G.R. No.

L-11390

March 26, 1918

EL BANCO ESPAOL-FILIPINO, plaintiff-appellant, vs. VICENTE PALANCA, administrator of the estate of Engracio Palanca Tanquinyeng, defendant-appellant. Aitken and DeSelms for Hartigan and Welch for appellee. STREET, J.: This action was instituted upon March 31, 1908, by "El Banco Espanol-Filipino" to foreclose a mortgage upon various parcels of real property situated in the city of Manila. The mortgage in question is dated June 16, 1906, and was executed by the original defendant herein, Engracio Palanca Tanquinyeng y Limquingco, as security for a debt owing by him to the bank. Upon March 31, 1906, the debt amounted to P218,294.10 and was drawing interest at the rate of 8 per centum per annum, payable at the end of each quarter. It appears that the parties to this mortgage at that time estimated the value of the property in question at P292,558, which was about P75,000 in excess of the indebtedness. After the execution of this instrument by the mortgagor, he returned to China which appears to have been his native country; and he there died, upon January 29, 1810, without again returning to the Philippine Islands. As the defendant was a nonresident at the time of the institution of the present action, it was necessary for the plaintiff in the foreclosure proceeding to give notice to the defendant by publication pursuant to section 399 of the Code of Civil Procedure. An order for publication was accordingly obtained from the court, and publication was made in due form in a newspaper of the city of Manila. At the same time that the order of the court should deposit in the post office in a stamped envelope a copy of the summons and complaint directed to the defendant at his last place of residence, to wit, the city of Amoy, in the Empire of China. This order was made pursuant to the following provision contained in section 399 of the Code of Civil Procedure: In case of publication, where the residence of a nonresident or absent defendant is known, the judge must direct a copy of the summons and complaint to be forthwith deposited by the clerk in the post-office, postage prepaid, directed to the person to be served, at his place of residence Whether the clerk complied with this order does not affirmatively appear. There is, however, among the papers pertaining to this case, an affidavit, dated April 4, appellant.

1908, signed by Bernardo Chan y Garcia, an employee of the attorneys of the bank, showing that upon that date he had deposited in the Manila post-office a registered letter, addressed to Engracio Palanca Tanquinyeng, at Manila, containing copies of the complaint, the plaintiff's affidavit, the summons, and the order of the court directing publication as aforesaid. It appears from the postmaster's receipt that Bernardo probably used an envelope obtained from the clerk's office, as the receipt purports to show that the letter emanated from the office. The cause proceeded in usual course in the Court of First Instance; and the defendant not having appeared, judgment was, upon July 2, 1908, taken against him by default. Upon July 3, 1908, a decision was rendered in favor of the plaintiff. In this decision it was recited that publication had been properly made in a periodical, but nothing was said about this notice having been given mail. The court, upon this occasion, found that the indebtedness of the defendant amounted to P249,355. 32, with interest from March 31, 1908. Accordingly it was ordered that the defendant should, on or before July 6, 1908, deliver said amount to the clerk of the court to be applied to the satisfaction of the judgment, and it was declared that in case of the failure of the defendant to satisfy the judgment within such period, the mortgage property located in the city of Manila should be exposed to public sale. The payment contemplated in said order was never made; and upon July 8, 1908, the court ordered the sale of the property. The sale took place upon July 30, 1908, and the property was bought in by the bank for the sum of P110,200. Upon August 7, 1908, this sale was confirmed by the court. About seven years after the confirmation of this sale, or to the precise, upon June 25, 1915, a motion was made in this cause by Vicente Palanca, as administrator of the estate of the original defendant, Engracio Palanca Tanquinyeng y Limquingco, wherein the applicant requested the court to set aside the order of default of July 2, 1908, and the judgment rendered upon July 3, 1908, and to vacate all the proceedings subsequent thereto. The basis of this application, as set forth in the motion itself, was that the order of default and the judgment rendered thereon were void because the court had never acquired jurisdiction over the defendant or over the subject of the action. At the hearing in the court below the application to vacate the judgment was denied, and from this action of the court Vicente Planca, as administrator of the estate of the original defendant, has appealed. No other feature of the case is here under consideration than such as related to the action of the court upon said motion. The case presents several questions of importance, which will be discussed in what appears to be the sequence of most convenient development. In the first

part of this opinion we shall, for the purpose of argument, assume that the clerk of the Court of First Instance did not obey the order of the court in the matter of mailing the papers which he was directed to send to the defendant in Amoy; and in this connection we shall consider, first, whether the court acquired the necessary jurisdiction to enable it to proceed with the foreclosure of the mortgage and, secondly, whether those proceedings were conducted in such manner as to constitute due process of law. The word "jurisdiction," as applied to the faculty of exercising judicial power, is used in several different, though related, senses since it may have reference (1) to the authority of the court to entertain a particular kind of action or to administer a particular kind of relief, or it may refer to the power of the court over the parties, or (2) over the property which is the subject to the litigation. The sovereign authority which organizes a court determines the nature and extent of its powers in general and thus fixes its competency or jurisdiction with reference to the actions which it may entertain and the relief it may grant. Jurisdiction over the person is acquired by the voluntary appearance of a party in court and his submission to its authority, or it is acquired by the coercive power of legal process exerted over the person. Jurisdiction over the property which is the subject of the litigation may result either from a seizure of the property under legal process, whereby it is brought into the actual custody of the law, or it may result from the institution of legal proceedings wherein, under special provisions of law, the power of the court over the property is recognized and made effective. In the latter case the property, though at all times within the potential power of the court, may never be taken into actual custody at all. An illustration of the jurisdiction acquired by actual seizure is found in attachment proceedings, where the property is seized at the beginning of the action, or some subsequent stage of its progress, and held to abide the final event of the litigation. An illustration of what we term potential jurisdiction over the res, is found in the proceeding to register the title of land under our system for the registration of land. Here the court, without taking actual physical control over the property assumes, at the instance of some person claiming to be owner, to exercise a jurisdiction in rem over the property and to adjudicate the title in favor of the petitioner against all the world. In the terminology of American law the action to foreclose a mortgage is said to be a proceeding quasi in rem, by which is expressed the idea that while it is not strictly speaking an action in rem yet it partakes of that nature and is substantially such. The expression "action

in rem" is, in its narrow application, used only with reference to certain proceedings in courts of admiralty wherein the property alone is treated as responsible for the claim or obligation upon which the proceedings are based. The action quasi rem differs from the true action in rem in the circumstance that in the former an individual is named as defendant, and the purpose of the proceeding is to subject his interest therein to the obligation or lien burdening the property. All proceedings having for their sole object the sale or other disposition of the property of the defendant, whether by attachment, foreclosure, or other form of remedy, are in a general way thus designated. The judgment entered in these proceedings is conclusive only between the parties. In speaking of the proceeding to foreclose a mortgage the author of a well known treaties, has said: Though nominally against person, such suits are to vindicate liens; they proceed upon seizure; they treat property as primarily indebted; and, with the qualification above-mentioned, they are substantially property actions. In the civil law, they are styled hypothecary actions, and their sole object is the enforcement of the lien against the res; in the common law, they would be different in chancery did not treat the conditional conveyance as a mere hypothecation, and the creditor's right ass an equitable lien; so, in both, the suit is real action so far as it is against property, and seeks the judicial recognition of a property debt, and an order for the sale of the res. (Waples, Proceedings In Rem. sec. 607.) It is true that in proceedings of this character, if the defendant for whom publication is made appears, the action becomes as to him a personal action and is conducted as such. This, however, does not affect the proposition that where the defendant fails to appear the action is quasi in rem; and it should therefore be considered with reference to the principles governing actions in rem. There is an instructive analogy between the foreclosure proceeding and an action of attachment, concerning which the Supreme Court of the United States has used the following language: If the defendant appears, the cause becomes mainly a suit in personam, with the added incident, that the property attached remains liable, under the control of the court, to answer to any demand which may be established

against the defendant by the final judgment of the court. But, if there is no appearance of the defendant, and no service of process on him, the case becomes, in its essential nature, a proceeding in rem, the only effect of which is to subject the property attached to the payment of the defendant which the court may find to be due to the plaintiff. (Cooper vs. Reynolds, 10 Wall., 308.) In an ordinary attachment proceeding, if the defendant is not personally served, the preliminary seizure is to, be considered necessary in order to confer jurisdiction upon the court. In this case the lien on the property is acquired by the seizure; and the purpose of the proceedings is to subject the property to that lien. If a lien already exists, whether created by mortgage, contract, or statute, the preliminary seizure is not necessary; and the court proceeds to enforce such lien in the manner provided by law precisely as though the property had been seized upon attachment. (Roller vs. Holly, 176 U. S., 398, 405; 44 L. ed., 520.) It results that the mere circumstance that in an attachment the property may be seized at the inception of the proceedings, while in the foreclosure suit it is not taken into legal custody until the time comes for the sale, does not materially affect the fundamental principle involved in both cases, which is that the court is here exercising a jurisdiction over the property in a proceeding directed essentially in rem. Passing now to a consideration of the jurisdiction of the Court of First Instance in a mortgage foreclosure, it is evident that the court derives its authority to entertain the action primarily from the statutes organizing the court. The jurisdiction of the court, in this most general sense, over the cause of action is obvious and requires no comment. Jurisdiction over the person of the defendant, if acquired at all in such an action, is obtained by the voluntary submission of the defendant or by the personal service of process upon him within the territory where the process is valid. If, however, the defendant is a nonresident and, remaining beyond the range of the personal process of the court, refuses to come in voluntarily, the court never acquires jurisdiction over the person at all. Here the property itself is in fact the sole thing which is impleaded and is the responsible object which is the subject of the exercise of judicial power. It follows that the jurisdiction of the court in such case is based exclusively on the power which, under the law, it possesses over the property; and any discussion relative to the jurisdiction of the court over the person of the defendant is entirely apart from the case. The jurisdiction of the court over the property, considered as the exclusive object of such action, is evidently based upon the following conditions and considerations, namely: (1) that the property is located within the district; (2) that the purpose of the litigation is to subject the property by sale

to an obligation fixed upon it by the mortgage; and (3) that the court at a proper stage of the proceedings takes the property into custody, if necessary, and expose it to sale for the purpose of satisfying the mortgage debt. An obvious corollary is that no other relief can be granted in this proceeding than such as can be enforced against the property. We may then, from what has been stated, formulated the following proposition relative to the foreclosure proceeding against the property of a nonresident mortgagor who fails to come in and submit himself personally to the jurisdiction of the court: (I) That the jurisdiction of the court is derived from the power which it possesses over the property; (II) that jurisdiction over the person is not acquired and is nonessential; (III) that the relief granted by the court must be limited to such as can be enforced against the property itself. It is important that the bearing of these propositions be clearly apprehended, for there are many expressions in the American reports from which it might be inferred that the court acquires personal jurisdiction over the person of the defendant by publication and notice; but such is not the case. In truth the proposition that jurisdiction over the person of a nonresident cannot be acquired by publication and notice was never clearly understood even in the American courts until after the decision had been rendered by the Supreme Court of the United States in the leading case of Pennoyer vs. Neff (95 U. S. 714; 24 L. ed., 565). In the light of that decision, and of other decisions which have subsequently been rendered in that and other courts, the proposition that jurisdiction over the person cannot be thus acquired by publication and notice is no longer open to question; and it is now fully established that a personal judgment upon constructive or substituted service against a nonresident who does not appear is wholly invalid. This doctrine applies to all kinds of constructive or substituted process, including service by publication and personal service outside of the jurisdiction in which the judgment is rendered; and the only exception seems to be found in the case where the nonresident defendant has expressly or impliedly consented to the mode of service. (Note to Raher vs. Raher, 35 L. R. A. [N. S. ], 292; see also 50 L .R. A., 585; 35 L. R. A. [N. S.], 312 The idea upon which the decision in Pennoyer vs. Neff (supra) proceeds is that the process from the tribunals of one State cannot run into other States or countries and that due process of law requires that the defendant shall be brought under the power of the court by service of process within the State, or by his voluntary appearance, in order to authorize the court to pass upon the question of his personal liability. The doctrine established by the Supreme Court of the United States on this point, being based upon the constitutional conception of due process of law, is binding upon the courts of the Philippine

Islands. Involved in this decision is the principle that in proceedings in rem or quasi in rem against a nonresident who is not served personally within the state, and who does not appear, the relief must be confined to the res, and the court cannot lawfully render a personal judgment against him. (Dewey vs. Des Moines, 173 U. S., 193; 43 L. ed., 665; Heidritter vs. Elizabeth Oil Cloth Co., 112 U. S., 294; 28 L. ed., 729.) Therefore in an action to foreclose a mortgage against a nonresident, upon whom service has been effected exclusively by publication, no personal judgment for the deficiency can be entered. (Latta vs. Tutton, 122 Cal., 279; Blumberg vs. Birch, 99 Cal., 416.) It is suggested in the brief of the appellant that the judgment entered in the court below offends against the principle just stated and that this judgment is void because the court in fact entered a personal judgment against the absent debtor for the full amount of the indebtedness secured by the mortgage. We do not so interpret the judgment. In a foreclosure proceeding against a nonresident owner it is necessary for the court, as in all cases of foreclosure, to ascertain the amount due, as prescribed in section 256 of the Code of Civil Procedure, and to make an order requiring the defendant to pay the money into court. This step is a necessary precursor of the order of sale. In the present case the judgment which was entered contains the following words: Because it is declared that the said defendant Engracio Palanca Tanquinyeng y Limquingco, is indebted in the amount of P249,355.32, plus the interest, to the 'Banco Espanol-Filipino' . . . therefore said appellant is ordered to deliver the above amount etc., etc. This is not the language of a personal judgment. Instead it is clearly intended merely as a compliance with the requirement that the amount due shall be ascertained and that the evidence of this it may be observed that according to the Code of Civil Procedure a personal judgment against the debtor for the deficiency is not to be rendered until after the property has been sold and the proceeds applied to the mortgage debt. (sec. 260). The conclusion upon this phase of the case is that whatever may be the effect in other respects of the failure of the clerk of the Court of First Instance to mail the proper papers to the defendant in Amoy, China, such irregularity could in no wise impair or defeat the jurisdiction of the court, for in our opinion that jurisdiction rest upon a basis much more secure than would be supplied by any form of notice that could be given to a resident of a foreign country.

Before leaving this branch of the case, we wish to observe that we are fully aware that many reported cases can be cited in which it is assumed that the question of the sufficiency of publication or notice in a case of this kind is a question affecting the jurisdiction of the court, and the court is sometimes said to acquire jurisdiction by virtue of the publication. This phraseology was undoubtedly originally adopted by the court because of the analogy between service by the publication and personal service of process upon the defendant; and, as has already been suggested, prior to the decision of Pennoyer vs. Neff (supra) the difference between the legal effects of the two forms of service was obscure. It is accordingly not surprising that the modes of expression which had already been molded into legal tradition before that case was decided have been brought down to the present day. But it is clear that the legal principle here involved is not effected by the peculiar language in which the courts have expounded their ideas. We now proceed to a discussion of the question whether the supposed irregularity in the proceedings was of such gravity as to amount to a denial of that "due process of law" which was secured by the Act of Congress in force in these Islands at the time this mortgage was foreclosed. (Act of July 1, 1902, sec. 5.) In dealing with questions involving the application of the constitutional provisions relating to due process of law the Supreme Court of the United States has refrained from attempting to define with precision the meaning of that expression, the reason being that the idea expressed therein is applicable under so many diverse conditions as to make any attempt ay precise definition hazardous and unprofitable. As applied to a judicial proceeding, however, it may be laid down with certainty that the requirement of due process is satisfied if the following conditions are present, namely; (1) There must be a court or tribunal clothed with judicial power to hear and determine the matter before it; (2) jurisdiction must be lawfully acquired over the person of the defendant or over the property which is the subject of the proceeding; (3) the defendant must be given an opportunity to be heard; and (4) judgment must be rendered upon lawful hearing. Passing at once to the requisite that the defendant shall have an opportunity to be heard, we observe that in a foreclosure case some notification of the proceedings to the nonresident owner, prescribing the time within which appearance must be made, is everywhere recognized as essential. To answer this necessity the statutes generally provide for publication, and usually in addition thereto, for the mailing of notice to the defendant, if his residence is known. Though commonly called constructive, or substituted service of process in any true sense. It is merely a means provided by law whereby the owner may be admonished that his property is the subject of judicial proceedings and that it is incumbent

upon him to take such steps as he sees fit to protect it. In speaking of notice of this character a distinguish master of constitutional law has used the following language: . . . if the owners are named in the proceedings, and personal notice is provided for, it is rather from tenderness to their interests, and in order to make sure that the opportunity for a hearing shall not be lost to them, than from any necessity that the case shall assume that form. (Cooley on Taxation [2d. ed.], 527, quoted in Leigh vs. Green, 193 U. S., 79, 80.) It will be observed that this mode of notification does not involve any absolute assurance that the absent owner shall thereby receive actual notice. The periodical containing the publication may never in fact come to his hands, and the chances that he should discover the notice may often be very slight. Even where notice is sent by mail the probability of his receiving it, though much increased, is dependent upon the correctness of the address to which it is forwarded as well as upon the regularity and security of the mail service. It will be noted, furthermore, that the provision of our law relative to the mailing of notice does not absolutely require the mailing of notice unconditionally and in every event, but only in the case where the defendant's residence is known. In the light of all these facts, it is evident that actual notice to the defendant in cases of this kind is not, under the law, to be considered absolutely necessary. The idea upon which the law proceeds in recognizing the efficacy of a means of notification which may fall short of actual notice is apparently this: Property is always assumed to be in the possession of its owner, in person or by agent; and he may be safely held, under certain conditions, to be affected with knowledge that proceedings have been instituted for its condemnation and sale. It is the duty of the owner of real estate, who is a nonresident, to take measures that in some way he shall be represented when his property is called into requisition, and if he fails to do this, and fails to get notice by the ordinary publications which have usually been required in such cases, it is his misfortune, and he must abide the consequences. (6 R. C. L., sec. 445 [p. 450]). It has been well said by an American court:

If property of a nonresident cannot be reached by legal process upon the constructive notice, then our statutes were passed in vain, and are mere empty legislative declarations, without either force, or meaning; for if the person is not within the jurisdiction of the court, no personal judgment can be rendered, and if the judgment cannot operate upon the property, then no effective judgment at all can be rendered, so that the result would be that the courts would be powerless to assist a citizen against a nonresident. Such a result would be a deplorable one. (Quarl vs. Abbett, 102 Ind., 233; 52 Am. Rep., 662, 667.) It is, of course universally recognized that the statutory provisions relative to publication or other form of notice against a nonresident owner should be complied with; and in respect to the publication of notice in the newspaper it may be stated that strict compliance with the requirements of the law has been held to be essential. In Guaranty Trust etc. Co. vs. Green Cove etc., Railroad Co. (139 U. S., 137, 138), it was held that where newspaper publication was made for 19 weeks, when the statute required 20, the publication was insufficient. With respect to the provisions of our own statute, relative to the sending of notice by mail, the requirement is that the judge shall direct that the notice be deposited in the mail by the clerk of the court, and it is not in terms declared that the notice must be deposited in the mail. We consider this to be of some significance; and it seems to us that, having due regard to the principles upon which the giving of such notice is required, the absent owner of the mortgaged property must, so far as the due process of law is concerned, take the risk incident to the possible failure of the clerk to perform his duty, somewhat as he takes the risk that the mail clerk or the mail carrier might possibly lose or destroy the parcel or envelope containing the notice before it should reach its destination and be delivered to him. This idea seems to be strengthened by the consideration that placing upon the clerk the duty of sending notice by mail, the performance of that act is put effectually beyond the control of the plaintiff in the litigation. At any rate it is obvious that so much of section 399 of the Code of Civil Procedure as relates to the sending of notice by mail was complied with when the court made the order. The question as to what may be the consequences of the failure of the record to show the proof of compliance with that requirement will be discussed by us further on. The observations which have just been made lead to the conclusion that the failure of the clerk to mail the notice,

if in fact he did so fail in his duty, is not such an irregularity, as amounts to a denial of due process of law; and hence in our opinion that irregularity, if proved, would not avoid the judgment in this case. Notice was given by publication in a newspaper and this is the only form of notice which the law unconditionally requires. This in our opinion is all that was absolutely necessary to sustain the proceedings. It will be observed that in considering the effect of this irregularity, it makes a difference whether it be viewed as a question involving jurisdiction or as a question involving due process of law. In the matter of jurisdiction there can be no distinction between the much and the little. The court either has jurisdiction or it has not; and if the requirement as to the mailing of notice should be considered as a step antecedent to the acquiring of jurisdiction, there could be no escape from the conclusion that the failure to take that step was fatal to the validity of the judgment. In the application of the idea of due process of law, on the other hand, it is clearly unnecessary to be so rigorous. The jurisdiction being once established, all that due process of law thereafter requires is an opportunity for the defendant to be heard; and as publication was duly made in the newspaper, it would seem highly unreasonable to hold that failure to mail the notice was fatal. We think that in applying the requirement of due process of law, it is permissible to reflect upon the purposes of the provision which is supposed to have been violated and the principle underlying the exercise of judicial power in these proceedings. Judge in the light of these conceptions, we think that the provision of Act of Congress declaring that no person shall be deprived of his property without due process of law has not been infringed. In the progress of this discussion we have stated the two conclusions; (1) that the failure of the clerk to send the notice to the defendant by mail did not destroy the jurisdiction of the court and (2) that such irregularity did not infringe the requirement of due process of law. As a consequence of these conclusions the irregularity in question is in some measure shorn of its potency. It is still necessary, however, to consider its effect considered as a simple irregularity of procedure; and it would be idle to pretend that even in this aspect the irregularity is not grave enough. From this point of view, however, it is obvious that any motion to vacate the judgment on the ground of the irregularity in question must fail unless it shows that the defendant was prejudiced by that irregularity. The least, therefore, that can be required of the proponent of such a motion is to show that he had a good defense against the action to foreclose the mortgage. Nothing of the kind is, however, shown either in the motion or in the affidavit which accompanies the motion.

An application to open or vacate a judgment because of an irregularity or defect in the proceedings is usually required to be supported by an affidavit showing the grounds on which the relief is sought, and in addition to this showing also a meritorious defense to the action. It is held that a general statement that a party has a good defense to the action is insufficient. The necessary facts must be averred. Of course if a judgment is void upon its face a showing of the existence of a meritorious defense is not necessary. (10 R. C. L., 718.) The lapse of time is also a circumstance deeply affecting this aspect of the case. In this connection we quote the following passage from the encyclopedic treatise now in course of publication: Where, however, the judgment is not void on its face, and may therefore be enforced if permitted to stand on the record, courts in many instances refuse to exercise their quasi equitable powers to vacate a judgement after the lapse of the term ay which it was entered, except in clear cases, to promote the ends of justice, and where it appears that the party making the application is himself without fault and has acted in good faith and with ordinary diligence. Laches on the part of the applicant, if unexplained, is deemed sufficient ground for refusing the relief to which he might otherwise be entitled. Something is due to the finality of judgments, and acquiescence or unnecessary delay is fatal to motions of this character, since courts are always reluctant to interfere with judgments, and especially where they have been executed or satisfied. The moving party has the burden of showing diligence, and unless it is shown affirmatively the court will not ordinarily exercise its discretion in his favor. (15 R. C. L., 694, 695.) It is stated in the affidavit that the defendant, Engracio Palanca Tanquinyeng y Limquingco, died January 29, 1910. The mortgage under which the property was sold was executed far back in 1906; and the proceedings in the foreclosure were closed by the order of court confirming the sale dated August 7, 1908. It passes the rational bounds of human credulity to suppose that a man who had placed a mortgage upon property worth nearly P300,000 and had then gone away from the scene of his life activities to end his days in the city of Amoy, China, should have long remained in ignorance of the fact that the mortgage had been foreclosed and the property sold, even supposing that he had no knowledge of those proceedings while they were being conducted. It

is more in keeping with the ordinary course of things that he should have acquired information as to what was transpiring in his affairs at Manila; and upon the basis of this rational assumption we are authorized, in the absence of proof to the contrary, to presume that he did have, or soon acquired, information as to the sale of his property. The Code of Civil Procedure, indeed, expressly declares that there is a presumption that things have happened according to the ordinary habits of life (sec. 334 [26]); and we cannot conceive of a situation more appropriate than this for applying the presumption thus defined by the lawgiver. In support of this presumption, as applied to the present case, it is permissible to consider the probability that the defendant may have received actual notice of these proceedings from the unofficial notice addressed to him in Manila which was mailed by an employee of the bank's attorneys. Adopting almost the exact words used by the Supreme Court of the United States in Grannis vs. Ordeans (234 U. S., 385; 58 L. ed., 1363), we may say that in view of the well-known skill of postal officials and employees in making proper delivery of letters defectively addressed, we think the presumption is clear and strong that this notice reached the defendant, there being no proof that it was ever returned by the postal officials as undelivered. And if it was delivered in Manila, instead of being forwarded to Amoy, China, there is a probability that the recipient was a person sufficiently interested in his affairs to send it or communicate its contents to him. Of course if the jurisdiction of the court or the sufficiency of the process of law depended upon the mailing of the notice by the clerk, the reflections in which we are now indulging would be idle and frivolous; but the considerations mentioned are introduced in order to show the propriety of applying to this situation the legal presumption to which allusion has been made. Upon that presumption, supported by the circumstances of this case, ,we do not hesitate to found the conclusion that the defendant voluntarily abandoned all thought of saving his property from the obligation which he had placed upon it; that knowledge of the proceedings should be imputed to him; and that he acquiesced in the consequences of those proceedings after they had been accomplished. Under these circumstances it is clear that the merit of this motion is, as we have already stated, adversely affected in a high degree by the delay in asking for relief. Nor is it an adequate reply to say that the proponent of this motion is an administrator who only qualified a few months before this motion was made. No disability on the part of the defendant himself existed from the time when the foreclosure was effected until his death; and we believe that the delay in the appointment of the administrator and institution of this action is a circumstance which is imputable to the parties in interest whoever they may have been. Of course if the minor

heirs had instituted an action in their own right to recover the property, it would have been different. It is, however, argued that the defendant has suffered prejudice by reason of the fact that the bank became the purchaser of the property at the foreclosure sale for a price greatly below that which had been agreed upon in the mortgage as the upset price of the property. In this connection, it appears that in article nine of the mortgage which was the subject of this foreclosure, as amended by the notarial document of July 19, 1906, the parties to this mortgage made a stipulation to the effect that the value therein placed upon the mortgaged properties should serve as a basis of sale in case the debt should remain unpaid and the bank should proceed to a foreclosure. The upset price stated in that stipulation for all the parcels involved in this foreclosure was P286,000. It is said in behalf of the appellant that when the bank bought in the property for the sum of P110,200 it violated that stipulation. It has been held by this court that a clause in a mortgage providing for a tipo, or upset price, does not prevent a foreclosure, nor affect the validity of a sale made in the foreclosure proceedings. (Yangco vs. Cruz Herrera and Wy Piaco, 11 Phil. Rep., 402; Banco-Espaol Filipino vs. Donaldson, Sim and Co., 5 Phil. Rep., 418.) In both the cases here cited the property was purchased at the foreclosure sale, not by the creditor or mortgagee, but by a third party. Whether the same rule should be applied in a case where the mortgagee himself becomes the purchaser has apparently not been decided by this court in any reported decision, and this question need not here be considered, since it is evident that if any liability was incurred by the bank by purchasing for a price below that fixed in the stipulation, its liability was a personal liability derived from the contract of mortgage; and as we have already demonstrated such a liability could not be the subject of adjudication in an action where the court had no jurisdiction over the person of the defendant. If the plaintiff bank became liable to account for the difference between the upset price and the price at which in bought in the property, that liability remains unaffected by the disposition which the court made of this case; and the fact that the bank may have violated such an obligation can in no wise affect the validity of the judgment entered in the Court of First Instance. In connection with the entire failure of the motion to show either a meritorious defense to the action or that the defendant had suffered any prejudice of which the law can take notice, we may be permitted to add that in our opinion a motion of this kind, which proposes to unsettle judicial proceedings long ago closed, can not be considered with favor, unless based upon grounds which appeal to the conscience of the court. Public policy requires that judicial proceedings be upheld. The maximum here applicable is non quieta movere. As was

once said by Judge Brewer, afterwards a member of the Supreme Court of the United States: Public policy requires that judicial proceedings be upheld, and that titles obtained in those proceedings be safe from the ruthless hand of collateral attack. If technical defects are adjudged potent to destroy such titles, a judicial sale will never realize that value of the property, for no prudent man will risk his money in bidding for and buying that title which he has reason to fear may years thereafter be swept away through some occult and not readily discoverable defect. (Martin vs. Pond, 30 Fed., 15.) In the case where that language was used an attempt was made to annul certain foreclosure proceedings on the ground that the affidavit upon which the order of publication was based erroneously stated that the State of Kansas, when he was in fact residing in another State. It was held that this mistake did not affect the validity of the proceedings. In the preceding discussion we have assumed that the clerk failed to send the notice by post as required by the order of the court. We now proceed to consider whether this is a proper assumption; and the proposition which we propose to establish is that there is a legal presumption that the clerk performed his duty as the ministerial officer of the court, which presumption is not overcome by any other facts appearing in the cause. In subsection 14 of section 334 of the Code of Civil Procedure it is declared that there is a presumption "that official duty has been regularly performed;" and in subsection 18 it is declared that there is a presumption "that the ordinary course of business has been followed." These presumptions are of course in no sense novelties, as they express ideas which have always been recognized. Omnia presumuntur rite et solemniter esse acta donec probetur in contrarium. There is therefore clearly a legal presumption that the clerk performed his duty about mailing this notice; and we think that strong considerations of policy require that this presumption should be allowed to operate with full force under the circumstances of this case. A party to an action has no control over the clerk of the court; and has no right to meddle unduly with the business of the clerk in the performance of his duties. Having no control over this officer, the litigant must depend upon the court to see that the duties imposed on the clerk are performed. Other considerations no less potent contribute to strengthen the conclusion just stated. There is no principle of law better settled than that after jurisdiction has once been required, every act of a court of general

jurisdiction shall be presumed to have been rightly done. This rule is applied to every judgment or decree rendered in the various stages of the proceedings from their initiation to their completion (Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S., 449); and if the record is silent with respect to any fact which must have been established before the court could have rightly acted, it will be presumed that such fact was properly brought to its knowledge. (The Lessee of Grignon vs. Astor, 2 How., 319; 11 L. ed., 283.) In making the order of sale [of the real state of a decedent] the court are presumed to have adjudged every question necessary to justify such order or decree, viz: The death of the owners; that the petitioners were his administrators; that the personal estate was insufficient to pay the debts of the deceased; that the private acts of Assembly, as to the manner of sale, were within the constitutional power of the Legislature, and that all the provisions of the law as to notices which are directory to the administrators have been complied with. . . . The court is not bound to enter upon the record the evidence on which any fact was decided. (Florentine vs. Barton, 2 Wall., 210; 17 L. ed., 785.) Especially does all this apply after long lapse of time. Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255) contains an instructive discussion in a case analogous to that which is now before us. It there appeared that in order to foreclose a mortgage in the State of Kentucky against a nonresident debtor it was necessary that publication should be made in a newspaper for a specified period of time, also be posted at the front door of the court house and be published on some Sunday, immediately after divine service, in such church as the court should direct. In a certain action judgment had been entered against a nonresident, after publication in pursuance of these provisions. Many years later the validity of the proceedings was called in question in another action. It was proved from the files of an ancient periodical that publication had been made in its columns as required by law; but no proof was offered to show the publication of the order at the church, or the posting of it at the front door of the court-house. It was insisted by one of the parties that the judgment of the court was void for lack of jurisdiction. But the Supreme Court of the United States said: The court which made the decree . . . was a court of general jurisdiction. Therefore every presumption not inconsistent with the record is to be

indulged in favor of its jurisdiction. . . . It is to be presumed that the court before making its decree took care of to see that its order for constructive service, on which its right to make the decree depended, had been obeyed. It is true that in this case the former judgment was the subject of collateral , or indirect attack, while in the case at bar the motion to vacate the judgment is direct proceeding for relief against it. The same general presumption, however, is indulged in favor of the judgment of a court of general jurisdiction, whether it is the subject of direct or indirect attack the only difference being that in case of indirect attack the judgment is conclusively presumed to be valid unless the record affirmatively shows it to be void, while in case of direct attack the presumption in favor of its validity may in certain cases be overcome by proof extrinsic to the record. The presumption that the clerk performed his duty and that the court made its decree with the knowledge that the requirements of law had been complied with appear to be amply sufficient to support the conclusion that the notice was sent by the clerk as required by the order. It is true that there ought to be found among the papers on file in this cause an affidavit, as required by section 400 of the Code of Civil Procedure, showing that the order was in fact so sent by the clerk; and no such affidavit appears. The record is therefore silent where it ought to speak. But the very purpose of the law in recognizing these presumptions is to enable the court to sustain a prior judgment in the face of such an omission. If we were to hold that the judgment in this case is void because the proper affidavit is not present in the file of papers which we call the record, the result would be that in the future every title in the Islands resting upon a judgment like that now before us would depend, for its continued security, upon the presence of such affidavit among the papers and would be liable at any moment to be destroyed by the disappearance of that piece of paper. We think that no court, with a proper regard for the security of judicial proceedings and for the interests which have by law been confided to the courts, would incline to favor such a conclusion. In our opinion the proper course in a case of this kind is to hold that the legal presumption that the clerk performed his duty still maintains notwithstanding the absence from the record of the proper proof of that fact. In this connection it is important to bear in mind that under the practice prevailing in the Philippine Islands the word "record" is used in a loose and broad sense, as indicating the collective mass of papers which contain the history of all the successive steps taken in a case and which are finally deposited in the archives of the clerk's office as a memorial of the litigation. It is a matter

of general information that no judgment roll, or book of final record, is commonly kept in our courts for the purpose of recording the pleadings and principal proceedings in actions which have been terminated; and in particular, no such record is kept in the Court of First Instance of the city of Manila. There is, indeed, a section of the Code of Civil Procedure which directs that such a book of final record shall be kept; but this provision has, as a matter of common knowledge, been generally ignored. The result is that in the present case we do not have the assistance of the recitals of such a record to enable us to pass upon the validity of this judgment and as already stated the question must be determined by examining the papers contained in the entire file. But it is insisted by counsel for this motion that the affidavit of Bernardo Chan y Garcia showing that upon April 4, 1908, he sent a notification through the mail addressed to the defendant at Manila, Philippine Islands, should be accepted as affirmative proof that the clerk of the court failed in his duty and that, instead of himself sending the requisite notice through the mail, he relied upon Bernardo to send it for him. We do not think that this is by any means a necessary inference. Of course if it had affirmatively appeared that the clerk himself had attempted to comply with this order and had directed the notification to Manila when he should have directed it to Amoy, this would be conclusive that he had failed to comply with the exact terms of the order; but such is not this case. That the clerk of the attorneys for the plaintiff erroneously sent a notification to the defendant at a mistaken address affords in our opinion very slight basis for supposing that the clerk may not have sent notice to the right address. There is undoubtedly good authority to support the position that when the record states the evidence or makes an averment with reference to a jurisdictional fact, it will not be presumed that there was other or different evidence respecting the fact, or that the fact was otherwise than stated. If, to give an illustration, it appears from the return of the officer that the summons was served at a particular place or in a particular manner, it will not be presumed that service was also made at another place or in a different manner; or if it appears that service was made upon a person other than the defendant, it will not be presumed, in the silence of the record, that it was made upon the defendant also (Galpin vs. Page, 18 Wall., 350, 366; Settlemier vs. Sullivan, 97 U. S., 444, 449). While we believe that these propositions are entirely correct as applied to the case where the person making the return is the officer who is by law required to make the return, we do not think that it is properly applicable where, as in the present case, the affidavit was made by a person who, so far as the provisions of law are concerned, was a mere intermeddler.

The last question of importance which we propose to consider is whether a motion in the cause is admissible as a proceeding to obtain relief in such a case as this. If the motion prevails the judgment of July 2, 1908, and all subsequent proceedings will be set aside, and the litigation will be renewed, proceeding again from the date mentioned as if the progress of the action had not been interrupted. The proponent of the motion does not ask the favor of being permitted to interpose a defense. His purpose is merely to annul the effective judgment of the court, to the end that the litigation may again resume its regular course. There is only one section of the Code of Civil Procedure which expressly recognizes the authority of a Court of First Instance to set aside a final judgment and permit a renewal of the litigation in the same cause. This is as follows: SEC. 113. Upon such terms as may be just the court may relieve a party or legal representative from the judgment, order, or other proceeding taken against him through his mistake, inadvertence, surprise, or excusable neglect; Provided, That application thereof be made within a reasonable time, but in no case exceeding six months after such judgment, order, or proceeding was taken. An additional remedy by petition to the Supreme Court is supplied by section 513 of the same Code. The first paragraph of this section, in so far as pertinent to this discussion, provides as follows: When a judgment is rendered by a Court of First Instance upon default, and a party thereto is unjustly deprived of a hearing by fraud, accident, mistake or excusable negligence, and the Court of First Instance which rendered the judgment has finally adjourned so that no adequate remedy exists in that court, the party so deprived of a hearing may present his petition to the Supreme Court within sixty days after he first learns of the rendition of such judgment, and not thereafter, setting forth the facts and praying to have judgment set aside. ... It is evident that the proceeding contemplated in this section is intended to supplement the remedy provided by section 113; and we believe the conclusion irresistible that there is no other means recognized by law whereby a defeated party can, by a proceeding in the same

cause, procure a judgment to be set aside, with a view to the renewal of the litigation. The Code of Civil Procedure purports to be a complete system of practice in civil causes, and it contains provisions describing with much fullness the various steps to be taken in the conduct of such proceedings. To this end it defines with precision the method of beginning, conducting, and concluding the civil action of whatever species; and by section 795 of the same Code it is declared that the procedure in all civil action shall be in accordance with the provisions of this Code. We are therefore of the opinion that the remedies prescribed in sections 113 and 513 are exclusive of all others, so far as relates to the opening and continuation of a litigation which has been once concluded. The motion in the present case does not conform to the requirements of either of these provisions; and the consequence is that in our opinion the action of the Court of First Instance in dismissing the motion was proper. If the question were admittedly one relating merely to an irregularity of procedure, we cannot suppose that this proceeding would have taken the form of a motion in the cause, since it is clear that, if based on such an error, the came to late for relief in the Court of First Instance. But as we have already seen, the motion attacks the judgment of the court as void for want of jurisdiction over the defendant. The idea underlying the motion therefore is that inasmuch as the judgment is a nullity it can be attacked in any way and at any time. If the judgment were in fact void upon its face, that is, if it were shown to be a nullity by virtue of its own recitals, there might possibly be something in this. Where a judgment or judicial order is void in this sense it may be said to be a lawless thing, which can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head. But the judgment in question is not void in any such sense. It is entirely regular in form, and the alleged defect is one which is not apparent upon its face. It follows that even if the judgment could be shown to be void for want of jurisdiction, or for lack of due process of law, the party aggrieved thereby is bound to resort to some appropriate proceeding to obtain relief. Under accepted principles of law and practice, long recognized in American courts, a proper remedy in such case, after the time for appeal or review has passed, is for the aggrieved party to bring an action to enjoin the judgment, if not already carried into effect; or if the property has already been disposed of he may institute suit to recover it. In every situation of this character an appropriate remedy is at hand; and if property has been taken without due process, the law concedes due process to recover it. We accordingly old that, assuming

10

the judgment to have been void as alleged by the proponent of this motion, the proper remedy was by an original proceeding and not by motion in the cause. As we have already seen our Code of Civil Procedure defines the conditions under which relief against a judgment may be productive of conclusion for this court to recognize such a proceeding as proper under conditions different from those defined by law. Upon the point of procedure here involved, we refer to the case of People vs. Harrison (84 Cal., 607) wherein it was held that a motion will not lie to vacate a judgment after the lapse of the time limited by statute if the judgment is not void on its face; and in all cases, after the lapse of the time limited by statute if the judgment is not void on its face; and all cases, after the lapse of such time, when an attempt is made to vacate the judgment by a proceeding in court for that purpose an action regularly brought is preferable, and should be required. It will be noted taken verbatim from the California Code (sec. 473). The conclusions stated in this opinion indicate that the judgment appealed from is without error, and the same is accordingly affirmed, with costs. So ordered. Arellano, C.J., Torres, Carson, and Avancea, JJ., concur.

11

G.R. No. L-5675

April 27, 1953

ordered the return of the record to the municipal court for that purpose. Defendant Carballo filed a motion for reconsideration of the order dismissing his appeal which motion was denied by an order 353 dated March 21, 1952, whereupon Carballo filed the present petition for certiorari, injunction, prohibition and mandamus wherein he asks that after due hearing the order and actuations of respondent Judge Encarnacion of the Court of First Instance of Manila be declared null and void; that he be ordered to desist from executing said order and that furthermore, he be commanded to proceed with the trial of the case "de novo." We agree that a decision by default rendered by an inferior court is not appealable (Lim Toco vs. Co. Fay,1 45 Off. Gaz., No. 8, p. 3350). The question now is whether defendant (now petitioner Carballo) defaulted in the municipal court of Manila. True, he filed no answer, but his counsel filed a written appearance. In addition, said counsel filed a motion or manifestation asking for postponement of the hearing on the ground that he was ill. In the case of Flores vs. Zurbito, (37 Phil., 746), this Court held that an appearance in whatever form without expressly objecting to the jurisdiction of the court over the person, is a submission to the jurisdiction of the court over the person. It is, therefore, clear that petitioner Carballo made an appearance in the municipal court. Could he then be declared in default just because he filed no answer? The answer must be in the negative. In the case of Quinzan vs. Arellano,2 G.R. No. 4461, December 28, 1951, the Supreme Court said that in the justice of the peace court failure to appear, not failure to answer is the sole ground for default. What really happened in the municipal court was that the defendant tho he filed no answer to the complaint, nevertheless, he made his appearance and in writing at that, but because of his failure and that of his counsel to appear on the date of the trial, a hearing ex-parte was held and judgment was rendered thereafter. The judgment, therefore, was not by default. So defendant Antonio Carballo had a right to appeal as in fact he appealed, and the Court of First Instance should not have declared the decision appealed from final and executory under the theory that it was not appealable. The present petition is granted and the respondent judge is hereby directed to proceed with the trial of the case. Respondent Mariano Ang will pay the costs. Paras, C.J., Feria, Pablo, Bengzon, Tuason, and Labrador, JJ., concur.

ANTONIO CARBALLO, petitioner, vs. DEMETRIO B. ENCARNACION in his capacity as Judge of First Instance of Manila and MARIANO ANG, respondents. J. Gonzales Orense for petitioner. Antonio Gonzales for respondents. MONTEMAYOR, J.: In the Municipal Court of Manila, Mariano Ang filed a complaint (civil case No. 8769) against Antonio Carballo for the collection of P1,860.84. The corresponding summons was served upon defendant Carballo for appearance and trial on October 10, 1949. As counsel for him Atty. J. Gonzales entered his written appearance on October 12, 1949. On the same day said counsel filed a motion for postponement of the hearing for one month on the ground that he was sick, attaching a medical certificate to prove his illness. Hearing was postponed to October 14, 1949 at which time defendant asked for another postponement on the ground that his counsel was still sick. The hearing was again postponed to October 24, 1949. Inn said last two postponement of the hearing, the municipal court warned the defendant that the hearing could not wait until his counsel recovered from his illness, and that if said counsel could not attend the trial he should obtain the services of another lawyer. On the day set for hearing, namely, October 24, 1949, neither defendant nor his counsel appeared although there was a written manifestation of defendant's counsel requesting further postponement because he was still sick. At the request of plaintiff's counsel, defendant was declared in default. The evidence for the plaintiff was received after which judgment was rendered against the defendant ordering him to pay the sum of P1,860 with legal interest. Counsel for defendant was duly notified of said decision and he filed a motion for new trial on the ground that injustice had been done, and that an error was committed in the decision. The motion for new trial was denied. Through his counsel defendant perfected his appeal to the Court of First Instance of Manila and he later filed an answer. When the case was called for hearing on March 18, 1952, counsel for plaintiff argued that the decision appealed from had become final and executory for the reason that said judgment having been rendered by default, no appeal could be validly taken from it. Despite opposition of the defendant, the Court of First Instance in an order dated March 18, 1952, considering said decision final and unappealable because it had been rendered by default, and held that the only jurisdiction left to it was to order the execution of said decision, so it

12

G.R. No. L-18164

January 23, 1967

WILLIAM F. GEMPERLE, plaintiff-appellant, vs. HELEN SCHENKER and PAUL SCHENKER as her husband, defendants-appellees. Gamboa & Gamboa for plaintiff-appellant. A. R. Narvasa for defendants-appellees. CONCEPCION, C. J.: Appeal, taken by plaintiff, William F. Gemperle, from a decision of the Court of First Instance of Rizal dismissing this case for lack of jurisdiction over the person of defendant Paul Schenker and for want of cause of action against his wife and co-defendant, Helen Schenker said Paul Schenker "being in no position to be joined with her as party defendant, because he is beyond the reach of the magistracy of the Philippine courts." The record shows that sometime in 1952, Paul Schenker-hereinafter referred to as Schenker acting through his wife and attorney-in-fact, Helen Schenker herein-after referred to as Mrs. Schenker filed with the Court of First Instance of Rizal, a complaint which was docketed as Civil Case No. Q-2796 thereof against herein plaintiff William F. Gemperle, for the enforcement of Schenker's allegedly initial subscription to the shares of stock of the Philippines-Swiss Trading Co., Inc. and the exercise of his alleged pre-emptive rights to the then unissued original capital stock of said corporation and the increase thereof, as well as for an accounting and damages. Alleging that, in connection with said complaint, Mrs. Schenker had caused to be published some allegations thereof and other matters, which were impertinent, irrelevant and immaterial to said case No. Q-2796, aside from being false and derogatory to the reputation, good name and credit of Gemperle, "with the only purpose of attacking" his" honesty, integrity and reputation" and of bringing him "into public hatred, discredit, disrepute and contempt as a man and a businessman", Gemperle commenced the present action against the Schenkers for the recovery of P300,000 as damages, P30,000 as attorney's fees, and costs, in addition to praying for a judgment ordering Mrs. Schenker "to retract in writing the said defamatory expressions". In due course, thereafter, the lower court, rendered the decision above referred to. A reconsiderating thereof having been denied, Gemperle interposed the present appeal. The first question for determination therein is whether or not the lower court had acquired jurisdiction over the person of Schenker. Admittedly, he, a Swiss citizen, residing in Zurich, Switzerland, has not been actually served with summons in the Philippines, although the summons address to him and Mrs. Schenker had been

served personally upon her in the Philippines. It is urged by plaintiff that jurisdiction over the person of Schenker has been secured through voluntary appearance on his part, he not having made a special appearance to assail the jurisdiction over his person, and an answer having been filed in this case, stating that "the defendants, by counsel, answering the plaintiff's complaint, respectfully aver", which is allegedly a general appearance amounting to a submission to the jurisdiction of the court, confirmed, according to plaintiff, by a P225,000 counterclaim for damages set up in said answer; but this counterclaim was set up by Mrs. Schenker alone, not including her husband. Moreover, said answer contained several affirmative defenses, one of which was lack of jurisdiction over the person of Schenker, thus negating the alleged waiver of this defense. Nevertheless, We hold that the lower court had acquired jurisdiction over said defendant, through service of the summons addressed to him upon Mrs. Schenker, it appearing from said answer that she is the representative and attorneyin-fact of her husband aforementioned civil case No. Q2796, which apparently was filed at her behest, in her aforementioned representative capacity. In other words, Mrs. Schenker had authority to sue, and had actually sued on behalf of her husband, so that she was, also, empowered to represent him in suits filed against him, particularly in a case, like the of the one at bar, which is consequence of the action brought by her on his behalf. Inasmuch as the alleged absence of a cause of action against Mrs. Schenker is premised upon the alleged lack of jurisdiction over the person of Schenker, which cannot be sustained, it follows that the conclusion drawn therefore from is, likewise, untenable. Wherefore, the decision appealed from should be, is hereby, reversed, and the case remanded to the lower court for proceedings, with the costs of this instance defendants-appellees. It is so ordered. Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.

13

G.R. No. L-1403

October 29, 1948

VICENTE CALUAG and JULIANA GARCIA, petitioners, vs. POTENCIANO PECSON and ANGEL H. MOJICA, Judges of the Court of First Instance of Bulacan, and LEON ALEJO, respondents. Marcial G. Mendiola for petitioners. Antonio Gonzalez for respondent L. Alejo. The respondent Judge Pecson in his own behalf. FERIA, J.: This is a petition for certiorari and prohibition filed by the petitioners on the ground that the respondent judge acted without or in excess of the jurisdiction of the court in rendering the resolution dated April 1, 1947, which declares the petitioners guilty of contempt of court for not complying or performing the order of the court of January 7, 1947, in case No. 5486 of the Court of First Instance of Bulacan, requiring the petitioners to execute a deed of sale in favor of plaintiff over one-half of the land pro indiviso in question, within ten days from the receipt of copy of said resolution, and which orders that the petitioners be imprisoned until they perform the said act. The first ground on which the petition is based is that the judgment of the court which the petitioners are ordered to perform has not yet become final. This ground is unfounded. From the pleadings and annexes it appears that the judgment of the lower against the petitioners was appealed to the Court of Appeals and was affirmed by the latter in its decision promulgated on May 30, 1944; that the petition to appeal to the Supreme Court by certiorari filed by the petitioners was denied on July 24, 1944; that a motion for reconsideration filed by the petitioners was also denied on August 21, 1944; that the record of the case, having been destroyed during the liberation, was reconstituted; that on September 24, 1945, the Deputy Clerk of this Court wrote a letter to and notified the petitioners of the resolution of the Court declaring said record reconstituted, together with the copies of the decision of the Court of Appeals and resolutions of the Supreme Court during Japanese occupation of June 24 and August 21, 1944; and that on October 23, 1946, the clerk of Court of First Instance of Bulacan notified the attorneys for both parties of the said decision of the Court of Appeals and resolutions of the Supreme Court. There can be no question, therefore, that the judgment of the Court of First Instance abovementioned, as affirmed by the Court of Appeals, has become final and executory. The other two grounds alleged by the petitioners in support of the present petition for certiorari are: that

plaintiff's action abated or was extinguished upon the death of the plaintiff Fortunato Alejo, because his right of legal redemption was a personal one, and therefore not transferable to his successors in interest; and that, even assuming that it is a personal one and therefore transferable, his successors in interest have failed to secure the substitution of said deceased by his legal representative under section 17, Rule 3. These reasons or grounds do not deserve any serious consideration, not only because they are without merits, but because the Court of First Instance of Bulacan, having jurisdiction to render that judgment, the latter cannot be disobeyed however erroneous it may be (Compaia General de Tabacos vs. Alhambra Cigar & Cigarette Mfg. Co., 33 Phil., 503; Golding vs. Balatbat, 36 Phil., 941). And this Court cannot in this proceeding correct any error which may have been committed by the lower court. However, although not alleged, we may properly take judicial notice of the fact that the respondent Judges have acted without jurisdiction in proceeding against and declaring the petitioners guilty of contempt of court. The contempt supposed to have been committed by the petitioners is not a direct contempt under section 1, Rule 64, for it is not a misbehavior in the presence of or so near a court or judge as to interrupt the administration of justice. It is an indirect contempt or disobedience of a lawful order of the court, under section 3, Rule 64, of the Rules of Court. According to sections 4 and 5 of said rule, where a contempt under section 3 has been committed against a superior court or judge the charge may be filed with such superior court, and the accused put under custody; but if the hearing is ordered to be had forthwith, the accused may be released from custody upon filing a bond in an amount to be fixed by the court for his appearance to answer the charge. From the record it appears that no charge for contempt was filed against the petitioners nor was a trial held. The only proceeding had in this case which led to the conviction of the defendants are: the order of January 7, 1947, issued by the lower court requiring the defendants to execute the deed of conveyance as direct in the judgment within ten days from the receipt of the copy of said order, with the admonition that upon failure to do so said petitioners will be dealt with for contempt of court; the motion of March 21, 1947, filed by the attorney for the respondent Leon Alejo, administrator of the estate of Fortunato Alejo, that the petitioners be punished for contempt; and the resolution of the court of April 1, 1947, denying the second motion for reconsideration of March 17, 1947, of the order of January 7, 1947, filed by the petitioners, and ordering the petitioners to be imprisoned in the provincial jail until they have complied with the order of the court above mentioned.

14

It is well settled that jurisdiction of the subject matter of a particular case is something more than the general power conferred by law upon a court to take cognizance of cases of the general class to which the particular case belongs. It is not enough that a court has power in abstract to try and decide the class of litigations to which a case belongs; it is necessary that said power be properly invoked, or called into activity, by the filing of a petition, complaint or other appropriate pleading. A Court of First Instance has an abstract jurisdiction or power to try and decide criminal cases for homicide committed within its territorial jurisdiction; but it has no power to try and decide a criminal case against a person for homicide committed within its territory, unless a complaint or information against him be filed with the said court. And it has also power to try civil cases involving title to real estate situated within its district; but it has no jurisdiction to take cognizance of a dispute or controversy between two persons over title of real property located in his province, unless a proper complaint be filed with its court. So, although the Court of First Instance of Bulacan has power conferred by law to punish as guilty of indirect contempt a party who disobeys its order or judgment, it did not have or acquire jurisdiction of the particular case under consideration to declare the petitioners guilty of indirect contempt, and order their confinement until they have executed the deed of conveyance in question, because neither a charge has been filed against them nor a hearing thereof held as required by law. The respondent Judge Angel Mojica acted not only without jurisdiction in proceeding against and declaring the petitioners guilty of contempt, but also in excess of jurisdiction in ordering the confinement of the petitioners, because it had no power to impose such punishment upon the latter. The respondent judge has no power under the law to order the confinement of the petitioners until they have compiled with the order of the court. Section 9, Rule 39, in connection with section 7 of Rule 64, provides that if a person is required by a judgment or order of the court to perform any other act than the payment of money or sale or delivery of real or personal property, and said person disobeys such judgment or order while it is yet in his power to perform it, he may be punished for contempt and imprisoned until he performs said order. This provision is applicable only to specific acts other than those provided for or covered by section 10 of the same Rule, that is, it refers to a specific act which the party or person must personally do, because his personal qualification and circumstances have been taken into consideration in accordance with the provision of article 1161 of the Civil Code. But if a judgment directs a party to execute a conveyance of land or to deliver deeds or other documents or to perform any specific act which may be performed by some other person, or in some other way provided by law with the same effect, as

in the present case, section 10, and not said section 9 of Rule 39 applies; and under the provision of said section 10, the court may direct the act to be done at the cost of the disobedient party, by some other person appointed or designated by the court, and the act when so done shall have like effect as if done by the party himself. It is also well settled by the authorities that a judgment may be void for want of power to render the particular judgment, though the court may have had jurisdiction over the subject matter and the parties. A wrong decision made within the limits of the court's authority is erroneous and may be corrected on appeal or other direct review, but a wrong, or for that matter a correct, decision is void, and may be set aside either directly or collaterally, where the court exceeds its jurisdiction and power in rendering it. Hence though the court has acquired jurisdiction over the subject matter and the particular case has been submitted properly to it for hearing and decision, it will overstep its jurisdiction if it renders a judgment which it has no power under the law to render. A sentence which imposes upon the defendant in a criminal prosecution a penalty different from or in excess of the maximum which the court is authorized by law to impose for the offense of which the defendant was convicted, is void for want or excess of jurisdiction, as to the excess in the latter case. And a judgment of imprisonment which the court has no constitutional or statutory power to impose, as in the present case, may also be collaterally attacked for want or rather in excess of jurisdiction. In Cruz vs. Director of Prisons (17 Phil., 269, 272, 273), this Court said the following applicable to punishment imposed for contempt of court: . . . The courts uniformly hold that where a sentence imposes a punishment in excess of the power of the court to impose, such sentence is void as to the excess, and some of the courts hold that the sentence is void in toto; but the weight of authority sustains the proposition that such a sentence is void only as to the excess imposed in case the parts are separable, the rule being that the petitioner is not entitled to his discharge on a writ of habeas corpus unless he has served out so much of the sentence as was valid. (Ex parte Erdmann, 88 Cal., 579; Lowrey vs. Hogue, 85 Cal., 600; Armstrong vs. People, 37 Ill., 459; State vs. Brannon, 34 La Ann., 942; People vs. Liscomb, 19 Am. Rep., 211; In re Taylor, 7 S. D., 382, 45 L. R. A., 136; Ex parte Mooney, 26 W. Va., 36, 53 Am. Rep., 59; U. S.

15

vs. Pridgeon, 153 U. S., 48; In re Graham, 138 U. S., 461.) In the present case, in view of the failure of the petitioners to execute the deed of conveyance directed in the judgment of the court, the respondent may, under section 10, Rule 39, either order its execution by some other person appointed or designated by the court at the expense of the petitioners, or enter a judgment divesting the title of the petitioner over the property in question and vesting it in Leon Alejo, administrator of estate of the deceased Fortunato Alejo, and such judgment has the force and effect of a conveyance executed in due form of law. In view of the foregoing, the order of the court of April 7, 1947, ordering the confinement of the petitioners in the provincial jail until they have complied with the order of the court, is set aside without costs. So ordered. Moran, C.J., Pablo, Bengzon, Briones and Tuason, JJ., concur. Paras, J., concurs in the result.

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G.R. No. 47517

June 27, 1941

IDONAH SLADE PERKINS, petitioner, vs. MAMERTO ROXAS, ET AL., respondents. Alva J. Hill for petitioner. DeWitt, Perkins & Ponce Enrile for respondent Judge and respondent Perkins. Ross, Lawrence, Selph & Carrascoso, Jr., for respondent Benguet Consolidated Mining Co. LAUREL, J.: On July 5, 1938, the respondent Eugene Arthur Perkins, filed a complaint in the Court of First Instance of Manila against the Benguet Consolidated Mining Company for the recovery of the sum of P71,379.90, consisting of dividends which have been declared and made payable on 52,874 shares of stock registered in his name, payment of which was being withheld by the company, and for the recognition of his right to the control and disposal of said shares, to the exclusion of all others. To the complaint, the company filed its answer, alleging, by way of defense, that the withholding of plaintiff's right to the disposal and control of the shares was due to certain demands made with respect to said shares by the petitioner herein. Idonah Slade Perkins, and by one George H. Engelhard. The answer prays that the adverse claimants be made parties to the action and served with notice thereof by publication, and that thereafter all such parties be required to interplead and settle the rights among themselves. On September 5, 1938, the trial court ordered the respondent, Eugene Arthur Perkins, to include in his complaint as parties defendants petitioner, Idonah Slade Perkins, and George H. Engelhard. The complaint was accordingly amended and in addition to the relief prayed for in the original complaint, respondent Perkins prayed that petitioner Idonah Slade Perkins and George H. Engelhard be adjudged without interest in the shares of stock in question and excluded from any claim they assert thereon. Thereafter, summons by publication were served upon the non-resident defendants, Idonah Slade Perkins and George H. Engelhard, pursuant to the order of the trial court. On December 9, 1938, Engelhard filed his answer to the amended complaint, and on January 8, 1940, petitioner's objection to the court's jurisdiction over her person having been overruled by the trial court and by this court in G. R. No. 46831, petitioner filed her answer with a cross-complaint in which she sets up a judgment allegedly obtained by her against respondent, Eugene Arthur Perkins, from the Supreme Court of the State of New York, wherein it is declared that she is the sole legal owner and entitled to the possession and control of the shares of stock in question together with all the cash dividends declared thereon by

the Benguet Consolidated Mining Company, and prays for various affirmative reliefs against the respondent. To the answer and cross-complaint thus filed, the respondent, Eugene Arthur Perkins, filed a reply and an answer in which he sets up several defenses to the enforcement in this jurisdiction of the judgment of the Supreme Court of the State of New York above alluded to. Instead of demurring to the reply on either of the two grounds specified in section 100 of the Code of Civil Procedure, petitioner, Idonah Slade Perkins, on June 5, 1940, filed a demurrer thereto on the ground that "the court has no jurisdiction of the subject of the action," because the alleged judgment of the Supreme Court of the State of New York is res judicata. Petitioner's demurrer having been overruled, she now filed in this court a petition entitled " Certiorari, Prohibition and Mandamus," alleging that "the respondent judge is about to and will render judgment in the abovementioned case disregarding the constitutional rights of this petitioner; contrary to and annulling the final, subsisting, valid judgment rendered and entered in this petitioner's favor by the courts of the State of New York, ... which decision is res judicata on all the questions constituting the subject matter of civil case No. 53317, of the Court of First Instance of Manila; and which New York judgment the Court of First Instance of Manila is without jurisdiction to annul, amend, reverse, or modify in any respect whatsoever"; and praying that the order of the respondent judge overruling the demurrer be annulled, and that he and his successors be permanently prohibited from taking any action on the case, except to dismiss the same. The only question here to be determined, therefore, is whether or not, in view of the alleged judgment entered in favor of the petitioner by the Supreme Court of New York, and which is claimed by her to be res judicata on all questions raised by the respondent, Eugene Arthur Perkins, in civil case No. 53317 of the Court of First Instace of Manila, the local court has jurisdiction over the subject matter of the action in the said case. By jurisdiction over the subject matter is meant the nature of the cause of action and of the relief sought, and this is conferred by the sovereign authority which organizes the court, and is to be sought for in general nature of its powers, or in authority specially conferred. In the present case, the amended complaint filed by the respondent, Eugene Arthur Perkins, in the court below alleged the ownership in himself of the conjugal partnership between him and his wife, Idonah Slade Perkins; that the petitioner, Idonah Slade Perkins, and George H. Engelhard assert claims to and interests in the said stock adverse to Eugene Arthur Perkins; that such claims are invalid, unfounded, and made only for the purpose of vexing, hindering and delaying Eugene Arthur Perkins in the exercise of the lawful control over and use of said shares and dividends accorded to him and by law and by previous orders and decrees of this

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court; and the said amended complaint prays, inter alia, "that defendant Benguet Consolidated Mining Company be required and ordered to recognize the right of the plaintiff to the control and disposal of said shares so standing in his name to the exclusion of all others; that the additional defendants, Idonah Slade Perkins and George H. Engelhard, be each held to have no interest or claim in the subject matter of the controversy between plaintiff and defendant Benguet Consolidated Mining Company, or in or under the judgment to be rendered herein and that by said judgment they, and each of them be excluded therefrom; and that the plaintiff be awarded the costs of this suit and general relief." The respondent's action, therefore, calls for the adjudication of title to certain shares of stock of the Benguet Consolidated Mining Company, and the granting of affirmative reliefs, which fall within the general jurisdiction of the Court of First Instance of Manila. ( Vide: sec. 146, et seq., Adm. Code, as amended by Commonwealth Act No. 145; sec. 56, Act No. 136, as amended by Act No. 400.) Similarly, the Court of First Instance of Manila is empowered to adjudicate the several demands contained in petitioner's cross-complaint. The crosscomplaint sets up a judgment allegedly recovered by Idonah Slade Perkins against Eugene Arthur Perkins in the Supreme Court of New York and by way of relief prays: (1) Judgment against the plaintiff Eugene Arthur Perkins in the sum of one hundred eighty-five thousand and four hundred dollars ($185,400), representing cash dividends paid to him by defendant Benguet Consolidated Mining Co. from February, 1930, up to and including the dividend of March 30, 1937. (2) That plaintiff Eugene Arthur Perkins be required to deliver to this defendant the certificates representing the 48,000 shares of capital stock of Benguet Consolidated Mining Co. issued as a stock dividend on the 24,000 shares owned by this defendant as described in the judgment Exhibit 1-A. (3) That this defendant recover under that judgment Exhibit 1-A interest upon the amount of each cash dividend referred to in that judgment received by plaintiff Eugene Arthur Perkins from February, 1930, to and including the dividend of March 30, 1937, from the date of payment of each of such

dividends at the rate of 7 per cent per annum until paid. (4) That this defendant recover of plaintiff her costs and disbursements in that New York action amounting to the sum of one thousand five hundred eighty-four and 20/00 dollars ($1,584.20), and the further sum of two thousand dollars ($2,000) granted her in that judgment Exhibit 1-A as an extra allowance, together with interest. (5) For an order directing an execution to be issued in favor of this defendant and against the plaintiff for amounts sufficient to satisfy the New York judgment Exhibit 1-A in its entirety, and against the plaintiff and the defendant Benguet Consolidated Mining Co. for such other amounts prayed for herein as this court may find to be due and payable by each of them; and ordering them to comply with all other orders which this court may issue in favor of the defendant in this case. (6) For the costs of this action, and (7) For such other relief as may be appropriate and proper in the premises. In other words, Idonah Slade Perkins in her crosscomplaint brought suit against Eugene Arthur Perkins and the Benguet Consolidated Mining Company upon the alleged judgment of the Supreme Court of the State of New York and asked the court below to render judgment enforcing that New York judgment, and to issue execution thereon. This is a form of action recognized by section 309 of the Code of Civil Procedure (now section 47, Rule 39, Rules of Court) and which falls within the general jurisdiction of the Court of First Instance of Manila, to adjudicate, settled and determine. The petitioner expresses the fear that the respondent judge may render judgment "annulling the final, subsisting, valid judgment rendered and entered in this petitioner's favor by the courts of the State of New York, ... which decision is res judicata on all the questions constituting the subject matter of civil case No. 53317," and argues on the assumption that the respondent judge is without jurisdiction to take cognizance of the cause. Whether or not the respondent judge in the course of the proceedings will give validity and efficacy to the New York judgment set up by the petitioner in her cross-complaint is a question that goes to the merits of the controversy and relates to the rights

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of the parties as between each other, and not to the jurisdiction or power of the court. The test of jurisdiction is whether or not the tribunal has power to enter upon the inquiry, not whether its conclusion in the course of it is right or wrong. If its decision is erroneous, its judgment case be reversed on appeal; but its determination of the question, which the petitioner here anticipates and seeks to prevent, is the exercise by that court and the rightful exercise of its jurisdiction. The petition is, therefore, hereby denied, with costs against the petitioner. So ordered.

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G.R. No. 115849

January 24, 1996

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO RIVERA, petitioners, vs. COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE JANOLO, respondents. DECISION PANGANIBAN, J.: In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna? Does the doctrine of "apparent authority" apply in this case? If so, may the Central Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such "apparent authority" after said contract has been deemed perfected? During the pendency of a suit for specific performance, does the filing of a "derivative suit" by the majority shareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale violate the ban against forum-shopping? Simply stated, these are the major questions brought before this Court in the instant Petition for review on certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the respondent Court of Appeals1 in CA-G.R CV No. 35756 and the Resolution promulgated June 14, 1994 denying the motion for reconsideration. The dispositive portion of the said Decision reads: WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED. All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito. Costs against appellant bank. The dispositive portion of the trial court's 2 decision dated July 10, 1991, on the other hand, is as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: 1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos; 2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owner's copies of T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of registration of the same deed and transfer of the six (6) titles in the names of the plaintiffs; 3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums of P200,000.00 each in moral damages; 4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P100,000.00 as exemplary damages ; 5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of attorney's fees; 6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount of P20,000.00; With costs against the defendants. After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was given due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda and reply memoranda. The First Division transferred this case to the Third Division per resolution dated October 23, 1995. After carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned ponente for the writing of this Decision.

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The Parties Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head-Manager of the Property Management Department of the petitioner Bank. Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo. Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this petition. The Facts The facts of this case are summarized in the respondent Court's Decision3 as follows: (1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. The property used to be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral for a loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose. (2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the defendant bank. The meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank through a letter dated August 30, 1987 (Exh. "B"), as follows:

Attn. Mr. Mercurio Q. Manager, Property Management Dept. Gentleman:

Rivera

I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less.

TCT NO. T-106932 T-106933 T-106934 T-106935 T-106936 T-106937

AREA 113,580 sq. m. 70,899 sq. m. 52,246 sq. m. 96,768 sq. m. 187,114 sq. m. 481,481 sq. m.

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash. Kindly contact me at Telephone Number 9211344. (3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder quoted (Exh. "C"):

September 1, 1987 JP M-P GUTIERREZ ENTERPRISES 142 Charisma St., Doa Andres II Rosario, Pasig, Metro Manila Attention: JOSE O. JANOLO Dear Sir:

August 30, 1987 The Producers Bank Makati, Metro Manila of the Philippines Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please be informed however that the bank's

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counter-offer is at P5.5 million for more than 101 hectares on lot basis. We shall be very glad to hear your position on the on the matter. Best regards. (4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply, wrote (Exh. "D"):

accepting your offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00). Thank you. (6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. "F"): Attention: Atty. Demetrio Demetria Dear Sir: Your proposal to buy the properties the bank foreclosed from Byme investment Corp. located at Sta. Rosa, Laguna is under study yet as of this time by the newly created committee for submission to the newly designated Acting Conservator of the bank. For your information. (7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what plaintiff considered as a perfected contract of sale, which demands were in one form or another refused by the bank. As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to defendant Rivera (Exhibit "G") tendered payment of the amount of P5.5 million "pursuant to (our) perfected sale agreement." Defendants refused to receive both the payment and the letter. Instead, the parcels of land involved in the transaction were advertised by the bank for sale to any interested buyer (Exh, "H" and "H-1"). Plaintiffs demanded the execution by the bank of the documents on what was considered as a "perfected agreement." Thus: Mr. Mercurio Manager, Producers Paseo de Roxas, Metro Manila Dear Mr. Rivera: This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101hectare lot located in Sta. Rosa, Laguna, and Rivera Bank Makati

September 17, 1987 Producers Paseo de Makati, Metro Manila Attention: Mr. Mercurio Rivera Gentlemen: In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa, Laguna, I would like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH.. Hoping that satisfaction. this proposal meets your Bank Roxas

(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took place was a meeting on September 28, 1987 between the plaintiffs and Luis Co, the Senior VicePresident of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. "E"): The Producers Bank of the Paseo de Roxas, Metro Manila Attention: Mr. Mercurio Rivera Re: 101 Hectares of in Sta. Rosa, Laguna Gentlemen: Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are Land Philippines Makati

22

which are covered by TCT No. T-106932 to 106937. From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was received by you on October 5, 1987. In view of the above circumstances, we believe that an agreement has been perfected. We were also informed that despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment. Instead, you have advertised for sale the same lot to others. In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the necessary actions/documentation within three (3) days from your receipt hereof. We are ready to remit the agreed amount of P5.5 million at your advice. Otherwise, we shall be constrained to file the necessary court action to protect the interest of our client. We trust that you will be guided accordingly. (8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its communication of December 2, 1987 (Exh. "I"), that said letter has been "referred . . . to the office of our Conservator for proper disposition" However, no response came from the Acting Conservator. On December 14, 1987, the plaintiffs made a second tender of payment (Exh. "L" and "L-1"), this time through the Acting Conservator, defendant Encarnacion. Plaintiffs' letter reads: PRODUCERS BANK OF THE PHILIPPINES Paseo de Roxas, Makati, Metro Manila Attn.: Atty. NIDA ENCARNACION Central Bank Conservator We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the amount of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934, 106935, 106936 and 106937 and registered under Producers Bank.

This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase price of the said lots. Please inform us of the date of documentation of the sale immediately. Kindly acknowledge receipt of our payment. (9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through counsel, made a final demand for compliance by the bank with its obligations under the considered perfected contract of sale (Exhibit "N"). As recounted by the trial court (Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex "4" of defendant's answer to amended complaint), the defendants through Acting Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the defendants justified the refusal of the tenders of payment and the noncompliance with the obligations under what the plaintiffs considered to be a perfected contract of sale. (10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivers and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale, The defendants took the position that there was no such perfected sale because the defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as to the price. On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan, filed a motion to intervene in the trial court, alleging that as owner of 80% of the Bank's outstanding shares of stock, he had a substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an order denying the motion to intervene on the ground that it was filed after trial had already been concluded. It also denied a motion for reconsideration filed thereafter. From the trial court's decision, the Bank, petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which subsequently affirmed with modification the said judgment. Henry Co did not appeal the denial of his motion for intervention. In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of

23

Demetria and Janolo, in view of the assignment of the latters' rights in the matter in litigation to said private respondent. On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the "Second Case") purportedly a "derivative suit" with the Regional Trial Court of Makati, Branch 134, docketed as Civil Case No. 921606, against Encarnacion, Demetria and Janolo "to declare any perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the sale"4 In his answer, Janolo argued that the Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice. "Private respondent opposed this motion on the ground, among others, that plaintiff's act of forum shopping justifies the dismissal of both cases, with prejudice."5 Private respondent, in his memorandum, averred that this motion is still pending in the Makati RTC. In their Petition6 and Memorandum7, summarized their position as follows: I. The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of Demetria and Janolo) and the bank. II. The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties. III. The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of previous management. IV. The findings and conclusions of the Court of Appeals do not conform to the evidence on record. On the other hand, petitioners prayed for dismissal of the instant suit on the ground8 that: petitioners

I. Petitioners have engaged in forum shopping. II. The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no longer be questioned in this case. III. The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by; respondent Ejercito) and the bank. IV. The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the agency and the contract, has no authority to revoke the contract of sale. The Issues From the foregoing positions of the parties, the issues in this case may be summed up as follows: 1) Was there forum-shopping on the part of petitioner Bank? 2) Was there a perfected contract of sale between the parties? 3) Assuming there was, was the said contract enforceable under the statute of frauds? 4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract? 5) Did the respondent Court commit any reversible error in its findings of facts? The First Issue: Was There Forum-Shopping? In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised Circular No. 28-91 requiring that a party "must certify under oath . . . [that] (a) he has not (t)heretofore commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is

24

pending" in said courts or agencies. A violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions or complaints. To be sure, petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating "for the record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants but which is the subject of a pending Motion to Dismiss Without Prejudice.9 Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual forum shopping because the instant petition pending before this Court involves "identical parties or interests represented, rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the issues in the two cases are so interwined that a judgement or resolution in either case will constitute res judicata in the other." 10 On the other hand, petitioners explain forum-shopping because:
11

forum non conveniens was developed whereby a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere. In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party attempts to have his action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict." Hence, according to Words and Phrases14, "a litigant is open to the charge of "forum shopping" whenever he chooses a forum with slight connection to factual circumstances surrounding his suit, and litigants should be encouraged to attempt to settle their differences without imposing undue expenses and vexatious situations on the courts". In the Philippines, forum shopping has acquired a connotation encompassing not only a choice of venues, as it was originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of venues), the Rules of Court, for example, allow a plaintiff to commence personal actions "where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff" (Rule 4, Sec, 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of pursuing civil liabilities independently of the criminal, arising from the same set of facts. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal each remedy being available independently of the others although he cannot recover more than once. In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his action, This was the original concept of the term forum shopping. Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts and consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme inconvenience to some of the parties to the action. Thus, "forum shopping" had acquired a different concept which is unethical professional legal practice. And this necessitated or had given rise to the formulation of rules and canons

that there is no

1) In the earlier or "First Case" from which this proceeding arose, the Bank was impleaded as a defendant, whereas in the "Second Case" (assuming the Bank is the real party in interest in a derivative suit), it was plaintiff; 2) "The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances"; 3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition identifies the action as a "derivative suit," it "does not mean that it is one" and "(t)hat is a legal question for the courts to decide"; 4) Petitioners did not hide the Second Case at they mentioned it in the said VERIFICATION/CERTIFICATION. We rule for private respondent. To begin with, forum-shopping originated as a concept in private international law.12, where non-resident litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses, including to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue. To combat these less than honorable excuses, the principle of

25

discouraging practice. 15

or

altogether

prohibiting

the

What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems has been abused and mis-used to assure scheming litigants of dubious reliefs. To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned, promulgated Circular 28-91. And even before that, the Court had prescribed it in the Interim Rules and Guidelines issued on January 11, 1983 and had struck down in several cases 16 the inveterate use of this insidious malpractice. Forum shopping as "the filing of repetitious suits in different courts" has been condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval Hughes, et al., "as a reprehensible manipulation of court processes and proceedings . . ." 17 when does forum shopping take place? There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the courts while an administrative proceeding is pending, as in this case, in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling. This is specially so, as in this case, where the court in which the second suit was brought, has no jurisdiction.18 The test for determining whether a party violated the rule against forum shopping has been laid dawn in the 1986 case of Buan vs. Lopez 19, also by Chief Justice Narvasa, and that is, forum shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other, as follows: There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at least such parties as represent the same interests in both actions, as well as identity of rights asserted and relief prayed for, the relief being founded on the same facts, and the identity on the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res adjudicata in the action under consideration: all the requisites, in fine, of auter action pendant. xxx xxx xxx

As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards parties, or interests represented, rights asserted and relief sought, as well as basis thereof, to a degree sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. That same identity puts into operation the sanction of twin dismissals just mentioned. The application of this sanction will prevent any further delay in the settlement of the controversy which might ensue from attempts to seek reconsideration of or to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563 promulgated on July 15, 1986, which dismissed the petition upon grounds which appear persuasive. Consequently, where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the defense of litis pendencia in one case is bar to the others; and, a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two 20 (or more) complaints or petitions, and for imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action against the erring lawyer. Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious that there exist identity of parties or interests represented, identity of rights or causes and identity of reliefs sought. Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint 21 in the Second Case seeks to declare such purported sale involving the same real property "as unenforceable as against the Bank", which is the petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission on Audit. 22, this Court ruled that the filing by a party of two apparently different actions, but with the same objective, constituted forum shopping:

26

In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10, 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel "T/T Andres Bonifacio", and for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages. One can see that although the relief prayed for in the two (2) actions are ostensibly different, the ultimate objective in both actions is the same, that is, approval of the sale of vessel in favor of petitioner and to overturn the letter-directive of the COA of October 10, 1988 disapproving the sale. (emphasis supplied). In an earlier case we held:
23

acts sought to be enjoined but nonetheless done. The remedy was certainly not the institution of another action in another forum based on essentially the same facts, The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both their actions, in this Court as well as in the Court a quo, dismissible. In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same interest and entity, namely, petitioner Bank, because: Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the assailed contract of sale; and Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a "derivative suit". In the caption itself, petitioners claim to have brought suit "for and in behalf of the Producers Bank of the Philippines" 24. Indeed, this is the very essence of a derivative suit: An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holdsstock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue , or are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]; emphasis supplied). In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the outstanding capital stock, but also constitute the majority in the Board of Directors of petitioner Bank. That being so, then they really represent the Bank. So, whether they sued "derivatively" or directly, there is undeniably an identity of interests/entity represented. Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is separate and distinct from its shareholders. But the rulings of this Court are consistent: "When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the

but with the same logic and vigor,

In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-shopping. Both actions unquestionably involve the same transactions, the same essential facts and circumstances. The petitioners' claim of absence of identity simply because the PCGG had not been impleaded in the RTC suit, and the suit did not involve certain acts which transpired after its commencement, is specious. In the RTC action, as in the action before this Court, the validity of the contract to purchase and sell of September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the propriety of implementing the same (by paying the pledgee banks the amount of their loans, obtaining the release of the pledged shares, etc.) were the basic issues. So, too, the relief was the same: the prevention of such implementation and/or the restoration of the status quo ante. When the acts sought to be restrained took place anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit did not become functus oficio. It remained an effective vehicle for obtention of relief; and petitioners' remedy in the premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit, so as to include the PCGG as defendant and seek nullification of the

27

circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals." 25 In addition to the many cases 26 where the corporate fiction has been disregarded, we now add the instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping. Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there is identity of parties, causes of action and reliefs sought, "because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the other (Second Case)",citing as authority Victronics Computers, Inc., vs. Regional Trial Court, Branch 63, Makati, etc. et al., 27 where Court held: The rule has not been extended to a defendant who, for reasons known only to him, commences a new action against the plaintiff instead of filing a responsive pleading in the other case setting forth therein, as causes of action, specific denials, special and affirmative defenses or even counterclaims, Thus, Velhagen's and King's motion to dismiss Civil Case No. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the first place. (emphasis supplied) Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the forum in said case. Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the present suit. In the former, as underscored in the abovequoted Court ruling, the defendants did not file any responsive pleading in the first case. In other words, they did not make any denial or raise any defense or counter-claim therein In the case before us however, petitioners filed a responsive pleading to the complaint as a result of which, the issues were joined.

Indeed, by praying for affirmative reliefs and interposing counterclaims in their responsive pleadings, the petitioners became plaintiffs themselves in the original case, giving unto themselves the very remedies they repeated in the Second Case. Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. In this case, this is exactly the problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring the parties front enforcing or implementing the said sale. Indeed, a final decision in one would constitute res judicata in the other 28 . The foregoing conclusion finding the existence of forumshopping notwithstanding, the only sanction possible now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed because petitioners' present counsel entered their appearance only during the proceedings in this Court, and the Petition's VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show good faith in observing Circular 28-91. The Lawyers who filed the Second Case are not before us; thus the rudiments of due process prevent us from motu propio imposing disciplinary measures against them in this Decision. However, petitioners themselves (and particularly Henry Co, et al.) as litigants are admonished to strictly follow the rules against forum-shopping and not to trifle with court proceedings and processes They are warned that a repetition of the same will be dealt with more severely. Having said that, let it be emphasized that this petition should be dismissed not merely because of forumshopping but also because of the substantive issues raised, as will be discussed shortly. The Second Perfected? Issue: Was The Contract

The respondent Court correctly treated the question of whether or not there was, on the basis of the facts established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has been established, respondent Court stated: There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets consisting of

28

six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. T106932 to T-106937. It is likewise beyond cavil that the bank intended to sell the property. As testified to by the Bank's Deputy Conservator, Jose Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera, Manager of the Property Management Department of the defendant bank, in early August 1987. The procedure in the sale of acquired assets as well as the nature and scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera himself, which testimony was relied upon by both the bank and by Rivera in their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20): A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an inter-office memorandum distributed to all branches that these are acquired assets for sale. I was instructed to advertise acquired assets for sale so on that basis, I have to entertain offer; to accept offer, formal offer and upon having been offered, I present it to the Committee. I provide the Committee with necessary information about the property such as original loan of the borrower, bid price during the foreclosure, total claim of the bank, the appraised value at the time the property is being offered for sale and then the information which are relative to the evaluation of the bank to buy which the Committee considers and it is the Committee that evaluate as against the exposure of the bank and it is also the Committee that submit to the Conservator for final approval and once approved, we have to execute the deed of sale and it is the Conservator that sign the deed of sale, sir. The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt with and talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs were dealing with the bank official authorized to entertain offers, to accept offers and to present the offer to the Committee before which the said official is authorized to discuss information relative to price determination. Necessarily, too, it being inherent in his authority, Rivera is the officer from whom official information regarding the

price, as determined by the Committee and approved by the Conservator, can be had. And Rivera confirmed his authority when he talked with the plaintiff in August 1987. The testimony of plaintiff Demetria is clear on this point (TSN of May 31,1990, pp. 27-28): Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-blank his authority to sell any property? A: No, sir. Not point blank although it came from him, (W)hen I asked him how long it would take because he was saying that the matter of pricing will be passed upon by the committee. And when I asked him how long it will take for the committee to decide and he said the committee meets every week. If I am not mistaken Wednesday and in about two week's (sic) time, in effect what he was saying he was not the one who was to decide. But he would refer it to the committee and he would relay the decision of the committee to me. Q Please answer the question. A He did not say that he had the authority (.) But he said he would refer the matter to the committee and he would relay the decision to me and he did just like that. "Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with Jose Entereso as one of the members. What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and the bank's internal procedure in the matter of the sale of bank's assets. As advised by Rivera, the plaintiffs made a formal offer by a letter dated August 20, 1987 stating that they would buy at the price of P3.5 Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers. Considering an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed buying price on one hand, and the bank Committee, the Conservator and ultimately the bank itself with the set price on the other, and considering further the discussion of price at the meeting of August resulting in a formal offer of P3.5 Million in cash, there can be

29

no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million for more than 101 hectares on lot basis," such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower, bid price during foreclosure, total claim of the bank, and market value. Tersely put, under the established facts, the price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive price at which the bank was selling the property. There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not discussed by the Committee and that price. As correctly characterized by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this point are at best equivocal and considering the gratuitous and self-serving character of these declarations, the bank's submission on this point does not inspire belief. Both Co ad Entereso, as members of the Past Due Committee of the bank, claim that the offer of the plaintiff was never discussed by the Committee. In the same vein, both Co and Entereso openly admit that they seldom attend the meetings of the Committee. It is important to note that negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase price, having been made to understand by Rivera, the official in charge of the negotiation, that the price will be submitted for approval by the bank and that the bank's decision will be relayed to plaintiffs. From the facts, the official bank price. At any rate, the bank placed its official, Rivera, in a position of authority to accept offers to buy and negotiate the sale by having the offer officially acted upon by the bank. The bank cannot turn around and later say, as it now does, that what Rivera states as the bank's action on the matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as against any one who has in good faith dealt with the corporation through such agent, he estopped from denying his authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v. Court of Appeals, G.R. No. 103957, June 14, 1993). 29

Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: "(1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established." There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first and third requisites. Petitioners allege that "there is no counter-offer made by the Bank, and any supposed counter-offer which Rivera (or Co) may have made is unauthorized. Since there was no counter-offer by the Bank, there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept." 30 They disputed the factual basis of the respondent Court's findings that there was an offer made by Janolo for P3.5 million, to which the Bank counteroffered P5.5 million. We have perused the evidence but cannot find fault with the said Court's findings of fact. Verily, in a petition under Rule 45 such as this, errors of fact if there be any - are, as a rule, not reviewable. The mere fact that respondent Court (and the trial court as well) chose to believe the evidence presented by respondent more than that presented by petitioners is not by itself a reversible error. In fact, such findings merit serious consideration by this Court, particularly where, as in this case, said courts carefully and meticulously discussed their findings. This is basic. Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the question of Rivera's authority to act and petitioner's allegations that the P5.5 million counter-offer was extinguished by the P4.25 million revised offer of Janolo. Here, there are questions of law which could be drawn from the factual findings of the respondent Court. They also delve into the contractual elements of consent and cause. The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of "apparent authority", with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals 31, where it was held that: Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent. The agent's apparent representation yields to the principal's true representation and the contract is considered as entered into between the principal and the third person (citing National Food Authority vs. Intermediate Appellate Court, 184 SCRA 166).

30

A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scape of their authority (9 C.J.S., p. 417). A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its responsibility for such frauds even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though, in the particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021). Application of these principles is especially necessary because banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be eroded where banks do not exercise strict care in the selection and supervision of its employees, resulting in prejudice to their depositors. From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied authority to act for the Bank in the matter of selling its acquired assets. This evidence includes the following: (a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material to this case, Manager of the Property Management Department of the Bank". By his own admission, Rivera was already the person in charge of the Bank's acquired assets (TSN, August 6, 1990, pp. 8-9); (b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial meeting between the buyers and Rivera, the latter suggested that the buyers' offer should be no less than P3.3 million (TSN, April 26, 1990, pp. 16-17);

(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p.11); (d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July 30, p. 11); (e) Rivera received the letter dated September 17, 1987 containing the buyers' proposal to buy the property for P4.25 million (TSN, July 30, 1990, p. 12); (f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank (TSN, January 16, 1990, p. 18); (g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1994, during which the Bank's offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major shareholder and officer of the Bank, confirmed Rivera's statement as to the finality of the Bank's counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35); (h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting for the Bank in relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera was the officer mentioned in the Bank's advertisements offering for sale the property in question (cf. Exhs. "S" and "S-1"). In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32, the Court, through Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of the Bank of P.I. in charge of acquired assets is borne out by similar circumstances surrounding his dealings with buyers. To be sure, petitioners attempted to repudiate Rivera's apparent authority through documents and testimony which seek to establish Rivera's actual authority. These pieces of evidence, however, are inherently weak as they consist of Rivera's self-serving testimony and various inter-office memoranda that purport to show his limited actual authority, of which private respondent cannot be charged with knowledge. In any event, since the issue is apparent authority, the existence of which is borne out by the respondent Court's findings, the evidence of actual authority is immaterial insofar as the liability of a corporation is concerned 33.

31

Petitioners also argued that since Demetria and Janolo were experienced lawyers and their "law firm" had once acted for the Bank in three criminal cases, they should be charged with actual knowledge of Rivera's limited authority. But the Court of Appeals in its Decision (p. 12) had already made a factual finding that the buyers had no notice of Rivera's actual authority prior to the sale. In fact, the Bank has not shown that they acted as its counsel in respect to any acquired assets; on the other hand, respondent has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a professional partnership), one of whose members (Atty. Susana Parker) acted in said criminal cases. Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the letter dated September 17, 1987 extinguished the Bank's offer of P5.5 million 34 .They disputed the respondent Court's finding that "there was a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex "L" (letter dated September 30, 1987) "accepted" Rivera's counter offer of P5.5 million under Annex "J" (letter dated September 17, 1987)", citing the late Justice Paras35, Art. 1319 of the Civil Code 36 and related Supreme Court rulings starting with Beaumont vs. Prieto 37. However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the respondent Court which reviewed the testimonies on this point, what was "accepted" by Janolo in his letter dated September 30, 1987 was the Bank's offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the said letter of September 30, 1987 begins with"(p)ursuant to our discussion last 28 September 1987 . . . Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September 28, 1987 meeting "was meant to have the offerors improve on their position of P5.5. million." 38 However, both the trial court and the Court of Appeals found petitioners' testimonial evidence "not credible", and we find no basis for changing this finding of fact. Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA) common finding that private respondents' evidence is more in keeping with truth and logic that during the meeting on September 28, 1987, Luis Co and Rivera "confirmed that the P5.5 million price has been passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35)" 39. Hence, assuming arguendo that the counter-offer of P4.25 million extinguished the offer of P5.5 million, Luis Co's reiteration of the said P5.5 million price during the September 28, 1987 meeting revived the said offer. And by virtue of the September 30, 1987 letter accepting this

revived offer, there was a meeting of the minds, as the acceptance in said letter was absolute and unqualified. We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's authority and action, particularly the latter's counter-offer of P5.5 million, as being "unauthorized and illegal" came only on May 12, 1988 or more than seven (7) months after Janolo' acceptance. Such delay, and the absence of any circumstance which might have justifiably prevented the Bank from acting earlier, clearly characterizes the repudiation as nothing more than a last-minute attempt on the Bank's part to get out of a binding contractual obligation. Taken together, the factual findings of the respondent Court point to an implied admission on the part of the petitioners that the written offer made on September 1, 1987 was carried through during the meeting of September 28, 1987. This is the conclusion consistent with human experience, truth and good faith. It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million was raised for the first time on appeal and should thus be disregarded. This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of fact and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145 SCRA 592).40 . . . It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).41 Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is a matter of due process. But we passed upon the issue anyway, if only to avoid deciding the case on purely procedural grounds, and we repeat that, on the basis of the evidence already in the record and as appreciated by the lower courts, the inevitable conclusion is simply that there was a perfected contract of sale.

32

The Third Issue: Is the Contract Enforceable? The petition alleged42: Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28 September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September 1987, the contract produced thereby would be unenforceable by action there being no note, memorandum or writing subscribed by the Bank to evidence such contract. (Please see article 1403[2], Civil Code.) Upon the other hand, the respondent Court in its Decision (p, 14) stated: . . . Of course, the bank's letter of September 1, 1987 on the official price and the plaintiffs' acceptance of the price on September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear embodiments of the fact that a contract of sale was perfected between the parties, such contract being binding in whatever form it may have been entered into (case citations omitted). Stated simply, the banks' letter of September 1, 1987, taken together with plaintiffs' letter dated September 30, 1987, constitute in law a sufficient memorandum of a perfected contract of sale. The respondent Court could have added that the written communications commenced not only from September 1, 1987 but from Janolo's August 20, 1987 letter. We agree that, taken together, these letters constitute sufficient memoranda since they include the names of the parties, the terms and conditions of the contract, the price and a description of the property as the object of the contract. But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute a "new" offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Bank's counter-offer of P5.5 million. Hence, petitioners by such utter failure to object are deemed to have waived any defects of the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code: Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them.

As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-offer of P5.5 million is a plenty and the silence of petitioners all throughout the presentation makes the evidence binding on them thus; A Yes, sir, I think it was September 28, 1987 and I was again present because Atty. Demetria told me to accompany him we were able to meet Luis Co at the Bank. xxx xxx xxx

Q Now, what transpired during this meeting with Luis Co of the Producers Bank? A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir. Q What price? A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final price and that is the price they intends (sic) to have, sir. Q What do you mean?. A That is the amount they want, sir. Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that the defendant Rivera's counter-offer of 5.5 million was the defendant's bank (sic) final offer? A He said in a day or two, he will make final acceptance, sir. Q What is the response of Mr. Luis Co?. A He said he will wait for the position of Atty. Demetria, sir. [Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.] Q What transpired during that meeting between you and Mr. Luis Co of the defendant Bank? A We went straight to the point because he being a busy person, I told him if the amount of P5.5 million could still be reduced and he said that was already passed upon by the committee. What the bank expects which was contrary to what Mr. Rivera stated. And he told me that is

33

the final offer of the bank P5.5 million and we should indicate our position as soon as possible. Q What was your response to the answer of Mr. Luis Co? A I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at his office. Q For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office in Producers Bank Building during this meeting? A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I. Q By Mr. Co you are referring to? A Mr. Luis Co. Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the bank? A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which offer we accepted, the offer of the bank which is P5.5 million. [Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.] Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee and it is not within his power to reduce this amount. What can you say to that statement that the amount of P5.5 million was reached by the Committee? A It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty. Demetrio Demetria and Atty. Pajardo (sic) in that September 28, 1987 meeting, sir. [Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.] The Fourth Issue: May the Conservator Revoke the Perfected and Enforceable Contract. It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines during the time that the negotiation and perfection of the contract of sale took place. Petitioners energetically contended that the conservator has the

power to revoke or overrule actions of the management or the board of directors of a bank, under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows: Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Board finds that a bank or a non-bank financial intermediary performing quasi-banking functions is in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets, liabilities, and the management of that institution, collect all monies and debts due said institution and exercise all powers necessary to preserve the assets of the institution, reorganize the management thereof, and restore its viability. He shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or non-bank financial intermediary performing quasi-banking functions, any provision of law to the contrary notwithstanding, and such other powers as the Monetary Board shall deem necessary. In the first place, this issue of the Conservator's alleged authority to revoke or repudiate the perfected contract of sale was raised for the first time in this Petition as this was not litigated in the trial court or Court of Appeals. As already stated earlier, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, "cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process."43 In the second place, there is absolutely no evidence that the Conservator, at the time the contract was perfected, actually repudiated or overruled said contract of sale. The Bank's acting conservator at the time, Rodolfo Romey, never objected to the sale of the property to Demetria and Janolo. What petitioners are really referring to is the letter of Conservator Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987 (Annex V, petition) which unilaterally repudiated not the contract but the authority of Rivera to make a binding offer and which unarguably came months after the perfection of the contract. Said letter dated May 12, 1988 is reproduced hereunder:

May 12, 1988

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Atty. Noe C. Zarate Zarate Carandang Perlas & Ass. Suite 323 Rufino Building Ayala Avenue, Makati, Metro-Manila Dear Atty. Zarate: This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6) parcels of land located at Sta. Rosa, Laguna. We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a "contract to sell and buy" with any of them for the following reasons. In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and approved by former Acting Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the functions of Property Management Department (PMD) staff and officers (Annex A.), you will immediately read that Manager Mr. Mercurio Rivera or any of his subordinates has no authority, power or right to make any alleged counter-offer. In short, your lawyer-clients did not deal with the authorized officers of the bank. Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates Pambansa Blg. 68.) and Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of Directors/Conservator may authorize the sale of any property of the corportion/bank.. Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators (starting January, 1984) to sell the aforesaid property to any of your clients. Apparently, what took place were just preliminary discussions/consultations between him and your clients, which everyone knows cannot bind the Bank's Board or Conservator. We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently violative of corporate and banking laws. We believe that this is more than sufficient legal justification for refusing said alleged tender. Rest assured that we have nothing personal against your clients. All our acts are official, legal and in accordance with law. We also have no

personal interest in any of the properties of the Bank. Please be advised accordingly. Very truly yours, (Sgd.) Leonida LEONIDA T. Acting Conservator T. Encarnacion EDCARNACION

In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a bank, it must be pointed out that such powers must be related to the "(preservation of) the assets of the bank, (the reorganization of) the management thereof and (the restoration of) its viability." Such powers, enormous and extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would infringe against the non-impairment clause of the Constitution 44. If the legislature itself cannot revoke an existing valid contract, how can it delegate such nonexistent powers to the conservator under Section 28-A of said law? Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under existing law, deemed to be defective i.e., void, voidable, unenforceable or rescissible. Hence, the conservator merely takes the place of a bank's board of directors. What the said board cannot do such as repudiating a contract validly entered into under the doctrine of implied authority the conservator cannot do either. Ineluctably, his power is not unilateral and he cannot simply repudiate valid obligations of the Bank. His authority would be only to bring court actions to assail such contracts as he has already done so in the instant case. A contrary understanding of the law would simply not be permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a failing bank to become solvent, at the expense of third parties, by simply getting the conservator to unilaterally revoke all previous dealings which had one way or another or come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank. The Fifth Issue: Were There Reversible Errors of Facts? Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust Corporation, 45, we held:

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. . . The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus: The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court. "The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of the fact being conclusive " [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has emphatically declared that "it is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court" (Tiongco v. De la Merced, G. R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA 596). "Barring, therefore, a showing that the findings complained of are totally devoid of support in the record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties" [Santa Ana, Jr. vs. Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp. 144145.] Likewise, in Bernardo vs. Court of Appeals 46, we held: The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency of evidence and the credibility of witnesses presented. This Court so held that it is not the function of the Supreme Court to analyze or weigh such evidence all over again. The Supreme Court's jurisdiction is limited to reviewing errors of law that may have been committed by the lower court. The Supreme Court is not a trier of facts. . . . As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp. 47: The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and conclusive and may not

be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is grave abuse of discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. After a careful study of the case at bench, we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below. In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company Inc. vs. Hon. Court of Appeals, et al. 48 is equally applicable to the present case: We see no valid reason to discard the factual conclusions of the appellate court, . . . (I)t is not the function of this Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties, particularly where, such as here, the findings of both the trial court and the appellate court on the matter coincide. (emphasis supplied) Petitioners, however, assailed the respondent Court's Decision as "fraught with findings and conclusions which were not only contrary to the evidence on record but have no bases at all," specifically the findings that (1) the "Bank's counter-offer price of P5.5 million had been determined by the past due committee and approved by conservator Romey, after Rivera presented the same for discussion" and (2) "the meeting with Co was not to scale down the price and start negotiations anew, but a meeting on the already determined price of P5.5 million" Hence, citing Philippine National Bank vs. Court of Appeals 49, petitioners are asking us to review and reverse such factual findings. The first point was clearly passed upon by the Court of Appeals 50, thus: There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million for more than 101 hectares on lot basis, "such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs' offer for discussion by the Committee . . . Tersely put, under the established fact, the price of P5.5

36

Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive price at which the bank was selling the property. (p. 11, CA Decision) xxx xxx xxx

. . . The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September 28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where the topic was the possible lowering of the price, the bank official refused it and confirmed that the P5.5 Million price had been passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision). The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as "not credible" and "at best equivocal and considering the gratuitous and self-serving character of these declarations, the bank's submissions on this point do not inspire belief." To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to testify on their behalf, as he would have been in the best position to establish their thesis. Under the rules on evidence 51, such suppression gives rise to the presumption that his testimony would have been adverse, if produced. The second point was squarely raised in the Court of Appeals, but petitioners' evidence was deemed insufficient by both the trial court and the respondent Court, and instead, it was respondent's submissions that were believed and became bases of the conclusions arrived at. In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid and correct. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are espousing, This we cannot do. To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals 52. We have studied both the records and the CA Decision and we find no such exceptions in this case. On the contrary, the findings of the said Court are supported by a preponderance of competent and credible evidence. The inferences and conclusions are seasonably based on evidence duly identified in the Decision. Indeed, the appellate court patiently traversed and dissected the issues presented before it, lending credibility and dependability to its findings. The best that

can be said in favor of petitioners on this point is that the factual findings of respondent Court did not correspond to petitioners' claims, but were closer to the evidence as presented in the trial court by private respondent. But this alone is no reason to reverse or ignore such factual findings, particularly where, as in this case, the trial court and the appellate court were in common agreement thereon. Indeed, conclusions of fact of a trial judge as affirmed by the Court of Appeals are conclusive upon this Court, absent any serious abuse or evident lack of basis or capriciousness of any kind, because the trial court is in a better position to observe the demeanor of the witnesses and their courtroom manner as well as to examine the real evidence presented. Epilogue. In summary, there are two procedural issues involved forum-shopping and the raising of issues for the first time on appeal [viz., the extinguishment of the Bank's offer of P5.5 million and the conservator's powers to repudiate contracts entered into by the Bank's officers] which per se could justify the dismissal of the present case. We did not limit ourselves thereto, but delved as well into the substantive issues the perfection of the contract of sale and its enforceability, which required the determination of questions of fact. While the Supreme Court is not a trier of facts and as a rule we are not required to look into the factual bases of respondent Court's decisions and resolutions, we did so just the same, if only to find out whether there is reason to disturb any of its factual findings, for we are only too aware of the depth, magnitude and vigor by which the parties through their respective eloquent counsel, argued their positions before this Court. We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a government-appointed conservator and "there is need to rehabilitate the Bank in order to get it back on its feet . . . as many people depend on (it) for investments, deposits and well as employment. As of June 1987, the Bank's overdraft with the Central Bank had already reached P1.023 billion . . . and there were (other) offers to buy the subject properties for a substantial amount of money." 53 While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally close its eyes to overriding considerations of substantive and procedural law, like respect for perfected contracts, non-impairment of obligations and sanctions against forum-shopping, which must be upheld under the rule of law and blind justice. This Court cannot just gloss over private respondent's submission that, while the subject properties may currently command a much higher price, it is equally true

37

that at the time of the transaction in 1987, the price agreed upon of P5.5 million was reasonable, considering that the Bank acquired these properties at a foreclosure sale for no more than P3.5 million 54. That the Bank procrastinated and refused to honor its commitment to sell cannot now be used by it to promote its own advantage, to enable it to escape its binding obligation and to reap the benefits of the increase in land values. To rule in favor of the Bank simply because the property in question has algebraically accelerated in price during the long period of litigation is to reward lawlessness and delays in the fulfillment of binding contracts. Certainly, the Court cannot stamp its imprimatur on such outrageous proposition. WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with more severely. Costs against petitioners. SO ORDERED. Narvasa, C.J., Davide Jr., Melo and Francisco, JJ., concur.

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G.R. No. L-32636

March 17, 1930

In the matter Estate of Edward Randolph Hix, deceased. A.W. FLUEMER, petitioner-appellant, vs. ANNIE COUSHING HIX, oppositor-appellee. C.A. Sobral for appellant. Harvey & O' Brien and Gibbs & McDonough for appellee. MALCOLM, J.: The special administrator of the estate of Edward Randolph Hix appeals from a decision of Judge of First Instance Tuason denying the probate of the document alleged to by the last will and testament of the deceased. Appellee is not authorized to carry on this appeal. We think, however, that the appellant, who appears to have been the moving party in these proceedings, was a "person interested in the allowance or disallowance of a will by a Court of First Instance," and so should be permitted to appeal to the Supreme Court from the disallowance of the will (Code of Civil Procedure, sec. 781, as amended; Villanueva vs. De Leon [1925], 42 Phil., 780). It is theory of the petitioner that the alleged will was executed in Elkins, West Virginia, on November 3, 1925, by Hix who had his residence in that jurisdiction, and that the laws of West Verginia Code, Annotated, by Hogg, Charles E., vol. 2, 1914, p. 1690, and as certified to by the Director of the National Library. But this was far from a compliance with the law. The laws of a foreign jurisdiction do not prove themselves in our courts. the courts of the Philippine Islands are not authorized to take American Union. Such laws must be proved as facts. (In re Estate of Johnson [1918], 39 Phil., 156.) Here the requirements of the law were not met. There was no was printed or published under the authority of the State of West Virginia, as provided in section 300 of the Code of Civil Procedure. Nor was the extract from the law attested by the certificate of the officer having charge of the original, under the sale of the State of West Virginia, as provided in section 301 of the Code of Civil Procedure. No evidence was introduced to show that the extract from the laws of West Virginia was in force at the time the alleged will was executed. In addition, the due execution of the will was not established. The only evidence on this point is to be found in the testimony of the petitioner. Aside from this, there was nothing to indicate that the will was acknowledged by the testator in the presence of two

competent witnesses, of that these witnesses subscribed the will in the presence of the testator and of each other as the law of West Virginia seems to require. On the supposition that the witnesses to the will reside without the Philippine Islands, it would then the duty of the petitioner to prove execution by some other means (Code of Civil Procedure, sec. 633.) It was also necessary for the petitioner to prove that the testator had his domicile in West Virginia and not establish this fact consisted of the recitals in the CATHY will and the testimony of the petitioner. Also in beginning administration proceedings orginally in the Philippine Islands, the petitioner violated his own theory by attempting to have the principal administration in the Philippine Islands. While the appeal pending submission in this court, the attorney for the appellant presented an unverified petition asking the court to accept as part of the evidence the documents attached to the petition. One of these documents discloses that a paper writing purporting to be the was presented for probate on June 8, 1929, to the clerk of Randolph Country, State of West Virginia, in vacation, and was duly proven by the oaths of Dana Wamsley and Joseph L. MAdden, the subscribing witnesses thereto , and ordered to be recorded and filed. It was shown by another document that, in vacation, on June 8, 1929, the clerk of court of Randolph Country, West Virginia, appointed Claude W. Maxwell as administrator, cum testamento annexo, of the estate of Edward Randolph Hix, deceased. In this connection, it is to be noted that the application for the probate of the will in the Philippines was filed on February 20, 1929, while the proceedings in West Virginia appear to have been initiated on June 8, 1929. These facts are strongly indicative of an intention to make the Philippines the principal administration and West Virginia the ancillary administration. However this may be, no attempt has been made to comply with Civil Procedure, for no hearing on the question of the allowance of a will said to have been proved and allowed in West Virginia has been requested. There is no showing that the deceased left any property at any place other than the Philippine Islands and no contention that he left any in West Virginia. Reference has been made by the parties to a divorce purported to have been awarded Edward Randolph Hix from Annie Cousins Hix on October 8, 1925, in the State of West specific pronouncements on the validity or validity of this alleged divorce. For all of the foregoing, the judgment appealed from will be affirmed, with the costs of this instance against the appellant.

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Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.

G.R. No. L-12105

January 30, 1960

TESTATE ESTATE OF C. O. BOHANAN, deceased. PHILIPPINE TRUST CO., executor-appellee, vs. MAGDALENA C. BOHANAN, EDWARD C. BOHANAN, and MARY LYDIA BOHANAN, oppositors-appellants. Jose D. Cortes for Ohnick, Velilla and Balonkita for appellee. LABRADOR, J.: Appeal against an order of the Court of First Instance of Manila, Hon. Ramon San Jose, presiding, dismissing the objections filed by Magdalena C. Bohanan, Mary Bohanan and Edward Bohanan to the project of partition submitted by the executor and approving the said project. On April 24, 195 0, the Court of First Instance of Manila, Hon. Rafael Amparo, presiding, admitted to probate a last will and testament of C. O. Bohanan, executed by him on April 23, 1944 in Manila. In the said order, the court made the following findings: According to the evidence of the opponents the testator was born in Nebraska and therefore a citizen of that state, or at least a citizen of California where some of his properties are located. This contention in untenable. Notwithstanding the long residence of the decedent in the Philippines, his stay here was merely temporary, and he continued and remained to be a citizen of the United States and of the state of his pertinent residence to spend the rest of his days in that state. His permanent residence or domicile in the United States depended upon his personal intent or desire, and he selected Nevada as his homicide and therefore at the time of his death, he was a citizen of that state. Nobody can choose his domicile or permanent residence for him. That is his exclusive personal right. Wherefore, the court finds that the testator C. O. Bohanan was at the time of his death a citizen of the United States and of the State of Nevada and appellants.

declares that his will and testament, Exhibit A, is fully in accordance with the laws of the state of Nevada and admits the same to probate. Accordingly, the Philippine Trust Company, named as the executor of the will, is hereby appointed to such executor and upon the filing of a bond in the sum of P10,000.00, let letters testamentary be issued and after taking the prescribed oath, it may enter upon the execution and performance of its trust. (pp. 26-27, R.O.A.). It does not appear that the order granting probate was ever questions on appeal. The executor filed a project of partition dated January 24, 1956, making, in accordance with the provisions of the will, the following adjudications: (1) one-half of the residuary estate, to the Farmers and Merchants National Bank of Los Angeles, California, U.S.A. in trust only for the benefit of testator's grandson Edward George Bohanan, which consists of several mining companies; (2) the other half of the residuary estate to the testator's brother, F.L. Bohanan, and his sister, Mrs. M. B. Galbraith, share and share alike. This consist in the same amount of cash and of shares of mining stock similar to those given to testator's grandson; (3) legacies of P6,000 each to his (testator) son, Edward Gilbert Bohana, and his daughter, Mary Lydia Bohanan, to be paid in three yearly installments; (4) legacies to Clara Daen, in the amount of P10,000.00; Katherine Woodward, P2,000; Beulah Fox, P4,000; and Elizabeth Hastings, P2,000; It will be seen from the above that out of the total estate (after deducting administration expenses) of P211,639.33 in cash, the testator gave his grandson P90,819.67 and one-half of all shares of stock of several mining companies and to his brother and sister the same amount. To his children he gave a legacy of only P6,000 each, or a total of P12,000. The wife Magadalena C. Bohanan and her two children question the validity of the testamentary provisions disposing of the estate in the manner above indicated, claiming that they have been deprived of the legitimate that the laws of the form concede to them. The first question refers to the share that the wife of the testator, Magdalena C. Bohanan, should be entitled to received. The will has not given her any share in the estate left by the testator. It is argued that it was error for the trial court to have recognized the Reno divorce secured by the testator from his Filipino wife Magdalena C. Bohanan, and that said divorce should be declared a nullity in this jurisdiction, citing the case of Querubin vs. Querubin, 87 Phil., 124, 47 Off. Gaz., (Sup, 12) 315, Cousins Hiz vs. Fluemer, 55 Phil., 852, Ramirez vs.

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Gmur, 42 Phil., 855 and Gorayeb vs. Hashim, 50 Phil., 22. The court below refused to recognize the claim of the widow on the ground that the laws of Nevada, of which the deceased was a citizen, allow him to dispose of all of his properties without requiring him to leave any portion of his estate to his wife. Section 9905 of Nevada Compiled Laws of 1925 provides: Every person over the age of eighteen years, of sound mind, may, by last will, dispose of all his or her estate, real and personal, the same being chargeable with the payment of the testator's debts. Besides, the right of the former wife of the testator, Magdalena C. Bohanan, to a share in the testator's estafa had already been passed upon adversely against her in an order dated June 19, 1955, (pp. 155-159, Vol II Records, Court of First Instance), which had become final, as Magdalena C. Bohanan does not appear to have appealed therefrom to question its validity. On December 16, 1953, the said former wife filed a motion to withdraw the sum of P20,000 from the funds of the estate, chargeable against her share in the conjugal property, (See pp. 294-297, Vol. I, Record, Court of First Instance), and the court in its said error found that there exists no community property owned by the decedent and his former wife at the time the decree of divorce was issued. As already and Magdalena C. Bohanan may no longer question the fact contained therein, i.e. that there was no community property acquired by the testator and Magdalena C. Bohanan during their converture. Moreover, the court below had found that the testator and Magdalena C. Bohanan were married on January 30, 1909, and that divorce was granted to him on May 20, 1922; that sometime in 1925, Magdalena C. Bohanan married Carl Aaron and this marriage was subsisting at the time of the death of the testator. Since no right to share in the inheritance in favor of a divorced wife exists in the State of Nevada and since the court below had already found that there was no conjugal property between the testator and Magdalena C. Bohanan, the latter can now have no longer claim to pay portion of the estate left by the testator. The most important issue is the claim of the testator's children, Edward and Mary Lydia, who had received legacies in the amount of P6,000 each only, and, therefore, have not been given their shares in the estate which, in accordance with the laws of the forum, should be two-thirds of the estate left by the testator. Is the failure old the testator to give his children two-thirds of the estate left by him at the time of his death, in accordance with the laws of the forum valid? The old Civil Code, which is applicable to this case because the testator died in 1944, expressly provides

that successional rights to personal property are to be earned by the national law of the person whose succession is in question. Says the law on this point: Nevertheless, legal and testamentary successions, in respect to the order of succession as well as to the extent of the successional rights and the intrinsic validity of their provisions, shall be regulated by the national law of the person whose succession is in question, whatever may be the nature of the property and the country in which it is found. (par. 2, Art. 10, old Civil Code, which is the same as par. 2 Art. 16, new Civil Code.) In the proceedings for the probate of the will, it was found out and it was decided that the testator was a citizen of the State of Nevada because he had selected this as his domicile and his permanent residence. (See Decision dated April 24, 1950, supra). So the question at issue is whether the estementary dispositions, especially hose for the children which are short of the legitime given them by the Civil Code of the Philippines, are valid. It is not disputed that the laws of Nevada allow a testator to dispose of all his properties by will (Sec. 9905, Complied Nevada Laws of 1925, supra). It does not appear that at time of the hearing of the project of partition, the above-quoted provision was introduced in evidence, as it was the executor's duly to do. The law of Nevada, being a foreign law can only be proved in our courts in the form and manner provided for by our Rules, which are as follows: SEC. 41. Proof of public or official record. An official record or an entry therein, when admissible for any purpose, may be evidenced by an official publication thereof or by a copy tested by the officer having the legal custody of he record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. . . . (Rule 123). We have, however, consulted the records of the case in the court below and we have found that during the hearing on October 4, 1954 of the motion of Magdalena C. Bohanan for withdrawal of P20,000 as her share, the foreign law, especially Section 9905, Compiled Nevada Laws. was introduced in evidence by appellant's (herein) counsel as Exhibits "2" (See pp. 77-79, VOL. II, and t.s.n. pp. 24-44, Records, Court of First Instance). Again said laws presented by the counsel for the executor and admitted by the Court as Exhibit "B" during the hearing

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of the case on January 23, 1950 before Judge Rafael Amparo (se Records, Court of First Instance, Vol. 1). In addition, the other appellants, children of the testator, do not dispute the above-quoted provision of the laws of the State of Nevada. Under all the above circumstances, we are constrained to hold that the pertinent law of Nevada, especially Section 9905 of the Compiled Nevada Laws of 1925, can be taken judicial notice of by us, without proof of such law having been offered at the hearing of the project of partition. As in accordance with Article 10 of the old Civil Code, the validity of testamentary dispositions are to be governed by the national law of the testator, and as it has been decided and it is not disputed that the national law of the testator is that of the State of Nevada, already indicated above, which allows a testator to dispose of all his property according to his will, as in the case at bar, the order of the court approving the project of partition made in accordance with the testamentary provisions, must be, as it is hereby affirmed, with costs against appellants. Paras, Bengzon, C.J., Padilla, Bautista Angelo and Endencia, JJ., concur. Barrera, J., concurs in the result.

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G.R. No. 93262. November 29,1991.*EN BANC. DAVAO LIGHT 6, POWER CO., INC., petitioner, vs. THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLAND TOURIST INN, and TEODORICO ADARNA, respondents. Courts; Jurisdiction, how acquired.It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of the plaintiff has been vested in the court, but before acquisition of jurisdiction over the person of the defendant (either by service of summons or his voluntary submission to the courts authority), nothing can be validly done by the plaintiff or the court. It is wrong to assume that the validity of acts done during this period should be dependent on, or held in suspension until, the actual obtention of jurisdiction over the defendants person. The obtention by the court of jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person of the plaintiff or over the subject-matter or nature of the action, or the res or object thereof. An action or proceeding is commenced by the filing of the complaint or other initiatory pleading. By that act, the jurisdiction of the court over the subject matter or nature of the action or proceeding is invoked or called into activity; and it is thus that the court acquires jurisdiction over said subject matter or nature of the action. And it is by that self-same act of the plaintiff (or petitioner) of filing the complaint (or other appropriate pleading)by which he signifies his submission to the courts power and authoritythat jurisdiction is acquired by the court over his person. On the other hand, jurisdiction over the person of the defendant is obtained, as above stated, by the service of summons or other coercive process upon him or by his voluntary submission to the authority of the court. Civil Procedure; Preliminary attachment may be validly applied for and granted before defendant is summoned or is heard from.Rule 57 xxx speaks of the grant of the remedy at the commencement of the action or at any time thereafter. The phrase, at the commencement of the action, obviously refers to the date of the filing of the complaintwhich, as above pointed out, is the date that marks the commencement of the action; and the reference plainly is to a time before summons is served on the defendant, or even before summons issues. What the rule is saying quite clearly is that after an action is properly commencedby the filing of the complaint and the payment of all requisite docket and other feesthe plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid down by law, and that he may do so at any time,

either before or after service of summons on the defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counterclaim, cross-claim, third-party claim) and for the Trial Court to issue the writ ex-parte at the commencement of the action if it finds. the application otherwise sufficient in form and substance. Same; Writs of attachment may properly issue ex parte. For the guidance of all concerned, the Court reiterates and reaffirms the proposition that writs of attachment may properly issue ex parte provided that the Court is satisfied that the relevant requisites therefor have been fulfilled by the applicant, although it may, in its discretion, require prior hearing on the application with notice to the defendant; but that levy on property pursuant to the writ thus issued may not be validly effected unless preceded, or contemporaneously accompanied, by service on the defendant of summons, a copy of the complaint (and of the appointment of guardian ad litem, if any), the application for attachment (if not incorporated in but submitted separately from the complaint), the order of attachment, and the plaintiff s attachment bond. PETITION for review from the decision of the Court of Appeals. The facts are stated in the opinion of the Court. Breva & Breva Law Offices for petitioner. Goc-Ong & Associates for private respondents. NARVASA, J.: Subject of the appellate proceedings at bar is the decision of the Court of Appeals in CA-G.R. Sp. No. 1967 entitled Queensland Hotel, Inc., etc. and Adarna v. Davao Light & Power Co., Inc.," promulgated on May 4,1990.1Jorge S, Imperial, J., ponente; Reynato J. Puno and Artemon Luna, JJ., concurring. That decision nullified and set aside the writ of preliminary attachment issued by the Regional Trial Court of Davao City2Branch 8, presided over by Hon. Milagros C. Nartatez. in Civil Case No. 1951389 on application of the plaintiff (Davao Light 6, Power Co.), before the service of summons on the defendants (herein respondents Queensland Co., Inc. and Adarna). Following is the chronology of the undisputed material facts culled from the Appellate Tribunals judgment of May 4,1990. 1. On May 2,1989 Davao Light 6, Power Co., Inc. (hereafter, simply Davao Light) filed a verified complaint

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for recovery of a sum of money and damages against Queensland Hotel, etc. and Teodorico Adarna (docketed as Civil Case No. 1951389). The complaint contained an ex parte application for a writ of preliminary attachment. 2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by raffle, issued an Order granting the ex parte application and fixing the attachment bond at P4,600,513.37. 3. On May 11.1989 the attachment bond having been submitted by Davao Light, the writ of attachment issued. 4. On May 12,1989, the summons and a copy of the complaint, as well as the writ of attachment and a copy of the attachment bond, were served on defendants Queensland and Adarna; and pursuant to the writ, the sheriff seized properties belonging to the latter. 5. On September 6, 1989, defendants Queensland and Adarna filed a motion to discharge the attachment for lack of jurisdiction to issue the same because at the time the order of attachment was promulgated (May 3, 1989) and the attachment writ issued (May 11,1989), the Trial Court had not yet acquired jurisdiction over the cause and over the persons of the defendants. 6. On September 14,1989, Davao Light filed an opposition to the motion to discharge attachment. 7. On September 19,1989, the Trial Court issued an Order denying the motion to discharge. This Order of September 19, 1989 was successfully challenged by Queensland and Adarna in a special civil action of certiorari instituted by them in the Court of Appeals. The Order was, as aforestated, annulled b the Court of Appeals in its Decision of May 4,1990. The Appell te Courts decision closed with the following disposition: x x the Orders dated May 3, 1989 granting the issuance of a writ of preliminary attachment, dated September 19, 1989 denying the motion to discharge attachment; dated November 7, 1989 denying petitioners motion for reconsideration; as well as all other orders emanating therefrom, specially the Writ of Attachment dated May 11, 1989 and Notice of Levy on Preliminary Attachment dated May 11, 1989, are hereby declared null and void and the attachment hereby ordered DISCHARGED." The Appellate Tribunal declared that x x x While it is true that a prayer for the issuance of a writ of preliminary attachment may be included in the complaint, as is usually done, it is likewise true that the

Court does not acquire jurisdiction over the person of the defendant until he is duly sum-moned or voluntarily appears, and adding the phrase that it be issued ex parte does not confer said jurisdiction before actual summons had been made, nor retroact jurisdiction upon summons being made. x x. It went on to say, citing Sievert v. Court of Appeals,3G.R. No. 84034, Dec. 22,1988,168 SCRA 692 (1988). that in a proceedings in attachment, the critical time which must be identified is x x when the trial court acquires authority under law to act coercively against the defendant or his property x x; and that that critical time is the time of the vesting of jurisdiction in the court over the person of the defendant in the main case. Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Light seeks in the present appellate proceedings. The question is whether or not a writ of preliminary attachment may issue ex parte against a defendant before acquisition of jurisdiction of the latters person by service of summons or his voluntary submission to the Courts authority. The Court rules that the question must be answered in the affirmative and that consequently, the petition for review will have to be granted. It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of the plaintiff has been vested in the court, but before the acquisition of jurisdiction over the person of the defendant (either by service of summons or his voluntary submission to the courts author-ity), nothing can be validly done by the plaintiff or the court. It is wrong to assume that the validity of acts done during this period should be dependent on, or held in suspension until, the actual obtention of jurisdiction over the defendants person. The obtention by the court of jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person of the plaintiff or over the subject matter or nature of the action, or the res or object thereof. An action or proceeding is commenced by the filing of the complaint or other initiatory pleading. The action is not deemed commenced, however, and will not be deemed to interrupt the running of the period of prescription, unless and until the docket and other court fees are , fully paid. By that act, the jurisdiction of the court over the subject matter or nature of the action or proceeding is invoked or called into activity, and it is thus ________________ 4 Sec. 6, Rule 2, Rules of Court.

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N.B. The action is not deemed commenced, however, and will not be deemed to interrupt the running of the period of pre-scription, unless and until the docket and other court fees are , fully paid. SEE Manchester Development Corporation v. Court of Appeals, 149 SCRA 562 (1987); Sun Insurance Office, Ltd., et al. v. Asuncion, et al., G.R. No. 7993738, Feb. 13, 1989; Tacay v. Regional Trial Court of Tagum, G.R. No. 8807577, Dec. 20, 1989; Ayala Corporation, et al. v. Madayag, G.R. No. 88421, Jan. 30, 1990; Hodges v. Court of Appeals, G.R. No. 87617, April 6, 1990; SEE also Lacson v. Luis Reyes, etc., G.R. No. 86250, Feb. 26,1990; Sapugay v. Court of Appeals, G.R. No. 86791, March 21,1990, 5 Moran, Comments on the Rules, 1979 ed. Vol. 1, p. 54, citing Caluag v. Pecson, 82 Phil. 8; Francisco, The Revised Rules of Court, that the court acquires jurisdiction over said subject matter or nature of the action.6Defined as the power to hear and determine cases of the general class to which the proceedings in question belong * *, conferred by the sovereign authority which organizes the court and defines its powers. Francisco, The Revised Rules of Court, 1973 ed., V... And it is by that self-same act of the plaintiff (or petitioner) of filing the complaint (or other appropriate pleading)by which he signifies his submission to the courts power and authoritythat jurisdiction is acquired by the court over his person.7Feria, op cit., p. 19, citing Manila Railroad Co. v. Attorney-General, 20 Phil 523, King Mau Wu v. Sycip, 94 Phil. 784, and 21 C.J.S., 122; Moran, op cit., p. 55, citing M.R.R. Co. v. AttorneyGeneral, 20 Phil 523 (in turn citing Ayers v. Watson, 113 U.S. 6... On the other hand, jurisdiction over the person of the defendant is obtained, as above stated, by the service of summons or other coercive process upon him or by his voluntary submission to the authority of the court.8Feria, op cit., p. 20, citing 21 C.J.S., 123; Pennoyer v. Neff, 95 U.S. 714, Banco Espaol-Filipino v. Palanca, 37 Phil. 921, and Perkins v. Dizon, 69 Phil. 186; Moran, op cit., citing Banco Espaol-Filipino v. Palanca, 37 Phil. 921, Infante v. T... The events that follo or the filing of the complaint as a matter of routine are well known. After the complaint is filed, summons issues to the defendant, the summons is then transmitted to the sheriff, and finally, service of the summons is effected on the defendant in any of the ways authorized by the Rules of Court. There is thus ordinarily some appreciable interval of time between the day of the filing of the complaint and the day of service of summons of the defendant. During this period, different acts may be done by the plaintiff or by the Court, which are of unquestionable validity and propriety. Among these, for example, are the appointment of a guardian ad litem,9See. 5, Rule 3. the grant of authority to the plaintiff to prosecute the suit as a pauper litigant, the amendment of the complaint by the plaintiff as a matter of right without leave of court,11Sec. 2, Rule 10.

authorization by the Court of service of summons by publication,12Sec. 16 or 17, Rule 14. the dismissal of the action by the plaintiff on mere notice.13Sec. 1, Rule 17. This, too, is true with regard to the provisional remedies of preliminary attachment, preliminary injunction, receivership or replevin. They may be validly and properly applied for and granted even before the defendant is summoned or is heard from. A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of which a plaintiff or other proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party taken into the custody of the court as security for the satisfaction of any judgment that may be recovered.15SEC. 1, Rule 57, Rules of Court. Another definition, given in 4 Words and Phrases 727 (1940), citing cases, is that it is a provisional remedy, auxiliary or incidental to the main action, whereby the debtors property capable of being taken un... It is a remedy which is purely statutory in respect of which the law requires a strict construction of the provisions granting it.16SEE Salas v. Adil, 90 SCRA 126, cited in Sievert v. CA., 168 SCRA 698. Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before acquisition of jurisdiction over the person of the defendant. Rule 57 in fact speaks of the grant of the remedy at the commencement of the action or at any time thereafter."17 The phrase, at the commencement of the action, obviously refers to the date of the filing of the complaintwhich, as above pointed out, is the date that marks the commencement of the action;" and the reference plainly is to a time before summons is served on the defendant, or even before summons issues. What the rule is saying quite clearly is that after an action is properly commencedby the filing of the complaint and the payment of all requisite docket and other feesthe plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counterclaim, cross-claim, third-party claim) and for the Trial Court to issue the writ ex-parte at the commencement of the action if it finds the application otherwise sufficient in form and substance. In Toledo v. Burgos,19168 SCRA 513 (Dec. 19, 1988). In this case, this Court ultimately ruled that the application for preliminary attachment ex parte should have been denied because the fundamental requisites

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under Rule 57, Section 1 did not exist, and not because ex parte app... this Court ruled that a hearing on a motion or application for preliminary attachment is not generally necessary unless otherwise directed by the Trial Court in its discretion.20La Granja, Inc. v. Samson, 58 Phil. 378, 380. And in Filinvest Credit Corporation v. Relova,21117 SCRA 420, 428429, cited in Francisco, op cit., 1985 ed., Provisional Remedies, pp. 3132. the Court declared that "(n)othing in the Rules of Court makes notice and hearing indispensable and mandatory requisites for the issuance of a writ of attachment. The only pre-requisite is that the Court be satisfied, upon consideration of the affidavit of the applicant or of some other person who personally knows the facts, that a sufficient cause of action exists, that the case is one of those mentioned in Section 1 xx (Rule 57), that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the applicant, or the value of the property the possession of which he is entitled to recover, is as much as the sum for which the order (of attachment) is granted above all legal counterclaims. In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18, 1989, 25 this Court had occasion to emphasize the postulate that no hearing is required on an application for preliminary attachment, with notice to the defendant, for the reason that this would defeat the objective of the remedy xx (since the) time which such a hearing would take, could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues. As observed by a former member of this Court,26Hon. Abraham F. Sarmiento, who retired on October 9,1991. such a procedure would warn absconding debtorsdefendants of the commencement of the suit against them and the probable seizure of their properties, and thus give them the advantage of time to hide their assets, leaving the creditor-plaintiff holding the proverbial empty bag; it would place the creditorapplicant in danger of losing any security for a favorable judgment and thus give him only an illusory victory. Withal, ample modes of recourse against a preliminary attachment are secured by law to the defendant. The relative ease with which a preliminary attachment may be obtained is matched and paralleled by the relative facility with which the attachment may legitimately be prevented or frustrated. These modes of recourse against preliminary attachments granted by Rule 57 were discussed at some length by the separate opinion in Mindanao Savings & Loans Asso. Inc. v. C.A., supra. That separate opinion stressed that there are two (2) ways of discharging an attachment: first, by the posting of a counterbond; and second, by a showing of its improper or irregular issuance.

1.0. The submission of a counterbond is an efficacious mode of lifting an attachment already enforced against property, or even of preventing its enforcement altogether. 1.1. When property has already been seized under attach-ment, the attachment may be discharged upon counterbond in accordance with Section 12 of Rule 57. SEC. 12. Discharge of attachment upon giving counterbond.At any time after an order of attachment has been granted, the party whose property has been attached or the person appearing in his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given x x in an amount equal to the value of the property attached as determined by the judge to secure the payment of any judgment that the attaching creditor may recover in the action. x x. 1.2, But even before actual levy on property, seizure under attachment may be prevented also upon counterbond. The defendant need not wait until his property is seized before seeking the discharge of the attachment by a counterbond. This is made possible by Section 5 of Rule 57. SEC. 5. Manner of attaching property.The officer executing the order shall without delay attach, to await judgment and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt from execution, or so much thereof as may be sufficient to satisfy the applicants demand, unless the former makes a deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the applicant, in an amount sufficient to satisfy such demand besides costs, or in an amount equal to the value of the property which is about to be attached, to secure payment to the applicant of any judgment which he may recover in the action. x x. (Italics supplied) 2.0. Aside from the filing of a counterbond, a preliminary attachment may also be lifted or discharged on the ground that it has been irregularly or improperly issued, in accordance with Section 13 of Rule 57. Like the first, this second mode of lifting an attachment may be resorted to even before any property has been levied on. Indeed, it may be availed of after property has been released from a levy on attachment, as is made clear by said Section 13, viz.: SEC. 13. Discharge of attachment for improper or irregular issuance.The party whose property has been attached may also, at any time either BEFORE or AFTER the release of the attached property, or before

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any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other evidence in addition to that on which the attachment was made. x x. (Italics supplied) This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987), The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor instead of the other way, which, in most instances x x would require presentation of evidence in a fullblown trial on the merits, and cannot easily be settled in a pending incident of the case. 27172 SCRA 480, 488. It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings & Loans Asso. Inc. v. C.A., supra.,28At pp. 488489. to wit: (a) When an attachment may not be dissolved by a showing of its irregular or improper issuance: x x (W)hen the preliminary attachment is issued upon a ground which is at the same time the applicants cause of action; e.g., an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty. (Sec. 1 [b], Rule 57), or an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought (Sec. 1 [d], Rule 57), the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiffs application and affidavits on which the writ was basedand consequently that the writ based thereon had been improperly or irregularly issued (SEE Benitez v. I.A.C., 154 SCRA 41)the reason being that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be

dissolved is by a counterbond (G.B. Inc. v. Sanchez, 98 Phil, 886)." (b) Effect of the dissolution of a preliminary attachment on the plaintiffs attachment bond: x x. The dissolution of the preliminary attachment upon security given, or a showing of its irregular or improper issuance, does not of course operate to discharge the sureties on plaintiffs own attachment bond. The reason is simple. That bond is executed to the adverse party, x x conditioned that the x x (applicant) will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto (SEC. 4, Rule 57). Hence, until that determination is made, as to the applicants entitlement to the attachment, his bond must stand and cannot be withdrawn. With respect to the other provisional remedies, i.e., preliminary injunction (Rule 58), receivership (Rule 59), replevin or delivery of personal property (Rule 60), the rule is the same: they may also issue ex parte. 29(1) Sec. 5, Rule 68 declares that while, generally ez No preliminary injunction shall be granted without notice to the defendant, nevertheless, If it shall appear from the facts shown by affidavits or by the verified complaint that gre... It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of the defendant, as above indicatedissuance of summons, order of attachment and writ of attachment (and/or appointment of guardian ad litem, or grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment of the complaint by the plaintiff as a matter of right without leave of court30SEE footnotes 9 to 13, supra.and however valid and proper they might otherwise be, these do not and cannot bind and affect the defendant until and unless jurisdiction over his person is eventually obtained by the court, either by service on him of summons or other coercive process or his voluntary submission to the courts authority. Hence, when the sheriff or other proper officer commences implementation of the writ of attachment, it is essential that he serve on the defendant not only a copy of the applicants affidavit and attachment bond, and of the order of attachment, as explicitly required by Section 5 of Rule 57, but also the summons addressed to said defendant as well as a copy of the complaint and order for appointment of guardian ad litem, if any, as also explicitly directed by Section 3, Rule 14 of the Rules of Court. Service of all such documents is indispensable not only for the acquisition of jurisdiction over the person of the defendant, but also upon considerations of fairness, to apprise the defendant of the complaint against him, of the issuance of a writ of preliminary

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attachment and the grounds therefor and thus accord him the opportunity to prevent attachment of his property by the posting of a counterbond in an amount equal to the plaintiffs claim in the complaint pursuant to Section 5 (or Section 12), Rule 57, or dissolving it by causing dismissal of the complaint itself on any of the grounds set forth in Rule 16, or demonstrating the insufficiency of the applicants affidavit or bond in accordance with Section 13, Rule 57. It was on account of the failure to comply with this fundamental requirement of service of summons and the other documents above indicated that writs of attachment issued by the Trial Court ex parte were struck down by this Courts Third Division in two (2) cases, namely: Sievert v. Court of Appeals,31168 SCRA 692 (1988). and BAC Manufacturing and Sales Corporation v. Court of Appeals, et al. 32G R. No. 96784, Aug. 2,1991. In contrast to the case at bar where the summons and a copy of the complaint, as well as the order and writ of attachment and the attachment bond were served on the defendantin Sievert, levy on attachment was attempted notwithstanding that only the petition for issuance of the writ of preliminary attachment was served on the defendant, without any prior or accompanying summons and copy of the complaint; and in BAC Manufacturing and Sales Corporation, neither the summons nor the order granting the preliminary attachment or the writ of attachment itself was served on the defendant before or at the time the levy was made. For the guidance of all concerned, the Court reiterates and reaffirms the proposition that writs of attachment may properly issue ex parte provided that the Court is satisfied that the relevant requisites therefor have been fulfilled by the applicant, although it may, in its discretion, require prior hearing on the application with notice to the defendant; but that levy on property pursuant to the writ thus issued may not be validly effected unless preceded, or contemporaneously accompanied, by service on the defendant of summons, a copy of the complaint (and of the appointment of guardian ad litem, if any), the application for attachment (if not incorporated in but submitted separately from the complaint), the order of attachment, and the plaintiffs attachment bond, WHEREFORE, the petition is GRANTED; the challenged decision of the Court of Appeals is hereby REVERSED, and the order and writ of attachment issued by Hon. Milagros C. Nartatez, Presiding Judge of Branch 8, Regional Trial Court of Davao City in Civil Case No. 1951389 against Queensland Hotel or Motel or Queensland Tourist Inn and Teodorico Adarna are hereby REINSTATED. Costs against private respondents. SO ORDERED.

Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla, Bidin, Grio-Aquino, Medialdea, Regalado and Romero, JJ., concur. Fernan (C.J.), On leave. Davide, Jr., J., No part; one of the parties was his client before. Petition granted; decision reversed. Note.No notice to the adverse party, or hearing on the application is required before a writ of preliminary attachment may issue, but a motion to quash a writ of attachment may only be granted, after notice to the applicant and after hearing. (Mindanao Savings and Loan Association, Inc. vs. Court of Appeals, 172 SCRA 480.) o0o [Davao Light & Power Co., Inc. vs. Court of Appeals, 204 SCRA 343(1991)]

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