Macasaet vs Co (G.R. No. 156759 June 5, 2013)

Macasaet etal vs Co
G.R. No. 156759 June 5, 2013

Facts: On July 3, 2000, respondent, a retired police officer assigned at the Western Police District in Manila, sued Abante Tonite, a daily tabloid of general circulation; its Publisher Allen A. Macasaet; its Managing Director Nicolas V. Quijano; its Circulation Manager Isaias Albano; its Editors Janet Bay, Jesus R. Galang and Randy Hagos; and its Columnist/Reporter Lily Reyes (petitioners), claiming damages because of an allegedly libelous article petitioners published in the June 6, 2000 issue of Abante Tonite. The suit, docketed as Civil Case No. 0097907, was raffled to Branch 51 of the RTC, which in due course issued summons to be served on each defendant, including Abante Tonite, at their business address at Monica Publishing Corporation, 301-305 3rd Floor, BF Condominium Building, Solana Street corner A. Soriano Street, Intramuros, Manila. In the morning of September 18, 2000, RTC Sheriff Raul Medina proceeded to the stated address to effect the personal service of the summons on the defendants. But his efforts to personally serve each defendant in the address were futile because the defendants were then out of the office and unavailable. He returned in the afternoon of that day to make a second attempt at serving the summons, but he was informed that petitioners were still out of the office. He decided to resort to substituted service of the summons, and explained why in his sheriff’s return dated September 22, 2005.

Issue: Whether or not jurisdiction over the petitioners have been acquired.

Held: Yes. Jurisdiction over the person, or jurisdiction in personam –the power of the court to render a personal judgment or to subject the parties in a particular action to the judgment and other rulings rendered in the action – is an element of due process that is essential in all actions, civil as well as criminal, except in actions in rem or quasi in rem. Jurisdiction over the defendant in an action in rem or quasi in rem is not required, and the court acquires jurisdiction over an action as long as it acquires jurisdiction over the res that is the subject matter of the action. The purpose of summons in such action is not the acquisition of jurisdiction over the defendant but mainly to satisfy the constitutional requirement of due process.

The distinctions that need to be perceived between an action in personam, on the one hand, and an action in rem or quasi in rem, on the other hand, are aptly delineated in Domagas v. Jensen, thusly:

The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought against the person and is based on the jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in accordance with the mandate of the court. The purpose of a proceeding in personam is to impose, through the judgment of a court, some responsibility or liability directly upon the person of the defendant. Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a pecuniary liability on him. An action in personam is said to be one which has for its object a judgment against the person, as distinguished from a judgment against the property to determine its state. It has been held that an action in personam is a proceeding to enforce personal rights or obligations; such action is brought against the person. As far as suits for injunctive relief are concerned, it is well-settled that it is an injunctive act in personam. In Combs v. Combs, the appellate court held that proceedings to enforce personal rights and obligations and in which personal judgments are rendered adjusting the rights and obligations between the affected parties is in personam. Actions for recovery of real property are in personam.

On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the property of such persons to the discharge of the claims assailed. In an action quasi in rem, an individual is named as defendant and the purpose of the proceeding is to subject his interests therein to the obligation or loan burdening the property. Actions quasi in rem deal with the status, ownership or liability of a particular property but which are intended to operate on these questions only as between the particular parties to the proceedings and not to ascertain or cut off the rights or interests of all possible claimants. The judgments therein are binding only upon the parties who joined in the action.

As a rule, Philippine courts cannot try any case against a defendant who does not reside and is not found in the Philippines because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court; but when the case is an action in rem or quasi in rem enumerated in Section 15, Rule 14 of the Rules of Court, Philippine courts have jurisdiction to hear and decide the case because they have jurisdiction over the res, and jurisdiction over the person of the non-resident defendant is not essential. In the latter instance, extraterritorial service of summons can be made upon the defendant, and such extraterritorial service of summons is not for the purpose of vesting the court with jurisdiction, but for the purpose of complying with the requirements of fair play or due process, so that the defendant will be informed of the pendency of the action against him and the possibility that property in the Philippines belonging to him or in which he has an interest may be subjected to a judgment in favor of the plaintiff, and he can thereby take steps to protect his interest if he is so minded. On the other hand, when the defendant in an action in personam does not reside and is not found in the Philippines, our courts cannot try the case against him because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court.

As the initiating party, the plaintiff in a civil action voluntarily submits himself to the jurisdiction of the court by the act of filing the initiatory pleading. As to the defendant, the court acquires jurisdiction over his person either by the proper service of the summons, or by a voluntary appearance in the action.

The significance of the proper service of the summons on the defendant in an action in personam cannot be overemphasized. The service of the summons fulfills two fundamental objectives, namely: (a) to vest in the court jurisdiction over the person of the defendant; and (b) to afford to the defendant the opportunity to be heard on the claim brought against him. As to the former, when jurisdiction in personam is not acquired in a civil action through the proper service of the summons or upon a valid waiver of such proper service, the ensuing trial and judgment are void. If the defendant knowingly does an act inconsistent with the right to object to the lack of personal jurisdiction as to him, like voluntarily appearing in the action, he is deemed to have submitted himself to the jurisdiction of the court. As to the latter, the essence of due process lies in the reasonable opportunity to be heard and to submit any evidence the defendant may have in support of his defense. With the proper service of the summons being intended to afford to him the opportunity to be heard on the claim against him, he may also waive the process. In other words, compliance with the rules regarding the service of the summons is as much an issue of due process as it is of jurisdiction.

Under the Rules of Court, the service of the summons should firstly be effected on the defendant himself whenever practicable. Such personal service consists either in handing a copy of the summons to the defendant in person, or, if the defendant refuses to receive and sign for it, in tendering it to him. The rule on personal service is to be rigidly enforced in order to ensure the realization of the two fundamental objectives earlier mentioned. If, for justifiable reasons, the defendant cannot be served in person within a reasonable time, the service of the summons may then be effected either (a) by leaving a copy of the summons at his residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copy at his office or regular place of business with some competent person in charge thereof. The latter mode of service is known as substituted service because the service of the summons on the defendant is made through his substitute.

There is no question that Sheriff Medina twice attempted to serve the summons upon each of petitioners in person at their office address, the first in the morning of September 18, 2000 and the second in the afternoon of the same date. Each attempt failed because Macasaet and Quijano were “always out and not available” and the other petitioners were “always roving outside and gathering news.” After Medina learned from those present in the office address on his second attempt that there was no likelihood of any of petitioners going to the office during the business hours of that or any other day, he concluded that further attempts to serve them in person within a reasonable time would be futile. The circumstances fully warranted his conclusion. He was not expected or required as the serving officer to effect personal service by all means and at all times, considering that he was expressly authorized to resort to substituted service should he be unable to effect the personal service within a reasonable time. In that regard, what was a reasonable time was dependent on the circumstances obtaining. While we are strict in insisting on personal service on the defendant, we do not cling to such strictness should the circumstances already justify substituted service instead. It is the spirit of the procedural rules, not their letter, that governs.


SICI vs Cuenca (G.R. No. 173297 March 6, 2013)

Stronghold Insurance Company Inc. vs Cuenca
G.R. No. 173297 March 6, 2013

Facts: On January 19, 1998, Marañon filed a complaint in the RTC against the Cuencas for the collection of a sum of money and damages. His complaint, docketed as Civil Case No. 98-023, included an application for the issuance of a writ of preliminary attachment. On January 26, 1998, the RTC granted the application for the issuance of the writ of preliminary attachment conditioned upon the posting of a bond of P1,000,000.00 executed in favor of the Cuencas. Less than a month later, Marañon amended the complaint to implead Tayactac as a defendant. On February 11, 1998, Marañon posted SICI Bond No. 68427 JCL (4) No. 02370 in the amount of P1,000,000.00 issued by Stronghold Insurance. Two days later, the RTC issued the writ of preliminary attachment. The sheriff served the writ, the summons and a copy of the complaint on the Cuencas on the same day. The service of the writ, summons and copy of the complaint were made on Tayactac on February 16, 1998.

Issue: Whether or not the respondents have the legal standing to sue petitioner for the recovery of the attached properties and damages.

Held: No. To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of the Rules of Court requires that unless otherwise authorized by law or the Rules of Court every action must be prosecuted or defended in the name of the real party in interest. Under the same rule, a real party in interest is one who stands to be benefited or injured by the judgment in the suit, or one who is entitled to the avails of the suit. Accordingly, a person , to be a real party in interest in whose name an action must be prosecuted, should appear to be the present real owner of the right sought to be enforced, that is, his interest must be a present substantial interest, not a mere expectancy, or a future, contingent, subordinate, or consequential interest.

Where the plaintiff is not the real party in interest, the ground for the motion to dismiss is lack of cause of action. The reason for this is that the courts ought not to pass upon questions not derived from any actual controversy. Truly, a person having no material interest to protect cannot invoke the jurisdiction of the court as the plaintiff in an action. Nor does a court acquire jurisdiction over a case where the real party in interest is not present or impleaded.

The purposes of the requirement for the real party in interest prosecuting or defending an action at law are: (a) to prevent the prosecution of actions by persons without any right, title or interest in the case; (b) to require that the actual party entitled to legal relief be the one to prosecute the action; (c) to avoid a multiplicity of suits; and (d) to discourage litigation and keep it within certain bounds, pursuant to sound public policy. Indeed, considering that all civil actions must be based on a cause of action, defined as the act or omission by which a party violates the right of another, the former as the defendant must be allowed to insist upon being opposed by the real party in interest so that he is protected from further suits regarding the same claim. Under this rationale, the requirement benefits the defendant because “the defendant can insist upon a plaintiff who will afford him a setup providing good res judicata protection if the struggle is carried through on the merits to the end.”

The rule on real party in interest ensures, therefore, that the party with the legal right to sue brings the action, and this interest ends when a judgment involving the nominal plaintiff will protect the defendant from a subsequent identical action. Such a rule is intended to bring before the court the party rightfully interested in the litigation so that only real controversies will be presented and the judgment, when entered, will be binding and conclusive and the defendant will be saved from further harassment and vexation at the hands of other claimants to the same demand.

But the real party in interest need not be the person who ultimately will benefit from the successful prosecution of the action. Hence, to aid itself in the proper identification of the real party in interest, the court should first ascertain the nature of the substantive right being asserted, and then must determine whether the party asserting that right is recognized as the real party in interest under the rules of procedure. Truly, that a party stands to gain from the litigation is not necessarily controlling.

Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuenca’s and Tayactac lacked the legal personality to claim the damages sustained from the levy of the former’s properties. According to Asset Privatization Trust v. Court of Appeals,  even when the foreclosure on the assets of the corporation was wrongful and done in bad faith the stockholders had no standing to recover for themselves moral damages; otherwise, they would be appropriating and distributing part of the corporation’s assets prior to the dissolution of the corporation and the liquidation of its debts and liabilities. Moreover, in Evangelista v. Santos, the Court, resolving whether or not the minority stockholders had the right to bring an action for damages against the principal officers of the corporation for their own benefit.

Ombudsman vs De Leon (G.R. No. 154083 February 27, 2013)

Office of the Ombudsman vs De Leon
G.R. No. 154083 February 27, 2013

Facts: Acting on a report of illegal quarrying being committed in the Municipality of Baras, Rizal, Graft Investigation Officer Dante D. Tornilla of the Fact Finding Investigation Bureau (FFIB) of the Office of the Ombudsman conducted an investigation pursuant to a mission order dated April 17, 1998. On June 8, 1998, Tornilla filed his report to Ombudsman Aniano Desierto, through Assistant Ombudsman Abelardo L. Aportadera, Jr. and Director Agapito B. Rosales, confirming the illegal quarrying. Tornilla recommended that a preliminary investigation be conducted against  Baras  Municipal Mayor Roberto Ferrera, Baras Municipal Planning and Coordinator Jonathan Llagas, and property owner Venancio Javier for the probable violation of Section 3(e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act); and that administrative proceedings for violations of the Civil Service Rules be also undertaken. In his report and recommendation dated July 13, 1998, DILG Resident Ombudsman Rudiger G. Falcis II sought the inclusion in the investigation of De Leon as the Provincial Environment and Natural Resources Officer (PENRO) and as concurrently the Chairman of the Provincial Mining Regulatory Board (PMRB) of Rizal. After the preliminary investigation, Graft Investigation Officer II Edgardo V. Geraldez of the FFIB, Office of the Ombudsman, issued a decision dated April 29, 1999, dismissing the complaint against all the respondents for lack of substantial evidence. However, Assistant Ombudsman Aportadera, Jr. recommended the disapproval of the said decision.  Ombudsman Desierto approved the recommendation of Assistant Ombudsman Aportadera, Jr. The case was then referred to Atty. Sabino M. Cruz, Resident Ombudsman for the Department of Environment and Natural Resources (DENR), who ultimately submitted a memorandum on October 20, 1999,  duly approved by the Ombudsman, finding De Leon liable for gross neglect of duty.

Issues: Whether or not respondent is liable for gross neglect of duty.

Whether or not the decisions of the Ombudsman is final and immediately executory.

Held: Yes. Gross neglect of duty or gross negligence “refers to negligence characterized by the want of even slight care, or by acting or omitting to act in a situation where there is a duty to act, not inadvertently but wilfully and intentionally, with a conscious indifference to the consequences, insofar as other persons may be affected. It is the omission of that care that even inattentive and thoughtless men never fail to give to their own property.” It denotes a flagrant and culpable refusal or unwillingness of a person to perform a duty. In cases involving public officials, gross negligence occurs when a breach of duty is flagrant and palpable.

In contrast, simple neglect of duty means the failure of an employee or official to give proper attention to a task expected of him or her, signifying a “disregard of a duty resulting from carelessness or indifference.

Conformably with these concepts, De Leon, given his rank and level of responsibility, was guilty of gross neglect in not performing the act expected of him as the PENRO under the circumstances obtaining. He was precisely assigned to perform tasks that imposed on him the obligation to do everything reasonably necessarily and permissible under the law in order to achieve the objectives of environmental protection. He could not feign ignorance of the Government’s current efforts to control or prevent environmental deterioration from all hazards, including uncontrolled mining and unregulated illegal quarrying, but he chose to be passive despite clear indications of the illegal quarrying activities that had been first brought to his official attention as early as in 1997 by Teresita Fabian of the Provincial Tourism Office of Rizal. The most that he did on the complaint was to dispatch two of his subordinates to verify the report of quarrying. After the subordinates returned with the information that there were no quarrying activities at the site, he was apparently content with their report. He was not even spurred into further action by the subordinates’ simultaneous report on having observed at the site the presence of earthmoving equipment (specifically, a backhoe and a payloader). Had he been conscientious, the presence of the earth moving equipment would have quickly alerted him to the high probability of their being used in quarrying activities at the site. We presume that he was not too obtuse to sense such high probability. The seriousness of the matter should have prodded him to take further actions, including personally inspecting the site himself either to confirm the findings of the subordinates or to satisfy himself that the earthmoving equipment was not being used for quarrying. By merely denying having granted any permit or unwarranted benefit to any quarry operator, he seemingly considered the report of his subordinates satisfactory.

Yes. An appeal shall not stop the decision from being executory. In case the penalty is suspension or removal and the respondent wins such appeal, he shall be considered as having been under preventive suspension and shall be paid the salary and such other emoluments that he did not receive by reason of the suspension or removal.

On 15 September 2003, AO 17 was issued, amending Rule III of the  Rules of Procedure of the Office of the Ombudsman. Thus, Section 7, Rule III of the Rules of Procedure of the Office of the Ombudsman was further amended and now reads:

Section 7. Finality and execution of decision. – Where the respondent is absolved of the charge, and in case of conviction where the penalty imposed is public censure or reprimand, suspension of not more than one month, or a fine equivalent to one month salary, the decision shall be final, executory and unappealable. In all other cases, the decision may be appealed to the Court of Appeals on a verified petition for review under the requirements and conditions set forth in Rule 43 of the Rules of Court, within fifteen (15) days from the receipt of the written Notice of the Decision or Order denying the Motion for Reconsideration.

Dare Adventure Farm Corp vs CA (G.R. No. 161122 September 24, 2012)

Dare Adventure Farm Corporation vs CA
G.R. No. 161122 September 24, 2012

Facts: The petitioner acquired a parcel of land with an area of 65,100 square meters situated in San Roque, Lilo-an, Metro Cebu known as lot 7531-part (the property) through a deed of absolute sale executed on July 28, 1994 between the petitioner, as vendee, and Agripina R. Goc-ong (a respondent herein), Porferio Goc-ong, Diosdado Goc-ong, Crisostomo Goc-ong, Tranquilino Goc-ong, Naciancena Goc-ong and Avelino Goc-ong (collectively, the Goc-ongs), as vendors. The petitioner later on discovered the joint affidavit executed on June 19, 1990 by the Goc-ongs, whereby the Goc-ongs declared that they were the owners of the property, and that they were mortgaging the property to Felix Ng, married to Nenita N. Ng, and Martin T. Ng, married to Azucena S. Ng (collectively, the Ngs) to secure their obligation amounting to P 648,000.00, subject to the condition that should they not pay the stipulated 36-monthly installments, the Ngs would automatically become the owners of the property. With the Goc-ongs apparently failing to pay their obligation to the Ngs as stipulated, the latter brought on January 16, 1997 a complaint for the recovery of a sum of money, or, in the alternative, for the foreclosure of mortgage in the Regional Trial Court, Branch 56, in Mandaue City (RTC) only against respondent Agripina R. Goc-ong.4 The action was docketed as Civil Case No. MAN-2838.

Issue: Whether or not annulment of judgement if the proper remedy for the petitioner.

Held: No. A petition for annulment of judgment is a remedy in equity so exceptional in nature that it may be availed of only when other remedies are wanting, and only if the judgment, final order or final resolution sought to be annulled was rendered by a court lacking jurisdiction or through extrinsic fraud. Yet, the remedy, being exceptional in character, is not allowed to be so easily and readily abused by parties aggrieved by the final judgments, orders or resolutions. The Court has thus instituted safeguards by limiting the grounds for the annulment to lack of jurisdiction and extrinsic fraud, and by prescribing in Section 1 of Rule 47 of the Rules of Court that the petitioner should show that the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner. A petition for annulment that ignores or disregards any of the safeguards cannot prosper.

It is elementary that a judgment of a court is conclusive and binding only upon the parties and those who are their successors in interest by title after the commencement of the action in court.

Section 47(b) of Rule 39 of the Rules of Court explicitly so provides, to wit:

Section 47. Effect of judgments or final orders —The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:


(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity;


The principle that a person cannot be prejudiced by a ruling rendered in an action or proceeding in which he has not been made a party conforms to the constitutional guarantee of due process of law. The operation of this principle was illustrated in Muñoz v. Yabut, Jr., where the Court declared that a person not impleaded and given the opportunity to take part in the proceedings was not bound by the decision declaring as null and void the title from which his title to the property had been derived. We said there that the effect of a judgment could not be extended to non-parties by simply issuing an alias writ of execution against them, for no man should be prejudiced by any proceeding to which he was a stranger. In the same manner, a writ of execution could be issued only against a party, not against a person who did not have his day in court.

Moreover, Section 1 of Rule 47 extends the remedy of annulment only to a party in whose favor the remedies of new trial, reconsideration, appeal, and petition for relief from judgment are no longer available through no fault of said party. As such, the petitioner, being a non-party in Civil Case No. MAN-2838, could not bring the action for annulment of judgment due to unavailability to it of the remedies of new trial, reconsideration, appeal, or setting the judgment aside through a petition for relief.

Sps Delos Santos vs Metrobank (GR No. G.R. No. 153852 October 24, 2012)

Sps Delos Santos vs Metropolitan Bank & Trust Company
G.R. No. 153852 October 24, 2012

Facts: From December 9, 1996 until March 20, 1998, the petitioners took out several loans totaling P12,000,000.00 from Metrobank, Davao City Branch, the proceeds of which they would use in constructing a hotel on their 305-square-meter parcel of land located in Davao City and covered by Transfer Certificate of Title No. I-218079 of the Registry of Deeds of Davao City. They executed various promissory notes covering the loans, and constituted a mortgage over their parcel of land to secure the performance of their obligation. The stipulated interest rates were 15.75% per annum for the long term loans (maturing on December 9, 2006) and 22.204% per annum for a short term loan of P4,400,000.00 (maturing on March 12, 1999). The interest rates were fixed for the first year, subject to escalation or de-escalation in certain events without advance notice to them. The loan agreements further stipulated that the entire amount of the loans would become due and demandable upon default in the payment of any installment, interest or other charges. On December 27, 1999, Metrobank sought the extrajudicial foreclosure of the real estate mortgage after the petitioners defaulted in their installment payments. The petitioners were notified of the foreclosure and of the forced sale being scheduled on March 7, 2000. The notice of the sale stated that the total amount of the obligation was P16,414,801.36 as of October 26, 1999. On April 4, 2000, prior to the scheduled foreclosure sale (i.e., the original date of March 7, 2000 having been meanwhile reset to April 6, 2000), the petitioners filed in the RTC a complaint (later amended) for damages, fixing of interest rate, and application of excess payments (with prayer for a writ of preliminary injunction). They alleged therein that Metrobank had no right to foreclose the mortgage because they were not in default of their obligations; that Metrobank had imposed interest rates (i.e., 15.75% per annum for two long-term loans and 22.204% per annum for the short term loan) on three of their loans that were different from the rate of 14.75% per annum agreed upon; that Metrobank had increased the interest rates on some of their loans without any basis by invoking the escalation clause written in the loan agreement; that they had paid P2,561,557.87 instead of only P1,802,867.00 based on the stipulated interest rates, resulting in their excess payment of P758,690.87 as interest, which should then be applied to their accrued obligation; that they had requested the reduction of the escalated interest rates on several occasions because of its damaging effect on their hotel business, but Metrobank had denied their request; and that they were not yet in default because the long-term loans would become due and demandable on December 9, 2006 yet and they had been paying interest on the short-term loan in advance.

Issue: Whether or not injunction may issue pending extrajudicial foreclosure.

Held: Yes. No writ of preliminary injunction to enjoin an impending extrajudicial foreclosure sale should issue except upon a clear showing of a violation of the mortgagors’ unmistakable right to the injunction.

Injunction will not protect contingent, abstract or future rights whose existence is doubtful or disputed. Indeed, there must exist an actual right, because injunction will not be issued to protect a right not in esse and which may never arise, or to restrain an act which does not give rise to a cause of action. At any rate, an application for injunctive relief is strictly construed against the pleader.

Nor do we discern any substantial controversy that had any real bearing on Metrobank’s right to foreclose the mortgage. The mere possibility that the RTC would rule in the end in the petitioners’ favor by lowering the interest rates and directing the application of the excess payments to the accrued principal and interest did not diminish the fact that when Metrobank filed its application for extrajudicial foreclosure they were already in default as to their obligations and that their short-term loan of P4,400,000.00 had already matured. Under such circumstances, their application for the writ of preliminary injunction could not but be viewed as a futile attempt to deter or delay the forced sale of their property.

Escalation clauses are valid and do not contravene public policy. These clauses are common in credit agreements as means of maintaining fiscal stability and retaining the value of money on long-term contracts. To avoid any resulting one sided situation that escalation clauses may bring, we required in Banco Filipino the inclusion in the parties’ agreement of a de-escalation clause that would authorize a reduction in the interest rates corresponding to downward changes made by law or by the Monetary Board.

The validity of escalation clauses notwithstanding, we cautioned that these clauses do not give creditors the unbridled right to adjust interest rates unilaterally. As we said in the same Banco Filipino case, any increase in the rate of interest made pursuant to an escalation clause must be the result of an agreement between the parties. The minds of all the parties must meet on the proposed modification as this modification affects an important aspect of the agreement. There can be no contract in the true sense in the absence of the element of an agreement, i.e., the parties’ mutual consent. Thus, any change must be mutually agreed upon, otherwise, the change carries no binding effect. A stipulation on the validity or compliance with the contract that is left solely to the will of one of the parties is void; the stipulation goes against the principle of mutuality of contract under Article 1308 of the Civil Code.

As with all equitable remedies, injunction must be issued only at the instance of a party who possesses sufficient interest in or title to the right or the property sought to be protected. It is proper only when the applicant appears to be entitled to the relief demanded in the complaint, which must aver the existence of the right and the violation of the right, or whose averments must in the minimum constitute a prima facie showing of a right to the final relief sought. Accordingly, the conditions for the issuance of the injunctive writ are: (a) that the right to be protected exists prima facie; (b) that the act sought to be enjoined is violative of that right; and (c) that there is an urgent and paramount necessity for the writ to prevent serious damage. An injunction will not issue to protect a right not in esse, or a right which is merely contingent and may never arise; or to restrain an act which does not give rise to a cause of action; or to prevent the perpetration of an act prohibited by statute. Indeed, a right, to be protected by injunction, means a right clearly founded on or granted by law or is enforceable as a matter of law.

Guerrero vs Commissioner (19 SCRA 25)

Commissioner of Internal Revenue vs Guerrero
19 SCRA 25 [GR No. L-19074 January 31, 1967]

Facts: Antonio G. Guerrero was, during the years of 1949 and 1950, a dealer of logs, which he used to sell to Aparri Lumber Company,  hereinafter referred to as the company. On April 2, 1954, the then collector of internal revenue made an assessment and demands requiring Guerrero to pay the sum of Php4,014.91, representing fixed and percentage taxes and forests charges, as well as surcharges and penalties, in connection with his aforementioned business transactions with the company. Upon Guerrero’s requests, the matter was submitted to the conference staff of the Bureau of Internal Revenue (BIR), which, in due course, thereafter on January 11, 1956, recommended that the assessment be increased to Php5,139.17. In addition to, the sums of Php20 and Php100 as compromise penalties in extrajudicial settlement of his penal liabilities under sections 208 and 209 of the NIRC should be reiterated. That another sum of Php50 as compromise penalty for his violation of the bookkeeping regulations should be imposed against the taxpayer, he having admitted during the hearing of this case that he did not keep books of accounts of his timber business. This recommendation was approved by the collection of internal revenue, who, accordingly made the corresponding reassessment upon receipt of notice which Guerrero requested, on February 10, 1956, a rehearing before the conference staff. Instead of acting on this request, on April 20, 1956, the corresponding internal revenue director issued an assessment of distraint and levy against the properties of Guerrero, in order to effect the collection of his tax liability under said reassessment. Hence, on June 8, 1956, Guerrero filed with the court of tax appeals the corresponding petition for review. Subsequently, said court rendered the decision appealed from. Hence, these appeals.

Issue: Whether or not reassessment by the BIR is proper.

Held: No. The foregoing circumstances clearly indicate that the logs involved in said reassessment were obtained from illegal sources, and that the forest charges due thereon had not been paid. Since these charges “are lieu on the products and collectible from whomsoever is in possession” thereof, unless he can show that he has the required auxiliary and official invoice and discharge permit – which Guerrero has not shown – it follows that he is bound to pay the aforementioned forest charges and surcharges, in the sum of Php 3,775.66.

At this juncture, it may not be amiss to advert to a problem of semantics arising from the operation of section 1588 of the revised administrative code, the counterpart of which is is now section 315 of the NIRC, pursuant to which:

Every internal revenue tax on property or on any business or occupation, and every tax on resources and receipts, and any increment to any of them incident to delinquency, shall constitute a lien superior to all other charges or liens not only on the property itself upon which such tax may be imposed but also upon the property used in any business or occupation upon which the tax is imposed and upon all property rights therein.

The enforcement of this lien by the commissioner (formerly collector) of internal revenue, has often induced the parties adversely affected thereby to raise the question whether a given charge is a tax or not, on the theory that there would be no lien if said question were decided in the negative. In connection therewith, said parties had tended to distinguish between taxes, on the one hand – as burdens imposed upon persons and/or properties, by way of contributions to the support of the government, in consideration of general benefits derived from its operation – and license fees – charged in the exercise of the regulatory authority of the state, under its police power – and other charges – for specific things or special or particular benefits received from the government – on the other hand.

Union Shipping Lines vs Commissoner (185 SCRA 547)

Commissioner of Internal Revenue vs Union Shipping Corporation
185 SCRA 547 [GR No. L-66160 May 21, 1990]

Facts: In a letter dated December 27, 1974 herein petitioner Commissioner of Internal Revenue assessed against Tee Fong Hong Ltd. and/or herein private respondent Union Shipping Corporation, the total sum of Php583,155.22 as deficiency income taxes due for the years 1971 and 1972. Said letter was received on January 4, 1975, and in a letter dated January 10, 1975, received by petitioner on January 13, 1975, private responded protested the assessment. Petitioner, without ruling on the protest, issued a warrant of distraint and levy, which was served on private respondent’s counsel, Clemente Celso, on November 25, 1976. In a letter dated November 27, 1976, received by petitioner on November 29, 1976, private respondent reiterated its request for reinvestigation of the assessment and for the reconsideration of the summary collection thru the warrant of distraint and levy. Petitioner again, without acting on the request for reinvestigation and reconsideration of the warrant of distraint and levy, filed a collection suit before branch XXI of the the CFI of Manila and docketed as civil case no. 120459 against private respondent. Summons in the said collection case issued to private respondent on December 28, 1978.

Issue: Whether or not issuance of writ of distraint and levy is a proof of finality of an assessment.

Held: Yes. The main thrust of their petition is that the issuance of a warrant distraint and levy is proof of the finality of an assessment because it is the most drastic action of all media of enforcing the collection of tax, and is tantamount to an outright denial of a motion for reconsideration of an assessment. Among others, petitioners contends that the warrant of distraint and levy was issued after respondent corporation filed a request for reconsideration of subject assessment, thus constituting petitioner’s final decision in the disputed assessment.

We deem it appropriate to state that the commissioner of internal revenue should always indicate to the taxpayer is clear and unequivocal language whenever his action on an assessment questioned by a taxpayer constitute his final determination on the disputed assessment as contemplated by sections 7 and 11 of RA 1125 as amended. On the basis of this statement indubitably showing that the commissioner’s communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be able to take recourse to the tax court at the opportune time. Without needless difficulty, the taxpayer would be able to determine when his right to appeal to the tax court accrues. This rule of conduct would also obviate all desire and opportunity on the part of the taxpayer to continually delay the finality of the assessment — and, consequently, the collection of the amount demanded as taxes – by repeated request for recomputation and reconsideration. On the part of the commissioner, this would encourage his office to conduct a careful and thorough study of every questioned assessment and render a correct and definite decision thereon in the first instance. This would also deter the commissioner from unfairly making the taxpayer grope in the dark and speculate as to which action continues the decision appealable to the tax court of greater imports this rule of conduct would must a pressing need for fair play, regularity, and orderliness in the administrative action.

Under the circumstances, the commissioner of internal revenue, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run. Thus, it was only when private respondent received the summons on the civil suit for collection of deficiency income on December 28, 1978 that the period of appeal commenced to run.