Republic of the Philippines

SUPREME COURT Manila

SECOND DIVISION

G.R. No. 152878 May 5, 2003

RIZAL COMMERCIAL BANKING CORPORATION, petitioner,

vs.

MAGWIN MARKETING CORPORATION, NELSON TIU, BENITO SY and

ANDERSON UY, respondents.

BELLOSILLO, J.:

WE ARE PERTURBED that this case should drag this Court in the banal attempts to decipher

the hazy and confused intent of the trial court in proceeding with what would have been a simple,

straightforward and hardly arguable collection case. Whether the dismissal without prejudice for

failure to prosecute was unconditionally reconsidered, reversed and set aside to reinstate the

civil case and have it ready for pre-trial are matters which should have been clarified and

resolved in the first instance by the court a quo. Unfortunately, this feckless imprecision of the

trial court became the soup stock of the parties and their lawyers to further delay the case below

when they could have otherwise put things in proper order efficiently and effectively.

On 4 March 1999 petitioner Rizal Commercial Banking Corporation (RCBC) filed a complaint

for recovery of a sum of money with prayer for a writ of preliminary attachment against

respondents Magwin Marketing Corporation, Nelson Tiu, Benito Sy and Anderson Uy.1 On 26

April 1999, the trial court issued a writ of attachment.2 On 4 June 1999 the writ was returned

partially satisfied since only a parcel of land purportedly owned by defendant Benito Sy was

attached.3 In the meantime, summons was served on each of the defendants, respondents herein,

who filed their respective answers, except for defendant Gabriel Cheng who was dropped

without prejudice as party-defendant as his whereabouts could not be located.4 On 21 September

1999 petitioner moved for an alias writ of attachment which on 18 January 2000 the court a quo

denied.5

Petitioner did not cause the case to be set for pre-trial.6 For about six (6) months thereafter,

discussions between petitioner and respondents Magwin Marketing Corporation, Nelson Tiu,

Benito Sy and Anderson Uy, as parties in Civil Case No. 99-518, were undertaken to restructure

the indebtedness of respondent Magwin Marketing Corporation.7 On 9 May 2000 petitioner

approved a debt payment scheme for the corporation which on 15 May 2000 was communicated

to the latter by means of a letter dated 10 May 2000 for the conformity of its officers, i.e.,

respondent Nelson Tiu as President/General Manager of Magwin Marketing Corporation and

respondent Benito Sy as Director thereof.8 Only respondent Nelson Tiu affixed his signature on

the letter to signify his agreement to the terms and conditions of the restructuring.9

On 20 July 2000 the RTC of Makati City, on its own initiative, issued an Order dismissing

without prejudice Civil Case No. 99-518 for failure of petitioner as plaintiff therein to "prosecute

its action for an unreasonable length of time . . .."10 On 31 July 2000 petitioner moved for

reconsideration of the Order by informing the trial court of respondents' unremitting desire to

settle the case amicably through a loan restructuring program.11 On 22 August 2000 petitioner

notified the trial court of the acquiescence thereto of respondent Nelson Tiu as an officer of

Magwin Marketing Corporation and defendant in the civil case.12

On 8 September 2000 the court a quo issued an Order reconsidering the dismissal without

prejudice of Civil Case No. 99-518 -

Acting on plaintiff's "Motion for Reconsideration" of the Order dated 20 July 2000

dismissing this case for failure to prosecute, it appearing that there was already

conformity to the restructuring of defendants' indebtedness with plaintiff by defendant

Nelson Tiu, President of defendant corporation per "Manifestation and Motion" filed by

plaintiff on 22 August 2000, there being probability of settlement among the parties, as

prayed for, the Order dated 20 July 2000 is hereby set aside.

Plaintiff is directed to submit the compromise agreement within 15 days from receipt

hereof. Failure on the part of plaintiff to submit the said agreement shall cause the

imposition of payment of the required docket fees for re-filing of this case.13

On 27 July 2000 petitioner filed in Civil Case No. 99-518 a Manifestation and Motion to Set

Case for Pre-Trial Conference alleging that "[t]o date, only defendant Nelson Tiu had affixed his

signature on the May 10, 2000 letter which informed the defendants that plaintiff [herein

petitioner] already approved defendant Magwin Marketing Corporations request for restructuring

of its loan obligations to plaintiff but subject to the terms and conditions specified in said

letter."14 This motion was followed on 5 October 2000 by petitioner's Supplemental Motion to

Plaintiffs Manifestation and Motion to Set Case for Pre-Trial Conference affirming that

petitioner "could not submit a compromise agreement because only defendant Nelson Tiu had

affixed his signature on the May 10, 2000 letter . . .."15 Respondent Anderson Uy opposed the

foregoing submissions of petitioner while respondents Magwin Marketing Corporation, Nelson

Tiu and Benito Sy neither contested nor supported them.16

The trial court, in an undated Order (although a date was later inserted in the Order), denied

petitioner's motion to calendar Civil Case No. 99-518 for pre-trial stating that -

Acting on plaintiff's [herein petitioner] "Manifestation and Motion to Set Case for Pre-

Trial Conference," the "Opposition" filed by defendant Uy and the subsequent

"Supplemental Motion" filed by plaintiff; defendant Uy's "Opposition," and plaintiff's

"Reply;" for failure of the plaintiff to submit a compromise agreement pursuant to the

Order dated 8 September 2000 plaintiff's motion to set case for pre-trial conference is

hereby denied.17

On 15 November 2000 petitioner filed its Notice of Appeal from the 8 September 2000 Order of

the trial court as well as its undated Order in Civil Case No. 99-518. On 16 November 2000 the

trial court issued two (2) Orders, one of which inserted the date "6 November 2000" in the

undated Order rejecting petitioner's motion for pre-trial in the civil case, and the other denying

due course to the Notice of Appeal on the ground that the "Orders dated 8 September 2000 and 6

November 2000 are interlocutory orders and therefore, no appeal may be taken . . .."18

On 7 December 2000 petitioner elevated the Orders dated 8 September 2000, 6 November 2000

and 16 November 2000 of the trial court to the Court of Appeals in a petition for certiorari under

Rule 65 of the Rules of Civil Procedure.19 In the main, petitioner argued that the court a quo had

no authority to compel the parties in Civil Case No. 99-518 to enter into an amicable settlement

nor to deny the holding of a pre-trial conference on the ground that no compromise agreement

was turned over to the court a quo.20

On 28 September 2001 the appellate court promulgated its Decision dismissing the petition for

lack of merit and affirming the assailed Orders of the trial court21 holding that -

. . . although the language of the September 8, 2000 Order may not be clear, yet, a careful

reading of the same would clearly show that the setting aside of the Order dated July 20,

2000 which dismissed petitioner's complaint . . . for failure to prosecute its action for an

unreasonable length of time is dependent on the following conditions, to wit: a) The

submission of the compromise agreement by petitioner within fifteen (15) days from

notice; and b) Failure of petitioner to submit the said compromise agreement shall cause

the imposition of the payment of the required docket fees for the re-filing of the case; so

much so that the non-compliance by petitioner of condition no. 1 would make condition

no. 2 effective, especially that petitioner's manifestation and motion to set case for pre-

trial conference and supplemental motion . . . [were] denied by the respondent judge in

his Order dated November 6, 2000, which in effect means that the Order dated July 20,

2000 was ultimately not set aside considering that a party need not pay docket fees for the

re-filing of a case if the original case has been revived and reinstated.22

On 2 April 2002 reconsideration of the Decision was denied; hence, this petition.

In the instant case, petitioner maintains that the trial court cannot coerce the parties in Civil Case

No. 99-518 to execute a compromise agreement and penalize their failure to do so by refusing to

go forward with the pre-trial conference. To hold otherwise, so petitioner avers, would violate

Art. 2029 of the Civil Code which provides that "[t]he court shall endeavor to persuade the

litigants in a civil case to agree upon some fair compromise," and this Court's ruling in Goldloop

Properties, Inc. v. Court of Appeals23 where it was held that the trial court cannot dismiss a

complaint for failure of the parties to submit a compromise agreement.

On the other hand, respondent Anderson Uy filed his comment after several extensions asserting

that there are no special and important reasons for undertaking this review. He also alleges that

petitioner's attack is limited to the Order dated 8 September 2000 as to whether it is conditional

as the Court of Appeals so found and the applicability to this case of the ruling in Goldloop

Properties, Inc. v. Court of Appeals. Respondent Uy claims that the Order reconsidering the

dismissal of Civil Case No. 99-518 without prejudice is on its face contingent upon the

submission of the compromise agreement which in the first place was the principal reason of

petitioner to justify the withdrawal of the Order declaring his failure to prosecute the civil case.

He further contends that the trial court did not force the parties in the civil case to execute a

compromise agreement, the truth being that it dismissed the complaint therein for petitioner's

dereliction.

Finally, respondent Uy contests the relevance of Goldloop Properties, Inc. v. Court of Appeals,

and refers to its incongruence with the instant case, i.e., that the complaint of petitioner was

dismissed for failure to prosecute and not for its reckless disregard to present an amicable

settlement as was the situation in Goldloop Properties, Inc., and that the dismissal was without

prejudice, in contrast with the dismissal with prejudice ordered in the cited case. For their part,

respondents Magwin Marketing Corporation, Nelson Tiu and Benito Sy waived their right to file

a comment on the instant petition and submitted the same for resolution of this Court.24

The petition of Rizal Commercial Banking Corporation is meritorious. It directs our attention to

questions of substance decided by the courts a quo plainly in a way not in accord with applicable

precedents as well as the accepted and usual course of judicial proceedings; it offers special and

important reasons that demand the exercise of our power of supervision and review.

Furthermore, petitioner's objections to the proceedings below encompass not only the Order of 8

September 2000 but include the cognate Orders of the trial court of 6 and 16 November 2000.

This is evident from the prayer of the instant petition which seeks to reverse and set aside the

Decision of the appellate court and to direct the trial court to proceed with the pre-trial

conference in Civil Case No. 99-518. Evidently, the substantive issue involved herein is whether

the proceedings in the civil case should progress, a question which at bottom embroils all the

Orders affirmed by the Court of Appeals.

On the task at hand, we see no reason why RTC-Br. 135 of Makati City should stop short of

hearing the civil case on the merits. There is no substantial policy worth pursuing by requiring

petitioner to pay again the docket fees when it has already discharged this obligation

simultaneously with the filing of the complaint for collection of a sum of money. The procedure

for dismissed cases when re-filed is the same as though it was initially lodged, i.e., the filing of

answer, reply, answer to counter-claim, including other foot-dragging maneuvers, except for the

rigmarole of raffling cases which is dispensed with since the re-filed complaint is automatically

assigned to the branch to which the original case pertained.25 A complaint that is re-filed leads to

the re-enactment of past proceedings with the concomitant full attention of the same trial court

exercising an immaculate slew of jurisdiction and control over the case that was previously

dismissed,26 which in the context of the instant case is a waste of judicial time, capital and

energy.

What judicial benefit do we derive from starting the civil case all over again, especially where

three (3) of the four (4) defendants, i.e., Magwin Marketing Corporation, Nelson Tiu and Benito

Sy, have not contested petitioner's plea before this Court and the courts a quo to advance to pre-

trial conference? Indeed, to continue hereafter with the resolution of petitioner's complaint

without the usual procedure for the re-filing thereof, we will save the court a quo invaluable time

and other resources far outweighing the docket fees that petitioner would be forfeiting should we

rule otherwise.

Going over the specifics of this petition and the arguments of respondent Anderson Uy, we rule

that the Order of 8 September 2000 did not reserve conditions on the reconsideration and

reversal of the Order dismissing without prejudice Civil Case No. 99-518. This is quite evident

from its text which does not use words to signal an intent to impose riders on the dispositive

portion -

Acting on plaintiff's "Motion for Reconsideration" of the Order dated 20 July 2000

dismissing this case for failure to prosecute, it appearing that there was already

conformity to the restructuring of defendants' indebtedness with plaintiff by defendant

Nelson Tiu, President of defendant corporation per "Manifestation and Motion" filed by

plaintiff on 22 August 2000, there being probability of settlement among the parties, as

prayed for, the Order dated 20 July 2000 is hereby set aside.

Plaintiff is directed to submit the compromise agreement within 15 days from receipt

hereof. Failure on the part of plaintiff to submit the said agreement shall cause the

imposition of payment of the required docket fees for re-filing of this case.27

Contrary to respondent Uy's asseverations, the impact of the second paragraph upon the first is

simply to illustrate what the trial court would do after setting aside the dismissal without

prejudice: submission of the compromise agreement for the consideration of the trial court.

Nothing in the second paragraph do we read that the reconsideration is subject to two (2)

qualifications. Certainly far from it, for in Goldloop Properties, Inc. v. Court of Appeals28 a

similar directive, i.e., "[t]he parties are given a period of fifteen (15) days from today within

which to submit a Compromise Agreement," was held to mean that "should the parties fail in

their negotiations the proceedings would continue from where they left off." Goldloop

Properties, Inc. further said that its order, or a specie of it, did not constitute an agreement or

even an expectation of the parties that should they fail to settle their differences within the

stipulated number of days their case would be dismissed.

The addition of the second sentence in the second paragraph does not change the absolute

nullification of the dismissal without prejudice decreed in the first paragraph. The sentence

"[f]ailure on the part of plaintiff to submit the said agreement shall cause the imposition of

payment of the required docket fees for re-filing of this case" is not a directive to pay docket fees

but only a statement of the event that may result in its imposition. The reason for this is that the

trial court could not have possibly made such payment obligatory in the same civil case, i.e.,

Civil Case No. 99-518, since docket fees are defrayed only after the dismissal becomes final and

executory and when the civil case is re-filed.

It must be emphasized however that once the dismissal attains the attribute of finality, the trial

court cannot impose legal fees anew because a final and executory dismissal although without

prejudice divests the trial court of jurisdiction over the civil case as well as any residual power to

order anything relative to the dismissed case; it would have to wait until the complaint is

docketed once again.29 On the other hand, if we are to concede that the trial court retains

jurisdiction over Civil Case No. 99-518 for it to issue the assailed Orders, a continuation of the

hearing thereon would not trigger a disbursement for docket fees on the part of petitioner as this

would obviously imply the setting aside of the order of dismissal and the reinstatement of the

complaint.

Indubitably, it is speculative to reckon the effectivity of the Order of dismissal without prejudice

to the presentation of the compromise agreement. If we are to admit that the efficacy of the

invalidation of the Order of dismissal is dependent upon this condition, then we must inquire:

from what date do we count the fifteen (15)-day reglementary period within which the alleged

revival of the order of dismissal began to run? Did it commence from the lapse of the fifteen (15)

days provided for in the Order of 8 September 2000? Or do we count it from the 6 November

2000 Order when the trial court denied the holding of a pre-trial conference? Or must it be upon

petitioner's receipt of the 16 November 2000 Order denying due course to its Notice of Appeal?

The court a quo could not have instituted an Order that marked the proceedings before it with a

shadow of instability and chaos rather than a semblance of constancy and firmness.

The subsequent actions of the trial court also belie an intention to revive the Order of dismissal

without prejudice in the event that petitioner fails to submit a compromise agreement. The

Orders of 6 and 16 November 2000 plainly manifest that it was retaining jurisdiction over the

civil case, a fact which would not have been possible had the dismissal without prejudice been

resuscitated. Surely, the court a quo could not have denied on 6 November 2000 petitioner's

motion to calendar Civil Case No. 99-518 for pre-trial if the dismissal had been restored to life in

the meantime. By then the dismissal without prejudice would have already become final and

executory so as to effectively remove the civil case from the docket of the trial court.

The same is true with the Order of 16 November 2000 denying due course to petitioner's Notice

of Appeal. There would have been no basis for such exercise of discretion because the

jurisdiction of the court a quo over the civil case would have been discharged and terminated by

the presumed dismissal thereof. Moreover, we note the ground for denying due course to the

appeal: the "Orders dated 8 September 2000 and 6 November 2000 are interlocutory orders and

therefore, no appeal may be taken from . . .."30 This declaration strongly suggests that something

more was to be accomplished in the civil case, thus negating the claim that the Order of

dismissal without prejudice was resurrected upon the parties' failure to yield a compromise

agreement. A "final order" issued by a court has been defined as one which disposes of the

subject matter in its entirety or terminates a particular proceeding or action, leaving nothing else

to be done but to enforce by execution what has been determined by the court, while an

"interlocutory order" is one which does not dispose of a case completely but leaves something

more to be decided upon.31

Besides the semantic and consequential improbabilities of respondent Uy's argument, our ruling

in Goldloop Properties, Inc., is decisive of the instant case. In Goldloop Properties, Inc., we

reversed the action of the trial court in dismissing the complaint for failure of the plaintiff to

prosecute its case, which was in turn based on its inability to forge a compromise with the other

parties within fifteen (15) days from notice of the order to do so and held -

Since there is nothing in the Rules that imposes the sanction of dismissal for failing to

submit a compromise agreement, then it is obvious that the dismissal of the complaint on

the basis thereof amounts no less to a gross procedural infirmity assailable by certiorari.

For such submission could at most be directory and could not result in throwing out the

case for failure to effect a compromise. While a compromise is encouraged, very strongly

in fact, failure to consummate one does not warrant any procedural sanction, much less

an authority to jettison a civil complaint worth P4,000,000.00 . . . Plainly, submission of a

compromise agreement is never mandatory, nor is it required by any rule.32

As also explained therein, the proper course of action that should have been taken by the court a

quo, upon manifestation of the parties of their willingness to discuss a settlement, was to suspend

the proceedings and allow them reasonable time to come to terms (a) If willingness to discuss a

possible compromise is expressed by one or both parties; or (b) If it appears that one of the

parties, before the commencement of the action or proceeding, offered to discuss a possible

compromise but the other party refused the offer, pursuant to Art. 2030 of the Civil Code. If

despite efforts exerted by the trial court and the parties the negotiations still fail, only then should

the action continue as if no suspension had taken place.33

Ostensibly, while the rules allow the trial court to suspend its proceedings consistent with the

policy to encourage the use of alternative mechanisms of dispute resolution, in the instant case,

the trial court only gave the parties fifteen (15) days to conclude a deal. This was, to say the

least, a passive and paltry attempt of the court a quo in its task of persuading litigants to agree

upon a reasonable concession.34 Hence, if only to inspire confidence in the pursuit of a middle

ground between petitioner and respondents, we must not interpret the trial court's Orders as

dismissing the action on its own motion because the parties, specifically petitioner, were anxious

to litigate their case as exhibited in their several manifestations and motions.

We reject respondent Uy's contention that Goldloop Properties, Inc. v. Court of Appeals is

irrelevant to the case at bar on the dubious reasoning that the complaint of petitioner was

dismissed for failure to prosecute and not for the non-submission of a compromise agreement

which was the bone of contention in that case, and that the dismissal imposed in the instant case

was without prejudice, in contrast to the dismissal with prejudice decreed in the cited case. To

begin with, whether the dismissal is with or without prejudice if grievously erroneous is

detrimental to the cause of the affected party; Goldloop Properties, Inc. does not tolerate a

wrongful dismissal just because it was without prejudice. More importantly, the facts in

Goldloop Properties, Inc. involve, as in the instant case, a dismissal for failure to prosecute on

the ground of the parties' inability to come up with a compromise agreement within fifteen (15)

days from notice of the court's order therein. All told, the parallelism between them is

unmistakable.

Even if we are to accept on face value respondent's understanding of Goldloop Properties, Inc.

as solely about the failure to submit a compromise agreement, it is apparent that the present case

confronts a similar problem. Perhaps initially the issue was one of failure to prosecute, as can be

observed from the Order dated 20 July 2000, although later reversed and set aside. But

thereafter, in the Order of 6 November 2000, the trial court refused to proceed to pre-trial owing

to the "failure of the plaintiff to submit a compromise agreement pursuant to the Order dated 8

September 2000." When the civil case was stalled on account of the trial court's refusal to call

the parties to a pre-trial conference, the reason or basis therefor was the absence of a negotiated

settlement - a circumstance that takes the case at bar within the plain ambit of Goldloop

Properties, Inc. In any event, given that the instant case merely revolves around the search for a

reasonable interpretation of the several Orders of the trial court, i.e., as to whether the dismissal

without prejudice was revived upon petitioner's helplessness to perfect an out-of-court

arrangement, with more reason must we employ the ruling in Goldloop Properties, Inc. to

resolve the parties' differences of opinion.

We also find nothing in the record to support respondent Uy's conclusion that petitioner has been

mercilessly delaying the prosecution of Civil Case No. 99-518 to warrant its dismissal. A

complaint may be dismissed due to plaintiff's fault: (a) if he fails to appear during a scheduled

trial, especially on the date for the presentation of his evidence in chief, or when so required at

the pre-trial; (b) if he neglects to prosecute his action for an unreasonable length of time; or (c) if

he does not comply with the rules or any order of the court. None of these was obtaining in the

civil case.

While there was a lull of about six (6) months in the prosecution of Civil Case No. 99-518, it

must be remembered that respondents themselves contributed largely to this delay. They

repeatedly asked petitioner to consider re-structuring the debt of respondent Magwin Marketing

Corporation to which petitioner graciously acceded. Petitioner approved a new debt payment

scheme that was sought by respondents, which it then communicated to respondent Corporation

through a letter for the conformity of the latter's officers, i.e., respondent Nelson Tiu as

President/General Manager and respondent Benito Sy as Director thereof. Regrettably, only

respondent Nelson Tiu affixed his signature on the letter to signify his concurrence with the

terms and conditions of the arrangement. The momentary lag in the civil case was aggravated

when respondent Benito Sy for unknown and unexplained reasons paid no heed to the

adjustments in the indebtedness although curiously he has not opposed before this Court or the

courts a quo petitioner's desire to go ahead with the pre-trial conference.

Admittedly, delay took place in this case but it was not an interruption that should have entailed

the dismissal of the complaint even if such was designated as without prejudice. To constitute a

sufficient ground for dismissal, the inattention of plaintiff to pursue his cause must not only be

prolonged but also be unnecessary and dilatory resulting in the trifling of judicial processes. In

the instant case, the adjournment was not only fleeting as it lasted less than six (6) months but

was also done in good faith to accommodate respondents' incessant pleas to negotiate. Although

the dismissal of a case for failure to prosecute is a matter addressed to the sound discretion of the

court, that judgment however must not be abused. The availability of this recourse must be

determined according to the procedural history of each case, the situation at the time of the

dismissal, and the diligence of plaintiff to proceed therein.35 Stress must also be laid upon the

official directive that courts must endeavor to convince parties in a civil case to consummate a

fair settlement36 and to mitigate damages to be paid by the losing party who has shown a sincere

desire for such give-and-take.37 All things considered, we see no compelling circumstances to

uphold the dismissal of petitioner's complaint regardless of its characterization as being without

prejudice.

In fine, petitioner cannot be said to have lost interest in fighting the civil case to the end. A court

may dismiss a case on the ground of non prosequitur but the real test of the judicious exercise of

such power is whether under the circumstances plaintiff is chargeable with want of fitting

assiduousness in not acting on his complaint with reasonable promptitude. Unless a party's

conduct is so indifferent, irresponsible, contumacious or slothful as to provide substantial

grounds for dismissal, i.e., equivalent to default or non-appearance in the case, the courts should

consider lesser sanctions which would still amount to achieving the desired end.38 In the absence

of a pattern or scheme to delay the disposition of the case or of a wanton failure to observe the

mandatory requirement of the rules on the part of the plaintiff, as in the case at bar, courts should

decide to dispense rather than wield their authority to dismiss.39

Clearly, another creative remedy was available to the court a quo to attain a speedy disposition

of Civil Case No. 99-518 without sacrificing the course of justice. Since the failure of petitioner

to submit a compromise agreement was the refusal of just one of herein respondents, i.e., Benito

Sy, to sign his name on the conforme of the loan restructure documents, and the common

concern of the courts a quo was dispatch in the proceedings, the holding of a pre-trial conference

was the best-suited solution to the problem as this stage in a civil action is where issues are

simplified and the dispute quickly and genuinely reconciled. By means of pre-trial, the trial court

is fully empowered to sway the litigants to agree upon some fair compromise.

Dismissing the civil case and compelling petitioner to re-file its complaint is a dangerous, costly

and circuitous route that may end up aggravating, not resolving, the disagreement. This case

management strategy is frighteningly deceptive because it does so at the expense of petitioner

whose cause of action, perhaps, may have already been admitted by its adverse parties as shown

by three (3) of four (4) defendants not willing to contest petitioner's allegations, and more

critically, since this approach promotes the useless and thankless duplication of hard work

already undertaken by the trial court. As we have aptly observed, "[i]nconsiderate dismissals,

even if without prejudice, do not constitute a panacea nor a solution to the congestion of court

dockets. While they lend a deceptive aura of efficiency to records of individual judges, they

merely postpone the ultimate reckoning between the parties. In the absence of clear lack of merit

or intention to delay, justice is better served by a brief continuance, trial on the merits, and final

disposition of the cases before the court."40

WHEREFORE, the Petition for Review is GRANTED. The Decision dated 28 September 2001

and Resolution dated 2 April 2002 of the Court of Appeals in CA-G.R. SP No. 62102 are

REVERSED and SET ASIDE.

The Orders dated 8 September 2000, 6 November 2000 and 16 November 2000 of the Regional

Trial Court, Branch 135, of Makati City, docketed as Civil Case No. 99-518, are also

REVERSED and SET ASIDE insofar as these Orders are interpreted to impose upon and collect

anew from petitioner RIZAL COMMERCIAL BANKING CORPORATION docket or legal fees

for its complaint, or to dismiss without prejudice Civil Case No. 99-518, or to preclude the trial

court from calling the parties therein to pre-trial conference, or from proceeding thereafter with

dispatch to resolve the civil case.

Civil Case No. 99-518 is deemed REINSTATED in, as it was never taken out from, the dockets

of the Regional Trial Court, Branch 135, of Makati City. The trial court is ORDERED to

exercise its jurisdiction over Civil Case No. 99-518, to CONDUCT the pre-trial conference

therein with dispatch, and to UNDERTAKE thereafter such other proceedings as may be

relevant, without petitioner being charged anew docket or other legal fees in connection with its

reinstatement. Costs against respondents.

SO ORDERED.

Quisumbing, Austria-Martinez and Callejo, Sr., JJ ., concur.

Republic of the Philippines

SUPREME COURT Manila

THIRD DIVISION

A.M. No. MTJ-03-1513 November 12, 2003

Spouses JAIME and PURIFICACION MORTA, Complainants.

vs.

Judge ANTONIO C. BAGAGÑAN, Municipal Trial Court, Guinobatan, Albay; and

Sheriff DANILO O. MATIAS, Regional Trial Court, Branch 14, Ligao, Albay,

Respondents.

D E C I S I O N

PANGANIBAN, J.:

Unreasonable delay in resolving motions opens a judge to administrative sanctions. Likewise, a

sheriff is administratively liable for delayed implementation of a writ of execution and failure to

render the required reports thereon. These are necessary lessons from the time-honored principle

that "justice delayed is justice denied."

The Case and the Facts

In their Administrative Complaint1 dated July 26, 2001, Spouses Jaime and Purificacion Morta

Sr. charged Judge Antonio C. Bagagñan of the Municipal Trial Court (MTC) of Guinobatan,

Albay with gross ignorance of the law, incompetence, bias and delay. They also indicted Sheriff

Danilo O. Matias of the Regional Trial Court (RTC) of Ligao, Albay (Branch 14) with gross

ignorance of the law, negligence and connivance with the defendants in Civil Case Nos. 481 and

482 (MTC, Guinobatan, Albay). The Office of the Court Administrator (OCA) summarized the

factual antecedents as follows:

"x x x [In] a Complaint-Affidavit dated July 26, 2001 (with enclosures), x x x [Spouses] Jaime

and Purificacion Morta[,] through their counsel[,] Atty. Rodolfo R. Paulino[,] charg[ed]

[Respondent] Judge Antonio C. Bagagñan and Sheriff Danilo O. Matias with gross ignorance of

the law and procedure, incompetence, bias and delay in the disposition of Civil Case No. 481,

entitled ‘Jaime Morta, Sr. and Purficacion Padilla vs. Jamie Occidental and Atty. Mariano

Baranda, Jr.’, for Damages with Prayer for a Writ of Preliminary Injunction, and Civil Case No.

482 entitled ‘Jaime Morta, Sr. and Purficacion Padilla vs. Jamie Occidental, Atty. Mariano

Baranda, Jr. and Daniel Corral’, for Damages with Prayer for a Writ of Preliminary Injunction.

"Complainants, who are the plaintiffs in the aforementioned civil cases, allege[d] that on March

29, 1994[,] the Municipal Trial Court [of] Guinobatan, Albay rendered a decision in their favor.

The decretal portion of the decision reads:

‘WHEREFORE, in view of the foregoing considerations, judgment is rendered in favor of the

plaintiffs and against the defendants in both cases as follows:

1) Ordering the defendants not to molest and disturb the peaceful possession of the

plaintiffs in the lands in question situated at San Rafael, Guinobatan;

2) Condemning the defendants in Civil Case No. 481 to jointly and severally pay the

plaintiffs the total amount of P8,130.00 representing the value of the coconuts, pili nuts

and anahaw leaves and for the destroyed plants;

3) Ordering the defendants in Civil Case No. 481 jointly and severally to reimburse the

plaintiffs the amount of P202.00 as legal expenses incurred in filing their suit;

4) Condemning the defendants in Civil Case No. 482 jointly and severally to pay the

plaintiffs the total amount of P9,950.00 representing the value of the coconuts and

anahaw leaves;

5) Ordering the said defendants in Civil Case No. 482 to jointly and severally reimburse

the plaintiffs the sum of P202.00 as legal expenses in filing this suit.’

"The defendants appealed to the Regional Trial Court [of] Ligao, Albay. In its decision dated

August 10, 1994, the Regional Trial Court [RTC] dismissed the aforesaid cases on the ground

that the claims for damages are tenancy-related problems which fall under the original and

exclusive jurisdiction of the Department of Agrarian Reform Adjudicatory Board (DARAB). On

September 9, 1994, the plaintiffs filed a petition for review with the Court of Appeals assailing

the decision of the RTC. However, in its decision dated May 31, 1995, the Court of Appeals

affirmed the lower court’s ruling that the cases fall within the original and exclusive jurisdiction

of DARAB. Thereafter, the First Division of this Court, acting on the petition for review on

certiorari filed by the plaintiffs, rendered its decision dated June 10, 1999 in G.R. No. 123417

affirming the decision of the Municipal Trial Court, Guinobatan, Albay in Civil Case Nos. 481

and 482 and thereby setting aside the decision of the Court of Appeals in CA-GR SP No. 35300

and that of the Regional Trial Court in Civil Cases Nos. 1751 and 1752.

"They now complain that despite the fact that the decision of the Supreme Court in the aforesaid

case had already become final and executory, the respondent Judge still refused to issue a writ of

possession in their favor.

"Complainants further allege that on June 6, 2000 they filed a motion to cite Jaime Occidental

for contempt of court. Although more than one (1) year had already elapsed since the motion was

filed in the respondent Judge’s sala, the same had remained unresolved up to the filing of the

instant complaint.

"As against the respondent Sheriff, the complainants aver[red] that through his ignorance,

negligence and connivance with the defendants, he failed to execute in full the writ of execution

that had been previously issued by the court in Civil Case Nos. 481 and 482. Moreover, it took

respondent Sheriff a long time before he finally submitted his Sheriff's Return of Service on the

Writ of Execution."2

In his Answer/Comment3 dated April 2, 2002, respondent judge explained that he had denied

complainants’ Motion for the issuance of a writ of possession because, by the time Civil Case

Nos. 481 and 482 were finally decided by this Court on June 10, 1999, they had already been

ousted from the lots in question pursuant to the Decisions in DARAB Case No. 2413 and Civil

Case No. 1920. In Civil Case No. 1920, respondent judge ordered complainants to vacate the

disputed lots. A Writ of Execution/Demolition was thereafter issued on January 29, 1998. On the

other hand, the DARAB Decision, which became final and executory on October 27, 1998,

directed them to cease and desist from disturbing the peaceful possession of therein Petitioner

Jaime Occidental.

Regarding the alleged delay in the resolution of the Motion for Contempt filed by complainants,

respondent judge contended that an ocular inspection and a hearing had been conducted by his

court as early as June 16, 2000, to determine if their Motion had any basis. With the consent of

their counsel, the hearing had to be deferred, however, pending receipt of the Sheriff’s Report in

Civil Case No. 1920.

For his part, Respondent Sheriff Matias admitted in his Comment4 dated April 18, 2002, that

there was delay in the full implementation of the Writ of Execution in Civil Case Nos. 481 and

482. Explaining that the delay was due to his heavy workload and thus unintentional, he begged

for compassion from this Court.

Evaluation and Recommendation of the OCA

The OCA found that the explanation of respondent judge for not granting the Motion for

Execution, filed by complainants, was sufficient. According to the court administrator, the

records showed that they had indeed been evicted from the lots they were claiming when Civil

Case Nos. 481 and 482 were finally decided by the Supreme Court on June 10, 1999.5 Moreover,

it emphasized that this Court had merely affirmed the Decision of the MTC insofar as the award

of damages was concerned.

As to complainants’ Motion to cite Occidental in contempt, the OCA held that the delay was due

primarily to the need of the court to clarify some important matters, not to the negligence or

partiality of respondent. Accordingly, it recommended that the charges against him be dismissed

for lack of merit.

On the other hand, the OCA found that Sheriff Matias had failed to implement the Writ of

Execution promptly and efficiently. It recommended that he be ordered to pay a fine of P1,000,

with a warning that a repetition of the same or a similar act in the future would be dealt with

more severely.

The Court’s Ruling

We modify the OCA’s findings and recommended penalties, consistent with Rule 140 of the

Revised Rules of Court and the Revised Uniform Rules on Administrative Cases in the Civil

Service.

Administrative Liability

We agree with the OCA that respondent judge acted correctly in not issuing a writ of

execution/possession. His action was consistent with the Decision of this Court in GR No.

123417 affirming that of the MTC as to damages. Besides, the latter’s Order directing defendants

not to molest complainants in their peaceful possession was rendered moot when they were

ousted from the disputed lots by virtue of the final and executory judgments in Civil Case No.

1920 and DARAB Case No. 2413. Indeed, the execution of a final judgment may be refused, as

in this case, when there has been a change in the situation of the parties that would make its

execution inequitable.6

The delay in the resolution of complainants’ Motion, however, is an altogether different matter.

The Code of Judicial Conduct enjoins trial court judges, as paragons of justice in the first

instance, to dispose of the court’s business promptly7 and to decide cases and motions within the

required periods.8 Section 15(1) of Article VIII of the Constitution mandates them to do so

within three months from the date of submission for decision or final resolution. This Court,

through Administrative Circular No. 1,9 also specifically requires all of them to act promptly on

all motions and interlocutory matters pending before their courts.10

Hence, it is well-settled that the unexplained failure of judges to decide cases and resolve

motions and incidents within the reglementary period of 90 days, which is fixed by the

Constitution and the law, renders them administratively liable.11 We have stressed often enough

that delay in the administration of justice undermines the faith of the people in the judiciary,

which is expected to hear their supplications promptly. Delay reinforces in the mind of litigants

the impression that the wheels of justice grind ever so slowly.12 As the time-honored principle

goes, "justice delayed is justice denied."

In this case, respondent judge never resolved the Motion, filed on June 6, 2000, to cite Defendant

Occidental for contempt. While it is true that the former immediately conducted an ocular

inspection of the area to determine if the Motion had any basis, this act served only to mitigate

his infraction, but not absolve him from it. The Sheriff’s Return of Service of the Writ of

Demolition issued in Civil Case No. 1920 would have clarified whether or not Occidental had

already been fully restored in possession. But while its absence was a valid reason to defer action

on the contempt Motion at the outset, it was certainly not an excuse for the prolonged inaction.

Had respondent judge been so minded, he would have requested a copy of the Sheriff’s Report,

so that he could rule on the Motion with dispatch. He has not satisfactorily explained his failure

to do so, considering that the Writ of Demolition issued in Civil Case No. 1920 had been fully

executed as early as February 25, 1998, and the return thereon made on March 17, 1998.13

With respect to the charges against respondent sheriff, we agree with the OCA that he was

remiss in his duty to implement the Writ fully in Civil Case Nos. 481 and 482.1a\^/phi1 Time

and time again, we have impressed upon those tasked to implement court orders and processes to

see to it that the final stage in the litigation process -- the execution of judgment -- be carried out

promptly. They should exert every effort and indeed consider it their bounden duty to do so, in

order to ensure the speedy and efficient administration of justice.14 A decision that is left

unexecuted or delayed indefinitely because of the sheriff’s inefficiency or negligence remains an

empty victory on the part of the prevailing party.15 For this reason, any inordinate delay in the

execution of judgment is truly deplorable and cannot be countenanced by the Court.1a\^/phi1

There is no mistaking the mandatory character of the period prescribed under Section 14 of Rule

39 of the Revised Rules of Court on the Return of a Writ of Execution, which reads:

"SEC. 14. Return of writ of execution. – The writ of execution shall be returnable to the court

issuing it immediately after the judgment has been satisfied in part or in full. If the judgment

cannot be satisfied in full within thirty (30) days after his receipt of the writ, the officer shall

report to the court and state the reason therefor. Such writ shall continue in effect during the

period within which the judgment may be enforced by motion. The officer shall make a report to

the court every thirty (30) days on the proceedings taken thereon until the judgment is satisfied in

full, or its effectivity expires. The returns or periodic reports shall set forth the whole of the

proceedings taken, and shall be filed with the court and copies thereof promptly furnished the

parties."

A similar rule is stated in Administrative Circular No. 12 dated October 1, 1985, and

incorporated in the Manual for Clerks of Court.16 According to this Circular, all sheriffs and

deputy sheriffs shall submit to the judge concerned a report on actions taken on all writs and

processes assigned to them within 10 days from receipt.

Per the records of this case, a Writ of Execution was issued on November 22, 1999 in Civil Case

Nos. 481 and 482.17 Respondent Sheriff’s Return of Service18 of that Writ was filed only on May

25, 2000, however, or six months thereafter. There is nothing in the records showing that he

submitted before then a periodic report on the actions he had taken on the Writ "every 30 days

from the date of receipt" as required. On the contrary, the Report indicates that the Writ was

partially executed on December 15-28, 1999 and January 11, 2000; and that the damages

adjudged were partly paid in the amount of P3,500 plus one unit of Karaoke machine. But it was

only on May 25, 2000, that this matter was reported to the trial court.

The excuse proffered by respondent sheriff -- heavy workload -- cannot absolve him from

administrative sanctions.19 As an officer of the court, he should at all times show a high degree

of professionalism in the performance of his duties.20 He has failed to observe that degree of

dedication required of him as a sheriff. The charge of connivance is, however, dismissed for lack

of basis.

Although the OCA recommended that Respondent Judge Bagagñan be absolved of all charges,

we find him guilty of undue delay21 in resolving a pending motion, an infraction that also

constitutes a violation of a Court circular.22 Under Section 11(B) of Rule 140 of the Revised

Rules of Court, this less serious charge23 may be sanctioned by a fine of more than P10,000, but

not exceeding P20,000.

As to Sheriff Matias, we find him guilty of simple neglect of duty,24 a less grave offense under

the Revised Uniform Rules on Administrative Cases in the Civil Service. This infraction is

punishable by a suspension of one month and one day to six months.25 But under the

circumstances, we find it inadvisable to suspend respondent sheriff, considering that his work

would be left unattended in his absence. Instead, we adopt our previous ruling in Aquino v.

Lavadia 26 imposing a fine equivalent to his one-month salary, so that he can finally implement

the subject Writ and perform his other duties.

WHEREFORE, Judge Antonio C. Bagagñan of the Municipal Trial Court of Guinobatan, Albay,

is found guilty of unreasonable delay and is FINED P11,000 with a stern warning that a

repetition of the same or a similar act in the future shall be dealt with more severely. On the other

hand, Sheriff Danilo O. Matias of the Regional Trial Court of Ligao, Albay (Branch 14), is

ordered to pay a fine equivalent to his one-month salary, with a similar warning of stiffer

sanctions for the same or a similar act.

SO ORDERED.

Puno, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

Republic of the Philippines

SUPREME COURT Manila

SECOND DIVISION

G.R. No. 133883 December 10, 2003

SPOUSES ARTURO AND NICETA SERRANO, petitioners,

vs.

COURT OF APPEALS AND HEIRS OF EMILIO S. GELI, respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court of the

Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 45573 setting aside the Order of the

Regional Trial Court of Quezon City in Civil Case No. Q-24790 with motion of herein

petitioners, Spouses Arturo and Niceta Serrano, for the issuance of an alias writ of execution.2

The Antecedents

The Spouses Serrano were the owners of a parcel of land as well as the house constructed

thereon located at Road 4, Project 6, Diliman, Quezon City, covered by Transfer Certificate of

Title No. 80384, and a parcel of land located in Caloocan City, covered by Transfer Certificate

of Title No. 15191. The couple mortgaged the said properties in favor of the Government Service

Insurance System (GSIS) as security for a loan of P50,000. By June 1969, the couple was able to

pay only the amount of P18,000.

On June 23, 1969, the Spouses Serrano, as vendors, and Spouses Emilio and Evelyn Geli, as

vendees, executed a deed of absolute sale with partial assumption of mortgage over the parcel of

land covered by TCT No. 80384 and the house thereon for the price of P70,000. The Spouses

Geli paid the amount of P38,000 in partial payment of the property, the balance of P32,000 to be

paid by them to the GSIS for the account of the Spouses Serrano. The Spouses Geli thereafter

took possession of the property. In the meantime, Evelyn Geli died intestate and was survived by

her husband Emilio Geli and their children.

However, Emilio Geli and his children failed to settle the amount of P32,000 to the GSIS. The

latter forthwith filed a complaint against Emilio Geli and his children with the Regional Trial

Court of Quezon City for the rescission of the deed of absolute sale with partial assumption of

mortgage. The defendants therein alleged, by way of special defense, that the plaintiffs Spouses

Serrano failed to furnish them with a detailed statement of the account due from the GSIS, thus

accounting for their failure to remit the balance of the loan to the GSIS. On September 6, 1984,

the trial court rendered judgment ordering the rescission of the said deed, the decretal portion of

which reads:

WHEREFORE, judgment is hereby rendered: a) ordering the rescission of the Deed of Absolute

Sale with Assumption of Mortgage, dated June 23, 1969; b) ordering defendant Emilio S. Geli

and all persons claiming under him, including the other defendants Oswaldo, Eugenia, Marilyn,

Cristopher and Ray, all surnamed Geli, to vacate the house and lot located at No. 110 A-1, Road

4, Project 6, Quezon City, and to turn over the peaceful possession of the premises to plaintiffs

Arturo Serrano and Niceta M. Serrano; c) ordering defendant Emilio S. Geli to pay plaintiffs the

amount of P1,000.00 a month representing reasonable compensation for the use and occupancy

of the premises starting June 23, 1969 up to the time the defendant Geli and all other persons

claiming under them including the other defendants, shall have completely vacated the property,

deducting therefrom the sum of P38,000.00 paid by defendant Geli to plaintiffs as part of the

aforesaid compensation; and, d) ordering defendant Emilio S. Geli to pay plaintiffs the sum of

P10,000.00 representing exemplary damages. Costs against defendant Emilio S. Geli.3

Emilio Geli and his children appealed the decision to the CA on October 19, 1984. During the

pendency of the appeal, the GSIS foreclosed the real estate mortgage over the property for non-

payment of the P50,000 loan secured by the said property. At the sale on public auction, the

GSIS was the highest bidder. A certificate of sale over the property was thereby issued by the

sheriff in its favor on August 30, 1986. On October 30, 1987 and November 3, 1987, Emilio Geli

paid the redemption price of P67,701.844 to the GSIS. Official Receipts Nos. 905401 and 901685

for the said amount with the notation "for the account of Arturo Serrano" were issued.

Accordingly, on February 22, 1988, the GSIS executed a certificate of redemption5 and turned

over to Emilio Geli the owner’s copy of TCT No. 80384 in the names of the Spouses Serrano.

Emilio Geli did not inform the Spouses Serrano and the CA that he had paid the redemption

price to the GSIS.

On January 8, 1991, the CA dismissed the appeal of Emilio Geli and his children on the ground

that the appellants failed to pay the requisite docket fees despite notices from the appellate court.

No motion for the reconsideration of the resolution was filed. Thus, the said dismissal of the

appeal became final and executory. The Court of Appeals forthwith issued an Entry of Judgment

on February 27, 1991.

After the remand of the records, the Spouses Serrano filed with the RTC on January 14, 1994 a

motion for the execution of the trial court’s September 6, 1984 Decision. On February 15, 1994,

the trial court issued an order granting the motion and forthwith issued a writ of execution. The

writ, however, was not implemented as the Spouses Serrano were then in the United States. On

August 1, 1995, the trial court issued an alias writ of execution on motion of the plaintiffs. This,

too, was not implemented, because of the defendants’ change of address. On May 9, 1996, the

trial court issued an order granting the motion of the plaintiffs for a second alias writ of

execution. On September 6, 1996, the defendants filed a motion to quash the same claiming, for

the first time, that defendant Emilio Geli had already redeemed the subject property in 1988 from

the GSIS. According to the defendants, this constituted a supervening event that would make the

execution of the trial court’s decision unjust and inequitable.

On May 19, 1997, the trial court issued an order denying the aforesaid motion of the defendants.

It noted that the payment by defendant Emilio Geli of the redemption price to the GSIS took

place before the CA dismissed the appeal and before the decision of the RTC became final and

executory; hence, it did not constitute a supervening event warranting a quashal of the writ of

execution. The trial court cited the ruling of this Court in Lim v. Jabalde.6

On September 18, 1997, the trial court issued an order granting the motion for the issuance of

another alias writ of execution filed by the Spouses Serrano, to wit:

The Motion to Quash Writ of Execution, filed by defendants having been earlier denied and, it

being explicit under the New Rules of Civil Procedure (1997) that no appeals may be taken from

orders of execution, instead of giving due course to the appeal interposed by defendant, the court

resolves to grant the motion for the issuance of an Alias Writ of Execution.7

On September 26, 1997, the trial court issued an Alias Writ of Execution.8 Conformably with

said writ, the sheriff served a Sheriff’s Notice to Vacate9 on the defendants. In the meantime,

Emilio Geli died intestate and was survived by his children.

On October 10, 1997, the heirs of Emilio Geli filed with the Court of Appeals a petition for

certiorari and/or prohibition praying for the nullification of the May 19, 1997 and September 18,

1997 Orders of the trial court. They alleged inter alia that when their father Emilio Geli paid the

redemption price to the GSIS on October 30, 1987 and November 3, 1987, their appeal of the

September 6, 1984 Decision of the RTC in Civil Case No. Q-24790 before the CA was still

pending resolution. Consequently, under the terms of the deed of absolute sale with assumption

of mortgage which was still subsisting at that time, they were ipso facto subrogated to the rights

of the Spouses Serrano as mortgagors of the property; hence, they became the owners of the

property and were entitled to the possession thereof. The petitioners therein further posited that

since they acquired ownership of the property before the CA dismissed their appeal and before

the September 6, 1984 Decision of the RTC became final and executory, the execution of the

decision against them was unjust and unfair. They then prayed for the following relief:

WHEREFORE, premises considered, it is respectfully prayed that the order of public respondent

Judge, dated 18 September 1997 and the Notice to Vacate issued by public respondent Sheriff,

dated 26 September 1997 be set aside. Likewise, to declare execution of judgment in Civil Case

No. Q-24790 to have been rendered impossible, as execution hereof would result to injustice. In

the meantime to obviate irreversible damage on the part of petitioners, a writ of PRELIMINARY

INJUNCTION be granted after due hearing, ORDERING public respondent Judge and public

respondent Sheriff to desist or refrain from implementing the September 18, 1997 order.

Other remedies available in law and equity are likewise prayed for.10

On January 5, 1998, the appellate court issued an order restraining the implementation of the

alias writ of execution and the notice to vacate issued by the trial court.11 On May 12, 1998, the

CA rendered the assailed decision in favor of the heirs of Emilio Geli, the decretal portion of

which reads:

WHEREFORE, the foregoing considered, the petition is hereby GRANTED, and the writ of

certiorari issued. The respondent court is hereby PERPETUALLY ENJOINED from issuing any

order or writ which would disturb the petitioners in their lawful ownership and possession of the

property subject matter of the instant case.12

The appellate court ruled that since Emilio Geli paid the redemption price for the property to the

GSIS in 1987 while his appeal was pending in the CA, the said redemption was a supervening

event which rendered the enforcement of the writ of execution issued by the trial court against

them unjust and inequitable.

The Spouses Serrano filed the instant petition and assigned to the CA the following errors:

I

THE COURT A QUO COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION WHEN IT PERMANENTLY ENJOINED THE

TRIAL COURT FROM DISTURBING THE RESPONDENTS IN THEIR ‘LAWFUL

OWNERSHIP AND POSSESSION’ OF THE SAID PROPERTY, IT BEING CLEAR THAT

THEIR REDEMPTION WAS EFFECTED FOR AND ON BEHALF OF PETITIONER

ARTURO V. SERRANO.

II

THE COURT A QUO COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION WHEN IT HELD THAT THE REDEMPTION

CONSTITUTED A SUPERVENING EVENT WHICH CHANGE THE RELATIONS OF THE

PARTIES, THUS RENDERING EXECUTION INEQUITABLE UNDER THE PREMISES.13

The petitioners contend that the payment of the redemption price made by Emilio Geli in 1987

during the pendency of the appeal in the CA was ineffective because, subsequently, when the

respondents’ appeal was dismissed by the CA, the summary decision of the RTC declaring the

deed of absolute sale with partial assumption of mortgage rescinded had become final and

executory. The deed of absolute sale with partial assumption of mortgage executed by the

petitioners and the Spouses Geli had ceased to exist with its rescission as decreed by the RTC.

According to the petitioners, the payment of the redemption price was conditioned upon the

perfection and outcome of the appeal. Since the appeal of the respondents was dismissed by their

failure to pay the requisite docket fees, they must suffer the consequences thereof. The

petitioners assert that the redemption of a property is a right belonging to the mortgagor-debtor,

and since the deed of absolute sale with partial assumption of mortgage had been rescinded by

final judgment of the RTC, Emilio Geli was no longer a mortgagor or the successor-in-interest of

the mortgagors; hence, he could not redeem the property on behalf of the mortgagors without the

latter’s knowledge and consent.

For their part, the respondents echo the ruling of the CA that although the issuance by the trial

court of a writ of execution is ministerial upon the finality of its decision, the same is subject to

the onset of a supervening event which may, as in this case, render the same unwarranted, unjust

and inequitable.

The respondents contend that the petitioners lost their ownership over the property when they

failed to redeem the property within one year from the sale thereof at public auction to the GSIS.

Although the GSIS executed a Certificate of Redemption in favor of Emilio Geli on February 22,

1988, the deed was, in fact, a deed of conveyance because, by then, the one-year period to

redeem the property had already lapsed and the GSIS in the meantime had become the owner of

the property. Thus, the Spouses Geli acquired ownership thereof when they purchased the same

from the GSIS in 1988 for P67,701.84. The GSIS in effect sold the property to Emilio Geli and

did not merely allow him to redeem it. Departing from their submission before the CA, the

respondents now posit that their claim of ownership over the subject property was after all not

anchored on the deed of sale with assumption of mortgage, as it had been admittedly rescinded

by virtue of the finality of the trial court’s September 6, 1984 Decision. Their claim of ownership

rests on the fact that they had acquired the property from the GSIS, the purchaser at public

auction. As owners of the property, they cannot now be evicted therefrom.

We find the petition to be meritorious.

Generally, the execution upon a final judgment is a matter of right on the part of the prevailing

party. It is the ministerial and mandatory duty of the trial court to enforce its own judgment once

it becomes final and executory. It may happen, however, that new facts and circumstances may

develop or occur after a judgment had been rendered and while an appeal therefrom is pending;

or new matters had developed after the appeal has been dismissed and the appealed judgment

had become final and executory, which the parties were not aware of and could not have been

aware of prior to or during the trial or during the appeal, as they were not yet in existence at that

time. In the first situation, any attempt to frustrate or put off the enforcement of an executory

decision must fail. Once a judgment has become final and executory, the only remedy left for

material attention thereof is that provided for in Rule 38 of the Rules of Court, as amended.

There is no other prerequisite mode of thwarting the execution of the judgment on equitable

grounds predicated on facts occurring before the finality of judgment.14 In the second situation,

the execution may be stayed, notwithstanding the affirmance of the appealed judgment by this

Court.15 It is required, however, that the supervening facts and circumstances must either have a

direct effect upon the matter already litigated and settled or create a substantial change in the

rights or relations of the parties therein which would render execution of a final judgment unjust,

impossible or inequitable or when it becomes imperative in the interest of justice.16 The

interested party may file a motion to quash a writ of execution issued by the trial court, or ask the

court to modify or alter the judgment to harmonize the same with justice and further supervening

facts.17 Evidence may be adduced by the parties on such supervening facts or circumstances.18

In this case, the payment by Emilio Geli of the amount of P67,701.84 on October 30 and

November 3, 1987 to the GSIS for the account of the petitioners was made while the appeal of

the private respondents from the summary judgment of the RTC was pending. The summary

judgment of the RTC had not yet become final and executory. It behooved the said respondents

to prosecute their appeal and file their brief, where they should have invoked the payment of the

redemption price as a ground for the reversal of the trial court’s summary judgment in their

favor. The respondents failed to do so, and even concealed the payment of the loan for the

account of the petitioners. Worse, the respondents did not pay the requisite docket fees for their

appeal, which resulted in its dismissal. The respondents even opted not to file any motion for the

reconsideration of the resolution of the CA dismissing their appeal. In sum, the respondents

allowed the decision of the trial court to become final and executory. Consequently, the

enforcement of the summary judgment of the trial court can no longer be frustrated by the

respondents’ payment, through Emilio Geli, of the amount of P67,701.84 to the GSIS in 1987.

Irrefragably, the Spouses Geli, as vendees-mortgagors under the deed of absolute sale with

partial assumption of mortgage, would have been subrogated to the rights and obligations of the

petitioners under the said deed, including the right to redeem the property from the GSIS.19

However, the CA dismissed their appeal for failure to pay the requisite docket fees, and such

dismissal became final and executory. Hence, the summary judgment of the trial court declaring

the deed of absolute sale with partial assumption of mortgage rescinded had also become final

and executory.

Generally, the rule is that to rescind a contract is not merely to terminate it, but to abrogate and

undo it from the beginning; that is, not merely to release the parties from further obligations to

each other in respect to the subject of the contract, but to annul the contract and restore the

parties to the relative positions which they would have occupied if no such contract had ever

been made. Rescission necessarily involves a repudiation of the contract and a refusal of the

moving party to be further bound by it.20 With the rescission of the deed of sale, etc., the rights

of Emilio Geli under the said deed to redeem the property had been extinguished. The petitioners

cannot even be compelled to subrogate the respondents to their rights under the real estate

mortgage over the property which the petitioners executed in favor of the GSIS since the

payment of the P67,701.84 redemption price was made without the knowledge of the

petitioners.21 The respondents, however, are entitled to be reimbursed by the petitioners to the

extent that the latter were benefited.22

Neither did the respondents acquire title to the property under the certificate of redemption

executed by the GSIS on February 10, 1998.

First. In the certificate of redemption, the mortgagor-debtor in whose favor the certificate was

executed was the petitioner Arturo Serrano and not Emilio Geli and/or the respondents:

NOW, THEREFORE, for and in consideration of the foregoing premises and the sum of SIXTY-

SEVEN THOUSAND SEVEN HUNDRED ONE & 84/100 (P67,701.84) PESOS, Philippine

Currency, herein paid by EMILIO S. GELI, of legal age, married, Filipino, with residence and

postal address at 110 A-1, Road 4, Project 6, Quezon City, do hereby resell, retransfer and

reconvey by way of Certificate of Redemption in favor of ARTURO V. SERRANO, the above-

described parcel/s of land, together with the building/s and improvements existing thereon.

IN WITNESS WHEREOF, the GOVERNMENT SERVICE INSURANCE SYSTEM has caused

this instrument to be executed by its Director, Atty. Roque M. Fernando, Jr., at the City of

Manila, Philippines, this _______ day of ______, 19__.

GOVERNMENT SERVICE INSURANCE SYSTEM

Mortgagee-Purchaser

By: Sgd.

ROQUE M. FERNANDO, JR.

in his capacity as Director23

Second. Case law has it that the one-year period within which the mortgagor-debtor or his

successor-in-interest may redeem the property should be counted from the time the certificate of

sale was registered with the Register of Deeds.24 Upon the lapse of the one-year period, the right

to redeem becomes functus officio on the date of its expiry.25 The rule on redemption is actually

liberally construed in favor of the original owner of the property. The purpose of the law is to aid

rather than to defeat him in the exercise of his right of redemption.26 Before the lapse of the one-

year period, the mortgagor-debtor remains the owner of the property. The right acquired by the

purchaser at public auction is merely inchoate until the period of redemption has expired without

the right being exercised by the redemptioner.27 Such right becomes absolute only after the

expiration of the redemption period without the right of redemption having been exercised.28 The

purchaser is entitled as a matter of right to consolidation of title and to the possession of the

property.29 Where redemption is seasonably exercised by the mortgagor-debtor, what is actually

effected is not the recovery of ownership of his land, which ownership he never lost, but the

elimination from his title thereto of the lien created by the registration of a mortgage thereon.30

Upon the expiry of the redemption period without the mortgagor-debtor being able to redeem the

property, the purchaser can no longer be compelled to allow the former to redeem the property or

to resell the property; and if he agrees to sell the property, it may be for a price higher than that

for which he purchased the property at public auction.31

In this case, there is no showing in the records that the sheriff’s certificate of sale in favor of the

GSIS had been registered in the Office of the Register of Deeds of Quezon City and if so, when

it was in fact registered in the said office. It cannot thus be argued that when Emilio Geli

remitted the amount of P67,701.84 to the GSIS in full payment of the account of the petitioners,

the one-year period to redeem the property had by then lapsed. Hence, the petitioners remained

the owners of the property. The GSIS never acquired title over the property and could not have

conveyed and transferred ownership over the same when it executed the certificate of redemption

to and in the name of the petitioner Arturo Serrano. As the Latin maxim goes: NEMO DAT

QUOD NON HABET.

We are not convinced by the ratiocination of the respondents that the enforcement of the

summary decision of the trial court and the alias writ of execution against them is unjust and

unreasonable.

The Spouses Geli and the respondents, as heirs and successors-in-interest of the said spouses,

were obliged under the deed of absolute sale with partial assumption of mortgage to pay to the

GSIS the balance of the petitioners’ account. The Spouses Geli reneged on their undertaking.

The petitioners were impelled to secure the services of counsel and sue the Spouses Geli with the

RTC for the rescission of the said deed with damages. The respondent spouses nevertheless

remained adamant and refused to pay the petitioners’ account with the GSIS which impelled the

latter to foreclose the real estate mortgage and sell the property at public auction. Emilio Geli

and the respondents did not inform the CA and the petitioners that Emilio Geli had paid the

amount of P67,701.84 for the account of the petitioners. The respondents even allowed their

appeal to be dismissed by the CA, and the dismissal to become final and executory. The

petitioners were impelled to spend money for their counsel and for sheriff’s fees for the

implementation of the writ of execution and the alias writ of execution issued by the trial court.

In the meantime, the respondents remained in possession of the property from 1969, when the

said deed of absolute sale with partial assumption of mortgage was executed, up to the present,

or for a period of 34 years without paying a single centavo. For the Court to allow the

respondents to benefit from their own wrong would run counter to the maxim: Ex Dolo Malo

Non Oritur Actio (No man can be allowed to found a claim upon his own wrongdoing).32 Equity

is applied only in the absence of and never against statutory law or judicial rules of procedure.33

We reiterate our ruling that:

Justice is done according to law. As a rule, equity follows the law.1âwphi1 There may be a moral

obligation, often regarded as an equitable consideration (meaning compassion), but if there is no

enforceable legal duty, the action must fail although the disadvantaged party deserves

commiseration or sympathy.

The choice between what is legally just and what is morally just, when these two options do not

coincide, is explained by Justice Moreland in Vales v. Villa, 35 Phil. 769, 788 where he said:

"Courts operate not because one person has been defeated or overcome by another, but because

he has been defeated or overcome illegally. Men may do foolish things, make ridiculous

contracts, use miserable judgment, and lose money by them—indeed, all they have in the world;

but not for that alone can the law intervene and restore. There must be in addition, a violation of

law, the commission of what the law knows as an actionable wrong before the courts are

authorized to lay hold of the situation and remedy it." (Rural Bank of Parañaque, Inc. v.

Remolado, 62051, March 18, 1985) (135 SCRA 409, 412).34

In sum then, the respondents, as heirs of Emilio Geli, are obliged to vacate the subject property.

However, since the petitioners were benefited to the extent of P67,701.84 which was the total

amount paid by Emilio Geli to the GSIS as redemption price for the foreclosed property, the

petitioners are obliged to refund the said amount to the respondents.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed decision of the

Court of Appeals dated May 12, 1998 in CA-G.R. SP No. 45573 is SET ASIDE AND

REVERSED. The petitioners Spouses Serrano are obliged to refund to the respondents, as heirs

of Emilio S. Geli, the amount of P67,701.84 to be deducted from the amount due to the

petitioners under the September 6, 1984 Decision of the Regional Trial Court, Quezon City, in

Civil Case No. Q-24790.

SO ORDERED.

Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.

Republic of the Philippines

SUPREME COURT Manila

THIRD DIVISION

G.R. No. 151325 June 27, 2005

D' ARMOURED SECURITY AND INVESTIGATION AGENCY, INC., petitioner,

vs.

ARNULFO ORPIA, LODUVICO ABUCEJO, ROWEL AGURO, EFREN ALMOETE,

ROMEO AMISTA, WARLITO BALAGOSA, ROMEO BALINGBING, RAMON

BARROA, MONTECLARO BATAWIL, ARNEL BON, RICARDO CAPENTES,

DANILO DADA, JOEL DELA CRUZ, HERNANO DELOS REYES, FLORENTINO

DELOS TRINO, ROGELIO DUERME, NONITO ESTRELLADO, JOSEPH FALCESO,

ISIDRO FLORES, VICTOR GUNGON, SONNY JULBA, PATRICIO LACANA, JR.,

FELIX LASCONA, JUANITO LUNA, RAUL LUZADAS, ROMMEL MAGBANUA,

ROGELIO MARIBUNG, NICOLAS MENDOZA, EZVENER OGANA, RICKY ORANO,

REYNALDO OZARAGA, SAMUEL PADILLA, EDWIN PARRENO, IRENEO

PARTOLAN, JUAN PIGTUAN, GUILLERMO PUSING, RODEL SIBAL, SILVESTRE

SOLEDAD, JOVENAR TEVER, VIRGILIO TIMAJO, ERMILIO TOMARONG, JR.,

VIRGILIO VERDEFLOR and JOEREX VICTORINO, respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

For resolution is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil

Procedure, as amended, assailing the Decision1 dated December 18, 2001 rendered by the Court

of Appeals in CA-G.R. SP No. 61799, entitled "D’Armoured Security and Investigation Agency,

Inc. vs. National Labor Relations Commission, Arbiter Ariel C. Santos, NLRC Sheriff Ricardo

Perona, Arnulfo Orpia, Ludovico Abucejo, Rowel Aguro, Efren Almoete, Romeo Amista, Warlito

Balgosa, Romeo Balingbing, Ramon Barroa, Monteclaro Batawil, Arnel Bon, Ricardo Capentes,

Danilo Dada, Joel dela Cruz, Hernando delos Reyes, Florentino delos Trino, Rogelio Duerme,

Nonito Estrellado, Joseph Falceso, Isidro Flores, Victor Gungon, Sonny Julba, Patricio Lacana,

Jr., Felix Lascona, Juanito Luna, Raul Lozadas, Rommel Magbanua, Rogelio Maribung, Nicolas

Mendoza, Ezvener Ogana, Ricky Orano, Reynaldo Ozaraga, Samuel Padilla, Edwin Parreno,

Ireneo Partolan, Juan Pigtuan, Guillermo Pusing, Rodel Sibal, Silvestre Soledad, Jovener Tever,

Virgilio Timajo, Emilio Tomarong, Jr., Virgilio Verdeflor and Joerex Victorino."

On February 9, 1995, the above-named respondents, who were employed as security guards by

D’Armoured Security and Investigation Agency, Inc., petitioner, and assigned to Fortune

Tobacco, Inc. (Fortune Tobacco), filed with the Labor Arbiter a complaint for illegal dismissal

and various monetary claims against petitioner and Fortune Tobacco, docketed as NLRC-NCR

Case No. 00-02-01148-95.

On June 11, 1998, the Labor Arbiter rendered a Decision, the dispositive portion of which reads:

"WHEREFORE, premises considered, all the respondents except Antonio Cabangon Chua are

jointly and severally liable to pay complainants the total sum of ONE MILLION SEVENTY

SEVEN THOUSAND ONE HUNDRED TWENTY FOUR AND TWENTY NINE CENTAVOS

(P1,077,124.29) for underpayment, overtime pay, legal holiday pay, service incentive leave pay,

13th month pay, illegal deduction and refund of firearms bond, as indicated in Annex ‘A’.

Finally, ten (10%) percent of all sums owing to complainants is hereby awarded as attorney’s

fees.

SO ORDERED."

From the said Decision, Fortune Tobacco interposed an appeal to the National Labor Relations

Commission (NLRC). Petitioner did not appeal. On March 26, 1999, the NLRC rendered its

Decision affirming with modification the assailed Arbiter’s Decision in the sense that the

complaint against Fortune Tobacco was dismissed. This Decision became final and executory.

Thus, the award specified in the Decision of the Arbiter became the sole liability of petitioner.

The records were then remanded to the Arbiter for execution.

Upon respondents’ motion, the Arbiter issued a writ of execution. Eventually, the sheriff served

a writ of garnishment upon the Chief Accountant of Foremost Farms, Inc., a corporation with

whom petitioner has an existing services agreement. Thus, petitioner’s receivables with

Foremost were garnished.

Petitioner filed with the NLRC a "Motion to Quash/Recall Writ of Execution and Garnishment"

which was opposed by respondents.

On March 10, 2000, the Arbiter issued an Order denying the motion and directing the sheriff to

release the garnished sum of money to respondents pro rata.

Petitioner’s motion for reconsideration was denied, hence, it interposed an appeal to the NLRC.

In a Resolution dated July 27, 2000, the NLRC dismissed the appeal for petitioner’s failure to

post a bond within the reglementary period. Its motion for reconsideration was denied in a

Resolution dated September 25, 2000.

Forthwith, petitioner filed with the Court of Appeals a petition for certiorari and prohibition with

prayer for issuance of a writ of preliminary injunction.

In a Decision dated December 18, 2001, the Court of Appeals dismissed the petition.

Hence, this petition for review on certiorari.

In this petition, the issue posed is whether the Court of Appeals erred in holding that petitioner’s

monthly receivables from the Foremost Farms, Inc. (garnishee) are not exempt from execution.

The petition lacks merit. We have ruled that an order of execution of a final and executory

judgment, as in this case, is not appealable, otherwise, there would be no end to litigation.2

On this ground alone, the instant petition is dismissible.

Assuming that an appeal is proper, still we have to deny the instant petition. Section 1, Rule IV

of the NLRC Manual on Execution of Judgment provides:

"Rule IV

EXECUTION

SECTION 1. Properties exempt from execution. – Only the properties of the losing party shall

be the subject of execution, except:

(a) The losing party’s family home constituted in accordance with the Civil Code or

Family Code or as may be provided for by law or in the absence thereof, the homestead

in which he resides, and land necessarily used in connection therewith, subject to the

limits fixed by law;

(b) His necessary clothing, and that of his family;

(c) Household furniture and utensils necessary for housekeeping, and used for that

purpose by the losing party such as he may select, of a value not exceeding the amount

fixed by law;

(d) Provisions for individual or family use sufficient for three (3) months;

(e) The professional libraries of attorneys, judges, physicians, pharmacists, dentists,

engineers, surveyors, clergymen, teachers, and other professionals, not exceeding the

amount fixed by law;

(f) So much of the earnings of the losing party for his personal services within the month

preceding the levy as are necessary for the support of his family;

(g) All monies, benefits, privileges, or annuities accruing or in any manner growing out

of any life insurance;

(h) Tools and instruments necessarily used by him in his trade or employment of a value

not exceeding three thousand (P3,000.00) pesos;

(i) Other properties especially exempted by law."

The above Rule clearly enumerates what properties are exempt from execution. It is apparent

that the exemption pertains only to natural persons and not to juridical entities. On this point, the

Court of Appeals correctly ruled that petitioner, being a corporate entity, does not fall within the

exemption, thus:

"We cannot accede to petitioner’s position that the garnished amount is exempt from execution.

Section 13 of Rule 39 of the Rules of Court is plain and clear on what properties are exempt

from execution. Section 13 (i) of the Rules pertinently reads:

‘SECTION 13. Property exempt from execution. – Except as otherwise expressly provided by

law, the following property, and no other, shall be exempt from execution:

x x x x x x x x x

(i) So much of the salaries, wages or earnings of the judgment obligor for his personal services

within the four months preceding the levy as are necessary for the support of his family.’

The exemption under this procedural rule should be read in conjunction with the Civil Code, the

substantive law which proscribes the execution of employee’s wages, thus:

‘ART. 1708. The laborer’s wage shall not be subject to execution or attachment, except for debts

incurred for food, shelter, clothing and medical attendance.’

Obviously, the exemption under Rule 39 of the Rules of Court and Article 1708 of the New Civil

Code is meant to favor only laboring men or women whose works are manual. Persons belonging

to this class usually look to the reward of a day’s labor for immediate or present support, and

such persons are more in need of the exemption than any other [Gaa vs. Court of Appeals, 140

SCRA 304 (1985)].

In this context, exemptions under this rule are confined only to natural persons and not to

juridical entities such as petitioner. Thus, the rule speaks of salaries, wages and earning from

the ‘personal services’ rendered by the judgment obligor. The rule further requires that such

earnings be intended for the support of the judgment debtor’s family.

Necessarily, petitioner which is a corporate entity, does not fall under the exemption. If at all, the

exemption refers to petitioner’s individual employees and not to petitioner as a corporation.

x x x. Parenthetically, in a parallel case where a security agency claimed that the guns it gives to

its guards are tools and implements exempt from execution, the Supreme Court had the occasion

to rule that the exemption pertains only to natural and not to juridical persons, thus:

‘However, it would appear that the exemption contemplated by the provision involved is

personal, available only to a natural person, such as a dentist’s dental chair and electric fan

(Belen v. de Leon, G.R. No. L-15612, 30 Nov. 1962). As pointed out by the Solicitor General, if

properties used in business are exempt from execution, there can hardly be an instance when a

judgment claim can be enforced against the business entity’ [Pentagon Security and

Investigation Agency vs. Jimenez, 192 SCRA 492 (1990)].

It stands to reason that only natural persons whose salaries, wages and earnings are indispensable

for his own and that of his family’s support are exempted under Section 13 (i) of Rule 39 of the

Rules of Court. Undeniably, a corporate entity such as petitioner security agency is not covered

by the exemption.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED."

WHEREFORE, the petition is DENIED. The assailed Decision dated December 18, 2001 of the

Court of Appeals in CA-G.R. SP No. 61799 is AFFIRMED IN TOTO. Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

Republic of the Philippines

SUPREME COURT

SECOND DIVISION

G.R. No. 157616. July 22, 2005

ISIDRO PEREZ and NARCISO A. RAGUA, Petitioners,

vs.

HON. COURT OF APPEALS, HON. VIVENCIO S. BACLIG and SPOUSES

GAUDENCIO DIGOS, JR. and RHODORA DIGOS, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

The spouses Gaudencio Digos, Jr. and Rhodora Digos secured a loan of P5,800,000.00 from the

International Exchange Bank in December 1996, to finance their project for the construction of

townhouses on their property covered by Transfer Certificate of Title (TCT) No. 168790 located

in Tandang Sora, Quezon City. To secure the payment of the loan, the spouses Digos executed a

Real Estate Mortgage over the said property. However, the completion of their project was

delayed, partly because some homeowners in the Pillarville Subdivision (which abutted the

subject property) refused to allow them to build an access road through the subdivision to the

property. Thus, the equipment to be used for the project could not pass through the Pillarville

Subdivision.

Because of the spouses Digos’ failure to pay the amortizations on their loan, the bank caused the

extrajudicial foreclosure of their real estate mortgage. Consequently, the property was sold at

public auction, with the bank as the highest bidder at P4,500,000.00, which appeared to be the

account of the spouses Digos at the time. The Certificate of Sale executed by the sheriff was,

thereafter, registered at the Office of the Register of Deeds on September 7, 1998.1

In the meantime, the spouses Digos referred the matter of the right of way to the barangay

captain for settlement. Due to the vehement objections of some Pillarville Subdivision

homeowners, the barangay captain failed to resolve the matter.2

On July 2, 1999, the spouses Digos wrote the bank, requesting for a period of six (6) months

from September 7, 1999 within which to redeem the property.3 However, the bank denied the

request. On August 3, 1999, the spouses again wrote to the bank, pleading for an extension of at

least three (3) months to redeem the property.4 In a Letter5 to the spouses dated August 30, 1999,

the bank granted the spouses Digos a period of one month from September 8, 1999 (or until

October 8, 1999) within which to redeem the property. However, the bank consolidated its title

over the property, and on September 19, 1999, the Register of Deeds issued TCT No. 206979 in

the name of the bank.

Instead of repurchasing the property on or before October 8, 1999, the spouses Digos filed a

Complaint6 against the bank on October 7, 1999 with the Regional Trial Court (RTC) of Quezon

City, for the nullification of the extrajudicial foreclosure of the real estate mortgage and sale at

public auction and/or redemption of the property, with a prayer for a temporary restraining order

and a writ of preliminary injunction to enjoin the bank from consolidating its title over the

property. The spouses Digos also sought judgment for damages.

In their complaint, the spouses Digos alleged, inter alia, that they were denied their right to due

process because the foreclosure of the real estate mortgage was extrajudicial; the sale of their

property at public auction was without prior notice to them; the property was sold for only

P4,500,000.00, the balance of their account with the bank, but about 400% lower than the

prevailing price of the property; the bank rejected their plea for a five-month extension to

redeem, and their offer of P1,000,000.00 in partial payment of their loan account to reduce the

same to P3,500,000.00, but the bank granted them an extension of only one month to redeem the

property, designed to divest them of the same and enrich some characters at their expense;

because of the foregoing acts of the bank, they suffered sleepless nights, nervous tension and the

rise in their blood pressure for which they were entitled to moral damages in the amount of

P500,000.00, aside from the exemplary damages they were entitled to in the amount of

P100,000.00.

The spouses Digos prayed for a temporary restraining order to enjoin the bank from

consolidating its title over the property, and that judgment be rendered in their favor, thus:

…

2. Ordering the defendant Bank to allow plaintiffs to redeem their property;

3. Making the writ of injunction permanent;

4. Ordering the defendant Bank to pay moral damages of P500,000.00;

5. Ordering defendant Bank to pay exemplary damages of P200,000.00;

6. Ordering defendant Bank to pay attorney’s fee of P30,000.00 plus P2,000.00 for every

appearance in Court;

Plaintiffs further pray for such other reliefs and remedies available within the premises.7

The case (first complaint, for brevity) was docketed as Civil Case No. Q-99-38941. The spouses

Digos caused the annotation of a notice of lis pendens at the dorsal portion of TCT No. 206979.

The trial court, however, did not issue a temporary restraining order or writ of preliminary

injunction.

Meanwhile, the bank filed a motion to dismiss the complaint and for the cancellation of the

notice of lis pendens on the following grounds:

1. The action for injunction has already been rendered moot and academic, title to the foreclosed

property having been consolidated in iBank’s name;

2. Assuming arguendo that title to the foreclosed property has not yet been consolidated, still

plaintiffs have no cause of action for injunction against iBank.8

The spouses Digos opposed the motion. The bank filed a reply, appending thereto a copy of TCT

No. 206979 in its name.

In an Order dated December 9, 1999, the trial court granted the motion and dismissed the

complaint. It found that the spouses Digos admitted in their complaint that the period for the

redemption of the property was about to expire, and that they were given up to October 8, 1999

within which to do so. The court held that it had no authority to extend the period for

redemption, and since it had already expired, the spouses had no more right to redeem the

property; as such, the defendant had the right to consolidate its title over the property, and had, in

fact, been issued TCT No. 206979. The court also declared that the spouses Digos had no right to

demand that they be allowed to redeem the property.

Finally, since the act sought to be enjoined – the consolidation of the bank’s title – was already

fait accompli, the spouses Digos had no cause of action for injunction.9 The trial court ruled that

a writ of injunction cannot issue to enjoin a consummated act.10 It, thus, ordered the cancellation

of the notice of lis pendens annotated at the dorsal portion of TCT No. 206979.

The spouses Digos failed to appeal the order; instead, they filed a petition for certiorari with the

Court of Appeals (CA), assailing the Order of the RTC. The CA dismissed the petition because it

was filed out of time. The petitioners then filed a motion for reconsideration thereof, which they

later withdrew via a motion. The CA then resolved to grant the motion; hence, the CA resolution

dismissing the petition became final and executory on May 7, 2001. Entry of judgment was made

of record.11

Meanwhile, the bank sold the property to Isidro Perez and Narciso Ragua to whom the Register

of Deeds issued TCT No. 211888. The vendees caused the subdivision of the property into

eighteen (18) lots. The Register of Deeds issued titles for each subdivision lot in favor of Perez

and Ragua.12

On June 4, 2001, the spouses Digos filed a Complaint13 with the RTC of Quezon City, this time,

against the bank, Perez and Ragua, for the cancellation and annulment of the extrajudicial

foreclosure of the real estate mortgage executed by them in favor of the bank, the sale at public

auction as well as the certificate of sale executed by the sheriff, and the Torrens title issued to

them. The spouses Digos prayed for a writ of preliminary injunction and a temporary restraining

order. The petitory portion of the complaint reads:

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that

immediately upon the filing of the instant complaint, a temporary restraining order be issued, and

after hearing, a writ of preliminary injunction issue, enjoining defendants PEREZ and RAGUA

from further disposing of the subject property.

Likewise, it is most respectfully prayed of this Honorable Court that, after due hearing, judgment

be rendered ordering the CANCELLATION and ANNULMENT of the extrajudicial foreclosure

of sale, the Sheriff’s Certificate of Sale and the consolidated title under the name of defendant

bank, as well as the transfer certificate/s of title issued or under the name of defendants iBANK,

PEREZ and RAGUA;

Further, it is most respectfully prayed also that judgment be rendered ordering the defendants:

1. to pay plaintiffs the amount of FIVE HUNDRED THOUSAND [PESOS] (P500,000.00), as

and by way of actual expenses:

2. to pay plaintiffs the amount of ONE MILLION AND FIVE HUNDRED THOUSAND PESOS

(P1,500,000.00), as and by way of moral damages;

3. to pay plaintiffs the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00), as and

by way of exemplary damages;

4. to pay plaintiffs the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00), as and

by way of attorney’s fees; and,

5. to pay the expenses of litigation and costs of suit.

Plaintiffs further pray for other reliefs, just and equitable, under the circumstances.14

The spouses Digos reiterated the allegations in their complaint in Civil Case No. Q-99-38941

that they were not notified of the sale at public auction, and that the bank’s P4,500,000.00 bid for

the property was unconscionably low compared to the prevailing market price of

P25,000,000.00. They also admitted their failure to pay their amortization on their loans.

However, they alleged this time that the extrajudicial foreclosure of the real estate mortgage and

the sale at public auction were illegal because the bank charged much more than the amount due

on their loan account, to wit: interest of 26% per annum on the loan account covering January 2,

1998, whereas under the promissory note executed in favor of the bank, the new interest rate

should commence only on March 4, 1993; penalty charges of 26% of the account, and 5%

penalty charges on top of the 26% interest per annum, as shown by the bank’s statement of

account. The spouses Digos also averred that although they pleaded for a restructuring of their

loan account and a moratorium on the payment of their account, they were unaware of the

erroneous computation of the balance of their loan account. They maintained that the bank’s

consolidation of its title over the property on September 19, 1999 was premature because they

were given until October 8, 1999 to redeem the property.

The spouses Digos also alleged that as a consequence of the bank’s acts, they incurred actual

damages of P500,000.00, sustained moral damages of P1,500,000.00, and were entitled to

exemplary damages for P100,000.00.15

The case was docketed as Civil Case No. Q-01-44227. The defendant bank filed a motion to

dismiss the complaint on the following grounds:

A. THE PLAINTIFFS HAVE NO CAUSE OF ACTION AGAINST DEFENDANTS, THEY

BEING ESTOPPED FROM QUESTIONING THE REGULARITY OF THE EXTRAJUDICIAL

FORECLOSURE SALE.

B. PLAINTIFFS HAVE VIOLATED THE RULE AGAINST SPLITTING A SINGLE CAUSE

OF ACTION UNDER SECTION 4, RULE 2 OF THE RULES OF COURT IN INSTITUTING

THE INSTANT CASE.

C. PLAINTIFFS ARE GUILTY OF FORUM SHOPPING.

D. PLAINTIFFS ARE GUILTY OF FALSE CERTIFICATION AGAINST FORUM

SHOPPING, IN VIOLATION OF SECTION 5, RULE 7 OF THE RULES OF COURT.16

The bank alleged that the spouses Digos admitted in their complaint that, after the extrajudicial

foreclosure of the real estate mortgage and the sale of the property at public auction, they

pleaded to redeem the property but failed to do so and were granted a one-month extension. The

bank averred that, based on the said allegations, the spouses were estopped from assailing the

extrajudicial foreclosure of the real estate mortgage, the sale at public auction and the Torrens

title issued to it; hence, they had no cause of action. It further alleged that the spouses Digos

already assailed the extrajudicial foreclosure of the real estate mortgage and the sale of the

property at public auction on account of lack of due process and arbitrary abuse in their first

complaint; they again sought to do so in this case, this time grounded on the invalid foreclosure

of the real estate mortgage, and the sale at public auction of the property for an amount in excess

of the balance of the loan account. The bank argued that, in so doing, the spouses Digos were

guilty of splitting a single cause of action which is proscribed by Rule 2, Section 4 of the Rules

of Court; they were, likewise, barred by res judicata from filing the second complaint for the

same causes of action, even if additional defendants were impleaded. Consequently, the spouses

Digos were also guilty of forum shopping.17

Perez and Ragua filed a motion to dismiss on similar grounds of res judicata, splitting of a single

cause of action and forum shopping.18

On June 29, 2001, the trial court issued an Order19 denying the motion, ruling that there was no

identity of issue in the two actions because, in the second complaint (docketed as Civil Case No.

Q-01-44227), the spouses Digos assailed the legality of the extrajudicial foreclosure, on the sole

ground that the bank had unlawfully increased their obligation, contrary to the terms and

conditions of the loan contract. The court held that the causes of action in the two complaints

were not identical: in the first case, it was for the redemption of the mortgaged property, distinct

and separate from their cause of action in the second case which is rooted on the erroneous

computation of the balance of their loan account with the bank. The court also declared that in

the first complaint, the spouses Digos assailed the validity or regularity of the extrajudicial

foreclosure of the real estate mortgage and the sale at public auction. Consequently, the court

concluded, the complaint was not barred by res judicata; nor are they guilty of forum shopping.

The trial court denied the defendants’ motion for reconsideration in its Order20 dated December

6, 2001; hence, they filed a petition21 for certiorari, prohibition and mandamus with the CA,

alleging therein that the respondent judge committed a grave abuse of his discretion amounting

to excess or lack of jurisdiction in denying their motion to dismiss the complaint.

On November 25, 2002, the CA rendered judgment dismissing the petition and affirming the

assailed orders. The appellate court declared that there was no identity of causes of action in the

two cases because the first action was one for injunction and redemption of the property, whereas

the second action was for the nullification of the extrajudicial foreclosure of the real estate

mortgage and the sale at public auction due to the erroneous computation of the balance on the

respondents’ account with the bank; hence, the spouses Digos were not estopped from filing their

second action.22 The petitioners filed a motion for a reconsideration of the said decision, which

the appellate court denied.23

Petitioners Isidro Perez and Narciso Ragua forthwith filed the instant petition for review on

certiorari, raising the following issues:

WHETHER OR NOT THE JUDGMENT IN CIVIL CASE NO. Q-99-[38941] (REDEMPTION

OF MORTGAGE) IS RES JUDICATA TO CIVIL CASE NO. Q-01-44227 (CANCELLATION

AND ANNULMENT OF FORECLOSURE SALE)?

WHETHER OR NOT THE PRIVATE RESPONDENTS ARE ALREADY ESTOPPED FROM

ATTACKING THE VALIDITY OF THE FORECLOSURE SALE?24

It is the contention of the petitioners that the private respondents (the plaintiffs in both actions in

the RTC) are guilty of splitting their cause of action. The petitioners point out that the private

respondents failed to pray for the nullification of the extrajudicial foreclosure and sale at public

auction in their first action, and did so only in their second complaint. For such failure, the

second action was barred by res judicata, conformably with Section 4, Rule 2 of the Rules of

Court. The petitioners point out that the issue of the computation of the respondents’ balance on

their loan account had already been passed upon and resolved by the court in the first case, and,

as such, can no longer be assailed in the second case. The petitioners likewise maintain that the

validity of the foreclosure of the real estate mortgage and sale at public auction was raised and

resolved in the first case. The petitioners insist that the private respondents were barred from

assailing the extrajudicial foreclosure of the real estate mortgage and the sale at public auction of

the property in favor of the bank. They further point out that the private respondents repeatedly

requested the bank for extensions to redeem the property; such requests were eventually granted

but the private respondents still failed to redeem the property.

For their part, the private respondents aver that their action in the first case was for the grant of

an extension to redeem the property and avert the bank’s act of consolidating its title over the

property, while their action in the second case was for the nullification of the extrajudicial

foreclosure of the real estate mortgage and the sale of the property at public auction on account

of the arbitrary, unlawful and baseless imposition of unconscionable re-priced interest rates on

their loan account. They aver that there can be no conclusiveness of judgment in the first action

because the issues in the two cases are not identical. They insist that the issues in the first case

are not being relitigated in the second case; hence, their second action is not barred by res

judicata, nor did they split their cause of action.

The Ruling of the Court

Splitting a single cause of action consists in dividing a single or indivisible cause of action into

several parts or claims and instituting two or more actions therein.25 A single cause of action or

entire claim or demand cannot be split up or divided so as to be made the subject of two or more

different actions.26

A single act or omission may be violative of various rights at the same time, such as when the act

constitutes a violation of separate and distinct legal obligations.27 The violation of each of these

rights is a cause of action in itself. However, if only one right may be violated by several acts or

omissions, there would only be one cause of action. Otherwise stated, if two separate and distinct

primary rights are violated by one and the same wrong; or if the single primary right should be

violated by two distinct and separate legal wrongs; or when the two primary rights are each

broken by a separate and distinct wrongs; in either case, two causes of action would result.28

Causes of action which are distinct and independent, although arising out of the same contract,

transaction or state of fact may be sued separately, recovery on one being no bar to subsequent

actions on the others.

The mere fact that the same relief is sought in the subsequent action will not render the judgment

in the prior action as res judicata.29 Causes of action are not distinguishable for purposes of res

judicata by difference in the claims for relief.30

Comparing the material averments of the two complaints, it would appear that separate primary

rights of the respondents were violated by the bank’s institution of a petition for extrajudicial

foreclosure of the real estate mortgage and the sale at public auction; hence, the respondents had

separate and independent causes of action against the bank, to wit: (a) the first complaint relates

to the violation by the bank of the right to a judicial, not extrajudicial, foreclosure of the real

estate mortgage and for an extension of the period for the respondents to redeem the property

with damages; (b) the second complaint relates to the breach by the bank of its loan contract with

the respondents by causing the extrajudicial foreclosure of the real estate mortgage for

P4,500,000.00 which was in excess of their unpaid account with the bank.

However, we are convinced that the institution by the respondents of their second complaint

anchored on their claim that the bank breached its loan contracts with them by erroneously

computing the actual and correct balance of their account when the petition for extrajudicial

foreclosure of the real estate mortgage was filed by it designed to avert the dismissal of their

complaint due to splitting causes of action and res judicata, following the dismissal of their first

complaint and the dismissal of their appeal through their negligence. The Court is constrained to

conclude that this was a last-ditch attempt to resuscitate their lost cause, a brazen violation of the

principle of res judicata.

Section 49(b)(c), Rule 39 of the Rules of Court provides in part:

SEC. 49. Effect of judgments. – The effect of a judgment or final order rendered by a court or

judge of the Philippines, having jurisdiction to pronounce the judgment or order, may be as

follows:

…

(b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to

any other matter that could have been raised in relation thereto, conclusive between the parties

and their successors in interest by title subsequent to the commencement of the action or special

proceeding, litigating for the same thing and under the same title and in the same capacity.

(c) In any other litigation between the same parties or their successors in interest, that only is

deemed to have been adjudged in a former judgment which appears upon its face to have been so

adjudged, or which was actually and necessarily included therein or necessary thereto.

Section 49(b) enunciates the first concept of res judicata, known as bar by prior judgment or

estoppel by judgment, which refers to a theory or matter that has been definitely and finally

settled on its merits by a court of competent jurisdiction without fraud or collusion.

There are four (4) essential requisites which must concur for the application of this doctrine:

(a) finality of the former judgment;

(b) the court which rendered it had jurisdiction over the subject matter and the parties;

(c) it must be a judgment on the merits; and

(d) there must be, between the first and second actions, identity of parties, subject matter and

causes of action.31

A judgment or order is on the merits of the case when it determines the rights and liabilities of

the parties based on the ultimate facts as disclosed by the pleadings or issues presented for trial.

It is not necessary that a trial, actual hearing or argument on the facts of the case ensued. For as

long as the parties had the full legal opportunity to be heard on their respective claims and

contentions, the judgment or order is on the merits.32 An order of the trial court on the ground

that the complaint does not state a cause of action is a determination of the case on its merits.33

Such order whether right or wrong bars another action based upon the same cause of action.34

The operation of the order as res judicata is not affected by a mere right of appeal where the

appeal has not been taken or by an appeal which never has been perfected.35

Indeed, absolute identity of parties is not a condition sine qua non for the application of res

judicata. It is sufficient that there is a shared identity of interest.36 The rule is that, even if new

parties are found in the second action, res judicata still applies if the party against whom the

judgment is offered in evidence was a party in the first action; otherwise, a case can always be

renewed by the mere expedience of joining new parties in the new suit.37

The ultimate test to ascertain identity of causes of action is whether or not the same evidence

fully supports and establishes both the first and second cases. The application of the doctrine of

res judicata cannot be excused by merely varying the form of the action or engaging a different

method of presenting the issue.38

Section 49(c) of Rule 39 enumerates the concept of conclusiveness of judgment. This is the

second branch, otherwise known as collateral estoppel or estoppel by verdict. This applies where,

between the first case wherein judgment is rendered and the second case wherein such judgment

is involved, there is no identity of causes of action. As explained by this Court:

It has been held that in order that a judgment in one action can be conclusive as to a particular

matter in another action between the same parties or their privies, it is essential that the issues be

identical. If a particular point or question is in issue in the second action, and the judgment will

depend on the determination of that particular point or question, a former judgment between the

same parties will be final and conclusive in the second if that same point or question was in issue

and adjudicated in the first suit; but the adjudication of an issue in the first case is not conclusive

of an entirely different and distinct issue arising in the second. In order that this rule may be

applied, it must clearly and positively appear, either from the record itself or by the aid of

competent extrinsic evidence that the precise point or question in issue in the second suit was

involved and decided in the first. And in determining whether a given question was an issue in

the prior action, it is proper to look behind the judgment to ascertain whether the evidence

necessary to sustain a judgment in the second action would have authorized a judgment for the

same party in the first action.39

In the present case, before the private respondents filed their first complaint, they already knew

that the balance of their account with the bank was P4,500,000.00. They even offered to make a

P1,000,000.00 partial payment of their loan to reduce their account to P3,500,000.00. These are

gleaned from the averments in the first complaint:

7. That the long process of negotiation for the right-of-way has unnecessarily delayed the project

of the plaintiffs and has nearly caused the foreclosure of the mortgage property by the private

defendant Bank, however, the said foreclosure was held in abeyance when plaintiffs offered to

pay the additional amount of P1,000,000.00 which should leave a balance of the loan in the

amount of P3,500,000.00;40

…

10. That as the auction sale was highly irregular, obviously, the only bidder is the defendant

Bank for the price limited to the remaining balance of the loan in the amount of P4,500,000.00,

no more, no less;41

More telling is the private respondents’ failure to object to the extrajudicial foreclosure of the

real estate mortgage and the sale at public auction; they even pleaded to be allowed to redeem

the property after it had already been sold at public auction. Patently then, the respondents were

proscribed from claiming that the foreclosure of the real estate mortgage was for an amount in

excess of the balance of their account and that the sale at public auction was irregular/illegal. As

the Court held in Aclon v. Court of Appeals:42

In the absence of evidence proving that a judgment debtor was merely trying to protect himself

or save his property, and that no reliance could or should have been placed upon his action in so

doing, an attempt to redeem from an execution sale has been construed as a waiver of defects or

irregularities therein, precluding him from relying upon them for the purpose of challenging its

validity. When Aclon sought to redeem his property from PNB he never made any reservation

with respect to his right to question the validity of the auction sale and to seek alternative relief

before the courts. In other words, there was no indication whatsoever that he does not recognize

the validity of the sale. If petitioner indeed felt that the assailed foreclosure proceedings were

attended with any irregularity he should have filed the appropriate action with the court. Instead,

he offered to repurchase the subject properties without any condition or reservation.

Nevertheless, Aclon failed to comply with his undertaking and instead defaulted in his

subsequent payments.

Redemption is inconsistent with the claim of invalidity of the sale. Redemption is an implied

admission of the regularity of the sale and would estop the respondents from later impugning its

validity on that ground.43 Thus, the private respondents’ pleas for extensions of time to redeem

the subject property are of the same genre.

The private respondents admitted in their complaint in the first case that the bank only gave a

one-month extension to redeem the property. Indeed, they made this declaration in their letter to

the bank, dated July 2, 1999, copy of which was appended to their complaint (and thus made an

integral part thereof), to wit:

Mr. Sonny Justiniano

Acquired Assets

International Exchange Bank

Salcedo Tower

169 H.V. De la Costa St.,

Salcedo Village, Makati City

Dear Sir:

Your deadline of September 7, 1999 is already fast approaching. Our action program to redeem

the property has been stalled due to the infighting of the homeowners’ association members. We

were not permitted to build access road to the property. They won’t allow our equipment to pass

and start work unless we get the approval of all the members. At present, there are two factions

and they are at odds with each. Either side does not recognize the existence of the other. Our

only option at the moment is to go to court and you know very well that this takes time.

Our interested buyers won’t budge unless they see improvements in the property like in place

drainage system and access road. We are ready to start work, however, the association has

prevented us based on [the] above-stated reasons.

We have no other alternative but to once again appeal to you. We respectfully request for an

extension of six months from September 7, 1999 to enable us to sort the association problem by

court proceedings and place in motion our action program to redeem the property.

We pray that your kind heart will once again grant our request.

Thank you very much.

Very truly yours,

(Sgd.)

GAUDENCIO DIGOS44

If indeed the bank made an erroneous computation of the balance of their account as claimed by

the private respondents in their second complaint, this should have been alleged in the first

complaint as one of their causes of action. They failed to do so. The private respondents

unequivocably admitted in their first complaint that the balance of their account with the bank

was P4,500,000.00 which was the precise amount for which the bank sought the foreclosure of

the real estate mortgage and the sale of the property at public auction; they even sought judicial

recourse to enable them to redeem the property despite the lapse of the one-year period therefor.

Relying on these admissions on the part of the private respondents, and the fact that the bank has

already consolidated its title over the property, the Court thus dismissed their first complaint. The

Order of the Court dismissing the first complaint is a judgment of the case on the merits.

The attempt of the respondents in their second complaint to avoid the application of the principle

of res judicata by claiming the nature of their account on the ground therefor and their legal

theory cannot prosper. Case law has it that where a right, question or fact is distinctly put in issue

and directly determined by a court of competent jurisdiction in a first case, between the same

parties or their privies, the former adjudication of that fact, right or question is binding on the

parties or their privies in a second suit irrespective of whether the causes of action are the same.45

The ruling of the CA that the action of the private respondents and their legal theory in their

second complaint were different from their causes of action and legal theory in the first

complaint is not correct. A different cause of action is one that proceeds not only on a

sufficiently different legal theory, but also on a different factual footing as not to require the trial

of facts material to the former suit; that is, an action that can be maintained even if all disputed

factual issues raised in the plaintiff’s original complaint are concluded in defendant’s favor.46

In this case, the private respondents’ second complaint cannot be maintained without trying the

facts material to the first case, and the second case cannot be maintained if all the disputed

factual issues raised in the first complaint are considered in favor of the bank.

The principle of res judicata applies when the opportunity to raise an issue in the first complaint

exists but the plaintiff failed to do so. Indeed, if the pleading of a different legal theory would

have convinced the trial court to decide a particular issue in the first action which, with the use of

diligence the plaintiffs could have raised therein but failed to do so, they are barred by res

judicata.47 Nor do legal theories operate to constitute a cause of action. New legal theories do not

amount to a new cause of action so as to defeat the application of the principle of res judicata.48

Indeed, in Siegel v. Knott,49 it was held that the statement of a different form of liability is not a

different cause of action, provided it grows out of the same transaction or act and seeks redress

for the wrong. Two actions are not necessarily for different causes of action simply because the

theory of the second would not have been open under the pleadings in the first. A party cannot

preserve the right to bring a second action after the loss of the first, merely by having

circumscribed and limited theories of recovery opened by the pleadings in the first.50

It bears stressing that a party cannot divide the grounds for recovery.51 A plaintiff is mandated to

place in issue in his pleading, all the issues existing when the suit began. A lawsuit cannot be

tried piecemeal.52 The plaintiff is bound to set forth in his first action every ground for relief

which he claims to exist and upon which he relied, and cannot be permitted to rely upon them by

piecemeal in successive action to recover for the same wrong or injury.53

A party seeking to enforce a claim, legal or equitable, must present to the court, either by the

pleadings or proofs, or both, on the grounds upon which to expect a judgment in his favor. He is

not at liberty to split up his demands, and prosecute it by piecemeal or present only a portion of

the grounds upon which a special relief is sought and leave the rest to the presentment in a

second suit if the first fails. There would be no end to litigation if such piecemeal presentation is

allowed.54

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and

Resolution of the Court of Appeals and the assailed Order of the RTC are SET ASIDE. The

Regional Trial Court is ORDERED to dismiss the complaint in Civil Case No. Q-01-44227.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

Republic of the Philippines

SUPREME COURT Manila

FIRST DIVISION

G.R. No. 154739 January 23, 2007

ROGELIO (ROGER) PANOTES (thru ARACELI BUMATAY, as successor-in-interest),

Petitioner,

vs.

CITY TOWNHOUSE DEVELOPMENT CORPORATION, Respondent.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant Petition for Review on Certiorari assailing the Decision1 of the

Court of Appeals dated January 29, 2002 in CA-G.R. SP No. 52621 and its Resolution2 dated

August 5, 2002 denying the motion for reconsideration.

This case stemmed from a complaint filed with the National Housing Authority (NHA) in April

1979 by Rogelio (Roger) Panotes, petitioner, then president of the Provident Village

Homeowners Association, Inc., against Provident Securities Corporation (PROSECOR), owner-

developer of the Provident Village in Marikina City. The complaint, docketed as NHA Case No.

4175, alleges that PROSECOR violated Sections 19, 20, 21, 38, and 39 of Presidential Decree

(P.D.) No. 957.3 One of the violations complained of was its failure to provide an open space in

the said subdivision.

During the proceedings before the NHA, an ocular inspection showed that the subdivision has no

open space. The NHA found, however, that Block 40, with an area of 22,916 square meters,

could be utilized as open space. Thus, in its Resolution dated August 14, 1980, the NHA directed

PROSECOR to provide the Provident Village an open space which is Block 40.

In a letter of the same date, then NHA Acting General Manager Antonio A. Fernando ordered

PROSECOR to "provide Block 40 of the subdivision as open space."

PROSECOR was served copies of the NHA Resolution and the letter on August 22, 1980.

Considering that PROSECOR did not appeal from the NHA Resolution, it became final and

executory.

When Panotes filed a motion for execution of the NHA Resolution, it was found that the records

of the case were "mysteriously missing." Hence, his motion "was provisionally dismissed"

without prejudice.

Meanwhile, PROSECOR sold to City Townhouse Development Corporation (CTDC),

respondent, several lots in the subdivision. Among the lots sold were those comprising Block 40.

CTDC was unaware of the NHA Resolution ordering PROSECOR to have Block 40 utilized as

open space of Provident Village.

Eventually, Panotes was succeeded by Araceli Bumatay as president of the Provident Village

Homeowners Association, Inc. On July 17, 1990, she filed with the Housing and Land Use

Regulatory Board (HLURB) a complaint for revival of the NHA Resolution dated August 14,

1980. Impleaded therein as defendant was CTDC, whom she alleged as successor-in-interest of

PROSECOR.

In its answer, CTDC averred, among others, that (1) Araceli Bumatay has no legal personality to

file the action for revival of judgment; (2) there is a pending litigation between CTDC and

PROSECOR involving Block 40; and (3) other entities like the Bangko Sentral Ng Pilipinas and

Provident Savings Bank have existing liens over Block 40.

On October 15, 1991, the HLURB, through Housing and Land Use Arbiter Charito M. Bunagan,

rendered its Decision in favor of Bumatay, reviving the NHA Resolution and declaring Block 40

of the Provident Village as "open space" for the said subdivision, thus:

WHEREFORE, premises considered, judgment is hereby rendered declaring Block 40 (with an

area of 22,916 square meters) of the Subdivision Plan Pcs-5683 of the Provident Villages located

at Marikina, Metro Manila as the legally mandated "open space" for said subdivision project; and

the Register of Deeds for Marikina is hereby directed to cause the annotation of this fact on the

corresponding Torrens Title which describes and covers said open space; said area to be reserved

and utilized exclusively in the manner and for the purposes provided for under P.D. N0. 957 and

P.D. No. 1216.4

Furthermore, let a Cease and Desist Order be, as it is hereby, issued against respondent Provident

Securities Corp. and City Townhouse Development Corporation, restraining said respondents,

and all persons, agents, or other associations or corporate entities acting on their behalf, from

asserting or perpetrating any or further acts of dominion or claim over said Block 40, Pcs-5683,

the open space allocated and reserved for the Provident Villages in Marikina, Metro Manila.

IT IS SO ORDERED.

On appeal to the HLURB Board of Commissioners, Arbiter Bunagan’s Decision was affirmed

with modification in the sense that CTDC has the right to recover from PROSECOR "what it has

lost."

After its motion for reconsideration was denied, CTDC then interposed an appeal to the Office of

the President (OP). On February 10, 1999, the OP rendered its Decision affirming in toto the

judgment of the HLURB Board of Commissioners. CTDC filed a motion for reconsideration, but

it was denied in a Resolution dated April 14, 1999.

CTDC then filed with the Court of Appeals a petition for review under Rule 43 of the 1997 Rules

of Procedure, as amended, docketed therein as CA-G.R. SP No. 52621.

In a Resolution5 dated May 10, 1999, the Court of Appeals dismissed CTDC’s petition for its

failure to attach thereto a certification against forum shopping. The Court of Appeals also found

that the petition was not supported by certified true copies of such material portions of the

records and other pertinent papers referred to in the petition.

CTDC filed a motion for reconsideration which was opposed by Bumatay.

On June 10, 1999, CTDC submitted to the Court of Appeals a certification of non-forum

shopping as well as the pleadings mentioned in its Resolution.

On July 27, 1999, the Court of Appeals issued a Resolution granting CTDC’s motion for

reconsideration and reinstated its petition.

On January 29, 2002, the appellate court rendered its Decision reversing the Decision of the OP

and dismissing the complaint for revival of judgment, thus:

IN VIEW OF ALL THE FOREGOING, finding merit in this petition for review, the assailed

Decision of the Office of the President dated February 10, 1999, together with its Resolution

dated February 14, 1999 are REVERSED and SET ASIDE, and a new one entered dismissing

HLRB Case No. REM-071790-4052 (NHA Case No. 4175; HLRB Case No. REM-A-1089).

Costs against the respondent.

SO ORDERED.

The basic issue for our resolution is whether the NHA Resolution dated August 14, 1980 may be

enforced against CTDC.

An action for revival of judgment is no more than a procedural means of securing the execution

of a previous judgment which has become dormant after the passage of five years without it

being executed upon motion of the prevailing party. It is not intended to re-open any issue

affecting the merits of the judgment debtor’s case nor the propriety or correctness of the first

judgment.6

Here, the original judgment or the NHA Resolution sought to be revived was between Rogelio

Panotes and PROSECOR, not between petitioner Araceli Bumatay and respondent CTDC.

In maintaining that CTDC is bound by the NHA Resolution, petitioner claims that CTDC is the

successor-in-interest of PROSECOR and, therefore, assumed the obligations of the latter to

provide an open space for Provident Village.

CTDC purchased from PROSECOR Block 40 in the said village, not as an owner-developer like

PROSECOR, but as an ordinary buyer of lots. Even after the sale, CTDC did not become an

owner-developer. The Deed of Sale executed by CTDC, as buyer, and PROSECOR, as seller,

shows that the subject matter of the sale is the unsold lots comprising Block 40 within the

subdivision to CTDC. The contract does not include the transfer of rights of PROSECOR as

owner-developer of the said subdivision. Clearly, there is no basis to conclude that CTDC is the

successor-in-interest of PROSECOR.

It bears stressing that when CTDC bought Block 40, there was no annotation on PROSECOR’s

title showing that the property is encumbered. In fact, the NHA Resolution was not annotated

thereon. CTDC is thus a buyer in good faith and for value, and as such, may not be deprived of

the ownership of Block 40. Verily, the NHA Resolution may not be enforced against CTDC.

Section 2 of P.D. No. 1216 provides:

Section 2. Section 31 of Presidential Decree No. 957 is hereby amended to read as follows:

Section 31. Roads, Alleys, Sidewalks and Open Spaces. – The owner or developer of a

subdivision shall provide adequate roads, alleys and sidewalks. For subdivision projects of one

(1) hectare or more, the owner shall reserve thirty percent (30%) of the gross area for open space.

xxx xxx xxx.

Clearly, providing an open space within the subdivision remains to be the obligation of

PROSECOR, the owner-developer and the real party-in-interest in the case for revival of

judgment. As aptly held by the Court of Appeals:

Quintessentially, the real party-in-interest in the revival of NHA Case No. 4175 is PROSECOR

and not CTDC. PROSECOR was the lone defendant or respondent in that case against whom

judgment was rendered. To insist that CTDC is a successor-in-interest of PROSECOR may have

some truth if we are talking about the ownership of the lots sold by PROSECOR in favor of

CTDC as a result of a civil action between the two. But then, to hold CTDC as the successor-in-

interest of PROSECOR as the developer of the subdivision, is far from realty. CTDC is simply

on the same footing as any lot buyer-member of PVHIA. x x x.

Furthermore, strangers to a case, like CTDC, are not bound by the judgment rendered by a court.

It will not divest the rights of a party who has not and never been a party to a litigation.

Execution of a judgment can be issued only against a party to the action and not against one who

did not have his day in court.7

WHEREFORE, we DENY the petition and AFFIRM the assailed Decision and Resolution of

the Court of Appeals in CA-G.R. SP No. 52621. Costs against petitioner.

SO ORDERED.

ANGELINA SANDOVAL GUTIERREZ Associate Justice

WE CONCUR:

REYNATO S. PUNO Chief Justice

Chairperson

RENATO C. CORONA Associate Justice

ADOLFO S. AZCUNA Asscociate Justice

CANCIO C. GARCIA Associate Justice

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions

in the above Decision were reached in consultation before the case was assigned to the writer of

the opinion of the Court’s Division.

REYNATO S. PUNO Chief Justice