G.R. No. 141833            March 26, 2003LM POWER ENGINEERING CORPORATION, petitioner, 

vs.CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, INC., respondent.

PANGANIBAN, J.:

Alternative dispute resolution methods or ADRs -- like arbitration, mediation, negotiation and conciliation -- are encouraged by the Supreme Court. By enabling parties to resolve their disputes amicably, they provide solutions that are less time-consuming, less tedious, less confrontational, and more productive of goodwill and lasting relationships.1

The Case

Before us is a Petition for Review on Certiorari2 under Rule 45 of the Rules of Court, seeking to set aside the January 28, 2000 Decision of the Court of Appeals3 (CA) in CA-GR CV No. 54232. The dispositive portion of the Decision reads as follows:

"WHEREFORE, the judgment appealed from is REVERSED and SET ASIDE. The parties are ORDERED to present their dispute to arbitration in accordance with their Sub-contract Agreement. The surety bond posted by [respondent] is [d]ischarged."4

The Facts

On February 22, 1983, Petitioner LM Power Engineering Corporation and Respondent Capitol Industrial Construction Groups Inc. entered into a "Subcontract Agreement" involving electrical work at the Third Port of Zamboanga.5

On April 25, 1985, respondent took over some of the work contracted to petitioner.6 Allegedly, the latter had failed to finish it because of its inability to procure materials.7

Upon completing its task under the Contract, petitioner billed respondent in the amount of P6,711,813.90.8Contesting the accuracy of the amount of advances and billable accomplishments listed by the former, the latter refused to pay. Respondent also took refuge in the termination clause of the Agreement.9 That clause allowed it to set off the cost of the work that

petitioner had failed to undertake -- due to termination or take-over -- against the amount it owed the latter.

Because of the dispute, petitioner filed with the Regional Trial Court (RTC) of Makati (Branch 141) a Complaint10for the collection of the amount representing the alleged balance due it under the Subcontract. Instead of submitting an Answer, respondent filed a Motion to Dismiss,11 alleging that the Complaint was premature, because there was no prior recourse to arbitration.

In its Order12 dated September 15, 1987, the RTC denied the Motion on the ground that the dispute did not involve the interpretation or the implementation of the Agreement and was, therefore, not covered by the arbitral clause.13

After trial on the merits, the RTC14 ruled that the take-over of some work items by respondent was not equivalent to a termination, but a mere modification, of the Subcontract. The latter was ordered to give full payment for the work completed by petitioner.

Ruling of the Court of Appeals

On appeal, the CA reversed the RTC and ordered the referral of the case to arbitration. The appellate court held as arbitrable the issue of whether respondent’s take-over of some work items had been intended to be a termination of the original contract under Letter "K" of the Subcontract. It ruled likewise on two other issues: whether petitioner was liable under the warranty clause of the Agreement, and whether it should reimburse respondent for the work the latter had taken over.15

Hence, this Petition.16

The Issues

In its Memorandum, petitioner raises the following issues for the Court’s consideration:

"A

Whether or not there exist[s] a controversy/dispute between petitioner and respondent regarding the interpretation and implementation of the Sub-Contract Agreement dated February 22, 1983 that requires prior recourse to voluntary arbitration;

"B

In the affirmative, whether or not the requirements provided in Article III 1 of CIAC Arbitration Rules regarding request for arbitration ha[ve] been complied with[.]"17

The Court’s Ruling

The Petition is unmeritorious.

First Issue:Whether Dispute Is Arbitrable

Petitioner claims that there is no conflict regarding the interpretation or the implementation of the Agreement. Thus, without having to resort to prior arbitration, it is entitled to collect the value of the services it rendered through an ordinary action for the collection of a sum of money from respondent. On the other hand, the latter contends that there is a need for prior arbitration as provided in the Agreement. This is because there are some disparities between the parties’ positions regarding the extent of the work done, the amount of advances and billable accomplishments, and the set off of expenses incurred by respondent in its take-over of petitioner’s work.

We side with respondent. Essentially, the dispute arose from the parties’ ncongruent positions on whether certain provisions of their Agreement could be applied to the facts. The instant case involves technical discrepancies that are better left to an arbitral body that has expertise in those areas. In any event, the inclusion of an arbitration clause in a contract does not ipso facto divest the courts of jurisdiction to pass upon the findings of arbitral bodies, because the awards are still judicially reviewable under certain conditions.18

In the case before us, the Subcontract has the following arbitral clause:

"6. The Parties hereto agree that any dispute or conflict as regards to interpretation and implementation of this Agreement which cannot be settled between [respondent] and [petitioner] amicably shall be settled by means of arbitration x x x."19

Clearly, the resolution of the dispute between the parties herein requires a referral to the provisions of their Agreement. Within the scope of the

arbitration clause are discrepancies as to the amount of advances and billable accomplishments, the application of the provision on termination, and the consequent set-off of expenses.

A review of the factual allegations of the parties reveals that they differ on the following questions: (1) Did a take-over/termination occur? (2) May the expenses incurred by respondent in the take-over be set off against the amounts it owed petitioner? (3) How much were the advances and billable accomplishments?

The resolution of the foregoing issues lies in the interpretation of the provisions of the Agreement. According to respondent, the take-over was caused by petitioner’s delay in completing the work. Such delay was in violation of the provision in the Agreement as to time schedule:

"G. TIME SCHEDULE

"[Petitioner] shall adhere strictly to the schedule related to the WORK and complete the WORK within the period set forth in Annex C hereof. NO time extension shall be granted by [respondent] to [petitioner] unless a corresponding time extension is granted by [the Ministry of Public Works and Highways] to the CONSORTIUM."20

Because of the delay, respondent alleges that it took over some of the work contracted to petitioner, pursuant to the following provision in the Agreement:

"K. TERMINATION OF AGREEMENT

"[Respondent] has the right to terminate and/or take over this Agreement for any of the following causes:

x x x           x x x           x x x

‘6. If despite previous warnings by [respondent], [petitioner] does not execute the WORK in accordance with this Agreement, or persistently or flagrantly neglects to carry out [its] obligations under this Agreement."21

Supposedly, as a result of the "take-over," respondent incurred expenses in excess of the contracted price. It sought to set off those expenses

against the amount claimed by petitioner for the work the latter accomplished, pursuant to the following provision:

"If the total direct and indirect cost of completing the remaining part of the WORK exceed the sum which would have been payable to [petitioner] had it completed the WORK, the amount of such excess [may be] claimed by [respondent] from either of the following:

‘1. Any amount due [petitioner] from [respondent] at the time of the termination of this Agreement."22

The issue as to the correct amount of petitioner’s advances and billable accomplishments involves an evaluation of the manner in which the parties completed the work, the extent to which they did it, and the expenses each of them incurred in connection therewith. Arbitrators also need to look into the computation of foreign and local costs of materials, foreign and local advances, retention fees and letters of credit, and taxes and duties as set forth in the Agreement. These data can be gathered from a review of the Agreement, pertinent portions of which are reproduced hereunder:

"C. CONTRACT PRICE AND TERMS OF PAYMENT

x x x           x x x           x x x

"All progress payments to be made by [respondent] to [petitioner] shall be subject to a retention sum of ten percent (10%) of the value of the approved quantities. Any claims by [respondent] on [petitioner] may be deducted by [respondent] from the progress payments and/or retained amount. Any excess from the retained amount after deducting [respondent’s] claims shall be released by [respondent] to [petitioner] after the issuance of [the Ministry of Public Works and Highways] of the Certificate of Completion and final acceptance of the WORK by [the Ministry of Public Works and Highways].

x x x           x x x           x x x

"D. IMPORTED MATERIALS AND EQUIPMENT

"[Respondent shall open the letters of credit for the importation of equipment and materials listed in Annex E hereof after the

drawings, brochures, and other technical data of each items in the list have been formally approved by [the Ministry of Public Works and Highways]. However, petitioner will still be fully responsible for all imported materials and equipment.

"All expenses incurred by [respondent], both in foreign and local currencies in connection with the opening of the letters of credit shall be deducted from the Contract Prices.

x x x           x x x           x x x

"N. OTHER CONDITIONS

x x x           x x x           x x x

"2. All customs duties, import duties, contractor’s taxes, income taxes, and other taxes that may be required by any government agencies in connection with this Agreement shall be for the sole account of [petitioner]."23

Being an inexpensive, speedy and amicable method of settling disputes,24 arbitration -- along with mediation, conciliation and negotiation -- is encouraged by the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the resolution of disputes, especially of the commercial kind.25 It is thus regarded as the "wave of the future" in international civil and commercial disputes.26 Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward.27

Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should liberally construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an order to arbitrate should be granted.28 Any doubt should be resolved in favor of arbitration.29

Second Issue:Prior Request for Arbitration

According to petitioner, assuming arguendo that the dispute is arbitrable, the failure to file a formal request for arbitration with the Construction Industry Arbitration Commission (CIAC) precluded the latter from acquiring jurisdiction over the question. To bolster its position, petitioner

even cites our ruling in Tesco Services Incorporated v. Vera.30 We are not persuaded.

Section 1 of Article II of the old Rules of Procedure Governing Construction Arbitration indeed required the submission of a request for arbitration, as follows:

"SECTION. 1. Submission to Arbitration -- Any party to a construction contract wishing to have recourse to arbitration by the Construction Industry Arbitration Commission (CIAC) shall submit its Request for Arbitration in sufficient copies to the Secretariat of the CIAC; PROVIDED, that in the case of government construction contracts, all administrative remedies available to the parties must have been exhausted within 90 days from the time the dispute arose."

Tesco was promulgated by this Court, using the foregoing provision as reference.

On the other hand, Section 1 of Article III of the new Rules of Procedure Governing Construction Arbitration has dispensed with this requirement and recourse to the CIAC may now be availed of whenever a contract "contains a clause for the submission of a future controversy to arbitration," in this wise:

"SECTION 1. Submission to CIAC Jurisdiction — An arbitration clause in a construction contract or a submission to arbitration of a construction dispute shall be deemed an agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a different arbitration institution or arbitral body in such contract or submission. When a contract contains a clause for the submission of a future controversy to arbitration, it is not necessary for the parties to enter into a submission agreement before the claimant may invoke the jurisdiction of CIAC."

The foregoing amendments in the Rules were formalized by CIAC Resolution Nos. 2-91 and 3-93.31

The difference in the two provisions was clearly explained in China Chang Jiang Energy Corporation (Philippines) v. Rosal Infrastructure Builders et al.32 (an extended unsigned Resolution) and reiterated

in National Irrigation Administration v. Court of Appeals,33 from which we quote thus:

"Under the present Rules of Procedure, for a particular construction contract to fall within the jurisdiction of CIAC, it is merely required that the parties agree to submit the same to voluntary arbitration Unlike in the original version of Section 1, as applied in the Tesco case, the law as it now stands does not provide that the parties should agree to submit disputes arising from their agreement specifically to the CIAC for the latter to acquire jurisdiction over the same. Rather, it is plain and clear that as long as the parties agree to submit to voluntary arbitration, regardless of what forum they may choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they specifically choose another forum, the parties will not be precluded from electing to submit their dispute before the CIAC because this right has been vested upon each party by law, i.e., E.O. No. 1008."34

Clearly, there is no more need to file a request with the CIAC in order to vest it with jurisdiction to decide a construction dispute.

The arbitral clause in the Agreement is a commitment on the part of the parties to submit to arbitration the disputes covered therein. Because that clause is binding, they are expected to abide by it in good faith. 35 And because it covers the dispute between the parties in the present case, either of them may compel the other to arbitrate.36

Since petitioner has already filed a Complaint with the RTC without prior recourse to arbitration, the proper procedure to enable the CIAC to decide on the dispute is to request the stay or suspension of such action, as provided under RA 876 [the Arbitration Law].37

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 144074      March 20, 2001MEDINA INVESTIGATION & SECURITY CORPORATION and

ERNESTO Z. MEDINA, petitioners, vs.

COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION and ROMEO TABURNAL, respondents.

R E S O L U T I O N

GONZAGA-REYES, J.:

Before this Court is a Petition for Review seeking to set aside the Resolution dated June 2, 2000 dismissing the petition for being filed beyond the 60-day reglementary period and the Resolution dated July 12, 2000 denying the motion for reconsideration, both issued by the Court of Appeals in CA-G.R. SP No. 58968.

Respondent Romeo Taburnal was hired by petitioner corporation as security guard on September 8, 1996 and was assigned to one of its clients, Abenson, Inc. at Sta. Lucia Grand Mall. On September 5, 1997, the client requested that respondent Taburnal be relieved due to violations pursuant to the Service Contract such as reporting late for duty, below standard performance of duties, and exceeding the maximum six (6) months duty in the company. In view of his replacement, respondent Taburnal filed a complaint for Illegal Dismissal claiming for separation pay, non-payment of legal/special holiday and overtime pay, underpayment of 13th month pay and cash bond and tax refund. On April 29, 1999, the Labor Arbiter rendered judgment ordering the reinstatement of respondent Taburnal without loss of seniority rights and the payment of full backwages and salary differentials. Petitioners appealed to the NLRC which dismissed the same for lack of jurisdiction. The Motion for Reconsideration thereto was denied. Herein petitioners filed a petition for certiorari with the Court of Appeals which dismissed the petition outright for having been filed beyond the 60-day reglementary period or on the 67th day per its Resolution on June 2, 2000. The Court of Appeals ruled that the petition was filed on the sixty-seventh (67th) day since petitioners received on November 10, 1999 the Order dated August 26, 1999 of the NLRC and the Motion for Reconsideration thereto was filed of November 19, 1999. Copy of the order denying the said motion was received by petitioners on April 3, 2000, while the petition was filed with the Court of Appeals on May 31, 2000. The Court of Appeals did not discuss the merits of the petition. Hence, the petition raising the following grounds:

"THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE PETITION FOR CERTIORARI WAS FILED BEYOND THE REGLEMENTARY PERIOD.1âwphi1.nêt

"PUBLIC APPELLEES COMMITTED A REVERSIBLE ERROR WHEN THEY DISMISSED THE PETITION, THEREBY AFFIRMING THE DECISION OF LABOR ARBITER FELIPE P. PATI WHICH AWARDED MONETARY CLAIMS AND OTHER RELIEF NOT PRAYED FOR IN THE COMPLAINT, IN GRAVE ABUSE OF THEIR DISCRETION, AMOUNTING TO LACK OR EXCESS OF JURISDICTION.

"PUBLIC APPELLEES GROSSLY ERRED AND GRAVELY ABUSED THEIR DISCRETION, WHEN THEY HELD APPELLANT ERNESTO Z. MEDINA JOINTLY AND SEVERALLY LIABLE WITH APPELLANT MISCOR, INSPITE OF THE FACT THAT THERE IS NO EVIDENCE TO THAT EFFECT."

Petitioners' main contention is that their petition for certiorari filed with the Court of Appeals was within the 60-day reglementary period pursuant to Rule 65. They insist that when the assailed Order was received on April 3, 2000, the petition filed on May 31, 2000 was the 58th day, citing Section 1, Rule 22 of the 1997 Rules on Civil Procedure and Article 13 of the Civil Code.

In his Comment, private respondent Romeo Taburnal alleges that he is aware that Section 4, Rule 65 of the 1997 Rules on Civil Procedure was later amended, which amendment took effect on September 1, 2000. He insists however that the petition filed with the Court of Appeals was not yet covered by said amendment. Private respondent further avers that Article 223 of the Labor Code and the NLRC Rules of Procedure provide that appeal is the proper remedy for a party aggrieved by a decision of the Labor Arbiter and the filing of a petition forcertiorari with the NLRC by petitioners is definitely a wrong remedy.

A.M. No. 00-2-03-SC amending Section 4, Rule 65 of the 1997 Rules of Civil Procedure (as amended by the Resolution of July 21, 1998) took effect on September 1, 2000 and provides, to wit:

"SEC. 4. When and where petition filed. --- The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or

not, the sixty (60) day period shall be counted from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless otherwise provided by law or these rules, the petition shall be filed in and cognizable only by the Court of Appeals.

No extension of time to file the petition shall be granted except for compelling reason and in no case exceeding fifteen (15) days.’’

Contrary to the position of respondents that such amendment should not apply in this case, we have ruled in the cases of Systems Factors Corporation and Modesto Dean vs. NLRC, et al., G.R. No. 143789 (promulgated on November 27, 2000) and Unity Fishing Development Corp. and/or Antonio Dee vs. CA, et al., G.R. No. 145415 (promulgated on February 2, 2001) that the amendment under A.M. No. 00-2-03-SC wherein the sixty-day period to file a petition for certiorari is reckoned from receipt of the resolution denying the motion for reconsideration should be deemed applicable. We reiterate that remedial statutes or statutes relating to remedies or modes of procedure, which do not create new or take away vested rights, but only operate in furtherance of the remedy or confirmation of rights already existing, do not come within the legal conception of a retroactive law, or the general rule against retroactive operation of statutes.1 Statutes regulating the procedure of the courts will be construed as applicable to actions pending and undetermined at the time of their passage. Procedural laws are retroactive in that sense and to that extent. The retroactive application of procedural laws is not violative of any right of a person who may feel that he is adversely affected.2 The reason is that as a general rule, no vested right may attach to nor arise from procedural laws.3

The above conclusion is consonant with the provision in Section 6, Rule 1 of the 1997 Rules of Civil Procedure that "(T)hese Rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding."

The other issues raised by petitioners should be addressed and resolved by the court below.

WHEREFORE, the Resolutions dated June 2, 2000 and July 12, 2000 are hereby SET ASIDE and the case is REMANDED to the Court of Appeals for further proceedings. 1âwphi1.nêt

SO ORDERED.

G.R. No. 149692               July 30, 2002HEIRS OF SPOUSES JULIAN DELA CRUZ AND MAGDALENA TUAZON, represented by their Attorney-in-Fact and co-heir,

VIRGILIO C. ALVENDIA, petitioners, vs.

HEIRS OF FLORENTINO QUINTOS, SR., namely, FLORENTINO QUINTOS, JR. and GLORIA QUINTOS BUGAYONG, respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before Us is a petition for review on certiorari under Rule 45 filed by petitioners seeking to reverse and set aside the Resolution dated May 29, 2001 of the Court of Appeals1 which dismissed their petition for review of the decision of the Regional Trial Court of Lingayen, Pangasinan (Branch 38) on the ground that the petition was filed out of time; and, the Resolution dated August 29, 20012 denying their motion for reconsideration.

Sometime in 1996, petitioners filed with the Municipal Trial Court of Lingayen, Pangasinan an action for reconveyance with damages3 against respondents alleging, among others, that they are the children of the late Ariston dela Cruz, who was the only forced and legal heir of his deceased parents, Julian dela Cruz and Magdalena Tuazon who died intestate; that sometime in 1897, Magdalena Tuazon purchased from Herminigildo and Filomena Tiong a certain parcel of land located at Heroes Street, Lingayen, Pangasinan consisting of 605 square meters and since then respondents and their predecessors had been in continuous occupation and adverse possession of the subject land; that sometime in 1987, private respondents’ predecessor Florentino Quintos, Sr., filed an application for the judicial registration of a certain land which included petitioners’ land; that the land registration court granted Quintos’ application and decreed the land in Florentino Quintos’ name and OCT No. 22665 was subsequently issued; that OCT No. 22665 was partitioned into four separate lots and petitioners’ land was covered by TCT No. 173052; that respondents subsequently filed a complaint (docketed as Civil Case No. 4118) for illegal detainer against petitioners for the latter’s refusal to vacate the subject land which resulted in petitioners’ ejectment from the subject property.

Respondents filed their answer with counterclaim, alleging that the subject land had always belonged to respondents’ late father Florentino Quintos, Sr., who in turn inherited the same from his mother, Dolores Tuazon; that the affidavit evidencing petitioners’ ownership of the subject

land was not attached to the complaint; that respondents’ predecessors merely tolerated petitioners’ possession of the subject land; that petitioners never filed their opposition to respondents’ application for registration despite knowledge thereof; that the land registration case which was the basis for the issuance of OCT No. 22665 in the name of the predecessor of respondents was a proceeding in rem which bound all persons whether notified or not.

On January 29, 1999, a decision4 was rendered by the MTC declaring petitioners as the legal owners of the land covered by TCT No. 173052 and ordering respondents to convey to petitioners the subject land and to pay damages to petitioners. 5

Respondents filed their appeal before the Regional Trial Court, Lingayen, Pangasinan (Branch 38). On January 19, 2000, the RTC6 reversed the decision of the MTC dismissing the complaint, declaring respondents as the absolute owners of the subject land and ordering petitioners to pay damages to respondents.

Petitioners filed their motion for reconsideration which the trial court denied in a Resolution dated March 8, 2000.7

On April 18, 2000, petitioners, through counsel, filed with the Court of Appeals (CA) a motion for extension of time to file a petition for review which she subsequently filed on May 2, 2000. Respondents filed a motion to dismiss the petition for review for being filed out of time since the certification issued by Postmaster Elizabeth I. Torio of Dagupan City Post Office and the affidavit of Ricardo C. Castro, Clerk III of the Regional Trial Court show that the trial court’s Resolution dated March 8, 2000 denying petitioners motion for reconsideration was received by the secretary of petitioners’ counsel on March 16, 2000, thus the filing of the petition was filed 28 days late.

Petitioners’ counsel filed her Comment to respondents’ motion to dismiss alleging that when she arrived in her office on April 3, 2000, she found copies of pleadings and correspondence including a copy of the trial court’s Resolution dated March 8, 2000 denying her motion for reconsideration; that she thought that these pleadings and correspondence were all received on April 3, 2000; that upon receipt of respondents’ motion to dismiss, she confronted her secretary who told her that the envelope containing the Resolution was only opened on April 3, 2000 and her secretary could not recall if the Resolution was among those she received on March 16, 2000.

On May 29, 2001, the CA issued the assailed Resolution dismissing petitioners’ petition for review for being filed out of time. It found the explanation given by petitioners’ counsel unconvincing since she failed to give the reason why the envelope was opened only on April 3, 2000; that counsel’s secretary did not even admit that she actually received the said Resolution; that it is the counsel’s duty to adopt and strictly maintain a system that efficiently takes into account all court notices sent to her and she failed to instruct and remind her secretary on what should be done with respect to such notices and processes. Petitioners’ motion for reconsideration was denied in a Resolution dated August 29, 2001.

Hence, the present petition on the following grounds:

1) The appellate court rejected and refused to consider the valid reason submitted by the petitioner’s counsel for the apparent delay in the filing of the petition for review with said court; hence the dismissal of the petition was tainted with grave abuse of discretion;

2) Granting, arguendo, that there is a basis for the dismissal of the petition, the appellate court should have applied the principle of liberal construction of the Rules pursuant to Rule 1, Section 6 of the 1997 Rules of Civil Procedure (1997 RCP), considering the valid and meritorious case of petitioners.

3) In either case, it is respectfully submitted that the appellate court has departed from the accepted and usual course of judicial proceedings in dismissing outright the petition for review as to call for the supervision of this Honorable Court in the exercise of its equity jurisdiction.8

We deny the petition.

Section 1, Rule 42 of the 1997 Rules on Civil Procedure, provides that the petition shall be filed and served within 15 days from notice of the decision sought to be reviewed or of the denial of petitioner’s motion for new trial or reconsideration filed in due time after judgment.9 In the instant case, it has been established that the resolution denying petitioners’ motion for reconsideration of the trial court’s decision was received by the secretary of petitioners’ former counsel on March 16, 2000, thus the last day of the 15-day period within which to file the petition for review with the respondent court was March 31, 2000. Considering that counsel filed a motion for extension of time to file a petition for review with the

respondent court only on April 18, 2000, the judgment of the RTC subject of the petition for review had already become final and executory. Consequently, the CA did not err in dismissing the petition for being filed out of time since it has no more jurisdiction to entertain the petition much less to alter a judgment.

This Court has invariably ruled that perfection of an appeal in the manner and within the period laid down by law is not only mandatory but also jurisdictional.10 The failure to perfect an appeal as required by the rules has the effect of defeating the right to appeal of a party and precluding the appellate court from acquiring jurisdiction over the case.11 The right to appeal is not a natural right nor a part of due process; it is merely a statutory privilege, and may be exercised only in the manner and in accordance with the provisions of the law.12 The party who seeks to avail of the same must comply with the requirement of the rules. Failing to do so, the right to appeal is lost. 13

We agree with the CA when it found that the reason advanced by petitioners’ former counsel, which is that she received the resolution denying her motion for reconsideration only on April 3, 2000 as she found it on her table on the same date, unacceptable. The negligence of her secretary in failing to immediately give the trial court’s resolution denying petitioners’ motion for reconsideration upon receipt to the counsel and the negligence of counsel to adopt and arrange matters in order to ensure that official or judicial communications sent by mail would reach her promptly cannot be considered excusable. The Court has also often repeated that the negligence of the clerks which adversely affect the cases handled by lawyers, is binding upon the latter.14 The doctrinal rule is that the negligence of counsel binds the client because otherwise, "there would never be an end to a suit so long as new counsel could be employed who could allege and show that prior counsel had not be sufficiently diligent, or experienced, or learned.15

Petitioners claim that there should be a liberal construction of the rules of procedure in order to effect substantial justice and appeal to this Court’s exercise of equity jurisdiction. We are not persuaded. There is no showing in this case of any extraordinary circumstance which may justify a deviation from the rule on timely filing of appeals. As held in the case of Tupas vs. CA:16

"Rules of procedure are intended to ensure the orderly administration of justice and the protection of substantive rights in judicial and extrajudicial proceedings. It is a mistake to suppose that substantive law and adjective law are contradictory to each other or, has often been "suggested, that

enforcement of procedural rules should never be permitted if it will result in prejudice to the substantive rights of the litigants. This is not exactly true; the concept is much misunderstood. As a matter of fact, the policy of the courts is to give effect to both kinds of law, as complementing each other, in the just and speedy resolution of the dispute between the parties. Observance of both substantive and procedural rights is equally guaranteed by due process, whatever the source of such rights, be it the Constitution itself or only a statute or a rule of court. (Limpot vs. CA, 170 SCRA 369)

x x x           x x x          x x x

"For all its conceded merits, equity is available only in the absence of law and not as its replacement. Equity is described as justice outside legality, which simply means that it cannot supplant although it may, as often happens, supplement the law. We said in an earlier case, and we repeat it now, that all abstract arguments based only on equity should yield to positive rules, which pre-empt and prevail over such persuasions. Emotional appeals for justice, while they may wring the heart of the Court, cannot justify disregard of the mandate of the law as long as it remains in force. The applicable maxim, which goes back to the ancient days of the Roman jurists- and is now still reverently observed- is `aequetas nunquam contravenit legis.’" (Aguila vs. CA, 160 SCRA 359)

At any rate, we find no reversible error committed by the RTC in dismissing petitioners’ complaint for reconveyance against respondents. Petitioners’ claim of ownership was based on the affidavit of Herminigildo and Filomena Tiong executed on November 9, 1926 which stated among others that they were the former owners in common of the subject parcel of land which they sold to Magdalena Tuazon (petitioners’ predecessor in interest) on or about the year 1897. However, such affidavit was not accompanied by any instrument showing the sale between the Tiong spouses and Magdalena Tuazon. By itself, an affidavit is not a mode of acquiring ownership,17thus it cannot serve as the basis of ownership of the petitioners. Moreover, the RTC found that there was no tax declaration or title in the name of the Tiong spouses to evidence their ownership of the subject land. On the other hand, respondents’ ownership of the subject land was by virtue of a land registration case where the land registration court found sufficient the well documented evidence submitted by applicant Florentino Quintos, Sr. ( respondents’ predecessor in interest ) to prove their ownership of 2,048 sq. meters lot which included the subject land.

In civil cases, the burden of proof is on the plaintiff to establish his case by a preponderance of evidence. 1âwphi1 If he claims a right granted or created by law, he must prove his claim by competent evidence. He must rely on the strength of his own evidence and not on the weakness of that of his opponent.18 The RTC had correctly ruled that petitioners failed to show sufficient proof of ownership over the subject land covered by TCT No. 173052 so as to entitle them the return of the same.

WHEREFORE, the petition is DENIED. The Court of Appeals’ Resolution dated May 29, 2001 and Resolution dated August 29, 2001 are AFFIRMED. Costs against petitioners.

SO ORDERED.

G.R. No. 144294            March 11, 2003SOLEDAD CHANLIONGCO RAMOS, FRANCISCO D.

CHANLIONGCO, ADELBERTO D. CHANLIONGCO, ARMANDO D. CHANLIONGCO and FLORENCIO D. CHANLIONGCO, petitioners, 

vs.TERESITA D. RAMOS, Spouses TERESITA and EDMUNDO S.

MUYOT, Spouses VEDASTA and FLORENCIO M. DATO, LORETO MUYOT, Spouses TERESITA and ELMER SOLIS, LICERIA TORRES,

Spouses CORAZON and VICENTE MACATUNGAL, Spouses PRECILLA and CRISOSTOMO MUYOT, and Spouses CARIDAD and

SALVADOR PINGOL, respondents.PANGANIBAN, J.:

Well-settled is the rule that a final judgment is immutable and unalterable. The only exceptions to this rule are (1) the correction of clerical errors, (2) the so-called nunc pro tunc entries which cause no prejudice to any party, and (3) void judgments.

The Case

Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to set aside the July 31, 2000 Resolution2 of the Court of Appeals (CA) in CA-GR CV No. 29507 which denied petitioners’ Motion to Set Aside the CA Decision3 dated September 28, 1995. The assailed Resolution disposed as follows:

"Finding the opposition of [respondents] to be well-taken, the [Court hereby DENIES the Motion."4

The Facts

Petitioners are children of the late Paulino V. Chanliongco Jr., who was the co-owner of a parcel of land known as Lot No. 2-G of Subdivision Plan SWO No. 7308. Situated in Tondo, Manila, it was co-owned by him, his sister Narcisa, and his brothers Mario and Antonio. By virtue of a Special Power of Attorney executed by the co-owners in favor of Narcisa, her daughter Adoracion C. Mendoza had sold the lot to herein respondents on different days in September 1986. Because of conflict among the heirs of the co-owners as to the validity of the sale, respondents filed with the Regional Trial Court (RTC)5 a Complaint6 for interpleader to resolve the various ownership claims.

The RTC upheld the sale insofar as the share of Narcisa was concerned. It ruled that Adoracion had no authority to sell the shares of the other co-owners, because the Special Power of Attorney had been executed in favor only of her mother, Narcisa.

On appeal, the CA modified the ruling of the RTC. It held that while there was no Special Power of Attorney in favor of Adoracion, the sale was nonetheless valid, because she had been authorized by her mother to be the latter’s sub-agent. There was thus no need to execute another special power of attorney in her favor as sub-agent. This CA Decision was not appealed, became final and was entered in favor of respondents on August 8, 1996.7

On April 10, 1999, petitioners filed with the CA a Motion to Set Aside the Decision. They contended that they had not been served a copy of either the Complaint or the summons. Neither had they been impleaded as parties to the case in the RTC. As it was, they argued, the CA Decision should be set aside because it adversely affected their respective shares in the property without due process.

In denying the Motion of petitioners, the CA cited the grounds raised in respondents’ Opposition: (a) the Motion was not allowed as a remedy under the 1997 Rules of Civil Procedure; (b) the Decision sought to be set aside had long become final and executory; (c) the movants did not have any legal standing; and (d) the Motion was purely dilatory and without merit.8

Hence, this Petition.9

The Issue

In their Memorandum, petitioners raise this sole issue for the Court’s consideration:

"x x x [W]hether the Court of Appeals erred in denying petitioners’ Motion and allowing its Decision dated September 25, 1995 to take its course, inspite of its knowledge that the lower court did not acquire jurisdiction over the person of petitioners and passing petitioners property in favor of respondents, hence without due process of law."10

The Court’s Ruling

The Petition is unmeritorious.

Main Issue:Entitlement to Summons

It is well settled that a decision that has acquired finality becomes immutable and unalterable. A final judgment may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact or law;11 and whether it will be made by the court that rendered it or by the highest court in the land.12 The only exceptions to this rule are the correction of (1) clerical errors, (2) the so-called nunc pro tunc entries which cause no prejudice to any party, and (3) void judgments.13 To determine whether the CA Decision of September 28, 1995 is void, the failure to implead and to serve summons upon petitioners will now be addressed.14

To be able to rule on this point, the Court needs to determine whether the action is in personam, in rem or quasi in rem. The rules on the service of summons differ depending on the nature of the action.

An action in personam is lodged against a person based on personal liability; an action in rem is directed against the thing itself instead of the person;15 while an action quasi in rem names a person as defendant, but its object is to subject that person’s interest in a property to a corresponding lien or obligation.16

The Complaint filed by respondents with the RTC called for an interpleader to determine the ownership of the real property in question.17 Specifically, it forced persons claiming an interest in the land to settle the dispute among themselves as to which of them owned the property. Essentially, it sought to resolve the ownership of the land and was not directed against the personal liability of any particular person. It was therefore a real action, because it affected title to or possession of real property.18 As such, the Complaint was brought against the deceased registered co-owners: Narcisa, Mario, Paulino and Antonio Chanliongco, as represented by their respective estates.

Clearly, petitioners were not the registered owners of the land, but represented merely an inchoate interest thereto as heirs of Paulino. They had no standing in court with respect to actions over a property of the estate, because the latter was represented by an executor or administrator.19 Thus, there was no need to implead them as defendants

in the case, inasmuch as the estates of the deceased co-owners had already been made parties.

Furthermore, at the time the Complaint was filed, the 1964 Rules of Court were still in effect. Under the old Rules, specifically Section 3 of Rule 3,20 an executor or administrator may sue or be sued without joining the party for whose benefit the action is prosecuted or defended.21 The present rule,22 however, requires the joinder of the beneficiary or the party for whose benefit the action is brought. Under the former Rules, an executor or administrator is allowed to either sue or be sued alone in that capacity. In the present case, it was the estate of petitioners’ father Paulino Chanliongco, as represented by Sebrio Tan Quiming and Associates, that was included as defendant23 and served summons.24 As it was, there was no need to include petitioners as defendants. Not being parties, they were not entitled to be served summons.

Petitioner Florencio D. Chanliongco, on the other hand, was impleaded in the Complaint, but not served summons. However, the service of summons upon the estate of his deceased father was sufficient, as the estate appeared for and on behalf of all the beneficiaries and the heirs of Paulino Chanliongco, including Florencio.

We also note that the counsel of petitioners, Atty. Felino V. Quiming Jr., is a partner of the law firm that represented the estate of the deceased father. Hence, it can reasonably be expected that the service upon the law firm was sufficient notice to all the beneficiaries of the estate, including Petitioner Florencio D. Chanliongco.

WHEREFORE, the Petition is hereby DENIED and the assailed Resolution AFFIRMED. Costs against petitioners.

SO ORDERED.

G.R. No. 155736. March 31, 2005SPOUSES DANILO and CRISTINA DECENA, Petitioners, 

vs.SPOUSES PEDRO and VALERIA PIQUERO, Respondents.

R E S O L U T I O N

CALLEJO, SR., J.:

The petitioners, Spouses Danilo and Cristina Decena were the owners of a parcel of land, with a house constructed thereon, located in Parañaque, Metro Manila (now Parañaque City) covered by Transfer Certificate of Title (TCT) No. 134391 issued on February 24, 1998.1

On September 7, 1997, the petitioners and the respondents, the Spouses Pedro and Valeria Piquero, executed a Memorandum of Agreement (MOA)2 in which the former sold the property to the latter for the price ofP940,250.00 payable in six (6) installments via postdated checks. The vendees forthwith took possession of the property.

It appears in the MOA that the petitioners obliged themselves to transfer the property to the respondents upon the execution of the MOA with the condition that if two of the postdated checks would be dishonored by the drawee bank, the latter would be obliged to reconvey the property to the petitioners.

On May 17, 1999, the petitioners, then residents of Malolos, Bulacan, filed a Complaint3 against the respondents with the Regional Trial Court (RTC) of Malolos, Bulacan, for the annulment of the sale/MOA, recovery of possession and damages. The petitioners alleged therein that, they did not transfer the property to and in the names of the respondents as vendees because the first two checks drawn and issued by them in payment for the purchase price of the property were dishonored by the drawee bank, and were not replaced with cash despite demands therefor.

The petitioners prayed that, after due proceedings, judgment be rendered in their favor, thus:

a. The sale/Memorandum of Agreement (Annex "A," supra) be declared null and void, rescinded and with no further force and effect;

b. Defendants, and all persons claiming right under them, be ordered to immediately vacate the subject property and turnover its possession to the plaintiffs;

c. Defendants, jointly and severally, be ordered to pay the plaintiffs:

i. P10,000.00 – monthly, starting 01 October 1997 until complete turnover of the subject property to the plaintiffs, as reasonable compensation for its continued unlawful use and occupation by the defendants;

ii. P200,000.00 – moral damages;

iii. P200,000.00 – exemplary damages;

iv. P250,000.00 – attorney’s fees and litigation – related expenses; and

v. the costs of suit.

Other reliefs just and equitable are, likewise, prayed for.4

The petitioners declared in their complaint that the property subject of the complaint was valued at P6,900,000.00. They appended copies of the MOA and TCT No. 134391 to their complaint. The case was eventually raffled to Branch 13 of the RTC of Malolos, Bulacan.

The respondents filed a motion to dismiss the complaint on the ground, inter alia, of improper venue and lack of jurisdiction over the property subject matter of the action.

On the first ground, the respondents averred that the principal action of the petitioners for the rescission of the MOA, and the recovery of the possession of the property is a real action and not a personal one; hence, it should have been brought in the RTC of Parañaque City, where the property subject matter of the action was located, and not in the RTC of Malolos, Bulacan, where the petitioners resided. The respondents posited that the said court had no jurisdiction over the property subject matter of the action because it was located in Parañaque City.5

In opposition, the petitioners insisted that their action for damages and attorney’s fees is a personal action and not a real action; hence, it may be filed in the RTC of Bulacan where they reside. They averred that while their second cause of action for the recovery of the possession of the property is a real action, the same may, nevertheless, be joined with the rest of their causes of action for damages, conformably with Section 5(c), Rule 2 of the Rules of Court.6

By way of reply, the respondents averred that Section 5(c), Rule 2 of the Rules of Court applies only when one or more of multiple causes of action falls within the exclusive jurisdiction of the first level courts, and the other or others are within the exclusive jurisdiction of the RTC, and the venue lies therein.

On February 9, 2000, the trial court issued an Order7 denying the motion for lack of merit. It found merit in the petitioner’s contention that Section 5(c), Rule 2 was applicable.

Meanwhile, the case was re-raffled to Branch 10 of the RTC of Malolos, Bulacan. In a Motion8 dated December 20, 2000, the respondents prayed for the reconsideration of the trial court’s February 9, 2000 Order. On October 16, 2001, the court issued an Order9 granting the motion and ordered the dismissal of the complaint. It ruled that the principal action of the petitioners was a real action and should have been filed in the RTC of Parañaque City where the property subject matter of the complaint was located. However, since the case was filed in the RTC of Bulacan where the petitioners reside, which court had no jurisdiction over the subject matter of the action, it must be dismissed.

Hence, the present recourse.

The petition has no merit.

The sole issue is whether or not venue was properly laid by the petitioners in the RTC of Malolos, Bulacan. The resolution of this issue is, in turn, anchored on whether Section 5, Rule 2 of the Rules of Court invoked by the petitioners is applicable in this case.

Under the said Rule, a party may, in one pleading, assert, in the alternative or otherwise, as many causes of action as he may have against an opposing party subject to the conditions therein enumerated, one of which is Section 5(c) which reads:

Sec. 5. Joinder of causes of action. -- …

…

(c) Where the causes of action are between the same parties but pertain to different venues or jurisdiction, the joinder may be allowed in the Regional Trial Court provided one of the causes of action falls within the jurisdiction of said court and the venue lies therein; …

Explaining the aforequoted condition, Justice Jose Y. Feria declared:

(c) Under the third condition, if one cause of action falls within the jurisdiction of the Regional Trial Court and the other falls within the jurisdiction of a Municipal Trial Court, the action should be filed in the Regional Trial Court. If the causes of action have different venues, they may be joined in any of the courts of proper venue. Hence, a real action and a personal action may be joined either in the Regional Trial Court of the place where the real property is located or where the parties reside.10

A cause of action is an act or omission of one party in violation of the legal right of the other which causes the latter injury. The essential elements of a cause of action are the following: (1) the existence of a legal right of the plaintiff; (2) a correlative legal duty of the defendant to respect one’s right; and (3) an act or omission of the defendant in violation of the plaintiff’s right.11 A cause of action should not be confused with the remedies or reliefs prayed for. A cause of action is to be found in the facts alleged in the complaint and not in the prayer for relief. It is the substance and not the form that is controlling.12 A party may have two or more causes of action against another party.

A joinder of causes of action is the uniting of two or more demands or right of action in a complaint. The question of the joinder of causes of action involves in particular cases a preliminary inquiry as to whether two or more causes of action are alleged.13 In declaring whether more than one cause of action is alleged, the main thrust is whether more than one primary right or subject of controversy is present. Other tests are whether recovery on one ground would bar recovery on the other, whether the same evidence would support the other different counts and whether separate actions could be maintained for separate relief;14 or whether more than one distinct primary right or subject of controversy is alleged for enforcement or adjudication.15

A cause of action may be single although the plaintiff seeks a variety of remedies. The mere fact that the plaintiff prays for multiple reliefs does not indicate that he has stated more than one cause of action. The prayer may be an aid in interpreting the petition and in determining whether or not more than one cause of action is pleaded.16 If the allegations of the complaint show one primary right and one wrong, only one cause of action is alleged even though other matters are incidentally involved, and although different acts, methods, elements of injury, items of claims or theories of recovery are set forth.17 Where two or more primary rights and wrongs appear, there is a joinder of causes of action.

After due consideration of the foregoing, we find and so rule that Section 5(c), Rule 2 of the Rules of Court does not apply. This is so because the petitioners, as plaintiffs in the court a quo, had only one cause of action against the respondents, namely, the breach of the MOA upon the latter’s refusal to pay the first two installments in payment of the property as agreed upon, and turn over to the petitioners the possession of the real property, as well as the house constructed thereon occupied by the respondents. The claim for damages for reasonable compensation for the respondents’ use and occupation of the property, in the interim, as well as moral and exemplary damages suffered by the petitioners on account of the aforestated breach of contract of the respondents are merely incidental to the main cause of action, and are not independent or separate causes of action.18

The action of the petitioners for the rescission of the MOA on account of the respondents’ breach thereof and the latter’s failure to return the premises subject of the complaint to the petitioners, and the respondents’ eviction therefrom is a real action.19 As such, the action should have been filed in the proper court where the property is located, namely, in Parañaque City, conformably with Section 1, Rule 4 of the Rules of Court which reads:

SECTION 1. Venue of real actions. — Actions affecting title to or possession of real property, or interest therein, shall be commenced and tried in the proper court which has jurisdiction over the area wherein the real property involved, or a portion thereof, is situated.

Since the petitioners, who were residents of Malolos, Bulacan, filed their complaint in the said RTC, venue was improperly laid; hence, the trial court acted conformably with Section 1(c), Rule 16 of the Rules of Court when it ordered the dismissal of the complaint.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.

SO ORDERED.

G.R. No. 147417 July 8, 2005SPS. VICTOR & MILAGROS

PEREZand CRISTINA AGRAVIADOR AVISO, Petitioners, 

vs.ANTONIO HERMANO, Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Resolution1 of the Court of Appeals dismissing petitioners’ original action for certiorari under Rule 65 for being filed out of time. Assailed as well is the Resolution2 dismissing petitioners’ motion for reconsideration.

The pertinent facts of the case are as follows:

On 27 April 1998, petitioners Cristina Agraviador Aviso and spouses Victor and Milagros Perez filed a civil case for Enforcement of Contract and Damages with Prayer for the Issuance of a Temporary Restraining Order (TRO) and/or Preliminary Injunction against Zescon Land, Inc. and/or its President Zenie Sales-Contreras, Atty. Perlita Vitan-Ele and against respondent herein Antonio Hermano before the Regional Trial Court (RTC) of Quezon City, Branch 224.3 On 15 May 1998, respondent (then defendant) Hermano filed his Answer with Compulsory Counterclaim. On 17 January 2000, respondent Hermano filed a "Motion with Leave to Dismiss the Complaint or Ordered Severed for Separate Trial" which was granted by the trial court in an Order dated 28 February 2000.

This Order was received by petitioners on 21 March 2000. On 23 March 2000, petitioners moved for reconsideration which was denied by the trial court on 25 May 2000 and received by petitioners on 18 June 2000. On 17 August 2000, petitioners filed an original action for certiorari before the Court of Appeals imputing grave abuse of discretion on the part of the trial court in dismissing the complaint against respondent Hermano.

On 19 October 2000, the Court of Appeals rendered the first assailed Resolution dismissing the petition forcertiorari "for having been filed beyond the reglementary period pursuant to Section 4, Rule 65 of the 1997 Rules on Civil Procedure, as amended." On 02 March 2001, the

second assailed Resolution was promulgated dismissing petitioners’ motion for reconsideration, the Court of Appeals holding that:

From the time petitioners received the assailed Order on March 21, 2000 and filed their motion for reconsideration, four (4) days had elapsed. On June 18, 2000, petitioners received the denial of their motion for reconsideration. When the instant petition was filed on August 17, 2000, a total of 63 days had elapsed.

A.M. No. 00-2-03-50 further amending Section 4, Rule 65 of the New Rules on Civil Procedure states that the petition shall be filed not later than sixty (60) days from notice of the judgment, Order or Resolution and in case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the 60-day period shall be counted from notice of the denial of said motion.

Viewed from its light, the assailed Orders had already attained finality, and are now beyond the power of this Court to review.4

Aggrieved by the foregoing ruling, petitioners are now before us assigning the following –

MANIFEST AND/OR SERIOUS ERROR COMMITTED BY THE HONORABLE COURT OF APPEALS IN THE COMPUTATION OF THE PERIOD WITHIN WHICH THE PETITIONERS FILED THEIR PETITION FOR CERTIORARI BEFORE IT AND CONSEQUENTLY COMMITTED GRAVE ABUSE OF DISCRETION IN THE APPRECIATION OF FACTS AND/OR MISAPPREHENSION OF FACTS, WITH ITS FINDING OF FACT NOT BEING BORNE BY THE RECORD OR EVIDENCE, AND THUS ITS CONCLUSION IS ENTIRELY BASELESS.5

According to petitioners, following the amendment introduced by A.M. No. 00-2-03-SC to Section 4, Rule 65 of the 1997 Rules on Civil Procedure, their petition was filed on the 60th day, thus, within the reglementary period. Respondent insists, on the other hand, that the petition was filed on the 61st day while the Court of Appeals had declared that the petition was filed on the 63rd day.

We agree in the position taken by petitioners.

Admittedly, at the time petitioners filed their petition for certiorari on 17 August 2000, the rule then prevailing was Section 4, Rule 65 of the 1997

Rules on Civil Procedure, as amended by Circular No. 39-98 effective 01 September 1998, which provides:

Sec. 4. Where petition filed. – The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution sought to be assailed in the Supreme Court, or if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, and unless otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the Court of Appeals.

If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said judgment, order, or resolution, the period herein fixed shall be interrupted. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of such denial. No extension of time to file the petition shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days. (Emphasis supplied)

However, on 01 September 2000, during the pendency of the case before the Court of Appeals, Section 4 was amended anew by A.M. No. 00-2-03-SC6 which now provides:

Sec. 4. When and where petition filed. – The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless otherwise provided by law or these rules, the petition shall be filed in and cognizable only by the Court of Appeals.

No extension of time to file the petition shall be granted except for compelling reason and in no case exceeding fifteen (15) days. (Emphasis supplied)

Under this amendment, the 60-day period within which to file the petition starts to run from receipt of notice of the denial of the motion for reconsideration, if one is filed.7

In Narzoles v. National Labor Relations Commission,8 we described this latest amendment as curative in nature as it remedied the confusion brought about by Circular No. 39-98 because, "historically, i.e., even before the 1997 revision to the Rules of Civil Procedure, a party had a fresh period from receipt of the order denying the motion for reconsideration to file a petition for certiorari." Curative statutes, which are enacted to cure defects in a prior law or to validate legal proceedings which would otherwise be void for want of conformity with certain legal requirements, by their very essence, are retroactive.9 And, being a procedural rule, we held in Sps. Ma. Carmen and Victor Javellana v. Hon. Presiding Judge Benito Legarda10 that "procedural laws are construed to be applicable to actions pending and undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent."

Consequently, petitioners had a fresh period of 60 days from the time they received the Order of the trial court denying their motion for reconsideration on 18 June 2000. When they filed their petition with the Court of Appeals on 17 August 2000, exactly 60 days had elapsed following the rule that in computing a period, the first day shall be excluded and the last day included.11 Hence, there can be no doubt that the petition was filed within the reglementary period for doing so and it was reversible error on the part of the Court of Appeals in not giving said petition due course. However, instead of remanding the case to the Court of Appeals which would only unduly prolong the disposition of the substantive issue raised, we shall resolve the petition originally filed therein.

Petitioners brought to the Court of Appeals on petition for certiorari under Rule 65 the lone issue of:

WHETHER OR NOT THE PUBLIC RESPONDENT [Hon. Emilio L. Leachon, Jr., Presiding Judge, RTC, Branch 224, Quezon City] HAD PLAINLY AND MANIFESTLY ACTED WITH GRAVE ABUSE OF DISCRETION, IN EXCESS OF JURISDICTION, TANTAMOUNT TO LACK OF JURISDICTION, IN DISMISSING THE COMPLAINT AS

AGAINST RESPONDENT ANTONIO HERMANO IN CIVIL CASE NO. Q-98-34211.12

Petitioners assert that respondent Hermano should not have been dismissed from the complaint because: (1) He did not file a motion to dismiss under Rule 16 of the Rules of Court and, in fact, his "Motion with Leave to Dismiss the Complaint or Ordered Severed for Separate Trial" was filed almost two years after he filed his Answer to the complaint; (2) There was no misjoinder of causes of action in this case; and (3) There was no misjoinder of parties.

The case filed by petitioners against respondent Hermano and the other defendants, namely Zescon Land, Inc. and/or its President Zenie Sales-Contreras and Atty. Perlita Vitan-Ele, was one for "Enforcement of Contract and Damages with Prayer for the Issuance of a Temporary Restraining Order (TRO) and/or Preliminary Injunction" docketed as Civil Case No. Q-98-34211 and raffled to Branch 224.

Petitioners presented three causes of action in their complaint, the first for enforcement of contract to sell entered into between petitioners and Zescon Land, Inc., the second for annulment or rescission of two contracts of mortgage entered into between petitioners and respondent Hermano and the third for damages against all defendants.

For the first cause of action, petitioners allege that sometime in November 1997, they entered into a Contract to Sell with Zescon Land, Inc., through Zenie Sales-Contreras, for the purchase of five (5) parcels of land in the total amount of Nineteen Million One Hundred Four Thousand Pesos (P19,104,000.00). As part of their agreement, a portion of the purchase price would be paid to them as down payment, another portion to be given to them as cash advance upon the execution of the contract and another portion to be used by the buyer, Zescon Land, Inc., to pay for loans earlier contracted by petitioners which loans were secured by mortgages.

Re-pleading the foregoing in their second cause of action, petitioners contend that "in a tricky machination and simultaneous with the execution of the aforesaid Contract to Sell," they were made to sign other documents, two of which were Mortgage deeds over the same five properties in favor of respondent Hermano, whom they had never met. It was allegedly explained to them by Sales-Contreras that the mortgage contracts would merely serve to facilitate the payment of the price as agreed upon in their Contract to Sell. Petitioners claim that it was never

their intention to mortgage their property to respondent Hermano and that they have never received a single centavo from mortgaging their property to him. Petitioners acknowledge, however, that respondent Hermano was responsible for discharging their obligations under the first mortgage and for having the titles over the subject lands released, albeit not to them but to respondent Hermano. They seek a TRO against respondent Hermano who had informed them that he would be foreclosing the subject properties.

In their third cause of action, petitioners pray for damages against all the defendants alleging that:

Due to the failure and refusal, without any valid justification and reason, by defendants Zescon and Contreras to comply with their obligations under the Contract to Sell, including their failure and refusal to pay the sums stipulated therein, and in misleading and misrepresenting the plaintiffs into mortgaging their properties to defendant Antonio Hermano, who in turn had not paid the plaintiffs the proceeds thereof, putting them in imminent danger of losing the same, plaintiffs had suffered, and continue to suffer, sleepless nights ….

By reason of defendants Zescon and Contreras’s failure and refusal to pay the sums stipulated in the Contract to Sell, and of defendant Antonio Hermano’s not having paid plaintiffs the proceeds of the mortgage agreements, plaintiffs had been deprived of the beneficial use of the proceeds and stood to lose, as they continue to lose, by way of unearned profits at least P1,000,000.00.13

In his Answer with (Compulsory) Counterclaim dated 15 May 1998, respondent Hermano denied petitioners’ allegations.14 Then, on 19 February 1999, respondent Hermano filed a civil case entitled "Judicial Foreclosure of Real Estate Mortgage" against petitioner Aviso docketed as Civil Case No. Q-99-36914 and raffled to Branch 216 of the RTC of Quezon City. On 17 January 2000, respondent Hermano filed a "Motion With Leave To Dismiss The Complaint Against Defendant Antonio Hermano, Or Ordered Severed For Separate Trial" before Branch 224. In said motion, respondent Hermano argued that there was a mis-joinder of causes of action under Rule 2, Section 6 of the Rules of Court. To quote respondent Hermano:

3. In the instant case, the plaintiffs’ action for the Enforcement of Contract and Damages with Prayer for The Issuance of a Temporary Restraining Order And/Or Preliminary Injunction against Zescon Land, Inc., and/or its

President Zenie Sales Contreras, may not, under Rule 2, Section 6 of the 1997 Rules of Civil Procedure, join defendant Hermano as party defendant to annul and/or rescind the Real Estate Mortgages of subject properties. There is a misjoinder of parties defendants under a different transaction or cause of action; that under the said Rule 2, Section 6, upon motion of defendant Hermano in the instant case, the complaint against defendant Hermano can be severed and tried separately; . . . .15

Over petitioners’ opposition to said motion, the same was granted by the trial court in its Order dated 28 February 2000 on the justification that:

. . . [D]efendant having filed a special civil action for judicial foreclosure of mortgage and now pending before RTC Branch 216, he should be dropped as one of the defendants in this case and whatever claims plaintiffs may have against defendant Hermano, they can set it up by way of an answer to said judicial foreclosure.16

And, in an Order dated 25 May 2000, the trial court resolved petitioners’ motion for reconsideration by dismissing the same, to wit:

After going over the arguments of the parties, the Court believes that defendant Hermano has nothing to do with the transaction which the plaintiffs entered into with defendant Zescon Land, Inc. Besides, the said motion raised matters and defenses previously considered and passed upon by the Court.17

It is these two Orders that were brought up by petitioners to the Court of Appeals on petition for Certiorari under Rule 65. The pivotal issue to be resolved, therefore, is whether or not respondent trial court committed grave abuse of discretion in dismissing the complaint against respondent Hermano in Civil Case No. Q-98-34211.

As far as we can glean from the Orders of the trial court, respondent Hermano was dropped from the complaint on the ground of misjoinder of causes of action. Petitioners, on the other hand, insist that there was no misjoinder in this case.

To better understand the present controversy, it is vital to revisit the rules on joinder of causes of action as exhaustively discussed in Republic v. Hernandez,18 thus:

By a joinder of actions, or more properly, a joinder of causes of action, is meant the uniting of two or more demands or rights of action in one

action; the statement of more than one cause of action in a declaration. It is the union of two or more civil causes of action, each of which could be made the basis of a separate suit, in the same complaint, declaration or petition. A plaintiff may under certain circumstances join several distinct demands, controversies or rights of action in one declaration, complaint or petition.

As can easily be inferred from the above definitions, a party is generally not required to join in one suit several distinct causes of action. The joinder of separate causes of action, where allowable, is permissive and not mandatory in the absence of a contrary statutory provision, even though the causes of action arose from the same factual setting and might under applicable joinder rules be joined. Modern statutes and rules governing joinders are intended to avoid a multiplicity of suits and to promote the efficient administration of justice wherever this may be done without prejudice to the rights of the litigants. To achieve these ends, they are liberally construed.

While joinder of causes of action is largely left to the option of a party litigant, Section 5, Rule 2 of our present Rules allows causes of action to be joined in one complaint conditioned upon the following requisites: (a) it will not violate the rules on jurisdiction, venue and joinder of parties; and (b) the causes of action arise out of the same contract, transaction or relation between the parties, or are for demands for money or are of the same nature and character.

The objectives of the rule or provision are to avoid a multiplicity of suits where the same parties and subject matter are to be dealt with by effecting in one action a complete determination of all matters in controversy and litigation between the parties involving one subject matter, and to expedite the disposition of litigation at minimum cost. The provision should be construed so as to avoid such multiplicity, where possible, without prejudice to the rights of the litigants. Being of a remedial nature, the provision should be liberally construed, to the end that related controversies between the same parties may be adjudicated at one time; and it should be made effectual as far as practicable, with the end in view of promoting the efficient administration of justice.

The statutory intent behind the provisions on joinder of causes of action is to encourage joinder of actions which could reasonably be said to involve kindred rights and wrongs, although the courts have not succeeded in giving a standard definition of the terms used or in developing a rule of universal application. The dominant idea is to permit joinder of causes of action, legal or equitable, where there is some

substantial unity between them. While the rule allows a plaintiff to join as many separate claims as he may have, there should nevertheless be some unity in the problem presented and a common question of law and fact involved, subject always to the restriction thereon regarding jurisdiction, venue and joinder of parties. Unlimited joinder is not authorized.

Our rule on permissive joinder of causes of action, with the proviso subjecting it to the correlative rules on jurisdiction, venue and joinder of parties and requiring a conceptual unity in the problems presented, effectively disallows unlimited joinder.

Section 6, Rule 2 on misjoinder of causes of action provides:

Sec. 6. Misjoinder of causes of action. - Misjoinder of causes of action is not a ground for dismissal of an action. A misjoined cause of action may, on motion of a party or on the initiative of the court, be severed and proceeded with separately.

There is misjoinder of causes of action when the conditions for joinder under Section 5, Rule 2 are not met. Section 5 provides:

Sec. 5. Joinder of causes of action. - A party may in one pleading assert, in the alternative or otherwise, as many causes of action as he may have against an opposing party, subject to the following conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of parties;

(b) The joinder shall not include special civil actions or actions governed by special rules;

(c) Where the causes of action are between the same parties but pertain to different venues or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action falls within the jurisdiction of said court and the venue lies therein; and

(d) Where the claims in all the causes of action are principally for recovery of money, the aggregate amount claimed shall be the test of jurisdiction.

As far as can be gathered from the assailed Orders, it is the first condition - on joinder of parties - that the trial court deemed to be lacking.

It is well to remember that the joinder of causes of action may involve the same parties or different parties. If the joinder involves different parties, as in this case, there must be a question of fact or of law common to both parties joined, arising out of the same transaction or series of transaction.19

In herein case, petitioners have adequately alleged in their complaint that after they had already agreed to enter into a contract to sell with Zescon Land, Inc., through Sales-Contreras, the latter also gave them other documents to sign, to wit: A Deed of Absolute Sale over the same properties but for a lower consideration, two mortgage deeds over the same properties in favor of respondent Hermano with accompanying notes and acknowledgment receipts for Ten Million pesos (P10,000,000) each. Petitioners claim that Zescon Land, Inc., through Sales-Contreras, misled them to mortgage their properties which they had already agreed to sell to the latter.

From the above averments in the complaint, it becomes reasonably apparent that there are questions of fact and law common to both Zescon Land, Inc., and respondent Hermano arising from a series of transaction over the same properties. There is the question of fact, for example, of whether or not Zescon Land, Inc., indeed misled petitioners to sign the mortgage deeds in favor of respondent Hermano. There is also the question of which of the four contracts were validly entered into by the parties. Note that under Article 2085 of the Civil Code, for a mortgage to be valid, it is imperative that the mortgagor be the absolute owner of the thing mortgaged. Thus, respondent Hermano will definitely be affected if it is subsequently declared that what was entered into by petitioners and Zescon Land, Inc., was a Contract of Sale (as evidenced by the Deed of Absolute Sale signed by them) because this would mean that the contracts of mortgage were void as petitioners were no longer the absolute owners of the properties mortgaged. Finally, there is also the question of whether or not Zescon Land, Inc., as represented by Sales-Contreras, and respondent Hermano committed fraud against petitioners as to make them liable for damages.

Prescinding from the foregoing, and bearing in mind that the joinder of causes of action should be liberally construed as to effect in one action a complete determination of all matters in controversy involving one subject matter, we hold that the trial court committed grave abuse of discretion in severing from the complaint petitioners’ cause of action against respondent Hermano.

WHEREFORE, premises considered, the Resolution of the Court of Appeals dated 19 October 2000 dismissing petitioners’ petition for certiorari and its Resolution dated 02 March 2001 denying petitioners’ motion for reconsideration are REVERSED and SET ASIDE. The petition for certiorari is hereby GRANTED. The Orders of the Regional Trial Court of Quezon City, Branch 224, dated 28 February 2000 and 25 May 2000 are ANNULLED and SET ASIDE. The RTC is further ordered to reinstate respondent Antonio Hermano as one of the defendants in Civil Case No. Q-98-34211. No costs.

SO ORDERED.

G.R. No. 164041. July 29, 2005ROSENDO ALBA, minor, represented by his mother and natural

guardian, Armi A. Alba, and ARMI A. ALBA, in her personal capacity, Petitioners, 

vs.COURT OF APPEALS and ROSENDO C. HERRERA, Respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

Assailed in this petition for certiorari1 are the February 27, 2004 decision2 and the May 14, 2004 resolution3 of the Court of Appeals in CA-G.R. SP No. 61883, which dismissed petitioner’s original action for annulment of judgment4 of the Regional Trial Court of Manila, Branch 37, and denied the motion for reconsideration, respectively.

The antecedent facts show that on October 21, 1996, private respondent Rosendo C. Herrera filed a petition5 for cancellation of the following entries in the birth certificate of "Rosendo Alba Herrera, Jr.", to wit: (1) the surname "Herrera" as appended to the name of said child; (2) the reference to private respondent as the father of Rosendo Alba Herrera, Jr.; and (3) the alleged marriage of private respondent to the child’s mother, Armi A. Alba (Armi) on August 4, 1982 in Mandaluyong City. He claimed that the challenged entries are false and that it was only sometime in September 1996 that he learned of the existence of said birth certificate.

Private respondent alleged that he married only once, i.e., on June 28, 1965 with Ezperanza C. Santos and never contracted marriage with Armi nor fathered Rosendo Alba Herrera, Jr. In support thereof, he presented certifications from the Civil Registrar of Mandaluyong City6 and the National Statistics Office,7 both stating that they have no record of marriage between private respondent and Armi.

On November 12, 1996, private respondent filed an amended petition,8 impleading Armi and "all the persons who have or claim any interest in th[e] petition."9

On November 27, 1996, the trial court issued an Order setting the petition for hearing on January 24, 1997, and directed the publication and service of said order to Armi at her address appearing in the birth certificate which is No. 418 Arquiza St., Ermita, Manila, and to the Civil Registrar of

the City of Manila and the Solicitor General. The full text of the order, reads:

In a verified Amended Petition for Correction of Entry, the Petitioner prays, inter alia, that the following entries appearing in the subject Certificate of Live Birth be deleted:

1. All informations having reference to him as the father of the child mentioned therein;

2. The surname "Herrera" appended to the child’s name;

3. His alleged marriage with the natural mother of the child.

Finding the Petition to be sufficient in form and substance, let the Petition be set for hearing on January 24, 1997 at nine o’clock in the morning before this Branch at Rooms 447-449, Fourth Floor, Manila City Hall. All interested parties are hereby notified of the said hearing and are ordered to show cause why the Petition should not be granted.

Let a copy of this Order be published at the expense of the Petitioner, once a week for three (3) consecutive weeks, in a newspaper of general circulation in the City of Manila, and raffled pursuant to P.D. 1079.

Furnish the Office of the Solicitor General and the Office of the Local Civil Registrar of the City of Manila with copies of the Petition and of this Order.

Let the same be likewise furnished the Private Respondent Armi Alba Herrera at the address indicated in the subject Certificate of Live Birth.

SO ORDERED.10

On January 13, 1997, before the scheduled January 24, 1997 hearing, the trial court issued an Amended Order11with substantially the same contents, except that the hearing was re-scheduled to February 26, 1997. A copy of said Amended Order was published in "Today", a newspaper of general circulation in Manila in its January 20, 27, and February 3, 1997 issues. Copies thereof were also sent to Armi at No. 418 Arquiza St., Ermita, Manila, on January 17, 1997, the Local Civil Registrar of Manila and the Solicitor General.

At the scheduled hearing on February 26, 1997, the counsel from the Office of the Solicitor General appeared but filed no opposition to the petition. Armi, on the other hand was not present. The return of the notice sent to her had the following notation:

This is to certify that on January 17, 1997, the undersigned [process server] personally served a copy of the Amended Order in Sp. Proc. No. 96-80512 dated January 13, 1997 to the private respondent, Armi Alba Herrera at … 418 Arquiza St., Ermita, Manila, but failed and unavailing for reason that (sic), private respondent is no longer residing at said given address.12

On April 1, 1997, the court a quo rendered a decision which became final and executory on June 2, 1997.13 The dispositive portion thereof, states:

ACCORDINGLY, and pursuant to Rule 108 of the Revised Rules of Court, judgment is hereby rendered ordering the correction of the entries in the Certificate of Live Birth of Rosendo Alba Herrera, Jr., in such a way that the entry under the name of the child, the surname Herrera, Jr.[,] is ordered deleted, and the child shall be known as ROSENDO ALBA; and that the entry under the date and place of marriage, the date August 4, 1982, Mandaluyong, MM is likewise ordered deleted or cancelled.

Let a copy of this Decision be furnished the Local Civil Registrar of Manila for proper correction and entry.

SO ORDERED.14

Private respondent filed a motion15 for amendment of the decretal portion of the decision to include the cancellation of all entries having reference to him as the father of petitioner minor. This was granted in the August 11, 1997 order of the trial court as follows:

ACCORDINGLY, and pursuant to Rule 108 of the Revised Rules of Court, judgment is hereby rendered ordering the correction of the entries in the Certificate of Live Birth of Rosendo Alba Herrera, Jr., in such a way that the entries under the name of the child, the surname Herrera, Jr., and the name of the father Rosendo Caparas Herrera are ordered deleted, and the child shall be known as ROSENDO ALBA; and the entry under the date and place of marriage, the date August 4, 1982, Mandaluyong, MM is likewise ordered deleted or cancelled.

SO ORDERED.16

On November 24, 2000, Armi and petitioner minor filed a petition for annulment of judgment before the Court of Appeals on the grounds of extrinsic fraud and lack of jurisdiction over their person. She allegedly came to know of the decision of the trial court only on February 26, 1998, when San Beda College, where her son was enrolled as a high school student, was furnished by private respondent with a copy of a court order directing the change of petitioner minor’s surname from Herrera to Alba.

Armi averred that private respondent was aware that her address is at Unit 302 Plaza Towers Condominium, 1175 Lorenzo Guerrero St., Ermita, Manila, because such was her residence when she and private respondent cohabited as husband and wife from 1982 to 1988; and her abode when petitioner minor was born on March 8, 1985. Even after their separation, private respondent continued to give support to their son until 1998; and that Unit 302 was conveyed to her by private respondent on June 14, 1991 as part of his support to petitioner minor. According to Armi, her address i.e., No. 418 Arquiza St., Ermita, Manila, as appearing in the birth certificate of their son, was entered in said certificate through the erroneous information given by her sister, Corazon Espiritu. She stressed that private respondent knew all along that No. 418 Arquiza St., is the residence of her sister and that he deliberately caused the service of notice therein to prevent her from opposing the petition.

In his answer, private respondent denied paternity of petitioner minor and his purported cohabitation with Armi. He branded the allegations of the latter as "false statements coming from a polluted source."17

On February 27, 2004, the Court of Appeals dismissed the petition holding, among others, that petitioner failed to prove that private respondent employed fraud and purposely deprived them of their day in court. It further held that as an illegitimate child, petitioner minor should bear the surname of his mother.18 Petitioners filed a motion for reconsideration but was denied.

Hence, the instant petition.

Under Section 2, Rule 47 of the 1997 Revised Rules of Civil Procedure, judgments may be annulled on the grounds of lack of jurisdiction and extrinsic fraud.19

Whether or not the trial court acquired jurisdiction over the person of petitioner and her minor child depends on the nature of private respondent’s action, that is, in personam, in rem or quasi in rem. An

action in personam is lodged against a person based on personal liability; an action in rem is directed against the thing itself instead of the person; while an action quasi in rem names a person as defendant, but its object is to subject that person’s interest in a property to a corresponding lien or obligation.20

Hence, petitions directed against the "thing" itself or the res,21 which concerns the status of a person,22 like a petition for adoption,23 annulment of marriage,24 or correction of entries in the birth certificate,25 as in the instant case, are actions in rem.

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and decide the case. In a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court, provided that the latter has jurisdiction over the res. Jurisdiction over the res is acquired either (a) by the seizure of the property under legal process, whereby it is brought into actual custody of the law; or (b) as a result of the institution of legal proceedings, in which the power of the court is recognized and made effective.26 The service of summons or notice to the defendant is not for the purpose of vesting the court with jurisdiction but merely for satisfying the due process requirements.27

In the case at bar, the filing with the trial court of the petition for cancellation vested the latter jurisdiction over the res. Substantial corrections or cancellations of entries in civil registry records affecting the status or legitimacy of a person may be effected through the institution of a petition under Rule 108 of the Revised Rules of Court, with the proper Regional Trial Court.28 Being a proceeding in rem, acquisition of jurisdiction over the person of petitioner is therefore not required in the present case. It is enough that the trial court is vested with jurisdiction over the subject matter.

The service of the order at No. 418 Arquiza St., Ermita, Manila and the publication thereof in a newspaper of general circulation in Manila, sufficiently complied with the requirement of due process, the essence of which is an opportunity to be heard. Said address appeared in the birth certificate of petitioner minor as the residence of Armi. Considering that the Certificate of Birth bears her signature, the entries appearing therein are presumed to have been entered with her approval. Moreover, the publication of the order is a notice to all indispensable parties, including Armi and petitioner minor, which binds the whole world to the judgment that may be rendered in the petition. An in rem proceeding is validated essentially through publication.29 The absence of personal service of the

order to Armi was therefore cured by the trial court’s compliance with Section 4, Rule 108, which requires notice by publication, thus:

SEC. 4. Notice and publication. – Upon the filing of the petition, the court shall, by an order, fix the time and place for the hearing of the same, and cause reasonable notice thereof to be given to the persons named in the petition. The court shall also cause the order to be published once a week for three (3) consecutive weeks in a newspaper of general circulation in the province.

In Barco v. Court of Appeals, the trial court granted a petition for correction/change of entries in a minor’s birth certificate to reflect the name of the minor’s real father as well as to effect the corresponding change of her surname. In seeking to annul said decision, the other children of the alleged father claimed that they are indispensable parties to the petition for correction, hence, the failure to implead them is a ground to annul the decision of the trial court. The Court of Appeals denied the petition which was sustained by this Court on the ground, inter alia, that while petitioner is indeed an indispensable party, the failure to implead her was cured by the publication of the order of hearing. Thus –

Undoubtedly, Barco is among the parties referred to in Section 3 of Rule 108. Her interest was affected by the petition for correction, as any judicial determination that June was the daughter of Armando would affect her ward’s share in the estate of her father. It cannot be established whether Nadina knew of Mary Joy’s existence at the time she filed the petition for correction. Indeed, doubt may always be cast as to whether a petitioner under Rule 108 would know of all the parties whose interests may be affected by the granting of a petition. For example, a petitioner cannot be presumed to be aware of all the legitimate or illegitimate offsprings of his/her spouse or paramour. The fact that Nadina amended her petition to implead Francisco and Gustilo indicates earnest effort on her part to comply with Section 3 as quoted above.

Yet, even though Barco was not impleaded in the petition, the Court of Appeals correctly pointed out that the defect was cured by compliance with Section 4, Rule 108, which requires notice by publication, thus:

Section 4. Upon the filing of the petition, the court shall, by order, fix the time and place for the hearing of the same, and cause reasonable notice thereof to be given to the persons named in the petition. The court shall also cause the order to be published once a week for three (3) consecutive weeks in a newspaper of general circulation in the province.

The purpose precisely of Section 4, Rule 108 is to bind the whole world to the subsequent judgment on the petition. The sweep of the decision would cover even parties who should have been impleaded under Section 3, Rule 108, but were inadvertently left out. The Court of Appeals correctly noted:

The publication being ordered was in compliance with, and borne out by the Order of January 7, 1985. The actual publication of the September 22, 1983 Order, conferred jurisdiction upon the respondent court to try and decide the case. While "nobody appeared to oppose the instant petition" during the December 6, 1984 hearing, that did not divest the court from its jurisdiction over the case and of its authority to continue trying the case. For, the rule is well-settled, that jurisdiction, once acquired continues until termination of the case.

Verily, a petition for correction is an action in rem, an action against a thing and not against a person. The decision on the petition binds not only the parties thereto but the whole world. An in rem proceeding is validated essentially through publication. Publication is notice to the whole world that the proceeding has for its object to bar indefinitely all who might be minded to make an objection of any sort against the right sought to be established. It is the publication of such notice that brings in the whole world as a party in the case and vests the court with jurisdiction to hear and decide it.30

Furthermore, extrinsic fraud, which was private respondent’s alleged concealment of Armi’s present address, was not proven. Extrinsic fraud exists when there is a fraudulent act committed by the prevailing party outside of the trial of the case, whereby the defeated party was prevented from presenting fully his side of the case by fraud or deception practiced on him by the prevailing party. Here, Armi contended that private respondent is aware of her present address because they lived together as husband and wife in the condominium unit from 1982 to 1988 and because private respondent continued to give support to their son until 1998. To prove her claim, she presented (1) private respondent’s title over the condominium unit; (2) receipts allegedly issued to private respondent for payment of homeowner’s or association dues; (2) a photocopy of a January 14, 1991 deed of sale of the subject unit in favor of Armi; and (3) the subsequent title issued to the latter. However, these documents only tend to prove private respondent’s previous ownership of the unit and the subsequent transfer thereof to Armi, but not the claimed live-in relationship of the parties. Neither does the sale prove that the conveyance of the unit was part of private respondent’s support to petitioner minor. Indeed, intimate relationships and family relations

cannot be inferred from what appears to be an ordinary business transaction.

Although the January 14, 1991 deed of sale31 stated that Armi resides at 1175 L. Guerrero St., Ermita, Manila, the same is not sufficient to prove that private respondent has knowledge of Armi’s address because the former objected to the offer of the deed for being a mere photocopy.32 The counsel for petitioners even admitted that they do not have the original of the deed and that per certification of the Clerk of Court, the Notary Public who notarized the deed of sale did not submit a copy of the notarized document as required by the rules.33 The deed cannot thus be the basis of ascribing knowledge of Armi’s address to private respondent inasmuch as the authenticity thereof was neither admitted by private respondent nor proven by petitioners.

While Armi presented the alleged love letters/notes from private respondent, they were only attached as annexes to the petition and not formally offered as evidence before the Court of Appeals. More importantly, said letters/notes do not have probative value because they were mere photocopies and never proven to be an authentic writing of private respondent. In the same vein, the affidavits34 of Armi and her sister, Corazon Espiritu, are of no evidentiary weight. The basic rule of evidence is that unless the affiants themselves are placed on the witness stand to testify on their affidavits, such affidavits must be rejected for being hearsay. Stated differently, the declarants of written statements pertaining to disputed facts must be presented at the trial for cross-examination.35 Inasmuch as Armi and her sister were not presented before the Court of Appeals to affirm the veracity of their affidavits, the same are considered hearsay and without probative value.

Ei incumbit probotio qui dicit, non qui negat. He who asserts, not he who denies, must prove.36 Armi’s claim that private respondent is aware of her present address is anchored on the assertion of a live-in relationship and support to her son. Since the evidence presented by Armi is not sufficient to prove the purported cohabitation and support, it follows that private respondent’s knowledge of Armi’s address was likewise not proven. Thus, private respondent could not have deliberately concealed from the court that which was not shown to be known to him. The Court of Appeals therefore correctly dismissed the petition for annulment of judgment on the ground of failure to establish extrinsic fraud.

The proper remedy of a party aggrieved by a decision of the Court of Appeals in an action to annul a judgment of a Regional Trial Court is a petition for review on certiorari under Rule 45 of the Revised Rules of

Civil Procedure, where only questions of law may be raised. The resort of petitioner to the instant civil action for certiorari under Rule 65 is therefore erroneous. The special civil action of certiorari will not be allowed as a substitute for failure to timely file a petition for review under Rule 45, which should be instituted within 15 days37 from receipt of the assailed decision or resolution. The wrong choice of remedy thus provides another reason to dismiss this petition.38

Finally, petitioner failed to establish the merits of her petition to annul the trial court’s decision. In an action for annulment of judgment, the petitioner must convince the court that something may indeed be achieved should the assailed decision be annulled.39 Under Article 17640 of the Family Code as amended by Republic Act (RA) No. 9255, which took effect on March 19, 2004, illegitimate children shall use the surname of their mother, unless their father recognizes their filiation, in which case they may bear the father’s surname. In Wang v. Cebu Civil Registrar,41 it was held that an illegitimate child whose filiation is not recognized by the father, bears only a given name and his mother’s surname. The name of the unrecognized illegitimate child identifies him as such. It is only when said child is recognized that he may use his father’s surname, reflecting his status as an acknowledged illegitimate child.

In the present case, it is clear from the allegations of Armi that petitioner minor is an illegitimate child because she was never married to private respondent. Considering that the latter strongly asserts that he is not the father of petitioner minor, the latter is therefore an unrecognized illegitimate child. As such, he must bear the surname of his mother.

In sum, the substantive and procedural aspects of the instant controversy do not warrant the annulment of the trial court’s decision.

WHEREFORE, the petition is DISMISSED. The February 27, 2004 decision and the May 14, 2004 resolution of the Court of Appeals in CA-G.R. SP No. 61883 are AFFIRMED.

SO ORDERED.

G.R. No. 175799               November 28, 2011NM ROTHSCHILD & SONS (AUSTRALIA) LIMITED, Petitioner, 

vs.LEPANTO CONSOLIDATED MINING COMPANY, Respondent.

D E C I S I O N

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari assailing the Decision1 of the Court of Appeals dated September 8, 2006 in CA-G.R. SP No. 94382 and its Resolution2 dated December 12, 2006, denying the Motion for Reconsideration.

On August 30, 2005, respondent Lepanto Consolidated Mining Company filed with the Regional Trial Court (RTC) of Makati City a Complaint3 against petitioner NM Rothschild & Sons (Australia) Limited praying for a judgment declaring the loan and hedging contracts between the parties void for being contrary to Article 20184 of the Civil Code of the Philippines and for damages. The Complaint was docketed as Civil Case No. 05-782, and was raffled to Branch 150. Upon respondent’s (plaintiff’s) motion, the trial court authorized respondent’s counsel to personally bring the summons and Complaint to the Philippine Consulate General in Sydney, Australia for the latter office to effect service of summons on petitioner (defendant).

On October 20, 2005, petitioner filed a Special Appearance With Motion to Dismiss5 praying for the dismissal of the Complaint on the following grounds: (a) the court has not acquired jurisdiction over the person of petitioner due to the defective and improper service of summons; (b) the Complaint failed to state a cause of action and respondent does not have any against petitioner; (c) the action is barred by estoppel; and (d) respondent did not come to court with clean hands.

On November 29, 2005, petitioner filed two Motions: (1) a Motion for Leave to take the deposition of Mr. Paul Murray (Director, Risk Management of petitioner) before the Philippine Consul General; and (2) a Motion for Leave to Serve Interrogatories on respondent.

On December 9, 2005, the trial court issued an Order6 denying the Motion to Dismiss. According to the trial court, there was a proper service of summons through the Department of Foreign Affairs (DFA) on account of the fact that the defendant has neither applied for a license to do business in the Philippines, nor filed with the Securities and Exchange

Commission (SEC) a Written Power of Attorney designating some person on whom summons and other legal processes maybe served. The trial court also held that the Complaint sufficiently stated a cause of action. The other allegations in the Motion to Dismiss were brushed aside as matters of defense which can best be ventilated during the trial.

On December 27, 2005, petitioner filed a Motion for Reconsideration.7 On March 6, 2006, the trial court issued an Order denying the December 27, 2005 Motion for Reconsideration and disallowed the twin Motions for Leave to take deposition and serve written interrogatories.8

On April 3, 2006, petitioner sought redress via a Petition for Certiorari9 with the Court of Appeals, alleging that the trial court committed grave abuse of discretion in denying its Motion to Dismiss. The Petition was docketed as CA-G.R. SP No. 94382.

On September 8, 2006, the Court of Appeals rendered the assailed Decision dismissing the Petition for Certiorari. The Court of Appeals ruled that since the denial of a Motion to Dismiss is an interlocutory order, it cannot be the subject of a Petition for Certiorari, and may only be reviewed in the ordinary course of law by an appeal from the judgment after trial. On December 12, 2006, the Court of Appeals rendered the assailed Resolution denying the petitioner’s Motion for Reconsideration.

Meanwhile, on December 28, 2006, the trial court issued an Order directing respondent to answer some of the questions in petitioner’s Interrogatories to Plaintiff dated September 7, 2006.

Notwithstanding the foregoing, petitioner filed the present petition assailing the September 8, 2006 Decision and the December 12, 2006 Resolution of the Court of Appeals. Arguing against the ruling of the appellate court, petitioner insists that (a) an order denying a motion to dismiss may be the proper subject of a petition for certiorari; and (b) the trial court committed grave abuse of discretion in not finding that it had not validly acquired jurisdiction over petitioner and that the plaintiff had no cause of action.

Respondent, on the other hand, posits that: (a) the present Petition should be dismissed for not being filed by a real party in interest and for lack of a proper verification and certificate of non-forum shopping; (b) the Court of Appeals correctly ruled that certiorari was not the proper remedy; and (c) the trial court correctly denied petitioner’s motion to dismiss.

Our discussion of the issues raised by the parties follows:

Whether petitioner is a real party in interest

Respondent argues that the present Petition should be dismissed on the ground that petitioner no longer existed as a corporation at the time said Petition was filed on February 1, 2007. Respondent points out that as of the date of the filing of the Petition, there is no such corporation that goes by the name NM Rothschild and Sons (Australia) Limited. Thus, according to respondent, the present Petition was not filed by a real party in interest, citing our ruling in Philips Export B.V. v. Court of Appeals,10 wherein we held:

A name is peculiarly important as necessary to the very existence of a corporation (American Steel Foundries vs. Robertson, 269 US 372, 70 L ed 317, 46 S Ct 160; Lauman vs. Lebanon Valley R. Co., 30 Pa 42; First National Bank vs. Huntington Distilling Co., 40 W Va 530, 23 SE 792). Its name is one of its attributes, an element of its existence, and essential to its identity (6 Fletcher [Perm Ed], pp. 3-4). The general rule as to corporations is that each corporation must have a name by which it is to sue and be sued and do all legal acts. The name of a corporation in this respect designates the corporation in the same manner as the name of an individual designates the person (Cincinnati Cooperage Co. vs. Bate, 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird, 10 NH 123); and the right to use its corporate name is as much a part of the corporate franchise as any other privilege granted (Federal Secur. Co. vs. Federal Secur. Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs. Portuguese Beneficial Association, 18 RI 165, 26 A 36).11

In its Memorandum12 before this Court, petitioner started to refer to itself as Investec Australia Limited (formerly "NM Rothschild & Sons [Australia] Limited") and captioned said Memorandum accordingly. Petitioner claims that NM Rothschild and Sons (Australia) Limited still exists as a corporation under the laws of Australia under said new name. It presented before us documents evidencing the process in the Australian Securities & Investment Commission on the change of petitioner’s company name from NM Rothschild and Sons (Australia) Limited to Investec Australia Limited.13

We find the submissions of petitioner on the change of its corporate name satisfactory and resolve not to dismiss the present Petition for Review on the ground of not being prosecuted under the name of the real party in interest. While we stand by our pronouncement in Philips Export

on the importance of the corporate name to the very existence of corporations and the significance thereof in the corporation’s right to sue, we shall not go so far as to dismiss a case filed by the proper party using its former name when adequate identification is presented. A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.14 There is no doubt in our minds that the party who filed the present Petition, having presented sufficient evidence of its identity and being represented by the same counsel as that of the defendant in the case sought to be dismissed, is the entity that will be benefited if this Court grants the dismissal prayed for.

Since the main objection of respondent to the verification and certification against forum shopping likewise depends on the supposed inexistence of the corporation named therein, we give no credit to said objection in light of the foregoing discussion.

Propriety of the Resort to a Petition for Certiorari with the Court of Appeals

We have held time and again that an order denying a Motion to Dismiss is an interlocutory order which neither terminates nor finally disposes of a case as it leaves something to be done by the court before the case is finally decided on the merits. The general rule, therefore, is that the denial of a Motion to Dismiss cannot be questioned in a special civil action for Certiorari which is a remedy designed to correct errors of jurisdiction and not errors of judgment.15 However, we have likewise held that when the denial of the Motion to Dismiss is tainted with grave abuse of discretion, the grant of the extraordinary remedy of Certiorari may be justified. By "grave abuse of discretion" is meant:

[S]uch capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction. The abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act all in contemplation of law.16

The resolution of the present Petition therefore entails an inquiry into whether the Court of Appeals correctly ruled that the trial court did not commit grave abuse of discretion in its denial of petitioner’s Motion to Dismiss. A mere error in judgment on the part of the trial court would

undeniably be inadequate for us to reverse the disposition by the Court of Appeals.

Issues more properly ventilated during the trial of the case

As previously stated, petitioner seeks the dismissal of Civil Case No. 05-782 on the following grounds: (a) lack of jurisdiction over the person of petitioner due to the defective and improper service of summons; (b) failure of the Complaint to state a cause of action and absence of a cause of action; (c) the action is barred by estoppel; and (d) respondent did not come to court with clean hands.

As correctly ruled by both the trial court and the Court of Appeals, the alleged absence of a cause of action (as opposed to the failure to state a cause of action), the alleged estoppel on the part of petitioner, and the argument that respondent is in pari delicto in the execution of the challenged contracts, are not grounds in a Motion to Dismiss as enumerated in Section 1, Rule 1617 of the Rules of Court. Rather, such defenses raise evidentiary issues closely related to the validity and/or existence of respondent’s alleged cause of action and should therefore be threshed out during the trial.

As regards the allegation of failure to state a cause of action, while the same is usually available as a ground in a Motion to Dismiss, said ground cannot be ruled upon in the present Petition without going into the very merits of the main case.

It is basic that "[a] cause of action is the act or omission by which a party violates a right of another."18 Its elements are the following: (1) a right existing in favor of the plaintiff, (2) a duty on the part of the defendant to respect the plaintiff's right, and (3) an act or omission of the defendant in violation of such right.19 We have held that to sustain a Motion to Dismiss for lack of cause of action, the complaint must show that the claim for relief does not exist and not only that the claim was defectively stated or is ambiguous, indefinite or uncertain.20

The trial court held that the Complaint in the case at bar contains all the three elements of a cause of action, i.e., it alleges that: (1) plaintiff has the right to ask for the declaration of nullity of the Hedging Contracts for being null and void and contrary to Article 2018 of the Civil Code of the Philippines; (2) defendant has the corresponding obligation not to enforce the Hedging Contracts because they are in the nature of wagering or gambling agreements and therefore the transactions implementing those

contracts are null and void under Philippine laws; and (3) defendant ignored the advice and intends to enforce the Hedging Contracts by demanding financial payments due therefrom.21

The rule is that in a Motion to Dismiss, a defendant hypothetically admits the truth of the material allegations of the ultimate facts contained in the plaintiff's complaint.22 However, this principle of hypothetical admission admits of exceptions. Thus, in Tan v. Court of Appeals, 23 we held:

The flaw in this conclusion is that, while conveniently echoing the general rule that averments in the complaint are deemed hypothetically admitted upon the filing of a motion to dismiss grounded on the failure to state a cause of action, it did not take into account the equally established limitations to such rule, i.e., that a motion to dismiss does not admit the truth of mere epithets of fraud; nor allegations of legal conclusions; nor an erroneous statement of law; nor mere inferences or conclusions from facts not stated; nor mere conclusions of law; nor allegations of fact the falsity of which is subject to judicial notice; nor matters of evidence; nor surplusage and irrelevant matter; nor scandalous matter inserted merely to insult the opposing party; nor to legally impossible facts; nor to facts which appear unfounded by a record incorporated in the pleading, or by a document referred to; and, nor to general averments contradicted by more specific averments. A more judicious resolution of a motion to dismiss, therefore, necessitates that the court be not restricted to the consideration of the facts alleged in the complaint and inferences fairly deducible therefrom. Courts may consider other facts within the range of judicial notice as well as relevant laws and jurisprudence which the courts are bound to take into account, andthey are also fairly entitled to examine records/documents duly incorporated into the complaint by the pleader himself in ruling on the demurrer to the complaint.24 (Emphases supplied.)

In the case at bar, respondent asserts in the Complaint that the Hedging Contracts are void for being contrary to Article 201825 of the Civil Code. Respondent claims that under the Hedging Contracts, despite the express stipulation for deliveries of gold, the intention of the parties was allegedly merely to compel each other to pay the difference between the value of the gold at the forward price stated in the contract and its market price at the supposed time of delivery.

Whether such an agreement is void is a mere allegation of a conclusion of law, which therefore cannot be hypothetically admitted. Quite properly, the relevant portions of the contracts sought to be nullified, as well as a copy of the contract itself, are incorporated in the Complaint. The

determination of whether or not the Complaint stated a cause of action would therefore involve an inquiry into whether or not the assailed contracts are void under Philippine laws. This is, precisely, the very issue to be determined in Civil Case No. 05-782. Indeed, petitioner’s defense against the charge of nullity of the Hedging Contracts is the purported intent of the parties that actual deliveries of gold be made pursuant thereto. Such a defense requires the presentation of evidence on the merits of the case. An issue that "requires the contravention of the allegations of the complaint, as well as the full ventilation, in effect, of the main merits of the case, should not be within the province of a mere Motion to Dismiss."26 The trial court, therefore, correctly denied the Motion to Dismiss on this ground.

It is also settled in jurisprudence that allegations of estoppel and bad faith require proof. Thus, in Parañaque Kings Enterprises, Inc. v. Court of Appeals,27 we ruled:

Having come to the conclusion that the complaint states a valid cause of action for breach of the right of first refusal and that the trial court should thus not have dismissed the complaint, we find no more need to pass upon the question of whether the complaint states a cause of action for damages or whether the complaint is barred by estoppel or laches. As these matters require presentation and/or determination of facts, they can be best resolved after trial on the merits.28 (Emphases supplied.)

On the proposition in the Motion to Dismiss that respondent has come to court with unclean hands, suffice it to state that the determination of whether one acted in bad faith and whether damages may be awarded is evidentiary in nature. Thus, we have previously held that "[a]s a matter of defense, it can be best passed upon after a full-blown trial on the merits."29

Jurisdiction over the person of petitioner

Petitioner alleges that the RTC has not acquired jurisdiction over its person on account of the improper service of summons. Summons was served on petitioner through the DFA, with respondent’s counsel personally bringing the summons and Complaint to the Philippine Consulate General in Sydney, Australia.

In the pleadings filed by the parties before this Court, the parties entered into a lengthy debate as to whether or not petitioner is doing business in

the Philippines. However, such discussion is completely irrelevant in the case at bar, for two reasons. Firstly, since the Complaint was filed on August 30, 2005, the provisions of the 1997 Rules of Civil Procedure govern the service of summons. Section 12, Rule 14 of said rules provides:

Sec. 12. Service upon foreign private juridical entity. – When the defendant is a foreign private juridical entitywhich has transacted business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. (Emphasis supplied.)

This is a significant amendment of the former Section 14 of said rule which previously provided:

Sec. 14. Service upon private foreign corporations. — If the defendant is a foreign corporation, or a nonresident joint stock company or association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. (Emphasis supplied.)

The coverage of the present rule is thus broader.30 Secondly, the service of summons to petitioner through the DFA by the conveyance of the summons to the Philippine Consulate General in Sydney, Australia was clearly made not through the above-quoted Section 12, but pursuant to Section 15 of the same rule which provides:

Sec. 15. Extraterritorial service. – When the defendant does not reside and is not found in the Philippines, and the action affects the personal status of the plaintiff or relates to, or the subject of which is property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under section 6; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or

in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer.

Respondent argues31 that extraterritorial service of summons upon foreign private juridical entities is not proscribed under the Rules of Court, and is in fact within the authority of the trial court to adopt, in accordance with Section 6, Rule 135:

Sec. 6. Means to carry jurisdiction into effect. – When by law jurisdiction is conferred on a court or judicial officer, all auxiliary writs, processes and other means necessary to carry it into effect may be employed by such court or officer; and if the procedure to be followed in the exercise of such jurisdiction is not specifically pointed out by law or by these rules, any suitable process or mode of proceeding may be adopted which appears comformable to the spirit of said law or rules.

Section 15, Rule 14, however, is the specific provision dealing precisely with the service of summons on a defendant which does not reside and is not found in the Philippines, while Rule 135 (which is in Part V of the Rules of Court entitled Legal Ethics) concerns the general powers and duties of courts and judicial officers.

Breaking down Section 15, Rule 14, it is apparent that there are only four instances wherein a defendant who is a non-resident and is not found in the country may be served with summons by extraterritorial service, to wit: (1) when the action affects the personal status of the plaintiffs; (2) when the action relates to, or the subject of which is property, within the Philippines, in which the defendant claims a lien or an interest, actual or contingent; (3) when the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; and (4) when the defendant non-resident's property has been attached within the Philippines. In these instances, service of summons may be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the court may deem sufficient.32

Proceeding from this enumeration, we held in Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporation33that:

Undoubtedly, extraterritorial service of summons applies only where the action is in rem or quasi in rem, but not if an action is in personam.

When the case instituted is an action in rem or quasi in rem, Philippine courts already have jurisdiction to hear and decide the case because, in actions in rem and quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court, provided that the court acquires jurisdiction over the res. Thus, in such instance, extraterritorial service of summons can be made upon the defendant. The said extraterritorial service of summons is not for the purpose of vesting the court with jurisdiction, but for complying with the requirements of fair play or due process, so that the defendant will be informed of the pendency of the action against him and the possibility that property in the Philippines belonging to him or in which he has an interest may be subjected to a judgment in favor of the plaintiff, and he can thereby take steps to protect his interest if he is so minded. On the other hand, when the defendant or respondent does not reside and is not found in the Philippines, and the action involved is in personam, Philippine courts cannot try any case against him because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court.34 (Emphases supplied.)

In Domagas v. Jensen,35 we held that:

[T]he aim and object of an action determine its character. Whether a proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought against the person and is based on the jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in accordance with the mandate of the court. The purpose of a proceeding in personam is to impose, through the judgment of a court, some responsibility or liability directly upon the person of the defendant. Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a pecuniary liability on him.36

It is likewise settled that "[a]n action in personam is lodged against a person based on personal liability; an action in rem is directed against the thing itself instead of the person; while an action quasi in rem names a person as defendant, but its object is to subject that person’s interest in a property to a corresponding lien or obligation."37

The Complaint in the case at bar is an action to declare the loan and Hedging Contracts between the parties void with a prayer for damages. It is a suit in which the plaintiff seeks to be freed from its obligations to the defendant under a contract and to hold said defendant

pecuniarily liable to the plaintiff for entering into such contract. It is therefore an action in personam, unless and until the plaintiff attaches a property within the Philippines belonging to the defendant, in which case the action will be converted to one quasi in rem.

Since the action involved in the case at bar is in personam and since the defendant, petitioner Rothschild/Investec, does not reside and is not found in the Philippines, the Philippine courts cannot try any case against it because of the impossibility of acquiring jurisdiction over its person unless it voluntarily appears in court.38

In this regard, respondent vigorously argues that petitioner should be held to have voluntarily appeared before the trial court when it prayed for, and was actually afforded, specific reliefs from the trial court.39 Respondent points out that while petitioner’s Motion to Dismiss was still pending, petitioner prayed for and was able to avail of modes of discovery against respondent, such as written interrogatories, requests for admission, deposition, and motions for production of documents.40

Petitioner counters that under this Court’s ruling in the leading case of La Naval Drug Corporation v. Court of Appeals,41 a party may file a Motion to Dismiss on the ground of lack of jurisdiction over its person, and at the same time raise affirmative defenses and pray for affirmative relief, without waiving its objection to the acquisition of jurisdiction over its person.42

It appears, however, that petitioner misunderstood our ruling in La Naval. A close reading of La Naval reveals that the Court intended a distinction between the raising of affirmative defenses in an Answer (which would notamount to acceptance of the jurisdiction of the court) and the prayer for affirmative reliefs (which would be considered acquiescence to the jurisdiction of the court):

In the same manner that a plaintiff may assert two or more causes of action in a court suit, a defendant is likewise expressly allowed, under Section 2, Rule 8, of the Rules of Court, to put up his own defenses alternatively or even hypothetically. Indeed, under Section 2, Rule 9, of the Rules of Court, defenses and objections not pleaded either in a motion to dismiss or in an answer, except for the failure to state a cause of action, are deemed waived. We take this to mean that a defendant may, in fact, feel enjoined to set up, along with his objection to the court's jurisdiction over his person, all other possible defenses. It thus appears that it is not the invocation of any of such defenses, but the

failure to so raise them, that can result in waiver or estoppel. By defenses, of course, we refer to the grounds provided for in Rule 16 of the Rules of Court that must be asserted in a motion to dismiss or by way of affirmative defenses in an answer.

Mindful of the foregoing, in Signetics Corporation vs. Court of Appeals and Freuhauf Electronics Phils., Inc. (225 SCRA 737, 738), we lately ruled:

"This is not to say, however, that the petitioner's right to question the jurisdiction of the court over its person is now to be deemed a foreclosed matter. If it is true, as Signetics claims, that its only involvement in the Philippines was through a passive investment in Sigfil, which it even later disposed of, and that TEAM Pacific is not its agent, then it cannot really be said to be doing business in the Philippines. It is a defense, however, that requires the contravention of the allegations of the complaint, as well as a full ventilation, in effect, of the main merits of the case, which should not thus be within the province of a mere motion to dismiss. So, also, the issue posed by the petitioner as to whether a foreign corporation which has done business in the country, but which has ceased to do business at the time of the filing of a complaint, can still be made to answer for a cause of action which accrued while it was doing business, is another matter that would yet have to await the reception and admission of evidence. Since these points have seasonably been raised by the petitioner, there should be no real cause for what may understandably be its apprehension, i.e., that by its participation during the trial on the merits, it may, absent an invocation of separate or independent reliefs of its own, be considered to have voluntarily submitted itself to the court's jurisdiction."43 (Emphases supplied.)

In order to conform to the ruling in La Naval, which was decided by this Court in 1994, the former Section 23, Rule 1444 concerning voluntary appearance was amended to include a second sentence in its equivalent provision in the 1997 Rules of Civil Procedure:

SEC. 20. Voluntary appearance. – The defendant's voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance. (Emphasis supplied.)

The new second sentence, it can be observed, merely mentions other grounds in a Motion to Dismiss aside from lack of jurisdiction over the person of the defendant. This clearly refers to affirmative defenses, rather than affirmative reliefs.

Thus, while mindful of our ruling in La Naval and the new Section 20, Rule 20, this Court, in several cases, ruled that seeking affirmative relief in a court is tantamount to voluntary appearance therein.45 Thus, in Philippine Commercial International Bank v. Dy Hong Pi,46 wherein defendants filed a "Motion for Inhibition without submitting themselves to the jurisdiction of this Honorable Court" subsequent to their filing of a "Motion to Dismiss (for Lack of Jurisdiction)," we held:

Besides, any lingering doubts on the issue of voluntary appearance dissipate when the respondents' motion for inhibition is considered. This motion seeks a sole relief: inhibition of Judge Napoleon Inoturan from further hearing the case. Evidently, by seeking affirmative relief other than dismissal of the case, respondents manifested their voluntary submission to the court's jurisdiction. It is well-settled that the active participation of a party in the proceedings is tantamount to an invocation of the court's jurisdiction and a willingness to abide by the resolution of the case, and will bar said party from later on impugning the court's jurisdiction.47 (Emphasis supplied.)1âwphi1

In view of the above, we therefore rule that petitioner, by seeking affirmative reliefs from the trial court, is deemed to have voluntarily submitted to the jurisdiction of said court. A party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction.48 Consequently, the trial court cannot be considered to have committed grave abuse of discretion amounting to lack or excess of jurisdiction in the denial of the Motion to Dismiss on account of failure to acquire jurisdiction over the person of the defendant.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision of the Court of Appeals dated September 8, 2006 and its Resolution dated December 12, 2006 in CA-G.R. SP No. 94382 are hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

G.R. No. L-55687 July 30, 1982JUASING HARDWARE, petitioner, 

vs.THE HONORABLE RAFAEL T. MENDOZA, Judge of the Court of

First Instance of Cebu, and PILAR DOLLA, respondents.Luis V. Diones, Paulito Y. Cabrera and Victor C. Laborte for petitioner.

Amadeo D. Seno for respondents.

GUERRERO, J.:

In this special civil action for certiorari, petitioner Juasing Hardware seeks to annul the Orders of respondent Judge dated September 5, 1980 and October 21, 1980 issued in Civil Case No. R-18386.

Records show the pertinent factual and procedural antecedents of the instant Petition to be as follows:

On August 17, 1979, Juasing Hardware, alleging to be a single proprietorship duly organized and existing under and by virtue of the laws of the Philippines and represented by its manager Ong Bon Yong, filed a complaint for the collection of a sum of money against Pilar Dolla.  1 The complaint charged that defendant Dolla failed and refused to pay, despite repeated demands, the purchase price of items, materials and merchandise which she bought from the plaintiff.2 In her Answer, defendant stated, among others, that she "has no knowledge about plaintiff's legal personality and capacity to sue as alleged in ... the complaint." 3 The case proceeded to pre-trial and trial. After plaintiff had completed the presentation of its evidence and rested its case, defendant filed a Motion for Dismissal of Action (Demurrer to Evidence) 4praying that the action be dismissed for plaintiff's lack of legal capacity to sue. Defendant in said Motion contended that plaintiff Juasing Hardware is a single proprietorship, not a corporation or a partnership duly registered in accordance with law, and therefore is not a juridical person with legal capacity to bring an action in court. Plaintiff filed an Opposition and moved for the admission of an Amended Complaint. 5

Resolving the foregoing controversy, respondent Judge issued the Order dated September 5, 1980 dismissing the case and denying admission of the Amended Complaint. Pertinent portions of said Order follow:

The Answer of the defendant to the complaint alleged the lack of legal capacity to sue of the plaintiff as contained in its affirmative defense. inspite of the allegation that plaintiff has no legal capacity to sue, the plaintiff insisted

in proceeding to trial instead of amending the Complaint. During the trial, it was found out that the affirmative defense of defendant of plaintiff's lack of legal capacity to sue is very evident for plaintiff Juasing Hardware is a single proprietorship which is neither a partnership nor a corporation. The amendment therefore ' is now too late it being substantial.

In view of all the foregoing, this case is hereby DISMISSED with costs de oficio. 6

Plaintiff's Motion for Reconsideration of the above Order was denied in another Order issued by respondent Judge on October 21, 1980. 7

The sole issue in this case is whether or not the lower court committed a grave abuse of discretion when it dismissed the case below and refused to admit the Amended Complaint filed by therein plaintiff, now herein petitioner, Juasing Hardware.

Rule 3 of the Revised Rules of Court provides as follows:

Sec. 1. Who may be parties.-Only natural or juridical persons or entities authorized by law may be parties in a civil action.

Petitioner is definitely not a natural person; nor is it a juridical person as defined in the New Civil Code of the Philippines thus:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

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

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

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

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

Be that as it may, petitioner's contention that respondent Judge erred in not allowing the amendment of the complaint to correct the designation of the party plaintiff in the lower court, is impressed with merit. Such an amendment is authorized by Rule 10 of the Revised Rules of Court which provides thus:

Sec. 4. Formal Amendments. — A defect in the designation of the parties may be summarily corrected at any stage of the action provided no prejudice is caused thereby to the adverse party. (Emphasis supplied.)

Contrary to the ruling of respondent Judge, the defect of the complaint in the instant case is merely formal, not substantial. Substitution of the party plaintiff would not constitute a change in the Identity of the parties. No unfairness or surprise to private respondent Dolla, defendant in the court a quo, would result by allowing the amendment, the purpose of which is merely to conform to procedural rules or to correct a technical error.

In point is the case of Alonzo vs. Villamor, et al. 8 which applied Sec. 110 of the Code of Civil Procedure authorizing the court "in furtherance of justice ... (to) allow a party to amend any pleading or proceeding and at any stage of the action, in either the Court of First Instance or the Supreme Court, by adding or striking out the name of any party, either plaintiff or defendant, or by correcting a mistake in the name of a party ..." In the Alonzo case, Fr. Eladio Alonzo, a priest of the Roman Catholic Church, brought an action to recover from therein defendants the value of certain properties taken from the Church. The defendants contended that Fr. Alonzo was not the real party in interest. This Court, speaking through Justice

Moreland, ordered the substitution of the Roman Catholic Apostolic Church in the place and stead of Eladio Alonzo as party plaintiff, and aptly held in this wise:

... Defect in form cannot possibly prejudice so long as the substantial is clearly evident. ...

No one has been misled by the error in the name of the party plaintiff. If we should by reason of this error send this case back for amendment and new trial, there would be on the retrial the same complaint, the same answer, the same defense, the same interests, the same witnesses, and the same evidence. The name of the plaintiff would constitute the only difference between the old trial and the new. In our judgment there is not enough in a name to justify such action.

There is nothing sacred about processes or pleadings, their forms or contents. Their sole purpose is to facilitate the application of justice to the rival claims of contending parties. They were created, not to hinder and delay, but to facilitate and promote, the administration of justice. They do not constitute the thing itself, which courts are always striving to secure to litigants. They are designed as the means best adapted to obtain that thing. In other words, they are a means to an end. When they lose the character of the one and become the other, the administration of justice is at fault and courts are correspondingly remiss in the performance of their obvious duty.

The error in this case is purely technical. To take advantage of it for other purposes than to cure it, does not appeal to a fair sense of justice. Its presentation as fatal to the plaintiff's case smacks of skill rather than right. A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of movement and position, entraps and destroys the other. It is, rather, a contest in which each contending party fully and fairly lays before the court the facts in issue and then, brushing aside as wholly trivial and indecisive all imperfections of form and technicalities of procedure, asks that justice be done upon the merits. Lawsuits, unlike duels, are not to be won by a rapier's thrust.

Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. There should be no vested rights in technicalities. No litigant should be permitted to challenge a record of a court ... for defect of form when his substantial rights have not been prejudiced thereby. 9

We reiterate what this Court had stated in the more recent case of Shaffer vs. Palma 10 that "(t)he courts should be liberal in allowing amendments to pleadings to avoid multiplicity of suits and in order that t he real controversies between the parties are presented and the case decided on the merits without unnecessary delay." 11 This rule applies with more reason and with greater force when, as in the case at bar, the amendment sought to be made refers to a mere matter of form and no substantial rights are prejudiced. 12

WHEREFORE, the Petition is hereby granted. The Orders dated September 5, 1980 and October 21, 1980 are hereby annulled and the lower court is hereby ordered to admit the Amended Complaint in conformity with the pronouncements in this Decision. No costs.

SO ORDERED.

G.R. No. 73722 February 26, 1990THE COMMISSIONER OF CUSTOMS, petitioner, 

vs.K.M.K. GANI, INDRAPAL & CO., and the HONORABLE COURT OF

TAX APPEALS, respondents.Armando S. Padilla for private respondent.

SARMIENTO, J.:

This is a review of the decision of the Court of Tax Appeals disposing as follows:

WHEREFORE. the subject ten (10) cartons of articles are hereby released to the carrying airline for immediate transshipment to the country of destination under the terms of the contract of carriage. No costs.

SO ORDERED. 1

The pertinent facts may be summarized thus:

On September 11, 1982, two (2,) containers loaded with 103 cartons of merchandise covered by eleven (11) airway bills of several supposedly Singapore-based consignees arrived at the Manila International Airport on board Philippine Air Lines (PAL) Flight PR 311 from Hongkong. The cargoes were consigned to these different entities: K.M.K. Gani (hereafter referred to as K.M.K.) and Indrapal and Company (hereafter referred to as INDRAPAL), the private respondents in the petition before us; and Sin Hong Lee Trading Co., Ltd., AAR TEE Enterprises, and C. Ratilal all purportedly based in Singapore.

While the cargoes were at the Manila International Airport, a "reliable source" tipped off the Bureau of customs that the said cargoes were going to be unloaded in Manila. Forthwith, the Bureau's agency on such matters, the Suspected Cargo and Anti-Narcotics (SCAN), dispatched an agent to verify the information. Upon arriving at the airport, the SCAN agent saw an empty PAL van parked directly alongside the plane's belly from which cargoes were being unloaded. When the SCAN agent asked the van's driver why he was at the site, the driver drove away in his vehicle. The SCAN agent then sequestered the unloaded cargoes.

The seized cargoes consisted of 103 cartons "containing Mogadon and Mandrax tablets, 

Sony T.V. sets 1546R/176R kw, Sony Betamax SL5800, and SL5000, Cassette Stereos with Headphone (ala walkman), Casio Calculators, Pioneer Car Stereos, Yamaha Watches, Eyeglass Frames, Sunglasses, Plastic Utility Bags, Perfumes, etc." These goods were transferred to the International Cargo Terminal under Warrant of Seizure and Detention and thereafter subjected to Seizure and Forfeiture proceedings for "technical smuggling."

At the hearing, Atty. Armando S. Padilla entered his appearance for the consignees K.M.K. and INDRAPAL. The records of the case do not show any appearance of the consignees in person. Atty. Padilla moved for the transshipment of the cargoes consigned to his clients. On the other hand, the Solicitor General avers that K.M.K. and INDRAPAL did not present any testimonial or documentary evidence. The, collector of Customs at the then Manila International Airport (MIA), now Ninoy Aquino International Airport (NAIA), ruled for the forfeiture of all the cargoes in the said containers (Seizure Identification No. 4993-82, dated July 14, 1983). Consequently, Atty. Padilla, ostensibly on behalf of his two clients, K.M.K. and INDRAPAL, appealed the order to the Commissioner. of Customs. 2

The Commissioner of Customs affirmed the finding of the Collector of Customs (Customs Case No. 83-85, January, 1984), of the presence of the intention to import the said goods in violation of the Dangerous Drugs Act 3and Central Bank Circular No. 808 in relation to the Tariff and Customs Code. 4

The Commissioner added the following findings of fact: 5

1. There is a direct flight from Hongkong to Singapore, thus making the transit through Manila more expensive, tedious, and circuitous.

2. The articles were grossly misdeclared, considering that Singapore is a free port.

3. The television sets and betamax units seized were of the American standard which is popularly used in Manila,

and not of the European standard which is used in Singapore.

4. One of the shippers is a Filipino national with no business connection with her alleged consignee in Singapore.

5. The alleged consignee of the prohibited drugs confiscated has no authority to import Mogadon or Mandrax.

Upon these findings, the Commissioner concluded that there was an "intent to unlade" in Manila, thus, an attempt to smuggle goods into the country.

Taking exception to these findings, Atty. Armando S. Padilla, again as counsel of the consignees K.M.K. and Indrapal, appealed to the respondent Court of Tax Appeals (CTA). He argued in the CTA that K.M.K. and INDRAPAL were "entitled to the release of their cargoes for transshipment to Singapore so manifested and covered by the Airway bills as in transit, ... contending that the goods were never intended importations into the Philippines and the same suffer none of any affiliating breaches allegedly found attributable to the other shipments under the Customs and related laws." 6

The CTA reversed the decision of the Commissioner of Customs. Hence this petition.

The petitioner raises the following errors:

1. THE COURT OF TAX APPEALS ERRED IN ENTERTAINING THE PETITION FOR REVIEW NOTWITHSTANDING HEREIN PRIVATE RESPONDENTS' FAILURE TO ESTABLISH THEIR PERSONALITY TO SUE IN A REPRESENTATIVE CAPACITY.

2. THE COURT OF TAX APPEALS ERRED IN RULING THAT THE SUBJECT GOODS WERE IMPORTATIONS NOT INTENDED FOR THE PHILIPPINES BUT

FOR SINGAPORE, THUS, NOT VIOLATING THE LAW ON TECHNICAL SMUGGLING UNDER THE TARIFF AND CUSTOMS CODE.

The issues before us are therefore: (1) whether or not the private respondents failed to establish their personality to sue in a representative capacity, hence making their action dismissable, and (2) whether or not the subject goods were importations intended for the Philippines in violation of the Tariff and Customs Code.

We answer both questions in the affirmative.

The law is clear: "No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws." 7

However, the Court in a long line of cases has held that a foreign corporation not engaged in business in the Philippines may not be denied the right to file an action in the Philippine courts for an isolated transaction. 8

Therefore, the issue on whether or not a foreign corporation which does not have a license to engage in business in this country can seek redress in Philippine courts boils down as to whether it is doing business or merely entered into an isolated transaction in the Philippines.

The fact that a foreign corporation is not doing business in the Philippines must be disclosed if it desires to sue in Philippine courts under the "isolated transaction rule." Without this disclosure, the court may choose to deny it the right to sue. 9

In the case at bar, the private respondents K.M.K. and INDRAPAL aver that they are "suing upon a singular and isolated transaction." But they failed to prove their legal existence or juridical personality as foreign corporations. Their unverified petition before the respondent Court of Tax Appeals merely stated:

1. That petitioner "K.M.K. Gani" is a single proprietorship doing business in accordance with the laws of Singapore with address at 99 Greenfield Drive, Singapore, Rep. of Singapore, while Petitioner INDRAPAL and COMPANY" is a firm doing business in accordance with the laws of Singapore with office address at 97 High Street, Singapore 0641, Republic of Singapore, and summons as well as other Court process may be served to the undersigned lawyer;

2. That the Petitioner's (sic) are sueing (sic) upon a singular and isolated transaction. 10

We are cognizant of the fact that under the "isolated transaction rule," only foreign corporations and not just any business organization or entity can avail themselves of the privilege of suing before Philippine courts even without a license. Counsel Armando S. Padilla stated before the respondent Court of Tax Appeals that his clients are "suing upon a singular and isolated transaction." But there is no proof to show that K.M.K. and INDRAPAL are indeed what they are represented to be. It has been simply stated by Attorney Padilla that K.M.K. Gani is "a single proprietorship," while INDRAPAL is "a firm," and both are "doing business in accordance with the laws of Singapore ... ," with specified addresses in Singapore. In cases of this nature, these allegations are not sufficient to clothe a claimant of suspected smuggled goods of juridical personality and existence. The "isolated transaction rule" refers only to foreign corporations. Here the petitioners are not foreign corporations. They do not even pretend to be so. The first paragraph of their petition before the Court, containing the allegation of their identities, does not even aver their corporate character. On the contrary, K.M.K. alleges that it is a "single proprietorship" while INDRAPAL hides under the vague identification as a "firm," although both describe themselves with the phrase "doing business in accordance with the laws of Singapore."

Absent such proof that the private respondents are corporations (foreign or not), the respondent Court of Tax Appeals should have barred their invocation of the right to sue within Philippine jurisdiction under the "isolated transaction rule" since they do not qualify for the availment of such right.

As we had stated before:

But merely to say that a foreign corporation not doing business in the Philippines does not need a license in order to sue in our courts does not completely resolve the issue in the present case. The proposition as stated, refers to the right to sue; the question here refers to pleading and procedure. It should be noted that insofar as the allegations in the complaint have a bearing on appellant's capacity to sue, all that is averred is that they are both foreign corporations existing under the laws of the United States. This averment conjures two alternative possibilities: either they are engaged in business in the Philippines or they are not so engaged. If the first, they must have been duly licensed in order to maintain this suit; if the second, if (sic) the transaction sued upon is singular and isolated, no such license is required. In either case, the qualifying circumstance is an essential part of the element of plaintiffs capacity to sue and must be affirmatively pleaded. 11

In this connection, we note also a fatal defect in the pleadings of the private respondents. There is no allegation as to who is the duly authorized representative or resident agent in our jurisdiction. All we have on record are the pleadings filed by Attorney Armando S. Padilla who represents himself as the counsel for the private respondents.

xxx xxx xxx

It is incumbent on plaintiff to allege sufficient facts to show that he is concerned with the cause of action averred, and is the party who has suffered injury by reason of the acts of defendant; in other words, it is not enough that he alleges a cause of action existing in favor of someone, but he must show that it exists in favor of himself. The burden should not be placed on defendant to show that plaintiff is not the aggrieved person and that he has sustained no damages. It is also necessary for plaintiff to allege facts showing that the causes of action alleged accrued to him in the capacity in which he sues, and for this purpose it is necessary for someone for one who sues otherwise than in his individual capacity to allege his authority.

xxx xxx xxx

The plaintiff must show, in his pleading, his right and interest in the subject matter of the suit; and a complaint which does not show that plaintiff has the requisite interest to enable him to maintain his action should be dismissed for insufficiency ... 12

xxx xxx xxx

The appearance of Atty, Armando S. Padilla as counsel for the two claimants would not suffice. Generally, a "lawyer is presumed to be properly authorized to represent any cause in which he appears, and no written power of attorney is required to authorize him to appear in court for his client." 13 Nevertheless, although the authority of an attorney to appear for and on behalf of a party may be assumed, it can still be questioned or challenged by the adverse party concerned. 14

The presumption established under the provision of Section 21, Rule 138 of the Revised Rules of Court is disputable. 15 The requirement for the production of authority is essential because the client will be bound by his acquiescence resulting from his knowledge that he was being represented by said attorney. 16

The Solicitor General, representing the petitioner-appellant, not only questions the authority of Atty. Armando S. Padilla to represent the private respondents but also the latter's capacity to sue:

... While it is alleged that the summons and court processes may be served to herein private respondents' counsel who filed the unverified petition before the Court of Tax Appeals, the allegation would be insufficient for the purpose of binding foreign corporations as in the instant case. To be sure, the admitted absence of special power of attorney in favor of their counsel, the relationship with the latter, if at all, is merely that of a lawyer-client relationship and definitely not one of a principal agent. Such being the case, said counsel cannot bind nor compromise the interest of private respondents as it is possible that the latter may disown the former's representation to avoid civil or criminal liability. In this respect, the Court cannot assume jurisdiction over the person of private respondents, notwithstanding the filing of the unverified petition in question.

Apart from the foregoing, Section 4, Rule 8, Revised Rules of Court mandates that facts showing the capacity of a party to sue or be sued; or the authority of a party to sue or be sued in a representative capacity; or the legal existence of an organized association of person (sic) that is made a party, must be averred. In like manner, the rule is settled that in case where the law denies a foreign corporation to maintain a suit unless it has previously complied with certain requirements, then such compliance or exemption therefrom, becomes a necessary averment in the complaint (Atlantic Mutual Inc. Co. v. Cebu Stevedoring Co., Inc. 17 SCRA 1037; vide; Sec. 4, Rule 8, Revised Rules of Court). In the case at bar, apart from merely alleging that private respondents are foreign corporation (sic) and that summons may be served to their counsel, their petition in the Court of Tax Appeals is bereft of any other factual allegation to show their capacity to sue or be sued in a representative capacity in his jurisdiction. 17

The representation and the extent of the authority of Atty. Padilla have thus been expressly challenged. But he ignored such challenge which leads us to the only conclusion that he has no authority to appear for such clients if they exist, which we even doubt. In cases like this, it is the duty of the government officials concerned to require competent proof of the representation and authority of any claimant of any goods coming from abroad and seized by our customs authorities or otherwise appearing to be illegally imported. This desired meticulousness, strictness if you may, should extend to their representatives and counsel. Our government has lost considerable sums of money due to such dubious claims or claimants.

Apropos the second issue, suffice it to state that we agree with the findings, already enumerated and discussed at the outset, made by the Collector of Customs in his decision, dated July 14, 1983, which was affirmed and amplified by the decision of the Commissioner of Customs, that those constitute sufficient evidence to support the conclusion that there was an intention to unlade the seized goods in the Philippines instead of its supposed destination, Singapore. There is no need of belaboring them anymore.

WHEREFORE, the petition is GRANTED; the decision of the Court of Tax Appeals is SET ASIDE, and the decision of the petitioner is hereby REINSTATED.

No costs.

SO ORDERED.

G.R. No. 78646 July 23, 1991

PABLO RALLA, substituted by his wife and co-defendant CARMEN MUÑOZ-RALLA, and his legal heirs, HILDA RALLA-ALMINE,

BELISTA, RENE RALLA-BELISTA and GERARDO M. RALLA, petitioners, 

vs.PEDRO RALLA, substituted by his legal heirs, LEONI, PETER, and

MARINELA all surnamed RALLA, and COURT OF APPEALS, respondents.

Rafael Triunfante and Teodorico C. Almine, Jr. for petitioners.

Ruben R. Basa for private respondents.

CRUZ, J.:p

Rosendo Ralla had two sons, Pablo and Pedro. The father apparently loved the former but not the latter, Pablo and his family lived with Rosendo, who took care of all the household expenses. Pablo administered part of the family properties and received a monthly salary of P250.00 plus part of the produce of the land. Pedro lived with his mother, Paz Escarella, in another town. He was not on good terms with his father.

Paz Escarella died in 1957 and the two brothers partitioned 63 parcels of land she left as her paraphernalia property. The partition was sustained by this Court in G.R. Nos. 63253-54 on April 27, 1989. 1 Meanwhile, on December 22, 1958, Rosendo executed a will disinheriting Pedro and leaving everything he owned to Pablo, to whom he said he had earlier sold a part of his property for P10,000.00. Rosendo himself filed for the probate of the will but pendente lite died on October 1, 1960.

On November 3, 1966, the probate judge converted SP 564 into an intestate proceeding. On February 28, 1978, a creditor of the deceased filed a petition for the probate of Rosendo's will in SP 1106, which was heard jointly with SP 564. On August 3, 1979, the order of November 3, 1966, was set aside.

The last will and testament of Rosendo Ralla was allowed on June 7, 1982 2 but on October 20, 1982, the disinheritance of Pedro was

disapproved. 3 This order was elevated to the Court of Appeals in AC-G.R. Nos. 00472, 00489.

In a decision dated July 25, 1986, the Court of Appeals 4 reversed the trial court and reinstated the disinheritance clause after finding that the requisites of a valid disinheritance had been complied with in the will. The appellate court noted that Pedro had threatened to kill his father, who was afraid of him and had earlier sued him for slander and grave oral defamation.

The decision was assailed before this Court in G.R. Nos. 76657-58, which was dismissed in our resolution of August 26, 1987, reading as follows:

. . . Assuming that, as claimed, the petitioners' counsel received a copy of the questioned decision only on August 15, 1986 (although it should have been earlier because it was mailed to him at his address of record on July 28, 1986), they had 15 days, or until August 30, 1986, within which to move for its reconsideration or appeal therefrom by certiorari to this Court. Instead, they filed on August 28, 1986, a motion for extension of time to file a motion for reconsideration, which was not allowed under our ruling in Habaluyas Enterprises, Inc. v. Japson, 142 SCRA 208, and so did not interrupt the running of the reglementary period. Indeed, even if the period were to be counted from October 7, 1986, when notice of the denial of the motion for extension was received by the petitioners, the petition would still be 30 days late, having been filed on December 8, 1986. Moreover, the petitioners have not shown that the questioned decision is tainted with grave abuse of discretion or that it is not in accord with law and jurisprudence. For these reasons, the Court Resolved to DISMISS the petition.

The motion for reconsideration was denied with finality in the following resolution dated October 26, 1987:

. . . The Court, after deliberation, Resolved to DENY with finality the motion for reconsideration, wherein the petitioners pray that they be relieved from the effects of our ruling in Habaluyas Enterprises, Inc. v. Japson, 142 SCRA 208, under which the petition was denied for tardiness. Counsel are expected to be abreast of current developments in law and jurisprudence and cannot plead

ignorance thereof as an excuse for non-compliance with the same. As earlier observed, the petition was filed extremely late, and, moreover, it was inadequate even on the merits, same having failed to show that the questioned decision was tainted with grave abuse of discretion or reversible error.

What is involved in the present petition is the correctness of the decision of the respondent court annulling the deed of sale executed by Rosendo Ralla in favor of Pablo over 149 parcels of land. Pedro had filed on May 19, 1972, a complaint to annul the transaction on the ground that it was simulated. 5 The original decision of the trial court declared the sale null and void. 6 In the resolution of the motion for reconsideration, however, Judge Jose F. Madara completely reversed himself and held the deed of sale to be valid. 7 This order was in turn set aside by the respondent court, which reinstated the original decision invalidating the deed of sale.

It is indeed intriguing that the trial judge should, in resolving the motion for reconsideration, make a complete turnabout on the basis of the same evidence and jurisprudence that he considered in rendering the original decision. It is no less noteworthy that the respondent court, after studying the two conclusions reached by him, saw fit to sustain his original findings as the correct appreciation of the evidence and the applicable law.

But we find that, regardless of these curious resolutions, the petition must nevertheless be sustained albeit not on the ground that the deed of sale was indeed valid. The Court is inclined to support the findings of the respondent court. However, we do not and cannot make any decision on this matter because of one insuperable obstacle. That obstacle is the proper party personality of Pedro Ralla to question the transaction.

The decision of the Court of Appeals in AC-G.R. Nos. 00472, 00489 approved the disinheritance of Pedro Ralla. That decision was appealed to this Court, but the petition for review was dismissed as above related. The decision has long since become final. Since then, Pedro Ralla no longer had the legal standing to question the validity of the sale executed by Rosendo in favor of his other son Pablo.

The real party-in-interest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. "Interest" within the meaning of the rule means material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. As a

general rule, one having no right or interest to protect cannot invoke the jurisdiction of the court as a party-plaintiff in an action.

As the sole heir, Pablo Ralla had the right to inherit the totality of his father's estate after payment of all its debts. Even if it be assumed that the deed of sale was indeed invalid, the subject-matter thereof nevertheless devolved upon Pablo as the universal successor of his father Rosendo. In his wig, Rosendo claimed the 149 parcels as "part of my property" –– as distinguished from the conjugal estate –– which he had earlier sold to Pablo. Significantly, Pedro did not deny this description of the property in his Comment to the present petition, confining himself to assailing the validity of the sale.

The Court must note the lackadaisical attitude of the heirs of Pedro Ralla, who substituted him upon his death. They seem to have lost interest in this litigation, probably because of the approval of their father's disinheritance by the respondent court. When the parties were required to submit their respective memoranda after we gave due course to this petition, the petitioners did but not the private respondents. Although the period to do so had already expired, the Court relaxed its rules to give the private respondents another opportunity to comply with the requirement. When the resolution of August 22, 1990, could not be served upon the private respondents' counsel, we directed that it be served on the private respondents themselves. 9 On January 18, 1991, the heirs of Pedro Ralla informed the Court that they were retaining another counsel and asked that they be furnished a copy of the petition and given 30 days within which to file their memorandum. 10 This motion was granted. The records show that they received a copy of the petition on February 26, 1991, but their memorandum was never filed. On May 29, 1991, the Court, noting this omission, finally resolved to dispense with the memorandum and to decide this case on the basis of the available records.

Our decision is that as a validly disinherited heir, and not claiming to be a creditor of his deceased father, Pedro Ralla had no legal personality to question the deed of sale dated November 29, 1957, between Rosendo Ralla and his son Pablo. Legally speaking, Pedro Ralla was a stranger to the transaction as he did not stand to benefit from its annulment. His disinheritance had rendered him hors de combat.

WHEREFORE, the decision of the respondent court dated January 23, 1987, is set aside and another judgment is hereby rendered dismissing Civil Case 194 (originally Civil Case 4624) in this Regional Trial Court of Ligao, Albay, Branch 5.

SO ORDERED.

G.R. No. 73765 August 26, 1991HANG LUNG BANK, LTD., petitioner, 

vs.HON. FELINTRIYE G. SAULOG, Presiding Judge, Regional Trial

Court, National Capital Judicial Region, Branch CXLII, Makati, Metro Manila, and CORDOVA CHIN SAN, respondents.

Belo, Abiera & Associates for petitioner.

Castelo Law Office for private respondent.

FERNAN, C.J.:p

Challenged in this petition for certiorari which is anchored on grave abuse of discretion, are two orders of the Regional Trial Court, Branch CXLII of Makati, Metro Manila dismissing the complaint for collection of a sum of money and denying the motion for reconsideration of the dismissal order on the ground that petitioner, a Hongkong-based bank, is barred by the General Banking Act from maintaining a suit in this jurisdiction.

The records show that on July 18, 1979, petitioner Hang Lung Bank, Ltd., which was not doing business in the Philippines, entered into two (2) continuing guarantee agreements with Cordova Chin San in Hongkong whereby the latter agreed to pay on demand all sums of money which may be due the bank from Worlder Enterprises to the extent of the total amount of two hundred fifty thousand Hongkong dollars (HK $250,000). 1

Worlder Enterprises having defaulted in its payment, petitioner filed in the Supreme Court of Hongkong a collection suit against Worlder Enterprises and Chin San. Summonses were allegedly served upon Worlder Enterprises and Chin San at their addresses in Hongkong but they failed to respond thereto. Consequently, the Supreme Court of Hongkong issued the following:

J U D G M E N T

THE 14th DAY OF JUNE, 1984

No notice of intention to defend having been given by the 1st and 2nd Defendants herein, IT IS THIS DAY ADJUDGED that: —

(1) the 1st Defendant (Ko Ching Chong Trading otherwise known as the Worlder Enterprises) do pay the Plaintiff the sum of HK$1,117,968.36 together with interest on the respective principal sums of HK$196,591.38, HK$200,216.29, HK$526,557.63, HK$49,350.00 and HK$3,965.50 at the rates of 1.7% per month (or HK$111.40 per day), 18.5% per annum (or HK$101.48 per day), 1.85% per month (or HK$324.71 per day), 1.55% per month (or HK$25.50 per day) and 1.7% per month (or HK$2.25 per day) respectively from 4th May 1984 up to the date of payment; and

(2) the 2nd Defendant (Cordova Chin San) do pay the Plaintiff the sum of HK$279,325.00 together with interest on the principal sum of HK$250,000.00 at the rate of 1.7% per month (or HK$141.67 per day) from 4th May 1984 up to the date of payment.

AND IT IS ADJUDGED that the 1st and 2nd Defendants do pay the Plaintiff the sum of HK$970.00 fixed costs.

N.J. BARNETT Registrar

Thereafter, petitioner through counsel sent a demand letter to Chin San at his Philippine address but again, no response was made thereto. Hence, on October 18, 1984, petitioner instituted in the court below an action seeking "the enforcement of its just and valid claims against private respondent, who is a local resident, for a sum of money based on a transaction which was perfected, executed and consummated abroad." 2

In his answer to the complaint, Chin San raised as affirmative defenses: lack of cause of action, incapacity to sue and improper venue. 3

Pre-trial of the case was set for June 17, 1985 but it was postponed to July 12, 1985. However, a day before the latter pre-trial date, Chin San filed a motion to dismiss the case and to set the same for hearing the next day. The motion to dismiss was based on the grounds that petitioner had no legal capacity to sue and that venue was improperly laid.

Acting on said motion to dismiss, on December 20, 1985, the lower court 4 issued the following order:

On defendant Chin San Cordova's motion to dismiss, dated July 10, 1985; plaintiff's opposition, dated July 12, 1985; defendant's reply, dated July 22, 1985; plaintiff's supplemental opposition, dated September 13, 1985, and defendant's rejoinder filed on September 23, 1985, said motion to dismiss is granted.

Section 14, General Banking Act provides:

"No foreign bank or banking corporation formed, organized or existing under any laws other than those of the Republic of the Philippines, shall be permitted to transact business in the Philippines, or maintain by itself any suit for the recovery of any debt, claims or demands whatsoever until after it shall have obtained, upon order of the Monetary Board, a license for that purpose."

Plaintiff Hang Lung Bank, Ltd. with business and postal address at the 3rd Floor, United Centre, 95 Queensway, Hongkong, does not do business in the Philippines. The continuing guarantee, Annexes "A" and "B" appeared to have been transacted in Hongkong. Plaintiff's Annex "C" shows that it had already obtained judgment from the Supreme Court of Hongkong against defendant involving the same claim on June 14, 1984.

The cases of Mentholatum Company, Inc. versus Mangaliman, 72 Phil. 524 and Eastern Seaboard Navigation, Ltd. versus Juan Ysmael & Company, Inc., 102 Phil. 1-8, relied upon by plaintiff, deal with isolated transaction in the Philippines of foreign corporation. Such transaction though isolated is the one that conferred jurisdiction to Philippine courts, but in the instant case, the transaction occurred in Hongkong.

Case dismissed. The instant complaint not the proper action.

SO ORDERED. 5

Petitioner filed a motion for the reconsideration of said order but it was denied for lack of merit. 6 Hence, the instant petition for certiorari seeking the reversal of said orders "so as to allow petitioner to enforce through the court below its claims against private respondent as recognized by the Supreme Court of Hongkong." 7

Petitioner asserts that the lower court gravely abused its discretion in: (a) holding that the complaint was not the proper action for purposes of collecting the amount guaranteed by Chin San "as recognized and adjudged by the Supreme Court of Hongkong;" (b) interpreting Section 14 of the General Banking Act as precluding petitioner from maintaining a suit before Philippine courts because it is a foreign corporation not licensed to do business in the Philippines despite the fact that it does not do business here; and (c) impliedly sustaining private respondent's allegation of improper venue.

We need not detain ourselves on the issue of improper venue. Suffice it to state that private respondent waived his right to invoke it when he forthwith filed his answer to the complaint thereby necessarily implying submission to the jurisdiction of the court. 8

The resolution of this petition hinges on a determination of whether petitioner foreign banking corporation has the capacity to file the action below.

Private respondent correctly contends that since petitioner is a bank, its capacity to file an action in this jurisdiction is governed by the General Banking Act (Republic Act No. 337), particularly Section 14 thereof which provides:

SEC. 14. No foreign bank or banking corporation formed, organized or existing under any laws other than those of the Republic of the Philippines shall be permitted to transact business in the Philippines, or maintain by itself or assignee any suit for the recovery of any debt, claims, or demand whatsoever, until after it shall have obtained, upon order of the Monetary Board, a license for that purpose from the Securities and Exchange Commissioner. Any officer, director or agent of any such corporation who transacts business in the Philippines without the said license shall be punished by imprisonment for not less than one year nor more than ten years and by a fine of not less than one thousand

pesos nor more than ten thousand pesos. (45 O.G. No. 4, 1647, 1649-1650)

In construing this provision, we adhere to the interpretation given by this Court to the almost identical Section 69 of the old Corporation Law (Act No. 1459) which reads:

SEC. 69. No foreign corporation or corporation formed, organized, or existing under any laws other than those of the Philippines shall be permitted to transact business in the Philippines or maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in the section immediately preceding. Any officer, director or agent of the corporation or any person transacting business for any foreign corporation not having the license prescribed shall be punished by imprisonment for not less than six months nor more than two years or by a fine of not less than two hundred pesos nor more than one thousand pesos, or by both such imprisonment and fine, in the discretion of the Court.

In a long line of cases, this Court has interpreted this last quoted provision as not altogether prohibiting a foreign corporation not licensed to do business in the Philippines from suing or maintaining an action in Philippine courts.9 What it seeks to prevent is a foreign corporation doing business in the Philippines without a license from gaining access to Philippine courts. As elucidated in Marshall-Wells Co. vs. Elser & Co., 46 Phil. 70:

The object of the statute was to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object of the statute was not to prevent it from performing single acts but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. The implication of the law is that it was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines from securing redress from Philippine courts, and thus, in effect, to permit persons to avoid their contract made with such foreign corporation. The effect of the statute preventing foreign corporations from doing business and from

bringing actions in the local courts, except on compliance with elaborate requirements, must not be unduly extended or improperly applied. It should not be construed to extend beyond the plain meaning of its terms, considered in connection with its object, and in connection with the spirit of the entire law.

The fairly recent case of Universal Shipping Lines vs. Intermediate Appellate Court, 10 although dealing with the amended version of Section 69 of the old Corporation Law, Section 133 of the Corporation Code (Batas Pambansa Blg. 68), but which is nonetheless apropos, states the rule succinctly: "it is not the lack of the prescribed license (to do business in the Philippines) but doing business without license, which bars a foreign corporation from access to our courts."

Thus, we have ruled that a foreign corporation not licensed to do business in the Philippines may file a suit in this country due to the collision of two vessels at the harbor of Manila 11 and for the loss of goods bound for Hongkong but erroneously discharged in Manila. 12

Indeed, the phraseologies of Section 14 of the General Banking Act and its almost identical counterpart Section 69 of the old Corporation Law are misleading in that they seem to require a foreign corporation, including a foreign bank or banking corporation, not licensed to do business and not doing business in the Philippines to secure a license from the Securities and Exchange Commission before it can bring or maintain an action in Philippine courts. To avert such misimpression, Section 133 of the Corporation Code is now more plainly worded thus:

No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines.

Under this provision, we have ruled that a foreign corporation may sue in this jurisdiction for infringement of trademark and unfair competition although it is not doing business in the Philippines 13 because the Philippines was a party to the Convention of the Union of Paris for the Protection of IndustrialProperty. 14

We even went further to say that a foreign corporation not licensed to do business in the Philippines may not be denied the right to file an action in our courts for an isolated transaction in this country. 15

Since petitioner foreign banking corporation was not doing business in the Philippines, it may not be denied the privilege of pursuing its claims against private respondent for a contract which was entered into and consummated outside the Philippines. Otherwise we will be hampering the growth and development of business relations between Filipino citizens and foreign nationals. Worse, we will be allowing the law to serve as a protective shield for unscrupulous Filipino citizens who have business relationships abroad.

In its pleadings before the court, petitioner appears to be in a quandary as to whether the suit below is one for enforcement or recognition of the Hongkong judgment. Its complaint states:

COMES NOW Plaintiff, by undersigned counsel, and to this Honorable Court, most respectfully alleges that:

1. Plaintiff is a corporation duly organized and existing under and by virtue of the laws of Hongkong with business and postal address at the 3rd Floor, United Centre, 95 Queensway, Hongkong, not doing business in the Philippines, but is suing for this isolated transaction, but for purposes of this complaint may be served with summons and legal processes of this Honorable Court, at the 6th Floor, Cibeles Building, 6780 Ayala Avenue, Makati, Metro Manila, while defendant Cordova Chin San, may be served with summons and other legal processes of this Honorable Court at the Municipality of Moncada, Province of Tarlac, Philippines;

2. On July 18, 1979 and July 25, 1980, the defendant executed Continuing Guarantees, in consideration of plaintiff's from time to time making advances, or coming to liability or discounting bills or otherwise giving credit or granting banking facilities from time to time to, or on account of the Wolder Enterprises (sic), photocopies of the Contract of Continuing Guarantees are hereto attached as Annexes "A" and "B", respectively, and made parts hereof;

3. In June 1984, a complaint was filed by plaintiff against the Wolder Enterprises (sic) and defendant Cordova Chin San, in The Supreme Court of Hongkong, under Case No. 3176, and pursuant to which complaint, a judgment dated

14th day of July, 1984 was rendered by The Supreme Court of Hongkong ordering to (sic) defendant Cordova Chin San to pay the plaintiff the sum of HK$279,325.00 together with interest on the principal sum of HK$250,000.00 at the rate of HK$1.7% per month or (HK$141.67) per day from 4th May, 1984 up to the date the said amount is paid in full, and to pay the sum of HK$970.00 as fixed cost, a photocopy of the Judgment rendered by The Supreme Court of Hongkong is hereto attached as Annex "C" and made an integral part hereof.

4. Plaintiff has made demands upon the defendant in this case to pay the aforesaid amount the last of which is by letter dated July 16, 1984 sent by undersigned counsel, a photocopy of the letter of demand is hereto attached as Annex "D" and the Registry Return Card hereto attached as Annex "E", respectively, and made parts hereof. However, this notwithstanding, defendant failed and refused and still continue to fail and refuse to make any payment to plaintiff on the aforesaid amount of HK$279,325.00 plus interest on the principal sum of HK$250,000.00 at the rate of (HK$141.67) per day from May 4, 1984 up to the date of payment;

5. In order to protect and safeguard the rights and interests of herein plaintiff, it has engaged the services of undersigned counsel, to file the suit at bar, and for whose services it has agreed to pay an amount equivalent to 25% of the total amount due and owing, as of and by way of attorney's fees plus costs of suit.

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that judgment be rendered ordering the defendant:

a) To pay plaintiff the sum of HK$279,325.00 together with interest on the principal sum of HK$260,000.00 at the rate of HK$1.7% (sic) per month (or HK$141.67 per day) from May 4, 1984 until the aforesaid amount is paid in full;

b) To pay an amount equivalent to 25% of the total amount due and demandable as of and by way of attorney's fees; and

c) To pay costs of suit, and

Plaintiff prays for such other and further reliefs, to which it may by law and equity, be entitled. 16

The complaint therefore appears to be one of the enforcement of the Hongkong judgment because it prays for the grant of the affirmative relief given by said foreign judgment. 17 Although petitioner asserts that it is merely seeking the recognition of its claims based on the contract sued upon and not the enforcement of the Hongkong judgment18 it should be noted that in the prayer of the complaint, petitioner simply copied the Hongkong judgment with respect to private respondent's liability.

However, a foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative relief is being sought. Hence, in the interest of justice, the complaint should be considered as a petition for the recognition of the Hongkong judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the defendant, private respondent herein, may present evidence of lack of jurisdiction, notice, collusion, fraud or clear mistake of fact and law, if applicable.

WHEREFORE, the questioned orders of the lower court are hereby set aside. Civil Case No. 8762 is reinstated and the lower court is directed to proceed with dispatch in the disposition of said case. This decision is immediately executory. No costs.

SO ORDERED.

G.R. No. 97816 July 24, 1992MERRILL LYNCH FUTURES, INC., petitioner, 

vs.HON. COURT OF APPEALS, and the SPOUSES PEDRO M. LARA and

ELISA G. LARA, respondents.

NARVASA, C.J.:

The capacity of a foreign corporation to maintain an action in the Philippines against residents thereof, is the principal question in the appellate proceedings at bar. The issue arises from the undisputed facts now to be briefly narrated.

On November 23, 1987, Merrill Lynch Futures, Inc. (hereafter, simply ML FUTURES) filed a complaint with the Regional Trial Court at Quezon City against the Spouses Pedro M. Lara and Elisa G. Lara for the recovery of a debt and interest thereon, damages, and attorney's fees. 1 In its complaint ML FUTURES described itself as —

a) a non-resident foreign corporation, not doing business in the Philippines, duly organized and existing under and by virtue of the laws of the state of Delaware, U.S.A.;" as well as

b) a "futures commission merchant" duly licensed to act as such in the futures markets and exchanges in the United States, . . essentially functioning as a broker . . (executing) orders to buy and sell futures contracts received from its customers on U.S. futures exchanges.

It also defined a "futures contract" as a "contractual commitment to buy and sell a standardized quantity of a particular item at a specified future settlement date and at a price agreed upon, with the purchase or sale being executed on a regulated futures exchange."

In its complaint ML FUTURES alleged the following:

1) that on September 28, 1983 it entered into a Futures Customer Agreement with the defendant spouses (Account No. 138-12161), in virtue of which it agreed to act as the latter's broker for the purchase and sale of futures contracts in the U.S.;

2) that pursuant to the contract, orders to buy and sell futures contracts were transmitted to ML FUTURES by the Lara Spouses "through the facilities of Merrill Lynch Philippines, Inc., a Philippine corporation and a company servicing plaintiffs customers; 2

3) that from the outset, the Lara Spouses "knew and were duly advised that Merrill Lynch Philippines, Inc. was not a broker in futures contracts," and that it "did not have a license from the Securities and Exchange Commission to operate as a commodity trading advisor (i.e., 'an entity which, not being a broker, furnishes advice on commodity futures to persons who trade in futures contracts');

4) that in line with the above mentioned agreement and through said Merrill Lynch Philippines, Inc., the Lara Spouses actively traded in futures contracts, including "stock index futures" for four years or so, i.e., from 1983 to October, 1987, 3 there being more or less regular accounting and corresponding remittances of money (or crediting or debiting) made between the spouses and ML FUTURES;

5) that because of a loss amounting to US$160,749.69 incurred in respect of three (3) transactions involving "index futures," and after setting this off against an amount of US$75,913.42 then owing by ML FUTURES to the Lara Spouses, said spouses became indebted to ML FUTURES for the ensuing balance of US$84,836.27, which the latter asked them to pay;

6) that the Lara Spouses however refused to pay this balance, "alleging that the transactions were null and void because Merrill Lynch Philippines, Inc., the Philippine company servicing accounts of plaintiff, . . had no license to operate as a 'commodity and/or financial futures broker.'"

On the foregoing essential facts, ML FUTURES prayed (1) for a preliminary attachment against defendant spouses' properties "up to the value of at least P2,267,139.50," and (2) for judgment, after trial, sentencing the spouses to pay ML FUTURES:

a) the Philippine peso equivalent of $84,836.27 at the applicable exchanged rate on date of payment, with legal interest from date of demand until full payment;

b) exemplary damages in the sum of at least P500,000.00; and

c) attorney's fees and expenses of litigation as may be proven at the trial.

Preliminary attachment issued ex parte on December 2, 1987, and the defendant spouses were duly served with summons.

They then filed a motion to dismiss dated December 18, 1987 on the grounds that:

(1) plaintiff ML FUTURES had "no legal capacity to sue" and

(2) its "complaint states no cause of action since . . (it) is not the real party in interest."

In that motion to dismiss, the defendant spouses averred that:

a) although not licensed to do so, ML FUTURES had been doing business in the Philippines "at least for the last four (4) years," this being clear from the very allegations of the complaint; consequently, ML FUTURES is prohibited by law "to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines;" and

b) they had never been informed that Merrill Lynch Philippines, Inc. was not licensed to do business in this country; and contrary to the allegations of the complaint, all their transactions had actually been with MERRILL LYNCH PIERCE FENNER & SMITH, INC., and not with ML FUTURES (Merrill Lynch Futures, Inc.), in proof of which they attached to their motion to dismiss copies of eight (8) agreements, receipts or reminders, etc., executed on standard printed forms of said Merrill Lynch Pierce Fenner & Smith Inc. 4

ML FUTURES filed an OPPOSITION to the defendant spouses' motion to dismiss. In that motion —

a) it drew attention to paragraph 4 of its complaint, admitted by defendants, that the latter "have been actively trading in futures contracts . . . in U.S. futures exchanges from 1983 to 1987," and ask, "If the trading . . . (was) made in U.S., how could plaintiff be doing business in the Philippines?"

b) it also drew attention to a printed form of "Merrill Lynch Futures, Inc." filled out and signed by defendant spouses when they opened an account with ML Futures, in order to supply information about themselves, including their bank's name —

(1) in which appear the following epigraph: "Account introduced by Merrill Lynch International, Inc.," and the following statements, to wit:

This Commodity Trading Advisor (Merrill Lynch, Pierce, Fenner & Smith Philippines, Inc.) is prohibited by the Philippine Securities and Exchange Commission from accepting funds in the trading advisor's name from a client of Merrill Lynch Futures, Inc. for trading commodity interests. All funds in this trading program must be placed with Merrill Lynch Futures, Inc.;

and

. . . It is agreed between MERRILL LYNCH, PIERCE, FENNER & SMITH INC., and other account carrying MERRILL LYNCH entities and their customers that all legal relationships between them will be governed by applicable laws in countries outside the Philippines where sale and purchase transactions take place.

c) and it argued that —

(1) it is not permitted for defendant spouses to present "evidence" in connection with a motion to dismiss based on failure of the complaint to state a cause of action;

(2) even if the documents appended to the motion to dismiss be considered as admissible "evidence," the same would be immaterial since the documents refer to a different account number:138-12136, the defendants' account number with ML FUTURES being 138-12161;

(3) it is a lie for the defendant spouses to assert that they were never informed that Merrill Lynch Philippines, Inc. had not been licensed to do business in the Philippines; and

(4) defendant spouses should not be allowed to "invoke the aid of the court with unclean hands.

The defendant spouses filed a REPLY reaffirming their lack of awareness that Merrill Lynch Philippines, Inc.(formerly registered as Merrill Lynch, Pierce, Fenner & Smith Philippines, Inc.) 5 did not have a license, claiming that they learned of this only from inquiries with the Securities and Exchange Commission which elicited the information that it had denied said corporation's application to operate as a commodity futures trading advisor — a denial subsequently affirmed by the Court of Appeals (Merrill Lynch Philippines, Inc. v. Securities & Exchange Commission, CA-G.R. No. 10821-SP, Nov. 19, 1987). The spouses also submitted additional documents (Annexes J to R) involving transactions with Merrill Lynch Pierce Fenner & Smith, Inc., dating back to 1980, stressing that all but one of the documents "refer to Account No. 138-12161 which is the very account that is involved in the instant complaint."

ML FUTURES filed a Rejoinder alleging it had given the spouses a disclosure statement by which the latter were made aware that the transactions they were agreeing on would take place outside of the Philippines, and that "all funds in the trading program must be placed with Merrill Lynch Futures, Inc."

On January 12, 1988, the Trial Court promulgated an Order sustaining the motion to dismiss, directing the dismissal of the case and discharging the writ of preliminary attachment. It later denied ML FUTURES's motion for reconsideration, by Order dated February 29, 1988. ML FUTURES appealed to the Court of Appeals. 6

In its own decision promulgated on November 27, 1990, 7 the Court of Appeals affirmed the Trial Court's judgment. It declared that the Trial Court had seen "through the charade in the representation of MLPI and the plaintiff that MLPI is only a trading advisor and in fact it is a conduit in the plaintiff's business transactions in the Philippines as a basis for invoking the provisions of Section 133 of the Corporation Code," 8 viz.:

Sec. 133. Doing business without a license. — No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency in the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

It also declared that the evidence established that plaintiff had in fact been "doing business" in this country in legal contemplation, adverting to Mentholatum v. Mangaliman, 72 Phil. 524, 528-530, and Section 1 of Republic Act No. 5455 reading as follows: 9

Sec. 1. Definition and scope of this ACT . (1) As used in this Act, the term "investment" shall mean equity participation in any enterprise formed, organized, or existing under the laws of the Philippines; and the phrase "doing business" shall INCLUDE soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines; AND ANY OTHER ACT OR ACTS THAT IMPLY A CONTINUITY OF COMMERCIAL DEALINGS OR ARRANGEMENTS AND CONTEMPLATE TO THAT EXTENT THE PERFORMANCE OF ACTS OR WORKS, OR THE EXERCISE OF SOME FUNCTIONS NORMALLY INCIDENT TO, AND IN PROGRESSIVE PROSECUTION OF COMMERCIAL GAIN OR OF THE PURPOSE AND OBJECT OF THE BUSINESS ORGANIZATION.

As regards the claim that it was error for the Trial Court to place reliance on the decision of the Court of Appeals in CA-G.R. No. 10821-SP — sustaining the finding of the Securities & Exchange Commission that ML FUTURES was doing business in the Philippines — since that judgment was not yet final and ML FUTURES was not a party to that proceeding, the Court of Appeals ruled that there was no need to belabor the point considering that there was, in any event, "adequate proof of the activities of MLPI . . . which manifestly show that the plaintiff (ML FUTURES) performed a series of business acts, consummated contracts and undertook transactions for the period from 1983 to October 1987," "and because ML FUTURES had done so without license, it consequently had "no legal personality to bring suit in Philippine courts."

Its motion for reconsideration having been denied, 10 ML FUTURES has appealed to this Court on certiorari. Here, it submits the following issues for resolution:

(a) Whether or not the annexes appended by the Laras to their Motion to Dismiss and Reply filed with the Regional

Trial Court, but never authenticated or offered, constitute admissible evidence.

(b) Whether or not in the proceedings below, ML FUTURES has been accorded procedural due process.

(c) Whether or not the annexes, assuming them to be admissible, established that ML FUTURES was doing business in the Philippines without a license.

As just stated, the Lara Spouse's motion to dismiss was founded on two (2) grounds: (a) that the plaintiff has no legal capacity to sue, and (b) that the complaint states no cause of action (Sec. 1 [d], and [g], Rule 16, Rules of Court).

As regards the second ground, i.e., that the complaint states no cause of action, the settled doctrine of course is that said ground must appear on the face of the complaint, and its existence may be determined only by the allegations of the complaint, consideration of other facts being proscribed, and any attempt to prove extraneous circumstances not being allowed. 11 The test of the sufficiency of the facts alleged in a complaint as constituting a cause of action is whether or not, admitting the facts alleged, the court might render a valid judgment upon the same in accordance with the prayer of the complaint. 12 Indeed, it is error for a judge to conduct a preliminary hearing and receive evidence on the affirmative defense of failure of the complaint to state a cause of action. 13

The other ground for dismissal relied upon, i.e., that the plaintiff has no legal capacity to sue — may be understood in two senses: one, that the plaintiff is prohibited or otherwise incapacitated by law to institute suit in Philippine Courts, 14 or two, although not otherwise incapacitated in the sense just stated, that it is not a real party in interest.  15 Now, the Lara Spouses contend that ML Futures has no capacity to sue them because the transactions subject of the complaint were had by them, not with the plaintiff ML FUTURES, but with Merrill Lynch Pierce Fenner & Smith, Inc. Evidence is quite obviously needed in this situation, for it is not to be expected that said ground, or any facts from which its existence may be inferred, will be found in the averments of the complaint. When such a ground is asserted in a motion to dismiss, the general rule governing evidence on motions applies. The rule is embodied in Section 7, Rule 133 of the Rules of Court.

Sec. 7. Evidence on motion. — When a motion is based on facts not appearing of record the court may hear the matter on affidavits or depositions presented by the

respective parties, but the court may direct that the matter be heard wholly or partly on oral testimony or depositions.

There was, to be sure, no affidavit or deposition attached to the Lara Spouses' motion to dismiss or thereafter proffered in proof of the averments of their motion. The motion itself was not verified. What the spouses did do was to refer in their motion to documents which purported to establish that it was not with ML FUTURES that they had theretofore been dealing, but another, distinct entity, Merrill Lynch, Pierce, Fenner & Smith, Inc., copies of which documents were attached to the motion. It is significant that ML FUTURES raised no issue relative to the authenticity of the documents thus annexed to the Laras' motion. In fact, its arguments subsumed the genuineness thereof and even adverted to one or two of them. Its objection was centered on the propriety of taking account of those documents as evidence, considering the established principle that no evidence should be received in the resolution of a motion to dismiss based on an alleged failure of the complaint to state a cause of action.

There being otherwise no question respecting the genuineness of the documents, nor of their relevance to at least one of the grounds for dismissal — i.e., the prohibition on suits in Philippine Courts by foreign corporations doing business in the country without license — it would have been a superfluity for the Court to require prior proof of their authenticity, and no error may be ascribed to the Trial Court in taking account of them in the determination of the motion on the ground, not that the complaint fails to state a cause of action — as regards which evidence is improper and impermissible — but that the plaintiff has no legal capacity to sue — respecting which proof may and should be presented.

Neither may ML FUTURES argue with any degree of tenability that it had been denied due process in the premises. As just pointed out, it was very clear from the outset that the claim of lack of its capacity to sue was being made to rest squarely on the documents annexed thereto, and ML FUTURES had more than ample opportunity to impugn those documents and require their authentication, but did not do so. To sustain its theory that there should have been identification and authentication, and formal offer, of those documents in the Trial Court pursuant to the rules of evidence would be to give unwarranted importance to technicality and make it prevail over the substance of the issue.

The first question then, is, as ML FUTURES formulates it, whether or not the annexes, assuming them to be admissible, establish that (a) ML

FUTURES is prohibited from suing in Philippine Courts because doing business in the country without a license, and that (b) it is not a real party in interest since the Lara Spouses had not been doing business with it, but with another corporation, Merrill Lynch, Pierce, Fenner & Smith, Inc.

The Court is satisfied that the facts on record adequately establish that ML FUTURES, operating in the United States, had indeed done business with the Lara Spouses in the Philippines over several years, had done so at all times through Merrill Lynch Philippines, Inc. (MLPI), a corporation organized in this country, and had executed all these transactions without ML FUTURES being licensed to so transact business here, and without MLPI being authorized to operate as a commodity futures trading advisor. These are the factual findings of both the Trial Court and the Court of Appeals. These, too, are the conclusions of the Securities & Exchange Commission which denied MLPI's application to operate as a commodity futures trading advisor, a denial subsequently affirmed by the Court of Appeals. Prescinding from the proposition that factual findings of the Court of Appeals are generally conclusive this Court has been cited to no circumstance of substance to warrant reversal of said Appellate Court's findings or conclusions in this case.

The Court is satisfied, too, that the Laras did transact business with ML FUTURES through its agent corporation organized in the Philippines, it being unnecessary to determine whether this domestic firm was MLPI (Merrill Lynch Philippines, Inc.) or Merrill Lynch Pierce Fenner & Smith (MLPI's alleged predecessor). The fact is that ML FUTURES did deal with futures contracts in exchanges in the United States in behalf and for the account of the Lara Spouses, and that on several occasions the latter received account documents and money in connection with those transactions.

Given these facts, if indeed the last transaction executed by ML FUTURES in the Laras's behalf had resulted in a loss amounting to US $160,749.69; that in relation to this loss, ML FUTURES had credited the Laras with the amount of US$75,913.42 — which it (ML FUTURES) then admittedly owed the spouses — and thereafter sought to collect the balance, US$84,836.27, but the Laras had refused to pay (for the reasons already above stated), the crucial question is whether or not ML FUTURES may sue in Philippine Courts to establish and enforce its rights against said spouses, in light of the undeniable fact that it had transacted business in this country without being licensed to do so. In other words, if it be true that during all the time that they were transacting with ML FUTURES, the Laras were fully aware of its lack of license to do business in the Philippines, and in relation to those transactions had

made payments to, and received money from it for several years, the question is whether or not the Lara Spouses are now estopped to impugn ML FUTURES' capacity to sue them in the courts of the forum.

The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. 16 And the "doctrine of estoppel to deny corporate existence applies to foreign as well as to domestic corporations;" 17 "one who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity." 18 The principle "will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes, chiefly in cases where such person has received the benefits of the contract (Sherwood v. Alvis, 83 Ala 115, 3 So 307, limited and distinguished in Dudley v. Collier, 87 Ala 431, 6 So 304; Spinney v. Miller, 114 Iowa 210, 86 NW 317), where such person has acted as agent for the corporation and has violated his fiduciary obligations as such, and where the statute does not provide that the contract shall be void, but merely fixes a special penalty for violation of the statute. . . ." 19

The doctrine was adopted by this Court as early as 1924 in Asia Banking Corporation v. Standard Products Co.,20 in which the following pronouncement was made: 21

The general rule that in the absence of fraud of person who has contracted or otherwise dealt with an association in such a way as to recognize and in effect admit its legal existence as a corporate body is thereby estopped to deny its corporate existence in any action leading out of or involving such contract or dealing, unless its existence is attacked for causes which have arisen since making the contract or other dealing relied on as an estoppel and this applies to foreign as well as domestic corporations. (14 C.J .7; Chinese Chamber of Commerce vs. Pua Te Ching, 14 Phil. 222).

There would seem to be no question that the Laras received benefits generated by their business relations with ML FUTURES. Those business relations, according to the Laras themselves, spanned a period of seven (7) years; and they evidently found those relations to be of such profitability as warranted their maintaining them for that not insignificant period of time; otherwise, it is reasonably certain that they would have terminated their dealings with ML FUTURES much, much earlier. In fact, even as regards their last transaction, in which the Laras allegedly

suffered a loss in the sum of US$160,749.69, the Laras nonetheless still received some monetary advantage, for ML FUTURES credited them with the amount of US$75,913.42 then due to them, thus reducing their debt to US$84,836.27. Given these facts, and assuming that the Lara Spouses were aware from the outset that ML FUTURES had no license to do business in this country and MLPI, no authority to act as broker for it, it would appear quite inequitable for the Laras to evade payment of an otherwise legitimate indebtedness due and owing to ML FUTURES upon the plea that it should not have done business in this country in the first place, or that its agent in this country, MLPI, had no license either to operate as a "commodity and/or financial futures broker."

Considerations of equity dictate that, at the very least, the issue of whether the Laras are in truth liable to ML FUTURES and if so in what amount, and whether they were so far aware of the absence of the requisite licenses on the part of ML FUTURES and its Philippine correspondent, MLPI, as to be estopped from alleging that fact as defense to such liability, should be ventilated and adjudicated on the merits by the proper trial court.

WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 16478 dated November 27, 1990 and its Resolution of March 7, 1991 are REVERSED and SET ASIDE, and the Regional Trial Court at Quezon City, Branch 84, is ORDERED to reinstate Civil Case No. Q-52360 and forthwith conduct a hearing to adjudicate the issues set out in the preceding paragraph on the merits.

SO ORDERED.

G.R. No. 102223 August 22, 1996COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-

TRADE, INC., (formerly ASPAC-ITEC PHILIPPINES, INC.) and FRANCISCO S. AGUIRRE, petitioners, 

vs.THE COURT OF APPEALS, ITEC INTERNATIONAL, INC., and ITEC,

INC., respondents.

TORRES, JR., J.:p

Business Corporations, according to Lord Coke, "have no souls." They do business peddling goods, wares or even services across national boundaries in "souless forms" in quest for profits albeit at times, unwelcomed in these strange lands venturing into uncertain markets and, the risk of dealing with wily competitors.

This is one of the issues in the case at bar.

Contested in this petition for review on Certiorari is the Decision of the Court of Appeals on June 7, 1991, sustaining the RTC Order dated February 22, 1991, denying the petitioners' Motion to Dismiss, and directing the issuance of a writ of preliminary injunction, and its companion Resolution of October 9, 1991, denying the petitioners' Motion for Reconsideration.

Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are both domestic corporations, while petitioner Francisco S. Aguirre is their President and majority stockholder. Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC, for brevity) are corporations duly organized and existing under the laws of the State of Alabama, United States of America. There is no dispute that ITEC is a foreign corporation not licensed to do business in the Philippines.

On August 14, 1987, ITEC entered into a contract with petitioner ASPAC referred to as "Representative Agreement".  1 Pursuant to the contract, ITEC engaged ASPAC as its "exclusive representative" in the Philippines for the sale of ITEC's products, in consideration of which, ASPAC was paid a stipulated commission. The agreement was signed by G.A. Clark and Francisco S. Aguirre, presidents of ITEC and ASPAC respectively, for and in behalf of their companies. 2 The said agreement was initially for a term of twenty-

four months. After the lapse of the agreed period, the agreement was renewed for another twenty-four months.

Through a "License Agreement" 3 entered into by the same parties on November 10, 1988, ASPAC was able to incorporate and use the name "ITEC" in its own name. Thus , ASPAC Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC (Philippines).

By virtue of said contracts, ASPAC sold electronic products, exported by ITEC, to their sole customer, the Philippine Long Distance Telephone Company, (PLDT, for brevity).

To facilitate their transactions, ASPAC, dealing under its new appellation, and PLDT executed a document entitled "PLDT-ASPAC/ITEC PROTOCOL" 4 which defined the project details for the supply of ITEC's Interface Equipment in connection with the Fifth Expansion Program of PLDT.

One year into the second term of the parties' Representative Agreement, ITEC decided to terminate the same, because petitioner ASPAC allegedly violated its contractual commitment as stipulated in their agreements. 5

ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of which is likewise petitioner Aguirre, of using knowledge and information of ITEC's products specifications to develop their own line of equipment and product support, which are similar, if not identical to ITEC's own, and offering them to ITEC's former customer.

On January 31, 1991, the complaint 6 in Civil Case No. 91-294, was filed with the Regional Trial Court of Makati, Branch 134 by ITEC, INC. Plaintiff sought to enjoin, first, preliminarily and then, after trial, permanently; (1) defendants DIGITAL, CMDI, and Francisco Aguirre and their agents and business associates, to cease and desist from selling or attempting to sell to PLDT and to any other party, products which have been copied or manufactured "in like manner, similar or identical to the products, wares and equipment of plaintiff," and (2) defendant ASPAC, to cease and desist from using in its corporate name, letter heads, envelopes, sign boards and business dealings, plaintiff's trademark, internationally known as ITEC; and the recovery from defendants in solidum, damages of at least P500,000.00, attorney's fees and litigation expenses.

In due time, defendants filed a motion to dismiss  7 the complaint on the following grounds:

(1) That plaintiff has no legal capacity to sue as it is a foreign corporation doing business in the Philippines without the required BOI authority and SEC license, and (2) that plaintiff is simply engaged in forum shopping which justifies the application against it of the principle of "forum non conveniens".

On February 8, 1991, the complaint was amended by virtue of which ITEC INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC, INC. 8

In their Supplemental Motion to Dismiss, 9 defendants took note of the amendment of the complaint and asked the court to consider in toto their motion to dismiss and their supplemental motion as their answer to the amended complaint.

After conducting hearings on the prayer for preliminary injunction, the court a quo on February 22, 1991, issued its Order: 10 (1) denying the motion to dismiss for being devoid of legal merit with a rejection of both grounds relied upon by the defendants in their motion to dismiss, and (2) directing the issuance of a writ of preliminary injunction on the same day.

From the foregoing order, petitioners elevated the case to the respondent Court of Appeals on a Petition forCertiorari and Prohibition 11 under Rule 65 of the Revised Rules of Court, assailing and seeking the nullification and the setting aside of the Order and the Writ of Preliminary Injunction issued by the Regional Trial Court.

The respondent appellate court stated, thus:

We find no reason whether in law or from the facts of record, to disagree with the (lower court's) ruling. We therefore are unable to find in respondent Judge's issuance of said writ the grave abuse of discretion ascribed thereto by the petitioners.

In fine, We find that the petition prima facie does not show that Certiorari lies in the present case and therefore, the petition does not deserve to be given due course.

WHEREFORE, the present petition should be, as it is hereby, denied due course and accordingly, is hereby dismissed. Costs against the petitioners.

SO ORDERED. 12

Petitioners filed a motion for reconsideration 13 on June 7, 1991, which was likewise denied by the respondent court.

WHEREFORE, the present motion for reconsideration should be, as it is hereby, denied for lack of merit. For the same reason, the motion to have the motion for reconsideration set for oral argument likewise should be and is hereby denied.

SO ORDERED. 14

Petitioners are now before us via Petition for Review on Certiorari 15 under Rule 45 of the Revised Rules of Court.

It is the petitioners' submission that private respondents are foreign corporations actually doing business in the Philippines without the requisite authority and license from the Board of Investments and the Securities and Exchange Commission, and thus, disqualified from instituting the present action in our courts. It is their contention that the provisions of the Representative Agreement, petitioner ASPAC executed with private respondent ITEC, are similarly "highly restrictive" in nature as those found in the agreements which confronted the Court in the case of Top-Weld Manufacturing, Inc. vs. ECED S.A. et al., 16 as to reduce petitioner ASPAC to a mere conduit or extension of private respondents in the Philippines.

In that case, we ruled that respondent foreign corporations are doing business in the Philippines because when the respondents entered into the disputed contracts with the petitioner, they were carrying out the purposes for which they were created, i.e., to manufacture and market welding products and equipment. The terms and conditions of the contracts as well as the respondents' conduct indicate that they established within our country a continuous business, and not merely one of a temporary character. The respondents could be exempted from the requirements of Republic Act 5455 if the petitioner is an

independent entity which buys and distributes products not only of the petitioner, but also of other manufacturers or transacts business in its name and for its account and not in the name or for the account of the foreign principal. A reading of the agreements between the petitioner and the respondents shows that they are highly restrictive in nature, thus making the petitioner a mere conduit or extension of the respondents.

It is alleged that certain provisions of the "Representative Agreement" executed by the parties are similar to those found in the License Agreement of the parties in the Top-Weld case which were considered as "highly restrictive" by this Court. The provisions in point are:

2.0 Terms and Conditions of Sales.

2.1 Sale of ITEC products shall be at the purchase price set by ITEC from time to time. Unless otherwise expressly agreed to in writing by ITEC the purchase price is net to ITEC and does not include any transportation charges, import charges or taxes into or within the Territory. All orders from customers are subject to formal acceptance by ITEC at its Huntsville, Alabama U.S.A. facility.

xxx xxx xxx

3.0 Duties of Representative

3.1. REPRESENTATIVE SHALL:

3.1.1. Not represent or offer for sale within the Territory any product which competes with an existing ITEC product or any product which ITEC has under active development.

3.1.2. Actively solicit all potential customers within the Territory in a systematic and business like manner.

3.1.3. Inform ITEC of all request for proposals, requests for bids, invitations to bid and the like within the Territory.

3.1.4. Attain the Annual Sales Goal for the Territory established by ITEC. The Sales Goals for the first 24

months is set forth on Attachment two (2) hereto. The Sales Goal for additional twelve month periods, if any, shall be sent to the Sales Agent by ITEC at the beginning of each period. These Sales Goals shall be incorporated into this Agreement and made a part hereof.

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6.0. Representative as Independent Contractor

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6.2. When acting under this Agreement REPRESENTATIVE is authorized to solicit sales within the Territory on ITEC's behalf but is authorized to bind ITEC only in its capacity as Representative and no other, and then only to specific customers and on terms and conditions expressly authorized by ITEC in writing. 17

Aside from the abovestated provisions, petitioners point out the following matters of record, which allegedly bear witness to the respondents' activities within the Philippines in pursuit of their business dealings:

a. While petitioner ASPAC was the authorized exclusive representative for three (3) years, it solicited from and closed several sales for and on behalf of private respondents as to their products only and no other, to PLDT, worth no less than US $ 15 Million (p. 20, tsn, Feb. 18, 1991);

b. Contract No. 1 (Exhibit for Petitioners) which covered these sales and identified by private respondents' sole witness, Mr. Clarence Long, is not in the name of petitioner ASPAC as such representative, but in the name of private respondent ITEC, INC. (p. 20, tsn, Feb. 18, 1991);

c. The document denominated as "PLDT-ASPAC/ITEC PROTOCOL (Annex C of the original and amended complaints) which defined the responsibilities of the parties thereto as to the supply, installation and maintenance of the ITEC equipment sold under said

Contract No. 1 is, as its very title indicates, in the names jointly of the petitioner ASPAC and private respondents;

d. To evidence receipt of the purchase price of US $ 15 Million, private respondent ITEC, Inc. issued in its letter head, a Confirmation of payment dated November 13, 1989 and its Invoice dated November 22, 1989 (Annexes 1 and 2 of the Motion to Dismiss and marked as Exhibits 2 and 3 for the petitioners), both of which were identified by private respondent's sole witness, Mr. Clarence Long (pp. 25-27, tsn, Feb. 18, 1991). 18

Petitioners contend that the above acts or activities belie the supposed independence of petitioner ASPAC from private respondents. "The unrebutted evidence on record below for the petitioners likewise reveal the continuous character of doing business in the Philippines by private respondents based on the standards laid down by this Court in Wang Laboratories, Inc. vs. Hon. Rafael T . Mendoza, et al. 19 and again in TOP-WELD. (supra)" It thus appears that as the respondent Court of Appeals and the trial court's failure to give credence on the grounds relied upon in support of their Motion to Dismiss that petitioners ascribe grave abuse of discretion amounting to an excess of jurisdiction of said courts.

Petitioners likewise argue that since private respondents have no capacity to bring suit here, the Philippines is not the "most convenient forum" because the trial court is devoid of any power to enforce its orders issued or decisions rendered in a case that could not have been commenced to begin with, such that in insisting to assume and exercise jurisdiction over the case below, the trial court had gravely abused its discretion and even actually exceeded its jurisdiction.

As against petitioner's insistence that private respondent is "doing business" in the Philippines, the latter maintains that it is not.

We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules and Regulations Implementing the Omnibus Investments Code of 1987, the following:

(1) A foreign firm is deemed not engaged in business in the Philippines if it transacts business through

middlemen, acting in their own names, such as indebtors, commercial bookers commercial merchants.

(2) A foreign corporation is deemed not "doing business" if its representative domiciled in the Philippines has an independent status in that it transacts business in its name and for its account. 20

Private respondent argues that a scrutiny of its Representative Agreement with the Petitioners will show that although ASPAC was named as representative of ITEC., ASPAC actually acted in its own name and for its own account. The following provisions are particularly mentioned:

3.1.7.1. In the event that REPRESENTATIVE imports directly from ITEC, REPRESENTATIVE will pay for its own account; all customs duties and import fees imposed on any ITEC products; all import expediting or handling charges and expenses imposed on ITEC products; and any stamp tax fees imposed on ITEC.

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4.1. As complete consideration and payment for acting as representative under this Agreement, REPRESENTATIVE shall receive a sales commission equivalent to a per centum of the FOB value of all ITEC equipment sold to customers within the territory as a direct result of REPRESENTATIVE's sales efforts. 21

More importantly, private respondent charges ASPAC of admitting its independence from ITEC by entering and ascribing to provision No. 6 of the Representative Agreement.

6.0 Representative as Independent Contractor

6.1. When performing any of its duties under this Agreement, REPRESENTATIVE shall act as an independent contractor and not as an employee, worker, laborer, partner, joint venturer of ITEC as these terms are defined by the laws, regulations, decrees or the like of any jurisdiction, including the jurisdiction of the United States, the state of Alabama and the Territory. 22

Although it admits that the Representative Agreement contains provisions which both support and belie the independence of ASPAC, private respondent echoes the respondent court's finding that the lower court did not commit grave abuse of discretion nor acted in excess of jurisdiction when it found that the ground relied upon by the petitioners in their motion to dismiss does not appear to be indubitable. 23

The issues before us now are whether or not private respondent ITEC is an unlicensed corporation doing business in the Philippines, and if it is, whether or not this fact bars it from invoking the injunctive authority of our courts.

Considering the above, it is necessary to state what is meant by "doing business" in the Philippines. Section 133 of the Corporation Code, provides that "No foreign corporation, transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine Courts or administrative tribunals on any valid cause of action recognized under Philippine laws." 24

Generally, a "foreign corporation" has no legal existence within the state in which it is foreign. This proceeds from the principle that juridical existence of a corporation is confined within the territory of the state under whose laws it was incorporated and organized, and it has no legal status beyond such territory. Such foreign corporation may be excluded by any other state from doing business within its limits, or conditions may be imposed on the exercise of such privileges. 25 Before a foreign corporation can transact business in this country, it must first obtain a license to transact business in the Philippines, and a certificate from the appropriate government agency. If it transacts business in the Philippines without such a license, it shall not be permitted to maintain or intervene in any action, suit, or proceeding in any court or administrative agency of the Philippines, but it may be sued on any valid cause of action recognized under Philippine laws. 26

In a long line of decisions, this Court has not altogether prohibited foreign corporation not licensed to do business in the Philippines from suing or maintaining an action in Philippine Courts. What it seeks to prevent is a foreign corporation doing business in the

Philippines without a licensed from gaining access to Philippine Courts. 27

The purpose of the law in requiring that foreign corporations doing business in the Philippines be licensed to do so and that they appoint an agent for service of process is to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object is not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking steps necessary to render it amenable to suit in the local courts. 28 The implication of the law is that it was never the purpose of the legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations. 29

There is no exact rule or governing principle as to what constitutes "doing" or "engaging" or "transacting" business. Indeed, such case must be judged in the light of its peculiar circumstances, upon its peculiar facts and upon the language of the statute applicable. The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized. 30

Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include:

soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity or commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization.

Thus, a foreign corporation with a settling agent in the Philippines which issued twelve marine policies covering different shipments to the Philippines 31 and a foreign corporation which had been collecting premiums on outstanding policies 32 were regarded as doing business here.

The same rule was observed relating to a foreign corporation with an "exclusive distributing agent" in the Philippines, and which has been selling its products here since 1929, 33 and a foreign corporation engaged in the business of manufacturing and selling computers worldwide, and had installed at least 26 different products in several corporations in the Philippines, and allowed its registered logo and trademark to be used and made it known that there exists a designated distributor in the Philippines. 34

In Georg Grotjahn GMBH and Co. vs. Isnani, 35 it was held that the uninterrupted performance by a foreign corporation of acts pursuant to its primary purposes and functions as a regional area headquarters for its home office, qualifies such corporation as one doing business in the country.

These foregoing instances should be distinguished from a single or isolated transaction or occasional, incidental, or casual transactions, which do not come within the meaning of the law, 36 for in such case, the foreign corporation is deemed not engaged in business in the Philippines.

Where a single act or transaction, however, is not merely incidental or casual but indicates the foreign corporation's intention to do other business in the Philippines, said single act or transaction constitutes "doing" or "engaging in" or "transacting" business in the Philippines. 37

In determining whether a corporation does business in the Philippines or not, aside from their activities within the forum, reference may be made to the contractual agreements entered into by it with other entities in the country. Thus, in the Top-Weld case (supra), the foreign corporation's LICENSE AND TECHNICAL AGREEMENT and DISTRIBUTOR AGREEMENT with their local contacts were made the basis of their being regarded by this Tribunal as corporations doing business in the country. Likewise, in Merill Lynch Futures, Inc. vs. Court of Appeals, etc. 38 the FUTURES CONTRACT entered into by the petitioner foreign corporation weighed heavily in the court's ruling.

With the abovestated precedents in mind, we are persuaded to conclude that private respondent had been "engaged in" or "doing business" in the Philippines for some time now. This is the inevitable result after a scrutiny of the different contracts and agreements entered into by ITEC with its various business contacts in the country, particularly ASPAC and Telephone Equipment Sales and Services, Inc. (TESSI, for brevity). The latter is a local electronics firm engaged by ITEC to be its local technical representative, and to create a service center for ITEC products sold locally. Its arrangements, with these entities indicate convincingly ITEC's purpose to bring about the situation among its customers and the general public that they are dealing directly with ITEC, and that ITEC is actively engaging in business in the country.

In its Master Service Agreement 39 with TESSI, private respondent required its local technical representative to provide the employees of the technical and service center with ITEC identification cards and business cards, and to correspond only on ITEC, Inc., letterhead. TESSI personnel are instructed to answer the telephone with "ITEC Technical Assistance Center.", such telephone being listed in the telephone book under the heading of ITEC Technical Assistance Center, and all calls being recorded and forwarded to ITEC on a weekly basis.

What is more, TESSI was obliged to provide ITEC with a monthly report detailing the failure and repair of ITEC products, and to requisition monthly the materials and components needed to replace stock consumed in the warranty repairs of the prior month.

A perusal of the agreements between petitioner ASPAC and the respondents shows that there are provisions which are highly restrictive in nature, such as to reduce petitioner ASPAC to a mere extension or instrument of the private respondent.

The "No Competing Product" provision of the Representative Agreement between ITEC and ASPAC provides: "The Representative shall not represent or offer for sale within the Territory any product which competes with an existing ITEC product or any product which ITEC has under active development." Likewise pertinent is the following provision: "When acting under this Agreement, REPRESENTATIVE is authorized to solicit sales within the Territory on ITEC's behalf but

is authorized to bind ITEC only in its capacity as Representative and no other, and then only to specific customers and on terms and conditions expressly authorized by ITEC in writing."

When ITEC entered into the disputed contracts with ASPAC and TESSI, they were carrying out the purposes for which it was created, i.e., to market electronics and communications products. The terms and conditions of the contracts as well as ITEC's conduct indicate that they established within our country a continuous business, and not merely one of a temporary character. 40

Notwithstanding such finding that ITEC is doing business in the country, petitioner is nonetheless estopped from raising this fact to bar ITEC from instituting this injunction case against it.

A foreign corporation doing business in the Philippines may sue in Philippine Courts although not authorized to do business here against a Philippine citizen or entity who had contracted with and benefited by said corporation. 41 To put it in another way, a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. And the doctrine of estoppel to deny corporate existence applies to a foreign as well as to domestic corporations.  42 One who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity: The principle will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract. 43

The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua non habere debet — no person ought to derive any advantage of his own wrong. This is as it should be for as mandated by law, "every person must in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith." 44

Concededly, corporations act through agents, like directors and officers. Corporate dealings must be characterized by utmost good faith and fairness. Corporations cannot just feign ignorance of the legal rules as in most cases, they are manned by sophisticated officers with tried management skills and legal experts with practiced eye on legal problems. Each party to a

corporate transaction is expected to act with utmost candor and fairness and, thereby allow a reasonable proportion between benefits and expected burdens. This is a norm which should be observed where one or the other is a foreign entity venturing in a global market.

As observed by this Court in TOP-WELD (supra), viz:

The parties are charged with knowledge of the existing law at the time they enter into a contract and at the time it is to become operative. (Twiehaus v. Rosner, 245 SW 2d 107; Hall v. Bucher, 227 SW 2d 98). Moreover, a person is presumed to be more knowledgeable about his own state law than his alien or foreign contemporary. In this case, the record shows that, at least, petitioner had actual knowledge of the applicability of R.A. No. 5455 at the time the contract was executed and at all times thereafter. This conclusion is compelled by the fact that the same statute is now being propounded by the petitioner to bolster its claim. We, therefore sustain the appellate court's view that "it was incumbent upon TOP-WELD to know whether or not IRTI and ECED were properly authorized to engage in business in the Philippines when they entered into the licensing and distributorship agreements." The very purpose of the law was circumvented and evaded when the petitioner entered into said agreements despite the prohibition of R.A. No. 5455. The parties in this case being equally guilty of violating R.A. No. 5455, they are in pari delicto, in which case it follows as a consequence that petitioner is not entitled to the relief prayed for in this case.

The doctrine of lack of capacity to sue based on the failure to acquire a local license is based on considerations of sound public policy. The license requirement was imposed to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. It was never intended to favor domestic corporations who enter into solitary transactions with unwary foreign firms and then repudiate their obligations simply because the latter are not licensed to do business in this country. 45

In Antam Consolidated Inc. vs. Court of Appeals, et al. 46 we expressed our chagrin over this commonly used scheme of defaulting local companies which are being sued by unlicensed foreign companies not engaged in business in the Philippines to invoke the lack of capacity to sue of such foreign companies. Obviously, the same ploy is resorted to by ASPAC to prevent the

injunctive action filed by ITEC to enjoin petitioner from using knowledge possibly acquired in violation of fiduciary arrangements between the parties.

By entering into the "Representative Agreement" with ITEC, Petitioner is charged with knowledge that ITEC was not licensed to engage in business activities in the country, and is thus estopped from raising in defense such incapacity of ITEC, having chosen to ignore or even presumptively take advantage of the same.

In Top-Weld, we ruled that a foreign corporation may be exempted from the license requirement in order to institute an action in our courts if its representative in the country maintained an independent status during the existence of the disputed contract. Petitioner is deemed to have acceded to such independent character when it entered into the Representative Agreement with ITEC, particularly, provision 6.2 (supra).

Petitioner's insistence on the dismissal of this action due to the application, or non application, of the private international law rule of forum non conveniens defies well-settled rules of fair play. According to petitioner, the Philippine Court has no venue to apply its discretion whether to give cognizance or not to the present action, because it has not acquired jurisdiction over the person of the plaintiff in the case, the latter allegedly having no personality to sue before Philippine Courts. This argument is misplaced because the court has already acquired jurisdiction over the plaintiff in the suit, by virtue of his filing the original complaint. And as we have already observed, petitioner is not at liberty to question plaintiff's standing to sue, having already acceded to the same by virtue of its entry into the Representative Agreement referred to earlier.

Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the facts of the case, whether to give due course to the suit or dismiss it, on the principle of forum non convenience. 47 Hence, the Philippine Court may refuse to assume jurisdiction in spite of its having acquired jurisdiction. Conversely, the court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met: 1) That the Philippine Court is one to which the parties may conveniently resort to; 2) That the Philippine Court is in a position to make an intelligent decision as

to the law and the facts; and, 3) That the Philippine Court has or is likely to have power to enforce its decision. 48

The aforesaid requirements having been met, and in view of the court's disposition to give due course to the questioned action, the matter of the present forum not being the "most convenient" as a ground for the suit's dismissal, deserves scant consideration.

IN VIEW OF THE FOREGOING PREMISES, the instant Petition is hereby DISMISSED. The decision of the Court of Appeals dated June 7, 1991, upholding the RTC Order dated February 22, 1991, denying the petitioners' Motion to Dismiss, and ordering the issuance of the Writ of Preliminary Injunction, is hereby affirmed in toto.

SO ORDERED.

G.R. No. 113074 January 22, 1997ALFRED HAHN, petitioner, 

vs.COURT OF APPEALS and BAYERSCHE MOTOREN WERKE

AKTIENGSELLSCHAFT (BMW), respondents.

MENDOZA, J.:

This is a petition for review of the decision  1 of the Court of Appeals dismissing a complaint for specific performance which petitioner had filed against private respondent on the ground that the Regional Trial Court of Quezon City did not acquire jurisdiction over private respondent, a nonresident foreign corporation, and of the appellate court's order denying petitioner's motion for reconsideration.

The following are the facts:

Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-Manila." On the other hand, private respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) is a nonresident foreign corporation existing under the laws of the former Federal Republic of Germany, with principal office at Munich, Germany.

On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with Special Power of Attorney," which reads in full as follows:

WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and device in the Philippines which ASSIGNOR uses and has been using on the products manufactured by ASSIGNEE, and for which ASSIGNOR is the authorized exclusive Dealer of the ASSIGNEE in the Philippines, the same being evidenced by certificate of registration issued by the Director of Patents on 12 December 1963 and is referred to as Trademark No. 10625;

WHEREAS, the ASSIGNOR has agreed to transfer and consequently record said transfer of the said BMW trademark and device in favor of the ASSIGNEE herein with the Philippines Patent Office;

NOW THEREFORE, in view of the foregoing and in consideration of the stipulations hereunder stated, the ASSIGNOR hereby affirms the said assignment and transfer in favor of the ASSIGNEE under the following terms and conditions:

1. The ASSIGNEE shall take appropriate steps against any user other than ASSIGNOR or infringer of the BMW trademark in the Philippines; for such purpose, the ASSIGNOR shall inform the ASSIGNEE immediately of any such use or infringement of the said trademark which comes to his knowledge and upon such information the ASSIGNOR shall automatically act as Attorney-In-Fact of the ASSIGNEE for such case, with full power, authority and responsibility to prosecute unilaterally or in concert with ASSIGNEE, any such infringer of the subject mark and for purposes hereof the ASSIGNOR is hereby named and constituted as ASSIGNEE's Attorney-In-Fact, but any such suit without ASSIGNEE's consent will exclusively be the responsibility and for the account of the ASSIGNOR,

2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been usual in the past without a formal contract, and for that purpose, the dealership of ASSIGNOR shall cover the ASSIGNEE's complete production program with the only limitation that, for the present, in view of ASSIGNEE's limited production, the latter shall not be able to supply automobiles to ASSIGNOR.

Per the agreement, the parties "continue[d] business relations as has been usual in the past without a formal contract." But on February 16, 1993, in a meeting with a BMW representative and the president of Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was informed that BMW was arranging to grant the exclusive dealership of BMW cars and products to CMC, which had expressed interest in acquiring the same. On February 24, 1993, petitioner received confirmation of the information from BMW which, in a letter, expressed dissatisfaction with various aspects of petitioner's business, mentioning among other things, decline in sales, deteriorating services, and inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply with the standards for an exclusive BMW dealer. 2 Nonetheless, BMW expressed willingness to continue business relations with the petitioner on the basis of a "standard BMW importer" contract, otherwise, it said, if this was not acceptable to petitioner, BMW would have no alternative but to terminate petitioner's exclusive dealership effective June 30, 1993.

Petitioner protested, claiming that the termination of his exclusive dealership would be a breach of the Deed of Assignment.  3 Hahn insisted that as long as the assignment of its trademark and device subsisted, he remained BMW's exclusive dealer in the Philippines because the assignment was made in consideration of the exclusive dealership. In the same letter petitioner explained that the decline in sales was due to lower prices offered for BMW cars in the United States and the fact that few customers returned for repairs and servicing because of the durability of BMW parts and the efficiency of petitioner's service.

Because of Hahn's insistence on the former business relation, BMW withdrew on March 26, 1993 its offer of a "standard importer contract" and terminated the exclusive dealer relationship effective June 30, 1993. 4 At a conference of BMW Regional Importers held on April 26, 1993 in Singapore, Hahn was surprised to find Alvarez among those invited from the Asian region. On April 29, 1993, BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts.

Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for specific performance and damages against BMW to compel it to continue the exclusive dealership. Later he filed an amended complaint to include an application for temporary restraining order and for writs of preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive dealership. Hahn's amended complaint alleged in pertinent parts:

2. Defendant [BMW] is a foreign corporation doing business in the Philippines with principal offices at Munich, Germany. It may be served with summons and other court processes through the Secretary of the Department of Trade and Industry of the Philippines. . . .

xxx xxx xxx

5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of Assignment with Special Power of Attorney covering the trademark and in consideration thereof, under its first whereas clause, Plaintiff was duly acknowledged as the "exclusive Dealer of the Assignee in the Philippines. . . .

xxx xxx xxx

8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff,

through its firm name "HAHN MANILA" and without any monetary contribution from defendant BMW, established BMW's goodwill and market presence in the Philippines. Pursuant thereto, Plaintiff has invested a lot of money and resources in order to single-handedly compete against other motorcycle and car companies. . . . Moreover, Plaintiff has built buildings and other infrastructures such as service centers and showrooms to maintain and promote the car and products of defendant BMW.

xxx xxx xxx

10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff that it was willing to maintain with Plaintiff a relationship but only "on the basis of a standard BMW importer contract as adjusted to reflect the particular situation in the Philippines" subject to certain conditions, otherwise, defendant BMW would terminate Plaintiffs exclusive dealership and any relationship for cause effective June 30, 1993. . . .

xxx xxx xxx

15. The actuations of defendant BMW are in breach of the assignment agreement between itself and plaintiff since the consideration for the assignment of the BMW trademark is the continuance of the exclusive dealership agreement. It thus, follows that the exclusive dealership should continue for so long as defendant BMW enjoys the use and ownership of the trademark assigned to it by Plaintiff.

The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch 104 of the Quezon City Regional Trial Court, which on June 14, 1993 issued a temporary restraining order. Summons and copies of the complaint and amended complaint were thereafter served on the private respondent through the Department of Trade and Industry, pursuant to Rule 14, §14 of the Rules of Court. The order, summons and copies of the complaint and amended complaint were later sent by the DTI to BMW via registered mail on June 15, 1993 5 and received by the latter on June 24, 1993.

On June 17, 1993, without proof of service on BMW, the hearing on the application for the writ of preliminary injunction proceeded ex parte, with petitioner Hahn testifying. On June 30, 1993, the trial court issued an order granting the writ of preliminary injunction upon the filing of a bond

of P100,000.00. On July 13, 1993, following the posting of the required bond, a writ of preliminary injunction was issued.

On July 1, 1993, BMW moved to dismiss the case, contending that the trial court did not acquire jurisdiction over it through the service of summons on the Department of Trade and Industry, because it (BMW) was a foreign corporation and it was not doing business in the Philippines. It contended that the execution of the Deed of Assignment was an isolated transaction; that Hahn was not its agent because the latter undertook to assemble and sell BMW cars and products without the participation of BMW and sold other products; and that Hahn was an indentor or middleman transacting business in his own name and for his own account.

Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing business in the Philippines through him as its agent, as shown by the fact that BMW invoices and order forms were used to document his transactions; that he gave warranties as exclusive BMW dealer; that BMW officials periodically inspected standards of service rendered by him; and that he was described in service booklets and international publications of BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines.

The trial court 6 deferred resolution of the motion to dismiss until after trial on the merits for the reason that the grounds advanced by BMW in its motion did not seem to be indubitable.

Without seeking reconsideration of the aforementioned order, BMW filed a petition for certiorari with the Court of Appeals alleging that:

I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE INJUDICIOUSLY IN PROCEEDINGS LEADING TOWARD THE ISSUANCE OF THE WRIT OF PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE TERMS FOR THE ISSUANCE THEREOF.

II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION OF THE MOTION TO DISMISS ON THE GROUND OF LACK OF JURISDICTION, AND THEREBY FAILING TO IMMEDIATELY DISMISS THE CASE A QUO.

BMW asked for the immediate issuance of a temporary restraining order and, after hearing, for a writ of preliminary injunction, to enjoin the trial

court from proceeding further in Civil Case No. Q-93-15933. Private respondent pointed out that, unless the trial court's order was set aside, it would be forced to submit to the jurisdiction of the court by filing its answer or to accept judgment in default, when the very question was whether the court had jurisdiction over it.

The Court of Appeals enjoined the trial court from hearing petitioner's complaint. On December 20, 1993, it rendered judgment finding the trial court guilty of grave abuse of discretion in deferring resolution of the motion to dismiss. It stated:

Going by the pleadings already filed with the respondent court before it came out with its questioned order of July 26, 1993, we rule and so hold that petitioner's (BMW) motion to dismiss could be resolved then and there, and that the respondent judge's deferment of his action thereon until after trial on the merit constitutes, to our mind, grave abuse of discretion.

xxx xxx xxx

. . . [T]here is not much appreciable disagreement as regards the factual matters relating to the motion to dismiss. What truly divide (sic) the parties and to which they greatly differ is the legal conclusions they respectively draw from such facts, (sic) with Hahn maintaining that on the basis thereof, BMW is doing business in the Philippines while the latter asserts that it is not.

Then, after stating that any ruling which the trial court might make on the motion to dismiss would anyway be elevated to it on appeal, the Court of Appeals itself resolved the motion. It ruled that BMW was not doing business in the country and, therefore, jurisdiction over it could not be acquired through service of summons on the DTI pursuant to Rule 14, §14. 'The court upheld private respondent's contention that Hahn acted in his own name and for his own account and independently of BMW, based on Alfred Hahn's allegations that he had invested his own money and resources in establishing BMW's goodwill in the Philippines and on BMW's claim that Hahn sold products other than those of BMW. It held that petitioner was a mere indentor or broker and not an agent through whom private respondent BMW transacted business in the Philippines. Consequently, the Court of Appeals dismissed petitioner's complaint against BMW.

Hence, this appeal. Petitioner contends that the Court of Appeals erred (1) in finding that the trial court gravely abused its discretion in deferring action on the motion to dismiss and (2) in finding that private respondent BMW is not doing business in the Philippines and, for this reason, dismissing petitioner's case.

Petitioner's appeal is well taken. Rule 14, §14 provides:

§14. Service upon private foreign corporations. — If the defendant is a foreign corporation, or a nonresident joint stock company or association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. (Emphasis added).

What acts are considered "doing business in the Philippines" are enumerated in §3(d) of the Foreign Investments Act of 1991 (R.A. No. 7042) as follows: 7

d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines;and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account. (Emphasis supplied)

Thus, the phrase includes "appointing representatives or distributors in the Philippines" but not when the representative or distributor "transacts

business in its name and for its own account." In addition, §1(f)(1) of the Rules and Regulations implementing (IRR) the Omnibus Investment Code of 1987 (E.O. No. 226) provided:

(f) "Doing business" shall be any act or combination of acts, enumerated in Article 44 of the Code. In particular, "doing business" includes:

(1) . . . A foreign firm which does business through middlemen acting in their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines.

The question is whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW. If he is, BMW may be considered doing business in the Philippines and the trial court acquired jurisdiction over it (BMW) by virtue of the service of summons on the Department of Trade and Industry. Otherwise, if Hahn is not the agent of BMW but an independent dealer, albeit of BMW cars and products, BMW, a foreign corporation, is not considered doing business in the Philippines within the meaning of the Foreign Investments Act of 1991 and the IRR, and the trial court did not acquire jurisdiction over it (BMW).

The Court of Appeals held that petitioner Alfred Hahn acted in his own name and for his own account and not as agent or distributor in the Philippines of BMW on the ground that "he alone had contacts with individuals or entities interested in acquiring BMW vehicles. Independence characterizes Hahn's undertakings, for which reason he is to be considered, under governing statutes, as doing business." (p. 13) In support of this conclusion, the appellate court cited the following allegations in Hahn's amended complaint:

8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and without any monetary contributions from defendant BMW, established BMW's goodwill and market presence in the Philippines. Pursuant thereto, Plaintiff invested a lot of money and resources in order to single-handedly compete against other motorcycle and car companies. . . . Moreover, Plaintiff has built buildings and other infrastructures

such as service centers and showrooms to maintain and promote the car and products of defendant BMW.

As the above quoted allegations of the amended complaint show, however, there is nothing to support the appellate court's finding that Hahn solicited orders alone and for his own account and without "interference from, let alone direction of, BMW." (p. 13) To the contrary, Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the downpayment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by signing and returning to Hahn the acceptance sheets. Payment was made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that the vehicles had been registered in the Philippines and serviced by him, Hahn received an additional 3% of the full purchase price. Hahn performed after-sale services, including warranty services, for which he received reimbursement from BMW. All orders were on invoices and forms of BMW. 8

These allegations were substantially admitted by BMW which, in its petition for certiorari before the Court of Appeals, stated: 9

9.4. As soon as the vehicles are fully manufactured and full payment of the purchase prices are made, the vehicles are shipped to the Philippines. (The payments may be made by the purchasers or third-persons or even by Hahn.) The bills of lading are made up in the name of the purchasers, but Hahn-Manila is therein indicated as the person to be notified.

9.5. It is Hahn who picks up the vehicles from the Philippine ports, for purposes of conducting pre-delivery inspections. Thereafter, he delivers the vehicles to the purchasers.

9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a commission of fourteen percent (14%) of the full purchase price thereof, and as soon as he confirms in writing that the vehicles have been registered in the Philippines and have been serviced by him, he will receive an additional three percent (3%) of the full purchase prices as commission.

Contrary to the appellate court's conclusion, this arrangement shows an agency. An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made.

As to the service centers and showrooms which he said he had put up at his own expense, Hahn said that he had to follow BMW specifications as exclusive dealer of BMW in the Philippines. According to Hahn, BMW periodically inspected the service centers to see to it that BMW standards were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged failure to maintain BMW standards that BMW was terminating Hahn's dealership.

The fact that Hahn invested his own money to put up these service centers and showrooms does not necessarily prove that he is not an agent of BMW. For as already noted, there are facts in the record which suggest that BMW exercised control over Hahn's activities as a dealer and made regular inspections of Hahn's premises to enforce compliance with BMW standards and specifications. 10 For example, in its letter to Hahn dated February 23, 1996, BMW stated:

In the last years we have pointed out to you in several discussions and letters that we have to tackle the Philippine market more professionally and that we are through your present activities not adequately prepared to cope with the forthcoming challenges. 11

In effect, BMW was holding Hahn accountable to it under the 1967 Agreement.

This case fits into the mould of Communications Materials, Inc. v. Court of Appeals, 12 in which the foreign corporation entered into a "Representative Agreement" and a "Licensing Agreement" with a domestic corporation, by virtue of which the latter was appointed "exclusive representative" in the Philippines for a stipulated commission. Pursuant to these contracts, the domestic corporation sold products exported by the foreign corporation and put up a service center for the products sold locally. This Court held that these acts constituted doing business in the Philippines. The arrangement showed that the foreign corporation's purpose was to penetrate the Philippine market and establish its presence in the Philippines.

In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even as it announced in the Asian region that Hahn was the "official BMW agent" in the Philippines. 13

The Court of Appeals also found that petitioner Alfred Hahn dealt in other products, and not exclusively in BMW products, and, on this basis, ruled that Hahn was not an agent of BMW. (p. 14) This finding is based entirely on allegations of BMW in its motion to dismiss filed in the trial court and in its petition for certiorari before the Court of Appeals. 14 But this allegation was denied by Hahn 15 and therefore the Court of Appeals should not have cited it as if it were the fact.

Indeed this is not the only factual issue raised, which should have indicated to the Court of Appeals the necessity of affirming the trial court's order deferring resolution of BMW's motion to dismiss. Petitioner alleged that whether or not he is considered an agent of BMW, the fact is that BMW did business in the Philippines because it sold cars directly to Philippine buyers. 16 This was denied by BMW, which claimed that Hahn was not its agent and that, while it was true that it had sold cars to Philippine buyers, this was done without solicitation on its part. 17

It is not true then that the question whether BMW is doing business could have been resolved simply by considering the parties' pleadings. There are genuine issues of facts which can only be determined on the basis of evidence duly presented. BMW cannot short circuit the process on the plea that to compel it to go to trial would be to deny its right not to submit to the jurisdiction of the trial court which precisely it denies. Rule 16, §3 authorizes courts to defer the resolution of a motion to dismiss until after the trial if the ground on which the motion is based does not appear to be indubitable. Here the record of the case bristles with factual issues and it is not at all clear whether some allegations correspond to the proof.

Anyway, private respondent need not apprehend that by responding to the summons it would be waiving its objection to the trial court's jurisdiction. It is now settled that, for purposes of having summons served on a foreign corporation in accordance with Rule 14, §14, it is sufficient that it be alleged in the complaint that the foreign corporation is doing business in the Philippines. The court need not go beyond the allegations of the complaint in order to determine whether it has Jurisdiction.  18 A determination that the foreign corporation is doing business is only tentative and is made only for the purpose of enabling the local court to acquire jurisdiction over the foreign corporation through service of summons pursuant to Rule 14, §14. Such determination does not foreclose a contrary finding should evidence later show that it is not transacting business in the country. As this Court has explained:

This is not to say, however, that the petitioner's right to question the jurisdiction of the court over its person is now to be deemed a

foreclosed matter. If it is true, as Signetics claims, that its only involvement in the Philippines was through a passive investment in Sigfil, which it even later disposed of, and that TEAM Pacific is not its agent, then it cannot really be said to be doing business in the Philippines. It is a defense, however, that requires the contravention of the allegations of the complaint, as well as a full ventilation, in effect, of the main merits of the case, which should not thus be within the province of a mere motion to dismiss. So, also, the issue posed by the petitioner as to whether a foreign corporation which has done business in the country, but which has ceased to do business at the time of the filing of a complaint, can still be made to answer for a cause of action which accrued while it was doing business, is another matter that would yet have to await the reception and admission of evidence. Since these points have seasonably been raised by the petitioner, there should be no real cause for what may understandably be its apprehension,i.e., that by its participation during the trial on the merits, it may, absent an invocation of separate or independent reliefs of its own, be considered to have voluntarily submitted itself to the court's jurisdiction. 19

Far from committing an abuse of discretion, the trial court properly deferred resolution of the motion to dismiss and thus avoided prematurely deciding a question which requires a factual basis, with the same result if it had denied the motion and conditionally assumed jurisdiction. It is the Court of Appeals which, by ruling that BMW is not doing business on the basis merely of uncertain allegations in the pleadings, disposed of the whole case with finality and thereby deprived petitioner of his right to be heard on his cause of action. Nor was there justification for nullifying the writ of preliminary injunction issued by the trial court. Although the injunction was issued ex parte, the fact is that BMW was subsequently heard on its defense by filing a motion to dismiss.

WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to the trial court for further proceedings.

SO ORDERED.

G.R. No. 143723      June 28, 2001LITONJUA GROUP OF COMPANIES, EDDIE LITONJUA and DANILO

LITONJUA, petitioners, vs.

TERESITA VIGAN, respondent.GONZAGA-REYES, J.:

In this petition for review on certiorari, petitioners seek to annul and set aside the (1) decision1 of the respondent Court of Appeals dated March 20, 2000 which reversed and set aside the decision of the National Labor Relations Commission finding respondent guilty of abandonment and (2) resolution2 dated June 19, 2000 denying petitioners’ motion for reconsideration.

The factual backdrop as found by the respondent Court of Appeals is as follows:3

"As to the factual milieu, the contending parties have diametrically opposed versions. Vigan tells it this way; She was hired by the Litonjua Group of Companies on February 2, 1979 as telex operator. Later, she was assigned as accounting and payroll clerk under the supervision of Danilo Litonjua. She had been performing well until 1995, when Danilo Litonjua who was already naturally a (sic) very ill-tempered, ill-mouthed and violent employer, became more so due to business problems. In fact, a complaint letter (Annex "I", p. 85, rollo) was sent by the Litonjua Employees to the father and his junior regarding the boorishness of their kin Danilo Litonjua but apparently the management just glossed over this. 1âwphi1.nêt

Danilo Litonjua became particularly angry with Vigan and threw a stapler at her when she refused to give him money upon the instructions of Eddie Litonjua. From then on, Danilo Litonjua had been rabid towards her – berated and bad-mouthed her, calling her a "mental case" "psycho", "sira ulo", etc. and even threatened to hit her for some petty matters. Danilo Litonjua even went so far as to lock her up in the comfort room and preventing others to help her out. Not contented, Danilo Litonjua would order the security guards to forcibly eject her or prevent her entry in the office premises whenever he was angry. This occurred twice in July of 1995, first on the 5th then on the 7th. The incidents prompted Vigan to write Danilo Litonjua letters asking why she was treated so and what was her fault (Annexes "F", "G" & "K", pp. 82, 83 & 87, rollo). She suspected that Danilo Litonjua wanted

her out for he would not let her inside the office such that even while abroad he would order the guards by phone to bar her. She pleaded for forgiveness or at least for explanation but it fell on deaf ears.

Later, Danilo Litonjua changed tack and charged that Vigan had been hysterical, emotional and created scenes at the office. He even required her to secure psychiatric assistance. (Annexes "L" to "N", pp. 88-90, rollo) But despite proof that she was not suffering from psychosis or organic brain syndrome as certified to by a Psychiatrist of Danilo Litonjua’s choice (Annex "H", p. 84, rollo), still she was denied by the guards entry to her work upon instructions again of Danilo Litonjua. Left with no alternative, Vigan filed this case for illegal dismissal, alleging she was receiving a monthly salary of P8,000.00 at the time she was unlawfully terminated.

The Litonjuas have a different version. They negate the existence of the Litonjua Group of Companies and the connection of Eduardo Litonjua thereto. They contend that Vigan was employed by ACT Theater, Inc., where Danilo Litonjua is a Director. They dispute the charge of illegal dismissal for it was Vigan who ceased to report for work despite notices and likewise contest the P8,000.00 monthly salary alleged by Vigan, claiming it was merely P6,850.00.

They claim that Vigan was a habitual absentee specially on Tuesdays that fell within three days before and after the "15th" day and "30th" day of every month. Her performance had been satisfactory, but then starting March 15, 1996 she had become emotional, hysterical, uncontrollable and created disturbances at the office with her crying and shouting for no reason at all. The incident was repeated on April 3, 1996, May 24, 1996 and on June 4, 1996. Thus alarmed, on July 24, 1996 Vigan was required by management to undergo medical and psychological examination at the company’s expense and naming three doctors to attend to her. Dr. Baltazar Reyes and Dr. Tony Perlas of the Philippine General Hospital and Dr. Lourdes Ignacio of the Medical Center Manila. But they claim that Vigan refused to comply.

On August 2, 1996, Vigan again had another breakdown, hysterical, shouting and crying as usual for about an hour, and then she just left the premises without a word. The next day,

August 3, 1996, Saturday, she came to the office and explained she was not feeling well the day before. After that Vigan went AWOL and did not heed telegram notices from her employer made on August 26, 1996 and on September 9, 1996 (Annexes "1" & "2", pp. 108 to 109, rollo). She instead filed the instant suit for illegal dismissal."

On June 10, 1997, Labor Arbiter Ernesto S. Dinopol rendered his decision4 finding Vigan diseased and unfit for work under Article 284 of the Labor Code5 and awarded the corresponding separation pay as follows:6

"WHEREFORE, judgment is hereby rendered ordering respondents LITONJUA GROUP OF COMPANIES, EDDIE K. LITONJUA and DANILO LITONJUA to jointly and severally pay complainant TERESITA Y. VIGAN, the following amounts:

Separation pay (P4,000 x 18) years….= P72,000.00

Proportionate 13th" month pay(P8,000 x 8 months over 12) …=

4,666.66

TOTAL AWARD………. P76,666.66

All other causes of action are DISMISSED for lack of merit."

Vigan appealed the decision to the National Labor Relations Commission which modified7 the arbiter’s decision by ruling that Art. 284 of the Labor Code is inapplicable in the instant case but affirmed the legality of the termination of the complainant based on her having effectively abandoned her job; the rest of the decision was affirmed. Vigan moved for a partial reconsideration which was denied in a resolution dated August 7, 1998.

Dissatisfied, Vigan filed a petition for certiorari with the respondent Court of Appeals which rendered its assailed decision dated March 20, 2000 reversing the NLRC Resolution. The dispositive portion of the decision reads:8

"WHEREFORE, premises considered, the assailed NLRC Decision and Resolution are hereby REVERSEDand SET ASIDE. In its stead judgment is rendered ordering the respondents

LITONJUA GROUP OF COMPANIES, EDDIE K. LITONJUA and DANILO LITONJUA jointly and severally to:

(a) Reinstate complainant TERESITA Y. VIGAN if she so desires;

or

(b) pay her separation compensation in the sum of P8,000.00 multiplied by her years of service counted from February 2, 1979 up to the time this Decision becomes final; and in either case to pay Vigan;

(c) full back wages from the time she was illegally dismissed up to the date of the finality of this Decision;

(d) moral damages in the amount of P40,000.00;

(e) exemplary damages in the amount of P15,000.00; and

(f) attorney’s fees of P10,000.00.

SO ORDERED."

Litonjuas filed their motion for reconsideration which was denied in a resolution dated June 19, 2000.

Petitioners Litonjuas filed the instant petition for review on certiorari alleging the following grounds:

I

WHETHER OR NOT "LITONJUA GROUP OF COMPANIES", WHICH HAS NO JURIDICAL PERSONALITY, BUT ONLY A GENERIC NAME TO DESCRIBE THE VARIOUS COMPANIES WHICH THE LITONJUA FAMILY HAS INTERESTS, CAN BE LEGALLY CONSTRUED AS RESPONDENT’S EMPLOYER.

II

WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AS A MATTER OF LAW IN HOLDING THAT

RESPONDENT WAS ILLEGALLY DISMISSED FROM HER EMPLOYMENT, INSTEAD OF AFFIRMING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION THAT SHE HAD ABANDONED HER JOB OR THAT OF LABOR ARBITER ERNESTO DINOPOL HOLDING THAT SHE SHOULD BE SEPARATED ON THE GROUND OF DISEASE UNDER ARTICLE 284 OF THE LABOR CODE, CONSIDERING THAT SHE HAS EXHIBITED A PATTERN OF PSYCHOLOGICAL AND MENTAL DISTURBANCE WHICH ADMITTEDLY NO LONGER MADE HER PHYSICALLY FIT TO WORK.

III

WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AS A MATTER OF LAW IN DIRECTING RESPONDENT’S REINSTATEMENT AT HER OWN CHOICE OR PAYMENT OF SEPARATION PAY OF ONE MONTH SALARY FOR EVERY YEAR OF SERVICE AND BACKWAGES.

IV

THE COURT OF APPEALS SERIOUSLY ERRED AS A MATTER OF LAW IN HOLDING PETITIONERS LIABLE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES.

Anent the first assigned error, petitioners allege that the Litonjua group of companies cannot be a party to this suit for it is not a legal entity with juridical personality but is merely a generic name used to describe collectively the various companies in which the Litonjua family has business interest; that the real employer of respondent Vigan was the ACT theater Incorporated where Danilo Litonjua is a member of the Board of Directors while Eddie Litonjua was not connected in any capacity.

Petitioners’ argument is meritorious. Only natural or juridical persons or entities authorized by law may be parties to a civil action and every action must be prosecuted and defended in the name of the real parties in interest.9Petitioners’ claim that Litonjua Group of Companies is not a legal entity with juridical personality hence cannot be a party to this suit deserves consideration since respondent failed to prove otherwise. In fact, respondent Vigan’s own allegation in her Memorandum supported petitioners’ claim that Litonjua group of companies does not exist when she stated therein that instead of naming each and every corporation of

the Litonjua family where she had rendered accounting and payroll works, she simply referred to these corporations as the Litonjua group of companies, thus, respondent merely used such generic name to describe collectively the various corporations in which the Litonjua family has business interest. Considering the non-existence of the Litonjua group of companies as a juridical entity and petitioner Eddie Litonjua’s denial of his connection in any capacity with the ACT Theater, the supposed company where Vigan was employed, petitioner Eddie Litonjuas should also be excluded as a party in this case since respondent Vigan failed to prove Eddie Litonjua’s participation in the instant case. It is respondent Vigan, being the party asserting a fact, who has the burden of proof as to such fact10 which however, she failed to discharge.

Next, petitioners claim that the complaint for illegal dismissal was prematurely filed since Vigan was not dismissed, actual or constructive, from her employment as the records show that despite being absent without official leave since August 5, 1996 and her receipt of two telegram notices sent to her by petitioners on August 26, and September 9, 1996 for her to report for work, she failed to do so and yet petitioners had not done any act to dismiss her. Petitioners deny Vigan’s claim that she had been physically barred from entering the work premises.

Petitioners thus contend that since respondent Vigan was not illegally dismissed from employment, the respondent court’s order reinstating the latter, awarding her separation pay equivalent to one month salary per year of service as well as backwages, damages and attorney’s fees have no factual and legal basis.

We are not persuaded.

The above arguments relate mainly to the correctness of the factual findings of the Court of Appeals and the award of damages. This Court has consistently affirmed that the findings of fact of the Court of Appeals are as a rule binding upon it, subject to certain exceptions, one of which is when the factual findings of the Court of Appeals are contrary to those of the trial court (or administrative body, as the case may be).11 However, it bears emphasizing that mere disagreement between the Court of Appeals and the trial court as to the facts of a case does not of itself warrant this Court's review of the same. It has been held that the doctrine that the findings of fact made by the Court of Appeals, being conclusive in nature, are binding on this Court, applies even if the Court of Appeals was in disagreement with the lower court as to the weight of evidence with a consequent reversal of its findings of fact, so long as the findings

of the Court of Appeals are borne out by the record or based on substantial evidence.12

We have gone over the records of this case and found no cogent reason to disagree with the respondent court’s findings that respondent Vigan did not abandon her job but was illegally dismissed. Petitioners’ claim that despite two (2) telegram notices dated August 26 and September 9, 1996 respectively sent to respondent Vigan to report for work, the latter did not heed the demands and absented herself since August 5, 1996 was belied by the respondent’s evidence, as it was upon instructions of petitioner Danilo Litonjua to the guards on duty that she could not enter the premises of her workplace. In fact, in her letter dated August 30, 1996 addressed to petitioner Danilo Litonjua, respondent Vigan had complained of petitioner Danilo’s inhumane treatment in barring her from entering her workplace, to wit:

"Sukdulan na po ang pang-aaping dinaranas ko sa inyo, sir. Since August 5 etc. I was always approached by your guard Batutay and harassed by your men to vacate my cubicle as per your strict order. Only this August 7 that you succeeded as you order the door locked for me only. As per our agreement Aug. 27 at Jollibee (sic) gave me assurance that I willingly undergo psychiatric test I could freely report for work without intimidating me, you won’t anymore charge me of insubordination. You won’t disturb my family anymore, so why do you advice to try to go back Aug. 30 but as always to be barred by guard Batutay? Sir, with my 18 years of loyal service, all I need is a little respect. Tao ako sir, hindi hayop. Malaki ang nawawala sa akin."

Notwithstanding the fact the she was refused entrance to her workplace, respondent Vigan, to show her earnest desire to report for work, would sneak her way into the premises and punched her time card but she could not resume work as the guards in the company gate would prevent her per petitioner Danilo Litonjua’s instructions. It appears also that respondent Vigan wrote petitioner Danilo a letter dated September 9, 1996 notifying him that per his instructions, she had made an appointment for a psychiatric test on September 11, 1996 and requested him to make a check payable to Dr. Lourdes Ladrido-Ignacio in the amount of P800.00 consultation fee as they agreed upon. She underwent a psychiatric examination as a result of which Dr. Ignacio issued a medical certificate as follows:13

"This is to certify that MISS TERESITA VIGAN has come for psychiatric evaluation on September 11 and 17, 1996. The

psychiatric interview and mental status examination did not reveal any symptoms of psychosis or organic brain syndrome. She showed anxiety but this was deemed a realistic reaction to her present job difficulties."

Respondent’s actuations militate against petitioners’ claim that she did not heed the notices to return to work and abandoned her job. She had been going to her workplace to report for work but was prevented from resuming her work upon the instructions of petitioner Danilo Litonjua. It would be the height of injustice to allow an employee to claim as a ground for abandonment a situation which he himself had brought about.14

We fully agree with the respondent court’s ratiocination on the illegality of Vigan’s dismissal, to wit:15

"The basic issue is whether Vigan’s employment was terminated by illegal dismissal or by abandonment of work, and We hold that this was a case of illegal dismissal.

Shopworn is the rule on abandonment that the immediate filing of a case for illegal dismissal negates the same. Mark that Vigan promptly filed this suit for illegal dismissal when her attempts to enter the premises of her workplace became futile and the efforts to bar and eject her became unmistakable. In the more recent case of Rizada vs. NLRC (G.R. No. 96982, September 21, 1999), the Supreme Court reiterated anew the hoary rule that:

"To constitute abandonment two elements must concur (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the second element as the more determinative factor and being manifested by some overt acts. Abandoning one’s job means the deliberate, unjustified refusal of the employee to resume his employment and the burden of proof is on the employer to show a clear and deliberate intent on the part of the employee to discontinue employment.

Abandonment is a matter of intention and cannot be lightly inferred, much less legally presumed from certain equivocal acts. (Shin Industrial v. National Labor Relations Commission, 164 SCRA 8).

An employee who forthwith took steps to protest his dismissal cannot be said to have abandoned his work." (Toogue v. National Labor Relations Commission, 238 SCRA 241), as where the employee immediately filed a complaint for illegal dismissal to seek reinstatement (Tolong Aqua Culture Corp., et al. V. National Labor Relations Commission, G.R. 122268, November 12, 1996) (emphasis supplied).

Note that in the instant case Vigan was even pleading to be allowed to work but she was prevented by the guards thereat upon the orders of Danilo Litonjua. These are disclosed by her letters (Annexes "F", "G", "K", "Q", "R" and "U", pp. 82, 83, 87, 93, 94 & 97, rollo), the entries in her time cards (Annexes "P", "S", "W" and "X", pp. 92, 95, 99 & 100, rollo) and her compliance when required to see a psychiatrist (Annex "H", p. 84, rollo). On the other hand there is complete silence from the Litonjuas on these matters, including on the collective manifesto of several employees against Danilo Litonjua and his highhanded ways (Annex "I", p. 85). They chose to ignore material and telling points. They even alleged that Vigan refused to comply with their request for her to have medical examination (Comment, pp. 164-171, rollo and Memorandum for the Respondents, pp. 215-222, rollo), an unmitigated falsity in the face of clear proofs that she complied with their directive and was given a clean bill of mental health by a reputable psychiatrist of their choice.

For emphasis, We shall quote with seeming triteness the dictum laid down in Mendoza vs. NLRC (supra) regarding the unflinching rule in illegal dismissal cases:

"that the employer bears the burden of proof. To establish a case of abandonment, the employer must prove the employees deliberate and unjustified refusal to resume employment without any intention of returning. . .

mere absence from work, especially where the employee has been verbally told not to report, cannot by itself constitute abandonment. To repeat, the employer has the burden of proving overt acts on the employee’s part which demonstrate a desire or intention to abandon her work…"

The NLRC had erred in shifting the onus probandi to Vigan in the charge of abandonment against her, while the Litonjuas failed to discharge their burden. Though they may not have verbally told Vigan not to report for work but the act of ordering the guards not to let her in was just as clear a notice. Vigan’s plight was akin to that of the truck helper in the case of Masagana Concrete Products, et al. vs. NLRC (G.R. No. 106916, September 3, 1999) who was likewise prevented from coming to work.

While there was no formal termination of his services, Mariñas, was constructively dismissed when he was accused of tampering the "vale sheet" and prevented from returning to work. Constructive dismissal does not always involve forthright dismissal or diminution in rank, compensation, benefit and privileges. For an act of clear discrimination insensibility or disdain by an employer may become so unbearable on the part of the employee that it could foreclose any choice by him except to forego his continued employment. In this case, Mariñas had to resign from his job because he was prevented from returning back to work unless he admitted his mistake in writing and he was not given any opportunity to contest the charge against him. It is a rule often repeated that unsubstantiated accusation without anything more are not synonymous with guilt and unless a clear, valid, just or authorized ground for dismissing an employee is established by the employer the dismissal shall be considered unfounded.

Similarly, Vigan was accused of having mental, emotional and physical disorders (Annex "M", p. 89, rollo), but per medical examination it was proven that hers was pure anxiety as a realistic reaction to her present job difficulties. She was charged of habitual absenteeism on Tuesdays that fell within three days before and after the "15th" day and "30th" day of every month (Litonjua’s Position Paper, pp. 101-107, rollo). This is preposterous for how many Tuesdays in a year would fall within three days before and after the "15th" day and "30th" day of every month? By no extrapolation can this be habitual absenteeism."

Since respondent Vigan was illegally dismissed from her employment, she is entitled to: (1) either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and (2) backwages.16 As correctly disposed by the respondent Court:17

"Thus finding that Vigan was illegally dismissed, she is entitled to the following:

1) Either reinstatement, if viable, or separation pay if reinstatement is no longer viable; and 2) Backwages, Backwages and separation pay are distinct relief given to alleviate the economic damage by an illegally dismissed employee. Hence, an award of separation pay in lieu of reinstatement does not bar an award of backwages, computed from the time of illegal dismissal… up to the date of the finality of the Decision... without qualification or deduction. Separation pay, equivalent to one month’s salary for every year of service, is awarded as an alternative to reinstatement when the latter is no longer an option. Separation pay is computed from the commencement of employment up to the time of termination, including the imputed service for which the employee is entitled to backwages, with the salary rate prevailing at the end of the period of putative service being the basis for computation (Masagana Concrete Products, et al. vs. NLRC, supra). In case of a fraction of at least six (6) months in the length of service, the same shall be considered as one year in computing the separation pay. With regard to backwages, it meant literal "full backwages" that is inclusive of allowances and other benefits or their monetary equivalent computed from the time her compensation was withheld from her up to the time of her actual reinstatement, if it is still viable or up to the time the Decision in her favor becomes final – without deducting from back wages the earning derived elsewhere, if there is any, by Vigan during the period of her illegal dismissal. (Lopez vs. NLRC, 297 SCRA 508).

In other words, Vigan is entitled to reinstatement, which perhaps is no longer viable due to the strained relations between the parties, or separation pay of P8,000.00 for every year of service and backwages of another P8,000 per month reckoned from the time she last received salary from the Litonjuas up to the date of the finality of this Decision. Mark again that We allowed the P8,000.00 claim of Vigan as her last salary received for again the Litonjuas failed to validly refute the same."

We likewise affirm respondent court’s award of moral and exemplary damages to the respondent. As a rule, moral damages are recoverable only where the dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. We find that bad faith

attended respondent’s dismissal from her employment. Bad faith involves a state of mind dominated by ill will or motive. It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or some moral obliquity.18 Petitioner Danilo Litonjua showed ill will in treating respondent Vigan in a very unfair and cruel manner which made her suffer anxieties by reason of such job difficulties. The report to work notices sent by petitioners to respondent Vigan was just part of the ploy to make it appear that the latter abandoned her work but in reality, Vigan was barred from entering her work premises. We fully subscribe to respondent’s position that petitioners’ action was for the purpose of removing her from her employment. Respondent Vigan is also entitled to exemplary damages as her dismissal was effected in an oppressive and malevolent manner.19

We also find that there is a basis for the award of attorney’s fees. It is settled that in actions for recovery of wages or where an employee was forced to litigate and incur expenses to protect his rights and interest, he is entitled to an award of attorney’s fees.20

WHEREFORE, premises considered, the decision of the respondent Court of Appeals dated March 20, 2000 is hereby AFFIRMED with the MODIFICATION that Litonjua Group of Companies and Eddie Litonjua are dropped as parties in the instant case. 1âwphi1.nêt

SO ORDERED.