KOREA EXCHANGE BANK, petitioner, vs. HON. ROGELIO C.

GONZALES, in his capacity as Presiding Judge of Branch 50 of

the Regional Trial Court of Pampanga, PHI-HAN DEVELOPMENT, INC., LOURDES DE MESA MENDOZA, MENELEO
MENDOZA, ANTUSA DE MESA MAGNO, FRANCISCO MAGNO, TEODORO DE MESA, FIRMO DE MESA and
MERCEDES DE MESA, respondents.
DECISION
CALLEJO, SR., J.:
For review in these consolidated petitions is the Joint Decision [1] of the Court of Appeals (CA) in CA-G.R. SP Nos. 46194 and
46436, as well as its Order[2] dated February 28, 2000 denying the motion for reconsideration thereof.
The Antecedents
The Phi-Han Development, Inc. (PHDI) is a domestic corporation organized primarily for the purpose of engaging in the real
estate business.[3] Teodoro de Mesa and his siblings, namely, Antusa de Mesa Magno and Lourdes de Mesa Mendoza, were among its
original incorporators and members of its board of directors. Jae Il Aum, a Korean national, was the president of the corporation, while
Lourdes Mendoza served as its corporate secretary and treasurer.[4]
On September 5, 1996, or barely a year after its operations began, the PHDI, together with Teodoro de Mesa, Antusa Magno and
Lourdes Mendoza, filed a complaint in the Regional Trial Court (RTC) of Guagua, Pampanga, against Jae Il Aum and the Korea
Exchange Bank (KEB), a foreign banking corporation licensed to do business in the Philippines.
The plaintiffs alleged therein that through the machination of Jae Il Aum, KEB granted a loan to the PHDI in the amount of
US$500,000.00, with the condition that the said loan be deposited with the KEB in the name of PHDI. Thereafter, the plaintiffs executed
a real estate mortgage over their properties located in Lubao, Pampanga. As security for the said loan, PHDI deposited the said amount
under its name with the KEB in two accounts, namely, Dollar Account No. 5311000486 and Peso Account No. 5311000487. Per
Resolution No. 12-10-95 of the PHDI Board of Directors, the only authorized signatories to all applications for withdrawals from the said
accounts were Jae Il Aum and Lourdes Mendoza. Jae Il Aum withdrew US$160,000.00 from the said account on February 15, 1996 by
forging the signature of Lourdes Mendoza. He was again able to withdraw from the separate accounts, leaving US$163,000.00 as the
balance thereof. It was further alleged that Jae Il Aum could not have withdrawn the said deposits without the connivance of the KEB.
Moreover, the defendants failure to heed demands for an accounting of the said withdrawals and for the restitution of the said amounts
constituted large scale estafa for which they are liable for exemplary and moral damages. [5] The case was docketed as Civil Case No.
G-3012 and raffled to Branch 49 of the court.
On September 13, 1996, the KEB filed a Motion to Dismiss [6] the complaint on the ground,[7] among others, that the case was
within the exclusive jurisdiction of the Securities and Exchange Commission (SEC). On December 5, 1996, the trial court issued an
Order denying the motion. The KEB filed a motion for reconsideration of the courts decision which was, however, denied.
The KEB filed a petition for certiorari and prohibition with the CA for the nullification of the orders of the RTC. The case was
docketed as CA-G.R. SP No. 43363.[8] On March 17, 1999, the CA dismissed the petition. The KEB filed a motion for reconsideration,
which was denied by the appellate court on July 22, 1999. It then filed a petition for review on certiorari in this Court, docketed as G.R.
No. 139460.[9]
Meanwhile, on April 2, 1997, the KEB filed a Complaint[10] against Lourdes Mendoza, Meneleo Mendoza, Antusa Magno,
Francisco Magno, Teodoro de Mesa, Firmo de Mesa, Mercedes de Mesa Magno and the PHDI (PHDI, et al.) before the RTC of
Guagua, Pampanga, for sum of money and reformation of real estate mortgage executed by PHDI in its favor. The case was docketed
as Civil Case No. G-3119 and was raffled to Branch 50 of the court.
The KEB alleged therein that on January 15, 1996, it extended a loan to the PHDI in the sum of US$500,000.00, payable within
one year, with interest at 3 months London Interbank Offering Rate (LIBOR) + 2% per annum, evidenced by a promissory note
executed by Jae Il Aum and Lourdes Mendoza, president and treasurer, respectively, for and in behalf of the PHDI, with Antusa Magno
and Teodoro de Mesa acting as witnesses. Jae Il Aum and Lourdes Mendoza were authorized by resolution of the Board of Directors of
PHDI to sign documents and other papers and mortgage corporate assets. To secure the payment of the said loan, Lourdes Mendoza
and her siblings, Antusa de Mesa Magno, Firmo de Mesa, Meneleo Mendoza and Mercedes de Mesa, executed a real estate mortgage
over 14 parcels of land they owned in common, under a Special Power of Attorney executed by them in favor of Teodoro, Lourdes and
Antusa. However, the real estate mortgage failed to express the true intent and agreement of the parties therein because the debtors

appearing therein were Lourdes de Mesa Mendoza, Antusa de Mesa Magno, Mercedes de Mesa and Firmo de Mesa, whereas the true
agreement was to bind only PHDI as the debtor. It was further alleged that PHDI, et al. had not paid the loan of US$500,000.00 and the
increment thereof despite demands therefor.
The KEB prayed that, after due proceedings, judgment be rendered in its favor, ordering the reformation of the said real estate
mortgage by designating the PHDI as the debtor; ordering PHDI, et al., jointly and severally, to pay US$500,000.00, with interest
thereon at the rate of the LIBOR for a three-month loan plus 2%, compounded monthly; 10% of the total amount due as interest as
withholding tax on the interest; 20% of the total amount due as attorneys fees; and costs of suit. The KEB, likewise, prayed that the
properties mortgaged be foreclosed and sold in case of failure to pay the said loan and its increment within 90 days from notice of the
judgment.[11] The KEB appended to its complaint a copy of the real estate mortgage and the secretarys certificate containing the
resolution of the Board of Directors.
The PHDI, et al. filed a motion to dismiss [12] the complaint on the ground of forum shopping, asserting that the KEB should have
filed its counterclaim for the reformation of the real estate mortgage and the collection of US$500,000.00, including increment and
damages in Civil Case No. G-3012. They averred that since the KEB sought the collection of the US$500,000.00 loan which was
referred to in paragraphs 2 and 3 of their complaint in Civil Case No. G-3012, the essential elements of litis pendentia were present;
hence, the trial court should dismiss the complaint.
The KEB opposed[13] the motion, contending that the complaint in Civil Case No. G-3012 involved corporate fraud; hence, the RTC
had no jurisdiction over the action in the said case, and as such, could not interpose any counterclaims therein. The KEB, likewise,
averred that litis pendentia may be involved only when the RTC had jurisdiction over the action in Civil Case No. G-3012. Moreover, the
actions in Civil Case Nos. G-3012 and G-3119 were unrelated.
On July 23, 1997, the RTC issued an Order[14] denying the motion to dismiss, holding that the essential requirements of litis
pendentia were not present, and that the grounds invoked therein were not indubitable.
Thereafter, PHDI, et al. filed, in due course, their answer [15] with counterclaims in Civil Case No. G-3119 where they denied being
indebted to the KEB. By way of special and affirmative defenses, they alleged that they were deceived by Jae Il Aum, in connivance
with the KEB, into agreeing to secure a loan of US$500,000.00 from the latter with their properties as security therefor to be used for
the development of their properties into a housing project; the US$500,000.00 loan of the PHDI was deposited in Account No.
5311000487 and Account No. 5311000486 with the KEB. Jae Il Aum was able to withdraw the amount of US$160,000.00 from the dollar
account of PHDI based on an application for withdrawal bearing the forged signature of Lourdes Mendoza. Believing that Jae Il Aum
could not validly withdraw from the said account without her presence, Lourdes de Mesa Mendoza signed applications for the
withdrawals from the said accounts, authorizing Jae Il Aum to make the said withdrawals. Jae Il Aum was then able to withdraw the rest
of the deposits of the PHDI. It was thus alleged that the acts of the plaintiff and Jae Il Aum constituted large scale estafa, and that he
had been charged with large scale estafa in Criminal Case Nos. 4085 and 4092 in the RTC of Pampanga. The aforementioned
unauthorized withdrawals could not have been made possible without the indispensable cooperation of the authorized and/or
responsible officer/s of the KEB.[16] Moreover, the loan of the PHDI should be extinguished under the principle of set-off or
compensation. By way of counterclaims, PHDI, et al., repleaded by reference all the allegations in their special and affirmative defenses
as part thereof, and alleged that by reason of the foregoing acts of the KEB and Jae Il Aum, they suffered shame and humiliation.
The PHDI, et al., prayed that the complaint be dismissed and, by way of counterclaim, that the KEB be ordered to
pay P500,000.00 as moral damages, P500,000.00 as exemplary damages to deter like-minded foreigners from victimizing Filipinos,
and P100,000.00 as attorneys fees, plus the cost of suit.[17]
On September 12, 1997, the KEB filed two motions: (1) a motion in Civil Case No. G-3119 to dismiss the counterclaims of the
PHDI, et al. for their failure to attach in their answer with counterclaims a certification of non-forum shopping as mandated by Supreme
Court Administrative Circular No. 04-94 (now Section 5, Rule 7 of the Rules of Court); [18] and (2) a motion in Civil Case No. G-3012 to
dismiss the complaint for forum shopping.[19]
In its motion to dismiss the counterclaims in Civil Case No. G-3119, the KEB alleged that the causes of action of the PHDI, et al.
as plaintiffs in Civil Case No. G-3012 for the collection of US$160,000.00 and damages, and their claim in Civil Case No. G-3119 for the
set-off of the said amount against its claim of US$500,000.00 were identical; hence, their counterclaims should be dismissed for forum
shopping and, consequently, their complaint in Civil Case No. G-3012 should likewise be dismissed.
The PHDI, et al. opposed the motion to dismiss their complaint in Civil Case No. G-3012 alleging that the KEB failed to include
forum shopping as a ground in its motion to dismiss their complaint; hence, is bound by the omnibus motion rule. They further alleged
that their complaint could not be dismissed on the ground of forum shopping based on their counterclaims in their answer to the

complaint, since they filed their answer and counterclaim after filing their complaint in Civil Case No. G-3012. [20] Besides, the trial court
had already denied their motion to dismiss the complaint in Civil Case No. G-3119 on its finding that there was no litis pendentia.
The PHDI, et al. also opposed the motion to dismiss[21] their counterclaims in Civil Case No. G-3119, on the ground that the
causes of action in Civil Case No. G-3012 and their counterclaims in Civil Case No. G-3119 were unrelated. They asserted that the
subject matter, causes of action and the issues in the two cases were different.
On October 14, 1997, the trial court issued an Order [22] in Civil Case No. G-3012 denying the KEBs motion to dismiss the
complaint, on its finding that the causes of action of the PHDI in Civil Case No. G-3012 were different from those in their counterclaim in
Civil Case No. G-3119. The trial court also denied the motion (in Civil Case No. G-3119) to dismiss the counterclaims of the PHDI, et
al., on its finding that the reliefs prayed for by the latter did not include the collection of US$160,000.00 from the KEB; hence, there was
no forum shopping. The KEBs respective motions for reconsideration of the orders of dismissal in Civil Case Nos. G-3119 and G-3012
were denied by the trial courts, per the Orders dated October 24, 1997[23] and November 14, 1997.[24]
The KEB filed a petition for certiorari, prohibition and mandamus against the PHDI, et al., in the CA, assailing the October 13 and
24, 1997 Orders of the trial court in Civil Case No. G-3119. The case was docketed as CA-G.R. SP No. 46194.
The KEB also filed a petition for certiorari, prohibition and mandamus with the CA on January 6, 1998, assailing the RTCs Orders
dated October 24 and November 14, 1997 in Civil Case No. G-3012. The case was docketed as CA-G.R. SP No. 46436. The two
petitions were consolidated.
Meanwhile, the KEB filed its answer to the counterclaims of the PHDI, et al., in Civil Case No. G-3119 for moral and exemplary
damages.[25] It alleged, inter alia, that only the consent of the PHDI, through its signatories, was required for any withdrawal, and that all
such withdrawals were made with the knowledge and consent of Lourdes de Mesa Mendoza, with her genuine signatures; [26] that the
trial court had no jurisdiction over the counterclaims for moral and exemplary damages since the controversy involved corporate fraud
which, under Subsection (a), Section 5 of Presidential Decree No. 902-A, was within the exclusive jurisdiction of the SEC; and that the
counterclaims for moral and exemplary damages should be dismissed because of the pendency of Civil Case No. G-3012 which
involved the same parties, the same rights, the same reliefs, the same issues, and the same causes of action, insofar as the complaint
in Civil Case No. G-3012 and the counterclaim in this case were concerned. Moreover, there was no certification against forum
shopping as required by Section 3, Rule 7 of the Rules of Court. They further insisted that all the withdrawals were authorized and
made on the basis of genuine signatures; that PHDI, being a corporation and an artificial person, had no feelings, and, as such, moral
damages could not be recovered from it; that it had all along acted in good faith; and that if PHDI, et al., hired the services of counsel,
the attorneys fees should be for their own account, since they unjustifiably refused to pay.[27]
On January 27, 2000, the CA rendered a Joint Decision [28] in CA-G.R. SP Nos. 46194 and 46436. The CA affirmed the assailed
orders of the RTC in Civil Case No. G-3012, dismissing the petition in CA-G.R. SP No. 46436 but partially giving due course to and
granting the petition in CA-G.R. SP No. 46194, by dismissing the counterclaims of the respondents for moral and exemplary damages
in Civil Case No. G-3119 on the ground of forum shopping. The CA declared that the counterclaims of the PHDI, et al., for moral and
exemplary damages in Civil Case No. G-3119, were merely permissive; hence, they were mandated to append thereto a certification of
non-forum shopping.
The CA anchored its decision on the rulings of this Court in Santo Tomas University Hospital v. Surla[29] and Valencia v. Court of
Appeals.[30] However, the CA did not order the dismissal of the complaint in Civil Case No. G-3012, on its finding that the RTC did not
commit grave abuse of its discretion in not ordering the dismissal of the same. Besides, the trial court had already dismissed the
counterclaims of the PHDI, et al., for moral and exemplary damages in Civil Case No. G-3119.[31]
Following the denial of its motion for reconsideration, the KEB, now the petitioner, filed with this Court, a consolidated petition for
review on certiorari against PHDI, et al., the respondents, alleging that the CA erred (a) in not ordering the dismissal of the counterclaim
of the latter in Civil Case No. G-3119 for their failure to append a certificate of non-forum shopping, and (b) in not dismissing the
complaint in Civil Case No. G-3012 for forum shopping.[32]
As the issues in this case are interrelated, the Court shall delve into and resolve them simultaneously.
The petitioner avers that the respondents are guilty of forum shopping because they sought to recover US$160,000.00 by way of
set-off in their counterclaims in Civil Case No. G-3119, pending in Branch 50 of the RTC of Guagua, Pampanga, the same amount they
sought to recover in their complaint in Civil Case No. G-3012 pending in Branch 49 of the said court. The petitioner asserts that the
respondents also sought to recoverP500,000.00 in moral damages, and P500,000.00 as exemplary damages in Civil Case No. G-3012,
which are the same amounts the respondents sought to collect from the petitioner in their counterclaims in Civil Case No. G-3119. The

petitioner notes that although the respondents alleged set-off of the US$160,000.00 in their special and affirmative defenses, they,
however, repleaded and incorporated, by way of reference, the said allegations in their counterclaims for moral and exemplary
damages and attorneys fees; hence, the claim of set-off or compensation of the respondents was a counterclaim. The respondents
were, thus, mandated to append a certificate of non-forum shopping to their counterclaims as mandated by Section 5, Rule 7 of the
Rules of Court, but failed to do so. The petitioner avers that there is identity of causes of action, issues and reliefs prayed for in the
complaint of the respondents in Civil Case No. G-3012, and their counterclaims for set-off or compensation of the US$160,000.00,
moral damages of P500,000.00 and P500,000.00 as exemplary damages in Civil Case No. G-3119. As such, the petitioner insists that
the respondents were guilty of forum shopping, for which reason their complaint in Civil Case No. G-3012 should be dismissed.
The respondents, for their part, refute the contentions of the petitioner and maintain that their claim for set-off or
compensation[33] in Civil Case No. G-3119 is a counterclaim but is compulsory in nature; hence, there was no need for them to append
a certificate of non-forum shopping. The respondents also allege that the petitioner itself is guilty of forum shopping because instead of
filing counterclaims against them in Civil Case No. G-3012, it filed a complaint for reformation of the real estate mortgage and for the
collection of US$500,000.00 and, in case of refusal or failure of the respondents to pay the said amount of US$500,000.00 for the
judicial foreclosure of the real estate mortgage, docketed as Civil Case No. G-3119. The respondents assert that, by praying for the
dismissal of their complaint in Civil Case No. G-3012 and their counterclaims in Civil Case No. G-3119, the petitioner could win in both
instances without due process of law.
The Courts Ruling
A counterclaim, as now used and understood, includes both set-off and recoupment and is broader than both; it includes equitable
demands and secures to the defendant full relief which is a separate action at law and would have secured him on the same state of
facts being substantially a cross-action by the defendant against the plaintiff.[34]
A set-off (compensacion) is a money demand by the defendant against the plaintiff arising upon contract and constituting a debt
independent of and unconnected with the cause of actions set forth in the complaint, and may be used to offset a plaintiffs claim but not
to recover affirmatively. As in the case with recoupment, set-off may be used to offset a plaintiffs claim but not to recover affirmatively.
This is similar to the English rule which was first authorized by an English statute in 1729.
A recoupment (reconvencion) differs from a counterclaim (contrarreclamacion) in that, under a counterclaim, the defendant may
have an affirmative judgment where he is able to prove a demand in excess of the plaintiffs demand, whereas in the case of
recoupment, whatever the damages proved by the defendant, they can go only to reduce or extinguish the claim against him.
Recoupment must arise out of the contract or transaction upon which the plaintiffs claim is founded. Recoupment is of French origin
and means the cutting back of the plaintiffs claim by the defendant. It thus implies an admission of the plaintiffs claim.
In Lopez v. Gloria and Sheriff of Leyte,[35] the Court ruled that for set-off or recoupment to be considered as a counterclaim, the
following must concur: (1) the same be essentially a genuine action of the defendant against the plaintiff; (2) the same should have as
its object to neutralize, wholly or partially, that which the plaintiff is trying to obtain; (3) the same does not have for its object to destroy
directly the action of the plaintiff; and (4) the same ought not to pray for a positive remedy distinct from the payment of money.
The Court explained that under the first requisite, independent of any other consideration, a genuine action is constituted by the
defendant which could be employed separately against the plaintiff. On the second requisite, the Court declared that the defendant
admits the facts upon which the action of the plaintiff is based. The second requisite is absent if the defendant bases his claim on facts
which directly destroy the action or cause of action of the plaintiff. In such a case, the claim of the defendant would only be a special
defense.[36] On the third requisite, set-off or recoupment may be merely a defense and not a counterclaim if it only tends to oppose or to
destroy the action of the plaintiff.
***After consideration of the material allegations of the answer of the respondents in Civil Case No. G-3119, we believe that the
respondents claim of set-off or compensation of the US$160,000.00 against the claim of US$500,000.00 of the petitioner against the
respondents is a counterclaim. The respondents admit in their complaint in Civil Case No. G-3012 and in their answer in Civil Case No.
G-3119 that they secured a loan from the petitioner in the amount of US$500,000.00, but maintain that they are not liable for the
payment of the said loan because the petitioner, in connivance with Jae Il Aum, had withdrawn not only US$160,000.00 but the entire
deposit of US$500,000.00 from the peso and dollar accounts of respondent PHDI without the consent of the respondents. The latter did
not seek to recover affirmatively from the petitioner.
However, we do not agree with the contention of the respondents that their counterclaims are compulsory in nature. Section 7,
Rule 5 of the Rules of Court reads:

Sec. 7. Compulsory counterclaim. A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is
connected with the transaction or occurrence constituting the subject matter of the opposing partys claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction. Such a counterclaim must be within the jurisdiction of the court both as to the
amount and the nature thereof, except that in an original action before the Regional Trial Court, the counterclaim may be considered compulsory
regardless of the amount.
As correctly held by the CA, the counterclaim of the respondents for moral and exemplary damages against the petitioner is
permissive. So is the respondents claim of a set-off or compensation of the US$160,000.00 which they sought in Civil Case No. G-3012
against the US$500,000.00 claimed by the petitioner against the respondents in Civil Case No. G-3119.
As the Court held in Yulienco v. Court of Appeals:[37]
A counterclaim is defined as any claim for money or other relief which a defending party may have against an opposing party. A counterclaim is
compulsory if (a) it arises out of, or is necessarily connected with, the transaction or occurrence which is the subject matter of the opposing partys
claim; (b) it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and (c) the court has
jurisdiction to entertain the claim. In other words, a compulsory counterclaim cannot be made the subject of a separate action but should be asserted
in the same suit involving the same transaction or occurrence giving rise to it.
The criteria or tests by which the compulsory or permissive nature of specific counterclaims can be determined are as follows:
(1) Are the issues of fact and law raised by the claim and counterclaim largely the same?
(2) Would res judicata bar a subsequent suit on defendants claim absent the compulsory counterclaim rule?
(3) Will substantially the same evidence support or refute plaintiffs claim as well as defendants counterclaim?
(4) Is there any logical relation between the claim and the counterclaim? [38]
In the present case, the issues of fact and law raised by the petitioner in its complaint in Civil Case No. G-3119, and in the
counterclaims of the respondents for the set-off of not only the US$160,000.00 but the entirety of the deposits of the respondent PHDI
of US$500,000.00, and for moral and exemplary damages, are not identical or even largely the same. In the complaint of the petitioner
in Civil Case No. G-3119, the issue is whether the loan of US$500,000.00 was secured by respondent PHDI from the petitioner, and
whether the respondents failed to pay the same and its increment despite the petitioners demands. On the other hand, the issues in the
respondents counterclaims for set-off of the amount of US$160,000.00 are the following: whether the signature of respondent Lourdes
Mendoza appearing on the said withdrawal application was forged; whether the petitioner connived with Jae Il Aum when the latter
withdrew the said amount from the accounts of respondent PHDI; whether the petitioner and Jae Il Aum are obliged to pay the said
amount to the respondent PHDI; and whether the obligations of the respondent to pay their loan of US$500,000.00 is extrajudicial pro
tanto. Any judgment of the court on the complaint of the petitioner in Civil Case No. G-3119 would not bar any suit on the respondents
counterclaim. The evidence of the petitioner on its claim in its complaint, and that of the respondents on their counterclaims are thus
different. There is, likewise, no logical relation between the claim of the petitioner and the counterclaim of the respondents. Hence, the
counterclaim of the respondents is an initiatory pleading, which requires the respondents to append thereto a certificate of non-forum
shopping. Their failure to do so results to the dismissal of their counterclaim without prejudice.[39]
The general rule is that compliance with the certificate of forum shopping is separate from and independent of the avoidance of
the act of forum shopping itself. Forum shopping is a ground for summary dismissal of both initiatory pleadings without prejudice to the
taking of appropriate action against the counsel or party concerned.[40]
Case law has it that there is forum shopping when, between an action pending before the court and another one, there exist:
(a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in the other action
will, regardless of which party is successful, amount to res judicata in the action under consideration. [41]
Otherwise stated, there is forum shopping where a litigant sues the same party against whom another action or actions for the
alleged violation of the same right and the enforcement of the same relief is/are still pending. The defense of litis pendentia in one case
is a bar to the other/others; and, a final judgment is one that would constitute res judicata and thus would cause the dismissal of the
rest. Absolute identity of parties is not required. It is enough that there is substantial identity of parties. [42] It is enough that the party
against whom the estoppel is set up is actually a party to the former case. [43] There is identity of causes of action if the same evidence

will sustain the second action. The principle applies even if the relief sought in the two cases may be different. [44] Forum shopping
consists of filing multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the
purpose of obtaining a favorable judgment.[45]
What is truly important to consider, the Court ruled in Golangco v. Court of Appeals,[46] is the vexation caused the courts and
parties-litigants who ask different courts and/or administrative agencies to rule on the same or restated causes and/or grant the same or
substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different courts upon
the same issues. In Yupangco Cotton Mills, Inc. v. Court of Appeals,[47] the Court ruled that for forum shopping to exist, both actions
must involve the same transactions, the same circumstances; and the actions must also raise identical causes of actions, subject
matter and issues. Forum shopping is an act of malpractice that is prohibited and considered as trifling with the court. It is an improper
conduct which tends to degrade the administration of justice. But there is no forum shopping where two different orders or questions,
two different causes of action and issues are raised, and two objectives are sought.[48]
In this case, in interposing their counterclaim for set-off of the US$160,000.00 against their loan of US$500,000.00 in Civil Case
No. G-3119, as well as the counterclaims for P500,000.00 as moral damages, andP500,000.00 as exemplary damages, the
respondents thereby engaged in forum shopping. As gleaned from the material averments of their complaint in Civil Case No. G-3012,
the respondents, who are the plaintiffs therein, claimed that Jae Il Aum, who was the president of respondent PHDI, withdrew
US$160,000.00 from the deposit accounts of the said respondent with the petitioner; that such withdrawal application bore the forged
signature of respondent Lourdes Mendoza; and that the authorized office/officers of the petitioner connived with Jae Il Aum in
consummating the withdrawal. The respondents prayed that the petitioner and Jae Il Aum be ordered to pay, jointly and severally, the
said amount, plus P500,000.00 as moral damages and P500,000.00 as exemplary damages based on their claim that the petitioner, a
corporation incorporated in Korea, and Jae Il Aum, a Korean national, victimized the respondents, who are Filipinos. The respondents
merely restated and repleaded the same allegations in their counterclaims in Civil Case No. G-3119, and prayed that the aforesaid
amount of US$160,000.00 be set-off against their loan of US$500,000.00 which was being claimed by the petitioner in the said case, in
addition to awards for P500,000.00 as moral damages, and P500,000.00 as exemplary damages against the petitioner for allegedly
victimizing Filipinos in their country. The threshold issues common to and decisive of the complaint in Civil Case No. G-3012 and the
counterclaim for set-off in Civil Case No. G-3119 are whether the signature of respondent Lourdes Mendoza on the application for
withdrawal of US$160,000.00 was forged, and whether the petitioner connived with Jae Il Aum in the alleged fraudulent withdrawal of
the said amount. The evidence of the respondents as plaintiffs in Civil Case No. G-3012 is the same evidence that they will have to
adduce as plaintiffs on their counterclaim for set-off in Civil Case No. G-3119. Any judgment of the RTC of Guagua, Pampanga, Branch
49, in Civil Case No. G-3012 will, likewise, resolve the threshold issue in the respondents counterclaim for set-off in Civil Case No. G3119. That Jae Il Aum is not a party in Civil Case No. G-3119 is not important; that the respondents did not pray in their counterclaim
that the petitioner pay to them the US$160,000.00 withdrawn by Jae Il Aum is, likewise, not a bar to the application of the principle
of litis pendentia.
It must be stressed, however, that the dismissal of the complaint of the respondents against the petitioner in Civil Case No. G3012 is without prejudice to the continuation of the case against Jae Il Aum.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The complaint of the respondents against the petitioner in Civil
Case No. G-3012 is DISMISSED without prejudice to the continuation thereof against the defendant Jae Il Aum. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

Korea Exchange Bank vs. Gonzales (456 SCRA 224) o Counterclaim any claim for money or other
relief which a defending party may have against an opposing party. o A counterclaim is compulsory if: a. It
arises out of, or is necessarily connected with, the transaction or occurrence which is the subject matter of the
opposing partys claim; b. It does not require for its adjudication the presence of third parties of whom the court
cannot acquire jurisdiction; and c. The court has jurisdiction to entertain the claim. o Compulsory counterclaim
cannot be made the subject of a separate action but should be asserted in the same suit involving the same
transaction or occurrence giving rise to it. o Test to determine compulsory or permissive nature of specific
counterclaims: a. Are the issues of fact and law raised by the claim and counterclaim largely the same? b. Would
res judicata bar a subsequent suit on defendants claim absent the compulsory counterclaim rule? c. Will

substantially the same evidence support or refute plaintiffs claim as well as defendants counterclaim? d. Is
there any logical relation between the claim and the counterclaim?

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 128464

June 20, 2006

REV. LUIS AO-AS, REV. JOSE LAKING, EUSQUICIO GALANG, REV. ISABELO MONONGGIT, REV. EDWINO
MERCADO, REV. DANIEL PONDEVIDA, REV. TEODORICO TARAN and DR. BENJAMIN GALAPIA, Petitioners,

vs.
HON. COURT OF APPEALS, THOMAS P. BATONG, JUANITO BASALONG, AUGUSTO CATANGI, PAUL GARCIA,
QUIDO RIVERA, VICTORIO Y. SAQUILAYAN and DANILO ZAMORA, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Certiorari under Rule 45 of the Rules of Court to seek the reversal of the Court of Appeals
Decision1 dated 10 October 1996 in favor of respondents [hereinafter referred to as the Batong group] and
Resolution2 dated 3 March 1997 denying the Motion for Reconsideration of the herein petitioners [hereinafter referred
to as the Ao-As group].
The Court of Appeals found the facts to be as follows:
The Lutheran Church in the Philippines (hereinafter referred to as the LCP) is a religious organization duly registered
with the Securities and Exchange Commission on May 8, 1967. Its members are comprised of the Lutheran clergymen
and the local Lutheran congregations in the Philippines which, at the time of its incorporation, was divided into three
districts, namely: the North Luzon District (hereinafter referred to as the NLD); the South Luzon District (hereinafter
referred to as the SLD); [and] the Mindanao district (hereinafter referred to as the MDD).
The governing body of the LCP is its national board of directors (hereinafter referred to as the LCP Board) which was
originally composed of seven (7) members serving a term of two years. Six members of the LCP Board are elected
separately in district conferences held in each district, with two members representing each district the elected
district president becomes the clergy representative to the LCP Board and the other is a lay representative to the LCP
Board. The seventh member of the Board is the National President of the LCP who is elected at large in a national
convention held in October of every even-numbered year.
During the 1976 LCP national convention, a resolution was passed dividing the North Luzon district (NLD) into two
districts: the NLD Highland District (NLHD) and the NLD Lowland District (NLLD) -- thereby increasing the number of
directors from seven (7) to nine (9). Again in the 1984 LCP national convention, a resolution was passed creating
another district, namely, the Visayan Islands District (VID) thereby increasing further the number of directors to eleven
(11). Both resolutions were passed pursuant to Section 2 of Article 7 of the LCP By-Laws which provides that: "LCP in
convention may form additional districts as it sees fit".
Since the addition of two or more districts, an eleven (11) member board of directors representing the five (5) districts
managed the LCP without any challenge from the membership until several years later when certain controversies
arose involving the resolutions of the Board terminating the services of the LCP business manager and corporate
treasurer since 1979, Mr. Eclesio Hipe.
The termination of Mr. Hipe sparked a series of intracorporate complaints lodged before the Securities and Exchange
Commission (SEC). For the first time, the legality of the eleven (11) member Board was put in issue as being in excess
of the number of directors provided in the Articles of Incorporation since no amendments were made thereto to reflect
the increase.
Aside from the present case, SEC-SICD Case no. 3556 entitled "Excelsio Hipe, et. al. vs. Thomas Batong, et. al." and
SEC-SICD Case No. 3524, "Domingo Shambu, et. al. vs. Thomas Batong, et. al." respectively, sought to declare null and
void Board Resolution Nos. LCP-BD-6-89 and LCP-BD-7-89; and SEC-SICD Case No. 3550 entitled "The Lutheran Church
in the Philippines vs. Exclesio Hipe" which sought to recover the corporate records still in the possession of Mr. Hipe.
[The members of the Batong group] are the duly elected board of directors of the LCP at the time of the filing of SECSICD Case No. 3857. On the other hand, [the Ao-As group] have served in various capacities as directors or officers of
the LCP.
On August 17, 1990, [the Ao-As group] filed SEC-SICD Case No. 3857 for accounting and damages with prayer for
preliminary injunction and appointment of a management committee asserting the following causes of action:

"First, the alleged non-liquidation and/or non-accounting of a part of the proceeds of the La Trinidad land
transaction in the amount of P64,000.00 by petitioner Thomas Batong;
Second, the alleged non-liquidation and/or unaccounting of cash advances in the aggregate amount
ofP323,750.00 by petitioner Thomas Batong;
Third, the alleged dissipation and/or unaccounting of the LCP general fund in the amount of 4.8 million;
Fourth, the non-registration of the Leyte land purchased with LCP funds by petitioner Victorio Saquilayan;
Fifth, severance of church-partnership relationship with Lutheran Church-Missouri Synod (LCMS); and
Sixth, the transfer of LCP corporate books from the Sta. Mesa office to the Caloocan office."
During the hearings on the application for creation of a management committee, [the Batong group] filed an Urgent
Motion to Suspend the Proceedings of the Case in view of an amicable settlement agreed upon by the parties entitled
"A FORMULA FOR CONCORD". However, notwithstanding the FORMULA FOR CONCORD, the SEC-SICD denied [the
Batong groups] motion to suspend proceedings.
On January 23, 1992, petitioners filed a Motion to Dismiss alleging again the FORMULA OF CONCORD. Again, the SECSICD denied [the Batong groups] motion.
Subsequently, on September 3, 1992, the SEC-SICD Hearing Officer after the presentation of the parties respective
evidence, issued an Order creating a management committee. Said Order reads, in part:
" x x x All board resolutions and/or management actions or decisions passed and approved by them are deemed null
and void ab initio for they were passed, and approved by an illegally constituted Board of Directors. . . And worse,
several resolutions or Boards actions are not only (deemed) null and void but have caused irreparable damage to the
corporation such as the termination of all LCP staff and employee (LCP-BD-29-90); dissolution of LCP Business Office
(LCP-BD-37-90); termination of the partner-church relationship between the LCP and the Lutheran Church Missouri
Synod which is the major benefactor and source of funds of LCP (LCP-BD-28-90); forcible taking of almost all official
records and equipment of LCP by respondent Thomas B. Batong and transferring the (same) from the LCP business
office; acquisition of some lands using the corporate funds were in the name of some person other than the LCP; and
various cash advances of corporate funds by the respondents are not liquidated up to the present.
WHEREFORE, premises considered, A MANAGEMENT COMMITTEE is hereby created to undertake the management of
the Lutheran Church in the Philippines until such time that new members of the LCP Board of Directors shall have been
elected and qualified in the election to be called and conducted by the Management Committee in accordance with the
LCPs Articles of Incorporation and By-Laws preferably in October 1992."
On September 14, 1992, [the Batong group] filed their Motion for Reconsideration which was subsequently denied in
an Order dated September 23, 1992.
On September 23, 1992, [the Batong group] filed with the SEC En Banc a Petition for Certiorari with prayer for a
temporary restraining order alleging that the SEC-SIDC acted with grave abuse of discretion in creating the
management committee.
Shortly thereafter, on September 29, 1992, the following were appointed to the management committee: Atty. Puno as
Chairman; and private respondents Jose Laking, Eduardo Ladlad, Romeo Celiz as members. However, Atty. Puno later
resigned and was replaced by Atty. Oscar Almazan who was appointed as Chairman. After the death of Romeo Celiz, he
was replaced by private respondent Luis Ao-As.
On October 6, 1992, [the Ao-As group] filed a motion for issuance of a writ of preliminary injunction seeking to enjoin
[the Batong group] not only from continuing to act as LCP board of directors but also from calling a national convention
to elect new set of officers and members of the Board as provided in the LCP Constitution and By-Laws.

On October 16, 1992, the SEC-SIDC ordered the issuance of a writ of preliminary injunction prohibiting [the Batong
group] from "acting as a board of directors or officers of Lutheran Church in the Philippines, Inc. (LCP) and from holding
any convention or general or special membership meeting as well as election of the members of the LCP board of
directors, until further orders".
The [the Batong group] allege that the SEC-SIDC management committee used the Order dated October 16, 1992 to
carry out ultra vires acts, more specifically: (i) to take control of and closing down church buildings; (ii) to evict LCP
clergymen from their church parsonages; (iii) to ordain and appoint new clergymen to replace incumbent members of
the church hierarchy. In at least one case which has reached this Court, CA-G.R. No. 34504, it was found that:
"On August 13, 1993, [members of the Ao-As group] Oscar Almazan, James Cerdenola, Edgar Balunsat and Edwino
Mercado, together with armed security guards, acting in behalf of LCP, forcibly took possession of the houses occupied
by [the Batong group]. In view of the latters refusal to leave the premises, they permanently padlocked the main gate
of the compound confining [the Batong group] and their families therein and prevented the ingress and egress thereto.
Later the [Batong group] left their houses due to the alleged intimidation and threats employed by the [Ao-As group].
Thereafter, the latter entered the dwelling and took possession of the same."
However, even before the creation of the management committee, the LCP national convention had already been
called in a Board meeting held on September 26, 1991 at the Lutheran Hospice, Quezon City. Hence, by the time the
writ of preliminary injunction was issued, all notices had already been received by all local congregations and
convention delegates had likewise already been chosen to attend the national convention.
Thus, the 17th LCP National Convention was held on October 26 to 30, 1992 as earlier scheduled at the Immanuel
Lutheran Church and School, Tugatong, Malabon, Metro-Manila. The list of official delegates to the Convention is shown
in pages 32 to 33 of the Convention Records.
During the 17th LCP National Convention, the delegates representing the majority of the members which comprised
the three districts (North Luzon, South Luzon and Mindanao) issued a "Manifesto" to initiate by themselves the election
for a new set of church leaders because the incumbent directors were enjoined to act as a board. In the election, the
following were elected as LCP officers, namely:
President -- Rev. Victorino Saquilayan
Vice-President -- Rev. Juanito Basalong
Secretary -- Rev. Charlito Mercado
Treasurer -- Rev. Benjamin Lasegan
Similarly, prior to the issuance of the writ of preliminary injunction and the appointment of the management
committee, the SLD (South Luzon District) of LCP already held its district conference on august 26 to 28, 1992 which
elected, among other of its officers, the SLD Lay Representative pursuant to the LCP Constitution and By Laws. The
following were elected:
SLD President and
Clergy Representative : Rev. Elmer Banes
SLD Lay Representative: Roman Moscoso
The district conference for NLD was likewise held before the issuance of the writ of preliminary injunction on October 7
to 9, 1992. In said convention, the local congregations and clergymen executed a manifesto expressing their own
opposition to the appointment of a management committee.
[The Batong group] then filed with the SEC En Banc a Supplemental Petition dated November 13, 1992 alleging the
supervening events in the case which took place after the filing of the original petition on September 23, 1992.

Subsequent to the 17th LCP national convention of October 1992, a special convention was called by the SEC
Management Committee on January 25 to 29, 1993 at Cagayan de Oro City to elect a different set of officers for LCP.
[The Batong group] allege that the required notices were not sent to several local congregations and even fewer LCP
members were permitted by [the Ao-As group] to attend the special convention as evidenced by the list of official
delegates contained in the minutes of the special convention.
On July 21, 1993, [the Batong Group] filed a Second Supplement to its petition for certiorari in the SEC En Banc
alleging the supervening events and seeking the review of an Order of the Hearing Officer dated June 9, 1993 which
enlisted the aid of the Secretary of the Department of Interior and Local Government and the PNP Director General to
enforce the writ of preliminary injunction.
Pending the resolution of the above-mentioned petitions, the management committee took control of several church
properties, replaced clergymen from their parsonages and froze all bank accounts in the name of LCP.
[The Batong group] then filed a Petition for Mandamus and Damages with Prayer for Preliminary Mandatory Injunction
on August 19, 1993 seeking to unfreeze the bank accounts and recover the seized buildings.
All of the aforementioned petitioners (sic) were denied by the SEC En Banc. A motion for reconsideration was filed but
the same was likewise denied.3
The Batong group then filed a Petition for Review with the Court of Appeals seeking to annul the Decision of the
Securities and Exchange Commission En Banc. In said Petition, the Batong group alleged that the Ao-As group
persisted in carrying out ultra vires and illegal acts, to wit:
(a) Private respondent Luis L. Ao-As, purportedly on the strength of a board action held at Baguio on February
22-24, 1994 and of the assailed Order dated October 16, 1992, closed the premises of the Gloria Dei School
after school year 1993-1994 in an attempt to take-over the management and operations of the said school.
The closure of the Gloria Dei School is the subject of SEC Case No. 05-93-4463.
(b) On February 1, 1994, Rev. Eduardo Ladlad, acting as President of the LCP, executed a Contract to Sell with
Solid Gold Realty Corporation whereby he agreed to sell a portion of LCPs property in Cavite with an area of
7,218 square meters at a price of P1,000 per square meter or a total of P7,218,000 with a down payment
of P1,000,000.
(c) Upon application of the [Ao-As group], the SEC-SIDC issued an Order dated June 1, 1994 ex parte and on
June 14, 1994 at around 7 p.m., a certain Rev. Laking, using the Order of the SEC-SIDC dated June 1, 1994 and
October 16, 1992 writ of preliminary injunction, entered the premises of the Abatan Hospital located in
Baguias, Benguet Province, took over the management and control of the Abatan Hospital and forced the
pastor previously assigned therein Pastor Laapniten to leave his post simply because Pastor Lapniten is
identified with the Saquilayan Group.4
On 30 June 1994, the Batong group filed with the Court of Appeals a motion for the issuance of a Temporary
Restraining Order and/or Preliminary Injunction. On 12 July 1994, the Court of Appeals issued a Temporary Restraining
Order to enjoin the Ao-As group "from implementing the contract to sell between the Lutheran church in the Philippines
(LCP) and Solid Gold Realty Corporation and from selling, transferring, assigning and/or disposing of any other property
of the LCP; to enjoin the Ao-As group and/or those officers elected in their convention from enforcing or implementing
the Order dated October 16, 1992 and the writ of preliminary injunction issued in SEC Case 3857."
On 22 September 1994, the Batong group filed a Motion/ Manifestation to cite Eduardo Ladlad, Harry Roa, James
Cerdenola and Luis Ao-As in contempt of court, alleging that the latter, on 15 September 1994, entered the Olongapo
Lutheran Church with six armed men and there and then padlocked the main gate of the church. Consequently, Rev.
Elmer Baes, the assigned overseer at said church, was barred from entering the premises on 17 September 1994.
On 10 October 1996, the Court of Appeals ruled in favor of the Batong group, disposing the petition as follows:
WHEREFORE, the petition is hereby granted. The Decision dated August 25, 1993 of the SEC En Banc is hereby
RECONSIDERED and SET-ASIDE and the Orders of the SEC-SIDC dated September 3, 1992 and October 16, 1992 are

hereby ANNULLED and SET ASIDE. The SEC is hereby directed to conduct a new election of the directors of the LCP
consistent with the provisions of the Corporation Code.5
Hence, this petition, where the Ao-As group brings forth the following issues to be resolved by this Court:
I.
Whether or not the Court of Appeals gravely erred in utterly ignoring and disregarding all the evidence adduced by
[the Ao-As group], and in making findings of facts contradicted by the evidence on record and not supported by any
evidence whatsoever.
II.
Whether or not the Court of Appeals reversibly erred in ruling that SEC-SICD Case No. 3857 is a case of forum
shopping.
III.
Whether or not the Court of Appeals committed reversible error in declaring as invalid the manner of elections of the
Board of Directors of the Lutheran Church in the Philippines as provided for in its By-Laws.
IV.
Whether or not the Court of Appeals committed reversible error in ruling that the SEC-SICD had no jurisdiction to call
for a special election of the Board of Directors of the Lutheran Church in the Philippines. 6
In addition to the prayer to reverse the 10 October 1996 Decision and 3 March 1997 Resolution of the Court of
Appeals, and the revival of Resolution of the SEC En Banc in SEC-EB Case No. 330 and the Order of the SEC-SIDC in
Case No. 3857, the Ao-As group prays for the following:
1. x x x x
2. Declaring the Board of Directors elected at the National Convention called by the Management Committee
on January 25-27, 1993 in Cagayan de Oro as the legitimate members of the Board of LCP;
3. Declaring all acts and resolutions passed by the Batong group invalid and of no legal effect; and
4. Ordering the Batong group to return all the properties seized from the LCP and to refrain from the
representing the LCP.7
The Ao-As group did not commit willful and deliberate forum shopping in the filing of SEC-SIDC Case No. 3857.
Since a ruling upholding the Court of Appeals on the issue of forum shopping would render all the other issues in this
petition moot, we resolve to pass upon the same at the onset.
The Ao-As group claims that the Court of Appeals reversibly erred in ruling that SEC-SICD Case No. 3857 is a case of
forum shopping. The Court of Appeals had ruled:
Finally, SEC-SICD Case No. 3857 is a clear case of forum shopping. The acts of [the Batong group], as embodied in
several board resolutions, have already been raised and passed upon in other cases pending at the time the [Ao-As
group] instituted the present controversy.
The board resolutions denominated as LCP-BD-29-90 and LCP-BD-37-90 authorizing the dissolution of the LCP
business office and termination of the employees connected therewith was the subject of NLRC CASE NOS. 03-0193590 and 04-01979-90 pending before the National Labor Relations Commission.

The board resolution denominated as LCP-BD-28-90 authorizing the transfer of the LCP corporate records from the Sta.
Mesa Office to the Caloocan Office was the subject of Civil Case No. 133394-CV and 131879-CV pending before the
Metropolitan Trial Court of Manila, Branches 20 and 21 and subsequently dismissed in view of the FORMULA OF
CONCORD entered into between the parties.
On the other hand, the legality of the composition of the eleven-member LCP Board was already the subject matter of
SICD Case No. 3524 which was appealed to the SEC En Banc and docketed as SEC Case No. 352.
SEC Case No. 3857 is not the first case where the [Ao-As group], or those with similar interests, have asked for the
appointment of a management committee. In SEC Case 3556 entitled "Exclesio Hipe and Lutheran Church of the
Philippines v. Thomas Batong, et al.", in a motion dated June 18, 1991, private respondent Exclesio Hipe prayed for the
appointment of a management committee for LCP. In an Order dated August 15, 1991, the SEC-SICD ruled that the
Motion for the Appointment of a Management Committee and Accounting filed by the petitioners cannot be given due
course considering that the same is one of the incidents in SEC Case No. 3857 entitled Rev. Luis Ao-As, et al. vs.
Thomas Batong now pending in the sala of Hon. Elpidio Salgado". Petitioners knew that similar petitions have been
previously commenced because Atty. Oscar Almazan who is also a co-counsel in the case was the counsel of record in
SEC Case No. 3556 and the other cases.
Clearly, the act of the [Ao-as group] in filing multiple petitions involving the same issues constitutes forum shopping
and should be sanctioned with dismissal. x x x8
SEC-SICD Case No. 3857 is a petition for accounting with prayer for the appointment of a management committee and
the issuance of a writ of injunction. The Ao-As group claims that the issue involved in the case is whether the Ao-As
group is entitled to an accounting and to the creation of a management committee due to the Batong groups alleged
dissipation and waste of the assets of the LCP, and the subject matter is the act of dissipation and waste committed by
the Batong group. On the other hand:
1. NLRC Cases No. 03-01935-90 and 04-01979-90 pending before the National Labor Relations Commission, is
a case for illegal termination, which allegedly "obviously involves a different cause of action";
2. The cases pending before Branches 20 and 21 of the Municipal Trial Court of Manila, docketed as Civil Cases
No. 133394-CV and 131879-CV, respectively, are actions for forcible entry and unlawful detainer; and
3. SEC-SICD Case No. 3556 puts in issue the validity of LCP Board resolutions LCP-BD-6-89 and LCP-BD-7-89,
where what are involved are the incidents resulting from the issuance of the resolutions the unjust
termination of Mr. Exclesio Hipe as LCP Business Manager and treasurer and the illegal appointment of one
Hildelberto Espejo in his place. SEC-SIDC Case No. 3524 puts in issue the legality of the composition of the
eleven-member LCP Board. These are allegedly different issues from that of SEC-SIDC Case No. 3857 where
the acts of respondents are claimed to the basis of a prayer for accounting and appointment of a management
committee.
As elucidated above, the causes of action under SEC-SIDC Case No. 3857 are the following:
First, the alleged non-liquidation and/or non-accounting of a part of the proceeds of the La Trinidad land
transaction in the amount of P64,000.00 by petitioner Thomas Batong;
Second, the alleged non-liquidation and/or unaccounting of cash advances in the aggregate amount
ofP323,750.00 by petitioner Thomas Batong;
Third, the alleged dissipation and/or unaccounting of the LCP general fund in the amount of 4.8 million;
Fourth, the non-registration of the Leyte land purchased with LCP funds by petitioner Victorio Saquilayan;
Fifth, severance of church-partnership relationship with Lutheran Church-Missouri Synod (LCMS); and
Sixth, the transfer of LCP corporate books from the Sta. Mesa office to the Caloocan office.

The elements of forum shopping are: (a) identity of parties, or at least such parties as represent the same interests in
both actions; (b) identity of rights asserted and the relief prayed for, the relief being founded on the same facts; and
(c) the identity of the two preceding particulars, such that any judgment rendered in the other action will, regardless of
which party is successful, amount to res judicata in the action under consideration. 9
Otherwise stated, there is forum shopping where a litigant sues the same party against whom another action or
actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending. The
defense of litis pendentia in one case is a bar to the other/others; and, a final judgment is one that would constitute
res judicata and thus would cause the dismissal of the rest. Absolute identity of the parties is not required. It is enough
that there is substantial identity of the parties. It is enough that the party against whom the estoppel is set up is
actually a party to the former case. There is identity of causes of action if the same evidence will sustain the second
action. The principle applies even if the relief sought in the two cases may be different. Forum shopping consists of
filing multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for
the purpose of obtaining a favorable judgment.10
As the present jurisprudence now stands, forum shopping can be committed in three ways: (1) filing multiple cases
based on the same cause of action and with the same prayer, the previous case not having been resolved yet (litis
pendentia); (2) filing multiple cases based on the same cause of action and the same prayer, the previous case having
been finally resolved (res judicata); and (3) filing multiple cases based on the same cause of action but with different
prayers (splitting of causes of action, where the ground for dismissal is also either litis pendentia or res judicata 11 ). If
the forum shopping is not considered willful and deliberate, the subsequent cases shall be dismissed without prejudice
on one of the two grounds mentioned above. However, if the forum shopping is willful and deliberate, both (or all, if
there are more than two) actions shall be dismissed with prejudice. 12lavvphi1.net
The six grounds originally relied upon by the Ao-As group in SEC-SICD Case No. 3857 are entirely different from the
causes of action in NLRC Cases No. 03-01935-90 and 04-01979-90, Civil Cases No. 133394-CV and 131879-CV, and
SEC-SICD Cases No. 3556 and 3524. It is true that the causes of action in the latter cases were included as additional
grounds in SEC-SICD Case No. 3857 for the appointment of the management committee and for accounting "of all
funds, properties and assets of LCP which may have come into their possession during their incumbency as officers
and/or directors of LCP."13 However, the creation of a management committee and the prayer for accounting could not
have been asked for in the labor (NLRC Cases No. 03-01935-90 and 04-01979-90) and forcible entry (Civil Cases No.
133394-CV and 131879-CV) cases.
As regards the other SEC Cases, though, the Ao-As group could have indeed prayed for the creation of the
management committee and the accounting of the funds of the LCP. In fact, as stated by the Court of Appeals, the
petitioner in SEC-SICD Case No. 3556 had prayed for the appointment of a management committee in a motion dated
18 June 1991. This motion, however, was subsequent to the filing of SEC-SICD Case No. 3857 on 17 August 1990, for
which reason the SEC-SICD ruled that such motion cannot be given due course considering that it was one of the
incidents of SEC-SIDC Case No. 3857. In effect, the SEC-SIDC had denied the subsequent motion on the ground of litis
pendentia. But should SEC-SICD Case No. 3857, which contains the earlier prayer to create a management committee,
be likewise dismissed? Following the rules set forth in the preceding paragraphs, it would depend on whether the
different SEC cases constitute willful and deliberate forum shopping on the part of Ao-As group.
We hold that this is not a case of willful and deliberate forum shopping and, hence, the SEC-SICD Case No. 3857, which
contains the earlier prayer to create a management committee, should not be dismissed. The reason for this is the
strict evidentiary requirement needed to grant a prayer to create a management committee. The power of the SEC 14 to
create a management committee is found in Section 6(d) of Presidential Decree No. 902-A, as amended, which
provides:
Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:
d) To create and appoint a management committee, board or body upon petition or motu propio to undertake the
management of corporations, partnerships or other associations not supervised or regulated by other government
agencies in appropriate cases when there is imminent danger of dissipation, loss, wastage or destruction of assets or
other properties or paralization of business operations of such corporations or entities which may be prejudicial to the
interest of the minority stockholders, parties-litigants or the general public.

Evidently, it should be difficult to deduce the "imminent danger of dissipation, loss, wastage or destruction of assets or
other properties" from an allegation of a single act of previous misappropriation or dissipation on the part of the
Batong group. It is often only when the previous misappropriations and dissipations have become extensive and out of
control that it can be candidly said that there is an imminent danger of further dissipation. The Ao-As group cannot be
faulted therefore for not praying for the creation of a management committee in the first couple of cases it filed with
the SEC, and neither can they be faulted for using the causes of action in previously filed cases to prove their
allegation of imminent dissipation. We cannot rule out the possibility that the danger of imminent dissipation of the
corporate assets became apparent only in the acts of the respondents subsequent to the filing of the first two SEC
cases.
The creation of a management committee is not warranted by the facts of the case.
The Ao-As group claims that the Court of Appeals "unceremoniously disregarded all the undisputed testimonial and
documentary evidence presented before the SEC,"15 and strongly pointed to their evidence which "clearly show the
dissipation, wastage and loss of LCP funds and assets."16 These pieces of evidence supposedly proved the following:
1. The alleged anomaly concerning the sale of the land and the purchase of another land, both located in La
Trinidad. The La Trinidad Land Transaction, the proceeds whereof were allegedly unliquidated, was testified to
by petitioner Ao-As and Mr. Excelsio Hipe before the SEC-SICD in a hearing conducted on 11 September 1990.
2. Unliquidated cash advances and unaccounted funds. Petitioners presented evidence to prove the failure of
respondent Batong to liquidate cash advances and account for P4,000,000 of LCP funds.
3. Purchase of Leyte Land in the name of respondent Saquilayan with LCP funds. Respondent LCP VicePresident Victorio Y. Saquilayan allegedly purchased a parcel of land in Albuera, Leyte in his name, using LCP
funds. Respondent Saquilayan subsequently donated to the LCP, and explained that the purchase in his name
was upon advice of LCPs lawyers to comply with the rulings in Republic of the Philippines v. Hon. Arsenio M.
Gonong17 and Republic of the Philippines v. Iglesia Ni Cristo.18
4. Severance of partner-church relationship between the LCP and the LCMS. Respondents issued LCP Board
Resolution No. LCP-BD-28-90 severing all relations with the Lutheran Church-Missouri Synod (LCMS), allegedly
in violation of LCP Board Resolution No. LCP-BD-33-70 which stated that "all actions taken by LCP in convention
can only be amended, modified and changed by LCP in convention."
5. Taking of LCP Books of Account. Respondent Batong, accompanied by members of the LCP Board and about
15 armed security guards allegedly barged into the premises of the LCP in Old Sta. Mesa, Manila, and removed
all of the official records and documents of the LCP (including the books of account, official receipts, check and
journal vouchers, official papers and titles to property) and had the same relocated to his residence in
Caloocan City and to the offices of Immanuel Lutheran Church in Malabon.
The Court of Appeals had ruled:
Nothing in [Ao-As groups] evidence presented in support for their application for a management committee showed
an impending or imminent danger of dissipation of funds. In the assailed SEC-SICD Order dated September 3, 1992,
the appointment of a management committee was justified because of "acquisition of some lands using the corporate
funds . . . in the name of some person other than the LCP, and various cash advances of corporate funds by the
respondents not liquidated up to the present".
The SEC-SICD Order refers to the La Trinidad and Leyte land transactions and the alleged non-liquidation or
unaccountability of cash advances and other funds which constitutes the four causes of action alleged in the petition.
[The Ao-As group] admit[s] that the La Trinidad Land transactions [were] consummated in 1984 while the Leyte
transaction was made in 1989. Both occurred prior to the Commencement (sic) of the present petition in 1990.
Similarly, the alleged unliquidated cash advances referred to accumulated funds long withdrawn in the past by Dr.
Thomas Batong "(in varying amounts) for personal, travel and other miscellaneous purposes, all in the aggregate
amount of not less than P 323,750.00". And the alleged unaccounted funds referred to the "trial balance of LCP as of
September 15, 1989".

Notably, the remaining two causes of action in the aforementioned petition do not involve dissipation of funds, namely:
(i) the severance of partner-church relationship between LCP and Lutheran Church-Missouri Synod; and (ii) the transfer
of corporate books from the Sta. Mesa Office to Caloocan City.
All of the grounds relied upon by [the Ao-As group] pertain to past delinquencies for which there are other available
remedies such as accounting and reconveyance. The [Ao-As group] did not allege, much less prove, any present or
imminent loss or destruction of LCP properties and assets. At best, it expresses merely a general apprehension for
possible mismanagement by respondent on the basis of the aforementioned past transactions.
It must be stressed that the appointment of a management committee inevitably results in the drastic summary
removal of all directors and officers of LCP. Clearly, the appointment of a management committee is not justified due
to the failure of only two (2) of the LCP Board members to liquidate past cash advances and other transactions
involving corporate property and funds.
Where the corporation is solvent, a receiver will not be appointed because of past misconduct and a subsequent mere
apprehension of a future misdoing, where the present situation and the prospects for the future are not such as to
warrant a receivership. x x x"
Significantly, the SEC En Banc even pointed out that: "the question of whether or not the [Batong group] have to
account for all funds, properties and assets of LCP which may come into their possession as directors and/or officers of
LCP is still to be resolved by the hearing officer after trial on the merits."
Under prevailing law, the SEC-SICD should have refused the appointment of a management committee.
"It is the general rule that a receiver (or a management committee) will not be appointed unless it appears that the
appointment is necessary either to prevent fraud, or to save the property from fraud or threatened destruction, or at
least in case of solvent corporation x x x. The burden of proof is a heavy one which requires a clear showing that an
emergency exists.
"x x x Similarly, a receiver (or a management committee) should not be appointed in an action by a minority
stockholder against corporate officers for an accounting where the corporation is solvent and going concern and a
receiver is not necessary to preserve the corporate property pending the accounting".
Furthermore, a management committee should not be created when there was an adequate remedy available to
private respondents for the liquidation of unaccounted funds. 19
The Court of Appeals went on to rule that the members of the Ao-As group "have not positively shown that the said
funds are unaccounted for,"20 and analyzed the evidence presented by the Ao-As group to illustrate that the
unaccounted funds were only P1,572.43, "which may be attributable to adjustment errors but certainly not a case of
misappropriation or misuse."21
The Ao-As group maintains that the unaccounted funds amount to around P4.8 million, and claim that if the Court of
Appeals "had only given the [the Ao-As group] a chance to prove their allegations (concerning acts committed by
respondents subsequent to the creation of the management committee), then it would have confirmed the earlier
determination made by the SEC-SICD regarding the necessity for the creation of the management committee." 22 It
further asseverates:
20. The acts constituting [the Ao-As groups] six causes of action in the petition filed with the SEC-SICD (the La Trinidad
land transaction, the unliquidated cash advances, the unaccounted funds amounting to P4.8 million, the Leyte land
transaction, the severance of the sister-church relationship and forcible removal of the LCP books of account) could not
be characterized merely as "past delinquencies". The six causes of action and the subsequent acts of the [Batong
group], after the filing of the petition with the SEC-SICD, clearly show a continuing and deliberate scheme of the
dissipation and wastage of LCP properties and assets, which if unrestricted would cause further destruction of LCP
assets and paralyzation of its operations, as it had already done. The creation of the Management Committee was,
therefore, perfectly legal and justified. And the ruling of respondent Court of Appeals that these acts do not justify its
appointment is, [the Ao-As group] humbly submit, reversible error.

21. In addition, the CA Decision also declared that "in any event, the past anomalies were only done by some of the
Batong group." This is erroneous. Under the By-Laws of the LCP, the Board of Directors is in charge of the
disbursement of funds. Sections 1 and 2 of Article 6 of the LCP By-Laws state:
"Section 1. The President of the LCP shall be given the following executive powers and supervisory duties:
xxx xxx xxx
b. The President together with two other members of the LCP Board of Directors, may authorize the release of
surplus funds in emergencies or in cases of sudden need.
xxx xxx xxx
Section 2. The Board of Directors of the LCP
xxx xxx xxx
c. The Board of Directors shall prepare the annual budget of the LCP.
d. The Board of Directors shall be responsible for the annual auditing of all the LCP Properties and may initiate
special auditing at any time."
22. From the foregoing, it is clear that respondent Batong did not act alone, but in concert with the other members of
the LCP Board. The creation of the management committee was therefore justified.
23. The CA Decision also noted that since there were other remedies available to the petitioners to correct these
anomalies, the creation of the management committee was unjustified. [The Ao-As group] again humbly submit again
(sic) that respondent Court of Appeals erred when it made this statement. The LCP management committee was
created precisely because of the extreme urgency that [mere] caused by the continued dissipation, loss and wastage
of LCP funds and assets by the Batong group. If [the Ao-As group] were to avail of these so-called available remedies
then by the time a decision is to be rendered in these "available remedies" the assets and funds of the LCP would have
indubitably been lost forever since the dissipation, loss and wastage were then, and still is, an on going process.
Consequently, it is clearly unreasonable for respondent Court of Appeals to declare that the [Ao-As group] should have
first availed of these so-called remedies.23
Even without delving into the analysis of the prosecution evidence concerning the six causes of action and the alleged
acts subsequent to these six causes of action, it is already appropriate for us to rule that the facts as they appear to us
now do not warrant the creation of a management committee.
Refusal to allow stockholders (or members of a non-stock corporation) to examine books of the company is not a
ground for appointing a receiver (or creating a management committee) since there are other adequate remedies,
such as a writ of mandamus.24 Misconduct of corporate directors or other officers is not a ground for the appointment
of a receiver where there are one or more adequate legal action against the officers, where they are solvent, or other
remedies.25
The appointment of a receiver for a going corporation is a last resort remedy, and should not be employed when
another remedy is available. Relief by receivership is an extraordinary remedy and is never exercised if there is an
adequate remedy at law or if the harm can be prevented by an injunction or a restraining order. Bad judgment by
directors, or even unauthorized use and misapplication of the companys funds, will not justify the appointment of a
receiver for the corporation if appropriate relief can otherwise be had. 26
The fact that the President of the LCP needs the concurrence of only two other directors to authorize the release of
surplus funds plainly contradicts the conclusion of conspiracy among the presently 11-man board. Neither does the
fact that the Board of Directors of the LCP prepares the annual budget and the annual auditing of properties of the LCP
justify the conclusion that the alleged acts of respondent Batong was done in concert with the other directors. There
should have been evidence that such dissipation took place with the knowledge and express or implied consent of
most or the entire board. Good faith is always presumed. 27 As it is the obligation of one who alleges bad faith to prove

it, so should he prove that such bad faith was shared by all persons to whom he attributes the same. The last resort
remedy of replacing the entire board, therefore, with a management committee, is uncalled for.
The Court of Appeals erred in declaring as invalid the manner of elections of the Board of Directors of the LCP as
provided in its By-Laws.
The Ao-As group stresses that the Court of Appeals committed reversible error in declaring as invalid the manner of
elections of the Board of Directors of the Lutheran Church in the Philippines as provided in its By-Laws. The Court of
Appeals ruled:
The Court notes that the LCP By-Laws provide for a special procedure for the election of its directors. This was the
procedure followed by both the [Batong group] and the [Ao-As group].
"Section 2. Composition of the Board of Directors of LCP.
a. The Board of Directors shall be composed of the President of LCP and the President and lay representative of
each District.
b. Newly elected members of the LCP Board of Directors shall assume their positions immediately after LCP
conventions or the October LCP Board of Directors meeting in the year in which they are elected."
However, Section 24 of the Corporation Code provides that "[a]t all elections of directors or trustees, there must be
present, either in person or by representative to act by written proxy, x x x if there be no capital stock, a majority of
the members entitled to vote."
It is clear from Section 24 that in the election of the trustees of a non-stock corporation, it is necessary that at least "a
majority of the members entitled to vote" must be present at the meeting held for the purpose. It follows that trustees
cannot be elected by zones or regions, each zone or region electing independently and separately a member of the
board of trustees of the corporation, such method being violative of Section 24. (SEC Opinions, Jan. 30, 1969, April 1,
1981). The election of the directors by district or regions as provided in the LCP By-Laws where a majority of the
members are not present is inconsistent with the Corporation [Code] and must be struck down as invalid.
Consequently, the directors elected by district cannot be considered as bona fide directors. Even the election of LCP
officers in the SEC-SICD sponsored national convention of the LCP must be considered as invalid. 28
As argued by the Ao-As group, however, the validity of the LCP By-Laws providing for a special procedure in the
election of the LCP Board of Directors was never put in issue, either by the Ao-As group or the Batong group. The Court
of Appeals, therefore, should have refrained from passing upon such issue, motu propio. According to Rule 51, Section
8 of the Rules of Court, which pertains to matters which may be decided on appeal:
Sec. 8. Questions that may be decided. No error which does not affect the jurisdiction over the subject matter or the
validity of the judgment appealed from or the proceedings therein will be considered unless stated in the assignment
of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court
may pass upon plain errors and clerical errors.
The ruling of the SEC En Banc setting aside the SEC-SICD determination that LCP Board of Directors was illegally
constituted has therefore become final and executory, subject to the determination by the SEC-SICD of the seven
members that should comprise the Board, as likewise provided in said Decision. 29
Even the Batong group agrees with the Ao-As group on the validity of the by-laws provision concerning the election of
the directors by districts:
[The Batong group] respectfully submit[s] that the matter of how the directors or other leaders of a church shall be
chosen is a matter of ecclesiastical law or custom which is outside the jurisdiction of civil courts. Hence, even
assuming arguendo, that the mode of election of the LCP is not strictly in accordance with the Corporation Code, it was
improper for the Securities and Exchange Commission to apply the provisions of the said Code to the LCP. 30

In any case, the stipulation in the By-Laws is not contrary to the Corporation Code. Section 89 of the Corporation Code
pertaining to non-stock corporations provides that "(t)he right of the members of any class or classes (of a non-stock
corporation) to vote may be limited, broadened or denied to the extent specified in the articles of incorporation or the
by-laws."31 This is an exception to Section 6 of the same code where it is provided that "no share may be deprived of
voting rights except those classified and issued as preferred or redeemable shares, unless otherwise provided in this
Code."32 The stipulation in the By-Laws providing for the election of the Board of Directors by districts is a form of
limitation on the voting rights of the members of a non-stock corporation as recognized under the aforesaid Section
89. Section 24, which requires the presence of a majority of the members entitled to vote in the election of the board
of directors, applies only when the directors are elected by the members at large, such as is always the case in stock
corporations by virtue of Section 6.
WHEREFORE, the Decision of the Court of Appeals annulling and setting aside the order to create a management
committee is thereby AFFIRMED, with the MODIFICATION that every subsequent election of the directors of Lutheran
Church in the Philippines shall henceforth be in accordance with the By-Laws and Articles of Incorporation of the same.
Costs against petitioners.
SO ORDERED.

PHILIPPINE AIRLINES, INC., G.R. No. 143088

MANOLO AQUINO, JORGE
MA. CUI, JR. and PATRICIA Present:
CHIONG,
Petitioners, PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ,
CORONA,
-versus- AZCUNA, and
GARCIA, JJ.
Promulgated:
FLIGHT ATTENDANTS AND
STEWARDS ASSOCIATION OF
THE PHILIPPINES (FASAP) and January 24, 2006
LEONARDO BHAGWANI,
Respondents.
x----------------------------------------------------------------------------------------x

DECISION
AZCUNA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court presents a recurring question regarding the
Courts requirement of a certification of non-forum shopping.
Petitioners Philippine Airlines, Inc. (PAL) and Manolo Aquino, Jorge Ma. Cui, Jr. and Patricia Chiong, in their capacity as
Executive Vice-President Administration and Services, Manager International Cabin Crew and Assistant Vice-President
Cabin Services, respectively, are before the Court seeking the reversal of the resolution of the Court of Appeals in C.A.
G.R. No. SP-56850, dated January 31, 2000, dismissing their appeal and the resolution of May 11, 2000, denying the
motion for reconsideration.
The facts on the conflict between PAL and respondents Flight Attendants and Stewards Association of the Philippines
(FASAP) and Leonardo Bhagwani are not necessary for the Courts resolution of the petition. It is enough to state that
on May 14, 1997 FASAP and Leonardo Bhagwani filed a complaint for unfair labor practice, illegal suspension and
illegal dismissal against petitioners before the Labor Arbiter of the National Labor Relations Commission (NLRC). The
Labor Arbiter rendered a decision holding that PAL committed unfair labor practice and illegal dismissal of Bhagwani
and, consequently, ordered the payment of damages. The NLRC later modified the decision by setting aside the finding
that PAL was guilty of unfair labor practice, but affirming the rest of the decision.
What is relevant to the case is the subsequent appeal to the Court of Appeals. When petitioners filed a petition for
certiorari against the decision with the Court of Appeals, it was accompanied by a Certification of Non-Forum Shopping
executed by Cesar R. Lamberte and Susan Del Carmen, Vice-President Human Resources and Assistant Vice-President
Cabin Services of PAL, respectively, who are not parties to the case. The certification, however, was without proof that
the two affiants had authority to sign in behalf of petitioners. As a result, the Court of Appeals dismissed the case for
failure to show the authority of affiants to sign for PAL and for failure of the other petitioners to join in the execution of

the certification. A motion for reconsideration was filed with a Secretarys Certificate attached evidencing that affiants
Cesar R. Lamberte and Susan Del Carmen have been authorized by Board Resolution No. 00-02-03 to initiate and/or
cause to be filed on behalf of PAL petitions and pleadings in all labor-related cases. As to the other petitioners, it was
argued that they are mere nominal parties so that their failure to execute the certification does not justify dismissal of
the petition. Despite this submission, the Court of Appeals denied the motion for reconsideration. Hence, the case is
now before this Court.
The petition is without merit.
The necessity for a certification of non-forum shopping in filing petitions for certiorari is found in Rule 65, Section 1, in
relation to Rule 46, Section 3 of the Rules of Court. These provisions require it to be executed by the corresponding
petitioner or petitioners. As no distinction is made as to which party must execute the certificate, this requirement is
made to apply to both natural and juridical entities.[1] When the petitioner is a corporation, the certification should be
executed by a natural person. Furthermore, not just any person can be called upon to execute the certification,
although such a person may have personal knowledge of the facts to be attested to.[2]
This Court has explained that a corporation has no power except those conferred on it by the Corporation Code and
those that are implied or incidental to its existence. The exercise of these powers is done through the board of
directors and/or duly authorized officers and agents. Given these corporate features, the power of a corporation to sue
in any court is generally lodged with the board of directors. The board, in turn, can delegate the physical acts needed
to sue, which may be performed only by natural persons, to its attorneys-in-fact by a board resolution, if not already
authorized under the corporate by-laws.[3]
Thus, only individuals vested with authority by a valid board resolution may sign the certificate of non-forum shopping
in behalf of a corporation. In addition, the Court has required that proof of said authority must be attached. Failure to
provide a certificate of non-forum shopping is sufficient ground to dismiss the petition. Likewise, the petition is subject
to dismissal if a certification was submitted unaccompanied by proof of the signatorys authority.[4]
The petition filed with the Court of Appeals had a certification of non-forum shopping executed by Cesar R. Lamberte
and Susan Del Carmen. The certification, however, was without proof of authority to sign. When a motion for
reconsideration was filed, a Secretarys Certificate was submitted as proof that the board of directors of PAL had
authorized the two to execute the certificate. Nonetheless, the Court finds that this belated submission is an
insufficient compliance with the certification requirement.
This Court has allowed the reinstatement of petitions that were dismissed due to lack of proof of authority to sign the
certification upon its subsequent submission, saying that this amounted to
substantial compliance. The rationale was that the signatories, at the time of execution of the certification, were in fact
authorized to sign, although proof of their authority was lacking.[5]
This is not what happened in this case. A perusal of the Secretarys Certificate submitted reveals that the authority to
cause the filing of the petition was granted on February 15, 2000.[6] The petition, on the other hand, was filed on
January 24, 2000 and was dismissed by the Court of Appeals on January 31, 2000. This means that at the time the
certification was signed, Cesar R. Lamberte and Susan Del Carmen were not duly authorized by the Board of Directors
of PAL and, consequently, their signing and attestations were not in representation of PAL. This effectively translates to
a petition that was filed without a certification at all as none was issued by PAL, the principal party to the case.
The required certification of non-forum shopping must be valid at the time of filing of the petition. An invalid certificate
cannot be remedied by the subsequent submission of a Secretarys Certificate that vests authority only after the
petition had been filed.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.

CAGAYAN VALLEY DRUG CORPORATION vs. CIR G.R. No. 151413 February 13, 2008
FACTS: Petitioner, a corporation duly organized and existing under Philippine laws, is a duly licensed retailer of medicine
and other pharmaceutical products. Sometime in 1995, it granted 20% sales discounts to qualified senior citizens on
purchases of medicine pursuant to RA No. 7432 and its implementing rules and regulations. In compliance with Revenue
Regulation No. 2-94, petitioner treated the 20% sales discounts granted to qualified senior citizens in 1995 as deductions
from the gross sales in order to arrive at the net sales, instead of treating them as tax credit as provided by Section 4 of
RA 7432. On December 27, 1996, however, petitioner filed with the Bureau of Internal Revenue (BIR) a claim for tax
refund/tax credit of the full amount of the 20% sales discount it granted to senior citizens for the year 1995, allegedly
totaling to PhP 123,083 in accordance with Sec. 4 of RA 7432. The BIRs inaction on petitioners claim for refund/tax credit

compelled petitioner to file a petition for review before the CTA. On April 26, 2000, the CTA rendered a Decision
dismissing the petition for review for lack of merit. Aggrieved, petitioner elevated the matter before the CA. On August 31,
2000, the CA issued the assailed Resolution dismissing the petition on procedural grounds. The CA held that the person
who signed the verification and certification of absence of forum shopping, a certain Jacinto J. Concepcion, President of
petitioner, failed to adduce proof that he was duly authorized by the board of directors to do so. Hence, this petition.
ISSUE: WON petitioners president can sign the subject verification and certification sans the approval of its Board of
Directors.
RULING: With respect to a juridical person, Sec. 4, Rule 7 on verification and Sec. 5, Rule 7 on certification against forum
shopping are silent as to who the authorized signatory should be. Said rules do not indicate if the submission of a board
resolution authorizing the officer or representative is necessary. In Philippine Airlines v. Flight Attendants and Stewards
Association of the Philippines , SC ruled that only individuals vested with authority by a valid board resolution may sign
the certificate of non-forum shopping on behalf of a corporation. The action can be dismissed if the certification was
submitted unaccompanied by proof of the signatorys authority. SC believes that appending the board resolution to the
complaint or petition is the better procedure to obviate any question on the authority of the signatory to the verification and
certification. The required submission of the board resolution is grounded on the basic precept that corporate powers are
exercised by the board of directors, and not solely by an officer of the corporation. Hence, the power to sue and be sued
in any court or quasi-judicial tribunal is necessarily lodged with the said board. In the case at bar, the petitioner
substantially complied with Secs. 4 and 5, Rule 7 of the 1997 Revised Rules on Civil Procedure. First, the requisite board
resolution has been submitted albeit belatedly by petitioner. Second, the ruling in Lepanto with the rationale that the
President of petitioner is in a position to verify the truthfulness and correctness of the allegations in the petition. Third, the
President of petitioner has signed the complaint before the CTA at the inception of this judicial claim for refund or tax
credit.
UNIVERSITY OF THE EAST, ET AL. v. ANALIZA F. PEPANIO ET. AL., G.R. No. 193897, January 23, 2013
Labor Law; Remedial Law; Service by registered mail. For completeness of service by registered mail, the reckoning
period starts either (a) from the date of actual receipt of the mail by the addressee or (b) after five days from the date he
received the first notice from the postmaster. There must be a conclusive proof, however, that the registry notice was
received by or at least served on the addressee before the five-day period begins to run.
Here, the records fail to show that Atty. Mison in fact received the alleged registry notice from the post office on March 22,
2005 that required him to claim his mail Respondents have not presented a copy of the receipt evidencing that notice. The
Court has no choice but to consider the registry return receipt bearing the date April 4, 2005 which showed the date of
Atty. Misons receipt of a copy of the LA Decision a conclusive proof of service on that date. Reckoned from April 4, UE
filed its appeal to the NLRC on time.
xxxx
Remedial Law; Verification and certification against non-forum shopping. As a general rule, the Board of Directors or
Board of Trustees of a corporation must authorize the person who signs the verification and certification against non
forum shopping of its petition. But the Court has held that such authorization is not necessary when it is self-evident that
the signatory is in a position to verify the truthfulness and correctness of the allegations in the petition. Here the
verification and certification were signed by petitioner Dean Javier who, based on the given facts of the case, was in a
position to verify the truthfulness and correctness of the allegations in the petition.
FACTS:

DECS required college faculty members to have a master's degree as a minimum educational qualification for acquiring regular status.

1994 UE and its union executed a CBA with effect up to 1999 which provided that UE shall extend only semester-to-semester appointments to
college faculty staffs who did not possess the minimum qualifications.

UE hired the two respondents on a semester-to-semester basis to teach in its college. They could not qualify for probationary or regular status because
they lacked postgraduate degrees.

The two enrolled in graduate studies but failed to finish it.

UE extended probationary appointments to Bueno and Pepanio.

The Dean of the UE College of Arts and Sciences, sent notices to probationary faculty members, reminding them of the expiration of the
probationary status of those lacking in postgraduate qualification

Pepanio replied that she was enrolled at the PUP.

Bueno later wrote UE, demanding that it consider her a regular employee based on her six-and-a-half-year service. Pepanio cited her 3.5 years service.

Respondents filed cases of illegal dismissal against the school before the LA.

LA: Bueno and Pepanio were regular employees, given that they taught at UE for at least four semesters under the old CBA. The new CBA could not
deprive them of the employment benefits they already enjoyed.
UE appealed to the NLRC.

Bueno and Pepanio questioned the timeliness of the appeal to the NLRC. They pointed to the postmasters certification that its office received the mail
containing the LAs Decision on March 17, 2005 and "informed the Office of Atty. Mison right away but they only got the letter on April 4, 2005." Bueno
and Pepanio claim that the 10-day period for appeal should be counted from March 22, 2005, five days after the postmasters first notice to Atty. Mison
to claim his mail.

NLRC ruled that old CBA did not automatically confer permanent status to Bueno and Pepanio. They still had to meet the standards for permanent
employment provided under the Manual of Regulations and the Joint Order mentioned above.

CA reinstated the LAs Decision by reason of technicality. It held that the 10-day period for appeal already lapsed when UE filed it on April 14, 2005
since the reckoning period should be counted five days from March 17, when the postmaster gave notice to UEs legal counsel to claim his mail or
from March 22, 2005.

Respondents: petition should be denied since it failed to enclose a certification from the UE Board of Trustees, authorizing petitioner Dean
Javier to sign the verification and CNFS.

Issues/ruling
WON UEs failure to enclose a certification from the UE Board of Trustees to execute the verification and certification of non-forum
shopping was fatal
The BOD or Board of Trustees of a CORP must authorize the person who signs the verification and certification against non-forum shopping of its
petition. But the Court has held that such authorization is not necessary when it is self-evident that the signatory is in a position to verify the
truthfulness and correctness of the allegations in the petition.
The verification and certification were signed by petitioner Dean Javier who, based on the given facts of the case, was "in a position to verify the
truthfulness and correctness of the allegations in the petition."

WON UE filed a timely appeal to the NLRC from the Decision of the LA;
Bueno and Pepanio contend that UE filed its appeal to the NLRC beyond the required 10-day period. They point out that thepostmaster gave notice to
Atty. Mison on March 17, 2005 to claim his mail that contained the LA Decision. He was deemed in receipt of that decision five days after the notice
or on March 22, 2005. UE had 10 days from the latter date or until April 1, 2005 within which to file its appeal from that decision.
UE: period of appeal should be counted from April 4, 2005, the date appearing on the registry return receipt of the mail addressed to its counsel.
For completeness of service by registered mail, the reckoning period starts either
(a) from the date of actual receipt of the mail by the addressee or
(b) after five days from the date he received the first notice from the postmaster.
There must be a conclusive proof, however, that the registry notice was received by or at least served on the addressee before the five-day period
begins to run.
The records fail to show that Atty. Mison in fact received the alleged registry notice from the post office on March 22, 2005 that required him to claim his
mail. The Court has no choice but to consider the registry return receipt bearing the date April 4, 2005 which showed the date of Atty. Misons
receipt of a copy of the LA Decision a conclusive proof of service on that date.
Reckoned from April 4, UE filed its appeal to the NLRC on time.

WON UE illegally dismissed Bueno and Pepanio.

Respondents argue that UE hired them when what was in force was the 1994 CBA between UE and the faculty union. Escorpizo v. University of
Baguio a school CBA must be read in conjunction with statutory and administrative regulations governing faculty qualifications.
UE gave respondents Bueno and Pepanio more than ample opportunities to acquire the postgraduate degree required of them.

FIRST DIVISION
[G.R. No. 151098. March 21, 2006.]
ERLINDA GAJUDO, FERNANDO GAJUDO, JR., ESTELITA GAJUDO, BALTAZAR GAJUDO and DANILO ARAHAN CHUA, petitioners,
vs. TRADERS ROYAL BANK, 1 respondent.
DECISION
PANGANIBAN, C.J p:
The mere fact that a defendant is declared in default does not automatically result in the grant of the prayers of the plaintiff. To win, the
latter must still present the same quantum of evidence that would be required if the defendant were still present. A party that defaults is
not deprived of its rights, except the right to be heard and to present evidence to the trial court. If the evidence presented does not
support a judgment for the plaintiff, the complaint should be dismissed, even if the defendant may not have been heard or allowed to
present any countervailing evidence.
The Case
Before us is a Petition for Review 2 under Rule 45 of the Rules of Court, assailing the June 29, 2001 Decision 3 and December 6, 2001
Resolution 4 of the Court of Appeals (CA) in CA-G.R. CV No. 43889. The CA disposed as follows:
"UPON THE VIEW WE TAKE OF THIS CASE, THUS, the partial judgment appealed from, must be, as it hereby is, VACATED and SET
ASIDE, and another one entered DISMISSING the complaint at bench. Without costs." 5
The assailed Resolution denied petitioners' Motion for Reconsideration 6 for lack of merit.
The Facts
The CA narrated the facts as follows:
"[Petitioners] filed a complaint before the Regional Trial Court of Quezon City, Branch 90, against [respondent] Traders Royal Bank, the
City Sheriff of Quezon City and the Register of Deeds of Quezon City. Docketed thereat as Civil Case No. Q-41203, the complaint
sought the annulment of the extra-judicial foreclosure and auction sale made by [the] city sheriff of Quezon City of a parcel of land
covered by TCT No. 16711 of the Register of Deeds of Quezon City, the conventional redemption thereof, and prayed for damages and
the issuance of a writ of preliminary injunction.
"The complaint alleged that in mid 1977[, Petitioner] Danilo Chua obtained a loan from [respondent] bank in the amount of P75,000.00
secured by a real estate mortgage over a parcel of land covered by TCT No. 16711, and owned in common by the [petitioners]; that
when the loan was not paid, [respondent] bank commenced extra-judicial foreclosure proceedings on the property; that the auction sale
of the property was set on 10 June 1981, but was reset to 31 August 1981, on [Petitioner Chua's] request, which, however, was made
without the knowledge and conformity of the other [petitioners]; that on the re-scheduled auction sale, [the] Sheriff of Quezon City sold
the property to the [respondent] bank, the highest bidder therein, for the sum of P24,911.30; that the auction sale was tainted with
irregularity because, amongst others, the bid price was shockingly or unconscionably, low; that the other [petitioners] failed to redeem
the property due to their lack of knowledge of their right of redemption, and want of sufficient education; that, although the period of
redemption had long expired, [Petitioner] Chua offered to buy back, and [respondent] bank also agreed to sell back, the foreclosed
property, on the understanding that Chua would pay [respondent] bank the amount of P40,135.53, representing the sum that the bank
paid at the auction sale, plus interest; that [Petitioner] Chua made an initial payment thereon in the amount of P4,000.00, covered by
Interbank Check No. 09173938, dated 16 February 1984, duly receipted by [respondent] bank; that, in a sudden change of position,
[respondent] bank wrote Chua, on 20 February 1984, asking that he could repurchase the property, but based on the current market
value thereof; and that sometime later, or on 22 March 1984, [respondent] bank wrote Chua anew, requiring him to tender a new offer to
counter the offer made thereon by another buyer. TSaEcH
"Traversing [petitioners'] complaint, [respondent] bank, upon 05 July 1984, filed its answer with counterclaim, thereunder asserting that
the foreclosure sale of the mortgaged property was done in accordance with law; and that the bid price was neither unconscionable, nor
shockingly low; that [petitioners] slept on their rights when they failed to redeem the property within the one year statutory period; and

that [respondent] bank, in offering to sell the property to [Petitioner] Chua on the basis of its current market price, was acting
conformably with law, and with legitimate banking practice and regulations.
"Pre-trial having been concluded, the parties entered upon trial, which dragged/lengthened to several months due to postponements.
Upon 11 June 1988, however, a big conflagration hit the City Hall of Quezon City, which destroyed, amongst other things, the records of
the case. After the records were reconstituted, [petitioners] discovered that the foreclosed property was sold by [respondent] bank to the
Ceroferr Realty Corporation, and that the notice of lis pendens annotated on the certificate of title of the foreclosed property, had
already been cancelled. Accordingly, [petitioners], with leave of court, amended their complaint, but the Trial Court dismissed the case
'without prejudice' due to [petitioners'] failure to pay additional filing fees.
"So, upon 11 June 1990, [petitioners] re-filed the complaint with the same Court, whereat it was docketed as Civil Case No. 90-5749,
and assigned to Branch 98: the amended complaint substantially reproduced the allegations of the original complaint. But [petitioners]
this time impleaded as additional defendants the Ceroferr Realty Corporation and/or Cesar Roque, and Lorna Roque, and included an
additional cause of action, to wit: that said new defendants conspired with [respondent] bank in [canceling] the notice of lis pendens by
falsifying a letter sent to and filed with the office of the Register of Deeds of Quezon City, purportedly for the cancellation of said notice.
"Summons was served on [respondent] bank on 26 September 1990, per Sheriff's Return dated 08 October 1990. Supposing that all the
defendants had filed their answer, [petitioners] filed, on 23 October 1991, a motion to set case for pre-trial, which motion was, however,
denied by the Trial Court in its Order of 25 October 1991, on the ground that [respondent] bank has not yet filed its answer. On 13
November 1991[, petitioners] filed a motion for reconsideration, thereunder alleging that they received by registered mail, on 19 October
1990, a copy of [respondent] bank's answer with counterclaim, dated 04 October 1990, which copy was attached to the motion. In its
Order of 14 November 1991, the trial Court denied for lack of merit, the motion for reconsideration, therein holding that the answer with
counterclaim filed by [respondent] bank referred to another civil case pending before Branch 90 of the same Court.
"For this reason, [petitioners] filed on 02 December 1991 a motion to declare [respondent] bank in default, thereunder alleging that no
answer has been filed despite the service of summons on it on 26 September 1990.
"On 13 December 1991, the Trial Court declared the motion submitted for resolution upon submission by [petitioners] of proof of service
of the motion on [respondent] bank.
"Thus, on 16 January 1992, upon proof that [petitioners] had indeed served [respondent] bank with a copy of said motion, the Trial
Court issued an Order of default against [respondent] bank.
"Upon 01 December 1992, on [petitioners'] motion, they were by the Court allowed to present evidence ex parte on 07 January 1993,
insofar as [respondent] bank was concerned.
"Thereafter, or on 08 February 1993, the Trial Court rendered the new questioned partial decision. 7
"Aggrieved, [respondent] bank filed a motion to set aside [the] partial decision by default against Traders Royal Bank and admit
[respondent] Traders Royal Bank's . . . Answer with counterclaim: thereunder it averred, amongst others, that the erroneous filing of said
answer was due to an honest mistake of the typist and inadvertence of its counsel. DETcAH
"The [trial court] thumbed down the motion in its Order of 26 July 1993." 8
Respondent bank appealed the Partial Decision 9 to the CA. During the pendency of that appeal, Ceroferr Realty Corporation and/or
Cesar and/or Lorna Roque filed a Manifestation with Motion 10 asking the CA to discharge them as parties, because the case against
them had already been dismissed on the basis of their Compromise Agreement 11 with petitioners. On May 14, 1996, the CA issued a
Resolution 12 granting Ceroferr et al.'s Manifestation with Motion to discharge movants as parties to the appeal. The Court, though,
deferred resolution of the matters raised in the Comment 13 of respondent bank. The latter contended that the Partial Decision had
been novated by the Compromise Agreement, whose effect of res judicata had rendered that Decision functus officio.
Ruling of the Court of Appeals
The CA ruled in favor of respondent bank. Deemed, however, to have rested on shaky ground was the latter's "Motion to Set Aside
Partial Decision by Default Against Traders Royal Bank and Admit Defendant Traders Royal Bank's Answer." 14 The reasons offered by

the bank for failing to file an answer were considered by the appellate court to be "at once specious, shallow and sophistical and can
hardly be dignified as a 'mistake' or 'excusable negligence,' which ordinary prudence could not have guarded against." 15
In particular, the CA ruled that the erroneous docket number placed on the Answer filed before the trial court was not an excusable
negligence by the bank's counsel. The latter had a bounden duty to be scrupulously careful in reviewing pleadings. Also, there were
several opportunities to discover and rectify the mistake, but these were not taken. Moreover, the bank's Motion to Set Aside the Partial
Decision and to Admit [the] Answer was not accompanied by an affidavit of merit. These mistakes and the inexcusable negligence
committed by respondent's lawyer were binding on the bank.

On the issue of whether petitioners had convincingly established their right to relief, the appellate court held that there was no ground to
invalidate the foreclosure sale of the mortgaged property. First, under Section 3 of Act No. 3135, an extrajudicial foreclosure sale did not
require personal notice to the mortgagor. Second, there was no allegation or proof of noncompliance with the publication requirement
and the public posting of the notice of sale, provided under Act No. 3135, as amended. Third, there was no showing of inadequacy of
price as no competent evidence was presented to show the real market value of the land sold or the readiness of another buyer to offer
a price higher than that at which the property had been sold.
Moreover, petitioners failed to prove that the bank had agreed to sell the property back to them. After pointing out that the redemption
period had long expired, respondent's written communications to Petitioner Chua only showed, at most, that the former had made a
proposal for the latter to buy back the property at the current market price; and that Petitioner Chua was requested to make an offer to
repurchase the property, because another buyer had already made an offer to buy it. On the other hand, respondent noted that the
Interbank check for P4,000 was for "deposit only." Thus, there was no showing that the check had been issued to cover part of the
repurchase price.
The appellate court also held that the Compromise Agreement had not resulted in the novation of the Partial Decision, because the two
were not incompatible. In fact, the bank was not even a party to the Agreement. Petitioners' recognition of Ceroferr's title to the
mortgaged property was intended to preclude future litigation against it.
Hence this Petition. 16
Issues
In their Memorandum, petitioners raise the following issues:
"1. Whether or not the Respondent Court of Appeals erred in failing to apply the provisions of Section 3, Rule 9 of the 1997 Rules of
Civil Procedure [and in applying instead] the rule on preponderance of evidence under Section 1, Rule 133 of the Rules of Court.
EITcaH
"2. Whether or not the respondent appellate court failed to apply the conventional redemption rule provided for under Article 1601 of the
New Civil Code.
"3. Whether or not this Honorable Court can exercise its judicial prerogative to evaluate the findings of facts." 17
The first issue is one of law and may be taken up by the Court without hindrance, pursuant to Section 1 of Rule 45 of the Rules of Court.
18 The second and the third issues, however, would entail an evaluation of the factual findings of the appellate court, a function
ordinarily not assumed by this Court, unless in some excepted cases. The Court will thus rule on the first issue before addressing the
second and the third issues jointly.
The Court's Ruling
The Petition has no merit.
First Issue:
Quantum of Proof

Petitioners challenge the CA Decision for applying Section 3 of Rule 9 of the Rules of Court, rather than Section 1 of Rule 133 of the
same Rules. In essence, petitioners argue that the quantum of evidence for judgments flowing from a default order under Section 3 of
Rule 9 is not the same as that provided for in Section 1 of Rule 133.
For ease of discussion, these two rules will be reproduced below, starting with Section 3 of Rule 9 of the Rules of Court:
"Sec. 3. Default; declaration of. If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of
the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the
court shall proceed to render judgment granting the claimant such relief as his pleading may warrant, unless the court in its discretion
requires the claimant to submit evidence. Such reception of evidence may be delegated to the clerk of court.
"(a) Effect of order of default. A party in default shall be entitled to notice of subsequent proceedings but not to take part in the trial.
"(b) Relief from order of default. A party declared in default may at any time after notice thereof and before judgment file a motion
under oath to set aside the order of default upon proper showing that his failure to answer was due to fraud, accident, mistake or
excusable negligence and that he has a meritorious defense. In such case, the order of default may be set aside on such terms and
conditions as the judge may impose in the interest of justice.
"(c) Effect of partial default. When a pleading asserting a claim states a common cause of action against several defending parties,
some of whom answer and the others fail to do so, the court shall try the case against all upon the answers thus filed and render
judgment upon the evidence presented.
"(d) Extent of relief to be awarded. A judgment rendered against a party in default shall not exceed the amount or be different in kind
from that prayed for nor award unliquidated damages.
"(e) Where no defaults allowed. If the defending party in an action for annulment or declaration of nullity of marriage or for legal
separation fails to answer, the court shall order the prosecuting attorney to investigate whether or nor a collusion between the parties
exists, and if there is no collusion, to intervene for the State in order to see to it that the evidence submitted is not fabricated."
We now quote Section 1 of Rule 133:
"SECTION 1. Preponderance of evidence, how determined. In civil cases, the party having the burden of proof must establish his
case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved
lies, the court may consider all the facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their
means and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or
improbability of their testimony, their interest or want of interest, and also their personal credibility so far as the same may legitimately
appear upon the trial. The court may also consider the number of witnesses, though the preponderance is not necessarily with the
greater number."
Between the two rules, there is no incompatibility that would preclude the application of either one of them. To begin with, Section 3 of
Rule 9 governs the procedure which the trial court is directed to take when a defendant fails to file an answer. According to this
provision, the court "shall proceed to render judgment granting the claimant such relief as his pleading may warrant," subject to the
court's discretion on whether to require the presentation of evidence ex parte. The same provision also sets down guidelines on the
nature and extent of the relief that may be granted. In particular, the court's judgment "shall not exceed the amount or be different in kind
from that prayed for nor award unliquidated damages." CTaSEI
As in other civil cases, basic is the rule that the party making allegations has the burden of proving them by a preponderance of
evidence. 19 Moreover, parties must rely on the strength of their own evidence, not upon the weakness of the defense offered by their
opponent. 20 This principle holds true, especially when the latter has had no opportunity to present evidence because of a default order.
Needless to say, the extent of the relief that may be granted can only be as much as has been alleged and proved 21 with preponderant
evidence required under Section 1 of Rule 133.
Regarding judgments by default, it was explained in Pascua v. Florendo 22 that complainants are not automatically entitled to the relief
prayed for, once the defendants are declared in default. Favorable relief can be granted only after the court has ascertained that the
relief is warranted by the evidence offered and the facts proven by the presenting party. In Pascua, this Court ruled that ". . . it would be

meaningless to require presentation of evidence if every time the other party is declared in default, a decision would automatically be
rendered in favor of the non-defaulting party and exactly according to the tenor of his prayer. This is not contemplated by the Rules nor
is it sanctioned by the due process clause." 23
The import of a judgment by default was further clarified in Lim Tanhu v. Ramolete. 24 The following disquisition is most instructive:
"Unequivocal, in the literal sense, as these provisions [referring to the subject of default then under Rule 18 of the old Rules of Civil
Procedure] are, they do not readily convey the full import of what they contemplate. To begin with, contrary to the immediate notion that
can be drawn from their language, these provisions are not to be understood as meaning that default or the failure of the defendant to
answer should 'be interpreted as an admission by the said defendant that the plaintiff's cause of action find support in the law or that
plaintiff is entitled to the relief prayed for.' . . . .
xxx xxx xxx
"Being declared in default does not constitute a waiver of rights except that of being heard and of presenting evidence in the trial court. .
...
"In other words, a defaulted defendant is not actually thrown out of court. While in a sense it may be said that by defaulting he leaves
himself at the mercy of the court, the rules see to it that any judgment against him must be in accordance with law. The evidence to
support the plaintiff's cause is, of course, presented in his absence, but the court is not supposed to admit that which is basically
incompetent. Although the defendant would not be in a position to object, elementary justice requires that only legal evidence should be
considered against him. If the evidence presented should not be sufficient to justify a judgment for the plaintiff, the complaint must be
dismissed. And if an unfavorable judgment should be justifiable, it cannot exceed in amount or be different in kind from what is prayed
for in the complaint." 25

In sum, while petitioners were allowed to present evidence ex parte under Section 3 of Rule 9, they were not excused from establishing
their claims for damages by the required quantum of proof under Section 1 of Rule 133. Stated differently, any advantage they may have
gained from the ex parte presentation of evidence does not lower the degree of proof required. Clearly then, there is no incompatibility
between the two rules.
Second and Third Issues:
Review of the Evidence
Petitioners urge this Court to depart from the general rule that the lower courts' findings of fact are not reviewable in a petition for review.
26 In support of their plea, they cite the conflicting findings of the trial and the appellate courts, as well as the alleged conjectures and
surmises made by the CA in arriving at its Decision. cCESaH
Indeed, the differences between the findings of the two courts a quo, leading to entirely disparate dispositions, is reason enough for this
Court to review the evidence in this case. 27 Whether the CA indulged in surmises and conjectures when it issued the assailed Decision
will thus be determined.
At the outset, it behooves this Court to clarify the CA's impression that no evidence was presented in the case which might have
contributed to petitioners' challenge to its Decision. The appellate court's observation was based on the notation by the lower court's
clerk of court that there were no separate folders for exhibits and transcripts, because "there was no actual hearing conducted in this
case." 28
True, there was no hearing conducted between petitioners and respondent, precisely because the latter had been declared in default,
and petitioners had therefore been ordered to present their evidence ex parte. But the absence of a hearing did not mean that no
evidence was presented. The Partial Decision dated February 8, 1993, in fact clearly enumerated the pieces of evidence adduced by
petitioners during the ex parte presentation on January 7, 1993. The documentary evidence they presented consisted of the following:
1. A copy of respondent bank's Petition for the extrajudicial foreclosure and auction sale of the mortgaged parcel of land 29
2. The Certificate of Sale that was a consequence of the foreclosure sale 30

3. A Statement of Account dated February 15, 1984, showing Petitioner Chua's outstanding debt in the amount of P40,135.53 31
4. A copy of the Interbank check dated February 16, 1984, in the amount of P4,000 32
5. The Official Receipt issued by the bank acknowledging the check 33
6. The bank's letter dated February 20, 1984, advising Petitioner Chua of the sale of the property at an extrajudicial public auction; the
lapse of the period of redemption; and an invitation to purchase the property at its current market price 34
7. Another letter from the bank dated March 22, 1984, inviting Petitioner Chua to submit, within five days, an offer to buy the same
property, which another buyer had offered to buy 35
8. A copy of the Notice of Lis Pendens, the filing of which was done after that of the Amended Complaint 36
9. A copy of the title showing the inscription of the Notice of Lis Pendens 37
10. A copy of the Absolute Deed of Sale to Cerrofer 38
11. A copy of a letter dated August 29, 1986, made and signed by petitioners' counsel, requesting the cancellation of the Notice of Lis
Pendens 39
12. A copy of a page of the Memorandum of Encumbrance from TCT No. (314341) 7778/T-39 40
Having clarified this matter, we proceed to review the facts.
Petitioners do not deny that the one-year period for legal redemption had already lapsed when respondent bank supposedly offered to
sell the property in question. The records clearly show that the Certificate of Sale following the extrajudicial public auction of the
property was registered on June 21, 1982, the date from which the legal redemption period was to be reckoned. 41 Petitioners insist,
though, that they had the right to repurchase the property through conventional redemption, as provided under Article 1601 of the Civil
Code, worded as follows:
"ART. 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon."
It is true that the one-year period of redemption provided in Act No. 3135, as amended the law under which the property here was
sold in a foreclosure sale is only directory and, as such can be extended by agreement of the parties. 42 However, it has also been
held that for legal redemption to be converted into conventional redemption, two requisites must be established: 1) voluntary agreement
of the parties to extend the redemption period; and 2) the debtor's commitment to pay the redemption price on a fixed date. 43 Thus,
assuming that an offer was made to Petitioner Chua to buy back the property after the lapse of the period of legal redemption,
petitioners needed to show that the parties had agreed to extend the period, and that Petitioner Chua had committed to pay the
redemption price on a fixed date.
The letters sent by the bank to Petitioner Chua on February 20 and March 22, 1984, do not convincingly show that the parties arrived at
a firm agreement for the repurchase of the property. What can be gleaned from the February 20 letter is that Petitioner Chua proposed
to pay the redemption price for the property, but that the bank refused to accede to his request, because the one-year redemption
period had already lapsed. 44 The bank, though, had offered to sell back the property to him at the current market value. Indeed, an
examination of his earlier letter of February 17, 1984, readily reveals that he expressed willingness to settle his account with the bank,
but that his "present financial situation precludes [him] from effecting an immediate settlement . . . ." 45
On the other hand, the letter dated March 22, 1984, clearly states that ". . . the Bank rejected [his] request to redeem said property due
to [the] lapse of [the] one (1) year legal redemption period." 46 Nonetheless, he was "[invited] to submit an offer to buy the same
property in five (5) days from receipt [of the letter]." 47 Petitioner Chua was also informed that the bank had received an offer to
purchase the foreclosed property. As to the P4,000 check enclosed in his proposal dated February 17, 1984, as a token of his good

faith, he was advised that the amount was still outstanding in the books of the bank and could be claimed by him if he thought the
invitation was not feasible. cAECST
More important, there was no showing that petitioners had committed to pay the redemption price on a fixed date. True, Petitioner Chua
had attempted to establish a previous agreement to repurchase the property for less than its fair market value. He had submitted in
evidence a Statement of Account 48 dated February 15, 1984, showing a balance of P40,135.53; the Interbank check dated February
16, 1984, for P4,000, which was deposited to the account of respondent bank; 49 and the Official Receipt for the check. 50
Granting that these documents evinced an agreement, petitioners were still unable to establish a firm commitment on their part to pay
the redemption price on a fixed date. On the contrary, the February 17 letter of Petitioner Chua to the bank clearly manifested that he
was not capable of paying the account immediately. For this reason, he proposed to pay in "three or four installments" without a
specification of dates for the payments, but with a plea for a reduction of the interest charges. That proposal was rejected.
Indeed, other than the Interbank check marked "for deposit" by respondent bank, no other evidence was presented to establish that
petitioners had offered to pay the alleged redemption price of P40,135.53 on a fixed date. For that matter, petitioners have not shown
that they tendered payment of the balance and/or consigned the payment to the court, in order to fulfill their part of the purported
agreement. These remedies are available to an aggrieved debtor under Article 1256 of the Civil Code, 51 when the creditor unjustly
refuses to accept the payment of an obligation.
The next question that presents itself for resolution is the propriety of the CA's ruling vacating the Partial Decision of the regional trial
court (RTC) and dismissing the case. To recall, the RTC had resolved to withhold a ruling on petitioners' right to redeem conventionally
and/or order the reconveyance of the property in question, pending a determination of the validity of the sale to Cerrofer Realty
Corporation and Spouses Cesar and Lorna Roque. The trial court, however, granted the prayer for damages against respondent bank.
The RTC ruled as follows:
"The evidence presented by [petitioners] in so far as the cause of action against [respondent] Traders Royal Bank is concerned are
preponderant to support the claims of the [petitioners]. However, in view of the fact that the property subject matter of this case has
already been conveyed to defendant Cerrofer Realty Corporation thus the issue as to whether or not the said conveyance or sale is valid
is sill pending between the [petitioners] and [respondents] Cerrofer Realty Corporation and Cesar Roque and Lorna Roque. Hence, this
Court resolves to grant the prayer for damages against Traders Royal Bank.
"The claims of the [petitioners] as against [respondent] Traders Royal Bank having been established and proved by evidence, judgment
is hereby rendered ordering [respondent] Traders Royal Bank to pay [petitioners] actual damage or the market value of the land in
question in the sum of P500,000.00; the sum of P70,000.00 as compensatory damages; the sum of P200,000.00 to the heirs of
[petitioner] Danilo Chua; and attorney's fees in the sum of P30,000.00." 52

In the light of the pending issue as to the validity of the sale of the property to the third parties (Cerrofer Realty Corporation and
Spouses Roque), the trial court properly withheld judgment on the matter and thus left the prayer for damages as the sole issue for
resolution.
To adjudge damages, paragraph (d) of Section 3 of Rule 9 of the Rules of Court provides that a judgment against a party in default
"shall not exceed the amount or be different in kind from that prayed for nor award unliquidated damages." The proscription against the
award of unliquidated damages is significant, because it means that the damages to be awarded must be proved convincingly, in
accordance with the quantum of evidence required in civil cases.
Unfortunately for petitioners, the grant of damages was not sufficiently supported by the evidence for the following reasons.
First, petitioners were not deprived of their property without cause. As correctly pointed out by the CA, Act No. 3135, as amended, does
not require personal notice to the mortgagor. 53 In the present case, there has been no allegation much less, proof of
noncompliance with the requirement of publication and public posting of the notice of sale, as required by Act No. 3135. Neither has
there been competent evidence to show that the price paid at the foreclosure sale was inadequate. 54 To be sure, there was no ground
to invalidate the sale. ESCTaA

Second, as previously stated, petitioners have not convincingly established their right to damages on the basis of the purported
agreement to repurchase. Without reiterating our prior discussion on this point, we stress that entitlement to actual and compensatory
damages must be proved even under Section 3 of Rule 9 of the Rules of Court. The same is true with regard to awards for moral
damages and attorney's fees, which were also granted by the trial court.
In sum, petitioners have failed to convince this Court of the cogency of their position, notwithstanding the advantage they enjoyed in
presenting their evidence ex parte. Not in every case of default by the defendant is the complainant entitled to win automatically.
WHEREFORE, this Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioners.
SO ORDERED.
Ynares-Santiago, Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.

Footnotes
1.The Court of Appeals was included in the Petition as a respondent. However, the CA was omitted by this Court from the title of the
case, because it need not be impleaded in petitions for review, under Section 4 of Rule 45 of the Rules of Court.
||| (Gajudo v. Traders Royal Bank, G.R. No. 151098, [March 21, 2006], 519 PHIL 791-812)

Gajudo vs. Traders Royal Bank (485 SCRA 108)

o There is no incompatibility between Rule 9, Sec 3 and Rule 133, Sec 1 that would preclude the application of
either one of them. Rule 9, Sec 3 governs the procedure which the trial court is directed to take when a
defendant fails to file an answer. According to the provision, the court shall proceed to render judgment
granting the claimant such relief as his pleading may warrant, subject to the courts discretion on whether to
require the presentation of evidence ex parte. The same provision also sets down guidelines on the nature and
extent of the relief that may be granted. In particular, the courts judgment shall not exceed the amount or
be different in kind from that prayed for nor award unliquidated damages.

Vlason Enterprises Corp. vs. CA (330 SCRA 26) o Service of a copy of a motion containing the time and place of hearing
of that motion is a mandatory requirement, and failure of the movants to comply with these requirements renders their
motions fatally defective. o However, there are exceptions to this rule where liberal construction has been allowed in
cases: 1. Where a rigid application will result in a manifest failure or miscarriage of justice; especially if a party
successfully shows that the alleged defect in the questioned final and executory judgment is not apparent on its face
or from the recitals contained therein; 2. Where the interest of substantial justice will be served; 3. Where the
resolution of the motion is addressed solely to the sound and judicious discretion of the court; and 4. Where the
injustice to the adverse party is not commensurate to the degree of his thoughtlessness in not complying with the
procedure prescribed.

CHOITHRAM JETHMAL RAMNANI and/or NIRMLA V. RAMNANI and MOTI C. RAMNANI, petitioners,
vs. COURT OF APPEALS, SPS. ISHWAR RAMNANI AND OVERSEAS HOLDING CO., LTD., respondents.
[G.R. No. 85496. July 10, 2001]
SPS. ISHWAR JETHMAL RAMNANI and SONYA JETHMAL RAMNANI, petitioners, vs. THE HONORABLE COURT
OF APPEALS, ORTIGAS & COMPANY, LTD. PARTNERSHIP and OVERSEAS HOLDING CO., LTD., et.
al., respondents.
[G.R. No. 195071. July 10, 2001]
OVERSEAS
HOLDING
CO.,
RAMNANI, respondents.

LTD., petitioner, vs.

ISHWAR

JETHMAL,

RAMNANI

and

SONYA

RESOLUTION
SANDOVAL-GUTIERREZ, J.:
Execution of a judgment is the fruit and end of the suit and is the life of the law. To frustrate it for almost a decade
by means of deception and dilatory schemes on the part of the losing litigants is to frustrate all the efforts, time and
expenditure of the courts. This Courts Decision in this case became final and executory as early as 1992. After years of
continuous wrangling during the execution stage, it is unfortunate that the judgment still awaits full

implementation.Delaying tactics employed by the said losing litigants have prevented the orderly execution. It is in the
interest of justice that we should write finis to this litigation.
For resolution is the Motion for Reconsideration of this Courts Resolution dated August 17, 1999 filed by spouses
Ishwar and Sonya Ramnani. Our assailed Resolution denied their Manifestation and Urgent Motion dated May 6, 1994
and affirmed the orders of the Regional Trial Court of Pasay City, Branch 119 dated January 27 and April 5, 1994.
The factual backdrop, culled from the voluminous records in these cases, are:
In the latter part of 1965, spouses Ishwar Jethmal Ramnani, an American citizen, and Sonya Jethmal Ramnani,
both from New York (hereinafter referred to as spouses Ishwar), invested substantial amount of money for a profitable
business venture in the Philippines. Since they could not personally manage their investments, they appointed two of
Ishwars brothers, Choithram Jethmal Ramnani and Navalrai Jethmal Ramnani, as their attorneys-in-fact.
Choithram decided to invest in the real estate business. On February 1, 1966 and May 16, 1966, Choithram, in his
capacity as attorney-in-fact of Ishwar, bought two parcels of land located in Barrio Ugong, Pasig, Rizal from Ortigas &
Company, Ltd. Partnership (Ortigas, for short) and had buildings constructed thereon. Through the industry and genius
of Choithram, Ishwars property was developed and improved into a valuable asset worth millions of pesos.
Unfortunately, Choithram, while showing himself to be a good manager, proved unfaithful to the trust reposed in
him by spouses Ishwar. Without their knowledge, Choithram started to appropriate his brothers property and other
assets as his own.
In 1973, upon complete payments of Ishwars lots which he purchased from Ortigas, Choithram caused the latter
to execute the corresponding deeds of sale in favor of his daughter-in-law, Nirmla. Eventually, TCT Nos. 403150 and
403152 were issued by the Registry of Deeds of Rizal in her favor.
Choithram also donated 2,500 shares of stock in a garment corporation to his children. He also fraudulently
mortgaged $3,000,000.00 worth of the spouses property to Overseas Holding Co. Records show that the
$3,000,000.00 mortgage was executed on June 20, 1989, or 6 days before the corporation was organized.
Spouses Ishwar learned what Choithram was doing. Hence, they asked him to render an accounting, but there
was none forthcoming. They then revoked Choithrams general power of attorney. He earnestly pleaded in writing to
Ishwar to issue another power of attorney, but to no avail.
Choithram repudiated all well-meaning efforts to solve the controversy within the Ramnani family. Moreover, he
denied the genuine nature of the trust relationship between him and his brother Ishwar.
Agitated, spouses Ishwar filed on October 6, 1982 with the Court of First Instance of Rizal a complaint for
reconveyance and damages against Choithram and his son Moti and daughter-in-law Nirmla (Choithram family for
short). Ironically, the CFI dismissed the complaint and recognized Choithrams full ownership of the questioned two
parcels of land. On appeal, the Court of Appeals reversed the trial courts decision, finding that spouses Ishwar
entrusted capital to Choithram to be invested in the Philippines. The appellate court held the Choithram family and
Ortigas jointly and severally liable to spouses Ishwar.
Subsequently, the Court of Appeals modified its earlier decision by dismissing the case against Ortigas. Both
parties appealed to this Court. In G.R. No. 85494, the Choithram family vigorously asserted their right of ownership
over the disputed lots, while in G.R. No. 85496, spouses Ishwar faulted the Court of Appeals in dismissing the case
against Ortigas.
In the meantime, Choithram continued to dissipate Ishwars assets.
On May 7, 1991, this Court rendered a joint Decision in G.R. Nos. 85494 and 85496, now in 196 SCRA 731. This
Court held that Choithram violated the trust relationship between him and Ishwar. Considering, however, that the two
protagonists are brothers and that Choithram made wise investments of spouses Ishwars money, this Court applied
a Solomonic solution by dividing equally between spouses Ishwar and the Choithram family the two parcels of land
subject of the litigation, including all the improvements thereon and income from 1967. This Court also ruled that

Ortigas is solidarily liable with Choithram family to spouses Ishwar because of its bad faith in executing the deeds of
sale in favor of Nirmla despite its knowledge that Choithrams general power of attorney had been revoked by Ishwar.
Later, this Court realized that its Solomonic Decision, in effect, formulated a new contract for the parties. Thus, in
its Resolution dated February 26, 1992, this Court declared that the disputed lots are solely owned by spouses
Ishwar. The motion for reconsideration of the Choithram family was denied with finality.
On March 18, 1992, this Court also denied Choithrams motion for clarification and/or second motion for
reconsideration. Entry of final judgment was then made on March 20, 1992.
Still obstinate to abide with this Courts final judgment, the Choithram family filed a petition for certiorari, through
the Overseas Holding Corporation, (docketed as G.R. No. 105071) seeking to set aside as unconstitutional this Courts
May 7, 1991 joint Decision declaring, among others, that the mortgaged contract involving the two parcels of land
executed between Nirmla and Overseas Holding is void. This Court denied the said petition for being in the nature of a
third motion for reconsideration and stressed that a writ of certiorari may not issue from the Court en banc to annul a
Decision of one of the Courts Divisions. This Court forthwith ordered the Regional Trial Court of Pasay City, Branch 112
to execute with dispatch its joint Decision of May 7, 1991 and Resolution dated February 26, 1992. The parties and
counsel were also warned to desist from further assailing an already final Decision and raising anew issues already
passed upon.
Per Resolution of this Court dated August 26, 1992, the case was re-assigned to the RTC of Pasay City, Branch
119. Thereafter, execution proceedings and hearing on the valuation of the disputed properties ensued.
Because of the Choithram familys continuing delaying tactics and evasive moves against the execution of this
Courts Decision and due to the desire of spouses Ishwar to quickly obtain the fruits of their many years of court battle,
the latter were constrained to agree to a compromise agreement which was denominated as Tripartite Agreement.
It bears stressing that spouses Ishwar were claiming for the value of the two lots, not the lots themselves. To clear
up this issue, the July 19, 1993 Tripartite Agreement fixed the valuation at P65,000,000.00 which the Choithram family,
together with Ortigas, agreed to pay spouses Ishwar, thus:
(a) P40 Million upon the signing hereof by the parties;
b) P10 Million within thirty (30) days from July 5, 1993 or on or before September 3, 1993;
c) P15 Million within sixty (60) days from July 5, 1993 or on or before September 3, 1993;
Choithram and/or Harish Ramnani shall issue to plaintiffs postdated checks on the amounts covered by paragraph (b
and c above) immediately encashable on due dates.[1]
There is also a specific agreement on default by the Choithram family, thus:
6. In the event of default of defendants Ortigas and Choithram Jethmal Ramnani to pay any of the amounts within the
agreed period, proceedings in execution, including hearings on valuation, shall immediately resume and plaintiff shall
be entitled to enforce and execute the Supreme Courts judgment against the defendants in accordance with the terms
thereof and the final and total monetary entitlements described in paragraph 1 above, less whatever amounts
plaintiffs may have partially recovered from the defendants. In case of execution of the balance due Ishwar as finally
determined by the Court, plaintiffs shall proceeds to first sell the subject properties mentioned in par. 6 hereof. [2]
The Choithram family paid spouses Ishwar 40,000,000.00, as agreed upon. However, when the payment of the
P25,000,000.00 balance became due, they defaulted and again balked at complying with their commitments under the
compromise agreement.
On August 3, 1993, or one day before August 4, 1993, the due date of the second payment, the Choithram family
wrote the Bureau of Internal Revenue, ostensibly requesting clarification whether or not, as payors of P65 million, they
should pay the government any tax. Significantly, they did not inform the BIR that Ishwar is a permanent resident alien
here and that the amount he will receive under the Tripartite Agreement is not subject to withholding tax at source. In

response, the BIR Commissioner, in a letter dated August 6, 1993, informed Choithram and Ortigas that the 65 million
compromise settlement is subject to 30% withholding tax collectible against spouses Ishwar and at the same time
constituted Choithram and Ortigas as withholding agents.
The side issue arising from the Choithram familys report to BIR of alleged non-payment of taxes due was
eventually decided in favor of spouses Ishwar. But it gave the Choithram family a convenient excuse for not complying
with their obligation to pay when due the balance under the compromise agreement.
On September 3, 1993, the Choithram family filed a manifestation tendering payment of the balance of P25
million as evidenced by checks payable, not to spouses Ishwar, but to the Branch Clerk of Court of the
RTC. Subsequently, or particularly on September 7, 1993, or three days after the maturity date of the second set of
checks, spouses Ishwar filed with the court a quo an urgent motion for immediate resumption of hearing, arguing that
pursuant to Paragraph 6 of the Tripartite Agreement, Choithram and Ortigas were already in default, hence, execution
proceedings should be resumed. The trial court, in its assailed order dated January 27, 1994, denied the motion, thus:
That defendants desire to pay the balance of the amount stipulated in their Tripartite Agreement is apparent. Under
the aforestated facts and circumstances, is it equitable that they be held in default? Article 1229 of the Civil Code
gives the court the power to equitably reduce penalty when the principal obligation has been partly complied with by
the debtor. In default cases, the court may likewise reconsider its order of default when the interest of justice so
dictates.
In order not to put to naught all the efforts of the parties in forging the Tripartite Agreement which took them a long
period of time to arrive at, the branch Clerk of Court is directed to immediately endorse to the counsel of plaintiffs, up
to the time the same is encashed, under the following terms:
1. That the Quasha Law (F)irm receives the balance of the amount of P25 million in compliance with the
Tripartite Agreement, adverted to, and subject to the tax claim of the BIR;
2. That it shall release to the plaintiffs the amount due them after the tax matter on said amount shall have
been resolved, and in the meanwhile the said amount shall be deposited in an interest bearing account
and/or money placement in treasury bills; and
3. T he upon receipt of the aforestated amount, plaintiffs shall execute the Deed of Assignment of Judgment
in favor of defendants Ortigas & Co., Ltd., Partnership and Choithram Jethmal Ramnani in the proportion
agreed upon by the said defendants.
In view of the foregoing, plaintiffs Motion for continuation of hearing is DENIED. [3]
Spouses Ishwar filed a Motion for Reconsideration but was denied. This prompted them to file with this Court a
Manifestation and Urgent Motion contending inter alia that the lower court committed grave abuse of discretion in
denying their motion for resumption of the execution proceedings.
On August 17, 1999, this Court issued a Resolution denying spouses Ishwars Manifestation and Urgent Motion and
sustaining the challenged orders of the RTC.
Hence, the present Motion for Reconsideration of the said Resolution.
In their motion, spouses Ishwar contend that we are rewarding bad faith and fraudulent maneuverings on the part
of the Choitram family. To allow non-compliance with the terms of the Tripartite Agreement and, therefore, a deviation
from our May 7, 1991 Decision and February 26, 1992 Resolution is an act of injustice.
Spouses Ishwar specified in their motion the reprehensible acts of Choithram, among them:
a) Patent violation of a clear compromise agreement burdensome to Ishwar Ramnani;

b) In spite of Ishwars generous concessions, Choithram repaid the favors with bad faith, delaying tactics and
sinister moves intended to thwart him (Ishwar) from getting what is justly due him, resulting in extreme
anxiety, considerable distress and needless expenses on his part;
c) Filing fabricated charges with the BIR regarding Ishwars alleged tax liabilities, all of them found without
basis but only after causing the delayed settlement of what Choithram promised to pay under the
compromise agreement; and
d) Continued maneuver to delay or prevent the execution of this Courts Decision dated May 7, 1991 and
February 26, 1992.
In what spouses Ishwar call a plea for simple justice, they now ask, Should deceit and unscrupulous(ness) be
rewarded?
It is elementary that nothing beneficial or lucrative should arise from subterfuge or deception. Bad faith has
characterized the history of this case. It started with Choithrams violations of the trust agreement and has continued
throughout the execution stage. Dilatory tactics, including a misleading report to the BIR, have resulted in nonimplementation for ten (10) years of a final and executory Decision of this Court. Moreover, there have been late and
faulty payments under a compromise agreement.
We rule that under the above circumstances, the Choitram family should strictly comply with the terms of the
compromise agreement in an expeditious manner.
A compromise is defined in the Civil Code as:
Art. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put
an end to one already commenced.
A compromise is intended to prevent or put an end to a lawsuit. The parties adjust their difficulties by mutual
consent. Each of the parties prefers the terms of the compromise to their earlier hope of gaining, balanced by the
danger of losing.It is intended to end litigation because of the uncertainty of its result. Prolonging a litigation is
anathema to a compromise agreement.
In this particular case, there is no longer any uncertainty over the result of litigation. Judgments were rendered
ten (10) years back. Spouses Ishwar have won their cases. The Choithram family should have accepted this settled
matter a long time ago. Spouses Ishwar agreed to the compromise simply because after more than a decade of
litigation, their lots or the value thereof have not been returned to them. In fact, up to the present time, or 17 years
from the filing of the complaint and more than nine (9) years after our denied-with-finality judgment, they have not
been fully paid.
A compromise agreement is valid and binding, not because it is the settlement of a controversy. Once the
compromise is perfected, the parties are bound to abide by it in good faith.
In the cases at bar, the Choithram family persisted in dilatory tactics even after the court battle was supposed to
have ended with finality. Their claims have been adjudged invalid but they continued the conflict.
Under the compromise agreement, the post-dated check for P10,000,000.00 should have been cashed not later
than August 4, 1993, and the P15,000,000.00 check not later than September 3, 1993. The post dated checks could
not be cashed.Instead, a P10,000,000.00 check was tendered on September 12, 1993, or 8 days late. The checks were
personal checks payable to the Clerk of Court, meaning that spouses Ishwar could not even encash them until ordered
by the trial court. The check for P15,000,000.00 was tendered on September 12, 1993, or 8 days late. It has to be
emphasized at this point that the compromise agreement is evidently in amounts substantially less than what the
Choitram family should pay spouses Ishwar. The compromise is spouses Ishwars concession to the Choithram family
for them to end the seemingly interminable litigation.
We thus rule that the trial court committed reversible error when it applied equitable considerations under Article
1229 of the Civil Code to justify the defaults of Choithram and Ortigas.

In Commercial Credit Corporation of Cagayan de Oro v. Court of Appeals, [4] this Court held:
(Article 1229) . . . applies only to obligations or contract, subject of a litigation, the condition being that the same has
been partly or irregularly complied with by the debtor. The provision also applies even if there has been no
performance, as long as the penalty is iniquitous or unconscionable. It cannot apply to a final and executory judgment.
Moreover, equity does not apply to a situation when fraud and dilatory schemes exist. The incidents, during the
supposed tender of payment, support a finding of continuing insincerity, recalcitrance, and bad faith on the part of the
Choitram family. But these were not taken into account by the trial court.
In the first place, the tender of payment was effected late with no valid reason for the delay.
Second, the tender of payment is of doubtful validity. It bears reiterating that the checks were personal checks
payable, not to spouses Ishwar, but to the RTC Branch Clerk of Court. They were not managers or cashiers
checks. Spouses Ishwar also state that the tender was conditional. It carried what they called unacceptable
conditions. The checks could not be indorsed to them because they were Not transferable. The term and maturity were
limited in nature.
Third and most important, the intent to really pay as agreed upon was missing. It was not a genuine or sincere
tender. Instead of making good on the stipulated payment, the Choithram family created a situation in such a way that
the balance of P25 million was to be paid to the Bureau of Internal Revenue, not to spouses Ishwar. Thus, Choitram
peremptorily wrote a poison letter to the BIR requesting clarification on the alleged tax liabilities of spouses Ishwar,
and of his (Choithrams) obligations as payor. Choithram maliciously concealed from the BIR the material fact that
Ishwar, although an alien, is a permanent resident of the Philippines, and his income and amounts received under the
Tripartite Agreement are, therefore, not subject to 30% withholding tax at source. Under the Tax Code, a final 30%
withholding tax at source is mandated to be collected only from non-resident aliens. The BIR promptly issued an
assessment based on an incomplete presentation of facts by Choithram, directing him to withhold Twenty Million One
Hundred Fifty Thousand Pesos (P20,150,000.00)
For the mischief of the Choithram family, spouses Ishwar were needlessly compelled to litigate before the Court of
Tax Appeals and subsequently before the Court of Appeals, and in the process wasted time and incurred expenses just
to correct the harm done by the said family. The Court of Tax appeals reversed the BIR and ruled that Ishwar is a
resident alien and his income is not subject to 30% automatic final withholding tax at source. Subsequently, the Court
of Appeals affirmed the CTA ruling on the status of Ishwar as a resident alien.
The administrative and judicial processes which Ishwar had to undergo because of the deceit and unscrupulous
acts of the Choithram family consumed five (5) exhausting years, from 1993 until the dispute was finally resolved in
1998.Indeed, incessant bad faith on the part of the Family Choithram is evident.
A second hard look at the history of these cases shows that it was a mis-step and when we upheld the orders of
the trial court dated January 7, 1994 and April 5, 1994. They should be rescinded.
By way of conclusion, it is elementary that if a party fails or refuses to abide by a compromise agreement, the
other party may either enforce the compromise or regard it as rescinded and insist upon his original demand. [5] This
rule must be followed. For indeed, it is not the province of the court to alter a contract by construction or to make a
new contract for the parties; its duty is confined to the interpretation of the one which they have made for themselves
without regard to its wisdom or folly as the court cannot supply material stipulations or read into the contract words
which it does not contain.[6]
WHEREFORE, this Courts Resolution dated August 17, 1999 is reconsidered. The January 27, 1994 and April 5,
1994 orders of the Regional Trial Court, Branch 119, Pasay City, in Civil Case No. 0534-P are set aside. The trial court is
ordered to speedily enforce and execute this Courts final and executory Decision dated May 7, 1991 and the Resolution
dated February 26, 1992; and to expeditiously resume and complete the proceedings in execution, including the
valuation of the parcels of land covered by TCT Nos. 403150 and 403152 of the Registry of Deeds of Pasig City for the
purpose of determining the final and total monetary entitlement of spouses Ishwar Jethmal and Sonya Jethmal
Ramnani, less the amount of Forty Million (40,000,000.00) Pesos received by them, strictly according to the tenor of
the above Decision and Resolution of this Court. The trial court is further directed to report the progress of its
compliance within 15 days from notice and every 10 days thereafter, until the execution is terminated.

SO ORDERED.
Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Pardo, Buena, YnaresSantiago and De Leon, Jr., JJ., concur.
Quisumbing, J., on official leave.
Gonzaga-Reyes, JJ., on leave.

Ramnani vs. CA (221 SCRA 582) o Remedies available to a defendant declared in default: 1.
Defendant in default may, at any time after discovery thereof and before judgment, file a motion
under oath, to set aside the order of default on the ground that his failure to answer was due to
FAME, and that he has a meritorious defense (Rule 18, Sec 3); 2. If the judgment has already
been rendered when the defendant discovered the default, but before the same has become final
and executory, he may file a motion for new trial under Rule 37, Sec 1(a); 3. If the defendant
discovered the default after the judgment has become final and executory, he may file a petition
for relief under Rule 38, Sec 2; and 4. He may also appeal from the judgment rendered against
him as contrary to the evidence or to the law, even if no petition to set aside the order of default
has been presented by him. (Rule 41, Sec 2)

MARTINEZ V REPUBLIC 506 SCRA 134ON FEB 24, 1999, Jose R. Martinez filed a petition for the registration in his
name of 3 parcels of landincluded in the cortes, Surigao del sur cadaster.1.
The lots collectively comprised around 3,700 square meters.2.
He alleged that he had purchased the lots in 52 from his uncle, whose predecessors in interestwere traceable up to the
1870s.Martinez further claimed that he had been constrained to initiate the proceedings because the directorof land
management services had failed to do so despite the completion of cadastral survey of cortes,Surigao del sur.The trial
court set the case for hearing and directed the publication of the corresponding notice of hearing in the official
gazette.1.
The OSG opposed the petit
ion because the appellees possession was not in accordance
with sec 48(b) of CA 141.His muniments of title were insufficient to prove bonafideacquisition and possession of the
subject parcels; and that the properties formed part of thepublic domain and thus not susceptible to private
appropriation.Despite the opposition filed by the OSG, the RTC issued an order of general default, even against
theRepublic on 29 march 2000. This ensued when during the hearing of even date, no party appearedbefore the
court to oppose Martinez petition
OSG filed a notice of appeal, approved by RTC.1.
LRA sent a letter to the LRA stating that only lot nos 464

A and 464-B were referred to in thenotice of hearing published in the official gazette.a.
Lot no 370 had been deliberately omitted due to lack of an approved survey plan for theproperty.b.
LRA manifested that this lot should not have been adjudicated to Martinez for lack of jurisdiction.Ruling:1.
The RTC appears to have issued the order of general default simply on the premise that nooppositor appeared before it
on the hearing of march 29,2000.a.
OSG had already duly filed its opposition to Martinezs petition LONG BEFORE THE SAID
HEARING.b.
Order of default is issued if NO PARTIES APPEAR AT THE TIME OF HEARING,1)
The order of default may be issued if no person appears and answers within the timeallowed. ( sec 26, PD 1529)2.

A defaulted defendant has the right to appeal the adverse decision of the trial court EVENWITHOUT SEEKING TO SET
ASIDE THE ORDER OF DEFAULT.
a.
For around 30 odd years, there was no cause of doubt that a defaulted defendant had theright to appeal the adverse
decision of the trial court even without seeking to set aside theorder of default.b.
If post-1997 jurisprudence and the published commentaries to the 97 rules of civilprocedure were taken as an
indication, the right of a defaulted defendant remains extant.c.
A defendant party declared in default retains the right to appeal from the judgment bydefault on the ground that the
plaintiff failed to prove the material allegations of thecomplaint, or that the decision is contrary to law, even without
need of prior filing of amotion to set aside the order of default.3.
The burden of proof in land registration cases is incumbent on the appellant who must show that he is the real and
absolute owner in fee simple of the land applied for, and must not rely ongeneral statements, or mere conclusions of
law other than the factual evidence of possession and title.a.
The October 1952 deed of sale by which the appellee claims to have purchased the subject parcels from his uncle,
Julian Martinez, was not translated from the vernacular in which itwas executed, and be said token is inadmissible in
evidence.b.
Having submitted a white print copy of the survey plan for lots 464-A and 464-B, appelleealso submitted the tracing
cloth plan for lot 370 which does appear to be approved by the director of lands

Martinez vs. Republic (506 SCRA 134) o A defaulted defendant has the right to appeal the
adverse decision of the trial court even without seeking to set aside the order of default. o The
right of defaulted defendant to appeal remains extant. o A defendant party declared in default
retains the right to appeal from the judgment by default on the ground that the plaintiff failed to
prove the material allegations of the complaint, or that the decision is contrary to law, even
without need of prior filing of a motion to set aside the order of default.
JANICE MARIE JAO, represented by her mother and guardian ad litem, ARLENE S. SALGADO, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and PERICO V. JAO, respondents.
PADILLA, J.:
Appeal by certiorari from the decision* of the Court of Appeals in CA-G.R. No. 51078-R, dated 29 August 1978,
which dismissed petitioner"s action for recognition and support against private respondent, and from the respondent
Court"s resolution, dated 11 October 1978, denying petitioner"s motion for reconsideration of said decision.
On 28 October 1968, petitioner Janice Marie Jao, then a minor, represented by her mother and guardian-adlitemArlene Salgado, filed a case for recognition and support with the Juvenile and Domestic Relations Court
against private respondent Perico V. Jao. The latter denied paternity so the parties agreed to a blood grouping test
which was in due course conducted by the National Bureau of Investigation (NBI) upon order of the trial court. The
result of the blood grouping test, held 21 January 1969, indicated that Janice could not have been the possible
offspring of Perico V. Jao and Arlene S. Salgado.1
The trial court initially found the result of the tests legally conclusive but upon plaintiff"s (herein petitioner"s) second
motion for reconsideration, it ordered a trial on the merits, after which, Janice was declared the child of Jao, thus
entitling her to his monthly support.
Jao appealed to the Court of Appeals, questioning the trial court"s failure to appreciate the result of the blood
grouping tests. As there was no showing whatsoever that there was any irregularity or mistake in the conduct of the

tests, Jao argued that the result of the tests should have been conclusive and indisputable evidence of his nonpaternity.
The Court of Appeals upheld Jao"s contentions and reversed the trial court"s decision. In its decision, the Court of
Appeals held:
From the evidence of the contending parties, it appears undisputed that JAO was introduced to ARLENE at
the Saddle and Sirloin, Bay Side Club, by Melvin Yabut. After this meeting, JAO dated and courted ARLENE.
Not long thereafter, they had their first sexual intercourse and subsequently, they lived together as husband
and wife. ...
It further appears undisputed that in April 1968, JAO accompanied ARLENE to the Marian General Hospital
for medical check-up and her confinement was with JAO"s consent. JAO paid the rentals where they lived,
the salaries of the maids, and other household expenses. ...
The record discloses that ARLENE gave birth to JANICE on August 16, 1968, after completing 36 weeks of
pregnancy, which indicates that ARLENE must have conceived JANICE on or about the first week of
December, 1967. "Thus, one issue to be resolved in this appeal is whether on or about that time, JAO and
ARLENE had sexual intercourse and were already living with one another as husband and wife.
In this connection, ARLENE contends that she first met JAO sometime in the third or fourth week of
November, 1967 at the Saddle and Sirloin, Bayside Club; that after several dates, she had carnal knowledge
with him at her house at 30 Long beach, Merville, Paranaque. Rizal in the evening of November 30, 1967,
and that he started to live with her at her dwelling after December 16, 1967, the date they finished their
cruise to Mindoro Island.
On the other hand, JAO, albeit admitting that he met ARLENE at the Saddle and Sirloin, Bayside Club,
however, maintains that this was on December 14, 1967 because the day following, he and his guests:
ARLENE, Melvin Yabut, Didi Crescini and Charlie Litonjua went to Mindoro by boat. He dated ARLENE four
times in January, 1968. He remembered he had carnal knowledge of her for the first time on January 18,
1968, because that was a week after his birthday and it was only in May, 1968 that he started cohabiting
with her at the Excelsior Apartments on Roxas Boulevard.
These conflicting versions of the parties emphasize, in resolving the paternity of JANICE, the role of the
blood grouping tests conducted by the NBI and which resulted in the negative finding that in a union with
ARLENE, JAO could not be the father of JANICE.
We cannot sustain the conclusion of the trial court that the NBI is not in a position to determine with
mathematical precision the issue of parentage by blood grouping test, considering the rulings of this Court ...
where the blood grouping tests of the NBI were admitted; especially where, in the latter case, it was Dr.
Lorenzo Sunico who conducted the test and it appears that in the present case, the same Dr. Sunico
approved the findings and report. ... In Co Tao vs. Court of Appeals, 101 Phil. 188, the Supreme Court had
given weight to the findings of the NBI in its blood grouping test. Thus, it cannot be gainsaid that the
competency of the NBI to conduct blood grouping tests has been recognized as early as the 1950"s.
The views of the Court on blood grouping tests may be stated as follows:
Paternity Science has demonstrated that by the analysis of blood samples of the mother, the
child, and the alleged father, it can be established conclusively that the man is not the father of the
child. But group blood testing cannot show that a man is the father of a particular child, but at least
can show only a possibility that he is. Statutes in many states, and courts in others, have recognized

the value and the limitations of such tests. Some of the decisions have recognized the conclusive
presumption of non-paternity where the results of the test, made in the prescribed manner, show the
impossibility of the alleged paternity. This is one of the few cases in which the judgment of the Court
may scientifically be completely accurate, and intolerable results avoided, such as have occurred
where the finding is allowed to turn on oral testimony conflicting with the results of the test.
The findings of such blood tests are not admissible to prove the fact of paternity as they show only a
possibility that the alleged father or any one of many others with the same blood type may have
been the father of the child. But the Uniform Act recognizes that the tests may have some probative
value to establish paternity where the blood type and the combination in the child is shown to be
rare, in which case the judge is given discretion to let it in (I Jones on Evidence, 5th Ed., pp. 193194).
In one specific biological trait, viz, blood groups, scientific opinion is now in accord in accepting the
fact that there is a causative relation between the trait of the progenitor and the trait of the progeny.
In other words, the blood composition of a child may be some evidence as to the child"s paternity.
But thus far this trait (in the present state of scientific discovery as generally accepted) can be used
only negatively i.e. to evidence that a particular man F is not the father of a particular child C. (I
Wigmore on Evidence 3rd Ed., pp. 610-611).
In a last ditch effort to bar the admissibility and competency of the blood test, JANICE claims that probative
value was given to blood tests only in cases where they tended to establish paternity; and that there has
been no case where the blood test was invoked to establish non-paternity, thereby implying that blood tests
have probative value only when the result is a possible affirmative and not when in the negative. This
contention is fallacious and must be rejected. To sustain her contention, in effect, would be recognizing only
the possible affirmative finding but not the blood grouping test itself for if the result were negative, the test is
regarded worthless. Indeed, this is illogical. .... As an admitted test, it is admissible in subsequent similar
proceedings whether the result be in the negative or in the affirmative. ...
The Court of Appeals also found other facts that ran contrary to petitioner"s contention that JAO"s actions before
and after JANICE was born were tantamount to recognition. Said the respondent appellate court:
On the contrary, after JANICE was born, JAO did not recognize her as his own. In fact, he filed a petition
that his name as father of JANICE in the latter"s certificate of live birth be deleted, evidencing his
repudiation, rather than recognition. The mere acts of JAO in cohabiting with ARLENE, the attention given to
her during her pregnancy and the financial assistance extended to her cannot overcome the result of the
blood grouping test. These acts of JAO cannot be evaluated as recognizing the unborn JANICE as his own
as the possession of such status cannot be founded on conjectures and presumptions, especially so that,
We have earlier said, JAO refused to acknowledge JANICE after the latter"s birth.
JAO cannot be compelled to recognize JANICE based on paragraph 2 of Article 283 in relation to Article 289
of the New Civil Code which provides: "When the child is in continuous possession of status of a child of the
alleged father by the direct acts of the latter.
Nor can there be compulsory recognition under paragraphs 3 or 4 of said article which states:
(3) When the child was conceived during the time when the mother cohabited with the supposed
father;
(4) When the child has in his favor any evidence or proof that the defendant is his father.

As aptly appreciated by the court below, JANICE could have been conceived from November 20, 1967 to
December 4, 1967. Indeed, ARLENE claims that her first sexual intercourse with JAO was on November 30,
1967 while the latter avers it was one week after January 18, 1968. However, to satisfy paragraph 3 as
above-quoted, JANICE must have been conceived when ARLENE and JAO started to cohabit with one
another. Since ARLENE herself testified that their cohabitation started only after December 16, 1967, then it
cannot be gainsaid that JANICE was not conceived during this cohabitation. Hence, no recognition will lie.
Necessarily, recognition cannot be had under paragraph 4 as JANICE has no other evidence or proof of her
alleged paternity.
Apart from these, there is the claim of JAO that, at the critical time of conception, ARLENE had carnal
knowledge with two other men: "Oying" Fernandez and Melvin Yabut, which was not even rebutted; and
considering that it was Melvin Yabut, who introduced ARLENE to JAO at the Bayside Club. Moreover, the
testimony of ARLENE is not wholly reliable. When the trial court said that "the Court is further convinced of
plaintiff"s cause by ARLENE"s manner of testifying in a most straight-forward and candid manner," the fact
that ARLENE was admittedly a movie actress may have been overlooked so that not even the trial court
could detect, by her acts, whether she was lying or not.
WHEREFORE, the judgment appealed from is hereby set aside and a new one entered dismissing plaintiffappellee"s complaint. Without pronouncement as to costs. SO ORDERED.
The petitioner now brings before this Court the issue of admissibility and conclusiveness of the result of blood
grouping tests to prove non-paternity.
In this jurisdiction, the result of blood tests, among other evidence, to, affirm paternity was dealt with in Co Tao v.
Court of Appeals,2 an action for declaration of filiation, support and damages. In said case, the NBI expert"s report of
the blood tests stated that "from their blood groups and types, the defendant Co Tao is a possible father of the
child." From this statement the defendant contended that the child must have been the child of another man. The
Court noted: "For obvious reasons, the NBI expert cannot give assurance that the appellant was the father of the
child; he can only give his opinion that he is a "possible father." This possibility, coupled with the other facts and
circumstances brought out during the trial, tends to definitely establish that appellant Co Tao is the father of the child
Manuel."3
Where the issue is admissibility and conclusiveness of blood grouping tests to disprove paternity, rulings have been
much more definite in their conclusions. For the past three decades, the use of blood typing in cases of disputed
parentage has already become an important legal procedure. There is now almost universal scientific agreement
that blood grouping tests are conclusive as to non-paternity, although inconclusive as to paternity that is, the fact
that the blood type of the child is a possible product of the mother and alleged father does not conclusively prove
that the child is born by such parents; but, if the blood type of the child is not the possible blood type when the blood
of the mother and that of the alleged father are crossmatched, then the child cannot possibly be that of the alleged
father.4
In jurisdictions like the United States, the admissibility of blood tests results to prove non-paternity has already been
passed upon in several cases. In Gilpin v. Gilpin5 the positive results of blood tests excluding paternity, in a case in
which it was shown that proper safeguards were drawn around the testing procedures, were recognized as final on
the question of paternity. In Cuneo v. Cuneo6 evidence of non-paternity consisting of the result of blood grouping
tests was admitted despite a finding that the alleged father had cohabited with the mother within the period of
gestation. The Court said that the competent medical testimony was overwhelmingly in favor of the plaintiff, and to
reject such testimony would be tantamount to rejecting scientific fact. Courts, it was stated, should apply the results
of science when competently obtained in aid of situations presented, since to reject said result was to deny
progress.7 This ruling was also echoed in Clark v. Rysedorph,8 a filiation proceeding where an uncontradicted blood

grouping test evidence, excluding paternity, was held conclusive. 9 Legislation expressly recognizing the use of blood
tests is also in force in several states.10 Tolentino,11 affirms this rule on blood tests as proof of non-paternity, thus
Medical science has shown that there are four types of blood in man which can be transmitted through
heredity. Although the presence of the same type of blood in two persons does not indicate that one was
begotten by the other, yet the fact that they are of different types will indicate the impossibility of one being
the child of the other. Thus, when the supposed father and the alleged child are not in the same blood group,
they cannot be father and child by consanguinity. The Courts of Europe today regard a blood test exclusion
as an unanswerable and indisputable proof of non-paternity. 12
Moreover,
The cohabitation between the mother and the supposed father cannot be a ground for compulsory
recognition if such cohabitation could not have produced the conception of the child. This would be the case,
for instance, if the cohabitation took place outside of the period of conception of the child. Likewise, if it can
be proved by blood tests that the child and the supposed father belong to different blood groups, the
cohabitation by itself cannot be a ground for recognition. 13
Petitioner has attempted to discredit the result of the blood grouping tests in the instant case by impugning the
qualifications of the NBI personnel who performed the tests and the conduct of the tests themselves. Her
allegations, in this regard, appear to be without merit. The NBI"s forensic chemist who conducted the tests is also a
serologist, and has had extensive practice in this area for several years. The blood tests were conducted six (6)
times using two (2) scientifically recognized blood grouping systems, the MN Test and the ABO System, 14 under
witness and supervision.15
Even the allegation that Janice was too young at five months to have been a proper subject for accurate blood tests
must fall, since nearly two years after the first blood test, she, represented by her mother, declined to undergo the
same blood test to prove or disprove their allegations, even as Jao was willing to undergo such a test again. 16
1avvphi1

Accordingly, the Court affirms the decision of the Court of Appeals and holds that the result of the blood grouping
tests involved in the case at bar, are admissible and conclusive on the non-paternity of respondent Jao vis-a-vis
petitioner Janice. No evidence has been presented showing any defect in the testing methods employed or failure to
provide adequate safeguards for the proper conduct of the tests. The result of such tests is to be accepted therefore
as accurately reflecting a scientific fact.
In view of the findings of fact made by the Court of Appeals, as heretofore quoted, which are binding on this Court,
we do not find it necessary to further pass upon the issue of recognition raised by petitioner.
WHEREFORE, the instant petition for review is hereby denied. Without pronouncement as to costs.
SO ORDERED.
Yap (Chairman), Melencio-Herrera, Paras and Sarmiento, JJ., concur.

Jao vs. CA (251 SCRA 391) o The proper remedy of a party wrongly declared in default is either to
appeal from the judgment by default or to file a petition for relief from judgment, and not
certiorari.
INDIANA V. CHED 04 Apr. 2001
Facts: The Indiana Aerospace University filed a complaint for damages against the Commission on Higher Education
(CHED) before the RTC. The RTC denied CHEDs motion to dismiss. Without filing a motion for reconsideration, CHED
filed a Petition for Certiorari with the CA.

Issue: Does CHEDs Petition for Certiorari require a prior resort to a motion for reconsideration?
Held: No. The general rule is that, in order to give the lower court the opportunity to correct itself, a motion for
reconsideration is a prerequisite to certiorari. This rule, however, is subject to certain exceptions such as: (1) the issues
raised are purely legal in nature; (2) public interest is involved; (3) extreme urgency is obvious; or (4) special
circumstances warrant immediate or more direct action. It is patently clear that the regulation or administration of
educational institutions, especially on the tertiary level, is invested with public interest. Thus CHEDs Petition for Certiorari
did not require prior resort to a motion for reconsideration.

INDIANA AEROSPACE UNIVERSITY, petitioner, vs. COMMISSION ON HIGHER EDUCATION (CHED), respondent.
DECISION
PANGANIBAN, J.:
When the delayed filing of an answer causes no prejudice to the plaintiff, default orders should be avoided. Inasmuch as herein
respondent was improvidently declared in default, its Petition for Certiorari to annul its default may be given due course. The act of
the Commission on Higher Education enjoining petitioner from using the word university in it corporate name and ordering it to revert

to its authorized name does not violate its proprietary rights or constitute irreparable damage to the school. Indeed, petitioner has no
vested right to misrepresent itself to the public. An injunction is a remedy in equity and should not be used to perpetuate a falsehood.
The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, challenging the July 21, 1999 Decision [1] of
the Court of Appeals (CA) in CA-GR SP No. 51346. The appellate court directed the Regional Trial Court (RTC) of Makati City,
Branch 136, to cease and desist from proceeding with Civil Case No. 98-811 and to dismiss the Complaint for Damages filed by the
Indiana Aerospace University against the Commission on Higher Education (CHED).The dispositive portion of the CA Decision reads
as follows:
WHEREFORE, in the light of the foregoing consideration, and pursuant to pertinent existing laws and jurisprudence on the matter,
[the trial court] is hereby DIRECTED to cease and desist from proceeding with Civil case No. 98-811 and to order the dismissal of
[petitioners] Petition dated March 31, 1999 in Civil Case No. 98-911 for lack of merit and valid cause of action. [2]
The Facts

The facts of this case we are summarized by the CA, as follows:

Sometime in October 1996, Dr. Reynaldo B. Vera, Chairman, Technical Panel for Engineering, Architecture, and Maritime Education
(TPRAM) of [CHED], received a letter dated October 18, 1998 (Annex C) from Douglas R. Macias, Chairman, Board of Aeronautical
Engineering, Professional Regulat[ory] Commission (PRC) and Chairman, Technical Committee for Aeronautical Engineering
(TPRAME) inquiring whether [petitioner] had already acquired [u]niversity status in view of the latters advertisement in [the] Manila
Bulletin.
In a letter dated October 24, 1996, Dr. Vera formally referred the aforesaid letter to Chairman Alcala with a request that the concerned
Regional Office of [CHED] be directed to conduct appropriate investigation on the alleged misrepresentation by
[petitioner]. Thereafter, [CHED] referred the matter to its Regional Director in Cebu City, requesting said office to conduct an
investigation and submit its report. The [R]eport submitted in January 1997, stated in substance:
xxx xxx xxx
To recall it was in the month of May 1996, [that] Director Ma. Lilia Gaduyon met the school [p]resident in the regional office and
verbally talked[with] and advised them not to use University when it first came out in an advertisement column of a local daily
newspaper in Cebu City. It was explained that there was a violation [committed by] his institution [when it used] the term university
unless the school ha[d] complied [with] the basic requirement of being a university as prescribed in CHED Memorandum Order No.
48, s. 1996.
x x x x x x x x x.
As a consequence of said Report, [respondents] Legal Affairs Service was requested to take legal action against
[petitioner]. Subsequently, on February 3, 1997, [respondent] directed [petitioner] to desist from using the term University, including
the use of the same in any of its alleged branches. In the course of it investigation, [respondent] was able to verify from the Securities
and Exchange Commission (SEC) that [petitioner had] filed a proposal to amend its corporate name from Indiana School of
Aeronautics to Indiana Aerospace University, which was supposedly favorably recommended by the Department of Education,
Culture and Sports (DECS) per its Indorsement dated 17 July 1995, and on [that] basis, SEC issued to [petitioner] Certificate of
Registration No. AS-083-002689 dated August 7, 1995. Surprisingly, however, it ought to be noted, that SEC Chairman Perfecto R.
Yasay, Jr. wrote the following letter to the [c]hairman of [respondent]:
Hon. Angel C. Alcala
Chairman
Commission on Higher Education
DAP Bldg., San Miguel Avenue
Ortigas Center, Pasig City
Dear Chairman Alcala:
This refers to your letter dated September 18, 1997 requesting this Commission to make appropriate changes in the Articles of
Incorporation of Indiana School of aeronautics, Inc. due to its unauthorized use of the term University in its corporate name.
Relative thereto, please be informed that our records show that the above-mentioned corporation has not filed any amended articles of
incorporation that changed its corporate name to include the term University.
In the case the corporation submit[s] an application for change of name, your Cease and Desist Order shall be considered accordingly.
Very truly yours,
(SGD.) PERFECTO R. YASAY, JR.
Chairman
In reaction to [respondents] order for [petitioner] to desist from using the word University, Jovenal Toring, [c]hairman and [f]ounder
of [petitioner] wrote a letter dated February 24, 1997 (Annex G) appealing for reconsideration of [respondents] Order, with a promise
to follow the provisions of CMO No. 48, pertinent portions of which have been quoted in the Petition, to wit:
On 07 August 1995, in line with the call of the government to go for global competitiveness and our vision to help in the development
of aerospace technology, the Board of Directors applied with the SEC for the amendment of Article I of the Articles of Incorporation
to read as Indiana Aerospace University instead of Indiana School of Aeronautics, Inc.
xxxxxxxxx
In view thereof, we would like to appeal to you Fr. Delagoza to please reconsider your order of February 3, 1997, otherwise the school
will encounter financial difficulties and suffer damages which will eventually result in the mass dislocation of xxx thousand[s] of
students. The undersigned, being the [c]hairman and [f]ounder, will try our very best to follow the provisions of CHED MEMO No.
48, series of 1996 that took effect last June 18, 1996.

xxxxxxxxx
Thank you very much for giving me a copy of said CHED MEMO order No. 48. More power and God Bless You.
x x x x x x x x x.
The appeal of [petitioner] was however rejected by [respondent] in its decision dated July 30, 1998 and the [the latter] ordered the
former to cease and desist from using the word University. However, prior to said date, on April 2, 1998, [petitioner] filed a Complaint
for Damages with prayer for Writ of preliminary and Mandatory Injunction and Temporary Restraining Order against [respondent],
docketed as Civil Case No. 98-811 before public respondent judge.
On April 7, 1998, [respondent] filed a Special Appearance with Motion to Dismiss, based on 1) improper venue; 2) lack of authority of
the person instituting the action; and 3) lack of cause of action. On April 17, 1998, [petitioner] filed its Opposition to the Motion to
Dismiss [on] grounds stated therein, to which [respondent] filed a Reply on April 21, 1998, reiterating the same arguments in its
Motion to Dismiss. After due hearing, [petitioner] formally offered its evidence on July 23, 1998 while [respondent] made a formal
offer of evidence on July 28, 1998 to which [petitioner] filed its Comments/Objections and finally, [respondent] submitted its
Memorandum relative thereto on October 1, 1998.
Public respondent judge, in an Order dated August 14, 1998, denied [respondents] Motion to Dismiss and at the same time, issued a
Writ of preliminary Injunction in favor of [petitioner]. [Respondent], in the same Order, was directed to file its Answer within fifteen
(15)days from receipt of said Order, which was August 15, 1998.
xxxxxxxxx
WHEREFORE, and in consideration of all the foregoing [respondents] Motion to Dismiss is hereby denied, and the [respondent] is
directed to file its [A]nswer to the [C]omplaint within fifteen (15) days from receipt of this Order.
In the meantime, [respondent], its officials, employees and all parties acting under its authority are hereby enjoined to observe the
following during the pendency of this case.
1. Not to publish or circulate any announcement in the newspaper, radio or television regarding its Cease and Desist Order against xxx
[petitioner];
2. Not to enforce the Cease and Desist Order issued against xxx [petitioner];
3. To maintain the status quo by not withholding the issuance of yearly school permits and special order to all graduates.
Let a writ of preliminary Injunction to that effect issue upon posting by [petitioner] of an injunction bond in the amount of One
Hundred Thousand Pesos (P100,000.00), and subject to the approval of the Court.
SO ORDERED.
On September 22, 1998, [petitioner] filed before public respondent a Motion To Declare [Respondent] in [D]efault pursuant to Section
3, Rule 9 in relation to Section 4, Rule 16 of the Rules of Court, as amended, and at the same time praying [for] the Motion to [S]et for
[H]earing on October 30, 1998 at 8:30 a.m. On the same date, [respondent] filed a Motion For Extension of Time to File its Answer, x
x x until November 18, 1998. On November 17, 1998, [respondent] filed its [A]nswer.
[Petitioner], on November 11, 1998 filed its Opposition to the Motion for Extension of Time to File [Respondents] Answer and on
November 9, 1998, a Motion to Expunge [Respondents] answer and at the same time praying that its [M]otion be heard on November
27, 1998 at 9:00 a.m. On even date, public respondent judge issued an Order directing the Office of the Solicitor General to file within
a period of ten (10) days from date its written Opposition to the Motion to Expunge [Respondents] answer and within the same period
to file a written [N]otice of [A]ppearance in the case. Unable to file their written Opposition to the Motion to Expunge within the
period given by public respondent, the OSG filed a Motion to Admit Written Opposition stating the reasons for the same, attaching
thereto the Opposition with [F]ormal [E]ntry of [A]ppearance.
In an Order dated December 9, 1998, (Annex A), public respondent judge ruled on [Petitioners ] Motion to Declare [Respondent in
Default], to wit:
WHEREFORE, and in view of all the foregoing, the present motion is granted. [Petitioner] is hereby directed to present its evidence
ex-parte before the [b]ranch [c]lerk of [c]ourt, who is designated as [c]ommissioner for the purpose, within ten (10) days from receipt
of this [O]rder, and for the latter to submit his report within twenty (20) days from the date the case is submitted for decision.
SO ORDERED.[3]
On February 23, 1999, respondent filed with the CA a Petition for certiorari, arguing that the RTC had committed grave abuse of
discretion (a) in denying the formers Motion to Dismiss, (b) in issuing a Writ of Preliminary Injunction, and (c) in declaring
respondent in default despite its filing an Answer.
Ruling of the Court of Appeals

The CA ruled that petitioner had no cause of action against respondent. Petitioner failed to show any evidence that it had been
granted university status by respondent as required under existing law and CHED rules and regulations. A certificate of incorporation
under an Unauthorized name does not confer upon petitioner the right to use the word university in its name. The evidence submitted
by respondent showed that the Securities and Exchange Commission (SEC) had denied that petitioner had ever amended its Articles of
Incorporation to include university in its corporate name. For its part, the Department of Education, Culture and Sports (DECS) denied
having issued the alleged Certification dated May 18, 1998, indorsing the change in petitioners corporate name. Besides, neither the
Corporation Code nor the SEC Charter vests the latter with the authority to confer university status on a corporation that it regulates.
For the same reason, the appellate court also ruled that the Writ of Preliminary Injunction had improvidently been issued. The
doubtful right claimed by petitioner is subordinate to the public interest to protect unsuspecting students and their parents from the
unauthorized operation and misrepresentation of an educational institution.
Respondent should not have been declared in default, because its answer had been filed long before the RTC ruled upon
petitioners Motion to declare respondent in default. Thus, respondent had not obstinately refused to file an Answer; on the contrary, its

failure to do so on time was due to excusable negligence. Declaring it in default did not serve the ends of justice, but only prevented it
from pursuing the merits of its case.
Hence, this Petition.[4]
Issues

Petitioner alleges that the appellate court committed the following reversible errors:
A. In giving due course to respondent CHEDs Petition for Certiorari filed way beyond the 60-day reglementary period
prescribed by Section 4, Rule 65 of the Rules of Court;
B. In not requiring Respondent CHED to first file a motion to Set Aside the Order of Default dated December 9, 1998; and
C. In ordering the dismissal of Civil Case No. 98-811.[5]
In its Memorandum, petitioner adds that the CA erred in dissolving the Writ of Preliminary Injunction issued by the RTC. We
shall take up these issues in the following order: (1) timeliness of the certiorari petition, (2) validity of the default order, (3) validity of
the preliminary injunction, and (4) dismissal of the Complaint.
This Courts Ruling

The Petition is partly meritorious.

First Issue: Timeliness of Certiorari

Petitioner claims that the Petition for certiorari of respondent should have been dismissed by the CA, because it was filed out of
time and was not preceded by a motion for reconsideration in the RTC. The copy of the Order of August 14, 1998 had been served at
respondents office on August 15, 1998, but its Answer was filed only after 180 days which, according to petitioner, could not be
considered a reasonable period. On the other hand, the Office of the Solicitor General (OSG) argues that the Order is null and void
and, hence, may be assailed at any time.
We hold that respondents Petition for Certiorari was seasonably filed. In computing its timeliness, what should have been
considered was not the Order of August 14, 1998, but the date when respondent received the December 9, 1998 Order declaring it in
default. Since it received this Order only on January 13, 1999, and filed its Petition for Certiorari on February 23, 1999, it obviously
complied with the sixty-day reglementary period stated in Section 4, Rule 65 of the 1997 Rules of Court. Moreover, the August 14,
1998 Order was not a proper subject of certiorari or appeal, since it was merely an interlocutory order.
Exhaustion of Available Remedies

Petitioner also contends that certiorari cannot prosper in this case, because respondent did not file a motion for reconsideration
before filing its Petition for Certiorari with the CA. Respondent counters that reconsideration should be dispensed with, because the
December 9, 1998 Order is a patent nullity.
The general rule is that, in order to give the lower court the opportunity to correct itself, a motion for reconsideration is a
prerequisite to certiorari. It also basic that petitioner must exhaust all other available remedies before resorting to certiorari. This rule,
however, is subject to certain exceptions such as any of the following: (1) the issues raised are purely legal in nature, (2) public
interest is involved, (3) extreme urgency is obvious or (4) special circumstances warrant immediate or more direct action. [6] It is
patently clear that the regulation or administration of educational institutions, especially on the tertiary level, is invested with public
interest. Hence, the haste with which the solicitor general raised these issues before the appellate court is understandable. For the
reason mentioned, we rule that respondents Petition for Certiorari did not require prior resort to a motion for reconsideration.
Second Issue: Validity of the Default Order

Petitioner avers the RTC was justified in declaring respondent in default, because the August 14, 1998 Order directing the filing
of an answer had been served on August 25, 1998. And as late as October 30, 1998, respondent could only file a Motion for Extension
of Time, which the trial court denied because of the expiry of the fifteen-day period. Petitioner adds that respondents proper remedy
would have been a Motion to Set Aside the Order of Default, pursuant to Section 3(b), Rule 9 of the Rules of Court.
Respondent, in turn, avers that certiorari was the only plain, speedy and adequate remedy in the ordinary course of law, because
the default Order had improvidently been issued.
We agree with respondent. Lina v. Court of Appeals[7] discussed the remedies available to a defendant declared in default, as
follows: (1) a motion to set aside the order of default under Section 3(b), Rule 9 of the Rules of Court, if the default was discovered
before judgment could be rendered; (2) a motion for new trial under Section 1(a) of Rule 37, if the default was discovered after
judgment but while appeal is still available; (3) a petition for relief under Rule 38, if judgment has become final and executory; and (4)
an appeal from the judgment under Section 1, Rule 41, even if no petition to set aside the order of default has been resorted to.
These remedies, however, are available only to a defendant who has been validly declared in default. Such defendant irreparably
loses the right to participate in the trial. On the other hand, a defendant improvidently declared in default may retain and exercise such
right after the order of default and the subsequent judgment by default are annulled, and the case remanded to the court of origin. The
former is limited to the remedy set forth in section 2, paragraph 3 of Rule 41 of the pre 1997 Rules of Court, and can therefore contest
only the judgment by default on the designated ground that it is contrary to evidence or law. The latter, however, has the following
options: to resort to this same remedy; to interpose a petition for certiorari seeking the nullification of the order of default, even before
the promulgation of a judgment by default; or in the event that judgment has been rendered, to have such order and judgment declared
void.
In prohibiting appeals from interlocutory orders, the law does not intend to accord executory force to such writs, particularly
when the effect would be to cause irreparable damage. If in the course of trial, a judge proceeds without or in excess of jurisdiction,
this rule prohibiting an appeal does not leave the aggrieved party without any remedy.[8] In a case like this, a special civil action of
certiorari is the plain, speedy and adequate remedy.
Herein respondent controverts the judgment by default, not on the ground that it is unsubstantiated by evidence or that it is
contrary to law, but on the ground that it is intrinsically void for having been rendered pursuant to a patently invalid order of default. [9]

Grave Abuse of Discretion

Petitioner claims that in issuing the default Order, the RTC did not act with grave abuse of discretion, because respondent had
failed to file its answer within fifteen days after receiving the August 14, 1998 Order.
We disagree. Quite the contrary, the trial court gravely abused its discretion when it declared respondent in default despite the
latters filing of an Answer.[10] Placing respondent in default thereafter served no practical purpose.
Petitioner was lax in calling the attention of the Court to the fifteen-day period for filing an answer. It moved to declare
respondent in default only on September 20, 1998, when the filing period had expired on August 30, 1998. The only conclusion in this
case is that petitioner has not been prejudiced by the delay. The same leniency can also be accorded to the RTC, which declared
respondent in default only on December 9, 1998, or twenty-two days after the latter had filed its Answer on November 17,
1998. Defendants Answer should be admitted, because it had been filed before it was declared in default, and no prejudice was caused
to plaintiff. The hornbook rule is that default judgments are generally disfavored.[11]
While there are instances when a party may be properly declared in default, these cases should be deemed exceptions to the rule
and should be resorted to only in clear cases of obstinate refusal or inordinate neglect in complying with the orders of the court. [12] In
the present case, however, no such refusal or neglect can be attributed to respondent.
It appears that respondent failed to file its Answer because of excusable negligence. Atty. Joel Voltaire Mayo, director of the
Legal Affairs Services of CHED, had to relinquish his position in accordance with the Memorandum dated July 7, 1998, requiring all
non-CESO eligibles holding non-career positions to vacate their respective offices. It was only on September 25, 1998, after CHED
Special Order No. 63 had been issued, when he resumed his former position. Respondent also presented a meritorious defense in its
Answer -- that it was duty-bound to pursue that state policy of protecting, fostering and promoting the right of all citizens to affordable
quality education at all levels. In stark contrast, petitioner neither qualified for nor was ever conferred university status by respondent.
Judges, as a rule, should avoid issuing default orders that deny litigants the chance to be heard. Instead, the former should give
the latter every opportunity to present their conflicting claims on the merits of the controversy, as much as possible avoiding any resort
to procedural technicalities.[13]
Third Issue: Preliminary Injunction

Petitioner contends that the RTC validly issued the Writ of Preliminary Injunction. According to the trial court, respondents
actions adversely affected petitioners interests, faculty and students. In fact, the very existence of petitioner as a business concern
would have been jeopardized had its proprietary rights not been protected.
We disagree. We concur with the CA that the trial court acted with grave abuse of discretion in issuing the Writ of Preliminary
Injunction against respondent. Petitioner failed to establish a clear right to continue representing itself to the public as a
university. Indeed, it has no vested right to misrepresent itself. Before an injunction can be issued, it is essential that (1) there must be
a right in esse to be protected, and (2) the act against which the injunction is to be directed must have violated such right. [14] The
establishment and the operation of schools are subject to prior authorization from the government. No school may claim to be a
university unless it has first complied with the prerequisites provided in Section 34 of the Manual of Regulations for Private
Schools. Section 3, Rule 58 of the Rules of Court, limits the grant of preliminary injunction to cases in which the plaintiff is clearly
entitled to the relief prayed for.
We also agree with the finding of the CA that the act sought to be enjoined by petitioner is not violative of the latters
rights. Respondents Cease and Desist Order of July 30, 1997 merely restrained petitioner from using the term university in its name. It
was not ordered to close, but merely to revert to its authorized name; hence, its proprietary rights were not violated.
Fourth Issue: Dismissal of the Complaint

Petitioner claims that the CA went beyond its limited jurisdiction under Rule 65 when it reversed the trial court and dismissed the
Complaint on the ground that petitioner had failed to state a cause of action. The RTC had yet to conduct trial, but the CA already
determined the factual issue regarding petitioners acquisition of university status, a determination that is not permitted in certiorari
proceedings.
The CA ruled that the trial court gravely abused its discretion in denying respondents Motion to dismiss on the ground of lack of
cause of action because of petitioners lack of legal authority or right to use the word university. Said appellate court:
x x x. No matter how we interpret the Corporation Code and the law granting the Securities and Exchange Commission its powers and
duties, there is nothing there which grants it the power or authority to confer University Status to an educational
institution. Fundamental is the rule that when there is no power granted, none exist[s], not even implied ones for there is none from
where to infer. The mere fact of securing an alleged Certificate of Incorporation under an unauthorized name does not confer the right
to use such name.
But what makes the conclusion of [the trial court] even anomalous, to say the least, is that no less than the Chairman of the SEC in his
letter to the [respondent] (Exh. J) expressly said that [petitioner] never filed any Amended Articles of Incorporation so as to have a
change of corporate name to include the term university. Worse, the records officer of DECS issued a Certification dated May 18,
1998 (Annex AA) to the effect that there was no Indorsement made by that office addressed to the SEC or the Proposed Amended
Article of Incorporation of Indiana Aeronautics. x x x.
Under such clear pattern of deceitful maneuvering to circumvent the requirement for acquiring University Status, it is [a] patently
reversible error for [the trial court] to hold that [petitioner] has a right to use the word University which must be protected. Dismissal
of [petitioners] Complaint for lack of a valid cause of action should have been the proper action taken by [the trial court] judge. [15]
An order denying a motion to dismiss is interlocutory, and so the proper remedy in such a case is to appeal after a decision has
been rendered. A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted to only to correct a
grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of jurisdiction. Its function is limited to keeping an

inferior court within its jurisdiction and to relieve persons from arbitrary acts -- acts which courts or judges have no power or authority
in law to perform. It is not designed to correct erroneous findings and conclusions made by the court.[16]
In the case at bar, we find no grave abuse of discretion in the RTCs denial of the Motion to Dismiss, as contained in the August
14, 1998 Order. The CA erred in ruling other wise. The trial court stated in its Decision that petitioner was an educational institution,
originally registered with the Securities and Exchange Commission as the Indiana School of Aeronautics, Inc. That name was
subsequently changed to Indiana Aerospace University after the Department of Education, Culture and Sports had interposed no
objection to such change.[17]
Respondent issued a formal Cease and Desist Order directing petitioner to stop using the word university in its corporate
name. The former also published an announcement in the March 21, 1998 issue of Freeman, a local newspaper in Cebu City, that there
was no institution of learning by that name. The counsel of respondent was quoted as saying in the March 28, 1998 issue of the
newspaper Today that petitioner had been ordered closed by the respondent for illegal advertisement, fraud and misrepresentation of
itself as a university. Such acts, according to the RTC undermined the publics confidence in petitioner as an educational institution.
[18]
This was a clear statement of a sufficient cause of action.
When a motion to dismiss is grounded on the failure to state a cause of action, a ruling thereon should be based only on the facts
alleged in the complaint.[19] The court must pass upon this issue based solely on such allegations, assuming them to be true. For it to do
otherwise would be a procedural error and a denial of plaintiffs right to due process. [20]
WHEREFORE, the Petition is hereby GRANTED IN PART, and the assailed Decision MODIFIED. The trial court
is DIRECTED to SET ASIDE the Order of default of December 9, 1998; to ADMIT the Answer dated November 5, 1998; toLIFT the
preliminary injunction; and to CONTINUE, with all deliberate speed, the proceedings in Civil Case No. 98-811.
SO ORDERED.
Melo, (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.