G.R. No.

210950, August 15, 2018

MILAGROS P. ENRIQUEZ v. THE MERCANTILE INSURANCE CO., INC.,

A surety bond remains effective until the action or proceeding is finally decided, resolved, or terminated, regardless of whether the
applicant fails to renew the bond. The applicant will be liable to the surety for any payment the surety makes on the bond, but only up
to the amount of this bond.

This is a Petition for Review on Certiorari assailing the August 13, 2013 Decision and January 14, 2014 Resolution in CA-G.R. CV
No. 95955, which affirmed the RTC's finding that Milagros P. Enriquez was liable for the full amount of the replevin bond issued by
Mercantile Insurance.

Sometime in 2003, Enriquez filed a Complaint for Replevin against Wilfred Asuten before the RTC of Angeles City, Pampanga.
This Civil Complaint, was for the recovery of her Toyota Hi-Ace van valued at P300,000.00. Asuten allegedly refused to return her
van, claiming that it was given by Enriquez's son as a consequence of a gambling deal.

Enriquez applied for a replevin bond from Mercantile Insurance. On February 24, 2003, Mercantile Insurance issued a Bond for
P600,000.00, which had a period of 1 year or until February 24, 2004. Enriquez also executed an indemnity agreement with
Mercantile Insurance, where she agreed to indemnify the latter "for all damages, payments, advances, losses, costs, taxes, penalties,
charges, attorney's fees and expenses of whatever kind and nature" that it would incur as surety of the replevin bond.

On May 24, 2004, the RTC issued an Order dismissing the Complaint without prejudice due to Enriquez's continued failure to present
evidence.

The RTC found that Enriquez surrendered the van to the BPI, San Fernando Branch but did not comply when ordered to return it to
the sheriff within 24 hours from receipt of the RTC March 15, 2004 Order. She also did not comply with prior court orders to prove
payment of her premiums on the replevin bond or to post a new bond. Thus, the RTC declared Bond No. 138 forfeited. Mercantile was
given 10 days to produce the van or to show cause why judgment should not be rendered against it for the amount of the bond.

On July 12, 2004, the RTC held a hearing on the final forfeiture of the bond where it was found that Mercantile failed to produce the
van, and that Bond No. 138 had already expired. In an Order issued on the same day, the RTC directed Mercantile to pay Asuten the
amount of P600,000.00.

Mercantile wrote to Enriquez requesting the remittance of P600,000.00 to be paid on the replevin bond. Due to Enriquez's failure to
remit the amount, Mercantile paid Asuten P600,000.00 on September 3, 2004, in compliance with the RTC July 12, 2004 Order. It
was also constrained to file a collection suit against Enriquez with the RTC of Manila.

In her defense, Enriquez claimed that her daughter-in-law, Asela, filed the Complaint for Replevin in her name and that Asela forged
her signature in the indemnity agreement. She also argued that she could not be held liable since the replevin bond had already
expired.

In its July 23, 2010 Decision, the RTC ruled in favor of Mercantile. It found that non-payment of the premiums did not cause the
replevin bond to expire. Thus, Enriquez was still liable for the reimbursement made by the surety on the bond. The RTC likewise
pointed out that Enriquez made "conflicting claims" of having applied for the bond and then later claiming that her daughter-in-law
was the one who applied for it. The dispositive portion of the RTC July 23, 2010 Decision read:

Enriquez appealed with the Court of Appeals, arguing that the replevin bond had already expired; therefore, she could not have been
liable under the indemnity agreement. She also averred that even assuming that she was still liable under the indemnity agreement, she
should not pay the full amount considering that the value of the van was only P300,000.00.

On August 13, 2013, the CA rendered a Decision affirming the RTC’s July 23, 2010 Decision.

The CA held that under the Guidelines on Corporate Surety Bonds, the lifetime of any bond issued in any court proceeding shall
be from court approval until the case is finally terminated. Thus, it found that the replevin bond and indemnity agreement were
still in force and effect when Mercantile Insurance paid P600,000.00 to Asuten.

The CA likewise found that Enriquez was "bound by the incontestability of payments clause" in the indemnity agreement, which
stated that she would be held liable for any payment made by the surety under the bond, regardless of the actual cost of the van. It held
that the issue of whether Enriquez was liable for the full amount of the replevin bond should have been raised before the RTC in the
Complaint for Replevin, and not in her appeal.
Enriquez’s MR was denied by the CA in its January 14, 2014 Resolution. Hence, this Petition was filed before this Court.

Arguments:

Petitioner argues that when respondent paid Asuten on September 3, 2004, the indemnity agreement was no longer in force and effect
since the bond expired on February 24, 2004. She claims that the indemnity agreement was a contract of adhesion, and that respondent
"intended the agreement to be so comprehensive and all-encompassing to the point of being ambiguous."

Petitioner contends that even assuming that the indemnity agreement could be enforced, she should not have been held liable for the
full amount of the bond. Citing Rule 60, Sec. 2 of the ROC, she argues that a judgment on replevin is only "either for the delivery of
the property or for its value in case delivery cannot be made and for such damages as either party may prove, with costs."

Respondent contends that the present action has already prescribed, considering that Rule 60, Sec. 10, in rel. to Rule 57, Section 20 of
the ROC, mandates that any objection on the award should be raised in the trial court where the complaint for replevin is filed. It
argues that since petitioner only raised the objection before the CA, her action should have been barred.

Respondent likewise points out that the forfeiture of the bond was due to petitioner's own negligence. It asserts that in the proceedings
before the RTC, Enriquez failed to present her evidence, and it was only when she filed an appeal that she raised her objections. It
argues that the Guidelines on Corporate Surety Bonds specify that the expiry of the bond shall be after the court proceeding is finally
decided; hence, the bond was still in effect when respondent paid Asuten.

ISSUE: WON petitioner Milagros P. Enriquez should be made liable for the full amount of the bond paid by respondent The
Mercantile Insurance Co., Inc. as surety, in relation to a previous case for replevin filed by petitioner.

I. Replevin is an action for the recovery of personal property. It is both a principal remedy and a provisional relief. When utilized as
a principal remedy, the objective is to recover possession of personal property that may have been wrongfully detained by another.
When sought as a provisional relief, it allows a plaintiff to retain the contested property during the pendency of the action.

Tillson v. CA: The term replevin is "the return to or recovery by a person of goods or chattels claimed to be wrongfully taken or
detained upon the person's giving security to try the matter in court and return the goods if defeated in the action;" "the writ by or the
common-law action in which goods and chattels are replevied," i.e., taken or gotten back by a writ for replevin;" and to replevy,
means to recover possession by an action of replevin; to take possession of goods or chattels under a replevin order.

Bouvier's Law Dictionary defines replevin as "a form of action which lies to regain the possession of personal chattels which have
been taken from the plaintiff unlawfully . . ., (or as) the writ by virtue of which the sheriff proceeds at once to take possession of the
property therein described and transfer it to the plaintiff upon his giving pledges which are satisfactory to the sheriff to prove his title,
or return the chattels taken if he fail so to do;" the same authority states that the term, "to replevy" means "to re-deliver goods which
have been distrained to the original possessor of them, on his giving pledges in an action of replevin."

The term therefore may refer either to the action itself, for the recovery of personality, or the provisional remedy traditionally
associated with it, by which possession of the property may be obtained by the plaintiff and retained during the pendency of the action.
In this jurisdiction, the provisional remedy is identified in Rule 60 of the Rules of Court as an order for delivery of personal
property.

In BA Finance Corporation v. CA: Replevin is both a form of principal remedy and of a provisional relief. It may refer either to the
action itself, i.e., to regain the possession of personal chattels being wrongfully detained from the plaintiff by another, or to the
provisional remedy that would allow the plaintiff to retain the thing during the pendency of the action and hold it pendente lite. The
action is primarily possessory in nature and generally determines nothing more than the right of possession. Replevin is so
usually described as a mixed action, being partly in rem and partly in personam-in rem insofar as the recovery of specific property
is concerned, and in personam as regards to damages involved. As an "action in rem," the gist of the replevin action is the right of
the plaintiff to obtain possession of specific personal property by reason of his being the owner or of his having a special interest
therein. Consequently, the person in possession of the property sought to be replevied is ordinarily the proper and only necessary party
defendant, and the plaintiff is not required to so join as defendants other persons claiming a right on the property but not in possession
thereof. Rule 60 of the Rules of Court allows an application for the immediate possession of the property but the plaintiff must show
that he has a good legal basis, i.e., a clear title thereto, for seeking such interim possession.

As a provisional remedy, a party may apply for an order for the delivery of the property before the commencement of the action or
at any time before an answer is filed. Rule 60 of the Rules of Court outlines the procedure for the application of a writ of replevin.
Rule 60, Section 2 requires that the party seeking the issuance of the writ must first file the required affidavit and a bond in an
amount that is double the value of the property:
Section 2. Affidavit and bond. — The applicant must show by his own affidavit or that of some other person who personally knows
the facts:
(a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof;
(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof according to the best of his
knowledge, information, and belief;
(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of execution
or preliminary attachment, or otherwise placed under custodia legis, or if so seized, that it is exempt from such seizure or custody; and
(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the affidavit
aforementioned, for the return of the property to the adverse party if such return be adjudged, and for the payment to the adverse party
of such sum as he may recover from the applicant in the action.

Once the affidavit is filed and the bond is approved by the court, the court issues an order and a writ of seizure requiring the sheriff
to take the property into his or her custody. If there is no further objection to the bond filed within 5 days from the taking of the
property, the sheriff shall deliver it to the applicant. The contested property remains in the applicant's custody until the court
determines, after a trial on the Issues, which among the parties has the right of possession.

In Civil Case No. 10846, petitioner Enriquez filed a replevin case against Asuten for the recovery of the Toyota Hi-Ace van valued at
P300,000.00. She applied for a bond in the amount of P600,000.00 with respondent in Asuten's favor. The RTC approved the bond
and ordered the sheriff to recover the van from Asuten and to deliver it to petitioner. While the van was in petitioner's custody, the
RTC dismissed the case without prejudice for failure to prosecute. Thus, it ordered the sheriff to restore the van to Asuten. When
petitioner failed to produce the van, the RTC directed respondent to pay Asuten the amount of the bond.

There was no trial on the merits. The RTC's dismissal for failure to prosecute was a dismissal without prejudice to re-filing. In this
particular instance, any writ of seizure, being merely ancillary to the main action, becomes functus oficio. The parties returned to the
status quo as if no case for replevin had been filed. Thus, upon the dismissal of the case, it was imperative for petitioner to return the
van to Asuten.

In Advent Capital and Finance Corporation v. Young: We agree with the CA in directing the trial court to return the seized car to
Young since this is the necessary consequence of the dismissal of the replevin case for failure to prosecute without prejudice. Upon
the dismissal of the replevin case for failure to prosecute, the writ of seizure, which is merely ancillary in nature, became functus
officio and should have been lifted. There was no adjudication on the merits, which means that there was no determination of the issue
who has the better right to possess the subject car. Advent cannot therefore retain possession of the subject car considering that it was
not adjudged as the prevailing party entitled to the remedy of replevin.

Contrary to Advent's view, Olympia International Inc. v. CA applies to this case. The dismissal of the replevin case for failure to
prosecute results in the restoration of the parties' status prior to litigation, as if no complaint was filed at all. To let the writ of
seizure stand after the dismissal of the complaint would be adjudging Advent as the prevailing party, when precisely no decision on
the merits had been rendered. Accordingly, the parties must be reverted to their status quo ante. Since Young possessed the subject car
before the filing of the replevin case, the same must be returned to him, as if no complaint was filed at all.

Petitioner argues that she should not have been made liable for the bond despite her failure to return the van, considering that it was
effective only until February 24, 2004, and that she did not renew or post another bond.

De Guia v. Alto Surety & Insurance, Co. requires that any application on the bond be made after hearing but before the entry of
judgment. Otherwise, the surety can no longer be made liable under the bond:

Construing and applying these provisions of the Rules, we have held in a long line of cases that said provisions are mandatory and
require the application upon the bond against the surety or bondsmen and the award thereof to be made after hearing and before the
entry of final judgment in the case; that if the judgment under execution contains no directive for the surety to pay, and the proper
party fails to make any claim for such directive before such judgment had become final and executory, the surety or bondsman cannot
be later made liable under the bond. The purpose of the aforementioned rules is to avoid multiplicity of suits.

For this reason, a surety bond remains effective until the action or proceeding is finally decided, resolved, or terminated. This
condition is deemed incorporated in the contract between the applicant and the surety, regardless of whether they failed to expressly
state it. Under the Guidelines on Corporate Surety Bonds:

VII. LIFETIME OF BONDS IN CRIMINAL AND CIVIL ACTIONS/SPECIAL PROCEEDINGS

Unless and until the Supreme Court directs otherwise, the lifetime or duration of the effectivity of any bond issued in criminal and
civil actions/special proceedings, or in any proceeding or incident therein shall be from its approval by the court, until the action or
proceeding is finally decided, resolved or terminated. This condition must be incorporated in the terms and condition of the bonding
contract and shall bind the parties notwithstanding their failure to expressly state the same in the said contract or agreement.

Civil Case No. 10846 is a rare instance where the writ of seizure is dissolved due to the dismissal without prejudice, but the bond
stands because the case has yet to be finally terminated by the RTC.

The peculiar circumstances in this case arose when petitioner failed to return the van to Asuten, despite the dismissal of her action.
This is an instance not covered by the Rules of Court or jurisprudence. In its discretion, the RTC proceeded to rule on the forfeiture of
the bond. As a result, respondent paid Asuten twice the value of the van withheld by petitioner. Respondent, thus, seeks to
recover this amount from petitioner, despite the van only being worth half the amount of the bond.

Of all the provisional remedies provided in the ROC, only Rule 60, Sec. 2 requires that the amount of the bond be double the value of
the property. The other provisional remedies provide that the amount be fixed by court or be merely equal to the value of the property:

Provisional Remedies
Rule 57. Preliminary Attachment

Section 4. Condition of applicant's bond. — The party applying for the order must thereafter give a bond executed to the adverse
party in the amount fixed by the court in its order granting the issuance of the writ,…

Section 12. Discharge of attachment upon giving counter-bond. — … The court shall, after due notice and hearing, order the
discharge of the attachment if the movant makes a cash deposit, or files a counter-bond executed to the attaching party with the clerk
of the court where the application is made, in an amount equal to that fixed by the court in the order of attachment, exclusive of
costs. But if the attachment is sought to be discharged with respect to a particular property, the counter-bond shall be equal to the
value of that property as determined by the court…

Section 14. Proceedings where property claimed by third person. — If the property attached is claimed by any person other than
the party against whom attachment had been issued or his agent, and such person makes an affidavit of his title thereto, or right to the
possession thereof, stating the grounds of such right or title, and serves such affidavit upon the sheriff while the latter has possession
of the attached property, and a copy thereof upon the attaching party, the sheriff shall not be bound to keep the property under
attachment, unless the attaching party or his agent, on demand of the sheriff, shall file a bond approved by the court to indemnify the
third-party claimant in a sum not less than the value of the property levied upon…

Rule 58. Preliminary Injunction

Section 4. Verified application and bond for preliminary injunction or temporary restraining order. — A preliminary injunction or
temporary restraining order may be granted only when:

(b) Unless exempted by the court, the applicant files with the court where the action or proceeding is pending, a bond executed to the
party or person enjoined, in an amount to be fixed by the court, to the effect that the applicant will pay to such party or person all
damages which he may sustain by reason of the injunction or temporary restraining order if the court should finally decide that the
applicant was not entitled thereto…

Section 6. Grounds for objection to, or for motion of dissolution of, injunction or restraining order. — The application for injunction
or restraining order may be denied, upon a showing of its insufficiency. The injunction or restraining order may also be denied, or, if
granted, may be dissolved, on other grounds upon affidavits of the party or person enjoined, which may be opposed by the applicant
also by affidavits. It may further be denied, or, if granted, may be dissolved, if it appears after hearing that although the applicant is
entitled to the injunction or restraining order, the issuance or continuance thereof, as the case may be, would cause irreparable damage
to the party or person enjoined while the applicant can be fully compensated for such damages as he may suffer, and the former files a
bond in an amount fixed by the court conditioned that he will pay all damages which the applicant may suffer by the denial or the
dissolution of the injunction or restraining order. If it appears that the extent of the preliminary injunction or restraining order granted
is too great, it may be modified.

Rule 59. Receivership

Section 2. Bond on appointment of receiver. — Before issuing the order appointing a receiver the court shall require the applicant to
file a bond executed to the party against whom the application is presented, in an amount to be fixed by the court,…

Section 3. Denial of application or discharge of receiver. — The application may be denied, or the receiver discharged, when the
adverse party files a bond executed to the applicant, in an amount to be fixed by the court,…
Rule 60. Replevin

Section 7. Proceedings where property claimed by third person. — …shall file a bond approved by the court to indemnify the third-
party claimant in a sum not less than the value of the property under replevin as provided in section 2 hereof…

However, there is a rationale to the requirement that the bond for a writ of seizure in a replevin be double the value of the property.
The bond functions not only to indemnify the defendant in case the property is lost, but also to answer for any damages that may
be awarded by the court if the judgment is rendered in defendant's favor.

In Citibank, N.A. v. CA:It should be noted that a replevin bond is intended to indemnify the defendant against any loss that he may
suffer by reason of its being compelled to surrender the possession of the disputed property pending trial of the action. The same may
also be answerable for damages if any when judgment is rendered in favor of the defendant or the party against whom a writ of
replevin was issued and such judgment includes the return of the property to him. Thus, the requirement that the bond be double the
actual value of the properties litigated upon. Such is the case because the bond will answer for the actual loss to the plaintiff, which
corresponds to the value of the properties sought to be recovered and for damages, if any.

Any application of the bond in a replevin case, therefore, is premised on the judgment rendered in favor of the defendant. Thus, the
Rules of Court imply that there must be a prior judgment on the merits before there can be any application on the bond:

Rule 60. Replevin

Section 9. Judgment. — After trial of the issues, the court shall determine who has the right of possession to and the value of the
property and shall render judgment in the alternative for the delivery thereof to the party entitled to the same, or for its value in case
delivery cannot be made, and also for such damages as either party may prove, with costs.

Section 10. Judgment to include recovery against sureties. — The amount, if any, to be awarded to any party upon any bond filed in
accordance with the provisions of this Rule, shall be claimed, ascertained, and granted under the same procedure as prescribed in
section 20 of Rule 57.

The Rules of Court likewise require that for the defendant to be granted the full amount of the bond, he or she must first apply to the
court for damages. These damages will be awarded only after a proper hearing:

Rule 57. Preliminary Attachment

Section 20. Claim for damages on account of improper, irregular or excessive attachment. — An application for damages on account
of improper, irregular or excessive attachment must be filed before the trial or before appeal is perfected or before the judgment
becomes executory, with due notice to the attaching party and his surety or sureties, setting forth the facts showing his right to
damages and the amount thereof. Such damages may be awarded only after proper hearing and shall be included in the judgment on
the main case.

If the judgment on the appellate court be favorable to the party against whom the attachment was issued, he must claim damages
sustained during the pendency of the appeal by filing an application in the appellate court, with notice to the party in whose favor the
attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may
allow the application to be heard and decided by the trial court.

Nothing herein contained shall prevent the party against whom the attachment was issued from recovering in the same action the
damages awarded to him from any property of the attaching party not exempt from execution should the bond or deposit given by the
latter be insufficient or fail to fully satisfy the award.

Forfeiture of the replevin bond, therefore, requires first, a judgment on the merits in the defendant's favor, and second, an
application by the defendant for damages. Neither circumstance appears in this case. When petitioner failed to produce the van,
equity demanded that Asuten be awarded only an amount equal to the value of the van. The RTC would have erred in ordering the
forfeiture of the entire bond in Asuten's favor, considering that there was no trial on the merits or an application by Asuten for
damages. This judgment could have been reversed had petitioner appealed the RTC’s May 24, 2004 Order in CC
10846. Unfortunately, she did not. Respondent was, thus, constrained to follow the RTC’s directive to pay Asuten the full amount of
the bond.

II. This is a simple case for collection of a sum of money. Petitioner cannot substitute this case for her lost appeal in Civil Case No.
10846.

In applying for the replevin bond, petitioner voluntarily undertook with respondent an Indemnity Agreement, which provided:
INDEMNIFICATION – to indemnify the SURETY for all damages, payments, advances, losses, costs, taxes, penalties, charges,
attorney's fees and expenses of whatever kind and nature that the SURETY may at any time sustain or incur as a consequence of
having become a surety upon the above-mentioned bond, and to pay, reimburse and make good to the SURETY, its successors and
assigns, all sums or all money which it shall pay or become liable to pay by virtue of said bond even if said payment/s or liability
exceeds the amount of the bond.

INCONTESTABILITY OF PAYMENTS MADE BY THE SURETY – any payment or disbursement made by the surety on
account of the above-mentioned bond, either in the belief that the SURETY was obligated to make such payment or in the belief that
said payment was necessary in order to avoid a greater loss or obligation for which the SURETY might be liable by virtue of the . . .
above-mentioned bond, shall be final, and will not be contested by the undersigned, who jointly and severally bind themselves to
indemnify the SURETY for any of such payment or disbursement.

Basic is the principle that "a contract is law between the parties" for as long as it is "not contrary to law, morals, good customs,
public order, or public policy." Under their Indemnity Agreement, petitioner held herself liable for any payment made by respondent
by virtue of the replevin bond.

Petitioner contends that the Indemnity Agreement was a contract of adhesion since respondent made the extent of liability "so
comprehensive and all-encompassing to the point of being ambiguous."

A contract of insurance is, by default, a contract of adhesion. It is prepared by the insurance company and might contain terms and
conditions too vague for a layperson to understand; hence, they are construed liberally in favor of the insured.

In Verendia v. CA: Basically a contract of indemnity, an insurance contract is the law between the parties. Its terms and conditions
constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right to recovery
from the insurer. As it is also a contract of adhesion, an insurance contract should be liberally construed in favor of the insured and
strictly against the insurer company which usually prepares it.

Respondent, however, does not seek to recover an amount which exceeds the amount of the bond or any "damages, payments,
advances, losses, costs, taxes, penalties, charges, attorney's fees and expenses of whatever kind and nature," all of which it could have
sought under the Indemnity Agreement. It only seeks to recover from petitioner the amount of the bond, or P600,000.00.

Respondent paid P600,000.00 to Asuten pursuant to a lawful order of the RTC in Civil Case No. 10846. If there were any errors in the
judgment of the RTC, petitioner could have appealed this. Petitioner, however, chose to let Civil Case No. 10846 lapse into finality.
This case cannot now be used as a substitute for her lost appeal.

It is clear from the antecedents that any losses which petitioner has suffered were due to the consequences of her actions, or
more accurately, her inactions. Civil Case No. 10846, which she filed, was dismissed due to her failure to prosecute. The RTC
forfeited the replevin bond which she had filed because she refused to return the property. She is now made liable for the replevin
bond because she failed to appeal its forfeiture.

WHEREFORE, the Petition is DENIED. The Decision and Resolution in CA-G.R. CV No. 95955 are AFFIRMED. SO
ORDERED.

G.R. No. 195450

DEVELOPMENT BANK OF THE PHILIPPINES vs. HON. EMMANUEL C. CARPIO, in his capacity as Presiding Judge,
Regional Trial Court, Branch 16, Davao City, COUNTRY BANKERS INSURANCE CORPORATION, DABAY ABAD,
HATAB ABAD, OMAR ABAS, HANAPI ABDULLAH, ROJEA AB ABDULLAH, ABDULLAH ABEDIN, ALEX ABEDIN,
et al., represented by their Attorney-in-Fact, MR. MANUEL L. TE

This is a petition for review on certiorari seeking to reverse and set aside the July 9, 2008 Decision and the January 21, 2011
Resolution in CA-G.R. SP No. 85719, which dismissed the petition for certiorari and mandamus praying for the annulment of the
May 17, 2004 and July 9, 2004 Orders of the RTC, Branch 16, Davao City, in Civil Case No. 28,721-01.

The Antecedents

On August 21, 2001, Dabay Abad, Hatab Abad, Omar Abas, Hanapi Abdullah, Rojea Ab Abdullah, Abdullah Abedin, Alex Abedin, et
al.(Abad, et al.), represented by their attorney-in-fact, Manuel L. Te, filed a complaint for delivery of certificates of title, damages,
and attorney's fees against petitioner DBP and Guarantee Fund for Small and Medium Enterprise (GFSME) before the RTC.
In their, Complaint, Abad, et al. prayed, among others, for the issuance of a writ of seizure, pending hearing of the case, for delivery
of their certificates of title they claimed to be unlawfully detained by DBP and GFSME. They alleged that their certificates of title
were submitted to DBP for safekeeping pursuant to the loan agreement they entered into with DBP. The same certificates of title were
turned over by DBP to GFSME because of its call on GFSME's guarantee on their loan, which became due and demandable, and
pursuant to the guarantee agreement between DBP and GFSME.

As prayed for, the RTC issued the Writ of Seizure on August 24, 2001. The writ was accompanied by Plaintiffs Bond for Manual
Delivery of Personal Property issued by Country Bankers Insurance Corporation (CBIC).

On September 5, 2001, DBP filed its Omnibus Motion to Dismiss Complaint and to Quash Writ of Seizure on the ground of improper
venue, among others. Abad, et al. filed their Opposition and later, their Supplemental Opposition, to which they attached the Delivery
Receipt showing that the court sheriff took possession of 228 certificates of title from GFSME.

In its Order, dated September 25, 2001, the RTC granted DBP's omnibus motion and dismissed the case for improper venue.

On December 20, 2001, DBP and GFSME filed their Joint Motion to Order Plaintiffs to Return Titles to Defendants DBP and
GFSME. After Abad, et al. filed their opposition, the RTC issued the Order, dated January 27, 2003, directing Abad, et al. to
return the 228 certificates of title.

Abad, et al. filed a petition for certiorari and prohibition with the Court praying, among others, for the nullification and reversal of the
January 27, 2003 Order of the RTC. The Court, however, in its June 9, 2003 Resolution, dismissed the petition.

On September 18, 2003, DBP filed its Motion for Writ of Execution of the January 27, 2003 Order before the RTC. On December
16, 2003, the RTC issued the corresponding Writ of Execution. The Sheriffs Return of Service, however, indicated that Abad, et
al. failed to deliver the certificates of title.

The Subject Motion against the Bond

Due to the non-delivery of the certificates of title by Abad, et al., DBP filed its Motion/Application to Call on Plaintiff's Surety
Bond, dated February 3, 2004, praying for the release of the bond issued by CBIC to answer for the damages it sustained as a result of
the failure to return the 228 certificates of title.

The RTC Ruling

In its Order, dated May 17, 2004, the RTC denied the subject motion explaining that the resolution of the motion was no longer part
of its residual power. It pointed out that although there was indeed an order to return the 228 certificates of title to DBP, it was not
made as a result of a trial of the case, but as a consequence of the order of dismissal based on improper venue.

DBP’s MR was denied by the RTC.

Aggrieved, DBP filed a petition for certiorari and mandamus before the CA.

The CA Ruling

In its July 9, 2008 Decision, the CA dismissed the petition for certiorari and mandamus. It noted that DBP did not move for
reconsideration of the September 25, 2001 Order of dismissal. It considered the RTC decision as final and executory. It added that
Section 20, Rule 57 of the Rules of Court provided that the claim for damages against the bond must be filed before trial or before
appeal was perfected or before the judgment became executory.

DBP’s MR was denied by the CA in its January 21, 2011 Resolution.

Hence, this petition.

ISSUE

THE CA ERRED IN ITS BLIND ADHERENCE TO AND STRICT APPLICATION OF SECTION 20, RULE 57 OF THE
1997 RULES OF CIVIL PROCEDURE.
Petitioner DBP argues that it could not have anticipated that Abad, et al. (respondents) would not abide by the writ of execution;
hence, prior to such failure of execution, it would be premature to claim for damages against the bond because DBP had not yet
suffered any consequential damages with the implementation of the writ of seizure; and that Sec. 20, Rule 57 of the ROC was not
applicable as the damages resulting from the improper issuance of the writ of seizure occurred only after the unjustified refusal of
respondents to return the titles despite the order from the RTC.

Respondent CBIC, in its Comment, dated August 11, 2011, averred that Sec 20, Rule 57 of the ROC specified that an application for
damages on account of improper, irregular or excessive attachment must be filed before the trial or before appeal is perfected or
before the judgment becomes executory; that the motion to call on plaintiff's surety bond was filed more than 2 years after the
September 25, 2001 Order of the RTC, dismissing the case, became final and executory; that, under Sect 10, Rule 60 of the ROC, the
surety's liability under the replevin bond should be included in the final judgment; that, there being no judgment as to who, between
the plaintiffs and the defendants, was entitled to the possession of the certificates of title, the RTC properly denied the motion to call
on plaintiff's surety bond; that, any claim for damages against the bond was only proper with respect to any loss that DBP might have
suffered by being compelled to surrender the possession of the certificates of title pending trial of the action; that, in this case, the
motion to call on plaintiffs surety bond was filed after the trial was already terminated with the issuance of the order of dismissal; and
that, instead of moving to claim for damages, DBP sought to quash the writ of seizure, even though it might already have some basis
to claim for damages at that time as could be gleaned from the wordings of their motion to dismiss the complaint, based on, among
others, improper venue and inapplicability of replevin as proper remedy.

Respondents, on the other hand, failed to file their comment despite several opportunities granted to them. Thus, their right to file a
comment on the petition for review was deemed waived.

In its Consolidated Reply, dated August 15, 2016, DPB asserted that Sec 20, Rule 57 of the ROC did not cover a situation where there
was an instantaneous dismissal of the case due to improper venue; that the damages resulting from the improper issuance of the writ of
seizure occurred only after the unjustified refusal of respondents to return the titles despite order from the RTC; and, that DBP could
not resort to the surety prior to recovering the titles from respondents at any time during the trial or before the judgment became final
and executory.

The Court's Ruling

The petition lacks merit.

The trial court did not reach the residual jurisdiction stage

Residual jurisdiction refers to the authority of the trial court to issue orders for the protection and preservation of the rights of the
parties which do not involve any matter litigated by the appeal; to approve compromises; to permit appeals by indigent litigants; to
order execution pending appeal in accordance with Section 2, Rule 39; and to allow the withdrawal of the appeal, provided these are
done prior to the transmittal of the original record or the record on appeal, even if the appeal has already been perfected or despite
the approval of the record on appeal or in case of a petition for review under Rule 42, before the CA gives due course to the petition.

The "residual jurisdiction" of the trial court is available at a stage in which the court is normally deemed to have lost jurisdiction
over the case or the subject matter involved in the appeal. This stage is reached upon the perfection of the appeals by the parties or
upon the approval of the records on appeal, but prior to the transmittal of the original records or the records on appeal. In either
instance, the trial court still retains its so-called residual jurisdiction to issue protective orders, approve compromises, permit appeals
of indigent litigants, order execution pending appeal, and allow the withdrawal of the appeal.

From the foregoing, it is clear that before the trial court can be said to have residual jurisdiction over a case, a trial on the merits must
have been conducted; the court rendered judgment; and the aggrieved party appealed therefrom.

In this case, there was no trial on the merits as the case was dismissed due to improper venue and respondents could not have
appealed the order of dismissal as the same was a dismissal, without prejudice. Section 1 (h), Rule 41 of the Rules of Civil
Procedure states that no appeal may be taken from an order dismissing an action without prejudice. Indeed, there is no residual
jurisdiction to speak of where no appeal has even been filed.

In Strongworld Construction Corporation, et al. v. Hon. Perello, et al., the Court elucidated on the difference between a dismissal
with prejudice and one without prejudice:

The dismissal with prejudice disallows and bars the refiling of the complaint; whereas, the same cannot be said of a dismissal without
prejudice. Likewise, where the law permits, a dismissal with prejudice is subject to the right of appeal.
Section 1, Rule 16 of the 1997 Rev. Rules of Civil Procedure enumerates the grounds for which a motion to dismiss may be filed, viz.:

Section 1. Grounds. Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to
dismiss may be made on any of the following grounds:
(a) That the court has no jurisdiction over the person of the defending party;
(b) That the court has no jurisdiction over the subject matter of the claim;
(c) That venue is improperly laid;
(d) That the plaintiff has no legal capacity to sue;
(e) That there is another action pending between the same parties for the same cause;
(f) That the cause of action is barred by a prior judgment or by the statute of limitations;
(g) That the pleading asserting the claim states no cause of action;
(h) That the claim or demand set forth in the plaintiffs pleading has been paid, waived, abandoned, or otherwise extinguished;
(i) That the claim on which the action is founded is unenforceable under the provisions of the statute of frauds; and
(j) That a condition precedent for filing the claim has not been complied with.

Section 5 of the same Rule, recites the effect of a dismissal under Sections 1(f), (h), and (i), thereof, thus:

SEC. 5. Effect of dismissal. Subject to the right of appeal, an order granting a motion to dismiss based on paragraphs (f), (h), and (i)
of section 1 hereof shall bar the refiling of the same action or claim.

Briefly stated, dismissals that are based on the following grounds, to wit: (1) that the cause of action is barred by a prior judgment or
by the statute of limitations; (2) that the claim or demand set forth in the plaintiffs pleading has been paid, waived, abandoned or
otherwise extinguished; and (3) that the claim on which the action is founded is unenforceable under the provisions of the statute of
frauds, bar the refiling of the same action or claim. Logically, the nature of the dismissal founded on any of the preceding grounds is
with prejudice because the dismissal prevents the refiling of the same action or claim. Ergo, dismissals based on the rest of the
grounds enumerated are without prejudice because they do not preclude the refiling of the same action.

As has been earlier quoted, Section 1(h), Rule 41 of the 1997 Revised Rules of Civil Procedure mandates that no appeal may be taken
from an order dismissing an action without prejudice. The same section provides that in such an instant where the final order is not
appealable, the aggrieved party may file an appropriate special civil action under Rule 65.

Here, the RTC dismissed the replevin case on the ground of improper venue. Such dismissal is one without prejudice and does not
bar the refiling of the same action; hence, it is not appealable. Clearly, the RTC did not reach, and could not have reached, the
residual jurisdiction stage as the case was dismissed due to improper venue, and such order of dismissal could not be the subject of an
appeal. Without the perfection of an appeal, let alone the unavailability of the remedy of appeal, the RTC did not acquire residual
jurisdiction. Hence, it is erroneous to conclude that the RTC may rule on DBP's application for damages pursuant to its
residual powers.

Equity cannot supersede the Rules of Court

DBP admits that it filed the application for damages after the order of dismissal had become final and executory. In seeking relief
from this Court, however, it invokes equity and argues that a strict application of Sec 20, Rule 57 of the ROC would prejudice its right
to recover damages arising from the improper attachment of the certificates of title.

DBP, however, must be reminded that equity, "which has been aptly described as a 'justice outside legality,' is applied only in the
absence of, and never against, statutory law or, as in this case, judicial rules of procedure. The pertinent positive rules being present
here, they should preempt and prevail over all abstract arguments based only on equity." As the Court has stated in Lim Tupas v.
CA, "emotional appeals for justice, while they may wring the heart of the Court, cannot justify disregard of the mandate of the law as
long as it remains in force. The applicable maxim, which goes back to the ancient days of the Roman jurists - and is now still
reverently observed - is 'aequetas nunquam contravenit legis.'"

Accordingly, the CA did not commit any reversible error when it applied the rules of procedure in resolving the issue at hand.

The application for damages was belatedly filed

Sec 10, Rule 60 of the ROC provides that in replevin cases, as in receivership and injunction cases, the damages to be awarded to
either party upon any bond filed by the other shall be claimed, ascertained, and granted in accordance with Sec 20 of Rule 57 which
reads:
SEC. 20. Claim for damages on account of illegal attachment. - If the judgment on the action be in favor of the party against whom
attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor, any damages resulting from
the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the
final judgment. The application must be filed before the trial or before appeal is perfected or before the judgment becomes
executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and
the amount thereof.

If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages
sustained during the pendency of the appeal by filing an application with notice to the party in whose favor the attachment was
issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may allow the
application to be heard and decided by the trial court.

In other words, to recover damages on a replevin bond (or on a bond for preliminary attachment, injunction or receivership), it is
necessary (1) that the defendant-claimant has secured a favorable judgment in the main action, meaning that the plaintiff has no cause
of action and was not, therefore, entitled to the provisional remedy of replevin; (2) that the application for damages, showing
claimant's right thereto and the amount thereof, be filed in the same action before trial or before appeal is perfected or before the
judgment becomes executory; (3) that due notice be given to the other party and his surety or sureties, notice to the principal not being
sufficient; and (4) that there should be a proper hearing and the award for damages should be included in the final judgment.

Likewise, to avoid multiplicity of suits, all incidents arising from the same controversy must be settled in the same court having
jurisdiction of the main action. Thus, the application for damages must be filed in the court which took cognizance of the case, with
due notice to the other parties.

In this case, DBP filed the application for damages long after the order of dismissal had become final and executory. It explained that
this belated filing was due to its recourse to other remedies, such as the enforcement of the writ of execution. The Court, however,
finds this reason to be wanting in persuasiveness. To begin with, the filing of an application for damages does not preclude resort to
other remedies. Nowhere in the ROC is it stated that an application for damages bars the filing of a motion for a writ of seizure, a writ
of execution or any other applicable remedy. DBP, from the beginning, had already perceived the attachment to be improper; hence, it
could have easily filed an application before the judgment became executory.

In Jao v. Royal Financing Corporation, the Court precluded the defendant therein from claiming damages against the surety bond
because it failed to file the application for damages before the termination of the case, thus:

xxx The dismissal of the case filed by the plaintiffs-appellees on July 11, 1959, had become final and executory before the
defendant-appellee corporation filed its motion for judgment on the bond on September 7, 1959. In the order of the trial court,
dismissing the complaint, there appears no pronouncement whatsoever against the surety bond. The appellee-corporation failed to file
its proper application for damages prior to the termination of the case against it. It is barred to do so now. The prevailing party,
if such would be the proper term for the appellee-corporation, having failed to file its application for damages against the bond prior to
the entry of final judgment, the bondsman-appellant is relieved of further liability thereunder.

Thus, the RTC has indeed no residual jurisdiction on DBP's claim for damages.

Remedies

The Court is not unmindful of the plight of DBP. Its chosen remedy, however, cannot be countenanced as it disregards the ROC and
the settled jurisprudence on the matter. Nevertheless, this is not to say that DBP has no other available remedies in order to recover
respondents' indebtedness.

First, DBP could enforce its guarantee agreement with GFSME. A contract of guaranty gives rise to a subsidiary obligation on the
part of the guarantor. A guarantor agrees that the creditor, after proceeding against the principal, may proceed against the guarantor if
the principal is unable to pay. Moreover, he contracts to pay if, by the use of due diligence, the debt cannot be made out of the
principal debtor.

Further, it may file an action for damages based on Article 19 of the NCC against respondents for unlawfully taking the certificates of
title, which served as security for their loan. In Globe Mackay Cable and Radio Corporation v. CA, the Court held:

This article, known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards which must be
observed not only in the exercise of one's rights, but also in the performance of one's duties. These standards are the following: to act
with justice; to give everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a primordial limitation on
all rights; that in their exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by itself legal
because recognized or granted by law as such, may nevertheless become the source of some illegality. When a right is exercised in a
manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby
committed for which the wrongdoer must be held responsible. But while Article 19 lays down a rule of conduct for the government of
human relations and for the maintenance of social order, it does not provide a remedy for its violation. Generally, an action for
damages under either Article 20 or Article 21 would be proper.

Finally, nothing precludes DBP from instituting an action for collection of sum of money against respondents. Besides, if the parcels
of land covered by the certificates of title, which DBP sought to recover from respondents, were mortgaged to the former, then DBP,
as mortgage-creditor, has the option of either filing a personal action for collection of sum of money or instituting a real action to
foreclose on the mortgage security. The 2 remedies are alternative and each remedy is complete by itself. If the mortgagee opts to
foreclose the real estate mortgage, he waives the action for the collection of the debt, and vice versa.

WHEREFORE, the petition is DENIED. The July 9, 2008 Decision and the January 21, 2011 Resolution of the Court of Appeals, in
CA-G.R. SP No. 85719, are AFFIRMED in toto. SO ORDERED.

G.R. No. 148132 January 28, 2008

SMART COMMUNICATIONS, INC., vs. REGINA M. ASTORGA
G.R. No. 151079 SMART COMMUNICATIONS, INC., vs. REGINA M. ASTORGA
G.R. No. 151372 REGINA M. ASTORGA vs. SMART COMM, INC. and ANN MARGARET V. SANTIAGO

For the resolution of the Court are 3 consolidated petitions for review on certiorari under Rule 45 of the ROC. G.R. No. 148132
assails the February 28, 2000 Decision and the May 7, 2001 Resolution in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372
question the June 11, 2001 Decision and the December 18, 2001 Resolution in CA-G.R. SP. No. 57065.

Regina M. Astorga was employed by respondent SMART on May 8, 1997 as District Sales Manager of the Corporate Sales Marketing
Group/ Fixed Services Division (CSMG/FSD). She was receiving a monthly salary of P33,650.00. As District Sales Manager, Astorga
enjoyed additional benefits, namely, annual performance incentive equivalent to 30% of her annual gross salary, a group life and
hospitalization insurance coverage, and a car plan in the amount of P455,000.00.

In February 1998, SMART launched an organizational realignment to achieve more efficient operations. This was made known to the
employees on February 27, 1998. Part of the reorganization was the outsourcing of the marketing and sales force. Thus, SMART
entered into a joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI
was formed to do the sales and marketing work, SMART abolished the CSMG/FSD, Astorga’s division.

To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would be recommended by SMART.
SMART then conducted a performance evaluation of CSMG personnel and those who garnered the highest ratings were favorably
recommended to SNMI. Astorga landed last in the performance evaluation, thus, she was not recommended by SMART. SMART,
nonetheless, offered her a supervisory position in the Customer Care Department, but she refused the offer because the position
carried lower salary rank and rate.

Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3, 1998, SMART issued a
memorandum advising Astorga of the termination of her employment on ground of redundancy, effective April 3, 1998. Astorga
received it on March 16, 1998.

The termination of her employment prompted Astorga to file a Complaint for illegal dismissal, non-payment of salaries and other
benefits with prayer for moral and exemplary damages against SMART and Ann Margaret V. Santiago. She claimed that abolishing
CSMG and, consequently, terminating her employment was illegal for it violated her right to security of tenure. She also posited that it
was illegal for an employer, like SMART, to contract out services which will displace the employees, especially if the contractor is an
in-house agency.

SMART responded that there was valid termination. It argued that Astorga was dismissed by reason of redundancy, which is an
authorized cause for termination of employment, and the dismissal was effected in accordance with the requirements of the Labor
Code. The redundancy of Astorga’s position was the result of the abolition of CSMG and the creation of a specialized and more
technically equipped SNMI, which is a valid and legitimate exercise of management prerogative.

In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay the current market value of the Honda
Civic Sedan which was given to her under the company’s car plan program, or to surrender the same to the company for proper
disposition. Astorga, however, failed and refused to do either, thus prompting SMART to file a suit for replevin with the Makati RTC
on August 10, 1998. The case was docketed as Civil Case No. 98-1936 and was raffled to Branch 57.

Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to state a cause of action; (iii) litis pendentia;
and (iv) forum-shopping. Astorga posited that the regular courts have no jurisdiction over the complaint because the subject thereof
pertains to a benefit arising from an employment contract; hence, jurisdiction over the same is vested in the labor tribunal and not in
regular courts.

Pending resolution of Astorga’s motion to dismiss the replevin case, the Labor Arbiter rendered a Decision dated August 20, 1998,
declaring Astorga’s dismissal from employment illegal. While recognizing SMART’s right to abolish any of its departments, the
Labor Arbiter held that such right should be exercised in good faith and for causes beyond its control. The Arbiter found the abolition
of CSMG done neither in good faith nor for causes beyond the control of SMART, but a ploy to terminate Astorga’s employment.
Astorga should be reinstated to her former position. The Arbiter also ruled that contracting out the functions performed by Astorga to
an in-house agency like SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code.

RTC

Subsequently, on March 29, 1999, the RTC issued an Order denying Astorga’s motion to dismiss the replevin case.

Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss.

As correctly pointed out, this case is to enforce a right of possession over a company car assigned to the defendant under a
car plan privilege arrangement. The car is registered in the name of the plaintiff. Recovery thereof via replevin suit is allowed
by Rule 60 of the 1997 Rules of Civil Procedure, which is undoubtedly within the jurisdiction of the RTC.

In the Complaint, plaintiff claims to be the owner of the company car and despite demand, defendant refused to return said
car. This is clearly sufficient statement of plaintiff’s cause of action.

Neither is there forum shopping. The element of litis pendentia does not appear to exist because the judgment in the labor
dispute will not constitute res judicata to bar the filing of this case.

Astorga’s MR was denied by the RTC on June 18, 1999.

Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28, 2000 Decision, reversed the RTC ruling.
Granting the petition and, consequently, dismissing the replevin case, the CA held that the case is intertwined with Astorga’s
complaint for illegal dismissal; thus, it is the labor tribunal that has rightful jurisdiction over the complaint. SMART’s MR having
been denied, it elevated the case to this Court, now docketed as G.R. No. 148132.

Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal dismissal case to the NLRC. In its
September 27, 1999 Decision, the NLRC sustained Astorga’s dismissal. Reversing the Labor Arbiter, the NLRC declared the
abolition of CSMG and the creation of SNMI to do the sales and marketing services for SMART a valid organizational action. It
overruled the Labor Arbiter’s ruling that SNMI is an in-house agency, holding that it lacked legal basis. It also declared that
contracting, subcontracting and streamlining of operations for the purpose of increasing efficiency are allowed under the law. The
NLRC further found erroneous the Labor Arbiter’s disquisition that redundancy to be valid must be impelled by economic reasons,
and upheld the redundancy measures undertaken by SMART.

Astorga’s MR was denied by the NLRC on December 21, 1999.

Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a Decision affirming with modification the
resolutions of the NLRC. In gist, the CA agreed with the NLRC that the reorganization undertaken by SMART resulting in the
abolition of CSMG was a legitimate exercise of management prerogative. It rejected Astorga’s posturing that her non-absorption into
SNMI was tainted with bad faith. However, the CA found that SMART failed to comply with the mandatory 1-month notice prior to
the intended termination. Accordingly, the CA imposed a penalty equivalent to Astorga’s 1-month salary for this non-compliance. The
CA also set aside the NLRC’s order for the return of the company vehicle holding that this issue is not essentially a labor concern, but
is civil in nature, and thus, within the competence of the regular court to decide. It added that the matter had not been fully ventilated
before the NLRC, but in the regular court.

Astorga filed a MR, while SMART sought partial reconsideration, of the Decision. On December 18, 2001, the CA resolved the
motions, viz.:
 WHEREFORE, Astorga’s MR is hereby PARTIALLY GRANTED. Smart is hereby ordered to pay Astorga backwages
from 15 February 1998 to 06 November 1998. Smart’s MR is outrightly DENIED.

SO ORDERED.

Astorga and SMART came to us with their respective petitions for review assailing the CA ruling, docketed as G.R Nos. 151079 and
151372. On February 27, 2002, this Court ordered the consolidation of these petitions with G.R. No. 148132.

In her Memorandum, Astorga argues:

I. THE CA ERRED IN UPHOLDING THE VALIDITY OF ASTORGA’S DISMISSAL DESPITE THE FACT THAT HER
DISMISSAL WAS EFFECTED IN CLEAR VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE,
CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR HER DISMISSAL.

II. SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE APPEAL AS REQUIRED BY ART.
223 OF THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES DURING THE PENDENCY OF THE APPEAL.

III. THE CA WAS CORRECT IN HOLDING THAT THE RTC HAS NO JURISDICTION OVER THE COMPLAINT FOR
RECOVERY OF A CAR WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.

On the other hand, Smart in its Memoranda raises the following issues:

I. WHETHER THE HONORABLE CA HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN
ACCORD WITH LAW OR WITH APPLICABLE DECISION OF THE HONORABLE SC AND HAS SO FAR DEPARTED FROM
THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER
OF SUPERVISION WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO
TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.

II. WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF LABOR AND
EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE REQUIREMENTS BEFORE TERMINATION.

III. WHETHER THE RULE ENUNCIATED IN SERRANO VS. NLRC FINDS APPLICATION IN THE CASE AT BAR
CONSIDERING THAT IN THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL.

IV. WHETHER THE HONORABLE CA HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN
ACCORD WITH LAW OR WITH APPLICABLE DECISION[S] OF THE HONORABLE SC AND HAS SO FAR DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE
POWER OF SUPERVISION WHEN IT RULED THAT THE RTC DOES NOT HAVE JURISDICTION OVER THE COMPLAINT
FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN COMPANY VEHICLE FROM A FORMER EMPLOYEE WHO
WAS LEGALLY DISMISSED.

V. WHETHER THE HONORABLE CA HAS FAILED TO APPRECIATE THAT THE SUBJECT OF THE REPLEVIN CASE IS
NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A COMPANY CAR.

VI. WHETHER THE HONORABLE CA HAS FAILED TO APPRECIATE THAT ASTORGA CAN NO LONGER BE
CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE LABOR CODE.

The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC of Makati City allegedly for lack of
jurisdiction, which is the issue raised in G.R. No. 148132.

Replevin is an action whereby the owner or person entitled to repossession of goods or chattels may recover those goods or chattels
from one who has wrongfully distrained or taken, or who wrongfully detains such goods or chattels. It is designed to permit one
having right to possession to recover property in specie from one who has wrongfully taken or detained the property. The term may
refer either to the action itself, for the recovery of personalty, or to the provisional remedy traditionally associated with it, by which
possession of the property may be obtained by the plaintiff and retained during the pendency of the action.

That the action commenced by SMART against Astorga in the RTC of Makati City was one for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the CA made the following disquisition:

It is plain to see that the vehicle was issued to Astorga by Smart as part of the employment package. We doubt that SMART
would extend [to Astorga] the same car plan privilege were it not for her employment as district sales manager of the
company. Furthermore, there is no civil contract for a loan between Astorga and Smart. Consequently, We find that the car
plan privilege is a benefit arising out of employer-employee relationship. Thus, the claim for such falls squarely within the
original and exclusive jurisdiction of the labor arbiters and the NLRC.

We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully assumed jurisdiction over the suit and acted well within
its discretion in denying Astorga’s motion to dismiss. SMART’s demand for payment of the market value of the car or, in the
alternative, the surrender of the car, is not a labor, but a civil dispute. It involves the relationship of debtor and creditor rather than
employee-employer relations. As such, the dispute falls within the jurisdiction of the regular courts.

In Basaya, Jr. v. Militante, this Court, in upholding the jurisdiction of the RTC over the replevin suit, explained:

Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The primary relief sought therein
is the return of the property in specie wrongfully detained by another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property. The question of whether or not a party has the right of
possession over the property involved and if so, whether or not the adverse party has wrongfully taken and detained said
property as to require its return to plaintiff, is outside the pale of competence of a labor tribunal and beyond the field of
specialization of Labor Arbiters.

The labor dispute involved is not intertwined with the issue in the Replevin Case. The respective issues raised in each forum
can be resolved independently on the other. In fact in 18 November 1986, the NLRC in the case before it had issued an
Injunctive Writ enjoining the petitioners from blocking the free ingress and egress to the Vessel and ordering the petitioners
to disembark and vacate. That aspect of the controversy is properly settled under the Labor Code. So also with petitioners’
right to picket. But the determination of the question of who has the better right to take possession of the Vessel and whether
petitioners can deprive the Charterer, as the legal possessor of the Vessel, of that right to possess in addressed to the
competence of Civil Courts.

In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of jurisdiction as laid down by pertinent
laws.

The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered the dismissal of the replevin case for
lack of jurisdiction. Having resolved that issue, we proceed to rule on the validity of Astorga’s dismissal.

Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal of an employee. The nature of
redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire File Co., Inc. v. NLRC, viz:

x x x redundancy in an employer’s personnel force necessarily or even ordinarily refers to duplication of work. That no other
person was holding the same position that private respondent held prior to termination of his services does not show that his
position had not become redundant. Indeed, in any well-organized business enterprise, it would be surprising to find
duplication of work and two (2) or more people doing the work of one person. We believe that redundancy, for purposes of
the Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or
dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.

The characterization of an employee’s services as superfluous or no longer necessary and, therefore, properly terminable, is an
exercise of business judgment on the part of the employer. The wisdom and soundness of such characterization or decision is not
subject to discretionary review provided, of course, that a violation of law or arbitrary or malicious action is not shown.

Astorga claims that the termination of her employment was illegal and tainted with bad faith. She asserts that the reorganization was
done in order to get rid of her. But except for her barefaced allegation, no convincing evidence was offered to prove it. This Court
finds it extremely difficult to believe that SMART would enter into a joint venture agreement with NTT, form SNMI and abolish
CSMG/FSD simply for the sole purpose of easing out a particular employee, such as Astorga. Moreover, Astorga never denied that
SMART offered her a supervisory position in the Customer Care Department, but she refused the offer because the position carried a
lower salary rank and rate. If indeed SMART simply wanted to get rid of her, it would not have offered her a position in any
department in the enterprise.
Astorga also states that the justification advanced by SMART is not true because there was no compelling economic reason for
redundancy. But contrary to her claim, an employer is not precluded from adopting a new policy conducive to a more economical and
effective management even if it is not experiencing economic reverses. Neither does the law require that the employer should suffer
financial losses before he can terminate the services of the employee on the ground of redundancy.

We agree with the CA that the organizational realignment introduced by SMART, which culminated in the abolition of CSMG/FSD
and termination of Astorga’s employment was an honest effort to make SMART’s sales and marketing departments more efficient
and competitive. As the CA had taken pains to elucidate:

x x x a careful and assiduous review of the records will yield no other conclusion than that the reorganization undertaken by
SMART is for no purpose other than its declared objective – as a labor and cost savings device. Indeed, this Court finds no
fault in SMART’s decision to outsource the corporate sales market to SNMI in order to attain greater productivity. Astorga
belonged to the CSMG/FSD, a distinct sales force of SMART in charge of selling SMART’s telecommunications services to
the corporate market. SMART, to ensure it can respond quickly, efficiently and flexibly to its customer’s requirement,
abolished CSMG/FSD and shortly thereafter assigned its functions to newly-created SNMI Multimedia Incorporated, a joint
venture company of SMART and NTT of Japan, for the reason that CSMG/FSD does not have the necessary technical
expertise required for the value added services. By transferring the duties of CSMG/FSD to SNMI, SMART has created a
more competent and specialized organization to perform the work required for corporate accounts. It is also relieved SMART
of all administrative costs – management, time and money-needed in maintaining the CSMG/FSD. The determination to
outsource the duties of the CSMG/FSD to SNMI was, to Our mind, a sound business judgment based on relevant criteria and
is therefore a legitimate exercise of management prerogative.

Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined towards the worker and upheld his cause in
most of his conflicts with his employer. This favored treatment is consonant with the social justice policy of the Constitution. But
while tilting the scales of justice in favor of workers, the fundamental law also guarantees the right of the employer to reasonable
returns for his investment. In this light, we must acknowledge the prerogative of the employer to adopt such measures as will promote
greater efficiency, reduce overhead costs and enhance prospects of economic gains, albeit always within the framework of existing
laws. Accordingly, we sustain the reorganization and redundancy program undertaken by SMART.

However, as aptly found by the CA, SMART failed to comply with the mandated 1 month notice prior to termination. The record is
clear that Astorga received the notice of termination only on March 16, 1998 or less than a month prior to its effectivity on April 3,
1998. Likewise, the DOLE was notified of the redundancy program only on March 6, 1998.

Art. 283 (LC). Closure of establishment and reduction of personnel. — The employer may also terminate the employment of
any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least 1
month before the intended date thereof x x x.

SMART’s assertion that Astorga cannot complain of lack of notice because the organizational realignment was made known to all the
employees as early as February 1998 fails to persuade. Astorga’s actual knowledge of the reorganization cannot replace the formal and
written notice required by the law. In the written notice, the employees are informed of the specific date of the termination, at least a
month prior to the effectivity of such termination, to give them sufficient time to find other suitable employment or to make whatever
arrangements are needed to cushion the impact of termination. In this case, notwithstanding Astorga’s knowledge of the
reorganization, she remained uncertain about the status of her employment until SMART gave her formal notice of termination. But
such notice was received by Astorga barely 2 weeks before the effective date of termination, a period very much shorter than that
required by law.

Be that as it may, this procedural infirmity would not render the termination of Astorga’s employment illegal. The validity of
termination can exist independently of the procedural infirmity of the dismissal. In DAP Corporation v. CA, we found the dismissal of
the employees therein valid and for authorized cause even if the employer failed to comply with the notice requirement under Article
283 of the LC. This Court upheld the dismissal, but held the employer liable for non-compliance with the procedural requirements.

The CA, therefore, committed no reversible error in sustaining Astorga’s dismissal and at the same time, awarding indemnity
for violation of Astorga's statutory rights.

However, we find the need to modify, by increasing, the indemnity awarded by the CA to Astorga, as a sanction on SMART for non-
compliance with the 1-month mandatory notice requirement, in light of our ruling in Jaka Food Processing Corporation v. Pacot, viz.:
 If the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the
sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee, and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed
to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the
employer’s exercise of his management prerogative.

We deem it proper to increase the amount of the penalty on SMART to P50,000.00.

As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay equivalent to at least 1 month salary or
to at least 1 month’s pay for every year of service, whichever is higher. The records show that Astorga’s length of service is less than a
year. She is, therefore, also entitled to separation pay equivalent to 1 month pay.

Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This assertion was never rebutted by SMART
in the proceedings a quo. No proof of payment was presented to disprove the allegation. It is settled that in labor cases, the burden of
proving payment of monetary claims rests on the employer. SMART failed to discharge the onus probandi. Accordingly, it must be
held liable for Astorga’s salary from February 15, 1998 until the effective date of her termination, April 3, 1998.

However, the award of backwages to Astorga by the CA should be deleted for lack of basis. Backwages is a relief given to an illegally
dismissed employee. Thus, before backwages may be granted, there must be a finding of unjust or illegal dismissal from work. The
Labor Arbiter ruled that Astorga was illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiter’s ruling and
categorically declared Astorga’s dismissal valid. This ruling was affirmed by the CA in its assailed Decision. Since Astorga’s
dismissal is for an authorized cause, she is not entitled to backwages. The CA’s award of backwages is totally inconsistent with its
finding of valid dismissal.

WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The February 28, 2000 Decision and the May
7, 2001 Resolution of the Court of Appeals in CA-G.R. SP. No. 53831 are SET ASIDE. The RTC of Makati City, Branch 57
is DIRECTED to proceed with the trial of Civil Case No. 98-1936 and render its Decision with reasonable dispatch.

On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and 151372 are DENIED. The June 11, 2001
Decision and the December 18, 2001 Resolution in CA-G.R. SP. No. 57065, are AFFIRMED with MODIFICATION. Astorga is
declared validly dismissed. However, SMART is ordered to pay Astorga P50,000.00 as indemnity for its non-compliance with
procedural due process, her separation pay equivalent to 1 month pay, and her salary from February 15, 1998 until the effective date of
her termination on April 3, 1998. The award of backwages is DELETED for lack of basis. SO ORDERED.

G.R. No. L-22585 December 18, 1967

NICANOR. B. PAGKALINAWAN, Supervising Agent, NBI, EV District Office Cebu City vs. HON. AMADOR E. GOMEZ,
in his capacity as Presiding Judge, Branch II, CFI of Cebu, Cebu City, and NORBERTO L. DAYRIT

ISSUE: Whether a court of first instance of one district in a replevin proceeding may ignore a search warrant issued by another court
of first instance.

This decision deals with the specific question on whether a court of first instance of one district in a replevin proceeding may ignore a
search warrant issued by another court of first instance. In brief, this petition presents this situation: Respondent Judge, the Hon.
Amador E. Gomez acting on a complaint for replevin filed by the other respondent Norberto L. Dayrit directed petitioner, Nicanor B.
Pagkalinawan, a supervising agent of the NBI to turn over to the Sheriff of Cebu City an automobile which was seized under a search
warrant issued by the CFI of Manila, the Hon. Guillermo Santos presiding, as a subject of the offense of theft or as stolen property.
Did respondent Judge act in excess of jurisdiction or with grave abuse of discretion?

What happened next after such seizure in accordance with the search warrant issued on February 4, 1964, at Manila was set forth in
the petition. Thus: "That on February 7, 1964, respondent Norberto L. Dayrit filed a complaint for Replevin in the Court of First
Instance of Cebu, which was docketed as Civil Case No. R-8284 and assigned to Branch II presided by respondent Honorable Judge
Amador E. Gomez, against the herein petitioner, Nicanor Pagkalinawan, Supervising Agent, National Bureau of Investigation, Cebu
City, [and two members of the] Manila Police Department for the recovery of possession of the aforementioned car alleging that it is
wrongfully detained by the herein petitioner . . .; that on February 8, 1964 the respondent Judge acting on said complaint issued an
order directing the Sheriff of Cebu City or any proper officer of the court, to take the aforementioned car into his custody and said
order was implemented by the Clerk of Court by issuing on the same date a writ of replevin; . . . that on same date, February 8, 1964
the petitioner after said writ of replevin was served on him manifested that he could not possibly comply with said order to deliver the
aforementioned car to the sheriff because he was holding the same in 'custodia legis' for the Court of First Instance of Manila, Branch
II, the court that issued the search warrant under which the said car was seized and held in custody; . . . that on February 12, 1964, the
respondent Judge, acting on the 'urgent motion to require defendant Nicanor B. Pagkalinawan, Supervising Agent, National Bureau of
Investigation, Cebu City, to explain why he persists in refusing to deliver the car in question to the sheriff', which motion was
vigorously opposed during the hearing by the petitioner, issued an order directing the petitioner . . . 'to immediately comply with the
order of the court and to turn over to the sheriff the car in question upon receipt of a copy of this order' with the warning that,
otherwise, 'this court visits on [him] the full harshness of its coercive power' and under this circumstance the petitioner on the same
date, February 12, 1964, was compelled to part with the custody of the said car to the Provincial Sheriff of Cebu who took over the
possession of the same and who in turn immediately gave it or turned it over to respondent Norberto L. Dayrit; . . . that the delivery of
the car to the Provincial Sheriff who in turn delivered it to the respondent Norberto L. Dayrit by virtue of the said order of the
respondent Judge, would place the petitioner in imminent danger of being declared in Contempt of the Manila Court of First Instance
that issued the search warrant because he cannot now comply with the recent order of the said court dated February 10, 1964 regarding
the proper disposition of said car; . . . that petitioner on February 14, 1964 filed an 'urgent motion for reconsideration of the order
dated February 12, 1964 and setting aside the writ of replevin dated February 8, 1964,' but respondent Judge after hearing on said
motion on February 15, 1964, denied the same in its order dated February 20, 1964. . . ."

It was then alleged by petitioner that the aforesaid orders issued by the respondent Judge compelling him to deliver such car to the
Sheriff so that it could be turned over to the other respondent, after it was explained that it was being held in custodia legis for the
Manila Court of First Instance, having been properly seized in pursuance of a search warrant issued by it, were made without or in
excess of its jurisdiction, or with grave abuse of discretion; that said orders moreover would likewise "nullify the purpose and defeat
the force and validity of the search warrant issued by the Court of First Instance, a competent court of equal category;" and "would
then cause confusion in the enforcement and implementation of lawful orders issued by other courts thereby causing embarrassment in
the proper administration of justice; . . . ."

The prayer was for respondent Judge being declared as having acted without or in excess of jurisdiction or with grave abuse of
discretion in thus proceeding in the replevin action and that pending the final hearing and determination of this petition, an order of
preliminary mandatory injunction be issued directing the respondent Judge to order the return of said car to petitioner, desisting and
refraining until further orders of this Court from acting on the matter.

On March 18, 1964, this Court issued a resolution ordering respondents to file an answer to the petition and likewise issued a
preliminary mandatory injunction without bond as prayed for.itc-alf

In the answer of respondent Dayrit, there was in effect an admission of the facts as alleged by petitioner. Respondent Dayrit would
however impugn the actuations of petitioner, who, it was alleged "instead of protecting rights of the citizens of this country used the
powers of his office in arrogating unto himself the interpretation of the law which only the courts are vested thereof and the alleged
contempt charge which petitioner asserts under this paragraph is not only nugatory and illegal but entirely imaginary for the reason
that the [search warrant] mentioned in the [Petition] is based on fraud and deceit. . . ." The special defenses appearing in the answer
further stressed not only the fact of the car that was seized under the search warrant as different from that referred to in the case
pending in the Court of First Instance of Manila, but also the fact of respondent being the true and lawful owner thereof. There was
thus a denial of the allegations that respondent Judge in issuing the orders complained of, acted in excess of his jurisdiction or with
grave abuse of discretion, for the truth of the matter, according to respondent, was that "the car in question is not subject of a criminal
case before a Court of First Instance of Manila, more specifically before Hon. Judge Guillermo Santos," who issued the search
warrant, or in any other court, respondent Dayrit further stating that he was not an accused "in any case where said car is allegedly
stolen property. . . ."

More specifically in so far as the assertion of the jurisdiction of respondent Judge on the suit for replevin affecting the validity of the
search warrant issued, it was alleged in the answer "That respondent Dayrit denies the allegations contained in paragraph 10 of the
[petition] with respect to the fact that the [orders] of co-respondent Judge Amador E. Gomez would nullify and defeat the force and
validity of the [search warrant] for [its] issuance . . . cannot prevent respondent Judge Amador E. Gomez to issue an order of replevin
as provided by Section 2, Rule 60 of the Rules of Court; . . ."

Petitioner is entitled to the remedy prayed for; the writ must be granted. It would be to ignore a principle to which this Court has been
firmly committed if under the circumstances disclosed, respondent Judge would be sustained. The moment a court of first instance has
been informed through the filing of an appropriate pleading that a search warrant has been issued by another court of first instance, it
cannot, even if the literal language of the Rules of Court yield a contrary impression which in this case demonstrated the good faith of
respondent Judge for acting as he did, require a sheriff or any proper officer of the Court to take the property subject of the replevin
action if theretofore it came into the custody of another public officer by virtue of a search warrant. Only the court of first instance that
issued such a search warrant may order its release.itc-alf Any other view would be subversive of a doctrine that has been steadfastly
adhered to, the main purpose of which is to assure stability and consistency in judicial actuations and to avoid confusion that may
otherwise ensue if courts of coordinate jurisdiction are permitted to interfere with each other's lawful orders.
Only the other day, in Tuason & Co. v. Hon. Guillermo E. Torres, this Court reaffirmed such a principle, when speaking through
Justice Bengzon, it held that only the particular branch of the Court of First Instance of Quezon City "can annul its own decision. . . ."
The opinion continues: "It is settled that the jurisdiction to annul a judgment of a branch of the Court of First Instance
belongs solely to the very same branch which rendered the judgment." As aptly stated, any other branch "even it be in the same
judicial district" that would attempt to do so "either excess its jurisdiction", or "acts with grave abuse of discretion amounting to lack
of jurisdiction, . . . ." As set forth in the above Tuason decision: "In either case, certiorari and prohibition would be proper to prevent
the attempting branch of the court from proceeding to nullify a final decision rendered by a co-equal and coordinate branch." In this
case then, certiorari is likewise an appropriate remedy when respondent Judge disregarded a search warrant issued by another court of
first instance.itc-alf

In Cabigao v. del Rosario, which was a petition to restrain respondent Judge from interfering with execution of a judgment rendered
by another court of first instance, this Court, speaking through Justice Ostrand stated: "Firstly, it is settled by an overwhelming weight
of authority that no court has power to interfere by injunction with the judgments or decrees of a court of concurrent or coordinate
jurisdiction having equal power to grant the relief sought by injunction."

In Philippine National Bank v. Javellana, which was a petition for certiorari, seeking to set aside a writ of preliminary injunction
issued by respondent Judge enjoining the Provincial Sheriff from proceeding with the sale of a property attached to satisfy a judgment
by another court of first instance, the above doctrine was reiterated, followed with the affirmation that such "ruling in the Cabigao case
is decisive on the issue before us."

While the instant proceeding does not deal with the annulment of a judgment previously issued, the principle therein announced calls
for application here. Otherwise court of first instance would be allowed to pass on the validity of a search warrant, issued by another
court of first instance. This is to preclude an undesirable situation from arising, one, which if, permitted, as above pointed out, would
be fraught with undesirable consequences, as already indicated, for the bench, no less than for the litigants.itc-alf To such an
eventuality, this Court cannot give its sanction.

Moreover, while not authoritative, this case being one of first impression, the doctrine announced in Molo v. Yatco, which denied an
original petition filed with this Court for mandamus is persuasive. There the petitioner alleging that by virtue of a search warrant
issued by the Court of First Instance of Rizal for an alleged violation of the Usury Law, certain documents belonging to him were
seized and thereafter kept in the possession of the respondent Collector of Internal Revenue, sought their return. This Court did not
oblige; mandamus did not lie, as "the one having the legal custody thereof is the Court of First Instance of Rizal which had ordered
their seizure and which is the only one authorized by law to return them to their owner." It is worth noting that while the then Justice
Laurel dissent his opinion being in effect that the remedy should be granted he admitted that where property is seized under color of
judicial process and brought under the control of the court, [it was] placed beyond the reach of replevin or other independent or
plenary remedy, . . . ." Again, while the above ruling is not squarely on all fours, still the governing principle does not seem to be in
doubt. The remedy for questioning the validity of a search warrant may be sought in the Court of First Instance that issued it, not in
the gala of another Judge, and as admitted in the dissenting opinion of Justice Laurel, not through replevin.

WHEREFORE, the writ prayed for is granted, and the mandatory preliminary injunction issued made permanent. With costs against
respondent Dayrit.

G.R. No. 201927, February 17, 2016

VICENTE D. CABANTING AND LALAINE V. CABANTING v. BPI FAMILY SAVINGS BANK, INC.

This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that the Decision of the CA,
promulgated on September 28, 2011, and the Resolution dated May 16, 2012, denying petitioner's motion for reconsideration thereof,
be reversed and set aside.

The antecedent facts are as follows:

On January 14, 2003, petitioners bought on installment basis from Diamond Motors Corporation a 2002 Mitsubishi Adventure SS MT
and for value received, petitioners also signed, executed and delivered to Diamond Motors a Promissory Note with Chattel Mortgage.
Therein, petitioners jointly and severally obligated themselves to pay Diamond Motors the sum of P836,032.00, payable in monthly
installments in accordance with the schedule of payment indicated therein, and which obligation is secured by a chattel mortgage on
the aforementioned motor vehicle. On the day of the execution of the document, Diamond Motors, with notice to petitioners, executed
a Deed of Assignment, thereby assigning to BPI Family Savings Bank, Inc. (BPI Family) all its rights, title and interest to the
Promissory Note with Chattel Mortgage.
Come October 16, 2003, however, a Complaint was filed by BPI Family against petitioners for Replevin and damages before the
Regional Trial Court of Manila (RTC), praying that petitioners be ordered to pay the unpaid portion of the vehicle's purchase price,
accrued interest thereon at the rate of 36% per annumas of August 26, 2003, 25% attorney's fees and 25% liquidated damages, as
stipulated on the Promissory Note with Chattel Mortgage. BPI Family likewise prayed for the issuance of a writ of replevin but it
failed to file a bond therefor, hence, the writ was never issued. BPI Family alleged that petitioners failed to pay three (3) consecutive
installments and despite written demand sent to petitioners through registered mail, petitioners failed to comply with said demand to
pay or to surrender possession of the vehicle to BPI Family.

In their Answer, petitioners alleged that they sold the subject vehicle to one Victor S. Abalos, with the agreement that the latter shall
assume the obligation to pay the remaining monthly installments. It was then Abalos who made payments to BPI Family through his
personal checks, and BPI Family accepted the post-dated checks delivered to it by Abalos. The checks issued by Abalos for the
months of May 2003 to October 2003 were made good, but subsequent checks were dishonored and not paid. Petitioners pointed out
that BPI Family should have sued Abalos instead of them.

Trial ensued, where BPI Family dispensed with the testimony of its sole witness and formally offered its documentary evidence. When
it was petitioners' turn to present its defense, several hearing dates were cancelled, sometimes due to failure of either or both the
petitioners' and/or respondent's counsels to appear. What is clear, though, is that despite numerous opportunities given to petitioners to
present evidence, they were never able to present their witness, Jacobina T. Alcantara, despite the court's issuance of a subpoena duces
tecum ad testificandum. Said failure to present evidence on several hearing dates and petitioners' absence at the hearing on February
13, 2008 prompted BPI Family to move that petitioners' right to present evidence be deemed waived. On the same date, the RTC
granted said motion and the case was submitted for decision. There is nothing on record to show that petitioners ever moved for
reconsideration of the Order dated February 13, 2008.

On April 14, 2008, the RTC rendered a Decision, the dispositive portion of which reads as follows:

WHEREFORE, and in the view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiff BPI Family
Savings Bank, Inc. and against the defendants VICENTE D. CABANTING and LALAINE V. CABANTING, by ordering the latter
to pay the plaintiff Bank the sum of Php742,022.92, with interest at the rate of 24% per annumfrom the filing of the Complaint, until
its full satisfaction, as well as the amount of P20,000.00 for and as attorney's fees.
With costs against the defendants.
SO ORDERED.

Aggrieved by the RTC's Decision, herein petitioners appealed to the CA. However, in its Decision dated September 28, 2011, the
appellate court affirmed with modification the judgment of the trial court, to wit:

WHEREFORE, premises considered, the appeal is DISMISSED. The Decision of the Regional Trial Court dated April 14, 2008
is AFFIRMED but with MODIFICATION. The defendants-appellants are ordered to pay the plaintiff-appellee the sum of Seven
Hundred Forty Thousand One Hundred Fifty-Five Pesos and Eighteen Centavos (P740,155.18), in Philippine currency, with
legal interest of 12% per annum from the filing of the Complaint, until its full satisfaction. The award of Twenty Thousand Pesos
(P20,000.00) as attorney's fees is DELETED.

Costs against the defendants-appellants. SO ORDERED.ChanRoblesVirtualawlibrary

The CA ruled that a preponderance of evidence was in favor of respondent, as the evidence, coupled with petitioners' admission in
their Answer, established that petitioners indeed executed a Promissory Note with Chattel Mortgage and then failed to pay the forty-
three (43) monthly amortizations. Moreover, since petitioners were deemed to have waived their right to present evidence, there is
nothing on record to prove their claim that there was a valid assumption of obligation by one Victor S. Abalos. Petitioners' motion for
reconsideration of the CA Decision was denied per Resolution dated May 16, 2012.

Elevating the matter to this Court via a petition for review on certiorari, petitioners now raise the following issues:

1. Whether or not respondent bank may be held entitled to the possession of the motor vehicle subject of the instant case for replevin,
or the payment of its value and damages, without proof of prior demand;

2. Whether or not petitioners were deprived of their right to due process when they were deemed to have waived their right to present
evidence in their behalf.

The petition is devoid of merit.

The CA is correct that no prior demand was necessary to make petitioners' obligation due and payable. The Promissory Note with
Chattel Mortgage clearly stipulated that "[i]n case of my/our [petitioners'] failure to pay when due and payable, any sum which I/We x
x x or any of us may now or in the future owe to the holder of this note x x x then the entire sum outstanding under this note shall
immediately become due and payable without the necessity of notice or demand which I/We hereby waive." Petitioners argue that
such stipulation should be deemed invalid as the document they executed was a contract of adhesion. It is important to stress the
Court's ruling in Dio v. St. Ferdinand Memorial Park, Inc. to wit:

A contract of adhesion, wherein one party imposes a ready-made form of contract on the other, is not strictly against the law. A
contract of adhesion is as binding as ordinary contracts, the reason being that the party who adheres to the contract is free to
reject it entirely. Contrary to petitioner's contention, not every contract of adhesion is an invalid agreement. As we had the occasion
to state in Development Bank of the Philippines v. Perez:

x x x In discussing the consequences of a contract of adhesion, we held in Rizal Commercial Banking Corporation v. Court of
Appeals:

It bears stressing that a contract of adhesion is just as binding as ordinary contracts. It is true that we have, on occasion, struck down
such contracts as void when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the
alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing, Nevertheless, contracts of
adhesion are not invalid per se; they arc not entirely prohibited. The one who adheres to the contract is in reality free to reject
it entirely; if he adheres, he gives his consent.

The validity or cnforceability of the impugned contracts will have to be determined by the peculiar circumstances obtaining in
each case and the situation of the parties concerned. Indeed, Article 24 of the New Civil Code provides that "[in] all contractual,
property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence,
mental weakness, tender age, or other handicap, the courts must be vigilant for his protection." x x xhanRoblesVirtualawlibrary

Here, there is no proof that petitioners were disadvantaged, uneducated or utterly inexperienced in dealing with financial institutions;
thus, there is no reason for the court to step in and protect the interest of the supposed weaker party.

Verily, petitioners are bound by the aforementioned stipulation in the Promissory Note with Chattel Mortgage waiving the necessity of
notice and demand to make the obligation due and payable. Agner v. BPI Family Savings Bank, Inc.,9 which is closely similar to the
present case, is squarely applicable. Petitioners therein also executed a Promissory Note with Chattel Mortgage containing the
stipulation waiving the need for notice and demand. The Court ruled:

xxx Even assuming, for argument's sake, that no demand letter was sent by respondent, there is really no need for it because
petitioners legally waived the necessity of notice or demand in the Promissory Note with Chattel Mortgage, which they voluntarily
and knowingly signed in favor of respondent's predecessor-in-interest. Said contract expressly stipulates:
chanRoblesvirtualLawlibrary
In case of my/our failure to pay when due and payable, any sum which I/We are obliged to pay under this note and/or any other
obligation which I/We or any of us may now or in the future owe to the holder of this note or to any other party whether as principal or
guarantor xxx then the entire sum outstanding under this note shall, without prior notice or demand, immediately become due and
payable.

A provision on waiver of notice or demand has been recognized as legal and valid in Bank of the Philippine Islands v. Court of
Appeals, wherein We held:

The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time the obligor demands the fulfillment of
the obligation from the obligee. However, the law expressly provides that demand is not necessary under certain circumstances, and
one of these circumstances is when the parties expressly waive demand. Hence, since the co-signors expressly waived demand in the
promissory notes, demand was unnecessary for them to be in default.

Further, the Court even ruled in Navarro v. Escobido that prior demand is not a condition precedent to an action for a writ of replevin,
since there is nothing in Section 2, Rule 60 of the Rules of Court that requires the applicant to make a demand on the possessor of the
property before an action for a writ of replevin could be filed.

Clearly, as stated above, Article 1169 (1) of the Civil Code allows a party to waive the need for notice and demand. Petitioners'
argument that their liability cannot be deemed due and payable for lack of proof of demand must be struck down.

There is likewise no merit to petitioners' claim that they were deprived of due process when they were deemed to have waived their
right to present evidence. Time and again, the Court has stressed that there is no deprivation of due process when a party is given an
opportunity to be heard, not only through hearings but even through pleadings, so that one may explain one's side or arguments; or an
opportunity to seek reconsideration of the action or ruling being assailed. The records bear out that herein petitioners were given
several opportunities to present evidence, but said opportunities were frittered away. We stress the fact that petitioners did not even
bother to move for reconsideration of the Order dated February 13, 2008, deeming petitioners to have waived their right to present
evidence. Such is glaring proof of their propensity to waste the opportunities granted them to present their evidence.

Lastly, the CA is correct that the interest rate being charged by respondent under the Promissory Note with Chattel Mortgage is quite
unreasonable. In New Sampaguita Builders Construction, Inc. (NSBCI) v. Philippine National Bank, the Court ruled that "the interest
ranging from 26 percent to 35 percent in the statements of account - 'must be equitably reduced for being iniquitous,
unconscionable and exorbitant.' Rates found to be iniquitous or unconscionable are void, as if it there were no express
contract thereon. Above all, it is undoubtedly against public policy to charge excessively for the use of money." However, pursuant
to prevailing jurisprudence and banking regulations, the Court must modify the lower court's award of legal interest. In Nacar v.
Gallery Frames, the Court held, thus:

xxx the guidelines laid down in the case of Eastern Shipping Lines are accordingly modified to embody BSP-MB Circular No.
799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi- contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining
the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as
the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged
on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.

Thus, legal interest, effective July 1, 2013, was set at six percent (6%) per annum in accordance with Bangko Sentral ng Pilipinas -
Monetary Board Circular No. 799, Series of 2013.chan
w
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals, promulgated on September 28, 2011, and the
Resolution dated May 16, 2012 in CA-G.R. CV No. 91814 are AFFIRMED with MODIFICATION by ordering payment of legal
interest at the rate of twelve percent (12%) per annumfrom the time of filing of the complaint up to June 30, 2013, and thereafter, at
the lower rate of six percent (6%) per annum from July 1, 2013 until full satisfaction, pursuant to Bangko Sentral ng Pilipinas -
Monetary Board Circular No. 799, Series of 2013 and applicable jurisprudence. SO ORDERED.

[G.R. NO. 153788 : November 27, 2009]

ROGER V. NAVARRO v. HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN
T. GO, doing business under the name KARGO ENTERPRISES

This is a Petition for Review on Certiorari that seeks to set aside the Court of Appeals (CA) Decision dated October 16, 2001 and
Resolution dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26, 2000 and March 7, 2001 orders of
the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarro's (Navarro) motion to
dismiss.
BACKGROUND FACTS

On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first complaint) and 98-
598 (second complaint),7 before the RTC for replevin and/or sum of money with damages against Navarro. In these complaints, Karen
Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarro's possession.

The first complaint stated:

1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City and doing
business under the trade name KARGO ENTERPRISES, an entity duly registered and existing under and by virtue of the laws of the
Republic of the Philippines, which has its business address at Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO is a
Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he may be served with summons and
other processes of the Honorable Court; that defendant "JOHN DOE" whose real name and address are at present unknown to plaintiff
is hereby joined as party defendant as he may be the person in whose possession and custody the personal property subject matter of
this suit may be found if the same is not in the possession of defendant ROGER NAVARRO;

2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles, including hauling trucks and
other heavy equipment;

3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8, 1997, the said defendant
leased [from] plaintiff a certain motor vehicle which is more particularly described as follows '

Make/Type FUSO WITH MOUNTED CRANE Serial No. FK416K-51680

Motor No. 6D15-338735 Plate No. GHK-378

as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and between KARGO ENTERPRISES,
then represented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER NAVARRO xxx; that in accordance
with the provisions of the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO delivered
unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND THREE HUNDRED THIRTY-THREE &
33/100 PESOS (P66,333.33) which were supposedly in payment of the agreed rentals; that when the fifth and sixth checks, i.e.
PHILIPPINE BANK OF COMMUNICATIONS - CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively
dated January 8, 1998 and February 8, 1998, were presented for payment and/or credit, the same were dishonored and/or returned by
the drawee bank for the common reason that the current deposit account against which the said checks were issued did not have
sufficient funds to cover the amounts thereof; that the total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-
TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66) therefore represents the principal liability of
defendant ROGER NAVARRO unto plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH RIGHT TO
PURCHASE; that demands, written and oral, were made of defendant ROGER NAVARRO to pay the amount of ONE HUNDRED
THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as
also provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in vain to the
great damage and injury of herein plaintiff; xxx

4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law, or seized under an
execution or an attachment as against herein plaintiff;

8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the above-described
motor vehicle from defendants unto plaintiff pending the final determination of this case on the merits and, for that purpose, there is
attached hereto an affidavit duly executed and bond double the value of the personal property subject matter hereof to answer for
damages and costs which defendants may suffer in the event that the order for replevin prayed for may be found out to having not
been properly issued.

The second complaint contained essentially the same allegations as the first complaint, except that the Lease Agreement with Option
to Purchase involved is dated October 1, 1997 and the motor vehicle leased is described as follows:

Make/Type FUSO WITH MOUNTED CRANE

Serial No. FK416K-510528 Motor No. 6D14-423403

The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount of P100,000.00, to Karen Go
in payment of the agreed rentals; however, the third check was dishonored when presented for payment.

On October 12, 1998 and October 14, 1998, the RTC issued writs of replevin for both cases; as a result, the Sheriff seized the two
vehicles and delivered them to the possession of Karen Go.

In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since Karen Go was
not a party to the Lease Agreements with Option to Purchase (collectively, the lease agreements) - the actionable documents on which
the complaints were based.

On Navarro's motion, both cases were duly consolidated on December 13, 1999.

In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of action.

In response to the motion for reconsideration Karen Go filed dated May 26, 2000, the RTC issued another order dated July 26, 2000
setting aside the order of dismissal. Acting on the presumption that Glenn Go's leasing business is a conjugal property, the RTC held
that Karen Go had sufficient interest in his leasing business to file the action against Navarro. However, the RTC held that Karen Go
should have included her husband, Glenn Go, in the complaint based on Section 4, Rule 3 of the Rules of Court (Rules). Thus, the
lower court ordered Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff.Ï

When the RTC denied Navarro's motion for reconsideration on March 7, 2001, Navarro filed a petition for certiorari with the CA,
essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of the case and directed
Karen Go to amend her complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a complaint which
failed to state a cause of action could not be converted into one with a cause of action by mere amendment or supplemental pleading.

On October 16, 2001, the CA denied Navarro's petition and affirmed the RTC's order. The CA also denied Navarro's motion for
reconsideration in its resolution of May 29, 2002, leading to the filing of the present petition.

THE PETITION

Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the requisite juridical
personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was Karen Go who filed the complaints and
not Glenn Go, she was not a real party-in-interest and the complaints failed to state a cause of action.

Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-plaintiff, instead of
dismissing the complaint outright because a complaint which does not state a cause of action cannot be converted into one with a
cause of action by a mere amendment or a supplemental pleading. In effect, the lower court created a cause of action for Karen Go
when there was none at the time she filed the complaints.

Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the complaints, to his
great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed that the leased vehicles are part of
the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of the
complaint are her paraphernal properties and the RTC gravely erred when it ordered the inclusion of Glenn Go as a co-plaintiff.

Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to amend her
complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules.

Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were premature because no
prior demand was made on him to comply with the provisions of the lease agreements before the complaints for replevin were filed.

Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were illegally seized
from his possession and should be returned to him immediately.

Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the subject of the
complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of Kargo Enterprises and Glenn
Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarro's insistence
that Kargo Enterprises is Karen Go's paraphernal property is without basis. Based on the law and jurisprudence on the matter, all
property acquired during the marriage is presumed to be conjugal property. Finally, Karen Go insists that her complaints sufficiently
established a cause of action against Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff, this was merely
to comply with the rule that spouses should sue jointly, and was not meant to cure the complaints' lack of cause of action.

THE COURT'S RULING

We find the petition devoid of merit.

Karen Go is the real party-in-interest

The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real party-in-
interest, i.e., the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.15

Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he still insists
that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts were in Kargo Enterprises'
name, this was merely a trade name without a juridical personality, so the actual parties to the lease agreements were Navarro and
Glenn Go, to the exclusion of Karen Go.

As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of Glenn Go as co-
plaintiff, since this in effect created a cause of action for the complaints when in truth, there was none.

We do not find Navarro's arguments persuasive.

The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name appears in the
title of the Complaint where the plaintiff was identified as "KAREN T. GO doing business under the name KARGO ENTERPRISES,"
and this identification was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO
ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant "leased from plaintiff a certain motor
vehicle" that was thereafter described. Significantly, the Complaint specifies and attaches as its integral part the Lease Agreement that
underlies the transaction between the plaintiff and the defendant. Again, the name KARGO ENTERPRISES entered the picture as this
Lease Agreement provides:

This agreement, made and entered into by and between:

GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the LESSOR-SELLER; representing
KARGO ENTERPRISES as its Manager,

thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by the express
terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises and the latter is clearly the
real party to the lease agreements.

As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a juridical person, as
defined by Article 44 of the Civil Code:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

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

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

Thus, pursuant to Section 1, Rule 3 of the Rules, Kargo Enterprises cannot be a party to a civil action. This legal reality leads to the
question: who then is the proper party to file an action based on a contract in the name of Kargo Enterprises?cralawred

We faced a similar question in Juasing Hardware v. Mendoza where we said:

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

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

This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:

SEC. 2. Parties in interest. - A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or
the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or
defended in the name of the real party in interest.

As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a judgment in this
case. Thus, contrary to Navarro's contention, Karen Go is the real party-in-interest, and it is legally incorrect to say that her Complaint
does not state a cause of action because her name did not appear in the Lease Agreement that her husband signed in behalf of Kargo
Enterprises. Whether Glenn Go can legally sign the Lease Agreement in his capacity as a manager of Kargo Enterprises, a sole
proprietorship, is a question we do not decide, as this is a matter for the trial court to consider in a trial on the merits.

Glenn Go's Role in the Case

We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go, who described herself in the
Complaints to be "a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing business under the
trade name KARGO ENTERPRISES." That Glenn Go and Karen Go are married to each other is a fact never brought in issue in the
case. Thus, the business name KARGO ENTERPRISES is registered in the name of a married woman, a fact material to the side issue
of whether Kargo Enterprises and its properties are paraphernal or conjugal properties. To restate the parties' positions, Navarro
alleges that Kargo Enterprises is Karen Go's paraphernal property, emphasizing the fact that the business is registered solely in Karen
Go's name. On the other hand, Karen Go contends that while the business is registered in her name, it is in fact part of their conjugal
property.

The registration of the trade name in the name of one person - a woman - does not necessarily lead to the conclusion that the trade
name as a property is hers alone, particularly when the woman is married. By law, all property acquired during the marriage, whether
the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal
unless the contrary is proved. Our examination of the records of the case does not show any proof that Kargo Enterprises and the
properties or contracts in its name are conjugal. If at all, only the bare allegation of Navarro to this effect exists in the records of the
case. As we emphasized in Castro v. Miat:

Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the marriage is presumed to be conjugal
partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife." This article does not require proof that
the property was acquired with funds of the partnership. The presumption applies even when the manner in which the property
was acquired does not appear.

Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is conjugal or
paraphernal property, we hold that it is conjugal property.

Article 124 of the Family Code, on the administration of the conjugal property, provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case
of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be
availed of within five years from the date of the contract implementing such decision.

This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal
property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before performing an act of
administration or any act that does not dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of partnership in all that is not
in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements. In other words, the
property relations of the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family
Code and, suppletorily, by the spouses' marriage settlement and by the rules on partnership under the Civil Code. In the absence of any
evidence of a marriage settlement between the spouses Go, we look at the Civil Code provision on partnership for guidance.

A rule on partnership applicable to the spouses' circumstances is Article 1811 of the Civil Code, which states:

Art. 1811. A partner is a co-owner with the other partners of specific partnership property.

The incidents of this co-ownership are such that:

(1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right with his partners
to possess specific partnership property for partnership purposes; xxx

Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered under this
name; hence, both have an equal right to seek possession of these properties. Applying Article 484 of the Civil Code, which states that
"in default of contracts, or special provisions, co-ownership shall be governed by the provisions of this Title," we find further support
in Article 487 of the Civil Code that allows any of the co-owners to bring an action in ejectment with respect to the co-owned
property.

While ejectment is normally associated with actions involving real property, we find that this rule can be applied to the circumstances
of the present case, following our ruling in Carandang v. Heirs of De Guzman. In this case, one spouse filed an action for the recovery
of credit, a personal property considered conjugal property, without including the other spouse in the action. In resolving the issue of
whether the other spouse was required to be included as a co-plaintiff in the action for the recovery of the credit, we said:

Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses Carandang, seems to be either
an indispensable or a necessary party. If she is an indispensable party, dismissal would be proper. If she is merely a necessary party,
dismissal is not warranted, whether or not there was an order for her inclusion in the complaint pursuant to Section 9, Rule 3.

Article 108 of the Family Code provides:

Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what
is expressly determined in this Chapter or by the spouses in their marriage settlements.

This provision is practically the same as the Civil Code provision it superseded:

Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what
is expressly determined in this Chapter.

In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with the other partners of specific
partnership property." Taken with the presumption of the conjugal nature of the funds used to finance the four checks used to pay for
petitioners' stock subscriptions, and with the presumption that the credits themselves are part of conjugal funds, Article 1811 makes
Quirino and Milagros de Guzman co-owners of the alleged credit.

Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the recovery thereof. In
the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-ownership, co-owners may bring actions for
the recovery of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs because the suit is
presumed to have been filed for the benefit of his co-owners. In the latter case and in that of De Guia v. Court of Appeals, we also held
that Article 487 of the Civil Code, which provides that any of the co-owners may bring an action for ejectment, covers all kinds of
action for the recovery of possession.

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil Code and
relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery of co-owned properties. Therefore,
only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party
thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a complete relief can be accorded
in the suit even without their participation, since the suit is presumed to have been filed for the benefit of all co-owners.
Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo Enterprises-leased
vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code, supporting as it does the position that
either spouse may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the property in question
without the other spouse's consent.

On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the leased
vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the Rules, which states:

Section 4. Spouses as parties. - Husband and wife shall sue or be sued jointly, except as provided by law.

Non-joinder of indispensable parties not ground to dismiss action

Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases that the misjoinder or non-
joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated in Macababbad v. Masirag:

Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the dismissal of an
action, thus:

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for dismissal of an action.
Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on
such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately.

In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable party at any stage
of the action. The court, either motu proprio or upon the motion of a party, may order the inclusion of the indispensable party or give
the plaintiff opportunity to amend his complaint in order to include indispensable parties. If the plaintiff to whom the order to include
the indispensable party is directed refuses to comply with the order of the court, the complaint may be dismissed upon motion of the
defendant or upon the court's own motion. Only upon unjustified failure or refusal to obey the order to include or to amend is the
action dismissed.

In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is fully in order.

Demand not required prior to filing of replevin action

In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a replevin action to
an unlawful detainer.

For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2, Rule 60 of the
Rules, which states:

Sec. 2. Affidavit and bond.

The applicant must show by his own affidavit or that of some other person who personally knows the facts:

(a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof;

(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof according to the best of his
knowledge, information, and belief;

(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of execution
or preliminary attachment, or otherwise placed under custodia legis, or if so seized, that it is exempt from such seizure or custody; and

(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the affidavit
aforementioned, for the return of the property to the adverse party if such return be adjudged, and for the payment to the adverse party
of such sum as he may recover from the applicant in the action.
We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the property before he can
file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action for a writ of replevin.

More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already admitted in his
Answers that he had received the letters that Karen Go sent him, demanding that he either pay his unpaid obligations or return the
leased motor vehicles. Navarro's position that a demand is necessary and has not been made is therefore totally unmeritorious.

WHEREFORE, premises considered, we DENY the Petition for Review for lack of merit. Costs against petitioner Roger V. Navarro.

SO ORDERED.

[G.R. NO. 165895 : June 5, 2009]

TERLYNGRACE RIVERA v. FLORENCIO L. VARGAS

What is the effect of a writ of replevin that has been improperly served?

This is the sole issue to be resolved in this Petition for Review on Certiorari seeking to set aside the Decision of the Court of Appeals
(CA) dated November 18, 2003 in CA-G.R. SP No. 78529, as well as its October 20, 2004 Resolution, denying the petition
for certiorari filed by petitioner Terlyngrace Rivera (Rivera).

The facts follow.

On February 24, 2003, respondent Florencio Vargas (Vargas) filed a complaint against petitioner and several John Does before Branch
02 of the Regional Trial Court (RTC) in Tuguegarao City, Cagayan, for the recovery of a 150 T/H rock crushing plant located in
Sariaya, Quezon. In his complaint and affidavit, Vargas claims ownership of the said equipment, having purchased and imported the
same directly from Hyun Dae Trading Co., in Seoul, South Korea, in December 1993. The equipment was allegedly entrusted to
petitioner's husband, Jan T. Rivera, who died sometime in late 2002, as caretaker of respondent's construction aggregates business in
Batangas. According to Vargas, petitioner failed to return the said equipment after her husband's death despite his repeated demands,
thus forcing him to resort to court action. The complaint was accompanied by a prayer for the issuance of a writ of replevin and the
necessary bond amounting to P2,400,000.00.

Summons dated February 24, 2003 was served upon petitioner through her personal secretary on April 28, 2003 at her residence in
Parañaque City. Interestingly, however, the writ of replevin was served upon and signed by a certain Joseph Rejumo, the security
guard on duty in petitioner's crushing plant in Sariaya, Quezon on April 29, 2003, 9 contrary to the sheriff's return stating that the writ
was served upon Rivera.

On May 8, 2003, Rivera filed her answer, manifestation, and motion for the acceptance of petitioner's redelivery bond. In her answer,
petitioner countered that the rock-crushing plant was ceded in favor of her husband as his share following the dissolution of the
partnership formed between Jan Rivera and respondent's wife, Iluminada Vargas (Iluminada), on May 28, 1998, while the
partnership's second rock-crushing plant in Cagayan was ceded in favor of Iluminada. She further averred that from the time that the
partnership was dissolved sometime in 2000 until Jan Rivera's death in late 2002, it was petitioner's husband who exercised ownership
over the said equipment without any disturbance from respondent.

On May 12, 2003, the RTC issued an Order disapproving petitioner's redelivery bond application for failure to comply with the
requirements under Sections 5 and 6 of Rule 60 of the Rules of Court. Without directly saying so, the RTC faulted petitioner for her
failure to file the application for redelivery bond within five (5) days from the date of seizure as provided in the Rules of Court.
Petitioner moved for reconsideration, but the same was also denied.

Aggrieved, petitioner elevated the matter to the CA through a petition for certiorari under Rule 65. This, too, was denied for lack of
merit. Petitioner moved for reconsideration, but it was also denied.

Undaunted, petitioner now comes to us via this Rule 45 petition.

Petitioner argues that the RTC committed grave abuse of discretion in denying her counterbond on the ground that it was filed out of
time. She contends that the mandatory five-day period did not even begin to run in this case due to the improper service of the writ of
replevin, contrary to Section 4 of Rule 60.
We find the petition meritorious.

Replevin is one of the most ancient actions known to law, taking its name from the object of its process. It originated in common law
as a remedy against the wrongful exercise of the right of distress for rent and, according to some authorities, could only be maintained
in such a case. But by the weight of authority, the remedy is not and never was restricted to cases of wrongful distress in the absence
of any statutes relating to the subject, but is a proper remedy for any unlawful taking. "Replevied," used in its technical sense, means
delivered to the owner, while the words "to replevy" means to recover possession by an action of replevin.

Broadly understood in this jurisdiction, replevin is both a form of principal remedy and of provisional relief. It may refer either to the
action itself, i.e., to regain the possession of personal chattels being wrongfully detained from the plaintiff by another, or to the
provisional remedy that would allow the plaintiff to retain the thing during the pendency of the action and to hold it pendente lite. The
action is primarily possessory in nature and generally determines nothing more than the right of possession.

The law presumes that every possessor is a possessor in good faith. He is entitled to be respected and protected in his possession31 as if
he were the true owner thereof until a competent court rules otherwise. Before a final judgment, property cannot be seized unless by
virtue of some provision of law. The Rules of Court, under Rule 60, authorizes such seizure in cases of replevin. However, a person
seeking a remedy in an action for replevin must follow the course laid down in the statute, since the remedy is penal in nature. When
no attempt is made to comply with the provisions of the law relating to seizure in this kind of action, the writ or order allowing the
seizure is erroneous and may be set aside on motion by the adverse party. Be it noted, however, that a motion to quash the writ of
replevin goes to the technical regularity of procedure, and not to the merits of the case in the principal action.

The process regarding the execution of the writ of replevin in Section 4 of Rule 60 is unambiguous: the sheriff, upon receipt of the
writ of replevin and prior to the taking of the property, must serve a copy thereof to the adverse party (petitioner, in this case) together
with the application, the affidavit of merit, and the replevin bond. The reasons are simple, i.e., to provide proper notice to the adverse
party that his property is being seized in accordance with the court's order upon application by the other party, and ultimately to allow
the adverse party to take the proper remedy consequent thereto.

Service of the writ upon the adverse party is mandatory in line with the constitutional guaranty on procedural due process and as
safeguard against unreasonable searches and seizures. If the writ was not served upon the adverse party but was instead merely handed
to a person who is neither an agent of the adverse party nor a person authorized to receive court processes on his behalf, the service
thereof is erroneous and is, therefore, invalid, running afoul of the statutory and constitutional requirements. The service is likewise
invalid if the writ of replevin was served without the required documents. Under these circumstances, no right to seize and to detain
the property shall pass, the act of the sheriff being both unlawful and unconstitutional.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

In the case at bar, petitioner avers that the writ of replevin was served upon the security guard where the rock-crushing plant to be
seized was located. The signature of the receiving party indicates that the writ was received on April 29, 2003 by a certain Joseph
Rejumo, the guard on duty in a plant in Sariaya, Quezon, where the property to be seized was located, and witnessed by Claudio
Palatino, respondent's caretaker. The sheriff's return, however, peremptorily states that both the writ of replevin and the summons
were served upon Rivera. On May 8, 2003, or nine (9) days after the writ was served on the security guard, petitioner filed an answer
to the complaint accompanied by a prayer for the approval of her redelivery bond. The RTC, however, denied the redelivery bond for
having been filed beyond the five-day mandatory period prescribed in Sections 5 and 6 of Rule 60. But since the writ was invalidly
served, petitioner is correct in contending that there is no reckoning point from which the mandatory five-day period shall commence
to run.

The trial court is reminded that not only should the writ or order of replevin comply with all the requirements as to matters of form or
contents prescribed by the Rules of Court. The writ must also satisfy proper service in order to be valid and effective: i.e. it should be
directed to the officer who is authorized to serve it; and it should be served upon the person who not only has the possession or
custody of the property involved but who is also a party or agent of a party to the action. Consequently, a trial court is deemed to have
acted without or in excess of its jurisdiction with respect to the ancillary action of replevin if it seizes and detains a personalty on the
basis of a writ that was improperly served, such as what happened in this case.

At the outset, petitioner's proper remedy should have been to file a motion to quash the writ of replevin or a motion to vacate the order
of seizure. Nevertheless, petitioner's filing of an application for a redelivery bond, while not necessary, did not thereby waive her right
to question the improper service. It now becomes imperative for the trial court to restore the parties to their former positions by
returning the seized property to petitioner and by discharging the replevin bond filed by respondent. The trial, with respect to the main
action, shall continue. Respondent may, however, file a new application for replevin should he choose to do so.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, as well as its Resolution, in CA-G.R. SP No. 78529
is hereby SET ASIDE. The Regional Trial Court is hereby ordered to restore the parties to their former positions, discharge
respondent's replevin bond, and proceed with the trial of the main action with dispatch. SO ORDERED.