depend on the defenses and
objections raised by the parties. Finally, Aure contended that the MeTC erred in dismissing his
Complaint with prejudice on the ground of non-compliance with barangay conciliation process. He was
not given the opportunity to rectify the procedural defect by going through the barangay mediation
proceedings and, thereafter, refile the Complaint.[15]
On 17 October 2001, the Court of Appeals rendered a Decision, reversing the MeTC and RTC
Decisions and remanding the case to the MeTC for further proceedings and final determination of the
substantive rights of the parties. The appellate court declared that the failure of Aure to subject the
matter to barangay conciliation is not a jurisdictional flaw and it will not affect the sufficiency of Aures
Complaint since Aquino failed to seasonably raise such issue in her Answer. The Court of Appeals further
ruled that mere allegation of ownership does not deprive the MeTC of jurisdiction over the ejectment
case for jurisdiction over the subject matter is conferred by law and is determined by the allegations
advanced by the plaintiff in his complaint. Hence, mere assertion of ownership by the defendant in an
ejectment case will not oust the MeTC of its summary jurisdiction over the same. The decretal part of
the Court of Appeals Decision reads:

WHEREFORE, premises considered, the petition is hereby GRANTED - and the

decisions of the trial courts below REVERSED and SET ASIDE. Let the records be
remanded back to the court a quo for further proceedings for an eventual decision of
the substantive rights of the disputants.[16]

In a Resolution dated 8 May 2002, the Court of Appeals denied the Motion for Reconsideration
interposed by Aquino for it was merely a rehash of the arguments set forth in her previous pleadings
which were already considered and passed upon by the appellate court in its assailed Decision.

Aquino is now before this Court via the Petition at bar raising the following issues:

I. WHETHER OR NOT NON-COMPLIANCE WITH THE BARANGAY CONCILIATION PROCEEDINGS IS

A JURISDICTIONAL DEFECT THAT WARRANTS THE DISMISSAL OF THE COMPLAINT.
II. WHETHER OR NOT ALLEGATION OF OWNERSHIP OUSTS THE MeTC OF ITS JURISDICTION OVER AN
EJECTMENT CASE.

The barangay justice system was established primarily as a means of easing up the congestion
of cases in the judicial courts. This could be accomplished through a proceeding before
the barangay courts which, according to the conceptor of the system, the late Chief Justice Fred Ruiz
Castro, is essentially arbitration in character, and to make it truly effective, it should also be compulsory.
With this primary objective of the barangay justice system in mind, it would be wholly in keeping with
the underlying philosophy of Presidential Decree No. 1508, otherwise known as the Katarungang
Pambarangay Law, and the policy behind it would be better served if an out-of-court settlement of the
case is reached voluntarily by the parties.[17]

The primordial objective of Presidential Decree No. 1508 is to reduce the number of court litigations and
prevent the deterioration of the quality of justice which has been brought by the indiscriminate filing of
cases in the courts.[18] To ensure this objective, Section 6 of Presidential Decree No. 1508[19] requires the
parties to undergo a conciliation process before the Lupon Chairman or the Pangkat ng
Tagapagkasundo as a precondition to filing a complaint in court subject to certain exceptions[20] which
are inapplicable to this case. The said section has been declared compulsory in nature.[21]

Presidential Decree No. 1508 is now incorporated in Republic Act No. 7160, otherwise known as
The Local Government Code, which took effect on 1 January 1992.

The pertinent provisions of the Local Government Code making conciliation a precondition to
filing of complaints in court, read:

SEC. 412. Conciliation.- (a) Pre-condition to filing of complaint in court. No

complaint, petition, action, or proceeding involving any matter within the authority of
the lupon shall be filed or instituted directly in court or any other government office for
adjudication, unless there has been a confrontation between the parties before the
lupon chairman or the pangkat, and that no conciliation or settlement has been reached
as certified by the lupon secretary or pangkat secretary as attested to by the lupon
chairman or pangkat chairman or unless the settlement has been repudiated by the
parties thereto.
(b) Where parties may go directly to court. The parties may go directly to court in the
following instances:

(1) Where the accused is under detention;

(2) Where a person has otherwise been deprived of personal liberty calling
for habeas corpus proceedings;

(3) Where actions are coupled with provisional remedies such as preliminary
injunction, attachment, delivery of personal property, and support pendente lite; and

(4) Where the action may otherwise be barred by the statute of limitations.
 (c) Conciliation among members of indigenous cultural communities. The customs and
traditions of indigenous cultural communities shall be applied in settling disputes
between members of the cultural communities.
SEC. 408. Subject Matter for Amicable Settlement; Exception Therein. The lupon
of each barangay shall have authority to bring together the parties actually residing in
the same city or municipality for amicable settlement of all disputes except:

(a) Where one party is the government or any subdivision or instrumentality

thereof;

(b) Where one party is a public officer or employee, and the dispute relates to
the performance of his official functions;

(c) Offenses punishable by imprisonment exceeding one (1) year or a fine

exceeding Five thousand pesos (P5,000.00);

(d) Offenses where there is no private offended party;

(e) Where the dispute involves real properties located in different cities or
municipalities unless the parties thereto agree to submit their differences to amicable
settlement by an appropriate lupon;

(f) Disputes involving parties who actually reside in barangays of different cities
or municipalities, except where such barangay units adjoin each other and the parties
thereto agree to submit their differences to amicable settlement by an appropriate
lupon;

(g) Such other classes of disputes which the President may determine in the
interest of justice or upon the recommendation of the Secretary of Justice.

There is no dispute herein that the present case was never referred to the Barangay Lupon for
conciliation before Aure and Aure Lending instituted Civil Case No. [Link] fact, no allegation of
such barangay conciliation proceedings was made in Aure and Aure Lendings Complaint before the
MeTC. The only issue to be resolved is whether non-recourse to the barangay conciliation process is a
jurisdictional flaw that warrants the dismissal of the ejectment suit filed with the MeTC.

Aquino posits that failure to resort to barangay conciliation makes the action for ejectment
premature and, hence, dismissible. She likewise avers that this objection was timely raised during the
pre-trial and even subsequently in her Position Paper submitted to the MeTC.
We do not agree.

It is true that the precise technical effect of failure to comply with the requirement of Section
412 of the Local Government Code on barangay conciliation (previously contained in Section 5 of
Presidential Decree No. 1508) is much the same effect produced by non-exhaustion of administrative
remedies -- the complaint becomes afflicted with the vice of pre-maturity; and the controversy there
alleged is not ripe for judicial determination. The complaint becomes vulnerable to a motion to
dismiss.[22] Nevertheless, the conciliation process is not a jurisdictional requirement, so that non-
compliance therewith cannot affect the jurisdiction which the court has otherwise acquired over the
subject matter or over the person of the defendant.[23]

As enunciated in the landmark case of Royales v. Intermediate Appellate Court[24]:

Ordinarily, non-compliance with the condition precedent prescribed by P.D.

1508 could affect the sufficiency of the plaintiff's cause of action and make his
complaint vulnerable to dismissal on ground of lack of cause of action or
prematurity; but the same would not prevent a court of competent jurisdiction from
exercising its power of adjudication over the case before it, where the defendants, as in
this case, failed to object to such exercise of jurisdiction in their answer and even during
the entire proceedings a quo.

While petitioners could have prevented the trial court from exercising
jurisdiction over the case by seasonably taking exception thereto, they instead invoked
the very same jurisdiction by filing an answer and seeking affirmative relief from it.
What is more, they participated in the trial of the case by cross-examining respondent
Planas. Upon this premise, petitioners cannot now be allowed belatedly to adopt an
inconsistent posture by attacking the jurisdiction of the court to which they had
submitted themselves voluntarily. x x x (Emphasis supplied.)

In the case at bar, we similarly find that Aquino cannot be allowed to attack the jurisdiction of the MeTC
over Civil Case No. 17450 after having submitted herself voluntarily thereto. We have scrupulously
examined Aquinos Answer before the MeTC in Civil Case No. 17450 and there is utter lack of any
objection on her part to any deficiency in the complaint which could oust the MeTC of its jurisdcition.

We thus quote with approval the disquisition of the Court of Appeals:

Moreover, the Court takes note that the defendant [Aquino] herself did not
raise in defense the aforesaid lack of conciliation proceedings in her answer, which
raises the exclusive affirmative defense of simulation. By this acquiescence, defendant
[Aquino] is deemed to have waived such objection. As held in a case of similar
circumstances, the failure of a defendant [Aquino] in an ejectment suit to specifically
allege the fact that there was no compliance with the barangay conciliation procedure
constitutes a waiver of that defense. x x x.[25]

By Aquinos failure to seasonably object to the deficiency in the Complaint, she is deemed to
have already acquiesced or waived any defect attendant thereto. Consequently, Aquino cannot
thereafter move for the dismissal of the ejectment suit for Aure and Aure Lendings failure to resort to
the barangay conciliation process, since she is already precluded from doing so. The fact that Aquino
raised such objection during the pre-trial and in her Position Paper is of no moment, for the issue of
non-recourse to barangaymediation proceedings should be impleaded in her Answer.

As provided under Section 1, Rule 9 of the 1997 Rules of Civil Procedure:

 Sec. 1. Defenses and objections not pleaded. Defenses and objections not pleaded either
in a motion to dismiss or in the answer are deemed waived. However, when it appears
from the pleadings or the evidence on record that the court has no jurisdiction over the
subject matter, that there is another action pending between the same parties for the
same cause, or that the action is barred by a prior judgment or by statute of limitations,
the court shall dismiss the claim. (Emphasis supplied.)

While the aforequoted provision applies to a pleading (specifically, an Answer) or a motion to dismiss, a
similar or identical rule is provided for all other motions in Section 8 of Rule 15 of the same Rule which
states:
Sec. 8. Omnibus Motion. - Subject to the provisions of Section 1 of Rule 9, a motion
attacking a pleading, order, judgment, or proceeding shall include all objections then
available, and all objections not so included shall be deemed waived.

The spirit that surrounds the foregoing statutory norm is to require the party filing a pleading or motion
to raise all available exceptions for relief during the single opportunity so that single or multiple
objections may be avoided.[26] It is clear and categorical in Section 1, Rule 9 of the Revised Rules of Court
that failure to raise defenses and objections in a motion to dismiss or in an answer is deemed a waiver
thereof; and basic is the rule in statutory construction that when the law is clear and free from any
doubt or ambiguity, there is no room for construction or interpretation.[27] As has been our consistent
ruling, where the law speaks in clear and categorical language, there is no occasion for interpretation;
there is only room for application.[28] Thus, although Aquinos defense of non-compliance with
Presidential Decree No. 1508 is meritorious, procedurally, such defense is no longer available for failure
to plead the same in the Answer as required by the omnibus motion rule.

Neither could the MeTC dismiss Civil Case No. 17450 motu proprio. The 1997 Rules of Civil Procedure
provide only three instances when the court may motu proprio dismiss the claim, and that is when the
pleadings or evidence on the record show that (1) the court has no jurisdiction over the subject matter;
(2) there is another cause of action pending between the same parties for the same cause; or (3) where
the action is barred by a prior judgment or by a statute of limitations. Thus, it is clear that a court may
not motu propriodismiss a case on the ground of failure to comply with the requirement
for barangay conciliation, this ground not being among those mentioned for the dismissal by the trial
court of a case on its own initiative.
Aquino further argues that the issue of possession in the instant case cannot be resolved by the MeTC
without first adjudicating the question of ownership, since the Deed of Sale vesting Aure with the legal
right over the subject property is simulated.

Again, we do not agree. Jurisdiction in ejectment cases is determined by the allegations pleaded
in the complaint. As long as these allegations demonstrate a cause of action either for forcible entry or
for unlawful detainer, the court acquires jurisdiction over the subject matter. This principle holds, even
if the facts proved during the trial do not support the cause of action thus alleged, in which instance the
court -- after acquiring jurisdiction -- may resolve to dismiss the action for insufficiency of evidence.

The necessary allegations in a Complaint for ejectment are set forth in Section 1, Rule 70 of the
Rules of Court, which reads:
 SECTION 1. Who may institute proceedings, and when. Subject to the provisions of the
next succeeding section, a person deprived of the possession of any land or building by
force, intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other
person against whom the possession of any land or building is unlawfully withheld after
the expiration or termination of the right to hold possession, by virtue of any contract,
express or implied, or the legal representatives or assigns of any such lessor, vendor,
vendee, or other person may at any time within one (1) year after such unlawful
deprivation or withholding of possession, bring an action in the proper Municipal Trial
Court against the person or persons unlawfully withholding or depriving of possession,
or any person or persons claiming under them, for the restitution of such possession,
together with damages and costs.
In the case at bar, the Complaint filed by Aure and Aure Lending on 2 April 1997, alleged as follows:
2. [Aure and Aure Lending] became the owners of a house and lot located at No.
37 Salazar Street corner Encarnacion Street, B.F. Homes, Quezon City by virtue of a deed
of absolute sale executed by [the spouses Aquino] in favor of [Aure and Aure Lending]
although registered in the name of x x x Ernesto S. Aure; title to the said property had
already been issued in the name of [Aure] as shown by a transfer Certificate of Title , a
copy of which is hereto attached and made an integral part hereof as Annex A;

3. However, despite the sale thus transferring ownership of the subject premises to
[Aure and Aure Lending] as above-stated and consequently terminating [Aquinos] right
of possession over the subject property, [Aquino] together with her family, is
continuously occupying the subject premises notwithstanding several demands made by
[Aure and Aure Lending] against [Aquino] and all persons claiming right under her to
vacate the subject premises and surrender possession thereof to [Aure and Aure
Lending] causing damage and prejudice to [Aure and Aure Lending] and making
[Aquinos] occupancy together with those actually occupying the subject premises
claiming right under her, illegal.[29]

It can be inferred from the foregoing that Aure, together with Aure Lending, sought the
possession of the subject property which was never surrendered by Aquino after the perfection of the
Deed of Sale, which gives rise to a cause of action for an ejectment suit cognizable by the MeTC. Aures
assertion of possession over the subject property is based on his ownership thereof as evidenced by TCT
No. 156802 bearing his name. That Aquino impugned the validity of Aures title over the subject property
and claimed that the Deed of Sale was simulated should not divest the MeTC of jurisdiction over the
ejectment case.[30]

As extensively discussed by the eminent jurist Florenz D. Regalado in Refugia v. Court of Appeals[31]:

As the law on forcible entry and unlawful detainer cases now stands, even where the
defendant raises the question of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of ownership, the
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts
nevertheless have the undoubted competence to resolve the issue of ownership albeit
only to determine the issue of possession.
 x x x. The law, as revised, now provides instead that when the question of possession
cannot be resolved without deciding the issue of ownership, the issue of ownership shall
be resolved only to determine the issue of possession. On its face, the new Rule on
Summary Procedure was extended to include within the jurisdiction of the inferior
courts ejectment cases which likewise involve the issue of ownership. This does not
mean, however, that blanket authority to adjudicate the issue of ownership in
ejectment suits has been thus conferred on the inferior courts.

At the outset, it must here be stressed that the resolution of this particular issue
concerns and applies only to forcible entry and unlawful detainer cases where the issue
of possession is intimately intertwined with the issue of ownership. It finds no proper
application where it is otherwise, that is, where ownership is not in issue, or where the
principal and main issue raised in the allegations of the complaint as well as the relief
prayed for make out not a case for ejectment but one for recovery of ownership.

Apropos thereto, this Court ruled in Hilario v. Court of Appeals[32]:

Thus, an adjudication made therein regarding the issue of ownership should be

regarded as merely provisional and, therefore, would not bar or prejudice an action
between the same parties involving title to the land. The foregoing doctrine is a
necessary consequence of the nature of forcible entry and unlawful detainer cases
where the only issue to be settled is the physical or material possession over the real
property, that is, possession de facto and not possession de jure.

In other words, inferior courts are now conditionally vested with adjudicatory power over the issue of
title or ownership raised by the parties in an ejectment suit. These courts shall resolve the question of
ownership raised as an incident in an ejectment case where a determination thereof is necessary for a
proper and complete adjudication of the issue of possession.[33]

WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals Decision
dated 17 October 2001 and its Resolution dated 8 May 2002 in CA-G.R. SP No. 63733 are
hereby AFFIRMED. Costs against the petitioner. SO ORDERED.
G.R. No. 163280 February 2, 2010
DORIS U. SUNBANUN, Petitioner, vs. AURORA B. GO, Respondent.

The Case

This petition for review on certiorari[1] assails the 30 September 2003 Decision[2] and the 18 March 2004
Resolution[3] of the Court of Appeals in CA-G.R. CV No. 67836.

The Facts

Petitioner Doris U. Sunbanun is the owner of a residential house located at No. 68-F Junquera Street,
Cebu City. On 7 July 1995, respondent Aurora B. Go leased the entire ground floor of petitioners
residential house for one year which was to expire on 7 July 1996. As required under the lease contract,
respondent paid a deposit of P16,000 to answer for damages and unpaid rent. To earn extra income,
respondent accepted lodgers, mostly her relatives, from whom she received a monthly income
of P15,000. Respondent paid the monthly rental until March 1996 when petitioner drove away
respondents lodgers by telling them that they could stay on the rented premises only until 15 April 1996
since she was terminating the lease. The lodgers left the rented premises by 15 April 1996, and
petitioner then padlocked the rooms vacated by respondents lodgers.

On 10 May 1996, respondent filed an action for damages against petitioner. Respondent alleged that
she lost her income from her lodgers for the months of April, May, and June 1996 totaling P45,000.
Respondent, who worked in Hongkong, also incurred expenses for plane fares and other travel expenses
in coming to the Philippines and returning to Hongkong.

On the other hand, petitioner argued that respondent violated the lease contract when she subleased
the rented premises. Besides, the lease contract was not renewed after its expiration on 7 July 1996;
thus, respondent had no more right to stay in the rented premises. Petitioner also moved to dismiss the
complaint in the trial court for failure to comply with prior barangay conciliation.

During the pre-trial, petitioner moved for the case to be submitted for judgment on the pleadings
considering that the only disagreement between the parties was the correct interpretation of the lease
contract. Respondent did not object to petitioners motion. The trial court then directed the parties to
submit their respective memoranda, after which the case would be considered submitted for decision.[4]

In its decision dated 28 March 2000, the trial court held that the case is not covered by the barangay
conciliation process since respondent is a resident of Hongkong. The trial court noted that petitioner did
not controvert respondents allegation that petitioner ejected respondents lodgers sometime in March
1996 even if the contract of lease would expire only on 7 July 1996. The trial court found untenable
petitioners contention that subleasing the rented premises violated the lease contract. The trial court
held that respondents act of accepting lodgers was in accordance with the lease contract which allows
the lessee to use the premises as a dwelling or as lodging house. Thus, the trial court ordered petitioner
to pay respondent actual damages of P45,000 for respondents lost income from her lodgers for the
months of April, May, and June 1996, and attorneys fees of P8,000.

Both parties appealed before the Court of Appeals. On 30 September 2003, the Court of Appeals
rendered its decision in favor of respondent and modified the trial courts decision. Aside from actual
damages and attorneys fees, the Court of Appeals also ordered petitioner to pay moral and exemplary
damages and the cost of the suit. The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, premises considered, the assailed Decision of the trial court is hereby
MODIFIED by ordering defendant-appellant [Doris U. Sunbanun] to pay plaintiff-
appellant [Aurora B. Go] the following amounts:

1. P45,000.00 as compensation for actual damages;

2. P50,000.00 as moral damages;
3. P50,000.00 as exemplary damages;
4. P8,000.00 as Attorneys Fees;
5. Cost of the suit.

SO ORDERED.[5]

The Court of Appeals Ruling

The Court of Appeals held that petitioners act of forcibly ejecting respondents lodgers three months
prior to the termination of the lease contract without valid reason constitutes breach of contract.
Petitioner also violated Article 1654 of the Civil Code which states that the lessor is obliged to maintain
the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contract. The
Court of Appeals awarded P50,000 as moral damages to respondent for breach of contract and for
petitioners act of pre-terminating the lease contract without valid reason, which shows bad faith on the
part of petitioner. The Court of Appeals also awarded respondent P50,000 as exemplary damages for
petitioners oppressive act.

The Issues

Petitioner raises the following issues:

I. THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF ACTUAL DAMAGES BY

THE TRIAL COURT.

II. THE COURT OF APPEALS ERRED IN MODIFYING THE JUDGMENT OF THE TRIAL COURT
AND AWARDING MORAL AND EXEMPLARY DAMAGES AND COSTS OF SUIT IN
FAVOR OF RESPONDENT.

III. THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF ATTORNEYS FEES IN
FAVOR OF RESPONDENT.[6]

The Ruling of the Court

We find the petition without merit.

In this case, the trial court rendered a judgment on the pleadings. Section 1, Rule 34 of the Rules of
Court reads:
 SECTION 1. Judgment on the pleadings. Where an answer fails to tender an issue, or
otherwise admits the material allegations of the adverse partys pleading, the court may,
on motion of that party, direct judgment on such pleading. However, in actions for
declaration of nullity or annulment of marriage or for legal separation, the material facts
alleged in the complaint shall always be proved.

The trial court has the discretion to grant a motion for judgment on the pleadings filed by a party if
there is no controverted matter in the case after the answer is filed.[7] A judgment on the pleadings is a
judgment on the facts as pleaded,[8] and is based exclusively upon the allegations appearing in the
pleadings of the parties and the accompanying annexes.

This case is unusual because it was petitioner, and not the claimant respondent, who moved for a
judgment on the pleadings during the pre-trial. This is clear from the trial courts Order[9] dated 7
October 1997 which reads:
ORDER

When this case was called for pre-trial, parties appeared together with
counsel. Defendant [Doris U. Sunbanun] moved that considering that there is no dispute
as far as the contract is concerned and the only disagreement between the parties is on
the interpretation of the contract so that the issue boils down on to which of the parties
are correct on their interpretation. With the conformity of the plaintiff [Aurora B. Go],
this case is therefore considered closed and submitted for judgment on the pleadings. x
x x (Emphasis supplied)

Petitioner, in moving for a judgment on the pleadings without offering proof as to the truth of her own
allegations and without giving respondent the opportunity to introduce evidence, is deemed to have
admitted the material and relevant averments of the complaint, and to rest her motion for judgment
based on the pleadings of the parties.[10] As held in Tropical Homes, Inc. v. CA:[11]

As to the amount of damages awarded as a consequence of this violation of plaintiffs

rights, the lower court based its award from the allegations and prayer contained in the
complaint. The defendant, however, questions this award for the reason that, according
to the defendant, the plaintiff, in moving for judgment on the pleadings, did not offer
proof as to the truth of his own allegations with respect to the damages claimed by him,
and gave no opportunity for the appellant to introduce evidence to refute his claims.
We find this objection without merit. It appears that when the plaintiff moved to have
the case decided on the pleadings, the defendant interposed no objection and has
practically assented thereto. The defendant, therefore, is deemed to have admitted the
allegations of fact of the complaint, so that there was no necessity for plaintiff to submit
evidence of his claim.
In this case, it is undisputed that petitioner ejected respondents lodgers three months before the
expiration of the lease contract on 7 July 1996. Petitioner maintains that she had the right to terminate
the contract prior to its expiration because respondent allegedly violated the terms of the lease contract
by subleasing the rented premises. Petitioners assertion is belied by the provision in the lease
contract[12] which states that the lessee can use the premises as a dwelling or as lodging house.
Furthermore the lease contract clearly provides that petitioner leased to respondent the ground floor of
her residential house for a term of one year commencing from 7 July 1995. Thus, the lease contract
would expire only on 7 July 1996. However, petitioner started ejecting respondents lodgers in March
1996 by informing them that the lease contract was only until 15 April 1996. Clearly, petitioners act of
ejecting respondents lodgers resulted in respondent losing income from her lodgers. Hence, it was
proper for the trial court and the appellate court to order petitioner to pay respondent actual damages
in the amount of P45,000.

We likewise sustain the award of moral damages in favor of respondent. In this case, moral damages
may be recovered under Article 2219 and Article 2220 of the Civil Code in relation to Article 21. The
pertinent provisions read:

Art. 2219. Moral damages may be recovered in the following and analogous cases:
xxx
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
Art. 2220. Wilfull injury to property may be a legal ground for awarding moral damages
if the court should find that, under the circumstances, such damages are justly due. The
same rule applies to breaches of contract where the defendant acted fraudulently or in
bad faith. (Emphasis supplied)

Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for the damage.

We agree with the appellate court that petitioners act of ejecting respondents lodgers three months
before the lease contract expired without valid reason constitutes bad faith. What aggravates the
situation was that petitioner did not inform respondent, who was then working in Hongkong, about
petitioners plan to pre-terminate the lease contract and evict respondents lodgers. Moral damages may
be awarded when the breach of contract was attended with bad faith.[13]

Furthermore, we affirm the award of exemplary damages and attorneys fees. Exemplary damages may
be awarded when a wrongful act is accompanied by bad faith or when the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner which would justify an award of exemplary
damages under Article 2232[14] of the Civil Code.[15] Since the award of exemplary damages is proper in
this case, attorneys fees and cost of the suit may also be recovered as provided under Article 2208[16] of
the Civil Code.[17]
WHEREFORE, the Court DENIES the petition. The Court AFFIRMS the 30 September 2003 Decision and
the 18 March 2004 Resolution of the Court of Appeals in CA-G.R. CV No. 67836. SO ORDERED.
G.R. No. 191336 January 25, 2012
CRISANTA ALCARAZ MIGUEL, Petitioner, vs. JERRY D. MONTANEZ, Respondent.
DECISION

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
Decision[1] and February 11, 2010 Resolution[2] 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 respondents 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 attorneys 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 judgment is entered dismissing
respondents 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. Contrary to petitioners 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 theKasunduang 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 respondents 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.

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 theRevised 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 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.[25] Thus, 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
respondents 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.
G.R. No. 156228. December 10, 2003

MA. TERESA VIDAL, LULU MARQUEZ, and CARLOS SOBREMONTE, petitioners, vs. MA. TERESA O.
ESCUETA, represented by HERMAN O. ESCUETA, respondent.

This is a petition for review of the Decision[1] dated July 23, 2002 of the Court of Appeals in CA-G.R.
SP NO. 68895 which affirmed the decision[2] of the Regional Trial Court (RTC)
ofMandaluyong City, Branch 208, which reversed and set aside the decision[3] of the Metropolitan Trial
Court of Mandaluyong City (MTC), Branch 60; and granted the motion for execution filed by private
respondent Ma. Teresa O. Escueta in Civil Case No. 17520.

The petition at bar stemmed from the following antecedents:

When Abelardo Escueta died intestate on December 3, 1994, he was survived by his widow
Remedios Escueta and their six children, including Ma. Teresa O. Escueta and her brother Herman O.
Escueta. Part of his estate was a parcel of land located at No. 14 Sierra Madre corner Kanlaon Streets,
Barangay Highway Hills, Mandaluyong City, covered by Transfer Certificate of Title (TCT) No. (77083) -
27568, and the house thereon. The property was leased to Rainier Llanera, who sublet the same to 25
persons. The heirs executed an extra-judicial settlement of estate over the property. They also executed
a special power of attorney authorizing Ma. Teresa Escueta to sell the said property.[4]

Sometime in 1999, Ma. Teresa Escueta, as a co-owner of the property, filed an ejectment case
against Llanera and the sub-lessees before the Lupon of Barangay Highway Hills, docketed as Barangay
Case No. 99-09.[5]

In the meantime, on April 15, 1999, the heirs of Abelardo Escueta executed a deed of conditional
[6]
sale over the property including the house thereon, to Mary Liza Santos forP13,300,000.00 payable as
follows:

Down payment ONE MILLION FIVE HUNDRED THOUSAND (P1,500,000.00) which the HEIRS-SELLERS
acknowledged receipt thereof with complete and full satisfaction;

Second payment - TEN MILLION EIGHT HUNDRED THOUSAND (P10,800,000.00) after publication of the
Extra-Judicial Settlement of the Estate of the late Abelardo Escueta and payment of the taxes with the
Bureau of Internal Revenue by the Attorney-in-Fact; and

The balance of ONE MILLION (P1,000,000.00) upon vacation of all the occupants of the subject property
within SIX (6) months from date hereof.[7]

The parties further agreed that:

Ms. Maria Teresa Escueta shall deliver unto the BUYER the Owners Duplicate Copy of the title upon
receipt of the down payment while the original copies of the Special Power of Attorney shall be
delivered upon payment of the Second Payment stated above.

The ATTORNEY-IN-FACT-SELLER shall be responsible for the ejectment of all the tenants in the said
subject property.
The ATTORNEY-IN-FACT-SELLER shall pay the estate tax, capital gains tax and documentary stamp tax
including the telephone, water and Meralco bills and the publication for the Extra-Judicial Settlement of
the estate of the late ABELARDO ESCUETA while the registration and transfer fees shall be shouldered by
the BUYER.[8]

On May 5, 1999, Escueta and Llanera, and the sub-lessees, executed an Amicable
Settlement,[9] where they agreed that (a) the owners of the property would no longer collect the rentals
due from the respondents therein (lessee and sub-lessees) starting May 1999, with the concomitant
obligation of the respondents to vacate the property on or before December 1999; (b) time was the
essence of the agreement, and that consequently, if the lessee and sub-lessees fail or refuse to vacate
the property on or before December 1999, the barangay chairman was authorized without any court
order to cause the eviction and removal of all the respondents on the property.[10] The amicable
settlement was attested by Pangkat Chairman Jose Acong. The parties did not repudiate the amicable
settlement within ten days from the execution thereof. Neither did any of the parties file any petition to
repudiate the settlement.

The vendees having paid the down payment and second installment of the price of the property,
the vendors caused the cancellation on December 17, 1999, of TCT No. 27568 and the issuance of TCT
No. 15324 to and under the names of the vendees Mary Liza Santos, Susana Lim and Johnny
Lim.[11] However, Escueta and the other vendors had yet to receive the balance of the purchase price
of P1,000,000.00 because the respondents were still in the property.

Llanera vacated the leased premises. Later, twenty of the sub-lessees also vacated the property. By
January 2000, five sub-lessees, namely, Ma. Teresa Vidal, Lulu Marquez, Marcelo Trinidad, Carlos
Sobremonte,[12] and Jingkee Ang remained in the property, and requested Escueta for extensions to
vacate the property. Escueta agreed, but despite the lapse of the extensions granted them, the five sub-
lessees refused to vacate the property.

Escueta opted not to have the sub-lessees evicted through the Punong Barangay as provided for in
the amicable settlement. Neither did she file a motion with the Punong Barangay for the enforcement
of the settlement. Instead, she filed on May 12, 2000, a verified Motion for Execution against the
recalcitrant sub-lessees with the MTC for the enforcement of the amicable settlement and the issuance
of a writ of execution. The pleading was docketed as Civil Case No. 17520, with Teresa Escueta as
plaintiff, and the sub-lessees as defendants.[13]

The defendants opposed the motion[14] alleging that they were enveigled into executing the
amicable settlement despite the fact that they had not violated any of the terms and conditions of the
verbal lease of the property; they were coerced and forced to enter into such amicable settlement as it
was the only way of prolonging their stay in the leased premises; and that they had been paying
faithfully and religiously the monthly rentals in advance.

They also contended that the plaintiff came to court with unclean hands, as the property had been
sold by the co-owners thereof on June 8, 1999, without notifying them. The real parties-in-interest as
plaintiffs, would be the new owners of the property, and not the Escuetas. The defendants further
asserted that the amicable settlement was not elevated to or approved by the MTC as required by
Section 419 of the Local Government Code (LGC), nor approved by a competent court; hence, there was
no judgment to enforce by a new motion for a writ of execution. As such, the plaintiffs motion was
premature and procedurally improper. The defendants asserted that the plaintiff must first secure a
certification to file action from the barangay and thereafter, file an action for ejectment against them as
required by Section 417 of the LGC. The amicable settlement of the parties before the Lupon cannot be
a substitute for an action for ejectment. Finally, they averred that they had been sub-lessees for more
than ten years already; hence, had the right of first refusal under Section 6 of the Urban Land Reform
Law (P.D. No. 1517). For her part, the plaintiff asserted that there having been no execution of the
amicable settlement on or before November 6, 1999 by the Lupon, the settlement may now be enforced
by action in the proper city or municipal court.

On February 22, 2001, the court issued an Order[15] denying the Motion for Execution. The court
held that the plaintiff was not the real party-in-interest as the subject property had already been sold
and titled to Susana Lim, Johnny Lim and Mary Liza Santos. Only the vendees had the right to demand
the ejectment of the defendants from the said property. The court further ruled that the defendants
had the right of first refusal to purchase the property under Presidential Decree No. 1517. The MTC,
however, did not rule on the issue of whether or not the plaintiffs motion for execution was premature.

Aggrieved, the plaintiff, now the appellant, appealed the order to the RTC where she contended
that:

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN FINDING AND IN
CONCLUDING THAT PLAINTIFF IS NO LONGER THE REAL PARTY-IN-INTEREST.

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN FINDING AND IN
CONCLUDING THAT DEFENDANTS CANNOT BE EJECTED AND CAN EXERCISE THE RIGHT OF FIRST
REFUSAL.

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN NOT FINDING AND IN NOT
MAKING THE CONCLUSION THAT DEFENDANTS HAVE VIOLATED THE FINAL AND EXECUTORY THE
WRITTEN AMICABLE SETTLEMENT BETWEEN PARTIES EXECUTED IN THEIR BARANGAY CONFRONTATION.

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN NOT ORDERING THE
EJECTMENT OF THE DEFENDANTS AND IN NOT ORDERING SAID DEFENDANTS TO PAY
THEIR ARREARAGES IN RENTAL PAYMENTS FROM MAY 1999 UP TO THE DAY THEY ACTUALLY LEAVE THE
PREMISES AS WELL AS ATTORNEYS FEES AND DAMAGES.[16]

On August 31, 2001, the RTC rendered a decision holding that the plaintiff-appellant was still the
owner of the property when the ejectment case was filed in the office of the barangay captain, and, as
such, was the real party-in-interest as the plaintiff in the MTC. Moreover, under the deed of conditional
sale between her and the buyers, it was stipulated therein that the purchase price of P1,000,000.00
would be delivered to the vendors only upon the vacation of all the occupants of the subject property
within six (6) months from date hereof. She was duty-bound to cause the eviction of the defendant from
the property; hence, the appellant, as a co-owner, had a substantial interest in the property. The MTC
further held that the sale, having been executed while the appellants complaint was pending with
the Lupon, the action in the MTC may be continued by the plaintiff-appellant.

As to the right of first refusal being asserted by the appellees, the court ruled that there was no
showing that the land leased had been proclaimed to be within a specific Urban Land Reform Zone. In
fact, the Housing and Land Use Regulatory Board had certified that the subject property was outside the
area for priority development; thus, the appellees may not claim that they had been deprived of their
preemptive right when no such right existed in the first place. The court did not rule on the third and
fourth issues on the ground that the said issues were never raised by the parties. The decretal portion of
the RTC decision reads as follows:

PREMISES CONSIDERED, the appeal is GRANTED. The Order dated February 2, 2001 issued by
the Metropolitan Trial Court of Mandaluyong City, Branch 60, in Civil Case No. 17520 is hereby
REVERSED and SET ASIDE, and a new one is entered granting the Motion for Execution.

Let the Record of this case be remanded to the court a quo for proper disposition.

SO ORDERED.[17]

A petition for review under Rule 42 was filed with the Court of Appeals by three of the appellees,
now petitioners Ma. Teresa Vidal, Lulu Marquez and Carlos Sobremonte. The court, however, dismissed
the petition on (1) procedural grounds, and (2) for lack of merit. [18]

On procedural grounds, the CA ruled that the petitioners failed to indicate the specific material
dates, showing that their petition was filed on time as required by the rules, and in declaring that they
failed to justify their failure to do so.

On the merits of the petition, the appellate court upheld the ruling of the RTC. The decretal portion
of the decision of the CA reads:

WHEREFORE, the instant petition is hereby DISMISSED. The assailed Decision of

the Regional Trial Court of Mandaluyong City, Branch 208, rendered in Civil Case No. MC01-333-A,
dated August 31, 2001 is hereby AFFIRMED.

SO ORDERED.[19]

In their petition at bar, the petitioners assert that the CA erred as follows: (1) in not applying the
rules of procedure liberally; (2) in declaring that there was no need for the respondents to file an
ejectment case for the eviction of the petitioners; (3) that the real parties-in-interest as plaintiffs in the
MTC were the new owners of the property, Susana Lim, Johnny Lim and Mary Liza Santos; (4) in not
finding that the Amicable Settlement was obtained through deceit and fraud; and (5) in ruling that the
petitioners had no right of first refusal in the purchase and sale of the subject property under
Presidential Decree No. 1517.

The petition is bereft of merit.

On the procedural issue, the CA dismissed the petition before it for the petitioners failure to comply
with Section 2, par. 1, Rule 42 of the 1997 Rules of Civil Procedure.[20] The CA ratiocinated that there was
no justification for a relaxation of the Rules, thus:

Petitioners cited decisions of the Supreme Court where a relaxation of procedural rules was allowed.
However, a reading of those cases shows that they are not exactly similar with the present case. In the
case of Mactan Cebu International Airport Authority vs. Francisco Cuizon Mangubat, the Supreme Court
allowed the late payment of docket fee by the Solicitor General on the ground that the 1997 Rules of
Civil Procedure regarding payment of docket fees was still new at that time. The same cannot be said in
the present case. The petition was filed on February 28, 2002, almost five years from the issuance of the
1997 Rules of Civil Procedure. The circumstances of typhoon and holiday for failure to obtain a
certified true copy of the DOJs Decision, in the case of Hagonoy Market Vendor Association
vs. Municipalityof Hagonoy, Bulacan, were present in the instant petition. The case of Salazar vs. Court
of Appeals is also not similar with the present case.[21]

The petitioners aver in this case that the failure of their counsel to include the material dates in
their petition with the CA was, as stated in their Amended Manifestation, because the said counsel was
suffering from a slight heart attack. The Court finds the petitioners pretext flimsy. If the petitioners
counsel was able to prepare their petition despite her condition, there was no valid reason why she
failed to include the material dates required under the Rules of Court. Besides, the petitioners stated in
their petition that they had appended a copy of their Amended Manifestation, but failed to do so. If the
rules were to be applied strictly, the CA could not be faulted for dismissing the petition.

However, in order to promote their objective of securing a just, speedy and inexpensive
dispensation of every action and proceedings, the Rules are to be liberally construed.[22] Rules of
procedure are intended to promote, not to defeat substantial justice and, therefore, should not be
applied in a very rigid and technical sense. This Court ruled in Buenaflor vs. Court of Appeals, et
al.[23] that appeal is an essential part of our judicial system and trial courts and the Court of Appeals are
advised to proceed with caution so as not to deprive a party of the right to appeal and that every party
litigant should be afforded the amplest opportunity for the proper and just disposition of his cause, free
from the constraints of technicalities. The Court has given due course to petitions where to do so would
serve the demands of substantial justice and in the exercise of its equity jurisdiction.[24] In this case, the
Court opts to apply the rules liberally to enable it to delve into and resolve the cogent substantial issues
posed by the petitioners.

We agree with the contention of the petitioners that under Section 416 of the LGC, the amicable
settlement executed by the parties before the Lupon on the arbitration award has the force and effect
of a final judgment of a court upon the expiration of ten (10) days from the date thereof, unless the
settlement is repudiated within the period therefor, where the consent is vitiated by force, violence or
intimidation, or a petition to nullify the award is filed before the proper city or municipal court.[25] The
repudiation of the settlement shall be sufficient basis for the issuance of a certification to file a
complaint.[26]

We also agree that the Secretary of the Lupon is mandated to transmit the settlement to the
appropriate city or municipal court within the time frame under Section 418 of the LGC and to furnish
the parties and the Lupon Chairman with copies thereof.[27] The amicable settlement which is not
repudiated within the period therefor may be enforced by execution by the Luponthrough the Punong
Barangay within a time line of six months, and if the settlement is not so enforced by the Lupon after
the lapse of the said period, it may be enforced only by an action in the proper city or municipal court as
provided for in Section 417 of the LGC of 1991, as amended, which reads:

SEC. 417. Execution. The amicable settlement or arbitration award may be enforced by execution by the
Lupon within six (6) months from the date of the settlement. After the lapse of such time, the
settlement may be enforced by action in the proper city or municipal court. (Underlining supplied).
 Section 417 of the Local Government Code provides a mechanism for the enforcement of a
settlement of the parties before the Lupon. It provides for a two-tiered mode of enforcement of an
amicable settlement executed by the parties before the Lupon, namely, (a) by execution of the Punong
Barangay which is quasi-judicial and summary in nature on mere motion of the party/parties entitled
thereto;[28] and (b) by an action in regular form, which remedy is judicial. Under the first remedy, the
proceedings are covered by the LGC 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.

Section 417 of the LGC grants a party a period of six months to enforce the amicable settlement by
the Lupon through the Punong Barangay before such party may resort to filing an action with the MTC
to enforce the settlement. The raison d etre of the law is to afford the parties during the six-month time
line, a simple, speedy and less expensive enforcement of their settlement before the Lupon.

The time line of six months is for the benefit not only of the complainant, but also of the
respondent. Going by the plain words of Section 417 of the LGC, the time line of six months should be
computed from the date of settlement. However, if applied to a particular case because of its peculiar
circumstance, the computation of the time line from the date of the settlement may be arbitrary and
unjust and contrary to the intent of the law. To illustrate: Under an amicable settlement made by the
parties before the Lupon dated January 15, 2003, the respondents were obliged to vacate the subject
property on or before September 15, 2003. If the time line of six months under Section 417 were to be
strictly and literally followed, the complainant may enforce the settlement through the Lupon only up
to July 15, 2003. But under the settlement, the respondent was not obliged to vacate the property on or
before July 15, 2003; hence, the settlement cannot as yet be enforced. The settlement could be
enforced only after September 15, 2003, when the respondent was obliged to vacate the property. By
then, the six months under Section 417 shall have already elapsed. The complainant can no longer
enforce the settlement through the Lupon, but had to enforce the same through an action in the MTC, in
derogation of the objective of Section 417 of the LGC. The law should be construed and applied in such a
way as to reflect the will of the legislature and attain its objective, and not to cause an injustice. As
Justice Oliver Wendell Holmes aptly said, courts are apt to err by sticking too closely to the words of the
law where these words support a policy that goes beyond them. The Court should not defer to the latter
that killeth but to the spirit that vivifieth.[29]

In light of the foregoing considerations, the time line in Section 417 should be construed to mean
that if the obligation in the settlement to be enforced is due and demandable on the date of the
settlement, the six-month period should be counted from the date of the settlement; otherwise, if the
obligation to be enforced is due and demandable on a date other than the date of the settlement, the
six-month period should be counted from the date the obligation becomes due and demandable.

Parenthetically, the Katarungang Pambarangay Implementing Rules and Regulations, Rule VII,
Section 2 provides:

SECTION 2. Modes of Execution. - The amicable settlement or arbitration award may be enforced by
execution by the Lupon within six [6] months from date of the settlement or date of receipt of the award
or from the date the obligation stipulated in the settlement or adjudged in the arbitration award
becomes due and demandable. After the lapse of such time, the settlement or award may be enforced
by the appropriate local trial court pursuant to the applicable provisions of the Rules of Court . An
amicable settlement reached in a case referred by the Court having jurisdiction over the case to
the Lupon shall be enforced by execution by the said court. (Underlining supplied).

By express provision of Section 417 of the LGC, an action for the enforcement of the settlement
should be instituted in the proper municipal or city court. This is regardless of the nature of the
complaint before the Lupon, and the relief prayed for therein. The venue for such actions is governed by
Rule 4, Section 1 of the 1997 Rules of Civil Procedure, as amended. An action for the enforcement of a
settlement is not one of those covered by the Rules on Summary Procedure in civil cases;[30] hence, the
rules on regular procedure shall apply, as provided for in Section 1, Rule 5 of the Rules of Civil Procedure,
as amended.[31]

As to the requisite legal fees for the filing of an action in the first level court under Section 417 of
the Local Government Code, indigents-litigants (a) whose gross income and that of their immediate
family do not exceed ten thousand (P10,000.00) pesos a month if residing in Metro Manila, and five
thousand (P5,000.00) pesos a month if residing outside Metro Manila, and (b) who do not own real
property with an assessed value of more than fifty thousand (P50,000.00) pesos shall be exempt from
the payment of legal fees. Section 18, Rule 141 of the Revised Rules of Court, as amended by A.M. No.
00-2-01-SC, is hereby further amended accordingly.

In this case, the parties executed their Amicable Settlement on May 5, 1999. However, the
petitioners were obliged to vacate the property only in January 2000, or seven months after the date of
the settlement; hence, the respondent may enforce the settlement through the Punong
Barangay within six months from January 2000 or until June 2000, when the obligation of the
petitioners to vacate the property became due. The respondent was precluded from enforcing the
settlement via an action with the MTC before June 2000. However, the respondent filed on May 12,
2000 a motion for execution with the MTC and not with the Punong Barangay. Clearly, the respondent
adopted the wrong remedy. Although the MTC denied the respondents motion for a writ of execution, it
was for a reason other than the impropriety of the remedy resorted to by the respondent. The RTC
erred in granting the respondents motion for a writ of execution, and the CA erred in denying the
petitioners petition for review.

Normally, the Court would remand the case to the Punong Barangay for further
proceedings. However, the Court may resolve the issues posed by the petitioners, based on the
pleadings of the parties to serve the ends of justice. It is an accepted rule of procedure for the Court to
strive to settle the existing controversy in a single proceeding, leaving no root or branch to bear the
seeds of future litigation.[32]

In this case, there is no question that the petitioners were obliged under the settlement to vacate
the premises in January 2000. They refused, despite the extensions granted by the respondent, to allow
their stay in the property. For the court to remand the case to the Lupon and require the respondent to
refile her motion for execution with the Lupon would be an idle ceremony. It would only unduly prolong
the petitioners unlawful retention of the premises.[33]

The RTC and the CA correctly ruled that the respondent is the real party-in-interest to enforce amicable
settlement. Rule 3, Section 2 of the Rules of Court, as amended, reads:
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.

The party-in-interest applies not only to the plaintiff but also to the defendant. Interest within the
meaning of the rules means material interest, an interest in issue and to be affected by the decree as
distinguished from mere interest in the question involved, or a mere incidental interest.[34] A real party
in interest is one who has a legal right.[35] Since a contract may be violated only by the parties thereto as
against each other, in an action upon that contract, the real parties-in-interest, either as plaintiff or as
defendant, must be parties to the said contract.[36] The action must be brought by the person who, by
substantive law, possesses the right sought to be enforced.[37] In this case, the respondent was the party
in the amicable [Link] is the real party-in-interest to enforce the terms of the settlement
because unless the petitioners vacate the property, the respondent and the other vendors should not be
paid the balance of P1,000,000.00 of the purchase price of the property under the Deed of Conditional
Sale.

The petitioners are estopped from assailing the amicable settlement on the ground of deceit and
fraud. First. The petitioners failed to repudiate the settlement within the period [Link]. The
petitioners were benefited by the amicable settlement. They were allowed to remain in the
property without any rentals therefor until December 1998. They were even granted extensions to
continue in possession of the property. It was only when the respondent filed the motion for execution
that the petitioners alleged for the first time that the respondents deceived them into executing the
amicable settlement.[38]

On the petitioners claim that they were entitled to the right of first refusal under P.D. No. 1517, we
agree with the disquisition of the trial court, as quoted by the Court of Appeals:

We likewise find no reversible error on the part of [the] RTC in rejecting that the petitioners have a right
of first refusal in the purchase and sale of the subject property. As ratiocinated by the court:

xxx. Presidential Decree No. 1517 (The Urban Land Reform Law) does not apply where there is no
showing that the land leased has been proclaimed to be within a specific Urban Land Reform Zone. In
the instant case, the annex attached to the Proclamation 1967 creating the areas declared as priority
development and urban land reform zone ... does not indicate that the barangay where the subject
property is located is included therein. This is bolstered by the certification issued by the Housing and
Land Regulatory Board to the effect that the location of the property is outside the area of Priority
Development. It is therefore a reversible error for the lower court to conclude that defendants-
appellees were deprived of their preemptive right when no right exists in the first place.

Indeed, before a preemptive right under PD 1517 can be exercised, the disputed land should be situated
in an area declared to be both an APD (Areas for Priority Development) and a ULRZ (Urban Land Reform
Zones). Records show, and as not disputed by the petitioners, the disputed property is not covered by
the aforementioned areas and zones.[39]

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The petitioners and all those acting for
and in their behalf are directed to vacate, at their own expense, the property covered by Transfer
Certificate of Title No. 15324 of the Register of Deeds of Muntinlupa City and deliver possession of the
property to the vendees Mary Liza Santos, Susana Lim and Johnny Lim. This is without prejudice to the
right of the vendees to recover from the petitioners reasonable compensation for their possession of
the property from January 2000 until such time that they vacate the property. Costs against the
petitioners. SO ORDERED.