CIV PRO - Cause of Action to Counterclaim

7/27/2019 CIV PRO - Cause of Action to Counterclaim

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PIONEER INTERNATIONAL, LTD., petitioner,vs.HON. TEOFILO GUADIZ, JR., in his capacity as Presiding Judge ofRegional Trial Court, Branch 147, Makati City, and ANTONIO D.

TODARO, respondents.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review on certiorari1 of the Decision2 dated 27 September2001 and of the Resolution

3dated 14 January 2003 of the Court of Appeals

(appellate court) in CA-G.R. SP No. 54062. The Decision affirmed theOrders

4dated 4 January 1999

5and 3 June 1999

6of Branch 147 of the

Regional Trial Court of Makati City (trial court) in Civil Case No. 98-124. Thetrial court denied the motion to dismiss filed by Pioneer International, Ltd.(PIL)

7in its special appearance.

The Facts

On 16 January 1998, Antonio D. Todaro (Todaro) filed a complaint for sum ofmoney and damages with preliminary attachment against PIL, PioneerConcrete Philippines, Inc. (PCPI), Pioneer Philippines Holdings, Inc. (PPHI),John G. McDonald (McDonald), and Philip J. Klepzig (Klepzig). PIL and its co-defendants were served copies of the summons and of the complaint at PPHIand PCPIs office in Alabang, Muntinlupa, through Cecille L. De Leon (DeLeon), who was Klepzigs Executive Assistant.

Todaro alleged that PIL is a corporation duly organized under Australian laws,while PCPI and PPHI are corporations duly organized under Philippine laws.PIL is engaged in the ready-mix and concrete aggregates business and hasestablished a presence worldwide. PIL established PPHI as the holding

company of the stocks of its operating company in the Philippines, PCPI.McDonald is the Chief Executive Officer of PILs Hong Kong office whileKlepzig is the President and Managing Director of PPHI and PCPI. For hispart, Todaro further alleged that he was the managing director of BetonvalReadyconcrete, Inc. (Betonval) from June 1975 up to his resignation inFebruary 1996.

Before Todaro filed his complaint, there were several meetings andexchanges of letters between Todaro and the officers of Pioneer Concrete(Hong Kong) Limited, Pioneer Concrete Group HK, PPHI, and PIL. Accordingto Todaro, PIL contacted him in May 1996 and asked if he could join it in

establishing a pre-mixed concrete plant and in overseeing its operations in thePhilippines. Todaro confirmed his availability and expressed interest in joiningPIL. Todaro met with several of PILs representatives and even gave PIL thenames of three of his subordinates in Betonval whom he would like to join himin PIL.

Todaro attached nine letters, marked as Annexes "A" to "I," to his complaint.Annex "A"

8shows that on 15 July 1996, Todaro, under the letterhead of Ital

Tech Distributors, Inc., sent a letter to Max Lindsay (Lindsay) of PioneerConcrete (Hong Kong) Limited. Todaro wrote that "[m]y aim is to run again aready-mix concrete company in the Philippines and not to be a part-timeconsultant. Otherwise, I could have charged your company with a muchhigher fee."

Annex "B"9

shows that on 4 September 1996, Lindsay, under the letterhead ofPioneer Concrete (Hong Kong) Limited, responded by fax to Todaros faxedletter to McDonald and proposed that Todaro "join Pioneer on a retainer basisfor 2 to 3 months on the understanding that [Todaro] would become apermanent employee if as we expect, our entry proceeds." The faxed letter toMcDonald referred to by Lindsay is not found in the rollo and was not attachedto Todaros complaint.

Annex "C"10

shows that on the same date as that of Annex "B," Todaro, underthe letterhead of Ital Tech Distributors, Inc., faxed another letter to Lindsay ofPioneer Concrete (Hong Kong) Limited. Todaro asked for a formal letteraddressed to him about the proposed retainer. Todaro requested that theletter contain a statement on his remuneration package and on his permanentemployment "with PIONEER once it has established itself on a permanentbasis in the Philippines."

Annex "D"11

shows that Todaro, under the letterhead of Ital Tech Distributors,Inc., sent a letter to McDonald of PIL. Todaro confirmed the following toMcDonald:

1. That I am accepting the proposal of PIONEER INTL. as aconsultant for three (3) months, starting October 1, 1996, with aretainer fee of U.S. $15,000.00 per month;

2. That after three (3) months consultancy, I should be employed byPIONEER INTL., on a permanent basis, as its Managing Director orCEO in the Philippines. Remuneration package will be mutuallyagreed upon by PIONEER and the undersigned;

3. That Gino Martinel and the Sales Manager Jun Ong, will be hiredas well, on a permanent basis, by PIONEER as soon as the company


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is established. Salary, likewise, will be accepted by both PIONEERand the respective parties.

Annex "E"12

is a faxed letter dated 18 November 1996 of McDonald, under theletterhead of Pioneer Concrete Group HK, to Todaro of Ital Tech Distributors,Inc. The first three paragraphs of McDonalds letter read:

Further to our recent meeting in Hong Kong, I am now able to confirmmy offer to engage you as a consultant to Pioneer International Ltd.

Should Pioneer proceed with an investment in the Philippines, thenPioneer would offer you a position to manage the premixed concreteoperations.

Pioneer will probably be in a position to make a decision onproceeding with an investment by mid January 97.

The basis for your consultancy would be:

Monthly fee USD 15,000 per month billed on monthlybasis and payable 15 days from billing date.

Additional pre-approved expenses to be reimbursed.

Driver and secretarial support-basis forreimbursement of this to be agreed.

Arrangement to commence from 1st

November 96,reflecting your contributions so far and to continueuntil Pioneer makes a decision.

Annex "F"13

shows Todaros faxed reply, under the letterhead of Ital TechDistributors, Inc., to McDonald of Pioneer Concrete Group HK dated 19November 1996. Todaro confirmed McDonalds package concerning theconsultancy and reiterated his desire to be the manager of PioneersPhilippine business venture.

Annex "G"14

shows Todaros faxed reply, under the letterhead of Ital Tech

Distributors, Inc., to McDonald of PIL dated 8 April 1997. Todaro informedMcDonald that he was willing to extend assistance to the Pioneerrepresentative from Queensland. The tenor of the letter revealed that Todarohad not yet occupied his expected position.

Annex "H"15

shows Klepzigs letter, under the letterhead of PPHI, to Todarodated 18 September 1997. Klepzigs message reads:

It has not proven possible for this company to meet with yourexpectations regarding the conditions of your providing Pioneer with

consultancy services. This, and your refusal to consider my terms ofoffer of permanent employment, leave me no alternative but towithdraw these offers of employment with this company.

As you provided services under your previous agreement with ourPioneer Hong Kong office during the month of August, I will see thatthey pay you at the previous rates until the end of August. They haveauthorized me on behalf of Pioneer International Ltd. to formallyadvise you that the agreement will cease from August 31

stas per our

previous discussions.

Annex "I"16

shows the letter dated 20 October 1997 of K.M. Folwell (Folwell),PILs Executive General Manager of Australia and Asia, to Todaro. Folwellconfirmed the contents of Klepzigs 18 September 1997 letter. Folwellsmessage reads:

Thank you for your letter to Dr. Schubert dated 29th

September 1997regarding the alleged breach of contract with you. Dr. Schubert hasasked me to investigate this matter.

I have discussed and examined the material regarding yourassociation with Pioneer over the period from mid 1996 through to

September 1997.

Clearly your consultancy services to Pioneer Hong Kong are welldocumented and have been appropriately rewarded. However, inregard to your request and expectation to be given permanentemployment with Pioneer Philippines Holdings, Inc. I am informedthat negotiations to reach agreement on appropriate terms andconditions have not been successful.

The employment conditions you specified in your letter to JohnMcDonald dated 11th September are well beyond our expectations.

Mr. Todaro, I regret that we do not wish to pursue our association withyou any further. Mr. Klepzig was authorized to terminate thisassociation and the letter he sent to you dated 18

thSeptember has

my support.

Thank you for your involvement with Pioneer. I wish you all the bestfor the future. (Emphasis added)

PIL filed, by special appearance, a motion to dismiss Todaros complaint.PILs co-defendants, PCPI, PPHI, and Klepzig, filed a separate motion to


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dismiss.17

PIL asserted that the trial court has no jurisdiction over PIL becausePIL is a foreign corporation not doing business in the Philippines. PIL alsoquestioned the service of summons on it. Assuming arguendo that Klepzig isPILs agent in the Philippines, it was not Klepzig but De Leon who receivedthe summons for PIL. PIL further stated that the National Labor RelationsCommission (NLRC), and not the trial court, has jurisdiction over the subjectmatter of the action. It claimed that assuming that the trial court has

jurisdiction over the subject matter of the action, the complaint should bedismissed on the ground offorum non-conveniens. Finally, PIL maintainedthat the complaint does not state a cause of action because there was no

perfected contract, and no personal judgment could be rendered by the trialcourt against PIL because PIL is a foreign corporation not doing business inthe Philippines and there was improper service of summons on PIL.

Todaro filed a Consolidated Opposition dated 26 August 1998 to refute PILsassertions. PIL filed, still by special appearance, a Reply on 2 October 1998.

The Ruling of the Trial Court

On 4 January 1999, the trial court issued an order18

which ruled in favor ofTodaro. The trial court denied the motions to dismiss filed by PIL, PCPI, PPHI,and Klepzig.

The trial court stated that the merits of a motion to dismiss a complaint for lackof cause of action are tested on the strength of the allegation of facts in thecomplaint. The trial court found that the allegations in the complaint sufficientlyestablish a cause of action. The trial court declared that Todaros cause ofaction is based on an alleged breach of a contractual obligation and analleged violation of Articles 19 and 21 of the Civil Code. Therefore, the causeof action does not lie within the jurisdiction of the NLRC but with the trial court.

The trial court also asserted its jurisdiction over PIL, holding that PIL didbusiness in the Philippines when it entered into a contract with Todaro.

Although PIL questions the service of summons on Klepzig, whom PIL claimsis not its agent, the trial court ruled that PIL failed to adduce evidence to proveits contention. Finally, on the issue offorum non-conveniens, the trial courtfound that it is more convenient to hear and decide the case in the Philippinesbecause Todaro resides in the Philippines and the contract allegedlybreached involves employment in the Philippines.

PIL filed an urgent omnibus motion for the reconsideration of the trial courts 4January 1999 order and for the deferment of filing its answer. PCPI, PPHI,and Klepzig likewise filed an urgent omnibus motion. Todaro filed aconsolidated opposition, to which PIL, PCPI, PPHI, and Klepzig filed a jointreply. The trial court issued an order

19on 3 June 1999 denying the motions of

PIL, PCPI, PPHI, and Klepzig. The trial court gave PIL, PCPI, PPHI, andKlepzig 15 days within which to file their respective answers.

PIL did not file an answer before the trial court and instead filed a petition forcertiorari before the appellate court.

The Ruling of the Appellate Court

The appellate court denied PILs petition and affirmed the trial courts ruling in

toto. The dispositive portion of the appellate courts decision reads:

WHEREFORE, premises considered, the present petition for certiorariis hereby DENIED DUE COURSE and accordingly DISMISSED. Theassailed Orders dated January 4, 1999 and June 3, 1999 of theRegional Trial Court of Makati City, Branch 147, in Civil Case No, 98-124 are hereby AFFIRMED in toto.

SO ORDERED.20

On 14 January 2003, the appellate court dismissed21

PILs motion forreconsideration for lack of merit. The appellate court stated that PILs motion

raised no new substantial or weighty arguments that could impel the appellatecourt from departing or overturning its previous decision. PIL then filed apetition for review on certiorari before this Court.

The Issues

PIL raised the following issues before this Court:

A. [The trial court] did not and cannot acquire jurisdiction over theperson of [PIL] considering that:

A.1. [PIL] is a foreign corporation "not doing business" in the

Philippines.

A.2. Moreover, the complaint does not contain appropriateallegations of ultimate facts showing that [PIL] is doing ortransacting business in the Philippines.

A.3. Assuming arguendo that jurisdiction may be acquiredover the person of [PIL], [the trial court] still failed to acquire

jurisdiction since summons was improperly served on [PIL].


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B. [Todaro] does not have a cause of action and the complaint fails tostate a cause of action. Jurisprudence is settled in that in resolving amotion to dismiss, a court can consider all the pleadings filed in thecase, including annexes, motions and all evidence on record.

C. [The trial court] did not and cannot acquire jurisdiction over thesubject matter of the complaint since the allegations contained thereinindubitably show that [Todaro] bases his claims on an alleged breachof an employment contract. Thus, exclusive jurisdiction is vested withthe [NLRC].

D. Pursuant to the principle offorum non-conveniens, [the trial court]committed grave abuse of discretion when it took cognizance of thecase.22

The Ruling of the Court

The petition has partial merit. We affirm with modification the rulings of thetrial and appellate courts. Apart from the issue on service of summons, therulings of the trial and appellate courts on the issues raised by PIL are correct.

Cause of Action

Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that a cause ofaction is the act or omission by which a party violates a right of another.

The general rule is that the allegations in a complaint are sufficient toconstitute a cause of action against the defendants if, admitting thefacts alleged, the court can render a valid judgment upon the same inaccordance with the prayer therein. A cause of action exists if thefollowing elements are present, namely: (1) a right in favor of theplaintiff by whatever means and under whatever law it arises or iscreated; (2) an obligation on the part of the named defendant torespect or not to violate such right; and (3) an act or omission on the

part of such defendant violative of the right of the plaintiff orconstituting a breach of the obligation of the defendant to the plaintifffor which the latter may maintain an action for recovery of damages.

23

In the present case, the summary of Todaros allegations states that PIL,PCPI, PPHI, McDonald, and Klepzig did not fulfill their contractual obligationto employ Todaro on a permanent basis in PILs Philippine office. Todarosallegations are thus sufficient to establish a cause of action. We quote withapproval the trial courts ruling on this matter:

On the issue of lack of cause of action It is well-settled that themerits of a motion to dismiss a complaint for lack of cause of action istested on the strength of the allegations of fact contained in thecomplaint and no other (De Jesus, et al. vs. Belarmino, et al., 95 Phil.366 [1954]). This Court finds that the allegations of the complaint,specifically paragraphs 13-33 thereof, paragraphs 30-33 alleging asfollows:

"30. All of the acts set forth in the foregoing have been donewith the knowledge, consent and/or approval of the

defendants who acted in concert and/or in conspiracy withone another.

31. Under the circumstances, there is a valid contract enteredinto between [Todaro] and the Pioneer Group, whereby,among others, the Pioneer Group would employ [Todaro], ona permanent basis, to manage and operate the ready-mixconcrete operations, if the Pioneer Group decides to invest inthe Philippines.

32. The Pioneer Group has decided to invest in thePhilippines. The refusal of the defendants to comply with the

Pioneer Groups undertaking to employ [Todaro] to managetheir Philippine ready-mix operations, on a permanent basis,is a direct breach of an obligation under a valid and perfectedcontract.

33. Alternatively, assuming without conceding, that there wasno contractual obligation on the part of the Pioneer Group toemploy [Todaro] on a permanent basis, in their Philippineoperations, the Pioneer Group and the other defendants didnot act with justice, give [Todaro] his due and observehonesty and good faith and/or they have willfully causedinjury to [Todaro] in a manner that is contrary to morals, goodcustoms, and public policy, as mandated under Arts. 19 and

21 of the New Civil Code."

sufficiently establish a cause of action for breach of contract and/orviolation of Articles 19 and 21 of the New Civil Code. Whether or notthese allegations are true is immaterial for the court cannot inquireinto the truth thereof, the test being whether, given the allegations offact in the complaint, a valid judgment could be rendered inaccordance with the prayer in the complaint.

24


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It should be emphasized that the presence of a cause of action rests on thesufficiency, and not on the veracity, of the allegations in the complaint. Theveracity of the allegations will have to be examined during the trial on themerits. In resolving a motion to dismiss based on lack of cause of action, thetrial court is limited to the four corners of the complaint and its annexes. It isnot yet necessary for the trial court to examine the truthfulness of theallegations in the complaint. Such examination is proper during the trial on themerits.

Forum Non-Conveniens

The doctrine offorum non-conveniens requires an examination of thetruthfulness of the allegations in the complaint. Section 1, Rule 16 of the 1997Rules of Civil Procedure does not mention forumnon-conveniens as a groundfor filing a motion to dismiss. The propriety of dismissing a case basedon forum non-conveniens requires a factual determination; hence, it is moreproperly considered a matter of defense. While it is within the discretion of thetrial court to abstain from assuming jurisdiction on this ground, the trial courtshould do so only after vital facts are established to determine whether specialcircumstances require the courts desistance.25

Jurisdiction over PIL

PIL questions the trial courts exercise of jurisdiction over it on two levels.First, that PIL is a foreign corporation not doing business in the Philippinesand because of this, the service of summons on PIL did not follow themandated procedure. Second, that Todaros claims are based on an allegedbreach of an employment contract so Todaro should have filed his complaintbefore the NLRC and not before the trial court.

Transacting Business in the Philippines and

Service of Summons

The first level has two sub-issues: PILs transaction of business in the

Philippines and the service of summons on PIL. Section 12, Rule 14 of the1997 Rules of Civil Procedure provides the manner by which summons maybe served upon a foreign juridical entity which has transacted business in thePhilippines. Thus:

Service upon foreign private juridical entity. When the defendant isa foreign juridical entity which has transacted business in thePhilippines, service may be made on its resident agent designated inaccordance with law for that purpose, or, if there be no such agent, onthe government official designated by law to that effect, or any of itsofficers or agents within the Philippines.

As to the first sub-issue, PIL insists that its sole act of "transacting" or "doingbusiness" in the Philippines consisted of its investment in PPHI. UnderPhilippine law, PILs mere investment in PPHI does not constitute "doingbusiness." However, we affirm the lower courts ruling and declare that, basedon the allegations in Todaros complaint, PIL was doing business in thePhilippines when it negotiated Todaros employment with PPHI. Section 3(d)of Republic Act No. 7042, Foreign Investments Act of 1991, states:

The phrase "doing business"shall includesoliciting orders,service contracts, opening offices, whether called

"liaison"offices or branches; appointing representatives or distributorsdomiciled in the Philippines or who in any calendar year stay in thecountry for a period or periods totaling one hundred eighty [180] daysor more; participating in the management, supervision or control ofany domestic business, firm, entity or corporation in thePhilippines; and any other act or acts that imply a continuity ofcommercial dealings or arrangements and contemplate to thatextent the performance of acts or works, or the exercise of someof the functions normally incident to, and in progressiveprosecution of commercial gain or of the purpose and object ofthe business organization:Provided, however, That the phrase"doing business"shall not be deemed to include mere investment asa shareholder by a foreign entity in domestic corporations dulyregistered to do business, and/or the exercise of rights as suchinvestor; nor having a nominee director or officer to represent itsinterests in such corporation; nor appointing a representative ordistributor domiciled in the Philippines which transacts business in itsown name and for its own account; (Emphases added)

PILs alleged acts in actively negotiating to employ Todaro to run its pre-mixedconcrete operations in the Philippines, which acts are hypothetically admittedin PILs motion to dismiss, are not mere acts of a passive investor in adomestic corporation. Such are managerial and operational acts in directingand establishing commercial operations in the Philippines. The annexes thatTodaro attached to his complaint give us an idea on the extent of PILs

involvement in the negotiations regarding Todaros employment. In Annex "E,"McDonald of Pioneer Concrete Group HK confirmed his offer to engageTodaro as a consultant of PIL. In Annex "F," Todaro accepted theconsultancy. In Annex "H," Klepzig of PPHI stated that PIL authorized him totell Todaro about the cessation of his consultancy. Finally, in Annex "I,"Folwell of PIL wrote to Todaro to confirm that "Pioneer" no longer wishes to beassociated with Todaro and that Klepzig is authorized to terminate thisassociation. Folwell further referred to a Dr. Schubert and to Pioneer HongKong. These confirmations and references tell us that, in this instance, thevarious officers and companies under the Pioneer brand name do not workindependently of each other. It cannot be denied that PIL had knowledge of


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and even authorized the non-implementation of Todaros alleged permanentemployment. In fact, in the letters to Todaro, the word "Pioneer" was used torefer not just to PIL alone but also to all corporations negotiating with Todarounder the Pioneer name.

As further proof of the interconnection of the various Pioneer corporations withregard to their negotiations with Todaro, McDonald of Pioneer ConcreteGroup HK confirmed Todaros engagement as consultant of PIL (Annex "E")while Folwell of PIL stated that Todaro rendered consultancy services toPioneer HK (Annex "I"). In this sense, the various Pioneer corporations were

not acting as separate corporations. The behavior of the various Pioneercorporations shoots down their defense that the corporations have separateand distinct personalities, managements, and operations. The various Pioneercorporations were all working in concert to negotiate an employment contractbetween Todaro and PPHI, a domestic corporation.

Finally, the phrase "doing business in the Philippines" in the former version ofSection 12, Rule 14 now reads "has transacted business in the Philippines."The scope is thus broader in that it is enough for the application of the Rulethat the foreign private juridical entity "has transacted business in thePhilippines."

26

As to the second sub-issue, the purpose of summons is not only to acquirejurisdiction over the person of the defendant, but also to give notice to thedefendant that an action has been commenced against it and to afford it anopportunity to be heard on the claim made against it. The requirements of therule on summons must be strictly followed; otherwise, the trial court will notacquire jurisdiction over the defendant.

When summons is to be served on a natural person, service of summonsshould be made in person on the defendant.

27Substituted service is resorted

to only upon the concurrence of two requisites: (1) when the defendant cannotbe served personally within a reasonable time and (2) when there isimpossibility of prompt service as shown by the statement in the proof ofservice in the efforts made to find the defendant personally and that such

efforts failed.28

The statutory requirements of substituted service must be followed strictly,faithfully, and fully, and any substituted service other than by the statute isconsidered ineffective. Substituted service is in derogation of the usualmethod of service. It is a method extraordinary in character and may be usedonly as prescribed and in the circumstances authorized by the statute.29 Theneed for strict compliance with the requirements of the rule on summons isalso exemplified in the exclusive enumeration of the agents of a domesticprivate juridical entity who are authorized to receive summons.

At present, Section 11 of Rule 14 provides that when the defendant is adomestic private juridical entity, service may be made on the "president,managing partner, general manager, corporate secretary, treasurer, or in-house counsel." The previous version of Section 11 allowed for the service ofsummons on the "president, manager, secretary, cashier, agent, or any of itsdirectors." The present Section 11 qualified "manager" to "general manager"and "secretary" to "corporate secretary." The present Section 11 alsoremoved "cashier, agent, or any of its directors" from the exclusiveenumeration.

When summons is served on a foreign juridical entity, there are threeprescribed ways: (1) service on its resident agent designated in accordancewith law for that purpose, (2) service on the government official designated bylaw to receive summons if the corporation does not have a resident agent,and (3) service on any of the corporations officers or agents within thePhilippines.

30

In the present case, service of summons on PIL failed to follow any of theprescribed processes. PIL had no resident agent in the Philippines. Summonswas not served on the Securities and Exchange Commission (SEC), thedesignated government agency,

31since PIL is not registered with the SEC.

Summons for PIL was served on De Leon, Klepzigs Executive Assistant.

Klepzig is PILs "agent within the Philippines" because PIL authorized Klepzigto notify Todaro of the cessation of his consultancy (Annexes "H" and"I").

32The authority given by PIL to Klepzig to notify Todaro implies that

Klepzig was likewise authorized to receive Todaros response to PILs notice.Todaro responded to PILs notice by filing a complaint before the trial court.

However, summons was not served personally on Klepzig as agent of PIL.Instead, summons was served on De Leon, Klepzigs Executive Assistant. Inthis instance, De Leon was not PILs agent but a mere employee of Klepzig. Ineffect, the sheriff

33resorted to substituted service. For symmetry, we apply the

rule on substituted service of summons on a natural person and we find thatno reason was given to justify the service of PILs summons on De Leon.

Thus, we rule that PIL transacted business in the Philippines and Klepzig wasits agent within the Philippines. However, there was improper service ofsummons on PIL since summons was not served personally on Klepzig.

NLRC Jurisdiction

As to the second level, Todaro prays for payment of damages due himbecause of PILs non-implementation of Todaros alleged employmentagreement with PPHI. The appellate court stated its ruling on this matter, thus:


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It could not be denied that there was no existing contract yet to speakof between PIONEER INTL. and [Todaro]. Since there was anabsence of an employment contract between the two parties, thisCourt is of the opinion and so holds that no employer-employeerelationship actually exists. Record reveals that all that was agreedupon by [Todaro] and the Pioneer Concrete, acting in behalf ofPIONEER INTL., was the confirmation of the offer to engage theservices of the former as consultant of PIONEER INTL. (Rollo, p.132). The failure on the part of PIONEER INTL. to abide by the saidagreement, which was duly confirmed by PIONEER INTL., brought

about a breach of an obligation on a valid and perfected agreement.There being no employer-employee relationship established between[PIL] and [Todaro], it could be said that the instant case falls within the

jurisdiction of the regular courts of justice as the money claim of[Todaro] did not arise out of or in connection with [an] employer-employee relationship.

34

Todaros employment in the Philippines would not be with PIL but with PPHIas stated in the 20 October 1997 letter of Folwell. Assuming the existence ofthe employment agreement, the employer-employee relationship would bebetween PPHI and Todaro, not between PIL and Todaro. PILs liability for thenon-implementation of the alleged employment agreement is a civil disputeproperly belonging to the regular courts. Todaros causes of action as statedin his complaint are, in addition to breach of contract, based on "violation of

Articles 19 and 21 of the New Civil Code" for the "clear and evident bad faithand malice"

35on the part of defendants. The NLRCs jurisdiction is limited to

those enumerated under Article 217 of the Labor Code.36

WHEREFORE,the petition is PARTIALLY GRANTED. The Decision dated 27September 2001 and the Resolution dated 14 January 2003 of the appellatecourt are AFFIRMED with the MODIFICATION that there was improperservice of summons on Pioneer International, Ltd. The case is remanded tothe trial court for proper service of summons and trial. No costs.

SO ORDERED.


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SIMPLICIO GALICIA, for himself, and as Attorney-in-Fact of ROSALIA G.TORRE, PAQUITO GALICIA, NELLIE GALICIA, LETICIA G. MAESTRO andCLARO GALICIA, Petitioners,vs.LOURDES MANLIQUEZ vda. de MINDO and LILIA RICO

MINANO, Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorariseeking to annul andset aside the Decision

1of the Court of Appeals (CA) dated January 14, 2002

in CA-G.R. SP No. 58834 and its Resolution2

of October 21, 2002 denyingpetitioners Motion for Reconsideration.

The present case originated from a complaint filed with the Regional TrialCourt (RTC) of Odiongan, Romblon by herein petitioners, in their capacity asheirs of Juan Galicia (Juan), against Milagros Rico-Glori (Milagros) and hertenants Dominador Musca and Alfonso Fallar, Jr. for Recovery of Possessionand Ownership, Annulment of Title, Documents and Other Papers. The caseis docketed as Civil Case No. OD-306.

In their Complaint, petitioners contended that their predecessor, Juan, was thetrue and lawful owner of a parcel of land situated in Concepcion Sur, Sta.Maria, Romblon known as Lot No. 139 and containing an area of 5.5329hectares, the same having been declared in his name under various taxdeclarations the latest of which being Tax Declaration No. 0037, Series of1994; after years of possession of the said land, Juan was driven away fromthe property through force by the heirs of a certain Ines Ramirez (Ines), one ofwhom is defendant Milagros; because of poverty and lack of knowledge, Juanwas not able to assert his right to the said property but he informed hischildren that they own the above-described parcel of land; and the continuouspossession of the property by Milagros and her co-defendants, tenants hasfurther deprived herein petitioners of their right over the same.

Defendants denied the allegations of petitioners in their complaint assertingthat Juan was not the owner and never took possession of the disputed lot.They also contended that the subject property was part of a larger parcel ofland which was acquired by Ines, Milagross predecessor-in-interest in 1947from a certain Juan Galicha who is a different person from Juan Galicia.

During the scheduled pre-trial conference on May 21, 1997, none of thedefendants appeared. They filed a motion for postponement of the pre-trialconference but it was belatedly received by the trial court. As a consequence,

defendants were declared in default. Herein petitioners, as plaintiffs, werethen allowed to present evidence ex parte.

On December 2, 1997, the RTC rendered judgment with the followingdispositive portion:

WHEREFORE, premises considered, and by preponderance of evidence,judgment is hereby rendered in favor of the plaintiffs and against thedefendants:

1. Declaring plaintiffs as the true and absolute owner of the propertysubject of the case and particularly described in paragraph II of thecomplaint;

2. Affirming and confirming the validity and legality of plaintiffsownership over the property;

3. Ordering defendants to vacate the land adverted to in paragraph IIof the complaint;

4. For the defendants to respect plaintiffs' peaceful possession andownership of the land aforesaid; and

5. To pay the costs.

SO ORDERED.3

On December 15, 1997, the RTC received a Motion for Leave of Court toIntervene with an attached Answer-in-Intervention filed by the compulsoryheirs of Ines, among whom are herein respondents, who are also co-heirs ofdefendant Milagros. The intervenors contended that the subject parcel of landforms part of the estate of Ines which is yet to be partitioned among them; anintestate proceeding is presently pending in the RTC of Odiongan, Romblon,Branch 81; the outcome of Civil Case No. OD-306, one way or the other,

would adversely affect their interest; their rights would be better protected inthe said civil case; and their intervention would not unduly delay, or in any wayprejudice the rights of the original parties.

In its Order of December 23, 1997, the RTC denied the said motion tointervene on the ground that it has already rendered judgment and underSection 2, Rule 19 of the Rules of Court, the motion to intervene should havebeen filed before rendition of judgment by the trial court.


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Meanwhile, the defendants in Civil Case No. OD-306 filed an appeal with theCA. Their Notice of Appeal was filed on February 27, 1998. On June 23, 1999,the CA issued a Resolution dismissing the appeal for failure of thedefendants-appellants to file their brief within the extended period granted bythe appellate court. On August 13, 1999, the abovementioned CA Resolutionbecame final and executory.

Subsequently, the trial court issued a writ of execution dated March 3, 2000.

On May 23, 2000, herein respondents filed a petition for annulment ofjudgment with the CA anchored on grounds of lack of jurisdiction over theirpersons and property and on extrinsic fraud.

On January 14, 2002, the CA promulgated the presently assailed Decisionwith the following dispositive portion:

WHEREFORE, the present petition is hereby GRANTED. The Decision datedDecember 2, 1997 and Writ of Execution dated March 3, 2000 of Branch 82 ofthe Regional Trial Court of Odiongan, Romblon are hereby ANNULLED andSET ASIDE.

SO ORDERED.4

Herein petitioners filed a Motion for Reconsideration but it was denied by theCA in its Resolution

5dated October 21, 2002.

Hence, the instant petition for review based on the following assignment oferrors:

1. THAT THE COURT OF APPEALS COMMITTED SERIOUSERROR OF LAW IN ANNULLING AND SETTING ASIDE THEDECISION DATED 2 DECEMBER 1997 AND WRIT OF EXECUTIONDATED 3 MARCH 2000 OF BRANCH 82 OF THE REGIONAL TRIALCOURT OF ODIONGAN, ROMBLON FOR LACK OF JURISDICTION

OVER THE PERSONS OF PETITIONERS (NOW RESPONDENTSIN THE ABOVE-ENTITLED CASE), A DECISION NOT IN ACCORDWITH LAW OR WITH THE APPLICABLE DECISIONS OF THESUPREME COURT.

2. THAT THE COURT OF APPEALS COMMITTED SERIOUSERROR OF LAW IN NOT DISMISSING THE PETITION FOR

ANNULMENT OF JUDGMENT ON THE GROUND OF ESTOPPELON THE PART OF THE PETITIONERS IN CA-G.R. SP. NO. 58834.

6

As to their first assigned error, petitioners invoke the principle that jurisdictionover the person is acquired by the voluntary appearance of a party in courtand his submission to its authority. Applying this rule in the present case,petitioners argue that by filing their Motion for Leave to Intervene in the RTC,herein respondents voluntarily submitted themselves to the authority of thetrial court, hence placing themselves under its jurisdiction; that by filing thesaid Motion, they recognized the authority of the court to hear and decide notonly their Motion but the case itself; and that by acting on their Motion, thecourt actually exercised jurisdiction over the persons of petitioners.

With respect to their second assigned error, petitioners contend that byrespondents voluntary submission to the jurisdiction of the trial court they arealready estopped in denying the authority of the court which they invokedwhen they filed their Motion. Petitioners also contend that respondents hadseveral opportunities to raise the issue of the courts lack of jurisdiction overtheir persons but they remained silent and did not pursue the remediesavailable to them for an unreasonable length of time; hence, they are nowbarred by laches from questioning the courts jurisdiction.

On the other hand, respondents counter that the CA did not err in settingaside the trial court's decision on the ground that defendants, asindispensable parties, were not joined in the complaint. Respondents argue

that the CA correctly held that when an indispensable party is not before thecourt then the action should be dismissed because the absence of suchindispensable party renders all subsequent actions of the court null and voidfor want of authority to act not only as against him but even as against thosepresent.

Respondents also aver that even assuming that herein petitioners were thetrue owners of the subject land, they have lost such ownership by extinctiveprescription because respondents and their predecessors had been inuninterrupted adverse possession of the subject lot for more than 40 years. Assuch, they had become the owners thereof by acquisitive prescription.

The petition lacks merit but the CA Decision will have to be modified in the

interest of substantial justice and for the orderly administration of justice, aswill be shown forthwith.

It is true that the allowance and disallowance of a motion to intervene isaddressed to the sound discretion of the court hearing the case.

7However,

jurisprudence is replete with cases wherein the Court ruled that a motion tointervene may be entertained or allowed even if filed after judgment wasrendered by the trial court, especially in cases where the intervenors areindispensable parties.

8In Pinlac v. Court of Appeals, this Court held:


10/47

The rule on intervention, like all other rules of procedure, is intended to makethe powers of the Court fully and completely available for justice. It is aimed tofacilitate a comprehensive adjudication of rival claims overriding technicalitieson the timeliness of the filing thereof. Indeed, in exceptional cases, the Courthas allowed intervention notwithstanding the rendition of judgment by the trialcourt.

9

Since it is not disputed that herein respondents are compulsory heirs of Ineswho stand to be affected by the judgment of the trial court, the latter shouldhave granted their Motion to Intervene and should have admitted their

Answer-in-Intervention.

Section 7, Rule 3 of the Rules of Court, defines indispensable parties asparties-in-interest without whom there can be no final determination of anaction. As such, they must be joined either as plaintiffs or as defendants. Thegeneral rule with reference to the making of parties in a civil action requiresthe joinder of all necessary parties where possible and the joinder of allindispensable parties under any and all conditions, their presence being asine qua non for the exercise of judicial power.10It is precisely when anindispensable party is not before the court that the action should bedismissed.

11The absence of an indispensable party renders all

subsequent actions of the court null and void for want of authority to

act, not only as to the absent parties but even as to those present.

12

Theevident aim and intent of the Rules regarding the joinder of indispensable andnecessary parties is a complete determination of all possible issues, not onlybetween the parties themselves but also as regards to other persons who maybe affected by the judgment.

13A valid judgment cannot even be rendered

where there is want of indispensable parties.14

1^wphi1.net

As to the question of whether the trial court acquired jurisdiction over thepersons of herein respondents, the Court has held that the filing of motionsseeking affirmative relief, such as, to admit answer, for additional time to fileanswer, for reconsideration of a default judgment, and to lift order of defaultwith motion for reconsideration, are considered voluntary submission to the

jurisdiction of the court.15 Hence, in the present case, when respondents filed

their Motion for Leave to Intervene, attaching thereto their Answer-in-Intervention, they have effectively submitted themselves to the jurisdiction ofthe court and the court, in turn, acquired jurisdiction over their persons. Butthis circumstance did not cure the fatal defect of non-inclusion of respondentsas indispensable parties in the complaint filed by petitioner. It must beemphasized that respondents were not able to participate during the pre-trialmuch less present evidence in support of their claims. In other words, thecourt acquired jurisdiction over the persons of herein respondents only whenthey filed their Motion for Leave to Intervene with the RTC. Prior to that, theywere strangers to Civil Case No. OD-306.

It is basic that no man shall be affected by any proceeding to which he is astranger, and strangers to a case are not bound by judgment rendered by thecourt.

16In the present case, respondents and their co-heirs are adversely

affected by the judgment rendered by the trial court considering theirostensible ownership of the property. It will be the height of inequity to declareherein petitioners as owners of the disputed lot without giving respondents theopportunity to present any evidence in support of their claim that the subjectproperty still forms part of the estate of their deceased predecessor and is thesubject of a pending action for partition among the compulsory heirs. Muchmore, it is tantamount to a violation of the constitutional guarantee that no

person shall be deprived of property without due process of law.17

1vvphi1.nt

This Court held in Metropolitan Bank and Trust Company v. Alejo that:

A void judgment for want of jurisdiction is no judgment at all. It cannot be thesource of any right nor the creator of any obligation. All acts performedpursuant to it and all claims emanating from it have no legal effect. Hence, itcan never become final and any writ of execution based on it is void: x x x itmay be said to be a lawless thing which can be treated as an outlaw and slainat sight, or ignored wherever and whenever it exhibits its head.18

In the absence of herein respondents and their co-heirs who are

indispensable parties, the trial court had in the first place no authority to act onthe case. Thus, the judgment of the trial court was null and void due to lack ofjurisdiction over indispensable parties.

19The CA correctly annulled the RTC

Decision and writ of execution.

As to the timeliness of the petition for annulment of judgment filed with the CA,Section 3, Rule 47 of the Rules of Court provides that a petition for annulmentof judgment based on extrinsic fraud must be filed within four years from itsdiscovery; and if based on lack of jurisdiction, before it is barred by laches orestoppel.

The principle of laches or "stale demands" ordains that the failure or neglect,for an unreasonable and unexplained length of time, to do that which byexercising due diligence could or should have been done earlier, or thenegligence or omission to assert a right within a reasonable time, warrants apresumption that the party entitled to assert it either has abandoned it ordeclined to assert it.

20

There is no absolute rule as to what constitutes laches or staleness ofdemand; each case is to be determined according to its particularcircumstances.

21The question of laches is addressed to the sound discretion

of the court and, being an equitable doctrine, its application is controlled byequitable considerations.

22It cannot be used to defeat justice or perpetrate


11/47

fraud and injustice.23

It is the better rule that courts, under the principle ofequity, will not be guided or bound strictly by the statute of limitations or thedoctrine of laches when to do so, manifest wrong or injustice would result.

24

In the present case, the CA found no evidence to show when respondentsacquired knowledge of the complaint that petitioners filed with the RTC.Moreover, the Court finds that herein respondents' right to due process is theoverriding consideration in allowing them to intervene in Civil Case No. OD-306.

Petitioners also fault herein respondents for their failure to avail of otherremedies before filing a petition for annulment of judgment with the CA.Petitioners cited the remedies enumerated by the RTC in its Order ofDecember 23, 1997. However, the Court notes that the remedies enumeratedtherein refer to those available to a party who has been declared in default. Inthe present case, herein respondents could not have been declared in default,and thus could not have availed of these remedies, because they neverbecame parties to Civil Case No. OD-306.

The settled rule is that a judgment rendered or final order issued by the RTCwithout jurisdiction is null and void and may be assailed any time eithercollaterally or in a direct action or by resisting such judgment or final order in

any action or proceeding whenever it is invoked, unless barred bylaches.25

Indeed, jurisprudence upholds the soundness of an independentaction to declare as null and void a judgment rendered without jurisdiction asin this case.

26

As a result of and in consonance with the foregoing discussions, the complaintfiled by herein petitioners with the trial court should have been dismissed atthe outset, in the absence of indispensable parties.

Inevitably, the following questions come to mind: what happens to the originaldefendants who were declared as in default and judgment by default was -rendered against them? What happens to the final and executory dismissal ofthe appeal of the defaulted defendants by the CA?

It is an accepted rule of procedure for this Court to strive to settle the entirecontroversy in a single proceeding, leaving no root or branch to bear theseeds of future litigation.27

In concurrence therewith, the Court makes the following observations:

To dismiss the complaint of herein petitioners for non-inclusion of hereinrespondents as indispensable parties, the former would have no otherrecourse but to file anew a complaint against the latter and the original

defendants. This would not be in keeping with the Court's policy of promotinga just and inexpensive disposition of a case. It is best that the complaintremains which is deemed amended by the admission of the Answer-in-Intervention of the indispensable parties.

The trial courts declaration of the defendants as in default in Civil Case No.OD-306 for their failure to attend the pre-trial conference and the consequentfinal and executory judgment by default, are altogether void and of no effectconsidering that the RTC acted without jurisdiction from the very beginningbecause of non-inclusion of indispensable parties. The Court reiterates the

ruling in Metropolitan Bank and Trust Companythat void judgment for want ofjurisdiction is no judgment at all; it cannot be the source of any right nor thecreator of any obligation.

28

Parties are reverted back to the stage where all the defendants have filed theirrespective Answers.

WHEREFORE, the petition is DENIED. The assailed Decision and Resolutionof the Court of Appeals areAFFIRMED with MODIFICATION to theeffectthatthe Regional Trial Court of Odiongan, Romblon, Branch 82 is orderedto GRANT the Motion for Leave to Intervene of respondents and their otherco-heirs, ADMIT their Answer-in-Intervention, MAINTAIN the Answer of

original defendants, and from there to PROCEED with Civil Case No. OD-306in accordance with the Rules of Court.

Costs against petitioners.

SO ORDERED.


12/47

Spouses JULITA DE LA CRUZ and FELIPE DE LA CRUZ,petitioners, vs.PEDRO JOAQUIN, respondent.

D E C I S I O N

PANGANIBAN, J.:

The Rules require the legal representatives of a dead litigant to besubstituted as parties to a litigation. This requirement is necessitated by dueprocess. Thus, when the rights of the legal representatives of a decedent are

actually recognized and protected, noncompliance or belated formalcompliance with the Rules cannot affect the validity of the promulgateddecision. After all, due process had thereby been satisfied.

The Case

Before us is a Petition for Review[1]

under Rule 45 of the Rules of Court,assailing the August 26, 2003 Decision

[2]and the March 9, 2004

Resolution[3]

of the Court of Appeals (CA) in CA-GR CV No. 34702. Thechallenged Decision disposed as follows:

WHEREFORE, the foregoing considered, the appeal is DISMISSED and theassailed decision accordingly AFFIRMED in toto. No costs.

[4]

On the other hand, the trial courts affirmed Decision disposed as follows:

WHEREFORE, judgment is hereby rendered:

a) declaring the Deed of Absolute Sale (Exh. D) andKasunduan (Exhibit B), to be a sale with right of

repurchase;

b) ordering the plaintiff to pay the defendants the sumof P9,000.00 by way of repurchasing the land in question;

c) ordering the defendants to execute a deed ofreconveyance of said land in favor of the plaintiff after thelatter has paid them the amount of P9,000.00 to

repurchase the land in question;

d) ordering the defendants to yield possession of the subjectland to the plaintiff after the latter has paid them the

amount of P9,000.00 to repurchase the property from

them; and

e) ordering the defendants to pay the plaintiff the amountof P10,000.00 as actual and compensatory damages; theamount of P5,000[.00] as exemplary damages; theamount ofP5,000.00 as expenses of litigation and the

amount of P5,000.00 by way of attorneys fees.[5]

The Facts

The case originated from a Complaint for the recovery of possession andownership, the cancellation of title, and damages, filed by Pedro Joaquinagainst petitioners in the Regional Trial Court of Baloc, Sto. Domingo, NuevaEcija.

[6]Respondent alleged that he had obtained a loan from them in the

amount of P9,000 on June 29, 1974, payable after five (5) years; that is, onJune 29, 1979. To secure the payment of the obligation, he supposedlyexecuted a Deed of Sale in favor of petitioners. The Deed was for a parcel ofland in Pinagpanaan, Talavera, Nueva Ecija, covered by TCT No. T-111802. The parties also executed another document entitled Kasunduan.

[7]

Respondent claimed that the Kasunduan showed the Deed of Sale to beactually an equitable mortgage.

[8]Spouses De la Cruz contended that this

document was merely an accommodation to allow the repurchase of theproperty until June 29, 1979, a right that he failed to exercise.

[9]

On April 23, 1990, the RTC issued a Decision in his favor. The trial courtdeclared that the parties had entered into a sale with a right ofrepurchase.

[10]It further held that respondent had made a valid tender of

payment on two separate occasions to exercise his right ofrepurchase.

[11]Accordingly, petitioners were required to reconvey the property

upon his payment.[12]

Ruling of the Court of Appeals

Sustaining the trial court, the CA noted that petitioners had givenrespondent the right to repurchase the property within five (5) years from thedate of the sale or until June 29, 1979. Accordingly, the parties executedthe Kasunduan to express the terms and conditions of their actualagreement.

[13]The appellate court also found no reason to overturn the finding

that respondent had validly exercised his right to repurchase the land.[14]


13/47

In the March 9, 2004 Resolution, the CA denied reconsideration andordered a substitution by legal representatives, in view of respondents deathon December 24, 1988.

[15]

Hence, this Petition.[16]

The Issues

Petitioners assign the following errors for our consideration:

I. Public Respondent Twelfth Division of the Honorable Court of Appealsseriously erred in dismissing the appeal and affirming in toto the Decision ofthe trial court in Civil Case No. SD-838;

II. Public Respondent Twelfth Division of the Honorable Court of Appealslikewise erred in denying [petitioners] Motion for Reconsideration given thefacts and the law therein presented.

[17]

Succinctly, the issues are whether the trial court lost jurisdiction over thecase upon the death of Pedro Joaquin, and whether respondent was guilty of

forum shopping.[18]

The Courts Ruling

The Petition has no merit.

First Issue:Jurisdiction

Petitioners assert that the RTCs Decision was invalid for lack ofjurisdiction.[19] They claim that respondent died during the pendency of thecase. There being no substitution by the heirs, the trial court allegedly lacked

jurisdiction over the litigation.[20]

Rule on Substitution

When a party to a pending action dies and the claim is notextinguished,

[21]the Rules of Court require a substitution of the

deceased. The procedure is specifically governed by Section 16 of Rule 3,which reads thus:

Section 16. Death of a party; duty of counsel. Whenever a party to apending action dies, and the claim is not thereby extinguished, it shall be theduty of his counsel to inform the court within thirty (30) days after such deathof the fact thereof, and to give the name and address of his legalrepresentative or representatives. Failure of counsel to comply with this duty

shall be a ground for disciplinary action.

The heirs of the deceased may be allowed to be substituted for thedeceased, without requiring the appointment of an executor or administratorand the court may appoint a guardian ad litem for the minor heirs.

The court shall forthwith order said legal representative or representatives toappear and be substituted within a period of thirty (30) days from notice.

If no legal representative is named by the counsel for the deceased party, orif the one so named shall fail to appear within the specified period, the courtmay order the opposing party, within a specified time, to procure the

appointment of an executor or administrator for the estate of the deceased,and the latter shall immediately appear for and on behalf of thedeceased. The court charges in procuring such appointment, if defrayed bythe opposing party, may be recovered as costs.

The rule on the substitution of parties was crafted to protect every partysright to due process.[22] The estate of the deceased party will continue to beproperly represented in the suit through the duly appointed legalrepresentative.

[23]Moreover, no adjudication can be made against the

successor of the deceased if the fundamental right to a day in court isdenied.

[24]

The Court has nullified not only trial proceedings conducted without the

appearance of the legal representatives of the deceased, but also theresulting judgments.

[25]In those instances, the courts acquired no jurisdiction

over the persons of the legal representatives or the heirs upon whom nojudgment was binding.

[26]

This general rule notwithstanding, a formalsubstitution by heirs is notnecessary when they themselves voluntarily appear, participate in the case,and present evidence in defense of the deceased.

[27]These actions negate

any claim that the right to due process was violated.


14/47

The Court is not unaware ofChittick v. Court of Appeals,[28]

in which thefailure of the heirs to substitute for the original plaintiff upon her death led tothe nullification of the trial courts Decision. The latter had sought to recoversupport in arrears and her share in the conjugal partnership. The childrenwho allegedly substituted for her refused to continue the case against theirfather and vehemently objected to their inclusion as parties.

[29]Moreover,

because he died during the pendency of the case, they were bound tosubstitute for the defendant also. The substitution effectively merged thepersons of the plaintiff and the defendant and thus extinguished the obligationbeing sued upon.

[30]

Clearly, the present caseis not similar, much less identical, to the factualmilieu ofChittick.

Strictly speaking, the rule on the substitution by heirs is not a matter ofjurisdiction, but a requirement of due process. Thus, when due process is notviolated, as when the right of the representative or heir is recognized andprotected, noncompliance or belated formal compliance with the Rules cannotaffect the validity of a promulgated decision.[31] Mere failure to substitute for adeceased plaintiff is not a sufficient ground to nullify a trial courtsdecision. The alleging party must prove that there was an undeniableviolation of due process.

Substitution inthe Instant Case

The records of the present case contain a Motion for Substitution ofParty Plaintiff dated February 15, 2002, filed before the CA. The prayerstates as follows:

WHEREFORE, it is respectfully prayed that the Heirs of the deceasedplaintiff-appellee as represented by his daughter Lourdes dela Cruz besubstituted as party-plaintiff for the said Pedro Joaquin.

It is further prayed that henceforth the undersigned counsel[32] for the heirs ofPedro Joaquin be furnished with copies of notices, orders, resolutions andother pleadings at its address below.

Evidently, the heirs of Pedro Joaquin voluntary appeared andparticipated in the case. We stress that the appellate court had ordered

[33]his

legal representatives to appear and substitute for him. The substitution evenon appeal had been ordered correctly. In all proceedings, the legalrepresentatives must appear to protect the interests of the deceased.

[34]After

the rendition of judgment, further proceedings may be held, such as a motionfor reconsideration or a new trial, an appeal, or an execution.

[35]

Considering the foregoing circumstances, the Motion for Substitution maybe deemed to have been granted; and the heirs, to have substituted for thedeceased, Pedro Joaquin. There being no violation of due process, the issueof substitution cannot be upheld as a ground to nullify the trial courtsDecision.

Second Issue:Forum Shopping

Petitioners also claim that respondents were guilty of forum shopping, afact that should have compelled the trial court to dismiss theComplaint.

[36]They claim that prior to the commencement of the present suit

on July 7, 1981, respondent had filed a civil case against petitioners on June25, 1979. Docketed as Civil Case No. SD-742 for the recovery of possessionand for damages, it was allegedly dismissed by the Court of First Instance ofNueva Ecija for lack of interest to prosecute.

Forum Shopping Defined

Forum shopping is the institution of two or more actions or proceedingsinvolving the same parties for the same cause of action, either simultaneouslyor successively, on the supposition that one or the other court would make afavorable disposition.[37] Forum shopping may be resorted to by a partyagainst whom an adverse judgment or order has been issued in one forum, inan attempt to seek a favorable opinion in another, other than by an appeal ora special civil action forcertiorari.

[38]

Forum shopping trifles with the courts, abuses their processes, degradesthe administration of justice, and congests court dockets.

[39]Willful and

deliberate violation of the rule against it is a ground for the summary dismissalof the case; it may also constitute direct contempt of court.

[40]

The test for determining the existence of forum shopping is whether theelements oflitis pendentia are present, or whether a final judgment in onecase amounts to res judicata in another.

[41]We note, however, petitioners

claim that the subject matter of the present case has already been litigatedand decided. Therefore, the applicable doctrine is res judicata.

[42]


15/47

Applicability of Res Judicata

Underres judicata, a final judgment or decree on the merits by a court ofcompetent jurisdiction is conclusive of the rights of the parties or their privies,in all later suits and on all points and matters determined in the previoussuit.

[43]The term literally means a matter adjudged, judicially acted upon, or

settled by judgment.[44] The principle bars a subsequent suit involving thesame parties, subject matter, and cause of action. Public policy requires thatcontroversies must be settled with finality at a given point in time.

The elements ofres judicata are as follows: (1) the former judgment ororder must be final; (2) it must have been rendered on the merits of thecontroversy; (3) the court that rendered it must have had jurisdiction over thesubject matter and the parties; and (4) there must have been -- between thefirst and the second actions -- an identity of parties, subject matter and causeof action.[45]

Failure to Support Allegation

The onus of proving allegations rests upon the party raising them.[46]

As

to the matter of forum shopping and res judicata, petitioners have failed toprovide this Court with relevant and clear specifications that would show thepresence of an identity of parties, subject matter, and cause of action betweenthe present and the earlier suits. They have also failed to show whether theother case was decided on the merits. Instead, they have made only bareassertions involving its existence without reference to its facts. In otherwords, they have alleged conclusions of law without stating any factual orlegal basis. Mere mention of other civil cases without showing the identity ofrights asserted and reliefs sought is not enough basis to claim that respondentis guilty of forum shopping, or that res judicata exists.

[47]

WHEREFORE, the Petition is DENIED and the assailed Decision andResolution areAFFIRMED. Costs against petitioners.

SO ORDERED.


16/47

WESTMONT VS. RICARDO SAMANIEGO

Before us are consolidated petitions for review on certiorariunder Rule 45 of

the 1997 Rules of Civil Procedure, as amended, filed by both contending

parties assailing the Decision[1] dated January 8, 2001 and the

Resolution[2]

dated March 9, 2001 rendered by the Court of Appeals in CA-

G.R. SP No. 60400.

The factual antecedents as borne by the records are:

On May 5, 1998, Ricardo C. Samaniego filed with the Office of the

Labor Arbiter, Regional Arbitration Branch (RAB) No. II, Tuguegarao City,

Cagayan, a complaint for illegal dismissal and damages against Westmont

Pharmaceuticals, Inc. (Westmont) and United Laboratories, Inc. (Unilab),

herein respondents. Also impleaded as respondents are Unilabs officers,

Jose Yao Campos, Carlos Ejercito, Ernesto Salazar, Eliezer Salazar, and

Jose Solidum, Jr.

The complaint alleges that Unilab initially hired Samaniego as

Professional Service Representative of its marketing arm, Westmont. Later,

Unilab promoted him as Senior Business Development Associate and

assigned him in Isabela as Acting District Manager of Westmont and

Chairman of Unilab Special Projects. In August 1995, he was transferred to

Metro Manila pending investigation of his subordinate and physicians of

Region II involved in a sales discount and Rx trade-off controversy. He was

then placed under floating status and assigned to perform duties not

connected with his position, like fetching at the airport physicians coming from

the provinces; making deposits in banks; fetching field men and doing

messengerial works. His transfer to Metro Manila resulted in the diminution

of his salary as his per diem was reduced from P13,194.00 to P2,299.00 only.

On June 26, 1998, Westmont and Unilab filed a motion to dismiss

Samaniegos complaint on the ground of improper venue and lack of cause of

action. They argued that the complaint should have been filed with the

National Labor Relations Commission (NLRC) in Manila, not with the Office of

the Labor Arbiter in Tuguegarao City, Cagayan; and that the action should

only be against Westmont, Samaniegos employer.

Samaniego filed an Opposition to the motion to which Westmont and

Unilab filed a Reply.

On August 13, 1998, the Labor Arbiter denied the motion to dismiss,

citing Section 1, Rule IV of the NLRC New Rules of Procedure. This

provision allows the Labor Arbiter to order a change of venue in meritorious

cases.

The Labor Arbiter then set the case for preliminary conference during

which Westmont and Unilab expressly reserved their right to contest the order

denying their motion to dismiss.

On September 3, 1998, Westmont and Unilab filed with the NLRC an

Urgent Petition to Change or Transfer Venue. On the same date, they filed

with the Office of the Labor Arbiter in Cagayan a Motion to Suspend

Proceedings in view of the pendency of their petition for change or transfer of

venue in the NLRC.

On September 8, 1998, the Labor Arbiter issued an Order directing

the parties to submit their respective position papers and supporting

documents within twenty (20) days from notice, after which the case shall be

deemed submitted for decision.


17/47

On September 22, 1998, the NLRC, acting on the petition to change

venue, directed the Labor Arbiter to forward to the NLRC the records of the

case. The Labor Arbiter retained the complete duplicate original copies of the

records and set the case for hearing. Westmont and Unilab repeatedly filed

motions for cancellation of the scheduled dates of hearing on the ground that

their petition for change of venue has remained unresolved. They did not file

their position papers nor did they attend the hearing. Thus, the Labor Arbiterconsidered the case submitted for Decision based on the records and the

evidence submitted by Samaniego.

On December 16, 1998, the Labor Arbiter rendered a Decision

finding that Samaniego was illegally and unjustly dismissed constructively

and ordering his reinstatement to his former position without loss of seniority

rights and privileges; and payment of his full backwages from the date of his

dismissal from the service up to the date of his actual reinstatement, as well

as per diem differential, profit share, and actual, moral and exemplary

damages, plus 10% attorneys fees.

On January 21, 1999, Westmont and Unilab interposed an appeal to

the NLRC. In its Resolution dated August 31, 1999, the NLRC dismissed the

petition for change of venue, holding that when the cause of action arose,

Samaniegos workplace was in Isabela over which the Labor Arbiter in

Cagayan has jurisdiction; and that the Labor Arbiters Decision is not

appealable.

In the same Resolution, the NLRC declared the Labor Arbiters

Decision null and void, finding that:

x x x the Executive Labor Arbiter below only allowedthe transmittal of the official records of the instant case to theCommission. Throwing caution into the wind, he retained

complete duplicate original copies of the same, conductedfurther proceedings and rendered his now contested Decisiondespite the pendency of the appeal-treated Urgent Petition forChange of Venue.

As a consequence, respondents-appellants weredeprived of their opportunity to be heard and defendthemselves on the issues raised in the instant case. Theywere therefore denied of their right to due process of law inviolation of Section 1, Article III of the Constitution which

provides: No person shall be deprived of his....propertywithout due process of law.

The dispositive portion of the NLRC Resolution reads:

WHEREFORE, premises considered, the mainAppeal and Motion to Quash are hereby PARTIALLYGRANTED and the appeal-treated Petition for Change ofVenue DISMISSED for lack of jurisdiction and/ormerit. Accordingly, the Decision appealed from is declaredNULL and VOID and the Order appealed from SUSTAINED

insofar as the denial of the Motion to Dismiss isconcerned. The entire records of the instant case areDIRECTED to be immediately remanded to the ExecutiveLabor Arbiter of origin for immediate conduct of furtherproceeding. The respondents-appellants are DIRECTED topay complainant-appellee the amount of Two Hundred ThirtyThousand Seven Hundred Twenty Pesos and ThirtyCentavos (P230,720.30) representing his salary from January1, 1999 to August 31, 1999, the date of issuance of thisResolution less any salary collected by him by way ofexecution pending appeal.

SO ORDERED.

The parties separately filed their motions for reconsideration but were

both denied by the NLRC in its Resolution dated June 27, 2000.

On January 8, 2001, the Court of Appeals, acting on the parties

petitions forcertiorari, rendered its Decision setting aside the NLRC


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Resolutions and affirming with modification the Labor Arbiters Decision in the

sense that the award of moral damages was reduced from P5,000,000.00

to P500,000.00; and the exemplary damages from P1,000,000.00

to P300,000.00, thus:

x x x

While this Court concurs with the ruling of theExecutive Labor Arbiter that there was constructive dismissalcommitted against Ricardo Samaniego, this Court finds theaward on moral and exemplary damages unconscionable.

x x x

WHEREFORE, the NLRCs resolutions dated August31, 1999 and June 27, 2000 are hereby SET ASIDE. Thedecision of the Executive Labor Arbiter dated December 16,1998 is REINSTATED and AFFIRMED in all respect exceptwith the following modification: the moral and exemplarydamages are reduced to P500,000.00 and P300,000.00,respectively.

SO ORDERED.

Hence, these consolidated petitions for review on certiorarifiled by

the opposing parties.

In their petition, Westmont and Unilab allege that the Court of Appeals

erred in denying their motion to dismiss by reason of improper venue and insustaining the Labor Arbiters Decision declaring that Samaniego was

constructively dismissed; and that they were denied due process.

For his part, Samaniego maintains that the Court of Appeals did not

err in its ruling. However, he claims that the Appellate Court should not have

reduced the Labor Arbiters award for moral and exemplary damages.

The petition to change or transfer venue filed by Westmont and Unilab

with the NLRC is not the proper remedy to assail the Labor Arbiters Order

denying their motion to dismiss. Such Order is merely interlocutory,

hence, not appealable. Section 3, Rule V of the Rules of Procedure of the

NLRC, as amended, provides:

SECTION 3. Motion to Dismiss. On or before the dateset for the conference, the respondent may file a motion todismiss. Any motion to dismiss on the ground of lack of

jurisdiction, improper venue, or that the cause of action isbarred by prior judgment, prescription or forumshopping, shall be immediately resolved by the LaborArbiter by a written order. An order denying the motionto dismiss or suspending its resolution until the finaldetermination of the case is not appealable.

In Indiana Aerospace University v. Commission on Higher

Education,[3]

we held:

An order denying a motion to dismiss is interlocutory,and so the proper remedy in such a case is to appeal aftera decision has been rendered.

Assuming that the petition to change or transfer venue is the proper

remedy, still we find that the Court of Appeals did not err in sustaining the

Labor Arbiters Order denying the motion to dismiss.

Section 1(a), Rule IV of the NLRC Rules of Procedure, as amended,

provides:

SECTION 1. Venue. (a) All cases which LaborArbiters have authority to hear and decide may be filed in theRegional Arbitration Branch having jurisdiction over theworkplace of the complainant/petitioner.


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For purposes of venue, workplace shall be understoodas the place or locality where the employee is regularlyassigned when the cause of action arose. It shall includethe place where the employee is supposed to report backafter a temporary detail, assignment or travel. In the case offield employees, as well as ambulant or itinerant workers,their workplace is where they are regularly assigned, or wherethey are supposed to regularly receive their salaries/wages orwork instructions from and report the results of theirassignment to, their employers.

In Sulpicio Lines, Inc. v. NLRC,[4] we held:

The question of venue essentially relates to the trialand touches more upon the convenience of the parties, ratherthan upon the substance and merits of the case. Ourpermissive rules underlying provisions on venue are intendedto assure convenience for the plaintiff and his witnesses andto promote the ends of justice. This axiom all the more findsapplicability in cases involving labor and managementbecause of the principle, paramount in our jurisdiction, that

the State shall afford full protection to labor.

x x x

This provision is obviously permissive, for the saidsection uses the word "may," allowing a different venue whenthe interests of substantial justice demand a different one. Inany case, as stated earlier, the Constitutional protectionaccorded to labor is a paramount and compelling factor,provided the venue chosen is not altogether oppressive to theemployer.

Here, it is undisputed that Samaniegos regular place of assignment

was in Isabela when he was transferred to Metro Manila or when the cause of

action arose. Clearly, the Appellate Court was correct in affirming the Labor

Arbiters finding that the proper venue is in the RAB No. II at Tuguegarao City,

Cagayan.

On the contention of Westmont and Unilab that they were denied due

process, well settled is the rule that the essence of due process is simply

an opportunity to be heard or,as applied to administrative proceedings, an

opportunity to explain ones side or an opportunity to seek a reconsideration of

the action or ruling complained of. The requirement of due process in labor

cases before a Labor Arbiter is satisfied when the parties are given

the opportunity to submit their position papers to which they are supposedto attach all the supporting documentsor documentaryevidence that would

prove their respective claims, in the event the Labor Arbiter determines that

no formal hearing would be conducted or that such hearing was not

necessary.[5]

As shown by the records, the Labor Arbiter gave Westmont and

Unilab, not only once, but thrice, the opportunity to submit their position

papers and supporting affidavits and documents. But they were

obstinate. Clearly, they were not denied their right to due process.

The ultimate issue for our resolution is whether the Court of Appeals

erred in holding that Samaniego was constructively dismissed

by Westmont and Unilab.

To recapitulate, Samaniego claims that upon his reassignment and/or

transfer to Metro Manila, he was placed on floating status and directed to

perform functions not related to his position. For their part, Westmont and

Unilab explain that his transfer is based on a sound business judgment, a

management prerogative.

In constructive dismissal, the employer has the burden of proving that

the transfer of an employee is for just and valid grounds, such as genuine

business necessity. The employer must be able to show that the transfer is

not unreasonable, inconvenient, or prejudicial to the employee. It must not


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involve a demotion in rank or a diminution of salary and other benefits. If the

employer cannot overcome this burden of proof, the employees transfer shall

be tantamount to unlawful constructive dismissal.[6]

Westmont and Unilab failed to discharge this burden. Samaniego

was unceremoniously transferred from Isabela to Metro Manila. We hold that

such transfer is economically and emotionally burdensome on his part. He

was constrained to maintain two residences one for himself in Metro Manila,

and the other for his family in Tuguegarao City, Cagayan. Worse,

immediately after his transfer to Metro Manila, he was placed on floating

status and was demoted in rank, performing functions no longer supervisory

in nature.

There may also be constructive dismissal if an act of clearinsensibility or disdain by an employer becomes so unbearable on the part of

the employee that it could foreclose any choice by him except to forego his

continued employment.[7]

This was what happened to Samaniego. Thus, he

is entitled to reinstatement without loss of seniority rights, full backwages,

inclusive of allowances, and other benefits or their monetary

equivalent, computed from the time his compensation was withheld from

him up to the time of his actual reinstatement.[8]

However, the circumstances obtaining in this case do not warrant the

reinstatement of Samaniego. Antagonism caused a severe strain in the

relationship between him and his employer. A more equitable disposition

would be an award of separation pay equivalent to at least one month pay, or

one month pay for every year of service, whichever is higher (with a fraction of

at least six [6] months being considered as one [1] whole year),[9]

in addition to

his full backwages, allowances and other benefits.[10]

Records show that Samaniego was employed from October 1982

to May 27, 1998,[11]

or for sixteen (16) years and seven (7) months, with a

monthly salary of P25,000.00. Hence, he is entitled to a separation pay

of P425,000.00.

WHEREFORE, the assailed Decision and Resolution of the Court of

Appeals in CA-G.R. SP No. 60400 and CA-G.R. SP No. 60478

areAFFIRMED, with MODIFICATION in the sense that Westmont and Unilab

are ordered to pay Samaniego his separation pay equivalent to P425,000.00,

plus his full backwages, and other privileges and benefits, or their monetary

equivalent, from the time of his dismissal up to his supposed actual

reinstatement. The award for moral and exemplary damages is deleted.

Costs against Westmont and Unilab.

SO ORDERED.


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UNIMASTERS CONGLOMERATION, INC.,petitioner, vs. COURT OFAPPEALS and KUBOTA AGRI-MACHINERY PHILIPPINES,INC.,respondents.

D E C I S I O N

NARVASA, C.J.:

The appellate proceeding at bar turns upon the interpretation of astipulation in a contract governing venue of actions thereunder arising.

On October 28, 1988 Kubota Agri-Machinery Philippines, Inc. (hereafter,simply KUBOTA) and Unimasters Conglomeration, Inc. (hereafter, simplyUNIMASTERS) entered into a "Dealership Agreement for Sales and Services"of the former's products in Samar and Leyte Provinces.[1] The contractcontained, among others:

1) a stipulation reading: "**All suits arising out of this Agreement shall befiled with / in the proper Courts of Quezon City,"and

2) a provision binding UNIMASTERS to obtain (as it did in fact obtain) acredit line with Metropolitan Bank and Trust Co.-Tacloban Branch in theamount of P2,000,000.00 to answer for its obligations to KUBOTA.

Some five years later, or more precisely on December 24, 1993,UNIMASTERS filed an action in the Regional Trial Court of Tacloban Cityagainst KUBOTA, a certain Reynaldo Go, and Metropolitan Bank and TrustCompany-Tacloban Branch (hereafter, simply METROBANK) for damages forbreach of contract, and injunction with prayer for temporary restrainingorder. The action was docketed as Civil Case No. 93-12-241 and assigned toBranch 6.

On the same day the Trial Court issued a restraining order enjoiningMETROBANK from "authorizing or effecting payment of any alleged obligationof ** (UNIMASTERS) to defendant ** KUBOTA arising out of or in connectionwith purchases made by defendant Go against the credit line caused to be

established by ** (UNIMASTERS) for and in the amount of P2 million coveredby defendant METROBANK ** or by way of charging ** (UNIMASTERS) forany amount paid and released to defendant ** (KUBOTA) by the Head Officeof METROBANK in Makati, Metro-Manila **." The Court also set theapplication for preliminary injunction for hearing on January 10, 1994 at 8:30o'clock in the morning.

On January 4, 1994 KUBOTA filed two motions. One prayed fordismissal of the case on the ground of improper venue (said motion being setfor hearing on January 11, 1994). The other prayed for the transfer of the

injunction hearing to January 11, 1994 because its counsel was not availableon January 10 due to a prior commitment before another court.

KUBOTA claims that notwithstanding that its motion to transfer hearinghad been granted, the Trial Court went ahead with the hearing on theinjunction incident on January 10, 1994 during which it received the directtestimony of UNIMASTERS' general manager, Wilford Chan; that KUBOTA'scounsel was "shocked" when he learned of this on the morning of the 11th,but was nonetheless instructed to proceed to cross-examine the witness; thatwhen said counsel remonstrated that this was unfair, the Court reset thehearing to the afternoon of that same day, at which time Wilford Chan wasrecalled to the stand to repeat his direct testimony. It appears that cross-examination of Chan was then undertaken by KUBOTA's lawyer with the"express reservation that ** (KUBOTA was) not (thereby) waiving and/orabandoning its motion to dismiss;" and that in the course of the cross-examination, exhibits (numbered from 1 to 20) were presented by saidattorney who afterwards submitted a memorandum in lieu of testimonialevidence.

[2]

On January 13, 1994, the Trial Court handed down an Order authorizingthe issuance of the preliminary injunction prayed for, upon a bondof P2,000,000.00.

[3]And on February 3, 1994, the same Court promulgated an

Order denying KUBOTA's motion to dismiss. Said the Court:

"The plaintiff UNIMASTERS Conglomeration is holding its principalplace of business in the City of Tacloban while the defendant **(KUBOTA) is holding its principal place of business in QuezonCity. The proper venue therefore pursuant to Rules of Court wouldeither be Quezon City or Tacloban City at the election of theplaintiff. Quezon City and Manila (sic), as agreed upon by theparties in the Dealership Agreement, are additional places other thanthe place stated in the Rules of Court. The filing, therefore, of thiscomplaint in the Regional Trial Court in Tacloban City is proper."

Both orders were challenged as having been issued with grave abuse ofdiscretion by KUBOTA in a special civil action ofcertiorariand prohibition filedwith the Court of Appeals, docketed as CA-G.R. SP No. 33234. It contended,

more particularly, that (1) the RTC had "no jurisdiction to take cognizance of **(UNIMASTERS') action considering that venue was improperly laid," (2)UNIMASTERS had in truth "failed to prove that it is entitled to the ** writ ofpreliminary injunction;" and (3) the RTC gravely erred "in denying the motionto dismiss."

[4]

The Appellate Court agreed with KUBOTA that -- in line with the Rules ofCourt

[5]and this Court's relevant rulings

[6]-- the stipulation respecting venue in

its Dealership Agreement with UNIMASTERS did in truth limit the venue of allsuits arising thereunder only and exclusively to "the proper courts of QuezonCity."

[7]The Court also held that the participation of KUBOTA's counsel at the


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hearing on the injunction incident did not in the premises operate as a waiveror abandonment of its objection to venue; that assuming that KUBOTA'sstandard printed invoices provided that the venue of actions thereundershould be laid at the Court of the City of Manila, this was inconsequentialsince such provision would govern "suits or legal actions between petitionerand its buyers" but not actions under the Dealership Agreement betweenKUBOTA and UNIMASTERS, the venue of which was controlled by paragraphNo. 7 thereof; and that no impediment precludes issuance of a TRO orinjunctive writ by the Quezon City RTC against METROBANK-Tacloban sincethe same "may be served on the principal office of METROBANK in Makati

and would be binding on and enforceable against, METROBANK branch inTacloban."

After its motion for reconsideration of that decision was turned down bythe Court of Appeals, UNIMASTERS appealed to this Court. Here, it ascribesto the Court of Appeals several errors which it believes warrant reversal of theverdict, namely:

[8]

1) "in concluding, contrary to deci