civpro cases dec. 13

7/25/2019 CivPro Cases Dec. 13

1/82

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 97816 July 24, 1992

MERRILL LYNCH FUTURES, INC., petitioner,

vs.

HON. COURT OF PPELS, !"# $%& SPOUSES PE'RO M. LR !"# ELIS G.

LR, respondents.

NR(S, C.J.:

he capacit! of a forei"n corporation to #aintain an action in the Philippines a"ainst

residents thereof, is the principal $uestion in the appellate proceedin"s at bar. he

issue arises fro# the undisputed facts no% to be briefl! narrated.

On Nove#ber &', ()*+, Merrill !nch -utures, Inc. hereafter, si#pl! M -//RES0

filed a co#plaint %ith the Re"ional rial Court at 1ue2on Cit! a"ainst the Spouses

Pedro M. ara and Elisa 3. ara for the recover! of a debt and interest thereon,

da#a"es, and attorne!4s fees. 1In its co#plaint M -//RES described itself as 5

a0 a non6resident forei"n corporation, not doin" business in the

Philippines, dul! or"ani2ed and e7istin" under and b! virtue of the

la%s of the state of Dela%are, /.S.8.9: as %ell as

b0 a :futures co##ission #erchant: dul! licensed to act as such in

the futures #ar;ets and e7chan"es in the /nited States, . .

essentiall! functionin" as a bro;er . . e7ecutin"0 orders to bu! and

sell futures contracts received fro# its custo#ers on /.S. futures

e7chan"es.

It also defined a :futures contract: as a :contractual co##it#ent to bu! and sell a

standardi2ed $uantit! of a particular ite# at a specified future settle#ent date and at

a price a"reed upon, %ith the purchase or sale bein" e7ecuted on a re"ulated futures

e7chan"e.:

In its co#plaint M -//RES alle"ed the follo%in"0 that in line %ith the above #entioned a"ree#ent and throu"h said Merrill !nch

Philippines, Inc., the ara Spouses activel! traded in futures contracts, includin"

:stoc; inde7 futures: for four !ears or so, i.e., fro# ()*' to October, ()*+, )there

bein" #ore or less re"ular accountin" and correspondin" re#ittances of #one! orcreditin" or debitin"0 #ade bet%een the spouses and M -//RES9

?0 that because of a loss a#ountin" to /S@(=A,+>).=) incurred in respect of three '0

transactions involvin" :inde7 futures,: and after settin" this off a"ainst an a#ount of

/S@+?,)('.>& then o%in" b! M -//RES to the ara Spouses, said spouses

beca#e indebted to M -//RES for the ensuin" balance of /S@*>,*'=.&+, %hich

the latter as;ed the# to pa!9

=0 that the ara Spouses ho%ever refused to pa! this balance, :alle"in" that the

transactions %ere null and void because Merrill !nch Philippines, Inc., the Philippine

co#pan! servicin" accounts of plaintiff, . . had no license to operate as a 4co##odit!

andBor financial futures bro;er.4:

On the fore"oin" essential facts, M -//RES pra!ed (0 for a preli#inar!

attach#ent a"ainst defendant spouses4 properties :up to the value of at least

P&,&=+,(').?A,: and &0 for ud"#ent, after t rial, sentencin" the spouses to pa! M

-//RES,*'=.&+ at the applicable

e7chan"ed rate on date of pa!#ent, %ith le"al interest fro# date of

de#and until full pa!#ent9

b0 e7e#plar! da#a"es in the su# of at least P?AA,AAA.AA9 and


2/82

c0 attorne!4s fees and e7penses of lit i"ation as #a! be proven at

the trial.

Preli#inar! attach#ent issuedex parteon Dece#ber &, ()*+, and the defendant

spouses %ere dul! served %ith su##ons.

he! then filed a #otion to dis#iss dated Dece#ber (*, ()*+ on the "rounds that, ?&*6?'A, and Section ( of

Republic 8ct No. ?>?? readin" as follo%s< 9

Sec. (.efinition an# "$ope of thi" *)T

. (0 8s used in this 8ct,

the ter# :invest#ent: shall #ean e$uit! participation in an!

enterprise for#ed, or"ani2ed, or e7istin" under the la%s of the

Philippines9 and the phrase :doin" business: "hall ')LUE

"oli$itin! or#er", p4r$ha"e", "er.i$e $ontra$t", openin!

offi$e", %hether called :liaison: offices or branches9appointin!repre"entati.e"or distributors %ho are do#iciled in the Philippines

or %ho in an! calendar !ear sta! in the Philippinesfor a perio# or

perio#" totallin! one h4n#re# ei!ht #a" or more9 participatin" in

the #ana"e#ent, supervision or control of an! do#estic business

fir#, entit! or corporation in the Philippines9 8ND 8N OER 8C

OR 8CS 8 IMP 8 CONIN/I O- COMMERCI8

DE8IN3S OR 8RR8N3EMENS 8ND CONEMP8E O 8

EEN E PER-ORM8NCE O- 8CS OR JORKS, OR E

EERCISE O- SOME -/NCIONS NORM8 INCIDEN O,

8ND IN PRO3RESSIVE PROSEC/ION O- COMMERCI8 38INOR O- E P/RPOSE 8ND OLHEC O- E L/SINESS

OR38NI8ION.

8s re"ards the clai# that it %as error for the rial Court to place reliance on the

decision of the Court of 8ppeals in C863.R. No. (A*&(6SP 5 sustainin" the findin" of

the Securities F E7chan"e Co##ission that M -//RES %as doin" business in the

Philippines 5 since that ud"#ent %as not !et final and M -//RES %as not a

part! to that proceedin", the Court of 8ppeals ruled that there %as no need to belabor

the point considerin" that there %as, in an! event, :ade$uate proof of the activities of

MPI . . . %hich #anifestl! sho% that the plaintiff M -//RES0 perfor#ed a series

of business acts, consu##ated contracts and undertoo; transactions for the period

fro# ()*' to October ()*+,: :and because M -//RES had done so %ithout

license, it conse$uentl! had :no le"al personalit! to brin" suit in Philippine courts.:

Its #otion for reconsideration havin" been denied, 1+M -//RES has appealed to

this Court on $ertiorari. ere, it sub#its the follo%in" issues for resolution& 5

%hich it M -//RES0 then ad#ittedl! o%ed the spouses 5 and thereafter sou"ht

to collect the balance, /S@*>,*'=.&+, but the aras had refused to pa! for the

reasons alread! above stated0, the crucial $uestion is %hether or not M -//RES

#a! sue in Philippine Courts to establish and enforce its ri"hts a"ainst said spouses,

in li"ht of the undeniable fact that it had transacted business in this countr! %ithout

bein" licensed to do so. In other %ords, if it be true that durin" all the ti#e that the!%ere transactin" %ith M -//RES, the aras %ere full! a%are of its lac; of license

to do business in the Philippines, and in relation to those transactions had #ade

pa!#ents to, and received #one! fro# it for several !ears, the $uestion is %hether or

not the ara Spouses are no% estopped to i#pu"n M -//RES4 capacit! to sue

the# in the courts of the foru#.

he rule is that a part! is estopped to challen"e the personalit! of a corporation after

havin" ac;no%led"ed the sa#e b! enterin" into a contract %ith it. 168nd the :doctrine

of estoppel to den! corporate e7istence applies to forei"n as %ell as to do#estic

corporations9: 17:one %ho has dealt %ith a corporation of forei"n ori"in as a corporate

entit! is estopped to den! i ts corporate e7istence and capacit!.: 18he principle :%ill

be applied to prevent a person contractin" %ith a forei"n corporation fro# later ta;in"advanta"e of its nonco#pliance %ith the statutes, chiefl! in cases %here such person

has received the benefits of the contract Sher%ood v. 8lvis, *' 8la ((?, ' So 'A+,

li#ited and distin"uished in Dudle! v. Collier, *+ 8la >'(, = So 'A>9 Spinne! v. Miller,

((> Io%a &(A, *= NJ '(+0, %here such person has acted as a"ent for the corporation

and has violated his fiduciar! obli"ations as such, and %here the statute does not

provide that the contract shall be void, but #erel! fi7es a special penalt! for violation

of the statute. . . .: 19

he doctrine %as adopted b! this Court as earl! as ()&> in*"ia an7in! )orporation

.. Stan#ar# %ro#4$t" )o.,2+in %hich the follo%in" pronounce#ent %as #ade< 21

he "eneral rule that in the absence of fraud of person %ho has

contracted or other%ise dealt %ith an association in such a %a! as

to reco"ni2e and in effect ad#it its le"al e7istence as a corporate

bod! is thereb! estopped to den! its corporate e7istence in an!

action leadin" out of or involvin" such contract or dealin", unless its

e7istence is attac;ed for causes %hich have arisen since #a;in"

the contract or other dealin" relied on as an estoppel and thi"

applie" to forei!n a" well a" #ome"ti$ $orporation". (> ). .+9

Chinese Cha#ber of Co##erce vs. Pua e Chin", (> Phil. &&&0.

here %ould see# to be no $uestion that the aras received benefits "enerated b!

their business relations %ith M -//RES. hose business relations, accordin" to

the aras the#selves, spanned a period of seven +0 !ears9 and the! evidentl! found

those relations to be of such profitabilit! as %arranted their #aintainin" the# for that

not insi"nificant period of ti#e9 other%ise, it is reasonabl! certain that the! %ould

have ter#inated their dealin"s %ith M -//RES #uch, #uch earlier. In fact, even

as re"ards their last transaction, in %hich the aras alle"edl! suffered a loss in the

su# of /S@(=A,+>).=), the aras nonetheless still received so#e #onetar!

advanta"e, for M -//RES credited the# %ith the a#ount of /S@+?,)('.>& then

due to the#, thus reducin" their debt to /S@*>,*'=.&+. 3iven these facts, and

assu#in" that the ara Spouses %ere a%are fro# the outset that M -//RES hadno license to do business in this countr! and MPI, no authorit! to act as bro;er for it,

it %ould appear $uite ine$uitable for the aras to evade pa!#ent of an other%ise

le"iti#ate indebtedness due and o%in" to M -//RES upon the plea that it should

not have done business in this countr! in the first place, or that its a"ent in this

countr!, MPI, had no license either to operate as a :co##odit! andBor financial

futures bro;er.:

Considerations of e$uit! dictate that, at the ver! least, the issue of %hether the aras

are in truth liable to M -//RES and if so in %hat a#ount, and %hether the! %ere

so far a%are of the absence of the re$uisite licenses on the part of M -//RES and

its Philippine correspondent, MPI, as to be estopped fro# alle"in" that fact as

defense to such liabilit!, should be ventilated and adudicated on the #erits b! theproper trial court.

JERE-ORE, the decision of the Court of 8ppeals in C863.R. CV No. (=>+* dated

Nove#ber &+, ())A and its Resolution of March +, ())( are REVERSED and SE

8SIDE, and the Re"ional rial Court at 1ue2on Cit!, Lranch *>, is ORDERED to

reinstate Civil Case No. 16?&'=A and forth%ith conduct a hearin" to adudicate the

issues set out in the precedin" para"raph on the #erits.

SO ORDERED.

%a#illa, Re!ala#o an# o$on, 9, $on$4r9

%ara", 9, Retire# a" of 4l :, 1//29


6/82


SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 1+222) uu-$ 22, 1996

COMMUNICTION MTERILS N' 'ESIGN, INC., SPC MULTITR'E, INC.,

/0o&ly SPCITEC PHILIPPINES, INC.3 !"# FRNCISCO S.

GUIRRE, petitioners,

vs.

THE COURT OF PPELS, ITEC INTERNTIONL, INC., !"# ITEC,

INC., respondents.

TORRES, JR., J.:p

Lusiness Corporations, accordin" to ord Co;e, :have no souls.: he! do

business peddlin" "oods, %ares or even services across national

boundaries in :souless for#s: in $uest for profits albeit at ti#es,

un%elco#ed in these stran"e lands venturin" into uncertain #ar;ets and,

the ris; of dealin" %ith %il! co#petitors.

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

Contested in this petition for revie% on )ertiorariis the Decision of the Court

of 8ppeals on Hune +, ())(, sustainin" the RC Order dated -ebruar! &&,

())(, den!in" the petitioners4 Motion to Dis#iss, and directin" the issuance

of a %rit of preli#inar! inunction, and its co#panion Resolution of October

), ())(, den!in" the petitioners4 Motion for Reconsideration.

Petitioners COMM/NIC8ION M8ERI8S 8ND DESI3N, INC., CMDI, for

brevit!0 and 8SP8C M/I6R8DE INC., 8SP8C, for brevit!0 are both

do#estic corporations, %hile petitioner -rancisco S. 8"uirre is their

President and #aorit! stoc;holder. Private Respondents IEC, INC. andBor

IEC, INERN8ION8, INC. IEC, for brevit!0 are corporations dul!

or"ani2ed and e7istin" under the la%s of the State of 8laba#a, /nitedStates of 8#erica. here is no dispute that IEC is a forei"n corporation not

licensed to do business in the Philippines.

On 8u"ust (>, ()*+, IEC entered into a contract %ith petitioner 8SP8C

referred to as :Representative 8"ree#ent:.1Pursuant to the contract, IEC

en"a"ed 8SP8C as its :e7clusive representative: in the Philippines for the

sale of IEC4s products, in consideration of %hich, 8SP8C %as paid a

stipulated co##ission. he a"ree#ent %as si"ned b! 3.8. Clar; and

-rancisco S. 8"uirre, presidents of IEC and 8SP8C respectivel!, for and in

behalf of their co#panies.2he said a"ree#ent %as initiall! for a ter# of

t%ent!6four #onths. 8fter the lapse of the a"reed period, the a"ree#ent %as

rene%ed for another t%ent!6four #onths.

hrou"h a :icense 8"ree#ent:)entered into b! the sa#e parties on

Nove#ber (A, ()**, 8SP8C %as able to incorporate and use the na#e

:IEC: in its o%n na#e. hus , 8SP8C Multi6rade, Inc. beca#e le"all! and

publicl! ;no%n as 8SP8C6IEC Philippines0.

L! virtue of said contracts, 8SP8C sold electronic products, e7ported b!

IEC, to their sole custo#er, the Philippine on" Distance elephone

Co#pan!, PD, for brevit!0.

o facilitate their transactions, 8SP8C, dealin" under its ne% appellation,and PD e7ecuted a docu#ent entitled :PD68SP8CBIEC

PROOCO:4%hich defined the proect details for the suppl! of IEC4s

Interface E$uip#ent in connection %ith the -ifth E7pansion Pro"ra# of

PD.

One !ear into the second ter# of the parties4 Representative 8"ree#ent,

IEC decided to ter#inate the sa#e, because petitioner 8SP8C alle"edl!

violated its contractual co##it#ent as stipulated in their a"ree#ents.*

IEC char"es the petitioners and another Philippine Corporation, DI3I8

L8SE COMM/NIC8IONS, INC. DI3I8, for brevit!0, the President of%hich is li;e%ise petitioner 8"uirre, of usin" ;no%led"e and infor#ation of


7/82

IEC4s products specifications to develop their o%n line of e$uip#ent and

product support, %hich are si#ilar, if not identical to IEC4s o%n, and offerin"

the# to IEC4s for#er custo#er.

On Hanuar! '(, ())(, the co#plaint 6in Civil Case No. )(6&)>, %as filed %ith

the Re"ional rial Court of Ma;ati, Lranch ('> b! IEC, INC. Plaintiff sou"ht

to enoin, first, preli#inaril! and then, after trial, per#anentl!9 (0 defendants

DI3I8, CMDI, and -rancisco 8"uirre and their a"ents and business

associates, to cease and desist fro# sellin" or atte#ptin" to sell to PDand to an! other part!, products %hich have been copied or #anufactured

:in li;e #anner, si#ilar or identical to the products, %ares and e$uip#ent of

plaintiff,: and &0 defendant 8SP8C, to cease and desist fro# usin" in its

corporate na#e, letter heads, envelopes, si"n boards and business

dealin"s, plaintiff4s trade#ar;, internationall! ;no%n as IEC9 and the

recover! fro# defendants in "oli#4m, da#a"es of at least P?AA,AAA.AA,

attorne!4s fees and liti"ation e7penses.

In due ti#e, defendants filed a #otion to dis#iss7the co#plaint on the

follo%in" "rounds??

if the petitioner is an independent entit! %hich bu!s and distributes products

not onl! of the petitioner, but also of other #anufacturers or t ransacts

business in its na#e and for its account and not in the na#e or for theaccount of the forei"n principal. 8 readin" of the a"ree#ents bet%een the

petitioner and the respondents sho%s that the! are hi"hl! restrictive in

nature, thus #a;in" the petitioner a #ere conduit or e7tension of the

respondents.

It is alle"ed that certain provisions of the :Representative 8"ree#ent:

e7ecuted b! the parties are si#ilar to those found in the icense 8"ree#ent

of the parties in the op6Jeld case %hich %ere considered as :hi"hl!

restrictive: b! this Court. he provisions in point are> of the O#nibus Invest#ents Code of ()*+ defines the phrase to

includeahn +M= an# )o..". '"nani,)*it %as held that the

uninterrupted perfor#ance b! a forei"n corporation of acts pursuant to its

pri#ar! purposes and functions as a re"ional area head$uarters for its ho#e

office, $ualifies such corporation as one doin" business in the countr!.

hese fore"oin" instances should be distin"uished fro# a sin"le or isolated

transaction or occasional, incidental, or casual transactions, %hich do not

co#e %ithin the #eanin" of the la%,)6for in such case, the forei"n

corporation is dee#ed not en"a"ed in business in the Philippines.


11/82

Jhere a sin"le act or transaction, ho%ever, is not #erel! incidental or casual

but indicates the forei"n corporation4s intention to do other business in the

Philippines, said sin"le act or transaction constitutes :doin": or :en"a"in" in:

or :transactin": business in the Philippines.)7

In deter#inin" %hether a corporation does business in the Philippines or not,

aside fro# their activities %ithin the foru#, reference #a! be #ade to the

contractual a"ree#ents entered into b! it %ith other entities in the countr!.

hus, in the op6Jeld case "4pra0, the forei"n corporation4s ICENSE 8NDECNIC8 83REEMEN and DISRIL/OR 83REEMEN %ith their

local contacts %ere #ade the basis of their bein" re"arded b! this ribunal

as corporations doin" business in the countr!. i;e%ise, in Merill Ln$h

F4t4re",'n$..".)o4rt of *ppeal", et$. )8the -//RES CONR8C

entered into b! the petitioner forei"n corporation %ei"hed heavil! in the

court4s rulin".

Jith the abovestated precedents in #ind, %e are persuaded to conclude

that private respondent had been :en"a"ed in: or :doin" business: in the

Philippines for so#e ti#e no%. his is the inevitable result after a scrutin! of

the different contracts and a"ree#ents entered into b! IEC %ith its various

business contacts in the countr!, particularl! 8SP8C and elephone

E$uip#ent Sales and Services, Inc. ESSI, for brevit!0. he latter is a local

electronics fir# en"a"ed b! IEC to be its local technical representative, and

to create a service center for IEC products sold locall!. Its arran"e#ents,

%ith these entities indicate convincin"l! IEC4s purpose to brin" about the

situation a#on" its custo#ers and the "eneral public that the! are dealin"

directl! %ith IEC, and that IEC is activel! en"a"in" in business in the

countr!.

In its Master Service 8"ree#ent)9%ith ESSI, private respondent re$uired

its local technical representative to provide the e#plo!ees of the technical

and service center %ith IEC identification cards and business cards, and tocorrespond onl! on IEC, Inc., letterhead. ESSI personnel are instructed to

ans%er the telephone %ith :IEC echnical 8ssistance Center.:, such

telephone bein" listed in the telephone boo; under the headin" of IEC

echnical 8ssistance Center, and all calls bein" recorded and for%arded to

IEC on a %ee;l! basis.

Jhat is #ore, ESSI %as obli"ed to provide IEC %ith a #onthl! report

detailin" the failure and repair of IEC products, and to re$uisition #onthl!

the #aterials and co#ponents needed to replace stoc; consu#ed in the

%arrant! repairs of the prior #onth.

8 perusal of the a"ree#ents bet%een petitioner 8SP8C and the respondents

sho%s that there are provisions %hich are hi"hl! restrictive in nature, such

as to reduce petitioner 8SP8C to a #ere e7tension or instru#ent of the

private respondent.

he :No Co#petin" Product: provision of the Representative 8"ree#ent

bet%een IEC and 8SP8C provides< :he Representative shall not

represent or offer for sale %ithin the erritor! an! product %hich co#petes

%ith an e7istin" IEC product or an! product %hich IEC has under activedevelop#ent.: i;e%ise pertinent is the follo%in" provision< :Jhen actin"

under this 8"ree#ent, REPRESEN8IVE is authori2ed to solicit sales

%ithin the erritor! on IEC4s behalf but is authori2ed to bind IEC onl! in its

capacit! as Representative and no other, and then onl! to specific

custo#ers and on ter#s and conditions e7pressl! authori2ed b! IEC in

%ritin".:

Jhen IEC entered into the disputed contracts %ith 8SP8C and ESSI, the!

%ere carr!in" out the purposes for %hich it %as created, i.e., to #ar;et

electronics and co##unications products. he ter#s and conditions of the

contracts as %ell as IEC4s conduct indicate that the! established %ithin our

countr! a continuous business, and not #erel! one of a te#porar!

character.4+

Not%ithstandin" such findin" that IEC is doin" business in the countr!,

petitioner is nonetheless estopped fro# raisin" this fact to bar IEC fro#

institutin" this inunction case a"ainst it.

8 forei"n corporation doin" business in the Philippines #a! sue in Philippine

Courts althou"h not authori2ed to do business here a"ainst a Philippine

citi2en or entit! %ho had contracted %ith and benefited b! said

corporation.41o put it in another %a!, a part! is estopped to challen"e the

personalit! of a corporation after havin" ac;no%led"ed the sa#e b! enterin"into a contract %ith it. 8nd the doctrine of estoppel to den! corporate

e7istence applies to a forei"n as %ell as to do#estic corporations.42One

%ho has dealt %ith a corporation of forei"n ori"in as a corporate entit! is

estopped to den! its corporate e7istence and capacit!< he principle %ill be

applied to prevent a person contractin" %ith a forei"n corporation fro# later

ta;in" advanta"e of its nonco#pliance %ith the statutes chiefl! in cases

%here such person has received the benefits of the contract.4)

he rule is deepl! rooted in the ti#e6honored a7io# of )ommo#4m ex

in>4ria "4a non haere #eet5 no person ou"ht to derive an! advanta"e of

his o%n %ron". his is as it should be for as #andated b! la%, :ever! person


12/82

#ust in the e7ercise of his ri"hts and in the perfor#ance of his duties, act

%ith ustice, "ive ever!one his due, and observe honest! and "ood faith.: 44

Concededl!, corporations act throu"h a"ents, li;e directors and officers.

Corporate dealin"s #ust be characteri2ed b! ut#ost "ood faith and fairness.

Corporations cannot ust fei"n i"norance of the le"al rules as in #ost cases,

the! are #anned b! sophisticated officers %ith t ried #ana"e#ent s;ills and

le"al e7perts %ith practiced e!e on le"al proble#s. Each part! to a corporate

transaction is e7pected to act %ith ut#ost candor and fairness and, thereb!allo% a reasonable proportion bet%een benefits and e7pected burdens. his

is a nor# %hich should be observed %here one or the other is a forei"n

entit! venturin" in a "lobal #ar;et.

8s observed b! this Court in OP6JED "4pra0, .i?? at the

ti#e the contract %as e7ecuted and at all ti#es thereafter. his conclusion is

co#pelled b! the fact that the sa#e statute is no% bein" propounded b! the

petitioner to bolster its clai#. Je, therefore sustain the appellate court4s vie%

that :it %as incu#bent upon OP6JED to ;no% %hether or not IRI and

ECED %ere properl! authori2ed to en"a"e in business in the Philippines

%hen the! entered into the l icensin" and distributorship a"ree#ents.: he

ver! purpose of the la% %as circu#vented and evaded %hen the petitioner

entered into said a"ree#ents despite the prohibition of R.8. No. ?>??. he

parties in this case bein" e$uall! "uilt! of violatin" R.8. No. ?>??, the! are in

pari delicto, in %hich case it follo%s as a conse$uence that petitioner is not

entitled to the relief pra!ed for in this case.

he doctrine of lac; of capacit! to sue based on the failure to ac$uire a local

license is based on considerations of sound public polic!. he license

re$uire#ent %as i#posed to subect the forei"n corporation doin" business

in the Philippines to the urisdiction of its courts. It %as never intended to

favor do#estic corporations %ho enter into solitar! transactions %ith un%ar!

forei"n fir#s and then repudiate their obli"ations si#pl! because the latter

are not licensed to do business in this countr!.4*

In*ntam )on"oli#ate# 'n$..". )o4rt of *ppeal", et al.46%e e7pressed our

cha"rin over this co##onl! used sche#e of defaultin" local co#panies

%hich are bein" sued b! unlicensed forei"n co#panies not en"a"ed in

business in the Philippines to invo;e the lac; of capacit! to sue of such

forei"n co#panies. Obviousl!, the sa#e plo! is resorted to b! 8SP8C to

prevent the inunctive action filed b! IEC to enoin petitioner fro# usin"

;no%led"e possibl! ac$uired in violation of fiduciar! arran"e#ents bet%een

the parties.

L! enterin" into the :Representative 8"ree#ent: %ith IEC, Petit ioner is

char"ed %ith ;no%led"e that IEC %as not licensed to en"a"e in business

activities in the countr!, and is thus estopped fro# raisin" in defense suchincapacit! of IEC, havin" chosen to i"nore or even presu#ptivel! ta;e

advanta"e of the sa#e.

In op6Jeld, %e ruled that a forei"n corporation #a! be e7e#pted fro# the

license re$uire#ent in order to institute an action in our courts if its

representative in the countr! #aintained an independent status durin" the

e7istence of the disputed contract. Petitioner is dee#ed to have acceded to

such independent character %hen it entered into the Representative

8"ree#ent %ith IEC, particularl!, provision =.& "4pra0.

Petitioner4s insistence on the dis#issal of this action due to the application,

or non application, of the private international la% rule of foru# non

$on.enien"defies %ell6settled rules of fair pla!. 8ccordin" to petitioner, the

Philippine Court has no venue to appl! its discretion %hether to "ive

co"ni2ance or not to the present action, because it has not ac$uired

urisdiction over the person of the plaintiff in the case, the latter alle"edl!

havin" no personalit! to sue before Philippine Courts. his ar"u#ent is

#isplaced because the court has alread! ac$uired urisdiction over the

plaintiff in the suit, b! virtue of his filin" the ori"inal co#plaint. 8nd as %e

have alread! observed, petitioner is not at libert! to $uestion plaintiff4s

standin" to sue, havin" alread! acceded to the sa#e b! virtue of its entr!

into the Representative 8"ree#ent referred to earlier.

hus, havin" ac$uired urisdiction, it is no% for the Philippine Court, based

on the facts of the case, %hether to "ive due course to the suit or dis#iss it ,

on the principle of foru# non $on.enien$e.47ence, the Philippine Court

#a! refuse to assu#e urisdiction in spite of its havin" ac$uired urisdiction.

Conversel!, the court #a! assu#e urisdiction over the case if it chooses to

do so9 provided, that the follo%in" re$uisites are #et< (0 hat the Philippine

Court is one to %hich the parties #a! convenientl! resort to9 &0 hat the

Philippine Court is in a position to #a;e an intelli"ent decision as to the la%

and the facts9 and, '0 hat the Philippine Court has or is li;el! to have po%er

to enforce its decision. 48


13/82

he aforesaid re$uire#ents havin" been #et, and in vie% of the court4s

disposition to "ive due course to the $uestioned action, the #atter of the

present foru# not bein" the :#ost convenient: as a "round for the suit4s

dis#issal, deserves scant consideration.

IN VIEJ O- E -ORE3OIN3 PREMISES, the instant Petition is hereb!

DISMISSED. he decision of the Court of 8ppeals dated Hune +, ())(,

upholdin" the RC Order dated -ebruar! &&, ())(, den!in" the petitioners4

Motion to Dis#iss, and orderin" the issuance of the Jrit of Preli#inar!Inunction, is hereb! affir#ed in toto.

SO ORDERED

SECOND DIVISION

G.R. No. 11)+74. J!"u!y 22, 19975

LFRE' HHN,petitioner, vs.COURT OF PPELS !"# YERISCHE

MOTOREN ERE TIENGESELLSCHFT /M3, respondents.

' E C I S I O N

MEN'O, J.:

his is a petition for revie% of the decision (of the Court of 8ppeals dis#issin" a

co#plaint for specific perfor#ance %hich petitioner had filed a"ainst private

respondent on the "round that the Re"ional rial Court of 1ue2on Cit! did not ac$uire

urisdiction over private respondent, a nonresident forei"n corporation, and of the

appellate court4s order den!in" petitioner4s #otion for reconsideration.

he follo%in" are the facts, ())', he filed a co#plaint

for specific perfor#ance and da#a"es a"ainst LMJ to co#pel it to continue the

e7clusive dealership. ater he filed an a#ended co#plaint to include an application

for te#porar! restrainin" order and for %rits of preli#inar!, #andator! and prohibitor!

inunction to enoin LMJ fro# ter#inatin" his e7clusive dealership. ahn4s a#ended

co#plaint alle"ed in pertinent parts, ())', defendant LMJ advised Plaintiff that it %as

%illin" to #aintain %ith Plaintiff a relationship but onl! :on the basis of a standard

LMJ i#porter contract as adusted to reflect the particular situation in the Philippines:

subect to certain conditions, other%ise, defendant LMJ %ould ter#inate Plaintiff4s

e7clusive dealership and an! relationship for cause effective Hune 'A, ())'. . . .

. . . .

(?. he actuations of defendant LMJ are in breach of the assi"n#ent a"ree#ent

bet%een itself and plaintiff since the consideration for the assi"n#ent of the LMJ

trade#ar; is the continuance of the e7clusive dealership a"ree#ent. It thus, follo%s

that the e7clusive dealership should continue for so lon" as defendant LMJ eno!s

the use and o%nership of the trade#ar; assi"ned to it b! Plaintiff.

he case %as doc;eted as Civil Case No. 16)'6(?)'' and raffled to Lranch (A>

of the 1ue2on Cit! Re"ional rial Court, %hich on Hune (>, ())' issued a te#porar!

restrainin" order. Su##ons and copies of the co#plaint and a#ended co#plaint

%ere thereafter served on the private respondent throu"h the Depart#ent of rade

and Industr!, pursuant to Rule (>, (> of the Rules of Court. he order, su##ons and
http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn4


15/82

copies of the co#plaint and a#ended co#plaint %ere later sent b! the DI to LMJ

via re"istered #ail on Hune (?, ())'?and received b! the latter on Hune &>, ())'.

On Hune (+, ())', %ithout proof of service on LMJ, the hearin" on the

application for the %rit of preli#inar! inunction proceeded ex parte,%ith petitioner

ahn testif!in". On Hune 'A, ())', the trial court issued an order "rantin" the %rit of

preli#inar! inunction upon the filin" of a bond of P(AA,AAA.AA. On Hul! (', ())',

follo%in" the postin" of the re$uired bond, a %rit of preli#inar! inunction %as issued.

On Hul! (, ())', LMJ #oved to dis#iss the case, contendin" that the trial court

did not ac$uire urisdiction over it throu"h the service of su##ons on the Depart#ent

of rade and Industr!, because it LMJ0 %as a forei"n corporation and it %as not

doin" business in the Philippines. It contended that the e7ecution of the Deed of

8ssi"n#ent %as an isolated transaction9 that ahn %as not its a"ent because the

latter undertoo; to asse#ble and sell LMJ cars and products %ithout the

participation of LMJ and sold other products9 and that ahn %as an indentor or

#iddle#an transactin" business in his o%n na#e and for his o%n account.

Petitioner 8lfred ahn opposed the #otion. e ar"ued that LMJ %as doin"

business in the Philippines throu"h hi# as its a"ent, as sho%n b! the fact that LMJ

invoices and order for#s %ere used to docu#ent his transactions9 that he "ave

%arranties as e7clusive LMJ dealer9 that LMJ officials periodicall! inspected

standards of service rendered b! hi#9 and that he %as described in service boo;lets

and international publications of LMJ as a :LMJ I#porter: or :LMJ radin"

Co#pan!: in the Philippines.

he trial court=deferred resolution of the Motion to dis#iss until after trial on the

#erits for the reason that the "rounds advanced b! LMJ in its #otion did not see#

to be indubitable.

Jithout see;in" reconsideration of the afore#entioned order, LMJ filed a

petition for $ertiorari%ith the Court of 8ppeals alle"in" that, Section (>. he court upheld private respondent4s

contention that ahn acted in his o%n na#e and for his o%n account and

independentl! of LMJ, based on 8lfred ahn4s alle"ations that he had invested hiso%n #one! and resources in establishin" LMJ4s "ood%ill in the Philippines and on

LMJ4s clai# that ahn sold products other than those of LMJ. It held that petitioner

%as a #ere indentor or bro;er and not an a"ent throu"h %ho# private respondent

LMJ transacted business in the Philippines. Conse$uentl!, the Court of 8ppeals

dis#issed petitioner4s co#plaint a"ainst LMJ.

ence, this appeal. Petitioner contends that the Court of 8ppeals erred (0 in

findin" that the trial court "ravel! abused its discretion in deferrin" action on the

#otion to dis#iss and &0 in findin" that private respondent LMJ is not doin"

business in the Philippines and, for this reason, dis#issin" petitioner4s case.

Petitioner4s appeal is %ell ta;en. Rule (>, (> provides. Ser.i$e 4pon forei!n $orporation"9If the defendant is a forei"n corporation, or a

nonresident oint stoc; co#pan! or association, #o;"


17/82

).>. 8s soon as the vehicles are full! #anufactured and full pa!#ent of the purchase

prices are #ade, the vehicles are shipped to the Philippines. he pa!#ents #a! be

#ade b! the purchasers or third6persons or even b! ahn.0 he bills of ladin" are

#ade up in the na#e of the purchasers, but ahn6Manila is therein indicated as the

person to be notified.

).?. It is ahn %ho pic;s up the vehicles fro# the Philippine ports, for purposes of

conductin" pre6deliver! inspections. hereafter, he delivers the vehicles to the

purchasers.

).=. 8s soon as LMJ invoices the vehicle ordered, ahn is credited %ith a

co##ission of fourteen percent (>0 of the full purchase price thereof, and as soon

as he confir#s in %ritin", that the vehicles have been re"istered in the Philippines and

have been serviced b! hi#, he %ill receive an additional three percent '0 of the full

purchase prices as co##ission.

Contrar! to the appellate court4s conclusion, this arran"e#ent sho%s an a"enc!.

8n a"ent receives a co##ission upon the successful conclusion of a sale. On the

other hand, a bro;er earns his pa! #erel! b! brin"in" the bu!er and the seller

to"ether, even if no sale is eventuall! #ade.

8s to the service centers and sho%roo#s %hich he said he had put up at his

o%n e7pense, ahn said that he had to follo% LMJ specifications as e7clusive dealer

of LMJ in the Philippines. 8ccordin" to ahn, LMJ periodicall! inspected the

service centers to see to it that LMJ standards %ere #aintained. Indeed, it %ould

see# fro# LMJ4s letter to ahn that it %as for ahn4s alle"ed failure to #aintain

LMJ standards that LMJ %as ter#inatin" ahn4s dealership.

he fact that ahn invested his o%n #one! to put up these service centers and

sho%roo#s does not necessaril! prove that he is not an a"ent of LMJ. -or as

alread! noted, there are facts in the record %hich su""est that LMJ e7ercised control

over ahn4s activities as a dealer and #ade re"ular inspections of ahn4s pre#ises toenforce co#pliance %ith LMJ standards and specifications.(A-or e7a#ple, in its

letter to ahn dated -ebruar! &', ())=, LMJ stated, (>, it is sufficient that it be alle"ed in the co#plaint that the

forei"n corporation is doin" business in the Philippines. he court need not "o

be!ond the alle"ations of the co#plaint in order to deter#ine %hether it has
http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn12http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn17http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn12http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/1997/jan1997/113074.htm#_edn17


18/82

urisdiction.(*8 deter#ination that the forei"n corporation is doin" business is onl!

tentative and is #ade onl! for the purpose of enablin" the local court to ac$uire

urisdiction over the forei"n corporation throu"h service of su##ons pursuant to Rule

(>, (>. Such deter#ination does not foreclose a contrar! findin" should evidence

later sho% that it is not transactin" business in the countr!. 8s this Court has

e7plained F )+,

rollo0, the entries in her ti#e cards 8nne7es P, S, J and , pp. )&, )?, )) F (AA,

rollo0 and her co#pliance %hen re$uired to see a ps!chiatrist 8nne7 , p. *>,rollo0. On the other hand there is co#plete silence fro# the itonuas on these
http://sc.judiciary.gov.ph/jurisprudence/2001/jun2001/143723.htm#_edn12http://sc.judiciary.gov.ph/jurisprudence/2001/jun2001/143723.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/2001/jun2001/143723.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/2001/jun2001/143723.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/2001/jun2001/143723.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/2001/jun2001/143723.htm#_edn12http://sc.judiciary.gov.ph/jurisprudence/2001/jun2001/143723.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/2001/jun2001/143723.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/2001/jun2001/143723.htm#_edn15


22/82

#atters, includin" on the collective #anifesto of several e#plo!ees a"ainst Danilo

itonua and his hi"hhanded %a!s 8nne7 I, p. *?0. he! chose to i"nore #aterial and

tellin" points. he! even alle"ed that Vi"an refused to co#pl! %ith their re$uest for

her to have #edical e7a#ination Co##ent, pp. (=>6(+(, rollo and Me#orandu# for

the Respondents, pp. &(?6&&&, rollo0, an un#iti"ated falsit! in the face of clear proofs

that she co#plied %ith their directive and %as "iven a clean bill of #ental health b! a

reputable ps!chiatrist of their choice.

-or e#phasis, Je shall $uote %ith see#in" triteness the dictu# laid do%n inMendo2a vs. NRC supra0 re"ardin" the unflinchin" rule in ille"al dis#issal cases*6R.

here is #erit to the petition,.

In the case of Lim Tanh4 .9 Ramolete, == SCR8 >&?, >?*6>?) ()+?0 this court held

that*6R.

Lut this is not all. Defendants in Civil Case No. &>*6R are not all indispensable

parties. 8n indispensable part! is one %hose interest %ill be affected b! the court4s

action in the liti"ation, and %ithout %ho# no final deter#ination of the case can be

had. he part!4s interest in the subect #atter of the suit and in the relief sou"ht are

so ine7tricabl! intert%ined %ith the other parties4 that his le"al presence as a part! to

the proceedin" is an absolute necessit!.

1)

In his absence there cannot be a


26/82

resolution of the dispute of the parties before the court %hich is effective, co#plete, or

e$uitable.14

Conversel!, a part! is not indispensable to the suit if his interest in the controvers! or

subect #atter is distinct and divisible fro# the interest of the other parties and %ill not

necessaril! be preudiced b! a ud"#ent %hich does co#plete ustice to the parties in

court.1*e is not indispensable if his presence %ould #erel! per#it co#plete relief

bet%een hi# and those alread! parties to the action, or %ill si#pl! avoid #ultiple

liti"ation.

16

It is true that all of petitioner4s clai#s in Civil Case No. &>*6R is pre#ised on the

%ron" co##itted b! defendant truc; driver. Concededl!, the truc; driver is an

indispensable part! to the suit. he other defendants, ho%ever, cannot be cate"ori2ed

as indispensable parties. he! are #erel! proper parties to the case. Proper parties

have been described as parties %hose presence is necessar! in order to adudicate

the %hole controvers!, but %hose interests are so far separable that a final decree

can be #ade in their absence %ithout affectin" the#.17It is eas! to see that if an! of

the# had not been i#pleaded as defendant, the case %ould still proceed %ithout

preudicin" the part! not i#pleaded. hus, if petitioner did not sue Jestern 3uarant!

Corporation, the o#ission %ould not cause the dis#issal of the suit a"ainst the other

defendants. Even %ithout the insurer, the trial court %ould not lose i ts co#petenc! toact co#pletel! and validl! on the da#a"e suit. he insurer, clearl!, is not an

indispensable part! in Civil Case No. &>*6R.

IN VIEJ JEREO-, the instant petition is 3R8NED. he Decision, dated Hul! (A,

())&, of the Court of 8ppeals in C863.R. SP No. (+=?( is REVERSED 8ND SE

8SIDE. he Co#plaint in Civil Case No. &>*6R is REINS8ED and REM8NDED to

the trial court for further proceedin"s. No costs.

SO ORDERED.

ar.a"a )99, Re!ala#o an# Men#oa, 9, $on$4r9

G.R. No. 11++48. No>&6door Sedan auto#obile,

%ith Motor No. &E6A*)&+, Serial No. 8((&86?&)+, Model No. ()+=.

he appellate court culled the facts that #atter as follo%s, ()+=, eticia . aus of 1ue2on Cit! purchased on credit a Colt 3alant

777 fro# -ortune Motors Phils.0 Corporation. On the sa#e date, she e7ecuted a

pro#issor! note for the a#ount ofP?=,A&*.AA, inclusive of interest at (& per annu#,

pa!able %ithin a period of >* #onths startin" 8u"ust, ()+= at a #onthl! install#ent

of P(,(=+.&? due and de#andable on the (+th da! of each #onth E7hibit 8, pp. (>>,

Ori". Records,0. It %as a"reed upon, a#on" others, that in case of default in the

pa!#ent of an! install#ent the total principal su#, to"ether %ith the interest, shall

beco#e i##ediatel! due and pa!able E7hibit 89 p. (>>, Ori". Records0. 8s a

securit! for the pro#issor! note, a chattel #ort"a"e %as constituted over the said

#otor vehicle E7hibit L, ibid.0, %ith a deed of assi"n#ent incorporated therein such

that the credit and #ort"a"e ri"hts %ere assi"ned b! -ortune Motors Corp. in favor of

-ilinvest Credit Corporation %ith the consent of the #ort"a"or6debtor eticia aus

E7hibits L6( and L6&9 p. (>+, ibid.0. he vehicle %as then re"istered in the na#e of

eticia . aus %ith the chattel #ort"a"e annotated on said certificate. E7hibit ::9 p.

(?>, ibid.0

On Septe#ber &?, ()+*, -ilinvest Credit Corporation in turn assi"ned the credit in

favor of Service%ide Specialists, Inc. Service%ide, for brevit!0 transferrin" unto the

latter all its ri"hts under the pro#issor! note and the chattel #ort"a"e E7hibit L6'9 p.

(>), ibid.0 %ith the correspondin" notice of assi"n#ent sent to the re"istered caro%ner E7hibit C9 p. (?A, Ibid.0.

On 8pril (*, ()++, eticia aus failed to pa! the #onthl! install#ent for that

#onth. he install#ents for the succeedin" (+ #onths %ere not li;e%ise full! paid,

hence on Septe#ber &?, ()+*, pursuant to the provisions of the pro#issor! note,

Service%ide de#anded pa!#ent of the entire outstandin" balance of P>=,++?.&>

inclusive of interests E7hibits D and E9 pp. (?(6(?&, ibid.0. Despite said for#al

de#and, eticia aus failed to pa! all the #onthl! install#ents due until Hul! (*,

()*A.

On Hul! &?, ()*>, Service%ide sent a state#ent of account to eticia aus andde#anded pa!#ent of the a#ount of P*=,=('.'& representin" the outstandin"
http://sc.judiciary.gov.ph/jurisprudence/1999/nov99/110048.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/1999/nov99/110048.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/1999/nov99/110048.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/1999/nov99/110048.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/1999/nov99/110048.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/1999/nov99/110048.htm#_edn2


27/82

balance plus interests up to Hul! &?, ()*?, attorne!s fees, li$uidated da#a"es,

esti#ated repossession e7pense, and bondin" fee E7hibit -9 p. (?', ibid.0

8s a result of the failure of eticia aus to settle her obli"ation, or at least to surrender

possession of the #otor vehicle for the purpose of foreclosure, Service%ide instituted

a co#plaint for replevin, i#pleadin" ilda ee and Hohn Dee in %hose custod! the

vehicle %as believed to be at the ti#e of the fil in" of the suit.

In its co#plaint, plaintiff alle"ed that it had superior lien over the #ort"a"ed vehicle9that it is la%full! entitled to the possession of the sa#e to"ether %ith all its

accessories and e$uip#ents9 sic0 that ilda ee %as %ron"full! detainin" the #otor

vehicle for the purpose of defeatin" its #ort"a"e lien9 and that a sufficient bond had

been filed in court. Co#plaint %ith 8nne7es, pp. (6(', ibid.0. On Hul! 'A, ()*>, the

court approved the replevin bond p. &A, ibid.0

On 8u"ust (, ()*>, 8lberto Villafranca filed a third part! clai# contendin" that he is

the absolute o%ner of the subect #otor vehicle dul! evidenced b! the Lureau of and

ransportations Certificate of Re"istration issued in his na#e on Hune &&, ()*>9 that

he ac$uired the said #other vehicle fro# a certain Re#edios D. an" under a Deed

of Sale dated Ma! (=, ()*>9 that he ac$uired the sa#e free fro# all lien and

e#cu#brances9 and that on Hul! 'A, ()*>, the said auto#obile %as ta;en fro# his

residence b! Deput! Sheriff Lernardo Lernabe pursuant to the sei2ure order issued

b! the court a $uo.

/pon #otion of the plaintiff belo%, 8lberto Villafranca %as substituted as

defendant. Su##ons %as served upon hi#. pp. ??6?=, ibid0.

On March &A, ()*?, 8lberto Villafranca #oved for the dis#issal of the co#plaint on

the "round that there is another action pendin" bet%een the sa#e parties before the

Re"ional rial Court of Ma;ati, Lranch (>A, doc;eted as Civil Case No. *'(A,

involvin" the sei2ure of subect #otor vehicle and the inde#nit! bond posted b!

Service%ide Motion to Dis#iss %i th 8nne7es9 pp. ?+6((A, ibid.0 On March &*, ()*?,the court "ranted the aforesaid #otion p. (&&, ibid.0, but subse$uentl! the order of

dis#issal %as reconsidered and set aside pp. ('?6('=, ibid.0. -or failure to file his

8ns%er as re$uired b! the court a$uo, 8lberto Villafranca %as declared in default and

plaintiffs evidence %as received e7 parte.

On Dece#ber &+, ()*?, the lo%er court rendered a decision dis#issin" the co#plaint

for insufficienc! of evidence. Its #otion for reconsideration of said decision havin"

been denied, 777.

In its appeal to the Court of 8ppeals, petitioner theori2ed that a suit for replevin

ai#ed at the foreclosure of a chattel is an action ;4a"i in rem, and does not re$uire

the inclusion of the principal obli"or in the Co#plaint. o%ever, the appellate court

affir#ed the decision of the lo%er Court9 ratiocinatin", thus?. Essentiall!,

the sole issue here is< Jhether or not a case for replevin #a! be pursued a"ainst the

defendant, 8lberto Villafranca, %ithout i#pleadin" the abscondin" debtor6#ort"a"orG

Rule =A of the Revised Rules of Court re$uires that an applicant for replevin

#ust sho% that he is the o%ner of the propert! clai#ed, particularl! describin" it, or is

entitled to the possession thereof.?Jhere the ri"ht of the plaintiff to the possession of

the specified propert! is so conceded or evident, the action need onl! be #aintaineda"ainst hi# %ho so possesses the propert!. 'n rem a$tion e"t per ;4am rem no"tram

;4ae a alio po""i#et4r petim4", et "emper a#.er"4" e4m e"t ;4i rem po""i#et9=

Citin" No$%&" Mo$o-, I"?. >-. H&&!,+the Court said in the case of

F;"!"?& %hich is of si#ilar i#port %ith the present case0, Crispin 3icale %as drivin" the passen"er

eepne! o%ned b! his #other Martina 3icale, respondent herein. It %as then rainin".

Jhile drivin" north bound alon" the National i"h%a! in alavera, Nueva Ecia, a

passen"er bus, o%ned b! Pantranco North E7press, Inc., petitioner, driven b!

8le7ander Luncan, also a petitioner, %as trailin" behind. Jhen the t%o vehicles %ere

ne"otiatin" a curve alon" the hi"h%a!, the passen"er bus overtoo; the eepne!. In so

doin", the passen"er bus hit the left rear side of the eepne! and sped a%a!.

Crispin reported the incident to the alavera Police Station and respondent

Standard Insurance Co., Inc. Standard0, insurer of the eepne!. he total cost of the

repair %as P&(,>(?.AA, but respondent Standard paid onl! P*,AAA.AA. Martina 3icale

shouldered the balance of P(',>(?.AA.

hereafter, Standard and Martina, respondents, de#anded rei#burse#ent fro#

petitioners Pantranco and its driver 8le7ander Luncan, but the! refused. his

pro#pted respondents to file %ith the Re"ional rial Court RC0, Lranch )>, Manila,

a co#plaint for su# of #one!.

In their ans%er, both petitioners specificall! denied the alle"ations in theco#plaint and averred that it is the Metropolitan rial Court, not the RC, %hich has

urisdiction over the case.

On Hune ?, ())&, the trial court rendered a Decision 'in favor of respondents

Standard and Martina, thusdated Hul! &', ())), affir#ed

the trial courts rulin", holdin" that, ())).

ence, this petition for revie% on $ertiorariraisin" the follo%in" assi"n#ents of

error(?.AA, or a total of P&(,>(?.AA. Section () of L.P. Ll". (&) provides

that the RC has e7clusive ori"inal urisdiction over all other cases, in %hich thede#and, e7clusive of interest and cost or the value of the propert! in controvers!,

a#ounts to #ore than t%ent! thousand pesos P&A,AAA.AA0. Clearl!, it is the RC that

has urisdiction over the instant case. It bears e#phasis that %hen the co#plaint %as

filed, R.8. +=)( e7pandin" the urisdiction of the Metropolitan, Municipal and

Municipal Circuit rial Courts had not !et ta;en effect. It beca#e effective on 8pril (?,

())>.

II

he findin" of the trial court, affir#ed b! the 8ppellate Court, that petitioners are

ne"li"ent and thus liable to respondents, is a factual findin" %hich is bindin" upon us,a rule %ell6established in our urisprudence. It has been repeatedl! held that the trial

court4s factual findin"s, %hen affir#ed b! the 8ppellate Court, are conclusive and

bindin" upon this Court, if the! are not tainted %ith arbitrariness or oversi"ht of so#e

fact or circu#stance of si"nificance and influence. Petitioners have not presented

sufficient "round to %arrant a deviation fro# this rule.(A

III

here is no #erit in petitioners contention that the! %ere denied due process.

Records sho% that durin" the hearin", petitioner Pantrancos counsel filed t%o

#otions for resettin" of trial %hich %ere "ranted b! the trial court. Subse$uentl!, said

counsel filed a notice to %ithdra%. 8fter respondents had presented their evidence,

the trial court, upon petitioners #otion, reset the hearin" to another date. On this

date, Pantranco failed to appear. hus, the trial court %arned Pantranco that should it

fail to appear durin" the ne7t hearin", the case %ill be sub#itted for resolution on the

basis of the evidence presented. Subse$uentl!, Pantrancos ne% counsel #anifested

that his client is %illin" to settle the case a#icabl! and #oved for another

postpone#ent. he trial court "ranted the #otion. On the date of the hearin", the ne%

counsel #anifested that Pantrancos e#plo!ees are on stri;e and #oved for another

postpone#ent. On the ne7t hearin", said counsel still failed to appear. ence, the trial

court considered the case sub#itted for decision.

Je have consistentl! held that the essence of due process is si#pl! an

opportunit! to be heard, or an opportunit! to e7plain ones side or an opportunit! to

see; for a reconsideration of the action or rulin" co#plained of.((

Petitioner Pantranco filed an ans%er and participated durin" the trial and

presentation of respondents evidence. It %as apprised of the notices of hearin"

issued b! the trial court. Indeed, it %as afforded fair and reasonable opportunit! to

e7plain its side of the controvers!. Clearl!, it %as not denied of its ri"ht to due

process. Jhat is fro%ned upon is the absolute lac; of notice and hearin" %hich is not

present here.

HEREFORE, the petition is DENIED. he assailed Decision dated Hul! &'

())) and Resolution dated Nove#ber >, ())) of the Court of 8ppeals in C863.R. CV

No. '*>?' are hereb! 8--IRMED. Costs a"ainst petitioners.

SO OR'ERE'.

%an!anian, ()hairman, )orona, )arpio-Morale", and+ar$ia, 9, concur9

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 162*7* '&?&


32/82

D E C I S I O N

PERLT, J.:

Lefore us is a petition for revie% on $ertiorari filed b! petitioner Leatri2 Sio; Pin" an"

see;in" to annul and set aside the Decision(dated October (+, &AA' and the

Resolution&dated March ?, &AA> of the Court of 8ppeals C80 in C863.R. SP No.

+>=&).

he antecedent facts are as follo%s, petitioner4s #otion for reconsideration %as

denied.

ence, this petition, %herein petitioner raises the follo%in" assi"n#ent of errorsto the ban;s, althou"h not

i#pleaded, !et the latter too; no action to $uestion their non6inclusion in the petition.

Notabl!, the SLC filed an /r"ent Motion for Clarification(?on %hether or not the
http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt11http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt11http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt12http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt12http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt13http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt14http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt14http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt15http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt15http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt11http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt12http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt13http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt14http://www.lawphil.net/judjuris/juri2010/dec2010/gr_162575_2010.html#fnt15


35/82

issuance of the RO has the effect of restrainin" the ban; fro# co#pl!in" %ith the

%rit of preli#inar! inunction issued b! the RC or nullif!in" Brenderin" ineffectual the

said %rit. In fact, SLC even stated that the #otion %as filed for no other purpose,

e7cept to see; proper "uidance on the issue at hand so that %hatever action or

position it #a! ta;e %ith respect to the C8 resolution %ill be consistent %ith its ter#

and purposes.

Fo4rth. Jhen the C8 rendered its assailed Decision nullif!in" the inunction issued b!

the RC, and copies of the decision %ere furnished these ban;s, not one of these

ban;s ever filed an! pleadin" to assail their non6inclusion in

the $ertiorari proceedin"s.

Indeed, the ban;s have no interest in the issuance of the inunction, but onl! the

petitioner. he ban;s4 interests as defendants in the petition for declaration of nullit! of

their ban; underta;in"s filed a"ainst the# b! petitioner in the RC are separable fro#

the interests of petitioner for the issuance of the inunctive relief.

Moreover,$ertiorari, as a special civil action, is an ori"inal action invo;in" the ori"inal

urisdiction of a court to annul or #odif! the proceedin"s of a tribunal, board or officer

e7ercisin" udicial or $uasi6udicial functions.(=It is an ori"inal and independent action

that is not part of the trial or the proceedin"s on the co#plaint filed before the trialcourt.(+Section ?, Rule =? of the Rules of Court provides) SCR8 '>'0. /nder the circu#stances

of this case, the sa#e rule should appl! to the successors6in6interest . . . .1*

Jhile it is true that a decision in an action for eect#ent is enforceable not onl!

a"ainst the defendant hi#self but also a"ainst #e#bers of his fa#il!, his relatives,

and his privies %ho derived their ri"ht of possession fro# the defendant and his

successors6in6interest,16it had been established that petitioner had, b! her o%n acts,

sub#itted to the urisdiction of the trial court. She is no% estopped to den! that she

had been heard in defense of her deceased husband in the proceedin"s therein. 8s

such, this petition evidentl! has no le" to stand on.

JERE-ORE, the instant petition is dis#issed for lac; of #erit. Costs a"ainstpetitioner.

SO ORDERED.

%a#illa, a.i#e, r9, ello"illo an# Dap4nan, 9, $on$4r9


SUPREME COURT

Manila


39/82

-IRS DIVISION

G.R. No. 1+116) J!"u!y 11, 199)

STTE IN(ESTMENT HOUSE, INC., petitioner,

vs.

COURT OF PPELS !"# NOR . MOULIC, respondents.

E"$oer, *lon & *""o$iate" for petitioner9

Martin 9 %antaleon for pri.ate re"pon#ent"9

ELLOSILLO, J.:

he liabilit! to a holder in due course of the dra%er of chec;s issued to another

#erel! as securit!, and the ri"ht of a real estate #ort"a"ee after e7traudicialforeclosure to recover the balance of the obli"ation, are the issues in this Petition for

Revie% of the Decision of respondent Court of 8ppeals.

Private respondent Nora L. Moulic issued to Cora2on Victoriano, as securit! for

pieces of e%elr! to be sold on co##ission, t%o &0 post6dated E$uitable Lan;in"

Corporation chec;s in the a#ount of -ift! housand Pesos P?A,AAA.AA0 each, one

dated 'A 8u"ust ()+) and the other, 'A Septe#ber ()+). hereafter, the pa!ee

ne"otiated the chec;s to petitioner State Invest#ent ouse. Inc. S8E0.

MO/IC failed to sell the pieces of e%elr!, so she returned the# to the pa!ee before

#aturit! of the chec;s. he chec;s, ho%ever, could no lon"er be retrieved as the!had alread! been ne"otiated. Conse$uentl!, before their #aturit! dates, MO/IC

%ithdre% her funds fro# the dra%ee ban;.

/pon present#ent for pa!#ent, the chec;s %ere dishonored for insufficienc! of

funds. On &A Dece#ber ()+), S8E alle"edl! notified MO/IC of the dishonor of

the chec;s and re$uested that it be paid in cash instead, althou"h MO/IC avers that

no such notice %as "iven her.

On = October ()*', S8E sued to recover the value of the chec;s plus attorne!4s

fees and e7penses of liti"ation.

In her 8ns%er, MO/IC contends that she incurred no obli"ation on the chec;s

because the e%elr! %as never sold and the chec;s %ere ne"otiated %ithout her

;no%led"e and consent. She also instituted a hird6Part! Co#plaint a"ainst Cora2on

Victoriano, %ho later assu#ed full responsibilit! for the chec;s.

On &= Ma! ()**, the trial court dis#issed the Co#plaint as %ell as the hird6Part!

Co#plaint, and ordered S8E to pa! MO/IC P',AAA.AA for attorne!4s fees.

S8E elevated the order of dis#issal to the Court of 8ppeals, but the appellate courtaffir#ed the trial court on the "round that the Notice of Dishonor to MO/IC %as

#ade be!ond the period prescribed b! the Ne"otiable Instru#ents a% and that even

if S8E did serve such notice on MO/IC %ithin the re"le#entar! period it %ould be

of no conse$uence as the chec;s should never have been presented for pa!#ent.

he sale of the e%elr! %as never effected9 the chec;s, therefore, ceased to serve

their purpose as securit! for the e%elr!.

Je are not persuaded.

he ne"otiabilit! of the chec;s is not in dispute. Indubitabl!, the! %ere ne"otiable.

8fter all, at the pre6trial, the parties a"reed to li#it the issue to %hether or not S8E

%as a holder of the chec;s in due course.1

In this re"ard, Sec. ?& of the Ne"otiable Instru#ents a% provides 5

Sec. ?&.


40/82

Conse$uentl!, S8E is indeed a holder in due course. 8s such, it holds the

instru#ents free fro# an! defect of title of prior parties, and fro# defenses available

to prior parties a#on" the#selves9 S8E #a!, therefore, enforce full pa!#ent of the

chec;s.4

MO/IC cannot set up a"ainst S8E the defense that there %as failure or absence

of consideration. MO/IC can onl! invo;e this defense a"ainst S8E if it %as priv!

to the purpose for %hich the! %ere issued and therefore is not a holder in due course.

hat the post6dated chec;s %ere #erel! issued as securit! is not a "round for the

dischar"e of the instru#ent as a"ainst a holder in due course. -or the onl! "rounds

are those outlined in Sec. (() of the Ne"otiable Instru#ents a% of the Ne"otiable Instru#ents a%.


41/82

he record sho%s that Mr. Ro#elito Caoili, an 8ccount 8ssistant, testified that the

obli"ation of Cora2on Victoriano and her husband at the ti#e their propert!

#ort"a"ed to S8E %as e7traudiciall! foreclosed a#ounted to P(.) #illion9 the bid

price at public auction %as onl! P( #illion. 12hus, the value of the propert!

foreclosed %as not even enou"h to pa! the debt in full.

Jhere the proceeds of the sale are insufficient to cover the debt in an e7traudicial

foreclosure of #ort"a"e, the #ort"a"ee is entitled to clai# the deficienc! fro# the

debtor.1)he step thus ta;en b! the #ort"a"ee6ban; in resortin" to an e7tra6udicial

foreclosure %as #erel! to find a proceedin" for the sale of the propert! and its action

cannot be ta;en to #ean a %aiver of its ri"ht to de#and pa!#ent for the %hole

debt.14-or, %hile 8ct '('?, as a#ended, does not discuss the #ort"a"ee4s ri"ht to

recover such deficienc!, it does not contain an! provision either, e7pressl! or

i#pliedl!, prohibitin" recover!. In this urisdiction, %hen the le"islature intends to

foreclose the ri"ht of a creditor to sue for an! deficienc! resultin" fro# foreclosure of

a securit! "iven to "uarantee an obli"ation, it so e7pressl! provides. -or instance,

%ith respect to pled"es, 8rt. &((? of the Civil Code1*does not allo% the creditor to

recover the deficienc! fro# the sale of the thin" pled"ed. i;e%ise, in the case of a

chattel #ort"a"e, or a thin" sold on install#ent basis, in the event of foreclosure, the

vendor :shall have no further action a"ainst the purchaser to recover an! unpaid

balance of the price. 8n! a"ree#ent to the contrar! %ill be void:.16

It is clear then that in the absence of a si#ilar provision in 8ct No. '('?, as a#ended,

it cannot be concluded that the creditor loses his ri"ht reco"ni2ed b! the Rules of

Court to ta;e action for the recover! of an! unpaid balance on the principal obli"ation

si#pl! because he has chosen to e7traudiciall! foreclose the real estate #ort"a"e

pursuant to a Special Po%er of 8ttorne! "iven hi# b! the #ort"a"or in the contract of

#ort"a"e.17

he filin" of the Co#plaint and the hird6Part! Co#plaint to enforce the chec;s

a"ainst MO/IC and the VICORI8NO spouses, respectivel!, is ust another #eans

of recoverin" the unpaid balance of the debt of the VICORI8NOs.

In fine, MO/IC, as dra%er, is liable for the value of the chec;s she issued to the

holder in due course, S8E, %ithout preudice to an! action for reco#pense she #a!

pursue a"ainst the VICORI8NOs as hird6Part! Defendants %ho had alread! been

declared as in default.

JERE-ORE, the petition is 3R8NED. he decision appealed fro# is REVERSED

and a ne% one entered declarin" private respondent NOR8 L. MO/IC liable to

petitioner S8E INVESMEN O/SE, INC., for the value of ELC Chec;s Nos.

'AA*)=?* and 'AA*)==A in the total a#ount of P(AA,AAA.AA, P',AAA.AA as attorne!4s

fees, and the costs of suit, %ithout preudice to an! action for reco#pense she #a!

pursue a"ainst the VICORI8NOs as hird6Part! Defendants.

Costs a"ainst private respondent.

SO ORDERED.

)r4 an# +rio-*;4ino, 9, $on$4r.

%a#illa, 9, too7 no part.

SECOND DIVISION

G.R. No. 117)**. =;l *, 2++25

RI(IER FILIPIN, INC.,petitioner, vs. COURT OF PPELS, JUN L. REYES,

/"oA #&?&!-, -uto co#pel the defendants therein Huan . Re!es, no% deceased,

Philippine C!press Construction F Develop#ent Corporation C!press0, Cornhill

radin" Corporation Cornhill0 and /rban Develop#ent Lan; to transfer the title

coverin" a (,A(* s$uare #eter parcel of land located alon" EDS8, 1ue2on Cit! for

alle"ed violation of Rivieras ri"ht of first refusal.

It appears that on Nove#ber &', ()*&, respondent Huan . Re!es Re!es, for

brevit!0 e7ecuted a Contract of ease %ith Riviera. he ten6!ear (A0 rene%able lease

of Riviera, %hich started on 8u"ust (, ()*&, involved a (,A(* s$uare #eter parcel of

land located alon" Edsa, 1ue2on Cit!, covered and described in ransfer Certificate

of itle No. (*='&= of the Re"istr! of Deeds of 1ue2on Cit! in the na#e of Huan .

Re!es.?
http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn5


42/82

he said parcel of land %as subect of a Real Estate Mort"a"e e7ecuted b!

Re!es in favor of Prudential Lan;. Since the loan %ith Prudential Lan; re#ained

unpaid upon #aturit!, the #ort"a"ee ban; e7traudiciall! foreclosed the #ort"a"e

thereon. 8t the public auction sale, the #ort"a"ee ban; e#er"ed as the hi"hest

bidder. he rede#ption period %as set to e7pire on March +, ()*). Reali2in" that he

could not possibl! raise in ti#e the #one! needed to redee# the subect propert!,

Re!es decided to sell the sa#e.=

Since para"raph (( of the lease contract e7pressl! provided that the LESSEE

"hall ha.e the ri!ht of fir"t ref4"al "ho4l# the LESS@R #e$i#e to "ell the propert

#4rin! the term of the lea"e,+Re!es offered to sell the subect propert! to Riviera,

throu"h its President Vicente C. 8n"eles, for -ive housand Pesos P?,AAA.AA0 per

s$uare #eter. o%ever, 8n"eles bar"ained for hree housand -ive undred Pesos

P',?AA.AA0 per s$uare #eter. Since Re!es %as not a#enable to the said price and

insisted on -ive housand Pesos P?,AAA.AA0 per s$uare #eter, 8n"eles re$uested

Re!es to allo% hi# to consult the other #e#bers of the Loard of Directors of Riviera.*

Seven +0 #onths later, or so#eti#e in October ()**, 8n"eles co##unicated

%ith Re!es Rivieras offer to purchase the subect propert! for -our housand Pesos

P>,AAA.AA0 per s$uare #eter. o%ever, Re!es did not accept the offer. his ti#e heas;ed for Si7 housand Pesos P=,AAA.AA0 per s$uare #eter since the value of the

propert! in the area had appreciated in vie% of the plans of 8raneta to develop the

vicinit!.)

In a letter dated Nove#ber &, ()**, 8tt!. Irineo S. Huan, actin" as counsel for

Re!es, infor#ed Riviera that Re!es %as sellin" the subect propert! for Si7 housand

Pesos P=,AAA.AA0 per s$uare #eter, net of capital "ains and transfer ta7es,

re"istration fees, notarial fees and all other attendant char"es. e further stated

therein thate$t propert, o4

ha.e 4nfort4natel faile# to ta7e a#.anta!e of "4$h opport4nit an# th4" lo"t o4r

ri!ht of fir"t ref4"al in "ale of "ai# propert.(?

Mean%hile, on Dece#ber >, ()**, Re!es confided to Rolando P. raballo, a

close fa#il! friend and President of C!press, his predica#ent about the nearin"

e7pir! date of the rede#ption period of the foreclosed #ort"a"ed propert! %ith

Prudential Lan;, the #one! for %hich he could not raise on ti#e thereb! offerin" the

subect propert! to hi# for Si7 housand Pesos P=,AAA.AA0 per s$uare

#eter.raballo e7pressed interest in bu!in" the said propert!, told Re!es that he %ill

stud! the #atter and su""ested for the# to #eet the ne7t da!.(=

he! #et the ne7t da!, Dece#ber ?, ()**, at %hich ti#e raballo bar"ained for

-ive housand hree undred Pesos P?,'AA.AA0 per s$uare #eter. 8fter

considerin" the reasons cited b! raballo for his $uoted price, Re!es accepted the

sa#e. o%ever, since raballo did not have the a#ount %ith %hich to pa! Re!es, he

told the latter that he %ill loo; for a partner for that purpose. (+Re!es told raballo that

he had alread! afforded Riviera its ri"ht of first refusal but the! cannot a"ree because

Rivieras final offer %as for -ive housand Pesos P?,AAA.AA0 per s$uare #eter.(*

So#eti#e in Hanuar! ()*), apprehensive of the i#pendin" e7piration in March

()*) of the rede#ption period of the foreclosed #ort"a"ed propert! %ith Prudential

Lan; and the deal bet%een Re!es and raballo %as not !et for#all! concluded,

Re!es decided to approach ane% Riviera. -or this purpose, he re$uested his nephe%,

8tt!. Estanislao 8linea, to approach 8n"eles and find out if the latter %as still

interested in bu!in" the subect propert! and as; hi# to raise his offer for the

purchase of the said propert! a little hi"her. 8s instructed, 8tt!. 8linea #et %ith
http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn12http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn12http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn12http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn17http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn18http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn18http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn12http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn17http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn18


43/82

8n"eles and as;ed the latter to increase his offer of -ive housand Pesos

P?,AAA.AA0 per s$uare #eter but 8n"eles said that his offer is -ive housand Pesos

P?,AAA.AA0 per s$uare #eter.()

-ollo%in" the #eetin", 8n"eles sent a letter dated -ebruar! >, ()*) to Re!es,

throu"h 8tt!. 8linea, that his offer is -ive housand Pesos P?,AAA.AA0 per s$uare

#eter pa!#ent of %hich %ould be fift! percent ?A0 do%n %ithin thirt! 'A0 da!s

upon sub#ission of certain docu#ents in three '0 da!s, the balance pa!able in five

?0 !ears in e$ual #onthl! install#ents at t%elve percent (&0 interest in di#inishin"

balance.&AJith the ter#s of this second offer, 8n"eles ad#ittedl! do%n"raded the

previous offer of Riviera on Dece#ber &, ()**.&(

8tt!. 8linea conve!ed to Re!es Rivieras offer of -ive housand Pesos

P?,AAA.AA0 per s$uare #eter but Re!es did not a"ree. Conse$uentl!, 8tt!. 8linea

contacted a"ain 8n"eles and as;ed hi# if he can increase his price. 8n"eles,

ho%ever, said he cannot add an!#ore.&&Re!es did not e7pressl! offer his subect

propert! to Riviera at the price of -ive housand hree undred Pesos P?,'AA.AA0

per s$uare #eter.&'

So#eti#e in -ebruar! ()*), C!press and its partner in the venture, Cornhill

radin" Corporation, %ere able to co#e up %ith the a#ount sufficient to cover therede#ption #one!, %ith %hich Re!es paid to the Prudential Lan; to redee# the

subect propert!.&>On Ma! (, ()*), a Deed of 8bsolute Sale coverin" the subect

propert! %as e7ecuted b! Re!es in favor of C!press and Cornhill for the

consideration of -ive Million hree undred Ninet! -ive housand -our undred

Pesos P?,')?,>AA.AA0.&?On the sa#e date, C!press and Cornhill #ort"a"ed the

subect propert! to /rban Develop#ent Lan; for hree Million Pesos

P',AAA,AAA.AA0.&=

hereafter, Riviera sou"ht fro# Re!es, C!press and Cornhill a resale of the

subect propert! to it clai#in" that its ri"ht of first refusal under the lease contract %as

violated. 8fter several unsuccessful atte#pts, &+Riviera filed the suit to co#pel Re!es,

C!press, Cornhill and /rban Develop#ent Lan; to transfer the disputed title to the

land in favor of Riviera upon its pa!#ent of the price paid b! C!press and Cornhill.

-ollo%in" trial on the #erits, the trial court dis#issed the co#plaint of Riviera as

%ell as the counterclai#s and cross6clai#s of the other parties. &*It ruled that the

defendants therein did not violate Rivieras ri"ht of first refusal, ratiocinatin" in this

%ise? and

not as a special civil action for certiorari under Rule =? of the Revised Rules of Court,

no% the ())+ Rules of Civil Procedure.

he distinctions bet%een Rule >? and =? are far and %ide, the #ost notable of

%hich is that errors of urisdiction are best revie%ed in a special civil action for

certiorari under Rule =?, %hile errors of ud"#ent are correctible onl! b! appeal in a

petition for revie% under Rule >?.'>he rationale for the distinction is si#ple. Jhen a

court e7ercises its urisdiction an error co##itted %hile so en"a"ed does not deprive

it of the urisdiction bein" e7ercised %hen the error is co##itted. If it did, ever! error

co##itted b! a court %ould deprive it of its urisdiction and ever! erroneous ud"#ent

%ould be a void ud"#ent. his cannot be allo%ed. he ad#inistration of ustice

%ould not countenance such a rule. hus, an error of ud"#ent that the court #a!co##it in the e7ercise of its urisdiction is not correctible throu"h the ori"inal special

civil action of certiorari.'?8ppeal fro# a final disposition of the Court of 8ppeals, as in

the case at bar, is b! %a! of a petition for revie% under Rule >?. '=

In the petition at bar, Riviera posits the vie% that its ri"ht of first refusal %as

totall! disre"arded or violated b! Re!es b! the latters sale of the subect propert! to

C!press and Cornhill. It contends that the ri"ht of first refusal principall! a#ounts to a

ri"ht to #atch in the sense that it needs another offer for the ri"ht to be e7ercised.

he concept and interpretation of the ri"ht of first refusal and the conse$uences

of a breach thereof evolved in Philippine uristic sphere onl! %ithin the last decade. It

all started in ())& %ith Guzman, Bocaling & Co. v. Bonnevie'+%here the Court

held that a lease %ith a proviso "rantin" the lessee the ri"ht of first priorit! all thin"s

and conditions bein" e$ual #eant that there should be identit! of the ter#s and

conditions to be offered to the lessee and all other prospective bu!ers, %ith the lessee

to eno! the ri"ht of first priorit!. 8 deed of sale e7ecuted in favor of a third part! %ho

cannot be dee#ed a purchaser in "ood faith, and %hich is in violation of a ri"ht of first

refusal "ranted to the lessee is not voidable under the Statute of -rauds but

rescissible under 8rticles ('*A to ('*( '0 of the Ne% Civil Code.

Subse$uentl! in ())>, in the case ofAng Yu Asuncion v. Court of Appeals,'*the Court en an$departed fro# the doctrine laid do%n in Guzman, Bocaling &

Co. v. Bonnevieand refused to rescind a contract of sale %hich violated the ri"ht of

first refusal. he Court held that the so6called ri"ht of first refusal cannot be dee#ed a

perfected contract of sale under 8rticle (>?* of the Ne% Civil Code and, as such, a

breach thereof decreed under a final ud"#ent does not entitle the a""rieved part! to

a %rit of e7ecution of the ud"#ent but to an action for da#a"es in a proper foru# for

the purpose.

In the ())= case of Equatorial ealt! "evelopment, #nc. v. $a!fair %eater,

#nc.,')the Court en an$reverted bac; to the doctrine in Guzman Bocaling & Co. v.

Bonneviestatin" that rescission is a relief allo%ed for the protection of one of the

contractin" parties and even third persons fro# all inur! and da#a"e the contract

#a! cause or to protect so#e inco#patible and preferred ri"ht b! the contract.

hereafter in ())+, in 'araaque (ings Enterprises, #nc. v. Court of Appeals,>Athe Court affir#ed the nature of and the conco#itant ri"hts and obli"ations of

parties under a ri"ht of first refusal. he Court, su##ari2in" the rulin"s in Guzman,

Bocaling & Co. v. Bonnevieand Equatorial ealt! "evelopment, #nc. v. $a!fair

%eater, #nc., held that in order to have full co#pliance %ith the contractual ri"ht

"rantin" petitioner the first option to purchase, the sale of the properties for the price

for %hich the! %ere finall! sold to a third person should have li;e%ise been first

offered to the for#er. -urther, there should be identit! of ter#s and conditions to be

offered to the bu!er holdin" a ri"ht of first refusal if such ri"ht is not to be renderedillusor!. astl!, the basis of the ri"ht of first refusal #ust be the current offer to sell of

the seller or offer to purchase of an! prospective bu!er.

hus, the prevailin" doctrine is that a ri"ht of first refusal #eans identit! of ter#s

and conditions to be offered to the lessee and all other prospective bu!ers and a

contract of sale entered into in violation of a ri"ht of first refusal of another person,

%hile valid, is rescissible.

o%ever, %e #ust re#e#ber that "eneral propositions do not decide specific

cases. Rather, la%s are interpreted in the conte7t of the peculiar factual situation of

each proceedin". Each case has its o%n f lesh and blood and cannot be ruled upon on

the basis of isolated clinical classroo# principles.>(8nal!sis and construction should

not be li#ited to the %ords used in the contract, as the! #a! not accuratel! reflect the

parties true intent.>&he court #ust read a contract as the avera"e person %ould

read it and should not "ive it a strained or forced construction.>'

In the case at bar, the Court finds relevant and si"nificant the cardinal rule in the

interpretation of contracts that the intention of the parties shall be accorded pri#ordial

consideration and in case of doubt, their conte#poraneous and subse$uent acts shall

be principall! considered.>>Jhere the parties to a contract have "iven it a practical

construction b! their conduct as b! acts in partial perfor#ance, such construction #a!

be considered b! the court in construin" the contract, deter#inin" its #eanin" and

ascertainin" the #utual intention of the parties at the ti#e for contractin". he parties
http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn34http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn35http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn35http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn36http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn37http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn37http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn38http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn39http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn40http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn41http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn41http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn42http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn43http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn44http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn44http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn34http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn35http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn36http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn37http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn38http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn39http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn40http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn41http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn42http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn43http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/117355.htm#_edn44


46/82

practical construction of their contract has been characteri2ed as a clue or inde7 to, or

as evidence of, their intention or #eanin" and as an i#portant, si"nificant, convincin",

persuasive, or influential factor in deter#inin" the proper construction of the contract.>?

8n e7a#ination of the attendant particulars of the case do not persuade us to

uphold Rivieras vie%. 8s clearl! sho%n b! the records and transcripts of the case, the

actions of the parties to the contract of lease, Re!es and Riviera, shaped their

understandin" and interpretation of the lease provision ri"ht of first refusal to #ean

si#pl! that should the lessor Re!es decide to sell the leased propert! durin" the ter#

of the lease, such sale should first be offered to the lessee Riviera. 8nd that is %hat

e7actl! ensued bet%een Re!es and Riviera, a series of ne"otiations on the price per

s$uare #eter of the subect propert! %ith neither part!, especiall! Riviera, un%illin" to

bud"e fro# his offer, as evidenced b! the e7chan"e of letters bet%een the t%o

contenders.

It can clearl! be discerned fro# Rivieras letters dated Dece#ber &, ()** and

-ebruar! >, ()*) that Riviera %as so intractable in its position and too; obvious

advanta"e of the ;no%led"e of the ti#e ele#ent in its ne"otiations %ith Re!es as the

rede#ption period of the subect foreclosed propert! dre% near. Riviera stron"l!

e7hibited a ta;e6it or leave6it attitude in its ne"otiations %ith Re!es. It $uoted its fi7edand final price as -ive housand Pesos P?,AAA.AA0 and not an! peso #ore. It voiced

out that it had other properties to c

civpro cases dec. 13

Documents