PINGA v.

HEIRS OF SANTIAGO
GR No. 170354

Facts:
Petitioner Eduardo Pinga was named one of two defendants in a complaint for injunction filed with the
RTC of San Miguel by respondent Heirs of Santiago. The complaint alleged that Pinga and co-defendant
Saavedra had been unlawfully entering the coco lands of the Heirs, cutting wood, and harvesting the
fruits. In their Amended Answer with Counterclaim, Pinga and Saavedra disputed the ownership of the
Heirs of the properties in question.

By July 2005, the trial had not yet been completed. The Heirs of Santiago failed to present their evidence.
Apparently, in October 2004, the RTC had already ordered the complaint’s dismissal after the counsel of
the Heirs had sought the postponement of the hearing scheduled then, but the dismissal was
subsequently reconsidered because the counsel assured the court that he would prioritize the case.

After the hearing, the counsel on record of the Heirs failed to appear and sent a representative asking for
a postponement. The counsel for the defendants (including Pinga) opposed the move for postponement
and instead moved for the dismissal of the case. The RTC noted that it was obvious that the Heirs had
failed to prosecute the case for an unreasonable length of time, not having been able to show evidence
yet. The RTC dismissed the complaint and also allowed the defendants therein to present their evidence
ex parte.

The Heirs filed an MR, claiming that the RTC allowing the presentation of evidence ex parte was not in
accord with established jurisprudence. The RTC granted the MR and dismissed the counterclaim. When
Pinga filed an MR, the Heirs filed an opposition, arguing that compulsory counterclaims cannot be
adjudicated independently of the plaintiff’s cause of action. Conversely, the dismissal of the complaint
carries with it the dismissal of the compulsory counterclaims.

Issue: W/N the dismissal of the complaint necessarily carries the dismissal of the compulsory
counterclaim – NO

Ruling:
The Court held that the dismissal of the complaint due to the fault of plaintiff does not necessarily carry
with it the dismissal of the counterclaim, compulsory or otherwise. In fact, the dismissal of the complaint is
without prejudice to the right of defendants to prosecute the counterclaim.

The doctrine that the complaint may not be dismissed if the counterclaim cannot be independently
adjudicated is not available to, and was not intended for the benefit of, a plaintiff who prevents or delays
the prosecution of his own complaint. Otherwise, the trial of counterclaims would be made to depend
upon the maneuvers of the plaintiff, and the rule would offer a premium to vexing or delaying tactics to the
prejudice of the counterclaimants. It is in the same spirit that the Court has ruled that a complaint may not
be withdrawn over the opposition of the defendant where the counterclaim is one that arises from, or is
necessarily connected with, the plaintiff’s action and cannot remain pending for independent adjudication.

The RTC clearly erred when it ordered the dismissal of the counterclaim, since Section 3, Rule 17
mandates that the dismissal of the complaint is without prejudice to the right of the defendant to prosecute
the counterclaim in the same or separate action. If the RTC were to dismiss the counterclaim, it should be
on the merits of such counterclaim. Reversal of the RTC is in order, and a remand is necessary for trial on
the merits of the counterclaim.

The formalistic distinction between a complaint and a counterclaim does not detract from the fact that
both of them embody causes of action that have in their end the vindication of rights. While the distinction
is necessary as a means to facilitate order and clarity in the rules of procedure, it should be remembered
that the primordial purpose of procedural rules is to provide the means for the vindication of rights. A party
with a valid cause of action against another party cannot be denied the right to relief simply because the
opposing side had the good fortune of filing the case first. Yet this in effect was what had happened under
the previous procedural rule and correspondent doctrine, which under their final permutation, prescribed
the automatic dismissal of the compulsory counterclaim upon the dismissal of the complaint, whether
upon the initiative of the plaintiff or of the defendant.

Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable disposition of
the counterclaims by ensuring that any judgment thereon is based on the merit of the counterclaim itself
and not on the survival of the main complaint. Certainly, if the counterclaim is palpably without merit or
suffers jurisdictional flaws which stand independent of the complaint, the trial court is not precluded from
dismissing it under the amended rules, provided that the judgment or order dismissing the counterclaim is
premised on those defects. At the same time, if the counterclaim is justified, the amended rules now
unequivocally protect such counterclaim from peremptory dismissal by reason of the dismissal of the
complaint.
CIR v. MIRANT PAGBILAO CORPORATION (now TeaM Energy Corporation)
GR No. 180434, January 20, 2016

Facts:
MPC is engaged in the generation and distribution of electricity to the NAPOCOR. The BIR approved
MPC’s application for Effective Zero-Rating for the construction and operation of its powerplant. For the
taxable year 2000, the quarterly VAT returns filed by MPC showed an excess input VAT paid, so MPC
filed an administrative claim for a refund before the BIR.

Fearing that the period for filing a judicial claim for refund was about to expire, MPC proceeded to file a
petition for review before the CTA without waiting for the CIR’s action on the administrative claim. The
CTA 2nd Division partially granted MPC’s claim by awarding a reduced amount. MPC filed a motion for
partial reconsideration and new trial. The CTA modified amount, but MPC was still dissatisfied. MPC
elevated the matter to the CTA en banc. This was docketed as Case 216.

Meanwhile, the CIR filed an MR of the amended decision of the CTA 2 nd Division, but this was denied.
The CIR then filed a petition for review before the CTA en banc. This was docketed as Case 225.

In Case 216, the CTA en banc sustained the 2nd Division’s decision. In Case 225, the CTA en banc
upheld the ruling of the en banc as well, saying that VAT at 0% rate may be imposed on the sale of
services of MPC to NAPOCOR on the basis of NAPOCOR’s exemption from direct and indirect taxes.

Both parties filed their MRs, which were denied. Thus, the CIR filed a petition for review on certiorari.

Issue: W/N the CTA had jurisdiction to entertain MPC’s claim (which was filed 15 days from filing
its administrative claim for refund and without waiting for the CIR’s action) – NO

Ruling:
While the matter was not raised by the CIR in its petition, it is settled that a jurisdictional issue may be
invoked by either party or even the Court motu proprio, and may be raised at any stage of the
proceedings, even on appeal. In the present dispute, compliance with the requirements on administrative
claims with the CIR, which are to precede judicial actions with the CTA, indubitably impinge on the tax
court’s jurisdiction.

Application of 120+30-day Periods

In CIR v. Aichi, the Court ruled that the premature filing of a claim for refund or credit of input VAT before
the CTA warrants a dismissal, inasmuch as no jurisdiction is acquired by the tax court. Pertinent thereto
are the provisions of Section 112 of the NIRC at the time of MPC’s filing of the administrative and judicial
claims, and which prescribe the periods within which to file and resolve such claims:

Sec. 112. Refunds or Tax Credits of Input Tax. –

(A) Zero-Rated or Effectively Zero-Rated Sales. – Any VAT-registered person, whose sales are
zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of
creditable input tax due or paid attributable to such sales x x x.

xxxx

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. – In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input
taxes within one hundred twenty (120) days from the date of submission of complete
documents in support of the application filed in accordance with Subsections (A) and (B) hereof.
 In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of
the Commissioner to act on the application within the period prescribed above, the taxpayer
affected may, within thirty (30) days from the receipt of the decision denying the claim or
after the expiration of the one hundred twenty-day period, appeal the decision or the
unacted claim with the [CTA].

Contrary to the specified periods, specifically those that are provided in the second paragraph of Section
112(D), MPC filed its petition for review with the CTA on March 26, 2002, or a mere 15 days after it filed
an administrative claim for refund with the CIR on March 11. It then did not wait for the lapse of the 120-
day period expressly provided for by law within which the CIR shall grant or deny the application for
refund.

The compliance with the 120-day waiting period is mandatory and jurisdictional. Failure to comply with the
120-day waiting period violates a mandatory provision of law. It violates the doctrine of exhaustion of
administrative remedies and renders the petition premature and thus without a cause of action, with the
effect that the CTA does not acquire jurisdiction over the taxpayer’s petition.

The charter of the CTA expressly provides that its jurisdiction is to review on appeal "decisions of the
[CIR] in cases involving refunds of internal revenue taxes." When a taxpayer prematurely files a judicial
claim for tax refund or credit with the CTA without waiting for the decision of the Commissioner, there is
no "decision" of the Commissioner to review and thus the CTA as a court of special jurisdiction has no
jurisdiction over the appeal. The charter of the CTA also expressly provides that if the Commissioner fails
to decide within "a specific period" required by law, such "inaction shall be deemed a denial" of the
application for tax refund or credit. It is the Commissioner’s decision, or inaction "deemed a denial," that
the taxpayer can take to the CTA for review. Without a decision or an "inaction deemed a denial" of the
Commissioner, the CTA has no jurisdiction over a petition for review.

The old rule that the taxpayer may file the judicial claim, without waiting for the Commissioner’s decision if
the two-year prescriptive period is about to expire, cannot apply because that rule was adopted before the
enactment of the 30-day period. The 30-day period was adopted precisely to do away with the old rule, so
that under the VAT System the taxpayer will always have 30 days to file the judicial claim even if the
Commissioner acts only on the 120th day, or does not act at all during the 120-day period. With the 30-
day period always available to the taxpayer, the taxpayer can no longer file a judicial claim for refund or
credit of input VAT without waiting for the Commissioner to decide until the expiration of the 120-day
period.

To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the
taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is
compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict compliance with the
120+30 day periods is necessary for such a claim to prosper.

MPC's failure to observe the mandatory 120-day period under the law was fatal to its immediate filing of a
judicial claim before the CTA. It rendered the filing of the CTA petition premature, and barred the tax court
from acquiring jurisdiction over the same. Thus, the dismissal of the petition is in order. "[T]ax refunds or
tax credits - just like tax exemptions - are strictly construed against taxpayers, the latter having the burden
to prove strict compliance with the conditions for the grant of the tax refund or credit."

Extra Note in case Judge asks: From the issuance of BIR Ruling No. DA-489-03 on December 10,
2003 up until October 6, 2010 when the Aichi doctrine was adopted (which again reinstated the 120+30
day periods as mandatory and jurisdiction), the 120+30 day periods is not strictly applied.
APO FRUITS CORP. v. CA and LANDBANK OF THE PHILIPPINES
**Mahaba talaga facts niya, dami nangyari

Facts:
Apo Fruits (AFC) and Hijo Plantation (HPI) owned tracks of land they voluntarily offered to sell to the
government. AFC received separate notices of land acquisition, but they both rejected the valuations for
being very low. Eventually, DAR requested Land Bank to deposit money into the accounts of AFC and
HPI. New titles were issued in favor of the Republic.

AFC and HPI filed separate petitions for determination of just compensation with the DARAB. DARAB
failed to act on these petitions for more than three years, so AFC and HPI filed separate complaints for
determination and payment of just compensation with the RTC, acting as a Special Agrarian Court.

The RTC consolidated the cases and fixed the just compensation due. Land Bank moved for
reconsideration. The RTC merely modified the interest rate. The 3 rd Division of the Supreme Court
affirmed the decision.

On MR, the 3rd Division issued a Resolution, modifying its previous decision by deleting the 12% interest
due on the balance of the awarded just compensation. All parties moved for the reconsideration of the
modified ruling. The Court uniformly denied all the motions in its April 30, 2008 Resolution, and entry of
judgment followed.

Notwithstanding the Entry of Judgment, AFC and HPI filed the following motions:
1) Motion for Leave to File and Admit Second MR;
2) Second MR, with respect to the denial of the award of legal interest and attorney’s fees;
3) Motion to Refer the Second MR to the Honorable Court en banc

The Third Division found the motion to admit the second MR and the motion to refer the second motion to
the Court en banc meritorious. However, the Court en banc, by majority vote, denied the petitioners’
second MR based on the reason that the grant of the second MR runs counter to the immutability of final
decisions. The case is not exception as it does not qualify as a substantial or transcendental matter or an
issue of paramount public interest.

Here, in their MR for the Court en banc’s Resolution, the petitioners argue that the principle of
immutability of judgment does not apply since the Entry of Judgment was issued before the lapse of 15
days from the parties receipt of the April 30, 2008 Resolution, and that they filed their second MR within
15 days from their receipt of the resolution.

Issue: W/N the principle of immutability of judgment applies here – NO

Ruling:
As a rule, a final judgment may no longer be altered, amended, or modified, even if the alteration,
amendment, or modification is meant to correct what is perceived to be an erroneous conclusion of fact or
law and regardless of what court, be it the highest Court of the land, rendered it. In the past, however, the
Court has recognized exceptions to this rule by reversing judgments and recalling their entries in the
interest of substantial justice and where special and compelling reasons called for such actions.

The Court has relaxed this rule in order to serve substantial justice considering (a) matters of life, liberty,
honor or property, (b) the existence of special or compelling circumstances, (c) the merits of the case, (d)
a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the
rules, (e) a lack of any showing that the review sought is merely frivolous and dilatory, and (f) the other
party will not be unjustly prejudiced thereby.

Invariably, rules of procedure should be viewed as mere tools designed to facilitate the attainment of
justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather
than promote substantial justice, must always be eschewed. Even the Rules of Court reflects this
principle. The power to suspend or even disregard rules can be so pervasive and compelling as to alter
even that which this Court itself had already declared to be final.

That the issues posed by this case are of transcendental importance is not hard to discern from these
discussions. A constitutional limitation, guaranteed under no less than the all-important Bill of Rights, is at
stake in this case: how can compensation in an eminent domain be "just" when the payment for the
compensation for property already taken has been unreasonably delayed? To claim, as the assailed
Resolution does, that only private interest is involved in this case is to forget that an expropriation involves
the government as a necessary actor. It forgets, too, that under eminent domain, the constitutional limits
or standards apply to government who carries the burden of showing that these standards have been
met. Thus, to simply dismiss this case as a private interest matter is an extremely shortsighted view that
this Court should not leave uncorrected.

As duly noted in the above discussions, this issue is not one of first impression in our jurisdiction; the
consequences of delay in the payment of just compensation have been settled by this Court in past
rulings. Our settled jurisprudence on the issue alone accords this case primary importance as a contrary
ruling would unsettle, on the flimsiest of grounds, all the rulings we have established in the past.

More than the stability of our jurisprudence, the matter before us is of transcendental importance to the
nation because of the subject matter involved agrarian reform, a societal objective that the government
has unceasingly sought to achieve in the past half century. This reform program and its objectives would
suffer a major setback if the government falters or is seen to be faltering, wittingly or unwittingly, through
lack of good faith in implementing the needed reforms. Truly, agrarian reform is so important to the
national agenda that the Solicitor General, no less, pointedly linked agricultural lands, its ownership and
abuse, to the idea of revolution. This linkage, to our mind, remains valid even if the landowner, not the
landless farmer, is at the receiving end of the distortion of the agrarian reform program.

As we have ruled often enough, rules of procedure should not be applied in a very rigid, technical sense;
rules of procedure are used only to help secure, not override, substantial justice.

Based on all these considerations, particularly the patently illegal and erroneous conclusion that the
petitioners are not entitled to 12% interest, we find that we are duty-bound to re-examine and overturn the
assailed Resolution. We shall completely and inexcusably be remiss in our duty as defenders of justice if,
given the chance to make the rectification, we shall let the opportunity pass.
JUAN PONCE ENRILE v. SANDIGANBAYAN
GR No. 213847, August 18, 2015

Facts:
The Ombudsman charged Enrile and others with plunder in the Sandiganbayan for their alleged
involvement in the diversion and misuse of appropriations under the PDAF. Enrile filed an Omnibus
Motion and Opposition, praying that he be allowed to post bail should probable cause be found against
him. The SB denied, saying it is premature, since Enrile had not yet then voluntarily surrendered or been
placed in custody. The SB ordered his arrest. 

On the same day as the issuance of the warrant, Enrile voluntarily surrendered to the CIDG in Camp
Crame, and was later confined in PNP General Hospital. 

Enrile filed for Motion for Detention in PHP-GH, and his Motion to Fix Bail. He said that he should be
allowed to post bail because: 
a. Prosecution had not yet established that the evidence was strong
b. Although he was charged with plunder, the penalty should be reclusion temporal only 
c. He was not at flight risk, and his age and physical condition must be seriously considered 

The Sandiganbayan issued the first assailed Resolution, denying the Motion to Fix Bail, saying that it shall
be only after the prosecution has presented the evidence, and the determination of the court that the
evidence is not strong, that Enrile can demand bail. The Sandiganbayan issued its second assailed
Resolution, denying Enrile’s MR. 

Issue: W/N Enrile should be granted bail – YES

Ruling:
Bail protects the right of the accused to due process and to be presumed innocent. The purpose of bail is
to guarantee the appearance of the accused at trial, or whenever so required by the trial court. Under the
Bill of Rights, all persons, except those charged with offenses punishable by RP when evidence of guilt is
strong, shall, before conviction, be bailable.

The Court elucidated that bail may be granted as a matter of right, or discretion. It is granted as a matter
of right in cases before the first-level courts, because such courts do not have jurisdiction over cases with
capital offenses, or those punishable by RP, life imprisonment. In the same way, it is a matter of right prior
to the conviction at the RTC when the requisites are fulfilled, that is, when the crime is not a capital
offense, when it is not punishable by RP or life imprisonment, and when the evidence of guilt is not
strong. It is only discretionary upon conviction of the RTC of an offense not punished by death, RP, or life
imprisonment.
`
In the end, Enrile is still entitled to bail because of his health conditions. In keeping with our
responsibilities with international law, the UDHR particularly, the Court decided to grant bail to Enrile
taking into consideration the humanitarian circumstances. This national commitment to uphold human
rights as well as the dignity of the every person, has authorized the grant of bail not only to those in
criminal proceedings, but also extradites, upon showing of no flight risk, and humanitarian and compelling
circumstances.

For the Court, Enrile has been suffering with chronic diseases. It is unlikely that he will surrender
considering this, and that he even voluntarily surrendered to the authorities. Enrile seems to really respect
the legal processes, as evidenced by his behavior at the onset of the PDAF scandal, and his disposition
with his previous charge for rebellion. He is unlikely to become a flight risk. Bail should be granted.
AGUINALDO v. AQUINO III
GR No. 224302, November 29, 2016

Facts:
There were six vacancies for justices in the Sandiganbayan. The JBC submitted six separate lists with 5-7
nominees each for the six vacancies. President Aquino disregarded the clustering of nominees and
appointed as if the six lists were just part of one list of 37 qualified nominees. Aguinaldo and the other
nominees who were not appointed filed a petition for Quo Warranto under Rule 66 and certiorari and
prohibition under Rule 65.

Aguinaldo and the others argue, among others, that the President should have chosen one nominee from
each of the six lists submitted by the JBC. The OSG that the constitutional power of the JBC to
recommend nominees for appointment to the Judiciary does not include the power to determine their
seniority. President Aquino correctly disregarded the order of precedence in the shortlists submitted by
the JBC and exercised his statutory power to determine the seniority of the appointed Sandiganbayan
Associate Justices. It is also the position of the OSG that the President has the absolute discretion to
determine who is best suited for appointment among all the qualified nominees.

Issue:
1. W/N the petition is procedurally infirm – YES (but the Court will take cognizance due to
transcendental importance)
2. W/N President Aquino’s disregard of the clustering of nominees was valid – YES
3. W/N the Motion for Intervention of the JBC should be granted – NO
4. What is the extent of the power of the JBC? – see ruling

Ruling:
1. The Court held that for a quo warranto petition to be successful, the private person suing must
show a clear right to the contested office or position, not just a mere preferential right to be
appointed. Not satisfying this requirement, Aguinaldo and the others are not proper parties to a
quo warranto proceeding. Being included in the list of nominees had given them only the
possibility, but not the certainty, of being appointed to the position, given the discretionary power
of the President in making judicial appointments. It is for this same reason that the other
nominees cannot be impleaded as respondents or unwilling plaintiffs in the proceeding.

Nevertheless, the Court still took into consideration the fact that the petition is also for certiorari
and prohibition, which alleges President Aquino violated Article VIII, Section 9 of the Constitution.
This would not be the first time that the Court, in the exercise of its expanded power of judicial
review, takes cognizance of a petition for certiorari that challenges a presidential appointment for
being unconstitutional or for having been done in grave abuse of discretion.

Even so, the Court finds it proper to drop President Aquino as respondent considering that when
this Petition was filed on May 17, 2016, he was still the incumbent President who enjoyed
immunity from suit.

2. The power to recommend of the JBC cannot be used to restrict or limit the President’s power to
appoint as the President’s prerogative to choose someone whom he/she considers worth
appointing to the Judiciary

President Aquino validly exercised his discretionary power to appoint members of the Judiciary
when he disregarded the clustering of nominees into six separate shortlists for the vacancies for
the 16th, 17th, 18th, 19th, 20th, and 21st Sandiganbayan Associate Justices.

President Aquino merely maintained the well-established practice, consistent with the paramount
Presidential Constitutional prerogative, to appoint the six new Sandiganbayan Associate Justices
from the 37 qualified nominees, as if embodied in one JBC list. This does not violate Article VIII,
 Section 9 of the 1987 Constitution which requires the President to appoint from a list of at least
three nominees submitted by the JBC for every vacancy.

3. Intervening in a case is not a matter of right but of sound discretion of the Court. The allowance or
disallowance of a motion for intervention rests on the sound discretion of the court after
consideration of the appropriate circumstances. It is not an absolute right. The statutory rules or
conditions for the right of intervention must be shown. The procedure to secure the right to
intervene is to a great extent fixed by the statute or rule, and intervention can, as a rule, be
secured only in accordance with the terms of the applicable provision.

The instant Petition was filed before this Court on May 17, 2016, yet the JBC filed its Motion for
Intervention only on November 26, 2016, more than six months later, and even praying for an
additional 30-day period from notice to submit its complaint-in-intervention. Therefore, allowing
the intervention will undoubtedly delay the resolution of the case; and further delay in the
resolution of this case will only perpetuate the doubts on the legitimacy of the appointments.

4. There are several rules and practices adopted by the JBC which the Court takes cognizance of
as a separate administrative matter. Article VIII, Section 8 of the 1987 Constitution gives the JBC
the principal function of "recommending appointees to the Judiciary," but it also explicitly states
that the JBC shall be "under the supervision of the Court" and that "[i]t may exercise such other
functions and duties as the Supreme Court may assign to it."

As a meaningful guidepost, jurisprudence provides the definition and scope of supervision. It is

Supervisory power, when contrasted with control, is the power of mere oversight over an inferior
body; it does not include any restraining authority over such body. Officers in control lay down the
rules in the doing of an act. If they are not followed, it is discretionary on his part to order the act
undone or re-done by his subordinate or he may even decide to do it himself. Supervision does
not cover such authority. Supervising officers merely sees to it that the rules are followed, but he
himself does not lay down such rules, nor does he have the discretion to modify or replace them.
If the rules are not observed, he may order the work done or re-done to conform to the prescribed
rules. He cannot prescribe his own manner for the doing of the act.

The Court had recognized that "[s]upervision is not a meaningless thing. It is an active power. It is
certainly not without limitation, but it at least implies authority to inquire into facts and conditions
in order to render the power real and effective.
REYES v. LIM
GR No. 134241, August 11, 2003

Facts:
Reyes filed a complaint for annulment of contract and damages before the RTC against Lim,
Keng, and Harrison Lumber. He alleges that:
a. He sold Lim a parcel of land in Pasay.
b. Harrison Lumber occupied the property as lessee. Reyes informed Harrison Lumber
to vacate the property, and he also informed Harrison Lumber and Keng that if they
don’t vacate by a certain date, he would hold them liable for the penalty in the
Contract to Sell.
c. Lim and Harrison Lumber connived that the latter would not vacate until the monthly
penalty would have accumulated into the unpaid purchase price.

In their Answer, Keng and Harrison Lumber denied they connived to defraud Reyes.

Reyes filed a Motion for Leave to File Amended Complaint due to supervening facts. These
included Lim filing a complaint for estafa against Reyes and an action for specific performance
and nullification of sale. The RTC granted the motion. In his Amended Answer, Lim prayed for the
cancellation of the Contract to Sell and for the issuance of a writ of preliminary attachment, which
was denied.

On March 6, Lim requested that Reyes be ordered to deposit 10M down payment with the
Paranaque RTC, which was granted. Reyes filed a Motion to Set Aside the March 6 Order,
claiming it practically granted the reliefs prayed for by Lim. The motion was denied by the RTC.
Reyes’ MR was denied as well.

Reyes filed a Petition for Certiorari with the CA. The CA dismissed the petition, ruling that the trial
court could validly issue the assailed orders in the exercise of its equity jurisdiction. The court
may grant equitable reliefs to breathe life and force to substantive law such as Article 1385 of the
Civil Code since the provisional remedies under the Rules of Court do not apply to this case. The
CA held the assailed orders merely directed Reyes to deposit the P10 million to the custody of
the trial court to protect the interest of Lim who paid the amount to Reyes as down payment. This
did not mean the money would be returned automatically to Lim.

Issue: W/N the CA erred in holding that the trial court could require Reyes to deposit 10M during
the pendency of the action, when deposit is not among the provisional remedies enumerated in
Rule 57-61 of the Rules on Civil Procedure – NO

Ruling:
The instant case is precisely one where there is a hiatus in the law and in the Rules of Court. If
left alone, the hiatus will result in unjust enrichment to Reyes at the expense of Lim. The hiatus
may also imperil restitution, which is a precondition to the rescission of the Contract to Sell that
Reyes himself seeks. This is not a case of equity overruling a positive provision of law or judicial
rule for there is none that governs this particular case. This is a case of silence or insufficiency of
the law and the Rules of Court. In this case, Article 9 of the Civil Code expressly mandates the
courts to make a ruling despite the "silence, obscurity or insufficiency of the laws. This calls for
the application of equity, which "fills the open spaces in the law.”

Thus, the trial court in the exercise of its equity jurisdiction may validly order the deposit of the
P10 million down payment in court. The purpose of the exercise of equity jurisdiction in this case
is to prevent unjust enrichment and to ensure restitution. Equity jurisdiction aims to do complete
justice in cases where a court of law is unable to adapt its judgments to the special circumstances
of a case because of the inflexibility of its statutory or legal jurisdiction. Equity is the principle by
which substantial justice may be attained in cases where the prescribed or customary forms of
ordinary law are inadequate.

Reyes is seeking rescission of the Contract to Sell. In his amended answer, Lim is also seeking
cancellation of the Contract to Sell. The trial court then ordered Reyes to deposit in court the P10
million down payment that Lim made under the Contract to Sell. Reyes admits receipt of the P10
million down payment but opposes the order to deposit the amount in court. Reyes contends that
prior to a judgment annulling the Contract to Sell, he has the "right to use, possess and enjoy" the
P10 million as its "owner" unless the court orders its preliminary attachment.

To subscribe to Reyes’ contention will unjustly enrich Reyes at the expense of Lim. Reyes sold to
Line One the Property even before the balance of P18 million under the Contract to Sell with Lim
became due on 8 March 1995. On 1 March 1995, Reyes signed a Deed of Absolute Sale in favor
of Line One. On 3 March 1995, the Register of Deeds issued TCT No. 13476730 in the name of
Line One. Reyes cannot claim ownership of the P10 million down payment because Reyes had
already sold to another buyer the Property for which Lim made the down payment. In fact, in his
Comment dated 20 March 1996, Reyes reiterated his offer to return to Lim the P10 million down
payment.

On balance, it is unreasonable and unjust for Reyes to object to the deposit of the P10 million
down payment. The application of equity always involves a balancing of the equities in a
particular case, a matter addressed to the sound discretion of the court. Here, the equities weigh
heavily in favor of Lim, who paid the P10 million down payment in good faith only to discover later
that Reyes had subsequently sold the Property to another buyer.

There is also no plausible or justifiable reason for Reyes to object to the deposit of the 10M down
payment in court since both Reyes and Lim are now seeking rescission of the Contract to Sell.
Under Article 1385 of the Civil Code, rescission creates the obligation to return the things that are
the object of the contract. Rescission is possible only when the person demanding rescission can
return whatever he may be obliged to restore. A court of equity will not rescind a contract unless
there is restitution, that is, the parties are restored to the status quo ante.

Thus, since Reyes is demanding to rescind the Contract to Sell, he cannot refuse to deposit the
P10 million down payment in court. Such deposit will ensure restitution of the P10 million to its
rightful owner. Lim, on the other hand, has nothing to refund, as he has not received anything
under the Contract to Sell.

The principle that no person may unjustly enrich himself at the expense of another is embodied in
Article 2238 of the Civil Code. This principle applies not only to substantive rights but also to
procedural remedies. One condition for invoking this principle is that the aggrieved party has no
other action based on contract, quasi-contract, crime, quasi-delict or any other provision of law.
Courts can extend this condition to the hiatus in the Rules of Court where the aggrieved party,
during the pendency of the case, has no other recourse based on the provisional remedies of the
Rules of Court. Thus, a court may not permit a seller to retain, pendente lite, money paid by a
buyer if the seller himself seeks rescission of the sale because he has subsequently sold the
same property to another buyer. By seeking rescission, a seller necessarily offers to return what
he has received from the buyer. Such a seller may not take back his offer if the court deems it
equitable, to prevent unjust enrichment and ensure restitution, to put the money in judicial
deposit.

There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against the fundamental principles of justice,
equity and good conscience. In this case, it was just, equitable and proper for the trial court to
order the deposit of the P10 million down payment to prevent unjust enrichment by Reyes at the
expense of Lim.