CIVIL PROCEDURE

RULE 3: PARTIES IN
CIVIL ACTION
Presented by: Emely Magno

Prof. JUSTICE CARMELITA S. MANAHAN (Ret.)

Sections 16-21, Rule 3 on the Rules of Civil Procedure
 Section 16: Death of a party and duty of the counsel
 Section 17: Death or separation of a party who is a public officer
 Section 18: Incompetency or incapacity of a party
 Section 19: Transfer of interest
 Section 20: Action on contractual money claims
 Section 21: Indigent party
SEC. 16, RULE 3 ON THE RULES OF
CIVIL PROCEDURE
DEATH OF A PARTY AND DUTY OF THE COUNSEL
SEC. 16: DEATH OF PARTY; DUTY OF COUNSEL-
The claim is not extinguished whenever a party to a pending action dies. It shall be the duty of his counsel to inform
the court within thirty (30) days after such death of the fact thereof, and to give the name and address of his legal
representative or representatives. Counsel’s failure to comply with this duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an
executor or administrator and the court may appoint a guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of
thirty (30) days from notice.
The court may order the opposing party, within a specified time, to procure the appointment of an executor or
administrator for the estate of the deceased and the latter shall immediately appear for and on behalf of the deceased if
no legal representative is named by the counsel for the deceased party, or if the one so named shall fail to appear within
the specified period. The court charges in procuring such appointment, if defrayed by the opposing party, may be
recovered as costs.
What are the duties of a counsel in case of death of party in an
action that survives?

 Whenever a party to a pending action

dies, and the claim is not thereby
extinguished, it shall be the duty of his
counsel to:
1. Inform the court within thirty (30)
days after such death of the fact thereof;
2. To give the name and address of
his legal representative or representatives.
What is the liability of the counsel to report the fact of death of
the party?

 Failure of the counsel to comply with

this duty shall be a ground for
disciplinary action.
What is the purpose of the rule?

 The rule is intended to protect every party’s right to due process.

 The estate of the deceased party will continue to be properly represented in the
suit, through the duly appointed legal representative. Moreover, no adjudication can
be made against the successor of the deceased if the fundamental right to a day in
court is denied. (Jose Ramilo O. Regalado vs. Chaucer B. Regalado, G.R. No.
196919, June 6, 2011)
Is formal notice of substitution required if the heirs already
participated in the case?

 No. A formal substitution of the heirs in place of the deceased is no longer

necessary if the heirs continued to appear and participated in the proceedings of
the case. (Joel Cardenas, Heir of the Late Elinaida L. Alcantara, represented by
Antonio Ignacio, Jr. vs. Heirs of the Late Sps Simplicia Aguilar, et al., G.R. No.
191079, March 2, 2016)
 Generoso Saligumba vs Monica Palanog (G.R. No. 143365,
December 4, 2008)

Complaint for quieting of title

Sps. Palanog
Spouses Monica and Avelino Palanog filed a complaint for quieting of title with damages against
Sps. Saligumbas
spouses Valeria Saligumba and Eliseo Saligumba, Sr. The spouses Palanogs alleged that they
have been in actual, open, adverse and continuous possession as owners for more than 50 years
of a land in Aklan. Allegedly, the spouses Saligumbas prevented them from entering and residing
on the said property and had destroyed the barbed wires enclosing the land. Thus, spouses
Palanogs prayed that they be declared the true and rightful owners of the same.
•  During the proceedings, Sps. Saligumba died.
• Atty. Miralles, failed to inform the court of the said events.
Further, he was appointed as an MCTC judge and told the
court that he would withdraw as counsel for the spouses
Saligumbas because of it.
• On the date of the presentation of evidence of the spouses
Saligumbas, only spouses Palanogs and their counsel
appeared. Thus, upon motion of the spouses Palanogs, the
spouses Saligumbas were deemed to have waived the
presentation of their evidence.
• The RTC rendered jugment declaring the spouses Palanogs
as the righful owners of the land and ordering the spouses
Saligumbas to vacate the premises.
 RTC: Ruled in favor of Monica Palanog.  It also ruled that
the non-substitution of the deceased spouses did not have
any legal significance as it was solely the negligence of
the spouses Saligumba's counsel by failing to inform the
court of the death of his client.

Heirs of Spouses Saligumbas: The 1987 decision should

be rendered void since there was no proper substitution of
the deceased spouses Saligumbas despite the trial court's
knowledge that the deceased spouses Saligumbas were
no longer represented by counsel. Thus, they were
deprived of due process.
Issues
When will the substituting heirs appear before the court?

 The duty of the courts to order the legal

representative or heir to appear arises
only “upon proper notice”. The notation
“Party-Deceased” on the unserved
notices could not be the “proper notice”
contemplated by the rule.
 As the trial court could not be expected
to know or take judicial notice of the
death of a party without the proper
manifestation from counsel, the trial
court was within its jurisdiction to
proceed as it did with the case.
What are the effects of failure of the counsel to inform the court of
the fact of death of the party and to file a substitution of heirs?

 The failure of counsel to comply with his duty to inform the court of the death of his
client and the non- substitution of such party will not invalidate the proceedings and
the judgement thereon if the action survives the death of such party.
 The complaint filed at that time was an action for quieting of title with damages
which is an action involving real property. It is an action that survives pursuant to
Section 1, Rule 87 as the claim is not extinguished by the death of a party.
 The decision rendered shall bind the party’s successor-in-interest. The rules operate
on the presumption that the attorney for the deceased party is in better position
than the attorney for the adverse party to know about the death of his client and to
inform the court of the name and address of his legal representative.
Petitioners should have questioned immediately the
validity of the proceedings absent any formal
substitution. Yet, despite the court's alleged lack of
jurisdiction over the persons of petitioners, they never
bothered to challenge the same, and in fact allowed the
proceedings to go on until the trial court rendered its
decision.

PETITION
How to determine whether the action survives or not?

 The action as to whether an action survives or not depends on the nature of the
action and the damage sued for.

 In the causes of action which survive, the wrong complained affects primarily and principally
property and property rights, the injuries to the person being merely incidental.

 In the causes of action which do not survive, the injury complained of is to the person, the property
and rights of property affected being incidental. (Pacific Rehouse Corp. vs. Joven Ngo, as
represented by Oscar Garcia, G.R. No. 214934, April 12, 2016)
What is the nature of the rule on substitution of heirs?

 The rule on substitution by heir is not a

matter of jurisdiction, but a requirement
of due process. Mere failure to
substitute a deceased party is not
sufficient ground to nullify a trial court’s
decision. The party alleging nullity must
prove that there was an undeniable
violation of due process. (Capitolina
Vivero Napere vs. Armando Barbarona,
G.R. No. 160426, January 31, 2008)
SEC. 17, RULE 3 ON THE RULES OF
CIVIL PROCEDURE
DEATH OR SEPARATION OF A PARTY WHO IS A PUBLIC OFFICER
SEC. 17: DEATH OR SEPARATION OF A PARTY WHO
IS A PUBLIC OFFICER
When a public officer is a party in an action in his official capacity and during its pendency dies,
resigns, or otherwise ceases to hold office, the action may be continued and maintained by or
against his successor if, within thirty (30) days after the successor take office or such time as
may be granted by the court, it is satisfactorily shown to the court by any party that there is a
substantial need for continuing or maintaining it and that the successor adopts or continues or
threatens to adopt or continue the action of his predecessor. Before a substitution is made, the
party or officer to be affected , unless expressly assenting thereto, shall be given reasonable
notice of the application therefor and accorded an opportunity to be heard.
What are the effects in case of death or separation of a
party who is a public officer?
When a public officer is a party in an action in his
official capacity and during its pendency dies,
resigns, or otherwise ceases to hold office, the
action may be:

1. Continued and maintained by or against

his successor of, within 30 days after the
successor takes office or such time as may
be granted by the court, if it is satisfactorily
shown to the court by any party that there is
a substantial need for continuing or
maintaining it and that the successor adopts
or continues or threatens to adopt or
continue the action of his predecessor.

2. Before a substitution is made, the party or

officer to be affected, unless expressly
assenting thereto, shall be given reasonable
notice of the application therefor and
accorded an opportunity to be heard.
SEC. 18, RULE 3 ON THE RULES OF
CIVIL PROCEDURE
INCOMPETENCY OR INCAPACITY OF A PARTY
SEC. 18. INCOMPETENCY OR INCAPACITY
When a party becomes incompetent or incapacitated, the court, upon motion with notice, may
allow the action to be continued by or against the incompetent or incapacitated person assisted
by his legal guardian or guardian ad litem
What is the effect if the party to the action becomes
incompetent or incapacitated?

 If a party becomes incompetent or

incapacitated, the court, upon motion
with notice, may allow the action to be
continued by or against the incompetent
or incapacitated person assisted by his
legal guardian or guardian ad litem.
SEC. 19, RULE 3 ON THE RULES OF
CIVIL PROCEDURE
TRANSFER OF INTEREST
SEC. 19. TRANSFER OF INTEREST
The action may be continued by or against the original party in case of any transfer of interest,
unless the court upon motion directs the person to whom the interest is transferred to be
substituted in the action or joined with the original party.
What is the effect in case of transfer of interest by the party?

 In case of any transfer of interest by the

party, the court may allow:
1.The action may be continued by or
against the original party;
2. Unless the court upon motion
directs the person to whom the interest is
transferred to be substituted in the action
or joined with the original party.
What is the nature of substitution of parties on account of
transfer of interest?

 The rule on substitution of parties on account of transfer of interest is not

mandatory but rather discretionary.
 The language of Sec. 19 reflects a wide latitude and considerable leeway given to
the court in ascertaining the propriety of substituting a party by another on account
of a transfer of interest.
 Whether or not a change or substitution of party can take place is left to the sound
discretion of the court. However, it is equally true that the discretionary nature of
allowing the substitution or joinder by the transferee demands that the court’s
determination must be well- within the sphere of law, guided by applicable statutory
principles, and supported by factual and legal bases.
Siguion Reyna Montecillo and Ongsiako Law Offices v Hon.
Norma Chionlo-Sia, G.R. No. 181186, February 3, 2016)

 Petitioner Siguion Reyna Montecillo & Ongsiako Law Offices

(SRMO) acted as counsel for Remedios N. Rodriguez
(Remedios) when she commenced an action for the intestate
settlement of the estate of her deceased husband, Susano J.
Rodriguez, before the Regional Trial Court (RTC) of Lucena
City.
 During the pendency of the intestate proceedings, Remedios
asked for the payment of widow's allowance. This, however,
was denied by the RTC. On review, the Court of Appeals (CA)
promulgated a decision reversing the RTC's Order and

SRMO
granted Remedios a monthly widow's allowance of P3,000.00.

 While the case was pending before the CA, Remedios

executed a Deed of Sale of Inheritance (Deed of Sale) wherein
she agreed to sell all her rights, interests and participation in
the estate of her husband to Remigio M. Gerardo (Gerardo).
  As a condition subsequent to the sale,
Remedios executed a special power of attorney
(SPA) authorizing Gerardo to receive from any
REMEDIOS GERARDO SRMO person, entity, government agency or
instrumentality, or from any court, any
property, real or personal, cash, checks or
Special Power of Substitution of Substitute other commercial documents which may be
Attorney Attorney-in-Fact Attorney due to her or payable to her by virtue of any
contract, inheritance or any other legal means
and to receive said property in his own name
and for his own account and to deposit the
same at his sole discretion for his own
account, and dispose of the same without any
limitation.
 Gerardo later on executed a document entitled
as "Substitution of Attorney-in-Fact,“ where he
designated SRMO as substitute attorney
pursuant to the power of substitution granted
to him in the earlier SPA.
 Gerardo subsequently executed his own SPA
authorizing SRMO "to appear and represent
him in any and all proceedings and incidents in
the aforementioned case
 After the CA's decision regarding the widow's allowance became final and
executory, SRMO filed a motion with the RTC for the payment of the allowance
then amounting to a total of P315,000.00.
 The Estate of Deceased Susano J. Rodriguez (Estate) remitted to SRMO three (3)
checks totaling this amount.
 RTC motu proprio directed SRMO to reimburse the Estate the amount of
P315,000.00 representing the widow's allowance it received.
 SRMO moved to be excused from reimbursing the Estate. According to SRMO,
when it sought the payment of the widow's allowance, it was merely seeking the
enforcement of a judgment credit in favor of its client, Remedios, who had, in
turn, sold her interests to Gerardo, also represented by SRMO.
 Issue
Whether or not SRMO should reimburse the Estate
Held
 The facts show that SRMO became involved in its own capacity only when the RTC ordered it to return
the money that it received on behalf of its client. The order of reimbursement was directed to SRMO in
its personal capacity—not in its capacity as counsel for either Remedios or Gerardo.

 The Court find this directive unusual because the order for reimbursement would typically have been
addressed to the parties of the case; the counsel's role and duty would be to ensure that his client
complies with the court's order. The underlying premise of the RTC's order of reimbursement is that,
SRMO kept or appropriated the money. But the premise itself is untenable because SRMO never
claimed the amount for its own account. In fact, it is uncontroverted that SRMO only facilitated the
transfer of the amount to Gerardo.
 Under the law of agency, an agent is not personally liable for the obligations of the principal unless he
performs acts outside the scope of his authority or he expressly binds himself to be personally liable.
Otherwise, the principal is solely liable. Here, there was no showing that SRMO bound itself personally
for Gerardo's obligations. SRMO also acted within the bounds of the authority issued by Gerardo, as
the transferee pendente lite of the widow's interest, to receive the payment.
  It appears that the RTC's primary justification for ordering SRMO to return the money from
its own pocket is due to the latter's failure to formally report the transfer of interest from
Remedios to Gerardo. While it certainly would have been prudent for SRMO to notify the
RTC, the Rules of Court do not require counsels of parties to report any transfer of
interest. The Rules do not even mandate the substitution of parties in case of a transfer
of interest. Rule 3, Section 19 of the Rules of Court provides:

Section. 19. Transfer of interest. — In case of any transfer of interest,

the action may be continued by or against the original party, unless the
court upon motion directs the person to whom the interest is
transferred to be substituted in the action or joined with the original
party.

 The Rules already consider Gerardo joined or substituted in the proceeding commencing at the
exact moment when the transfer of interest was perfected between original party-transferor,
Remedios, and the transferee pendente lite, Gerardo.
 Given the foregoing, the Court find that the RTC was unjustified in ordering SRMO, in its own
capacity, to return the money to the Estate despite the fact, as certified to by Gerardo's heirs,
that SRMO had already accounted for all monies or funds it had received on its client's behalf to
Gerardo. If the RTC was convinced that the Estate had a right to reimbursement, it should have
ordered the party who ultimately benefited from any unwarranted payment—not his lawyer—to
return the money.
SEC. 20, RULE 3 ON THE REVISED
RULES OF CIVIL PROCEDURE
ACTION ON CONTRACTUAL MONEY CLAIMS
SEC. 20.- ACTION ON CONTRACTUAL MONEY
CLAIMS
When the action is for recovery of money arising from contract, express or implied, and the
defendant dies before entry of final judgement in the court in which the action was pending at
the time of such death, it shall not be dismissed but shall instead be allowed to continue until
entry of final judgement. A favorable judgement obtained by the plaintiff therein shall be
enforced in the manner especially provided in these Rules for prosecuting claims against the
estate of a deceased person.
What is the effect in case of death of a party in an action based
on a contractual money claims?

 When the action is for a recovery of money arising from a contract, express or
implied, and the defendant dies before entry of final judgement in the court in which
the action was pending at the time of such death, the case shall:
a. It will not be dismissed but shall instead be allowed to continue until entry of
final judgement; and
b. In case of a favorable judgement obtained by the plaintiff therein shall be
enforced in the manner especially provided in these Rules for prosecuting claims
against the estate of a deceased person.
What are the actions that survives the death of the party?

 Actions that survive the death of the party under the rules are as follows, to wit:

1. Action for the recovery of money arising from contract, express or implied (Sec.
20, Rule 3);
2. Actions to recover real property;
3. Recovery of personal property or an interest therein, from the estate, or to
enforce a lien thereon; and
4. Actions to recover damages for an injury to person or property, real or
personal, may be commenced against him. (Sec. 1, Rule 87)
How will the judgement be enforced in case of death of a party
during the pendency of the action?

 In case of death of the defendant, the case will continue and judgement shall be
enforced against the estate.
When to file the claim against the estate based on a favorable
judgement?

 It shall be filed immediately after granting letters testamentary or of administration,

the court shall issue a notice requiring all persons having money claims against the
decedent to file them in the office of the clerk of said court. (Sec. 1, Rule 86 of the
Rules of Court)
What are the claims which can be charged against the estate?

 The following may be claimed against the estate of the deceased:

1. All claims for money against the decedent, arising from contract, express or
implied, whether the same be due, not due, or contingent;
2. All claims for funeral expenses;
3. Expenses for the last sickness of the decedent; and
4. Judgement for money against the decedent, must be filed within the time
limited in the notice. (Sec. 5, Rule 86 of the Rules of Court)
What is the effect if the claim is not filed within the period
prescribed?

 Claims after notice issued by the court

must be filed within the time limited in
the notice; otherwise they are barred
forever.(Sec. 5, Rule 86)
What is the remedy of the claimant if he failed to file his claim
within the time prescribed?

 Claims not filed may be set forth as

counter claims in any action that the
executor or administrator may bring
against the claimants. (Sec. 5, Rule 86)
What are the remedies of the debtor in case an action is commenced
by the deceased and prosecuted by the executor or administrator?

 Where an executor or administrator commences an action, or prosecutes an action

already commenced by the deceased in his lifetime, the debtor may:
a. Set forth by answer the claims he has against the decedent, instead of
presenting independently to the court;
b. Mutual claims may be set off against each other in such action;
c. If final judgement is rendered in favor of the defendant, the amount so
determined shall be considered the true balance against the estate, as though the
claim had been presented directly before the court in the administration proceedings;
and
d. Claims not yet due, or contingent, may be approved at their present value.
Pasda, Inc. vs. Reynaldo Dimayacyac Sr., substituted by the
Heirs (G. R. No. 220479, August 17, 2016)

Facts PASDA, Inc and Reynaldo P. Dimayacyac, Sr. entered into a Contract of Lease of Suite 506
PASDA Mansion in Quezon City. Dimayacyac vacated the unit leaving an outstanding
arrearage for monthly rentals in the aggregate amount of P340,071.00.

 Pursuant to the lease contract, PASDA took possession of Dimayacyac's articles and
equipment found in the rented unit and prepared an inventory of the said items. In spite of the
lapse of the agreed 30-day period to settle his obligations and the demand letters sent to him,
he still failed to pay his outstanding obligation.

 PASDA filed a complaint for sum of money before the MeTC against Dimayacyac to collect the
outstanding obligation in the amount of P340,071.00. MeTC found Dimayacyac liable for the
amount claimed in PASDA's complaint. It, however, reduced the amount from P340,071.00 to
P16,271.00 because it deducted the value of the items confiscated by PASDA, which amounted
to P323,800.00. Unsatisfied with the reduction of the monetary award, PASDA appealed before
the RTC.
 RTC and CA affirmed MeTC’s decision but with modifications. The appellate court opined
that it was appropriate to deduct the value of the mentioned items from Dimayacyac's
total liability. It cited paragraph 23 of the lease contract, which authorized PASDA to
retain Dimayacyac's properties inside the leased unit, in case of the latter's default, and
to dispose the same in a private sale and apply the proceeds thereof against the
outstanding obligation. This forfeiture clause, according to the CA, was ruled to be valid
by the Court in Fort Bonifacio Development Corp. v. Yllas Lending Corp. (Fort Bonifiacio).

 In the course of the proceedings before the CA, Dimayacyac died and he was substituted
by his heirs as respondents.
 Issue
Whether or not PASDA’s money claim should be enforced
against Dimayacyac’s Estate
Held
Section 20, Rule 3 of the Rules of Court provides:

When the action is for recovery of money arising from contract, express or
implied, and the defendant dies before entry of final judgment in the court in
which the action was pending at the time of such death, it shall not be
dismissed but shall instead be allowed to continue until entry of final
judgment. A favorable judgment obtained by the plaintiff therein shall be
enforced in the manner especially provided in these Rules for prosecuting
claims against the estate of a deceased person.
 From the foregoing provisions of the Rules of Court, it is clear that in the
event that the respondent-debtor dies during the pendency of the case,
the same is not dismissed but is allowed to continue. If, eventually, the
court rules against the deceased respondent, the same shall be enforced
as a claim against his estate, and not against the individual heirs.

 The fact that Dimayacyac's heirs have not instituted any action for the
settlement of his estate does not warrant the conclusion that the
judgment award must be enforced against the individual heirs.
SEC. 21, RULE 3 ON THE RULES OF
CIVIL PROCEDURE
INDIGENT PARTY
SEC. 21. INDIGENT PARTY
If the court, upon an ex parte application and hearing, is satisfied that the party is one who has no
money or property sufficient and available for food, shelter and basic necessities for himself and his
family, a party may be authorized to litigate his action, claim or defense as an indigent.
Such authority shall include an exemption from payment of docket and other lawful fees, and of
transcripts of stenographic notes which the indigent was exempted from paying shall be a lien on any
judgement rendered in the case favorable to the indigent, unless the court otherwise provides.
Any adverse party may contest the grant of such authority at any time before judgement is
rendered by the trial court. The proper docket and other lawful fees shall be assessed and collected
by the clerk of court if it determined after hearing that the party declared as an indigent is in fact a
person with sufficient income or property. If payment is not made within the time fixed by the court,
execution shall issue for the payment thereof, without prejudice to such other sanctions as the court
may impose.
Who is an indigent party?

 An indigent party is one who is allowed

to litigate an action who has no money
or property sufficient and available for
food, shelter, and basic necessities for
himself and his family.
What are the requirements to be declared as an indigent?

 A party may be authorized to litigate his action, claim or defense as an indigent if

the court allows subject to the following requirements:
1. Upon an ex parte application and hearing;
2. The court is satisfied that the party is one who has no money or property
sufficient and available for food, shelter, and basic necessities for himself and his
family.
What are the effects of declaration of a party as an indigent?

 If a party is declared by the court as an

indigent party, the authority shall
include:
1. An exemption from the payment of
docket and other lawful fees; and
2. Exemption from the payment of
transcripts of stenographic notes which the
court may order to furnish him.
Note: The amount of the docket and other
lawful fees which the indigent was
exempted from paying shall be a lien on
any judgement rendered in the case
favorable to the indigent, unless the court
otherwise provides.
What is the remedy of the adverse party in case of declaration
of indigency?

Any adverse party may contest the grant of such authority at any time
before the judgment is rendered by the trial court.
What is the effect if the party has sufficient income?

 If the court should determine after hearing that the party declared as an indigent is
in fact a person with sufficient income or property, that court may:
1. Order that the proper docket and other lawful fees shall be assessed and
collected by the clerk of court;
2. If payment is not made within the time fixed by the court, execution shall issue
for the payment thereof, without prejudice to such other sanctions as the court may
impose.
What are the requirements for a party to be declared as an
indigent?

 Indigent litigants shall have the following qualifications to be declared as such:

1. Whose gross income and that of their immediate family do not exceed four
thousand (Php 14,000) pesos a month if residing in Metro Manila and three thousand
(Php 13, 000) pesos a month if residing outside Metro Manila; and
2. Who do not own real property with an assessed value of more than fifty
thousand (Php 50, 000) pesos shall be exempt from the payment of legal fees.
What are the other documentary requirements for the litigant
to comply?

 To be entitled to the exemption, the

litigant shall execute an affidavit and
shall state that:
1. He and his immediate family do not
earn a gross income abovementioned;
2.They do not own any real property
with the assessed value aforementioned;
3. It must be supported by an affidavit
of a disinterested person attesting to the
truth of the litigant’s affidavit.
What is the effect in case the litigant made a falsity in his
affidavit?

 Any falsity in the affidavit of a litigant or

disinterested person shall be sufficient
cause to strike out the pleading of that
party, without prejudice to whatever
criminal liability may have been
incurred.
(Samsoden Pangcatan vs Alexandro Maghuyop, et al., and Bankiao et al. vs
Samsoden Pangcatan, G.R. No. 194412/ G.R. No. 194566, November 16, 2016)

Facts
 Pangcatan commenced civil case in the RTC to recover various damages he had suffered from the vehicular
accident caused by the negligence of the defendants. Defendants Alexandro "Dodong" Maghuyop and
. Belindo Bankiao were respectively the owner and driver of the passenger van that Pangcatan had hired to
transport himself and the goods he had purchased in Pagadian City to his store in Margosatubig,
Zamboanga del Sur.

 Pangcatan’s right leg had been fractured, and he had lost all the goods he had bought in Pagadian City.

 Pangcatan's complaint alleged that his estimated daily income before the accident was P400.00/day; that
because of his injury, he could never sell again or engage in any other business; and that his medical bills
and the costs of his surgical operation would easily run up to P500,000.00.

 When he filed his complaint, Pangcatan also filed his Ex Parte Motion for Leave to File Case as Pauper
Litigant, which the RTC granted under the condition that the filing fees would constitute a first lien on any
favorable monetary judgment that he would recover from the suit.
 Instead of filing their answer, Maghuyop and Bankiao moved to dismiss the complaint based on several
grounds, which includes the ground that the plaintiff, a well known businessman, was not an indigent
litigant.

 The RTC denied the motion to dismiss because the movants did not substantiate the grounds of the
motion. Maghuyop and Bankiao did not file their answer subsequently, and were declared in default as
a consequence.

 Pangcatan then presented ex parte his evidence against them. Later on, they submitted their Comment
and Opposition to Plaintiff's Formal Offer of Evidence with Motion to Strike Out All Pleadings filed by
the Plaintiff, whereby they maintained that Pangcatan was not an indigent litigant based on his offer of
documentary evidence and his pleadings, and that, as such, he was not entitled to the services and
representation of any lawyer from the Public Attorney's Office; that the RTC did not acquire jurisdiction
over the case by virtue of the non-payment of the required docket fees; and that the complaint should
be expunged from the records.

 The RTC rendered judgment in favor of Pangcatan which was annulled and set aside by the CA. The
case is REMANDED to the RTC which is ordered to hear the plaintiff-appellee's Ex-Parte Motion for
Leave to File Case as Pauper Litigant, applying Rule 3, Section 21 of the Rules of Court to determine
whether plaintiff-appellee can qualify as an indigent litigant; and, after which to decide the case on the
merits with dispatch.
 Issue
Whether or not the Court of Appeals (CA) justifiably
annulled and set aside the judgment of the Regional
Trial Court (RTC) on the ground that the RTC had not
received evidence showing said party's being an indigent
litigant exempt from the payment of filing fees.
Held
 The rule Is that when an action is filed in court, the complaint must be accompanied by the payment of the
requisite docket and filing fees. Section 1, Rule 141 of the Rules of Court expressly requires that upon the filing of
the pleading or other application that initiates an action or proceeding, the prescribed fees for such action or
proceeding shall be paid in full. If the complaint is filed but the prescribed fees are not paid at the time of filing,
the courts acquire jurisdiction only upon the full payment of such fees within a reasonable time as the courts may
grant, barring prescription.

 Nonetheless, Section 11, Article III of the Constitution has guaranteed free access to the courts, to wit:

Section 11. Free access to the courts and quasi-judicial bodies and adequate legal assistance shall not be
denied to any person by reason of poverty.

 This guarantee of free access to the courts is extended to litigants who may be indigent by exempting them from
the obligation to pay docket and filing fees.
 The procedure governing an application for authority to litigate as an indigent party as provided under
Section 21, Rule 3 and Section 19, Rule 141 of the Rules of Court have been synthesized in Algura v. The
Local Government Unit of the City of Naga.

 Algura stipulates that when the application to litigate as an indigent litigant is filed, the trial court shall:

 Scrutinize the affidavits and supporting documents submitted by the applicant to determine if he
complies with the income and property standards prescribed in the present Section 19 of Rule 141;

 That if the trial court finds that he meets the income and property requirements, the authority to
litigate as indigent litigant is automatically granted, and the grant is a matter of right;

 That, if the trial court finds that one or both requirements have not been met, it should then set a
hearing to enable the applicant to prove that he has "no money or property sufficient and available
for food, shelter and basic necessities for himself and his family;"
 That in that hearing, the adverse party may adduce countervailing evidence to disprove the
evidence presented by the applicant;

 That, afterwards, the trial court will rule on the application depending on the evidence adduced;

 That, in addition, Section 21 of Rule 3 provides that the adverse party may later still contest the
grant of such authority at any time before judgment is rendered by the trial court, possibly based
on newly discovered evidence not obtained at the time the application was heard;

 That, if the trial court determines after hearing that the party declared as an indigent is in fact a
person with sufficient income or property, the proper docket and other lawful fees shall be
assessed and collected by the clerk of court; and that if payment is not made within the time fixed
by the trial court, execution shall issue or the payment of the prescribed fees shall be made,
without prejudice to other sanctions that the trial court may impose.
 The Court ruled that the CA grossly erred in annulling and setting aside the judgment of the RTC based
solely on the non-payment of the filing fees. If the RTC had incorrectly granted Pangcatan's Ex Parte
Motion for Leave to File Case as Pauper Litigant, the grant was not jurisdictional but an error of judgment
on its part as the trial court.

 It is true that the non-payment of the filing fees usually prevents the trial court from acquiring jurisdiction
over the claim stated in the complaint But for the CA to annul the judgment rendered after trial based
solely on such non-payment was not right and just considering that the non-payment of the filing fees
had not been entirely attributable to the plaintiff alone. The trial court was more, if not exclusively, to
blame for the omission. For sure, all that Pangcatan had done was to apply for the exemption, leaving to
the RTC the decision whether or not to grant his application. Moreover, the CA disregarded the fact that
the RTC had granted his Ex Parte Motion for Leave to File Case as Pauper Litigant and had allowed him to
litigate as an indigent party subject to the condition that the legal fees would constitute a first lien on the
monetary judgment to be rendered after trial.

 Pangcatan was represented from the start by the Public Attorney's Office (PAO). The exemption of the
clients of the PAO like him from the payment of the legal fees was expressly declared by law for in
Republic Act No. 9406.
THANK YOU!

Emely R. Magno