Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 185734

July 3, 2013

ALFREDO C. LIM, JR., PETITIONER,

vs.
SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO, RESPONDENTS.
RESOLUTION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari 1 are the July 10, 2008 Decision2 and December 18,
2008 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 100270, affirming the March 29,
2007 Order4 of the Regional Trial Court of Quezon City, Branch 223 (RTC), which lifted the writ of
preliminary attachment issued in favor of petitioner Alfredo C. Lim, Jr. (Lim, Jr.).
The Facts
On August 22, 2005, Lim, Jr. filed a complaint 5 for sum of money with prayer for the issuance of a
writ of preliminary attachment before the RTC, seeking to recover from respondents-spouses Tito S.
Lazaro and Carmen T. Lazaro (Sps. Lazaro) the sum of P2,160,000.00, which represented the
amounts stated in several dishonored checks issued by the latter to the former, as well as interests,
attorneys fees, and costs. The RTC granted the writ of preliminary attachment application 6 and upon
the posting of the required P2,160,000.00 bond,7 issued the corresponding writ on October 14,
2005.8 In this accord, three (3) parcels of land situated in Bulacan, covered by Transfer Certificates
of Title (TCT) Nos. T-64940, T-64939, and T-86369 (subject TCTs), registered in the names of Sps.
Lazaro, were levied upon.9
In their Answer with Counterclaim, 10 Sps. Lazaro averred, among others, that Lim, Jr. had no cause
of action against them since: (a) Colim Merchandise (Colim), and not Lim, Jr., was the payee of the
fifteen (15) Metrobank checks; and (b) the PNB and Real Bank checks were not drawn by them, but
by Virgilio Arcinas and Elizabeth Ramos, respectively. While they admit their indebtedness to Colim,
Sps. Lazaro alleged that the same had already been substantially reduced on account of previous
payments which were apparently misapplied. In this regard, they sought for an accounting and
reconciliation of records to determine the actual amount due. They likewise argued that no fraud
should be imputed against them as the aforesaid checks issued to Colim were merely intended as a
form of collateral.11 Hinged on the same grounds, Sps. Lazaro equally opposed the issuance of a writ
of preliminary attachment.12
Nonetheless, on September 22, 2006, the parties entered into a Compromise Agreement 13 whereby
Sps. Lazaro agreed to pay Lim, Jr. the amount of P2,351,064.80 on an installment basis, following a
schedule of payments covering the period from September 2006 until October 2013, under the
following terms, among others: (a) that should the financial condition of Sps. Lazaro improve, the
monthly installments shall be increased in order to hasten the full payment of the entire
obligation;14 and (b) that Sps. Lazaros failure to pay any installment due or the dishonor of any of the

postdated checks delivered in payment thereof shall make the whole obligation immediately due and
demandable.
The aforesaid compromise agreement was approved by the RTC in its October 31, 2006
Decision15 and January 5, 2007 Amended Decision.16
Subsequently, Sps. Lazaro filed an Omnibus Motion, 17 seeking to lift the writ of preliminary
attachment annotated on the subject TCTs, which the RTC granted on March 29, 2007. 18 It ruled that
a writ of preliminary attachment is a mere provisional or ancillary remedy, resorted to by a litigant to
protect and preserve certain rights and interests pending final judgment. Considering that the case
had already been considered closed and terminated by the rendition of the January 5, 2007
Amended Decision on the basis of the September 22, 2006 compromise agreement, the writ of
preliminary attachment should be lifted and quashed. Consequently, it ordered the Registry of Deeds
of Bulacan to cancel the writs annotation on the subject TCTs.
Lim, Jr. filed a motion for reconsideration 19 which was, however, denied on July 26, 2007, 20 prompting
him to file a petition for certiorari21 before the CA.
The CA Ruling
On July 10, 2008, the CA rendered the assailed decision, 22 finding no grave abuse of discretion on
the RTCs part. It observed that a writ of preliminary attachment may only be issued at the
commencement of the action or at any time before entry of judgment. Thus, since the principal
cause of action had already been declared closed and terminated by the RTC, the provisional or
ancillary remedy of preliminary attachment would have no leg to stand on, necessitating its
discharge.23
Aggrieved, Lim, Jr. moved for reconsideration 24 which was likewise denied by the CA in its December
18, 2008 Resolution.25
Hence, the instant petition.
The Issue Before the Court
The sole issue in this case is whether or not the writ of preliminary attachment was properly lifted.
The Courts Ruling
The petition is meritorious.
By its nature, preliminary attachment, under Rule 57 of the Rules of Court (Rule 57), is an ancillary
remedy applied for not for its own sake but to enable the attaching party to realize upon the relief
sought and expected to be granted in the main or principal action; it is a measure auxiliary or
incidental to the main action. As such, it is available during its pendency which may be resorted to by
a litigant to preserve and protect certain rights and interests during the interim, awaiting the ultimate
effects of a final judgment in the case.26 In addition, attachment is also availed of in order to acquire
jurisdiction over the action by actual or constructive seizure of the property in those instances where
personal or substituted service of summons on the defendant cannot be effected. 27
In this relation, while the provisions of Rule 57 are silent on the length of time within which an
attachment lien shall continue to subsist after the rendition of a final judgment, jurisprudence dictates

that the said lien continues until the debt is paid, or the sale is had under execution issued on the
judgment or until the judgment is satisfied, or the attachment discharged or vacated in the same
manner provided by law.28
Applying these principles, the Court finds that the discharge of the writ of preliminary attachment
against the properties of Sps. Lazaro was improper.
Records indicate that while the parties have entered into a compromise agreement which had
already been approved by the RTC in its January 5, 2007 Amended Decision, the obligations
thereunder have yet to be fully complied with particularly, the payment of the total compromise
amount of P2,351,064.80. Hence, given that the foregoing debt remains unpaid, the attachment of
Sps. Lazaros properties should have continued to subsist.
In Chemphil Export & Import Corporation v. CA,29 the Court pronounced that a writ of attachment is
not extinguished by the execution of a compromise agreement between the parties, viz:
Did the compromise agreement between Antonio Garcia and the consortium discharge the latters
attachment lien over the disputed shares?
CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the dismissal of the
case, dies a natural death. Thus, when the consortium entered into a compromise agreement, which
resulted in the termination of their case, the disputed shares were released from garnishment.
We disagree. To subscribe to CEICs contentions would be to totally disregard the concept and
purpose of a preliminary attachment.
xxxx
The case at bench admits of peculiar character in the sense that it involves a compromise
agreement. Nonetheless, x x x. The parties to the compromise agreement should not be deprived of
the protection provided by an attachment lien especially in an instance where one reneges on his
obligations under the agreement, as in the case at bench, where Antonio Garcia failed to hold up his
own end of the deal, so to speak.
xxxx
If we were to rule otherwise, we would in effect create a back door by which a debtor can easily
escape his creditors. Consequently, we would be faced with an anomalous situation where a debtor,
in order to buy time to dispose of his properties, would enter into a compromise agreement he has
no intention of honoring in the first place. The purpose of the provisional remedy of attachment
would thus be lost. It would become, in analogy, a declawed and toothless tiger. (Emphasis and
underscoring supplied; citations omitted)
In fine, the Court holds that the writ of preliminary attachment subject of this case should be restored
and its annotation revived in the subject TCTs, re-vesting unto Lim, Jr. his preferential lien over the
properties covered by the same as it were before the cancellation of the said writ. Lest it be
misunderstood, the lien or security obtained by an attachment even before judgment, is in the nature
of a vested interest which affords specific security for the satisfaction of the debt put in suit. 30 Verily,
the lifting of the attachment lien would be tantamount to an abdication of Lim, Jr.s rights over Sps.
Lazaros properties which the Court, absent any justifiable ground therefor, cannot allow.

WHEREFORE, the petition is GRANTED. The July 10, 2008 Decision and the December 18, 2008
Resolution of the Court of Appeals in CA-G.R. SP No. 100270 are REVERSED and SET ASIDE, and
the March 29, 2007 Order of the Regional Trial Court of Quezon City, Branch 223 is NULLIFIED.
Accordingly, the trial court is directed to RESTORE the attachment lien over Transfer Certificates of
Title Nos. T-64940, T-64939, and T-86369, in favor of petitioner Alfredo C. Lim, Jr.
SO ORDERED.
Carpio, (Chairperson), Brion, Del Castillo, Perez, and Perlas-Bernabe, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 190028

February 26, 2014

LETICIA P. LIGON, Petitioner,

vs.
THE REGIONAL TRIAL COURT, BRANCH 56 AT MAKATI CITY AND ITS PRESIDING JUDGE,
JUDGE REYNALDO M. LAIGO, SHERIFF IV LUCITO V. ALEJO, ATTY. SILVERIO GARING, MR.
LEONARDO J. TING, AND MR. BENITO G. TECHICO, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari is the Decision dated October 30, 2009 of the Court
of Appeals (CA) in CA-G.R. SP No. 106175, finding no grave abuse of discretion on the part of the
Regional Trial Court of Makati City, Branch 56 (Makati City RTC) in issuing the following orders
(Assailed Orders) in Civil Case No. 03-186:
1

(a) the Order dated February 9, 2007 which directed the Register of Deeds of Muntinlupa
City, respondent Atty. Silverio Garing (Atty. Garing), to (1) register the Officer's
3

Final Deed of Sale issued by respondent SheriffLucito V. Alejo (Sheriff Alejo) on October 27,
2006 in favor of the highest bidder, respondent Leonardo J. Ting (Ting), (2) cancel Transfer
Certificate of Title (TCT) No. 8502/T44 in the name of Spouses Rosario and Saturnino
Baladjay (Sps. Baladjay), and (3) issue a new certificate of title in favor of Ting, free from any
liens and encumbrances;
(b) the Order dated March 20, 2007 which directed Atty. Garing to comply with the February
9, 2007 Order under pain of contempt of court; and
4

(c) the Order dated April 25, 2007 which reiterated the directive to Atty. Garing to issue a
new title in favor of Ting after the latters payment of capital gains, documentary and transfer
taxes, as required.
5

The Facts
On November 20, 2002, petitioner Leticia P. Ligon (Ligon) filed an amended complaint before the
Regional Trial Court of Quezon City, Branch 101 (Quezon City RTC) for collection of sum of money
and damages, rescission of contract, and nullification of title with prayer for the issuance of a writ of
preliminary attachment, docketed as Civil Case No. Q-10-48145 (Quezon City Case), against Sps.
Baladjay, a certain Olivia Marasigan (Marasigan), Polished Arrow Holdings, Inc. (Polished Arrow),
and its incorporators, namely, Spouses Julius Gonzalo and Charaine Doreece Anne Fuentebella
(Sps. Fuentebella), Ma. Linda Mendoza (Mendoza), Barbara C. Clavo (Clavo), Bayani E. Arit, Jr.
(Arit, Jr.), and Peter M. Kairuz (Kairuz), as well as the latters spouses (individual defendants).
6

In her complaint, Ligon alleged, inter alia, that Rosario Baladjay (Rosario) enticed her to extend a
short-term loan in the amount of P3,000,000.00, payable in a months time and secured by an Allied
Bank post-dated check for the same amount. Ligon likewise claimed that Rosario, as further
enticement for the loan extension, represented that she and her husband Saturnino were in the
process of selling their property in Ayala Alabang Village, Muntinlupa City (subject property), covered
by a clean title, i.e., TCT No. 8502 in the name of Rosario Baladjay, married to Saturnino Baladjay,
and that the proceeds of the said sale could easily pay-off the loan. Unfortunately, the Allied Bank
check was dishonored upon presentment and, despite assurances to replace it with cash, Rosario
failed to do so. Moreover, Ligon discovered that the subject property had already been transferred to
Polished Arrow, alleged to be a dummy corporation of Sps. Baladjay and the individual defendants
(defendants). As a result, TCT No. 8502 was cancelled and replaced on October 11, 2002 by TCT
No. 9273 in the name of Polished Arrow. Thus, Ligon prayed that all defendants be held solidarily
liable to pay her the amount of P3,000,000.00, with interest due, as well as P1,000,000.00 as
attorneys fees and another P1,000,000.00 by way of moral and exemplary damages. Asserting that
the transfer of the subject property to Polished Arrow was made in fraud of Sps. Baladjays creditors,
Ligon also prayed that the said transfer be nullified, and that a writ of preliminary attachment be
issued in the interim against defendants assets, including the subject property. Subsequently, an
Amended Writ of Preliminary Attachment was issued on November 26, 2002, and annotated on the
dorsal portion of TCT No. 9273 on December 3, 2002 (December 3, 2002 attachment annotation).
8

10

11

12

13

On February 18, 2003, a similar complaint for collection of sum of money, damages, and
cancellation of title with prayer for issuance of a writ of preliminary attachment was lodged before the
Makati City RTC, docketed as Civil Case No. 03-186 (Makati City Case), by Spouses Cecilia and Gil
Vicente (Sps. Vicente) against Sps. Baladjay, Polished Arrow, and other corporations. In that case,
it was established that Sps. Baladjay solicited millions of pesos in investments from Sps. Vicente
using conduit companies that were controlled by Rosario, as President and Chairperson. During the
proceedings therein, a writ of preliminary attachment also against the subject property was issued
and annotated on the dorsal portion of TCT No. 9273 on March 12, 2003. Thereafter, but before the
Quezon City Case was concluded, the Makati City RTC rendered a Decision dated December 9,
2004 (December 9, 2004 Decision), rescinding the transfer of the subject property from Sps.
Baladjay to Polished Arrow upon a finding that the same was made in fraud of
creditors. Consequently, the Makati City RTC directed the Register of Deeds of Muntinlupa City to:
(a) cancel TCT No. 9273 in the name of Polished Arrow; and (b) restore TCT No. 8502 "in its
previous condition" in the name of Rosario Baladjay, married to Saturnino Baladjay.
14

15

16

Meanwhile, in the pending Quezon City Case, Polished Arrow and the individual defendants (with
the exception of Marasigan) were successively dropped as party-defendants, after it was
established that they, by themselves directly or through other persons, had no more ownership,
interest, title, or claim over the subject property. The parties stipulated on the existence of the
December 9, 2004 Decision of the Makati City RTC, and the fact that the same was no longer
questioned by defendants Sps. Fuentebella, Arit, Jr., and Polished Arrow were made conditions for
17

their dropping as party-defendants in the case. In view of the foregoing, the Quezon City Case
proceeded only against Sps. Baladjay and Marasigan and, after due proceedings, the Quezon City
RTC rendered a Decision dated March 26, 2008 (March 26, 2008 Decision), directing Sps. Baladjay
to pay Ligon the amount ofP3,000,000.00 with interest, as well as attorneys fees and costs of suit.
18

19

On September 25, 2008, the March 26, 2008 Decision of the Quezon City RTC became final and
executory. However, when Ligon sought its execution, she discovered that the December 3, 2002
attachment annotation had been deleted from TCT No. 9273 when the subject property was sold by
way of public auction on September 9, 2005 to the highest bidder, respondent Ting, for the amount
of P9,000,000.00 during the execution proceedings in the Makati City Case, as evidenced by the
Officers Final Deed of Sale dated October 27, 2006 (Officers Final Deed of Sale) issued by Sheriff
Alejo. In this regard, Ligon learned that the Makati City RTC had issued its first assailed
Order dated February 9, 2007 (First Assailed Order), directing Atty. Garing, as the Register of
Deeds of Muntinlupa City, to: (a) register the Officers Final Deed of Sale on the official Record Book
of the Register of Deeds of Muntinlupa City; and (b) cancel TCT No. 8502 in the name of Sps.
Baladjay and issue a new title in the name of Ting, free from any liens and encumbrances.
20

21

22

Atty. Garing manifested before the Makati City RTC that it submitted the matter en consulta to the
Land Registration Authority (LRA) as he was uncertain whether the annotations on TCT No. 9273
should be carried over to TCT No. 8502. In response to the manifestation, the Makati City RTC
issued its second assailed Order dated March 20, 2007 (Second Assailed Order), directing Atty.
Garing to comply with the First Assailed Order under pain of contempt. It explained that it could not
allow the LRA to carry over all annotations previously annotated on TCT No. 9273 in the name of
Polished Arrow as said course of action would run counter to its December 9, 2004 Decision which
specifically ordered the cancellation of said TCT and the restoration of TCT No. 8502 in its previous
condition. It further clarified that:
23

24

25

26

[I]f there were liens or encumbrances annotated on TCT No. 8502 in the name of Rosario Baladjay
when the same was cancelled and TCT No. 9273 was issued by the Register of Deeds of
Muntinlupa City in favor of Polished Arrow Holdings, Inc. based on the Deed of Absolute Sale
executed between the former and the latter, only such liens or encumbrances will have to be carried
over to the new Transfer Certificate of Title that he (Atty. Garing) is mandated to immediately issue in
favor of Leonardo J. Ting even as the Order of the Court dated February 9, 2007 decreed that a new
TCT be issued in the name of Mr. Leonardo J. Ting, free from any encumbrance. On the other hand,
if TCT No. 8502 in the name of Rosario Baladjay was free from any liens or encumbrances when the
same was cancelled and TCT No. 9273 was issued by the Register of Deeds of Muntinlupa City in
favor of Polished Arrow Holdings, Inc. by virtue of that Deed of Absolute Sale executed between
Rosario Baladjay and Polished Arrow Holdings, Inc., it necessarily follows that the new Transfer of
Certificate of Title that the said Registrar of Deeds is duty bound to issue immediately in favor of
Leonardo Ting will also be freed from any liens and encumbrances, as simple as that. (Emphases
and underscoring supplied)
Based on the foregoing, it pronounced that it was Atty. Garings ministerial duty "to promptly cancel
TCT No. 8502/T-44 in the name of defendant-spouses Baladjay and to issue a new Transfer
Certificate of Title in the name of the highest bidder, Leonardo J. Ting."
27

Separately, Ting filed a motion before the Makati City RTC on account of Atty. Garings letter dated
March 26, 2006 requiring him to comply with certain documentary requirements and to pay the
appropriate capital gains, documentary stamp and transfer taxes before a new title could be issued
in his name. In its third assailed Order dated April 25, 2007 (Third Assailed Order), the Makati City
RTC directed Ting to pay the aforesaid taxes and ordered Atty. Garing to immediately cancel TCT
No. 8502 and issue a new title in the formers name.
28

29

On June 7, 2007, Atty. Garing issued TCT No. 19756 in the name of Ting, free from any liens and
encumbrances. Later, Ting sold the subject property to respondent Benito G. Techico (Techico),
resulting in the cancellation of TCT No. 19756 and the issuance of TCT No. 31001 in Techicos
name.
30

31

32

In view of the preceding circumstances, Ligon filed, inter alia, a certiorari petition against
respondent Presiding Judge Reynaldo Laigo (Judge Laigo), Sheriff Alejo, Atty. Garing, Ting, and
Techico (respondents), alleging, among others, that the Makati City RTC committed grave abuse of
discretion in issuing the Assailed Orders. In this relation, she prayed that the said orders be declared
null and void for having been issued in violation of her right to due process, and resulting in (a) the
deletion of the December 3, 2002 attachment annotation on TCT No. 9273 which evidences her prior
attachment lien over the subject property, and (b) the issuance of new titles in the names of Ting and
Techico.
33

Consolidated with Ligons certiorari petition is a complaint for indirect contempt against
respondents, whereby it was alleged that the latter unlawfully interfered with the court processes of
the Quezon City RTC, particularly by deleting the December 3, 2002 attachment annotation on TCT
No. 9273 which thereby prevented the execution of the Quezon City RTCs March 26, 2008
Decision.
34

The CA Ruling
In a Decision dated October 30, 2009, the CA dismissed Ligons certiorari petition, finding that the
Makati City RTC did not gravely abuse its discretion in issuing the Assailed Orders, adding further
that the same was tantamount to a collateral attack against the titles of both Ting and Techico, which
is prohibited under Section 48 of Presidential Decree No. (PD) 1529. Likewise, it dismissed the
indirect contempt charge for lack of sufficient basis, emphasizing that the Assailed Orders were
issued prior to the Quezon City RTCs Decision, meaning that the said issuances could not have
been issued in disregard of the latter decision.
35

36

37

Aggrieved, Ligon filed the present petition.

The Issues Before the Court
The Court resolves the following essential issues: (a) whether or not the CA erred in ruling that the
Makati City RTC did not gravely abuse its discretion in issuing the Assailed Orders; and (b) whether
or not Judge Laigo should be cited in contempt and penalized administratively.
The Courts Ruling
The petition is partly meritorious.
A. Issuance of the Assailed Orders vis--vis
Grave Abuse of Discretion.
Attachment is defined as a provisional remedy by which the property of an adverse party is taken
into legal custody, either at the commencement of an action or at any time thereafter, as a security
for the satisfaction of any judgment that may be recovered by the plaintiff or any proper party. Case
law instructs that an attachment is a proceeding in rem, and, hence, is against the particular
property, enforceable against the whole world. Accordingly, the attaching creditor acquires a specific
38

lien on the attached property which nothing can subsequently destroy except the very dissolution of
the attachment or levy itself. Such a proceeding, in effect, means that the property attached is an
indebted thing and a virtual condemnation of it to pay the owners debt. The lien continues until the
debt is paid, or sale is had under execution issued on the judgment, or until the judgment is satisfied,
or the attachment discharged or vacated in some manner provided by law. Thus, a prior
registration of an attachment lien creates a preference, such that when an attachment has been
duly levied upon a property, a purchaser thereof subsequent to the attachment takes the property
subject to the said attachment. As provided under PD 1529, said registration operates as a form of
constructive notice to all persons.
39

40

41

42

43

Applying these principles to this case, the Court finds that the CA erred in holding that the RTC did
not gravely abuse its discretion in issuing the Assailed Orders as these issuances essentially
disregarded, inter alia, Ligons prior attachment lien over the subject property patently anathema to
the nature of attachment proceedings which is well-established in law and jurisprudence. In this
case, Ligon, in order to secure the satisfaction of a favorable judgment in the Quezon City Case,
applied for and was eventually able to secure a writ of preliminary attachment over the subject
property on November 25, 2002, which was later annotated on the dorsal portion of TCT No. 9273
in the name of Polished Arrow on December 3, 2002. Notwithstanding the subsequent cancellation
of TCT No. 9273 due to the Makati City RTCs December 9, 2004 Decision rescinding the transfer of
the subject property from Sps. Baladjay to Polished Arrow upon a finding that the same was made in
fraud of creditors, Ligons attachment lien over the subject property continued to subsist since the
attachment she had earlier secured binds the property itself, and, hence, continues until the
judgment debt of Sps. Baladjay to Ligon as adjudged in the Quezon City Case is satisfied, or the
attachment discharged or vacated in some manner provided by law. The grave abuse of discretion of
the Makati City RTC lies with its directive to issue a new certificate of title in the name of Ting (i.e.,
TCT No. 19756), free from any liens and encumbrances. This course of action clearly negates the
efficacy of Ligons attachment lien and, also, defies the legal characterization of attachment
proceedings. It bears noting that Ligons claim, secured by the aforesaid attachment, is against Sps.
Baladjay whose ownership over the subject property had been effectively restored in view of the
RTCs rescission of the propertys previous sale to Polished Arrow. Thus, Sps. Ligons attachment
lien against Sps. Baladjay as well as their successors-in-interest should have been preserved, and
the annotation thereof carried over to any subsequent certificate of title, the most recent of which as
it appears on record is TCT No. 31001 in the name of Techico, without prejudice to the latters right
to protect his own ownership interest over the subject property.
44

45

46

47

48

49

That said, the Court now proceeds to resolve the second and final issue on indirect contempt.
B. Indirect Contempt Charges.
While the Court agrees with Ligons position on the issue of grave abuse of discretion, it holds an
opposite view anent its complaint for indirect contempt against Judge Laigo and/or the respondents
in this case.
Contempt of court has been defined as a willful disregard or disobedience of a public authority. In its
broad sense, contempt is a disregard of, or disobedience to, the rules or orders of a legislative or
judicial body or an interruption of its proceedings by disorderly behavior or insolent language in its
presence or so near thereto as to disturb its proceedings or to impair the respect due to such a body.
In its restricted and more usual sense, contempt comprehends a despising of the authority, justice,
or dignity of a court.
50

Contempt of court is of two (2) kinds, namely: direct and indirect contempt. Indirect contempt or
constructive contempt is that which is committed out of the presence of the court. Any improper
1wphi1

conduct tending, directly or indirectly, to impede, obstruct, or degrade the administration of justice
would constitute indirect contempt.
51

The indirect contempt charges in this case involve an invocation of paragraphs b, c, and d, Section
3, Rule 71 of the Rules of Court which read as follows:
Section 3. Indirect contempt to be punished after charge and hearing. After a charge in writing
has been filed, and an opportunity given to the respondent to comment thereon within such period
as may be fixed by the court and to be heard by himself or counsel, a person guilty of any of the
following acts may be punished for indirect contempt:
xxxx
(b) Disobedience of or resistance to a lawful writ, x x x;
(c) Any abuse of or any unlawful interference with the processes or proceedings of a
court not constituting direct contempt under section 1 of this Rule;
(d) Any improper conduct tending, directly or indirectly, to impede, obstruct, or
degrade the administration of justice;
Examining the petition, the Court finds that Ligon failed to sufficiently show how the acts of each of
the respondents, or more specifically, Judge Laigo, constituted any of the acts punishable under the
foregoing section tending towards a wilful disregard or disobedience of a public authority. In issuing
the Assailed Orders, Judge Laigo merely performed his judicial functions pursuant to the December
9, 2004 Decision in the Makati City Case which had already attained finality. Thus, without Ligon's
proper substantiation, considering too that Judge Laigo's official acts are accorded with the
presumption of regularity, the Court is constrained to dismiss the indirect contempt charges in this
case.
52

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated October 30, 2009 of the
Court of Appeals in CA-G.R. SP No. 106175 is REVERSED and SET ASIDE. Accordingly, the
Assailed Orders subject of this case are hereby declared NULL and VOID only insofar as they relate
to the issuance of Transfer Certificate of Title No. 19756 in the name of respondent Leonardo J. Ting
free from any liens and encumbrances. The Register of Deeds of Muntinlupa City is DIRECTED to
carry over and annotate on TCT No. 31001 in the name of respondent Benito G. Techico the original
attachment lien of petitioner Leticia P. Ligon as described in this Decision. The indirect contempt
charges are, however, DISMISSED.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO*
Acting Chief Justice
Chairperson
MARIANO C. DEL CASTILLO

JOSE PORTUGAL PEREZ

Associate Justice

Associate Justice

MARVIC MARIO VICTOR F. LEONEN**

Associate Justice
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.
ANTONIO T. CARPIO
Acting Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 166759

November 25, 2009

SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR RESOURCES,
INC.,Petitioners,
vs.
NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and NIKKI
NORLIN SATSATIN, Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari assailing the Decision 1 dated November 23, 2004 of the
Court of Appeals (CA) in CA-G.R. SP No. 83595, and its Resolution 2 dated January 18, 2005,
denying petitioners motion for reconsideration.
The factual and procedural antecedents are as follows:
The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario Torres (Mario) each own
adjacent 20,000 square meters track of land situated at Barrio Lankaan, Dasmarias, Cavite,
covered by Transfer Certificate of Title (TCT) Nos. 251267, 3 251266,4 and 251265,5 respectively.
Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners mother, Agripina Aledia, if she
wanted to sell their lands. After consultation with her daughters, daughter-in-law, and grandchildren,
Agripina agreed to sell the properties. Petitioners, thus, authorized Nicanor, through a Special Power
of Attorney, to negotiate for the sale of the properties.6

Sometime in 1999, Nicanor offered to sell the properties to Solar Resources, Inc. (Solar). Solar
allegedly agreed to purchase the three parcels of land, together with the 10,000-square-meter
property owned by a certain Rustica Aledia, for P35,000,000.00. Petitioners alleged that Nicanor was
supposed to remit to them the total amount ofP28,000,000.00 or P9,333,333.00 each to Sofia,
Fructosa, and the heirs of Mario.
Petitioners claimed that Solar has already paid the entire purchase price of P35,000,000.00 to
Nicanor in Thirty-Two (32) post-dated checks which the latter encashed/deposited on their respective
due dates. Petitioners added that they also learned that during the period from January 2000 to April
2002, Nicanor allegedly acquired a house and lot at Vista Grande BF Resort Village, Las Pias City
and a car, which he registered in the names of his unemployed children, Nikki Normel Satsatin and
Nikki Norlin Satsatin. However, notwithstanding the receipt of the entire payment for the subject
property, Nicanor only remitted the total amount of P9,000,000.00, leaving an unremitted balance
of P19,000,000.00. Despite repeated verbal and written demands, Nicanor failed to remit to them the
balance of P19,000,000.00.
Consequently, on October 25, 2002, petitioners filed before the regional trial court (RTC) a
Complaint7 for sum of money and damages, against Nicanor, Ermilinda Satsatin, Nikki Normel
Satsatin, and Nikki Norlin Satsatin. The case was docketed as Civil Case No. 2694-02, and raffled to
RTC, Branch 90, Dasmarias, Cavite.
On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ of
Attachment,8 alleging among other things: that respondents are about to depart the Philippines; that
they have properties, real and personal in Metro Manila and in the nearby provinces; that the amount
due them is P19,000,000.00 above all other claims; that there is no other sufficient security for the
claim sought to be enforced; and that they are willing to post a bond fixed by the court to answer for
all costs which may be adjudged to the respondents and all damages which respondents may
sustain by reason of the attachment prayed for, if it shall be finally adjudged that petitioners are not
entitled thereto.
On October 30, 2002, the trial court issued an Order 9 directing the petitioners to post a bond in the
amount ofP7,000,000.00 before the court issues the writ of attachment, the dispositive portion of
which reads as follows:
WHEREFORE, premises considered, and finding the present complaint and motion sufficient in form
and substance, this Court hereby directs the herein plaintiffs to post a bond, pursuant to Section 3,
Rule 57 of the 1997 Rules of Civil Procedure, in the amount of Seven Million Pesos (P7,000,000.00),
before the Writ of Attachment issues.10
On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff, 11 informing the court that
they have already filed an attachment bond. They also prayed that a sheriff be deputized to serve
the writ of attachment that would be issued by the court.
In the Order12 dated November 15, 2002, the RTC granted the above motion and deputized the
sheriff, together with police security assistance, to serve the writ of attachment.
Thereafter, the RTC issued a Writ of Attachment 13 dated November 15, 2002, directing the sheriff to
attach the estate, real or personal, of the respondents, the decretal portion of which reads:
WE, THEREFORE, command you to attach the estate, real or personal, not exempt from execution,
of the said defendants, in your province, to the value of said demands, and that you safely keep the
same according to the said Rule, unless the defendants give security to pay such judgment as may

be recovered on the said action, in the manner provided by the said Rule, provided that your legal
fees and all necessary expenses are fully paid.
You shall return this writ with your proceedings indorsed hereon within twenty (20) days from the
date of receipt hereof.
GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day of November, 2002, at Imus for
Dasmarias, Cavite, Philippines.14
On November 19, 2002, a copy of the writ of attachment was served upon the respondents. On the
same date, the sheriff levied the real and personal properties of the respondent, including household
appliances, cars, and a parcel of land located at Las Pias, Manila. 15
On November 21, 2002, summons, together with a copy of the complaint, was served upon the
respondents.16
On November 29, 2002, respondents filed their Answer.17
On the same day respondents filed their answer, they also filed a Motion to Discharge Writ of
Attachment18anchored on the following grounds: the bond was issued before the issuance of the writ
of attachment; the writ of attachment was issued before the summons was received by the
respondents; the sheriff did not serve copies of the application for attachment, order of attachment,
plaintiffs affidavit, and attachment bond, to the respondents; the sheriff did not submit a sheriffs
return in violation of the Rules; and the grounds cited for the issuance of the writ are baseless and
devoid of merit. In the alternative, respondents offered to post a counter-bond for the lifting of the
writ of attachment.19
On March 11, 2003, after the parties filed their respective pleadings, the RTC issued an
Order20 denying the motion, but at the same time, directing the respondents to file a counter-bond, to
wit:
WHEREFORE, premises considered, after the pertinent pleadings of the parties have been taken
into account, the herein defendants are hereby directed to file a counter-bond executed to the
attaching party, in the amount of Seven Million Pesos (P7,000,000.00), to secure the payment of any
judgment that the attaching party may recover in the action, with notice on the attaching party,
whereas, the Motion to Discharge Writ of Attachment is DENIED.
SO ORDERED.21
Thereafter, respondents filed a motion for reconsideration and/or motion for clarification of the above
order. On April 3, 2003, the RTC issued another Order 22 which reads:
In view of the Urgent Motion For Reconsideration And/Or Motion For Clarification of the Order of this
Court dated March 11, 2003, denying their Motion to Discharge Writ of Attachment filed by the
defendants through counsel Atty. Franco L. Loyola, the Motion to Discharge Writ of Attachment is
denied until after the defendants have posted the counter-bond in the amount of Seven Million
Pesos (P7,000,000.00).
The defendants, once again, is directed to file their counter-bond of Seven Million Pesos
(P7,000,000.00), if it so desires, in order to discharge the Writ of Attachment.

SO ORDERED.
On December 15, 2003, respondents filed an Urgent Motion to Lift/Set Aside Order Dated March
[11], 2003,23which the RTC denied in an Order24 of even date, the dispositive portion of which reads:
WHEREFORE, premises considered, defendants Urgent Motion to Lift/Set Aside Order Dated
March 23, 2003 (With Manifestation to Dissolve Writ of Attachment) is hereby DENIED for lack of
Merit.
SO ORDERED.
Respondents filed an Urgent Motion for Reconsideration, 25 but it was denied in the Order26 dated
March 3, 2004.
Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and Prohibition with
Preliminary Injunction and Temporary Restraining Order27 under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 83595, anchored on the following grounds:
(1) public respondents committed grave abuse of discretion amounting to lack of or in excess
of jurisdiction in failing to notice that the lower court has no jurisdiction over the person and
subject matter of the complaint when the subject Writ of Attachment was issued;
(2) public respondents committed grave abuse of discretion amounting to lack of or in excess
of jurisdiction in granting the issuance of the Writ of Attachment despite non-compliance with
the formal requisites for the issuance of the bond and the Writ of Attachment. 28
Respondents argued that the subject writ was improper and irregular having been issued and
enforced without the lower court acquiring jurisdiction over the persons of the respondents. They
maintained that the writ of attachment was implemented without serving upon them the summons
together with the complaint. They also argued that the bond issued in favor of the petitioners was
defective, because the bonding company failed to obtain the proper clearance that it can transact
business with the RTC of Dasmarias, Cavite. They added that the various clearances which were
issued in favor of the bonding company were applicable only in the courts of the cities of Pasay,
Pasig, Manila, and Makati, but not in the RTC, Imus, Cavite. 29
On November 23, 2003, the CA rendered the assailed Decision in favor of the respondents, finding
grave abuse of discretion amounting to lack of or in excess of jurisdiction on the part of the RTC in
issuing the Orders dated December 15, 2003 and March 3, 2004. The decretal portion of the
Decision reads:
WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed Orders are hereby
nullified and set aside. The levy on the properties of the petitioners pursuant to the Writ of
Attachment issued by the lower court is hereby LIFTED.
SO ORDERED.30
Petitioners filed a Motion for Reconsideration,31 but it was denied in the Resolution 32 dated January
18, 2005.
Hence, this petition assigning the following errors:

I.
THE HONORABLE COURT OF APPEALS ERRED IN ORDERING THE LIFTING OF THE WRIT OF
ATTACHMENT PURSUANT TO SECTION 13, RULE 57 OF THE REVISED RULES OF CIVIL
PROCEDURE.
II.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PUBLIC RESPONDENT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF
JURISDICTION IN GRANTING THE WRIT OF ATTACHMENT DESPITE THE BOND BEING
INSUFFICIENT AND HAVING BEEN IMPROPERLY ISSUED.
III.
THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING THE PETITION BY
REASON OF ESTOPPEL, LACHES AND PRESCRIPTION AND IN HOLDING THAT THE WRIT OF
ATTACHMENT WAS IMPROPERLY AND IRREGULARLY ENFORCED IN VIOLATION OF
SECTION 5, RULE 57 OF THE REVISED RULES OF COURT.
IV.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRINCIPLE OF
ESTOPPEL WILL NOT LIE AGAINST RESPONDENTS.
Petitioners maintain that in the case at bar, as in the case of FCY Construction Group, Inc. v. Court
of Appeals,33the only way the subject writ of attachment can be dissolved is by a counter-bond. They
claim that the respondents are not allowed to file a motion to dissolve the attachment under Section
13, Rule 57 of the Rules of Court. Otherwise, the hearing on the motion for the dissolution of the writ
would be tantamount to a trial on the merits, considering that the writ of preliminary attachment was
issued upon a ground which is, at the same time, the applicants cause of action.
Petitioners insist that the determination of the existence of grounds to discharge a writ of attachment
rests in the sound discretion of the lower court. They argue that the Certification 34 issued by the
Office of the Administrator and the Certifications 35 issued by the clerks of court of the RTCs of
Dasmarias and Imus, Cavite, would show that the bonds offered by Western Guaranty Corporation,
the bonding company which issued the bond, may be accepted by the RTCs of Dasmarias and
Imus, Cavite, and that the said bonding company has no pending liability with the government.
Petitioners contend that respondents are barred by estoppel, laches, and prescription from
questioning the orders of the RTC issuing the writ of attachment. They also maintain that the issue
whether there was impropriety or irregularity in the issuance of the orders is moot and academic,
considering that the attachment bond questioned by the respondent had already expired on
November 14, 2003 and petitioners have renewed the attachment bond covering the period from
November 14, 2003 to November 14, 2004, and further renewed to cover the period of November
14, 2004 to November 14, 2005.
The petition is bereft of merit.
A writ of preliminary attachment is defined as a provisional remedy issued upon order of the court
where an action is pending to be levied upon the property or properties of the defendant therein, the

same to be held thereafter by the sheriff as security for the satisfaction of whatever judgment that
might be secured in the said action by the attaching creditor against the defendant. 36
In the case at bar, the CA correctly found that there was grave abuse of discretion amounting to lack
of or in excess of jurisdiction on the part of the trial court in approving the bond posted by petitioners
despite the fact that not all the requisites for its approval were complied with. In accepting a surety
bond, it is necessary that all the requisites for its approval are met; otherwise, the bond should be
rejected.37
Every bond should be accompanied by a clearance from the Supreme Court showing that the
company concerned is qualified to transact business which is valid only for thirty (30) days from the
date of its issuance.38 However, it is apparent that the Certification 39 issued by the Office of the Court
Administrator (OCA) at the time the bond was issued would clearly show that the bonds offered by
Western Guaranty Corporation may be accepted only in the RTCs of the cities of Makati, Pasay, and
Pasig. Therefore, the surety bond issued by the bonding company should not have been accepted
by the RTC of Dasmarias, Branch 90, since the certification secured by the bonding company from
the OCA at the time of the issuance of the bond certified that it may only be accepted in the abovementioned cities. Thus, the trial court acted with grave abuse of discretion amounting to lack of or in
excess of jurisdiction when it issued the writ of attachment founded on the said bond.
Moreover, in provisional remedies, particularly that of preliminary attachment, the distinction between
the issuance and the implementation of the writ of attachment is of utmost importance to the validity
of the writ. The distinction is indispensably necessary to determine when jurisdiction over the person
of the defendant should be acquired in order to validly implement the writ of attachment upon his
person.
This Court has long put to rest the issue of when jurisdiction over the person of the defendant should
be acquired in cases where a party resorts to provisional remedies. A party to a suit may, at any time
after filing the complaint, avail of the provisional remedies under the Rules of Court. Specifically,
Rule 57 on preliminary attachment speaks of the grant of the remedy "at the commencement of the
action or at any time before entry of judgment."40 This phrase refers to the date of the filing of the
complaint, which is the moment that marks "the commencement of the action." The reference plainly
is to a time before summons is served on the defendant, or even before summons issues. 41
In Davao Light & Power Co., Inc. v. Court of Appeals,42 this Court clarified the actual time when
jurisdiction should be had:
It goes without saying that whatever be the acts done by the Court prior to the acquisition of
jurisdiction over the person of defendant x x x issuance of summons, order of attachment and writ
of attachment x x x these do not and cannot bind and affect the defendant until and unless
jurisdiction over his person is eventually obtained by the court, either by service on him of
summons or other coercive process or his voluntary submission to the courts authority. Hence,
when the sheriff or other proper officer commences implementation of the writ of attachment, it is
essential that he serve on the defendant not only a copy of the applicants affidavit and attachment
bond, and of the order of attachment, as explicitly required by Section 5 of Rule 57, but also
thesummons addressed to said defendant as well as a copy of the complaint x x x. (Emphasis
supplied.)
In Cuartero v. Court of Appeals,43 this Court held that the grant of the provisional remedy of
attachment involves three stages: first, the court issues the order granting the application; second,
the writ of attachment issues pursuant to the order granting the writ; and third, the writ is
implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the

defendant be first obtained. However, once the implementation of the writ commences, the court
must have acquired jurisdiction over the defendant, for without such jurisdiction, the court has no
power and authority to act in any manner against the defendant. Any order issuing from the Court
will not bind the defendant.44
Thus, it is indispensable not only for the acquisition of jurisdiction over the person of the defendant,
but also upon consideration of fairness, to apprise the defendant of the complaint against him and
the issuance of a writ of preliminary attachment and the grounds therefor that prior or
contemporaneously to the serving of the writ of attachment, service of summons, together with a
copy of the complaint, the application for attachment, the applicants affidavit and bond, and the
order must be served upon him.
In the instant case, assuming arguendo that the trial court validly issued the writ of attachment on
November 15, 2002, which was implemented on November 19, 2002, it is to be noted that the
summons, together with a copy of the complaint, was served only on November 21, 2002.
At the time the trial court issued the writ of attachment on November 15, 2002, it can validly to do so
since the motion for its issuance can be filed "at the commencement of the action or at any time
before entry of judgment." However, at the time the writ was implemented, the trial court has not
acquired jurisdiction over the persons of the respondent since no summons was yet served upon
them. The proper officer should have previously or simultaneously with the implementation of the writ
of attachment, served a copy of the summons upon the respondents in order for the trial court to
have acquired jurisdiction upon them and for the writ to have binding effect. Consequently, even if
the writ of attachment was validly issued, it was improperly or irregularly enforced and, therefore,
cannot bind and affect the respondents.
Moreover, although there is truth in the petitioners contention that an attachment may not be
dissolved by a showing of its irregular or improper issuance if it is upon a ground which is at the
same time the applicants cause of action in the main case, since an anomalous situation would
result if the issues of the main case would be ventilated and resolved in a mere hearing of a motion.
However, the same is not applicable in the case bar. It is clear from the respondents pleadings that
the grounds on which they base the lifting of the writ of attachment are the irregularities in its
issuance and in the service of the writ; not petitioners cause of action.
1avvphi1

Further, petitioners contention that respondents are barred by estoppel, laches, and prescription
from questioning the orders of the RTC issuing the writ of attachment and that the issue has become
moot and academic by the renewal of the attachment bond covering after its expiration, is devoid of
merit. As correctly held by the CA:
There are two ways of discharging the attachment. First, to file a counter-bond in accordance with
Section 12 of Rule 57. Second[,] [t]o quash the attachment on the ground that it was irregularly or
improvidently issued, as provided for in Section 13 of the same rule. Whether the attachment was
discharged by either of the two ways indicated in the law, the attachment debtor cannot be deemed
to have waived any defect in the issuance of the attachment writ by simply availing himself of one
way of discharging the attachment writ, instead of the other. The filing of a counter-bond is merely a
speedier way of discharging the attachment writ instead of the other way.45
Moreover, again assuming arguendo that the writ of attachment was validly issued, although the trial
court later acquired jurisdiction over the respondents by service of the summons upon them, such
belated service of summons on respondents cannot be deemed to have cured the fatal defect in the
enforcement of the writ. The trial court cannot enforce such a coercive process on respondents
without first obtaining jurisdiction over their person. The preliminary writ of attachment must be

served after or simultaneous with the service of summons on the defendant whether by personal
service, substituted service or by publication as warranted by the circumstances of the case. The
subsequent service of summons does not confer a retroactive acquisition of jurisdiction over her
person because the law does not allow for retroactivity of a belated service. 46
WHEREFORE, premises considered, the petition is DENIED. The Decision and Resolution of the
Court of Appeals dated November 23, 2004 and January 18, 2005, respectively, in CA-G.R. SP No.
83595 are AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
WE CONCUR:
RENATO C. CORONA
Associate Justice
Chairperson
MINITA V. CHICO-NAZARIO
Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
RENATO C. CORONA
Associate Justice
Third Division, Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION
G.R. No. 125027

August 12, 2002

ANITA MANGILA, petitioner,

vs.
COURT OF APPEALS and LORETA GUINA, respondents.
CARPIO, J.:
The Case
This is a petition fore review on certiorari under Rule 45 of the Rules of Court, seeking to set aside
the Decision1of the Court of Appeals affirming the Decision2 of the Regional Trial Court, Branch 108,
Pasay City. The trial court upheld the writ of attachment and the declaration of default on petitioner
while ordering her to pay private respondent P109,376.95 plus 18 percent interest per annum, 25
percent attorneys fees and costs of suit.
The Facts
Petitioner Anita Mangila ("petitioner" for brevity) is an exporter of sea foods and doing business
under the name and style of Seafoods Products. Private respondent Loreta Guina ("private
respondent" for brevity) is the President and General Manager of Air Swift International, a single
registered proprietorship engaged in the freight forwarding business.
Sometime in January 1988, petitioner contracted the freight forwarding services of private
respondent for shipment of petitioners products, such as crabs, prawns and assorted fishes, to
Guam (USA) where petitioner maintains an outlet. Petitioner agreed to pay private respondent cash
on delivery. Private respondents invoice stipulates a charge of 18 percent interest per annum on all
overdue accounts. In case of suit, the same invoice stipulates attorneys fees equivalent to 25
percent of the amount due plus costs of suit.3
On the first shipment, petitioner requested for seven days within which to pay private respondent.
However, for the next three shipments, March 17, 24 and 31, 1988, petitioner failed to pay private
respondent shipping charges amounting to P109, 376.95. 4
Despite several demands, petitioner never paid private respondent. Thus, on June 10, 1988, private
respondent filed Civil Case No. 5875 before the Regional Trial Court of Pasay City for collection of
sum of money.
On August 1, 1988, the sheriff filed his Sheriffs Return showing that summons was not served on
petitioner. A woman found at petitioners house informed the sheriff that petitioner transferred her
residence to Sto. Nio, Guagua, Pampanga. The sheriff found out further that petitioner had left the
Philippines for Guam.5
Thus, on September 13, 1988, construing petitioners departure from the Philippines as done with
intent to defraud her creditors, private respondent filed a Motion for Preliminary Attachment. On
September 26, 1988, the trial court issued an Order of Preliminary Attachment 6 against petitioner.
The following day, the trial court issued a Writ of Preliminary Attachment.

The trial court granted the request of its sheriff for assistance from their counterparts in RTC,
Pampanga. Thus, on October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga served on
petitioners household help in San Fernando, Pampanga, the Notice of Levy with the Order, Affidavit
and Bond.7
On November 7, 1988, petitioner filed an Urgent Motion to Discharge Attachment 8 without submitting
herself to the jurisdiction of the trial court. She pointed out that up to then, she had not been served
a copy of the Complaint and the summons. Hence, petitioner claimed the court had not acquired
jurisdiction over her person. 9
In the hearing of the Urgent Motion to Discharge Attachment on November 11, 1988, private
respondent sought and was granted a re-setting to December 9, 1988. On that date, private
respondents counsel did not appear, so the Urgent Motion to Discharge Attachment was deemed
submitted for resolution.10
The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon filing of
petitioners counter-bond. The trial court, however, did not rule on the question of jurisdiction and on
the validity of the writ of preliminary attachment.
On December 26, 1988, private respondent applied for an alias summons, which the trial court
issued on January 19, 1989. 11 It was only on January 26, 1989 that summons was finally served on
petitioner.12
On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of improper
venue. Private respondents invoice for the freight forwarding service stipulates that "if court litigation
becomes necessary to enforce collection xxx the agreed venue for such action is Makati, Metro
Manila."13 Private respondent filed an Opposition asserting that although "Makati" appears as the
stipulated venue, the same was merely an inadvertence by the printing press whose general
manager executed an affidavit14 admitting such inadvertence. Moreover, private respondent claimed
that petitioner knew that private respondent was holding office in Pasay City and not in Makati. 15 The
lower court, finding credence in private respondents assertion, denied the Motion to Dismiss and
gave petitioner five days to file her Answer. Petitioner filed a Motion for Reconsideration but this too
was denied.
Petitioner filed her Answer16 on June 16, 1989, maintaining her contention that the venue was
improperly laid.
On June 26, 1989, the trial court issued an Order setting the pre-trial for July 18, 1989 at 8:30 a.m.
and requiring the parties to submit their pre-trial briefs. Meanwhile, private respondent filed a Motion
to Sell Attached Properties but the trial court denied the motion.
On motion of petitioner, the trial court issued an Order resetting the pre-trial from July 18, 1989 to
August 24, 1989 at 8:30 a.m..
On August 24, 1989, the day of the pre-trial, the trial court issued an Order 17 terminating the pre-trial
and allowing the private respondent to present evidence ex-parte on September 12, 1989 at 8:30
a.m.. The Order stated that when the case was called for pre-trial at 8:31 a.m., only the counsel for
private respondent appeared. Upon the trial courts second call 20 minutes later, petitioners counsel
was still nowhere to be found. Thus, upon motion of private respondent, the pre-trial was considered
terminated.

On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order terminating the
pre-trial. Petitioner explained that her counsel arrived 5 minutes after the second call, as shown by
the transcript of stenographic notes, and was late because of heavy traffic. Petitioner claims that the
lower court erred in allowing private respondent to present evidence ex-parte since there was no
Order considering the petitioner as in default. Petitioner contends that the Order of August 24, 1989
did not state that petitioner was declared as in default but still the court allowed private respondent to
present evidence ex-parte.18
On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled the
presentation of private respondents evidence ex-parte on October 10, 1989.
1wphi1.nt

On October 10, 1989, petitioner filed an Omnibus Motion stating that the presentation of
evidence ex-parte should be suspended because there was no declaration of petitioner as in default
and petitioners counsel was not absent, but merely late.
On October 18, 1989, the trial court denied the Omnibus Motion. 19
On November 20, 1989, the petitioner received a copy of the Decision of November 10, 1989,
ordering petitioner to pay respondent P109,376.95 plus 18 percent interest per annum, 25 percent
attorneys fees and costs of suit. Private respondent filed a Motion for Execution Pending Appeal but
the trial court denied the same.
The Ruling of the Court of Appeals
On December 15, 1995, the Court of Appeals rendered a decision affirming the decision of the trial
court. The Court of Appeals upheld the validity of the issuance of the writ of attachment and
sustained the filing of the action in the RTC of Pasay. The Court of Appeals also affirmed the
declaration of default on petitioner and concluded that the trial court did not commit any reversible
error.
Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals denied the
same in a Resolution dated May 20, 1996.
Hence, this petition.
The Issues
The issues raised by petitioner may be re-stated as follows:
I.
WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF
ATTACHMENT WAS IMPROPERLY ISSUED AND SERVED;
II.
WHETHER THERE WAS A VALID DECLARATION OF DEFAULT;
III.
WHETHER THERE WAS IMPROPER VENUE.

IV.
WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS
OBLIGED TO PAY P109, 376.95, PLUS ATTORNEYS FEES.20
The Ruling of the Court
Improper Issuance and Service of Writ of Attachment
Petitioner ascribes several errors to the issuance and implementation of the writ of attachment.
Among petitioners arguments are: first, there was no ground for the issuance of the writ since the
intent to defraud her creditors had not been established; second, the value of the properties levied
exceeded the value of private respondents claim. However, the crux of petitioners arguments rests
on the question of the validity of the writ of attachment. Because of failure to serve summons on her
before or simultaneously with the writs implementation, petitioner claims that the trial court had not
acquired jurisdiction over her person and thus the service of the writ is void.
As a preliminary note, a distinction should be made between issuance and implementation of the writ
of attachment. It is necessary to distinguish between the two to determine when jurisdiction over the
person of the defendant should be acquired to validly implement the writ. This distinction is crucial in
resolving whether there is merit in petitioners argument.
This Court has long settled the issue of when jurisdiction over the person of the defendant should be
acquired in cases where a party resorts to provisional remedies. A party to a suit may, at any time
after filing the complaint, avail of the provisional remedies under the Rules of Court. Specifically,
Rule 57 on preliminary attachment speaks of the grant of the remedy "at the commencement of
the action or at any time thereafter."21 This phrase refers to the date of filing of the complaint
which is the moment that marks "the commencement of the action." The reference plainly is to a time
before summons is served on the defendant, or even before summons issues.
In Davao Light & Power Co., Inc. v. Court of Appeals,22 this Court clarified the actual time when
jurisdiction should be had:
"It goes without saying that whatever be the acts done by the Court prior to the acquisition of
jurisdiction over the person of defendant - issuance of summons, order of attachment and
writ of attachment - these do not and cannot bind and affect the defendant until and
unless jurisdiction over his person is eventually obtained by the court, either by service
on him of summons or other coercive process or his voluntary submission to the courts
authority. Hence, when the sheriff or other proper officer commencesimplementation of the
writ of attachment, it is essential that he serve on the defendant not only a copy of the
applicants affidavit and attachment bond, and of the order of attachment, as explicitly
required by Section 5 of Rule 57, but also the summons addressed to said defendant as
well as a copy of the complaint xxx." (Emphasis supplied.)
Furthermore, we have held that the grant of the provisional remedy of attachment involves three
stages: first, the court issues the order granting the application; second, the writ of attachment
issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two
stages, it is not necessary that jurisdiction over the person of the defendant be first
obtained. However, once the implementation of the writ commences, the court must have
acquired jurisdiction over the defendant for without such jurisdiction, the court has no power and
authority to act in any manner against the defendant. Any order issuing from the Court will not bind
the defendant.23

In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and
implemented on October 28, 1988. However, the alias summons was served only on
January 26, 1989 or almost three months after the implementation of the writ of attachment.
The trial court had the authority to issue the Writ of Attachment on September 27 since a motion for
its issuance can be filed "at the commencement of the action." However, on the day the writ was
implemented, the trial court should have, previously or simultaneously with the implementation of the
writ, acquired jurisdiction over the petitioner. Yet, as was shown in the records of the case, the
summons was actually served on petitioner several months after the writ had been implemented.
Private respondent, nevertheless, claims that the prior or contemporaneous service of summons
contemplated in Section 5 of Rule 57 provides for exceptions. Among such exceptions are "where
the summons could not be served personally or by substituted service despite diligent efforts or
where the defendant is a resident temporarily absent therefrom x x x." Private respondent asserts
that when she commenced this action, she tried to serve summons on petitioner but the latter could
not be located at her customary address in Kamuning, Quezon City or at her new address in
Guagua, Pampanga.24 Furthermore, respondent claims that petitioner was not even in Pampanga;
rather, she was in Guam purportedly on a business trip.
Private respondent never showed that she effected substituted service on petitioner after her
personal service failed. Likewise, if it were true that private respondent could not ascertain the
whereabouts of petitioner after a diligent inquiry, still she had some other recourse under the Rules
of Civil Procedure.
The rules provide for certain remedies in cases where personal service could not be effected on a
party. Section 14, Rule 14 of the Rules of Court provides that whenever the defendants
"whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by leave of
court, be effected upon him by publication in a newspaper of general circulation x x x." Thus, if
petitioners whereabouts could not be ascertained after the sheriff had served the summons at her
given address, then respondent could have immediately asked the court for service of summons by
publication on petitioner.25
Moreover, as private respondent also claims that petitioner was abroad at the time of the service of
summons, this made petitioner a resident who is temporarily out of the country. This is the exact
situation contemplated in Section 16,26 Rule 14 of the Rules of Civil Procedure, providing for service
of summons by publication.
In conclusion, we hold that the alias summons belatedly served on petitioner cannot be deemed to
have cured the fatal defect in the enforcement of the writ. The trial court cannot enforce such a
coercive process on petitioner without first obtaining jurisdiction over her person. The preliminary writ
of attachment must be served after or simultaneous with the service of summons on the defendant
whether by personal service, substituted service or by publication as warranted by the
circumstances of the case.27 The subsequent service of summons does not confer a retroactive
acquisition of jurisdiction over her person because the law does not allow for retroactivity of a
belated service.
Improper Venue
Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in private
respondents invoice which contains the following:

"3. If court litigation becomes necessary to enforce collection, an additional equivalent (sic)
to 25% of the principal amount will be charged. The agreed venue for such action is Makati,
Metro Manila, Philippines."28
Based on this provision, petitioner contends that the action should have been instituted in the RTC of
Makati and to do otherwise would be a ground for the dismissal of the case.
We resolve to dismiss the case on the ground of improper venue but not for the reason stated by
petitioner.
The Rules of Court provide that parties to an action may agree in writing on the venue on which an
action should be brought.29 However, a mere stipulation on the venue of an action is not enough to
preclude parties from bringing a case in other venues. 30 The parties must be able to show that such
stipulation is exclusive. Thus, absent words that show the parties intention to restrict the filing of a
suit in a particular place, courts will allow the filing of a case in any venue, as long as jurisdictional
requirements are followed. Venue stipulations in a contract, while considered valid and enforceable,
do not as a rule supersede the general rule set forth in Rule 4 of the Revised Rules of Court. 31 In the
absence of qualifying or restrictive words, they should be considered merely as an agreement on
additional forum, not as limiting venue to the specified place. 32
In the instant case, the stipulation does not limit the venue exclusively to Makati. There are no
qualifying or restrictive words in the invoice that would evince the intention of the parties that Makati
is the "only or exclusive" venue where the action could be instituted. We therefore agree with private
respondent that Makati is not the only venue where this case could be filed.
Nevertheless, we hold that Pasay is not the proper venue for this case.
Under the 1997 Rules of Civil Procedure, the general rule is venue in personal actions is "where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff." 33 The exception to this rule is when the parties agree
on an exclusive venue other than the places mentioned in the rules. But, as we have discussed, this
exception is not applicable in this case. Hence, following the general rule, the instant case may be
brought in the place of residence of the plaintiff or defendant, at the election of the plaintiff (private
respondent herein).
In the instant case, the residence of private respondent (plaintiff in the lower court) was not alleged
in the complaint. Rather, what was alleged was the postal address of her sole proprietorship, Air
Swift International. It was only when private respondent testified in court, after petitioner was
declared in default, that she mentioned her residence to be in Better Living Subdivision, Paraaque
City.
In the earlier case of Sy v. Tyson Enterprises, Inc.,34 the reverse happened. The plaintiff in that case
was Tyson Enterprises, Inc., a corporation owned and managed by Dominador Ti. The complaint,
however, did not allege the office or place of business of the corporation, which was in Binondo,
Manila. What was alleged was the residence of Dominador Ti, who lived in San Juan, Rizal. The
case was filed in the Court of First Instance of Rizal, Pasig. The Court there held that the evident
purpose of alleging the address of the corporations president and manager was to justify the filing of
the suit in Rizal, Pasig instead of in Manila. Thus, the Court ruled that there was no question that
venue was improperly laid in that case and held that the place of business of Tyson Enterpises, Inc.
is considered as its residence for purposes of venue. Furthermore, the Court held that the residence
of its president is not the residence of the corporation because a corporation has a personality
separate and distinct from that of its officers and stockholders.

In the instant case, it was established in the lower court that petitioner resides in San Fernando,
Pampanga35while private respondent resides in Paraaque City.36 However, this case was brought in
Pasay City, where the business of private respondent is found. This would have been permissible
had private respondents business been a corporation, just like the case in Sy v. Tyson Enterprises,
Inc. However, as admitted by private respondent in her Complaint 37 in the lower court, her business
is a sole proprietorship, and as such, does not have a separate juridical personality that could enable
it to file a suit in court.38 In fact, there is no law authorizing sole proprietorships to file a suit in court. 39
A sole proprietorship does not possess a juridical personality separate and distinct from the
personality of the owner of the enterprise. 40 The law merely recognizes the existence of a sole
proprietorship as a form of business organization conducted for profit by a single individual and
requires its proprietor or owner to secure licenses and permits, register its business name, and pay
taxes to the national government.41 The law does not vest a separate legal personality on the sole
proprietorship or empower it to file or defend an action in court.42
Thus, not being vested with legal personality to file this case, the sole proprietorship is not the
plaintiff in this case but rather Loreta Guina in her personal capacity. In fact, the complaint in the
lower court acknowledges in its caption that the plaintiff and defendant are Loreta Guina and Anita
Mangila, respectively. The title of the petition before us does not state, and rightly so, Anita
Mangila v. Air Swift International, but rather Anita Mangila v. Loreta Guina. Logically then, it is the
residence of private respondent Guina, the proprietor with the juridical personality, which should be
considered as one of the proper venues for this case.
All these considered, private respondent should have filed this case either in San Fernando,
Pampanga (petitioners residence) or Paraaque (private respondents residence). Since private
respondent (complainant below) filed this case in Pasay, we hold that the case should be dismissed
on the ground of improper venue.
Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court, petitioner
expressly stated that she was filing the motion without submitting to the jurisdiction of the court. At
that time, petitioner had not been served the summons and a copy of the complaint. 43 Thereafter,
petitioner timely filed a Motion to Dismiss44 on the ground of improper venue. Rule 16, Section 1 of
the Rules of Court provides that a motion to dismiss may be filed "[W]ithin the time for but before
filing the answer to the complaint or pleading asserting a claim." Petitioner even raised the issue of
improper venue in his Answer45 as a special and affirmative defense. Petitioner also continued to
raise the issue of improper venue in her Petition for Review46 before this Court. We thus hold that the
dismissal of this case on the ground of improper venue is warranted.
The rules on venue, like other procedural rules, are designed to insure a just and orderly
administration of justice or the impartial and evenhanded determination of every action and
proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted freedom
to choose where to file the complaint or petition. 47
We find no reason to rule on the other issues raised by petitioner.

1wphi1.nt

WHEREFORE, the petition is GRANTED on the grounds of improper venue and invalidity of the
service of the writ of attachment. The decision of the Court of Appeals and the order of respondent
judge denying the motion to dismiss are REVERSED and SET ASIDE. Civil Case No. 5875 is
hereby dismissed without prejudice to refiling it in the proper venue. The attached properties of
petitioner are ordered returned to her immediately.
SO ORDERED.

Puno, Panganiban, and JJ., concur.

Sandoval-Gutierrez, J., On leave.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 139941

January 19, 2001

VICENTE B. CHUIDIAN, petitioner,

vs.
SANDIGANBAYAN (Fifth Division) and the REPUBLIC OF THE PHILIPPINES, respondents.
YNARES-SANTIAGO, J.:
The instant petition arises from transactions that were entered into by the government in the
penultimate days of the Marcos administration. Petitioner Vicente B. Chuidian was alleged to be a
dummy or nominee of Ferdinand and Imelda Marcos in several companies said to have been
illegally acquired by the Marcos spouses. As a favored business associate of the Marcoses,
Chuidian allegedly used false pretenses to induce the officers of the Philippine Export and Foreign
Loan Guarantee Corporation (PHILGUARANTEE), the Board of Investments (BOI) and the Central
Bank, to facilitate the procurement and issuance of a loan guarantee in favor of the Asian Reliability
Company, Incorporated (ARCI) sometime in September 1980. ARCI, 98% of which was allegedly
owned by Chuidian, was granted a loan guarantee of Twenty-Five Million U.S. Dollars
(US$25,000,000.00).
1wphi1.nt

While ARCI represented to Philguarantee that the loan proceeds would be used to establish five
inter-related projects in the Philippines, Chuidian reneged on the approved business plan and
instead invested the proceeds of the loan in corporations operating in the United States, more
particularly Dynetics, Incorporated and Interlek, Incorporated. Although ARCI had received the
proceeds of the loan guaranteed by Philguarantee, the former defaulted in the payments thereof,
compelling Philguarantee to undertake payments for the same. Consequently, in June 1985,
Philguarantee sued Chuidian before the Santa Clara County Superior Court, 1 charging that in
violation of the terms of the loan, Chuidian not only defaulted in payment, but also misused the funds
by investing them in Silicon Valley corporations and using them for his personal benefit.
For his part, Chuidian claimed that he himself was a victim of the systematic plunder perpetrated by
the Marcoses as he was the true owner of these companies, and that he had in fact instituted an
action before the Federal Courts of the United States to recover the companies which the Marcoses
had illegally wrested from him.2
On November 27, 1985, or three (3) months before the successful people's revolt that toppled the
Marcos dictatorship, Philguarantee entered into a compromise agreement with Chuidian whereby
petitioner Chuidian shall assign and surrender title to all his companies in favor of the Philippine
government. In return, Philguarantee shall absolve Chuidian from all civil and criminal liability, and in

so doing, desist from pursuing any suit against Chuidian concerning the payments Philguarantee
had made on Chuidian's defaulted loans.
It was further stipulated that instead of Chuidian reimbursing the payments made by Philguarantee
arising from Chuidian's default, the Philippine government shall pay Chuidian the amount of Five
Million Three Hundred Thousand Dollars (US$5,300,000.00). Initial payment of Five Hundred
Thousand Dollars (US$500,000.00) was actually received by Chuidian, as well as succeeding
payment of Two Hundred Thousand Dollars (US$200,000.00). The remaining balance of Four Million
Six Hundred Thousand Dollars (US$4,600,000.00) was to be paid through an irrevocable Letter of
Credit (L/C) from which Chuidian would draw One Hundred Thousand Dollars (US$100,000.00)
monthly.3 Accordingly, on December 12, 1985, L/C No. SSD-005-85 was issued for the said amount
by the Philippine National Bank (PNB). Subsequently, Chuidian was able to make two (2) monthly
drawings from said L/C at the Los Angeles branch of the PNB.4
With the advent of the Aquino administration, the newly-established Presidential Commission on
Good Government (PCGG) exerted earnest efforts to search and recover money, gold, properties,
stocks and other assets suspected as having been illegally acquired by the Marcoses, their relatives
and cronies.
Petitioner Chuidian was among those whose assets were sequestered by the PCGG. On May 30,
1986, the PCGG issued a Sequestration Order 5 directing the PNB to place under its custody, for and
in behalf of the PCGG, the irrevocable L/C (No. SSD-005-85). Although Chuidian was then residing
in the United States, his name was placed in the Department of Foreign Affairs' Hold Order list. 6
In the meantime, Philguarantee filed a motion before the Superior Court of Santa Clara County of
California in Civil Case Nos. 575867 and 577697 seeking to vacate the stipulated judgment
containing the settlement between Philguarantee and Chuidian on the grounds that: (a)
Philguarantee was compelled by the Marcos administration to agree to the terms of the settlement
which was highly unfavorable to Philguarantee and grossly disadvantageous to the government; (b)
Chuidian blackmailed Marcos into pursuing and concluding the settlement agreement by threatening
to expose the fact that the Marcoses made investments in Chuidian's American enterprises; and (c)
the Aquino administration had ordered Philguarantee not to make further payments on the L/C to
Chuidian. After considering the factual matters before it, the said court concluded that Philguarantee
"had not carried its burden of showing that the settlement between the parties should be set
aside."7 On appeal, the Sixth Appellate District of the Court of Appeal of the State of California
affirmed the judgment of the Superior Court of Sta. Clara County denying Philguarantee's motion to
vacate the stipulated judgment based on the settlement agreement. 8
After payment on the L/C was frozen by the PCGG, Chuidian filed before the United States District
Court, Central District of California, an action against PNB seeking, among others, to compel PNB to
pay the proceeds of the L/C. PNB countered that it cannot be held liable for a breach of contract
under principles of illegality, international comity and act of state, and thus it is excused from
payment of the L/C. Philguarantee intervened in said action, raising the same issues and arguments
it had earlier raised in the action before the Santa Clara Superior Court, alleging that PNB was
excused from making payments on the L/C since the settlement was void due to illegality, duress
and fraud.9
The Federal Court rendered judgment ruling: (1) in favor of PNB excusing the said bank from making
payment on the L/C; and (2) in Chuidian's favor by denying intervenor Philguarantee's action to set
aside the settlement agreement. 10

Meanwhile, on February 27, 1987, a Deed of Transfer 11 was executed between then Secretary of
Finance Jaime V. Ongpin and then PNB President Edgardo B. Espiritu, to facilitate the rehabilitation
of PNB, among others, as part of the government's economic recovery program. The said Deed of
Transfer provided for the transfer to the government of certain assets of PNB in exchange for which
the government would assume certain liabilities of PNB.12 Among those liabilities which the
government assumed were unused commercial L/C's and Deferred L/C's, including SSD-005-85
listed under Dynetics, Incorporated in favor of Chuidian in the amount of Four Million Four Hundred
Thousand Dollars (US$4,400,000.00).13
On July 30, 1987, the government filed before the Sandiganbayan Civil Case No. 0027 against the
Marcos spouses, several government officials who served under the Marcos administration, and a
number of individuals known to be cronies of the Marcoses, including Chuidian. The complaint
sought the reconveyance, reversion, accounting and restitution of all forms of wealth allegedly
procured illegally and stashed away by the defendants.
In particular, the complaint charged that Chuidian, by himself and/or in conspiracy with the Marcos
spouses, engaged in "devices, schemes and stratagems" by: (1) forming corporations for the
purpose of hiding and avoiding discovery of illegally obtained assets; (2) pillaging the coffers of
government financial institutions such as the Philguarantee; and (3) executing the court settlement
between Philguarantee and Chuidian which was grossly disadvantageous to the government and the
Filipino people.
In fine, the PCGG averred that the above-stated acts of Chuidian committed in unlawful concert with
the other defendants constituted "gross abuse of official position of authority, flagrant breach of
public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of
the Constitution and laws" of the land. 14
While the case was pending, on March 17, 1993, the Republic of the Philippines filed a motion for
issuance of a writ of attachment15 over the L/C, citing as grounds therefor the following:
(1) Chuidian embezzled or fraudulently misapplied the funds of ARCI acting in a fiduciary
capacity, justifying issuance of the writ under Section 1(b), Rule 57 of the Rules of Court;
(2) The writ is justified under Section 1(d) of the same rule as Chuidian is guilty of fraud in
contracting the debt or incurring the obligation upon which the action was brought, or that he
concealed or disposed of the property that is the subject of the action;
(3) Chuidian has removed or disposed of his property with the intent of defrauding the
plaintiff as justified under Section 1(c) of Rule 57; and
(4) Chuidian is residing out of the country or one on whom summons may be served by
publication, which justifies the writ of attachment prayed for under Section 1(e) of the same
rule.
The Republic also averred that should the action brought by Chuidian before the U.S. District Court
of California to compel payment of the L/C prosper, inspite of the sequestration of the said L/C,
Chuidian can ask the said foreign court to compel the PNB Los Angeles branch to pay the proceeds
of the L/C. Eventually, Philguarantee will be made to shoulder the expense resulting in further
damage to the government. Thus, there was an urgent need for the writ of attachment to place the
L/C under the custody of the Sandiganbayan so the same may be preserved as security for the
satisfaction of judgment in the case before said court.

Chuidian opposed the motion for issuance of the writ of attachment, contending that:
(1) The plaintiff's affidavit appended to the motion was in form and substance fatally
defective;
(2) Section 1(b) of Rule 57 does not apply since there was no fiduciary relationship between
the plaintiff and Chuidian;
(3) While Chuidian does not admit fraud on his part, if ever there was breach of contract,
such fraud must be present at the time the contract is entered into;
(4) Chuidian has not removed or disposed of his property in the absence of any intent to
defraud plaintiff;
(5) Chuidian's absence from the country does not necessarily make him a non-resident; and
(6) Service of summons by publication cannot be used to justify the issuance of the writ
since Chuidian had already submitted to the jurisdiction of the Court by way of a motion to lift
the freeze order filed through his counsel.
On July 14, 1993, the Sandiganbayan issued a Resolution ordering the issuance of a writ of
attachment against L/C No. SSD-005-85 as security for the satisfaction of judgment. 16 The
Sandiganbayan's ruling was based on its disquisition of the five points of contention raised by the
parties. On the first issue, the Sandiganbayan found that although no separate affidavit was attached
to the motion, the motion itself contained all the requisites of an affidavit, and the verification thereof
is deemed a substantial compliance of Rule 57, Section 3 of the Rules of Court.
Anent the second contention, the Sandiganbayan ruled that there was no fiduciary relationship
existing between Chuidian and the Republic, but only between Chuidian and ARCI. Since the
Republic is not privy to the fiduciary relationship between Chuidian and ARCI, it cannot invoke
Section 1(b) of Rule 57.
On the third issue of fraud on the part of Chuidian in contracting the loan, or in concealing or
disposing of the subject property, the Sandiganbayan held that there was a prima facie case of fraud
committed by Chuidian, justifying the issuance of the writ of attachment. The Sandiganbayan also
adopted the Republic's position that since it was compelled to pay, through Philguarantee, the bank
loans taken out by Chuidian, the proceeds of which were fraudulently diverted, it is entitled to the
issuance of the writ of attachment to protect its rights as creditor.
Assuming that there is truth to the government's allegation that Chuidian has removed or disposed of
his property with the intent to defraud, the Sandiganbayan held that the writ of attachment is
warranted, applying Section 1(e) of Rule 57. Besides, the Rules provide for sufficient security should
the owner of the property attached suffer damage or prejudice caused by the attachment. 17
Chuidian's absence from the country was considered by the Sandiganbayan to be "the most potent
insofar as the relief being sought is concerned."18 Taking judicial notice of the admitted fact that
Chuidian was residing outside of the country, the Sandiganbayan observed that:
"x x x no explanation whatsoever was given by him as to his absence from the country, or as to his
homecoming plans in the future. It may be added, moreover, that he has no definite or clearcut plan

to return to the country at this juncture given the manner by which he has submitted himself to the
jurisdiction of the court."19
Thus, the Sandiganbayan ruled that even if Chuidian is one who ordinarily resides in the Philippines,
but is temporarily living outside, he is still subject to the provisional remedy of attachment.
Accordingly, an order of attachment 20 was issued by the Sandiganbayan on July 19, 1993, ordering
the Sandiganbayan Sheriff to attach PNB L/C No. SSD-005-85 for safekeeping pursuant to the Rules
of Court as security for the satisfaction of judgment in Sandiganbayan Civil Case No. 0027.
On August 11, 1997, or almost four (4) years after the issuance of the order of attachment, Chuidian
filed a motion to lift the attachment based on the following grounds:
First, he had returned to the Philippines; hence, the Sandiganbayan's "most potent ground" for the
issuance of the writ of preliminary attachment no longer existed. Since his absence in the past was
the very foundation of the Sandiganbayan's writ of preliminary attachment, his presence in the
country warrants the immediate lifting thereof.
Second, there was no evidence at all of initial fraud or subsequent concealment except for the
affidavit submitted by the PCGG Chairman citing mere "belief and information" and "not on
knowledge of the facts." Moreover, this statement is hearsay since the PCGG Chairman was not a
witness to the litigated incidents, was never presented as a witness by the Republic and thus was
not subject to cross-examination.
Third, Chuidian denies that he ever disposed of his assets to defraud the Republic, and there is
nothing in the records that support the Sandiganbayan's erroneous conclusion on the matter. Fourth,
Chuidian belied the allegation that he was also a defendant in "other related criminal action," for in
fact, he had "never been a defendant in any prosecution of any sort in the Philippines." 21 Moreover,
he could not have personally appeared in any other action because he had been deprived of his
right to a travel document by the government.
Fifth, the preliminary attachment was, in the first place, unwarranted because he was not "guilty of
fraud in contracting the debt or incurring the obligation". In fact, the L/C was not a product of
fraudulent transactions, but was the result of a US Court-approved settlement. Although he was
accused of employing blackmail tactics to procure the settlement, the California Supreme Court
ruled otherwise. And in relation thereto, he cites as a sixth ground the fact that all these allegations
of fraud and wrongdoing had already been dealt with in actions before the State and Federal Courts
of California. While it cannot technically be considered as forum shopping, it is nevertheless a "form
of suit multiplicity over the same issues, parties and subject matter." 22 These foreign judgments
constitute res judicata which warrant the dismissal of the case itself.
Chuidian further contends that should the attachment be allowed to continue, he will be deprived of
his property without due process. The L/C was payment to Chuidian in exchange for the assets he
turned over to the Republic pursuant to the terms of the settlement in Case No. 575867. Said assets,
however, had already been sold by the Republic and cannot be returned to Chuidian should the
government succeed in depriving him of the proceeds of the L/C. Since said assets were disposed of
without his or the Sandiganbayan's consent, it is the Republic who is fraudulently disposing of
assets.
Finally, Chuidian stressed that throughout the four (4) years that the preliminary attachment had
been in effect, the government had not set the case for hearing. Under Rule 17, Section 3, the case
itself should be dismissed for laches owing to the Republic's failure to prosecute its action for an

unreasonable length of time. Accordingly, the preliminary attachment, being only a temporary or
ancillary remedy, must be lifted and the PNB ordered to immediately pay the proceeds of the L/C to
Chuidian.
Subsequently, on August 20, 1997, Chuidian filed a motion to require the Republic to deposit the L/C
in an interest bearing account.23 Annex "D"; Rollo, pp. 77-79.23 He pointed out to the
Sandiganbayan that the face amount of the L/C had, since its attachment, become fully demandable
and payable. However, since the amount is just lying dormant in the PNB, without earning any
interest, he proposed that it would be to the benefit of all if the Sandiganbayan requires PNB to
deposit the full amount to a Sandiganbayan trust account at any bank in order to earn interest while
awaiting judgment of the action.
The Republic opposed Chuidian's motion to lift attachment, alleging that Chuidian's absence was not
the only ground for the attachment and, therefore, his belated appearance before the
Sandiganbayan is not a sufficient reason to lift the attachment. Moreover, allowing the foreign
judgment as a basis for the lifting of the attachment would essentially amount to an abdication of the
jurisdiction of the Sandiganbayan to hear and decide the ill gotten wealth cases lodged before it in
deference to the judgment of foreign courts.
In a Resolution promulgated on November 13, 1998, the Sandiganbayan denied Chuidian's motion
to lift attachment.24
On the same day, the Sandiganbayan issued another Resolution denying Chuidian's motion to
require deposit of the attached L/C in an interest bearing account. 25
In a motion seeking a reconsideration of the first resolution, Chuidian assailed the Sandiganbayan's
finding that the issues raised in his motion to lift attachment had already been dealt with in the earlier
resolution dated July 14, 1993 granting the application for the writ of preliminary attachment based
on the following grounds:
First, Chuidian was out of the country in 1993, but is now presently residing in the country.
Second, the Sandiganbayan could not have known then that his absence was due to the nonrenewal of his passport at the instance of the PCGG. Neither was it revealed that the Republic had
already disposed of Chuidian's assets ceded to the Republic in exchange for the L/C. The foreign
judgment was not an issue then because at that time, said judgment had not yet been issued and
much less final. Furthermore, the authority of the PCGG Commissioner to subscribe as a
knowledgeable witness relative to the issuance of the writ of preliminary attachment was raised for
the first time in the motion to lift the attachment. Finally, the issue of laches could not have been
raised then because it was the Republic's subsequent neglect or failure to prosecute despite the
passing of the years that gave rise to laches.26
Chuidian also moved for a reconsideration of the Sandiganbayan resolution denying the motion to
require deposit of the L/C into an interest bearing account. He argued that contrary to the
Sandiganbayan's pronouncement, allowing the deposit would not amount to a virtual recognition of
his right over the L/C, for he is not asking for payment but simply requesting that it be deposited in
an account under the control of the Sandiganbayan. He further stressed that the Sandiganbayan
abdicated its bounden duty to rule on an issue when it found "that his motion will render nugatory the
purpose of sequestration and freeze orders over the L/C." Considering that his assets had already
been sold by the Republic, he claimed that the Sandiganbayan's refusal to exercise its fiduciary duty
over attached assets will cause him irreparable injury. Lastly, the Sandiganbayan's position that
Chuidian was not the owner but a mere payee-beneficiary of the L/C issued in his favor negates

overwhelming jurisprudence on the Negotiable Instruments Law, while at the same time obliterating
his rights of ownership under the Civil Code.27
On July 13, 1999, the Sandiganbayan gave due course to Chuidian's plea for the attached L/C to be
deposited in an interest-bearing account, on the ground that it will redound to the benefit of both
parties.
The Sandiganbayan declared the national government as the principal obligor of the L/C even
though the liability remained in the books of the PNB for accounting and monitoring purposes.
The Sandiganbayan, however, denied Chuidian's motion for reconsideration of the denial of his
motion to lift attachment, agreeing in full with the government's apriorisms that:
x x x (1) it is a matter of record that the Court granted the application for writ of attachment upon
grounds other than defendant's absence in the Philippine territory. In its Resolution dated July 14,
1993, the Court found a prima facie case of fraud committed by defendant Chuidian, and that
defendant has recovered or disposed of his property with the intent of defrauding plaintiff; (2)
Chuidian's belated presence in the Philippines cannot be invoked to secure the lifting of attachment.
The rule is specific that it applies to a party who is about to depart from the Philippines with intent to
defraud his creditors. Chuidian's stay in the country is uncertain and he may leave at will because he
holds a foreign passport; and (3) Chuidian's other ground, sufficiency of former PCGG Chairman
Gunigundo's verification of the complaint, has been met fairly and squarely in the Resolution of July
14, 1993.28
Hence, the instant petition for certiorari contending that the respondent Sandiganbayan committed
grave abuse of discretion amounting to lack or excess of jurisdiction when it ruled that:
1) Most of the issues raised in the motion to lift attachment had been substantially addressed
in the previous resolutions dated July 14, 1993 and August 26, 1998, while the rest were of
no imperative relevance as to affect the Sandiganbayan's disposition; and
2) PNB was relieved of the obligation to pay on its own L/C by virtue of Presidential
Proclamation No. 50.
The Rules of Court specifically provide for the remedies of a defendant whose property or asset has
been attached. As has been consistently ruled by this Court, the determination of the existence of
grounds to discharge a writ of attachment rests in the sound discretion of the lower courts. 29
The question in this case is: What can the herein petitioner do to quash the attachment of the L/C?
There are two courses of action available to the petitioner:
First. To file a counterbond in accordance with Rule 57, Section 12, which provides:
SEC. 12. Discharge of attachment upon giving counterbond. At anytime after an order of
attachment has been granted, the party whose property has been attached, or the person appearing
on his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the
order, or to the judge of the court in which the action is pending, for an order discharging the
attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge
of the attachment if a cash deposit is made, or a counterbond executed to the attaching creditor is
filed, on behalf of the adverse party, with the clerk or judge of the court where the application is
made, in an amount equal to the value of the property attached as determined by the judge, to

secure the payment of any judgment that the attaching creditor may recover in the action. Upon the
filing of such counter-bond, copy thereof shall forthwith be served on the attaching creditor or his
lawyer. Upon the discharge of an attachment in accordance with the provisions of this section the
property attached, or the proceeds of any sale thereof, shall be delivered to the party making the
deposit or giving the counter-bond, or the person appearing on his behalf, the deposit or counterbond aforesaid standing in place of the property so released. Should such counterbond for any
reason be found to be, or become, insufficient, and the party furnishing the same fail to file an
additional counter-bond, the attaching creditor may apply for a new order of attachment.
1wphi1.nt

or
Second. To quash the attachment on the ground that it was irregularly or improvidently issued, as
provided for in Section 13 of the same Rule:
SEC. 13. Discharge of attachment for improper or irregular issuance. - The party whose property has
been attached may also, at any time either before or after the release of the attached property, or
before any attachment shall have been actually levied, upon reasonable notice to the attaching
creditor, apply to the judge who granted the order, or to the judge of the court in which the action is
pending, for an order to discharge the attachment on the ground that the same was improperly or
irregularly issued. If the motion be made on affidavits on the part of the party whose property has
been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits
or other evidence in addition to that on which the attachment was made. After hearing, the judge
shall order the discharge of the attachment if it appears that it was improperly or irregularly issued
and the defect is not cured forthwith.
It would appear that petitioner chose the latter because the grounds he raised assail the propriety of
the issuance of the writ of attachment. By his own admission, however, he repeatedly acknowledged
that his justifications to warrant the lifting of the attachment are facts or events that came to light or
took place after the writ of attachment had already been implemented.
More particularly, petitioner emphasized that four (4) years after the writ was issued, he had returned
to the Philippines. Yet while he noted that he would have returned earlier but for the cancellation of
his passport by the PCGG, he was not barred from returning to the Philippines. Then he informed
the Sandiganbayan that while the case against him was pending, but after the attachment had
already been executed, the government lost two (2) cases for fraud lodged against him before the
U.S. Courts, thus invoking res judicata. Next, he also pointed out that the government is estopped
from pursuing the case against him for failing to prosecute for the number of years that it had been
pending litigation.
It is clear that these grounds have nothing to do with the issuance of the writ of attachment. Much
less do they attack the issuance of the writ at that time as improper or irregular. And yet, the rule
contemplates that the defect must be in the very issuance of the attachment writ. For instance, the
attachment may be discharged under Section 13 of Rule 57 when it is proven that the allegations of
the complaint were deceptively framed, 30 or when the complaint fails to state a cause of
action.31 Supervening events which may or may not justify the discharge of the writ are not within the
purview of this particular rule.
In the instant case, there is no showing that the issuance of the writ of attachment was attended by
impropriety or irregularity. Apart from seeking a reconsideration of the resolution granting the
application for the writ, petitioner no longer questioned the writ itself. For four (4) long years he kept
silent and did not exercise any of the remedies available to a defendant whose property or asset has

been attached. It is rather too late in the day for petitioner to question the propriety of the issuance of
the writ.
Petitioner also makes capital of the two foreign judgments which he claims warrant the application of
the principle of res judicata. The first judgment, in Civil Case Nos. 575867 and 577697 brought by
Philguarantee before the Santa Clara Country Superior Court, denied Philguarantee's prayer to set
aside the stipulated judgment wherein Philguarantee and Chuidian agreed on the subject attached
L/C. On March 14, 1990, the Court of Appeal of the State of California affirmed the Superior Court's
judgment. The said judgment became the subject of a petition for review by the California Supreme
Court. There is no showing, however, of any final judgment by the California Supreme Court. The
records, including petitioner's pleadings, are bereft of any evidence to show that there is a final
foreign judgment which the Philippine courts must defer to. Hence, res judicata finds no application
in this instance because it is a requisite that the former judgment or order must be final. 32
Second, petitioner cites the judgment of the United States District Court in Civil Case 86-2255 RSWL
brought by petitioner Chuidian against PNB to compel the latter to pay the L/C. The said Court's
judgment, while it ruled in favor of petitioner on the matter of Philguarantee's action-in-intervention to
set aside the settlement agreement, also ruled in favor of PNB, to wit:
Under Executive Order No. 1, the PCGG is vested by the Philippine President with the power to
enforce its directives and orders by contempt proceedings. Under Executive Order No. 2, the PCGG
is empowered to freeze any, and all assets, funds and property illegally acquired by former President
Marcos or his close friends and business associates.
On March 11, 1986, PNB/Manila received an order from the PCGG ordering PNB to freeze any
further drawings on the L/C. The freeze order has remained in effect and was followed by a
sequestration order issued by the PCGG. Subsequently, Chuidian's Philippine counsel filed a series
of challenges to the freeze and sequestration orders, which challenges were unsuccessful as the
orders were found valid by the Philippine Supreme Court. The freeze and sequestration orders are
presently in effect. Thus, under the PCGG order and Executive Orders Nos. 1 and 2, performance by
PNB would be illegal under Philippine Law. Therefore PNB is excused from performance of the L/C
agreement as long as the freeze and sequestration orders remain in effect. (Underscoring ours)
xxx

xxx

xxx

Chuidian argues that the fact that the L/C was issued pursuant to a settlement in California, that the
negotiations for which occurred in California, and that two of the payments were made at PNB/LA,
compels the conclusion that the act of prohibiting payment of the L/C occurred in Los Angeles.
However, the majority of the evidence andTchacosh and Sabbatino compel the opposite conclusion.
The L/C was issued in Manila, such was done at the request of a Philippine government
instrumentality for the benefit of a Philippine citizen, the L/C was to be performed in the Philippines,
all significant events relating to the issuance and implementation of the L/C occurred in the
Philippines, the L/C agreement provided that the L/C was to be construed according to laws of the
Philippines, and the Philippine government certainly has an interest in preventing the L/C from being
remitted in that it would be the release of funds that are potentially illgotten gains. Accordingly, the
Court finds that the PCGG orders are acts of state that must be respected by this Court, and thus
PNB is excused from making payment on the L/C as long as the freeze and sequestration orders
remain in effect.33 (Underscoring ours)
Petitioner's own evidence strengthens the government's position that the L/C is under the jurisdiction
of the Philippine government and that the U.S. Courts recognize the authority of the Republic to
sequester and freeze said L/C. Hence, the foreign judgments relied upon by petitioner do not

constitute a bar to the Republic's action to recover whatever alleged ill-gotten wealth petitioner may
have acquired.
Petitioner may argue, albeit belatedly, that he also raised the issue that there was no evidence of
fraud on record other than the affidavit of PCGG Chairman Gunigundo. This issue of fraud, however,
touches on the very merits of the main case which accuses petitioner of committing fraudulent acts
in his dealings with the government. Moreover, this alleged fraud was one of the grounds for the
application of the writ, and the Sandiganbayan granted said application after it found a prima
facie case of fraud committed by petitioner.
In fine, fraud was not only one of the grounds for the issuance of the preliminary attachment, it was
at the same time the government's cause of action in the main case.
We have uniformly held that:
x x x when the preliminary attachment is issued upon a ground which is at the same time the
applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently
misapplied or converted to his own use by a public officer, or an officer of a corporation, or an
attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other
person in a fiduciary capacity, or for a willful violation of duty," or "an action against a party who has
been guilty of fraud in contracting the debt or incurring the obligation upon which the action is
brought," the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of
Rule 57 by offering to show the falsity of the factual averments in the plaintiff's application and
affidavits on which the writ was based and consequently that the writ based thereon had been
improperly or irregularly issued the reason being that the hearing on such a motion for dissolution
of the writ would be tantamount to a trial of the merits of the action. In other words, the merits of the
action would be ventilated at a mere hearing of a motion, instead of at the regular
trial.34 (Underscoring ours)
Thus, this Court has time and again ruled that the merits of the action in which a writ of preliminary
attachment has been issued are not triable on a motion for dissolution of the attachment, otherwise
an applicant for the lifting of the writ could force a trial of the merits of the case on a mere motion. 35
It is not the Republic's fault that the litigation has been protracted. There is as yet no evidence of
fraud on the part of petitioner. Petitioner is only one of the twenty-three (23) defendants in the main
action. As such, the litigation would take longer than most cases. Petitioner cannot invoke this delay
in the proceedings as an excuse for not seeking the proper recourse in having the writ of attachment
lifted in due time. If ever laches set in, it was petitioner, not the government, who failed to take action
within a reasonable time period. Challenging the issuance of the writ of attachment four (4) years
after its implementation showed petitioner's apparent indifference towards the proceedings before
the Sandiganbayan.
In sum, petitioner has failed to convince this Court that the Sandiganbayan gravely abused its
discretion in a whimsical, capricious and arbitrary manner. There are no compelling reasons to
warrant the immediate lifting of the attachment even as the main case is still pending. On the other
hand, allowing the discharge of the attachment at this stage of the proceedings would put in
jeopardy the right of the attaching party to realize upon the relief sought and expected to be granted
in the main or principal action. It would have the effect of prejudging the main case.
The attachment is a mere provisional remedy to ensure the safety and preservation of the thing
attached until the plaintiff can, by appropriate proceedings, obtain a judgment and have such
property applied to its satisfaction.36To discharge the attachment at this stage of the proceedings

would render inutile any favorable judgment should the government prevail in the principal action
against petitioner. Thus, the Sandiganbayan, in issuing the questioned resolutions, which are
interlocutory in nature, committed no grave abuse of discretion amounting to lack or excess of
jurisdiction. As long as the Sandiganbayan acted within its jurisdiction, any alleged errors committed
in the exercise of its jurisdiction will amount to nothing more than errors of judgment which are
reviewable by timely appeal and not by special civil action of certiorari. 37
Moreover, we have held that when the writ of attachment is issued upon a ground which is at the
same time the applicant's cause of action, the only other way the writ can be lifted or dissolved is by
a counterbond, in accordance with Section 12 of the same rule. 38 This recourse, however, was not
availed of by petitioner, as noted by the Solicitor General in his comment. 39
To reiterate, there are only two ways of quashing a writ of attachment: (a) by filing a counterbond
immediately; or (b) by moving to quash on the ground of improper and irregular issuance. 40 These
grounds for the dissolution of an attachment are fixed in Rule 57 of the Rules of Court and the power
of the Court to dissolve an attachment is circumscribed by the grounds specified
therein.41 Petitioner's motion to lift attachment failed to demonstrate any infirmity or defect in the
issuance of the writ of attachment; neither did he file a counterbond.
Finally, we come to the matter of depositing the Letter of Credit in an interest-bearing account. We
agree with the Sandiganbayan that any interest that the proceeds of the L/C may earn while the
case is being litigated would redound to the benefit of whichever party will prevail, the Philippine
government included. Thus, we affirm the Sandiganbayan's ruling that the proceeds of the L/C
should be deposited in an interest bearing account with the Land Bank of the Philippines for the
account of the Sandiganbayan in escrow until ordered released by the said Court.
We find no legal reason, however, to release the PNB from any liability thereunder. The Deed of
Transfer, whereby certain liabilities of PNB were transferred to the national government, cannot
affect the said L/C since there was no valid substitution of debtor. Article 1293 of the New Civil Code
provides:
Novation which consists in substituting a new debtor in the place of the original one, may be made
without the knowledge or against the will of the latter, but not without the consent of the creditor.
Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237.
Accordingly, any substitution of debtor must be with the consent of the creditor, whose consent
thereto cannot just be presumed. Even though Presidential Proclamation No. 50 can be considered
an "insuperable cause", it does not necessarily make the contracts and obligations affected thereby
exceptions to the above-quoted law, such that the substitution of debtor can be validly made even
without the consent of the creditor. Presidential Proclamation No. 50 was not intended to set aside
laws that govern the very lifeblood of the nation's commerce and economy. In fact, the Deed of
Transfer that was executed between PNB and the government pursuant to the said Presidential
Proclamation specifically stated that it shall be deemed effective only upon compliance with several
conditions, one of which requires that:
(b) the BANK shall have secured such governmental and creditors' approvals as may be necessary
to establish the consummation, legality and enforceability of the transactions contemplated hereby."
The validity of this Deed of Transfer is not disputed. Thus, PNB is estopped from denying its liability
thereunder considering that neither the PNB nor the government bothered to secure petitioner's
consent to the substitution of debtors. We are not unmindful that any effort to secure petitioner's
consent at that time would, in effect, be deemed an admission that the L/C is valid and binding. Even

the Sandiganbayan found that: 36 Sta. Ines Melale Forest Products Corp. v. Macaraig, Jr., 299 SCRA
491, 515 (1998).
x x x Movant has basis in pointing out that inasmuch as the L/C was issued in his favor, he is
presumed to be the lawful payee-beneficiary of the L/C until such time that the plaintiff successfully
proves that said L/C is ill-gotten and he has no right over the same. 42
In Republic v. Sandiganbayan,43 we held that the provisional remedies, such as freeze orders and
sequestration, were not "meant to deprive the owner or possessor of his title or any right to the
property sequestered, frozen or taken over and vest it in the sequestering agency, the Government
or other person."
Thus, until such time that the government is able to successfully prove that petitioner has no right to
claim the proceeds of the L/C, he is deemed to be the lawful payee-beneficiary of said L/C, for which
any substitution of debtor requires his consent. The Sandiganbayan thus erred in relieving PNB of its
liability as the original debtor.
WHEREFORE, in view of all the foregoing, the petition is DISMISSED. The Resolutions of the
Sandiganbayan dated November 6, 1998 and July 2, 1999 are AFFIRMED. The PNB is DIRECTED
to remit to the Sandiganbayan the proceeds of Letter of Credit No. SFD-005-85 in the amount of
U.S. $4.4 million within fifteen (15) days from notice hereof, the same to be placed under special
time deposit with the Land Bank of the Philippines, for the account of Sandiganbayan in escrow for
the person or persons, natural or juridical, who shall eventually be adjudged lawfully entitled thereto,
the same to earn interest at the current legal bank rates. The principal and its interest shall remain in
said account until ordered released by the Court in accordance with law.
1wphi1.nt

No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 161028

January 31, 2005

TERESITA V. IDOLOR, petitioner,

vs.
HON. COURT OF APPEALS, SPOUSES GUMERSINDO DE GUZMAN and ILUMINADA DE
GUZMAN and HON. JOSE G. PINEDA, Presiding Judge of Regional Trial Court, National
Capital Judicial Region, Branch 220, Quezon City, respondents.
DECISION

YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the September 1, 2003 decision1 of the Court of Appeals
in CA-G.R. SP No. 72494 which reversed the May 27, 2002 order of the Regional Trial Court of
Quezon City, Branch 220, in Civil Case No. Q-98-34728, denying respondent-spouses Motion for
Immediate Issuance of Writ of Possession.
Petitioner Teresita V. Idolor obtained a loan from respondent-spouses Gumersindo and Iluminada De
Guzman secured by a real estate mortgage over a property covered by Transfer Certificate of Title
No. 25659.2
Upon default by petitioner in the payment of her obligation, respondent-spouses instituted extrajudicial foreclosure proceedings against the real estate mortgage. During the auction sale,
respondent-spouses emerged as the highest bidder and were issued a Certificate of Sale. 3
On June 25, 1998, petitioner filed with the Regional Trial Court of Quezon City, Branch 220, a
complaint for annulment of the Certificate of Sale with prayer for the issuance of a temporary
restraining order and a writ of preliminary injunction. The case was docketed as Civil Case No. Q-9834728.
The trial court issued a writ of preliminary injunction, however, the Court of Appeals in a petition
for certiorari filed by respondent-spouses, annulled the same for having been issued with grave
abuse of discretion. We affirmed said decision of the appellate court in Idolor v. Court of Appeals .4
The ownership over the subject property having been consolidated in their name, respondentspouses De Guzman moved for the issuance of a writ of possession with the Regional Trial Court
where the case for the annulment of the Certificate of Sale was pending. 5 On May 27, 2002, the trial
court denied the motion, ruling that the "the lifting of the writ of preliminary injunction does not ipso
facto entitle defendant De Guzman to the issuance of a writ of possession over the property in
question. It only allows the defendant Sheriff to issue a final deed of sale and confirmation sale and
the defendant De Guzman to consolidate the ownership/title over the subject property in his
name."6
1awphi1.nt

In a petition for certiorari before the Court of Appeals, the appellate court found that the trial court
gravely abused its discretion in denying the motion for the issuance of the "writ of possession to the
mortgagee or the winning bidder is a ministerial function of the court and that the pendency of an
action questioning the validity of a mortgage cannot bar the issuance of the writ of possession after
title to the property has been consolidated in the mortgagee."7 Hence, it reversed and set aside the
May 27, 2002 order of the trial court.
The following issues are raised for our consideration:
A. WHETHER OR NOT THE COURT A QUO HAS JURISDICTION ON THE MOTION OF
THE MORTGAGEE TO APPLY FOR A WRIT OF POSSESSION NOTWITHSTANDING NONPAYMENT OF DOCKET FEES;
B. WHETHER OR NOT THE MORTGAGEE, BY MERE MOTION, NOT BY A PETITION,
MAY APPLY FOR A WRIT OF POSSESSION IN THE SAME CASE FOR ANNULMENT OF
THE SHERIFFS CERTIFICATE OF SALE OF WHICH HE IS A DEFENDANT.8

A writ of possession is an order whereby the sheriff is commanded to place a person in possession
of a real or personal property.9 It may be issued under the following instances: (1) land registration
proceedings under Sec. 17 of Act 496; (2) judicial foreclosure, provided the debtor is in possession
of the mortgaged realty and no third person, not a party to the foreclosure suit, had intervened; and
(3) extrajudicial foreclosure of a real estate mortgage under Sec. 7 of Act 3135 as amended by Act
4118,10 to which the present case falls.
Section 7, Act 3135, as amended by Act 4118, provides:
SECTION 7. In any sale made under the provisions of this Act, the purchaser may petition the Court
of First Instance of the province or place where the property or any part thereof is situated, to give
him possession thereof during the redemption period, furnishing bond in an amount equivalent to the
use of the property for a period of twelve months, to indemnify the debtor in case it be shown that
the sale was made without violating the mortgage or without complying with the requirements of this
Act. Such petition shall be made under oath and filed in form of an ex parte motion in the registration
or cadastral proceedings if the property is registered, or in special proceedings in the case of
property registered under the Mortgage Law or under section one hundred and ninety-four of the
Administrative Code, or of any other real property encumbered with a mortgage duly registered in
the office of any register of deeds in accordance with any existing law, and in each case the clerk of
the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of
section one hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act
Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval of the bond, order
that a writ of possession issue, addressed to the sheriff of the province in which the property is
situated, who shall execute said order immediately.
Under the provision cited above, the purchaser in a foreclosure sale may apply for a writ of
possession during the redemption period by filing for that purpose an ex parte motion under oath, in
the corresponding registration or cadastral proceeding in the case of a property with torrens title.
Upon the filing of such motion and the approval of the corresponding bond, the court is expressly
directed to issue the writ.11
Upon the expiration of the redemption period, the right of the purchaser to the possession of the
foreclosed property becomes absolute. The basis of this right to possession is the purchasers
ownership of the property. Mere filing of an ex parte motion for the issuance of the writ of possession
would suffice, and the bond required is no longer necessary, since possession becomes an absolute
right of the purchaser as the confirmed owner.12
In this case, respondent-spouses acquired an absolute right over the property upon the failure of
petitioner to exercise her right of redemption and upon the consolidation of the title in their name.
The pendency of the case for the annulment of the Certificate of Sale is not a bar to the issuance of
the writ of possession. Upon the filing of the motion, the trial court has no discretion to deny the
same, thus:
This Court has consistently held that the duty of the trial court to grant a writ of possession is
ministerial. Such writ issues as a matter of course upon the filing of the proper motion and the
approval of the corresponding bond. No discretion is left to the trial court. Any question regarding the
regularity and validity of the sale, as well as the consequent cancellation of the writ, is to be
determined in a subsequent proceeding as outlined in Section 8 of Act 3135. Such question cannot
be raised to oppose the issuance of the writ, since the proceeding is ex parte. The recourse is
available even before the expiration of the redemption period provided by law and the Rules of
Court.13

The judge to whom an application for writ of possession is filed need not look into the validity of the
mortgage or the manner of its foreclosure. As a rule, after the consolidation of title in the buyers
name, for failure of the mortgagor to redeem, the writ of possession becomes a matter of right. Its
issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial function. As such, the
court neither exercises its official discretion nor judgment. 14 Any question regarding the validity of the
mortgage or its foreclosure cannot be a legal ground for refusing the issuance of a writ of
possession. Regardless of whether or not there is a pending suit for annulment of the mortgage or
the foreclosure itself, the purchaser is entitled to a writ of possession, without prejudice of course to
the eventual outcome of said case.15
Contrary to petitioners assertion, the Regional Trial Court of Quezon City has jurisdiction to act on
respondents motion for writ of possession. Section 7, Act 3135, as amended, is clear that in any
sale made under its provisions, "the purchaser may petition the Court of the province or place
where the property or any part thereof is situated" Since the property subject of this controversy is
in Quezon City, then the citys Regional Trial Court should rightly take cognizance of the case.
The Court of Appeals correctly observed:
Thus, it is clear under the aforesaid law that the RTC of the place where the property is situated has
the appropriate authority to issue the writ of possession and, specifically in the instant case, it is the
RTC of Quezon City. And when jurisdiction pertains to the RTC of Quezon City, it includes all
branches thereof including the court a quo where a related proceeding is being conducted. 16
Further, in Bacalso, et al. v. Ramolete, et al.,17 we held:
The various branches of the Court of First Instance of Cebu under the Fourteenth Judicial District,
are a coordinate and co-equal courts, and the totality of which is only one Court of First Instance.
The jurisdiction is vested in the court, not in the judges. And when a case is filed in one branch,
jurisdiction over the case does not attach to the branch or judge alone, to the exclusion of the other
branches. Trial may be held or proceedings continue by and before another branch or judge. It is for
this reason that Section 57 of the Judiciary Act expressly grants to the Secretary of Justice, the
administrative right or power to apportion the cases among the different branches, both for the
convenience of the parties and for the coordination of the work by the different branches of the same
court. The apportionment and distribution of cases does not involve a grant or limitation of
jurisdiction; the jurisdiction attaches and continues to be vested in the Court of First Instance of the
province, and the trials may be held by any branch or judge of the court.
Necessarily, therefore, Branch 220 of the Regional Trial Court of Quezon City has jurisdiction over
respondent-spouses application for writ of possession over a property in Quezon City.
The Court of Appeals properly debunked petitioners claim that the Regional Trial Court acquired no
jurisdiction over the case due to alleged non-payment of docket fees by the respondent. This
allegation, having been raised for the first time on appeal, should be disallowed. Besides, the fees
mentioned in Section 7, Act 3135 in relation to Section 114, Act 496, pertain to fees payable upon
registration of land titles, and not to court or docket fees, as erroneously claimed by petitioner.
An ex-parte petition for issuance of possessory writ under Section 7 of Act No. 3135 is not, strictly
speaking, a "judicial process". Even if the same may be considered a judicial proceeding for the
enforcement of ones right of possession as purchaser in a foreclosure sale, it is not an ordinary suit
filed in court, by which one party "sues another for the enforcement or protection of a right, or the
prevention or redress of a wrong." 18 It is a non-litigious proceeding and summary in nature as well.
As such, the rigid and technical application of the rules on legal fees may be relaxed in order to

avoid manifest injustice to the respondent. After all, rules of procedure are used to help secure and
not override substantial justice. Even the Rules of Court mandates a liberal construction in order to
promote their objective of securing a just, speedy and inexpensive disposition of every action and
proceeding. Since rules of procedure are 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 avoided. 19
1awphi1.nt

This rule is applicable in the present case. Although respondent- spouses have been declared as the
highest bidder and despite having consolidated the title in their name, they still failed to take
possession of the property through numerous legal maneuverings of the petitioner. A simple ex
parte application for the issuance of a writ of possession has become a litigious and protracted
proceeding.
Thus, if we strictly apply the Rules, justice long been denied to respondent would be effectively
defeated. At any rate, should there be fees and costs relative to the issuance and implementation
of the writ of possession, the same may be assessed and collected from the respondent-spouses De
Guzman.
l^vvphi1.net

WHEREFORE, in view of the foregoing, the petition for review on certiorari is DENIED and the
decision of the Court of Appeals in CA-G.R. SP No. 72494 is AFFIRMED. The Regional Trial Court of
Quezon City, Branch 220 is ordered to issue a writ of possession in favor of respondent-spouses
Gumersindo and Iluminada De Guzman.
SO ORDERED.
Davide, Jr., C.J. (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

SECOND DIVISION

[A.M. No. MTJ-00-1250. February 28, 2001]

RIMEO S. GUSTILO, complainant, vs. HON. RICARDO S. REAL, SR.,

Presiding Judge, 2nd Municipal Circuit Trial Court of VictoriasManapla, Negros Occidental, respondent.
R E S O LUTIO N
QUISUMBING, J.:

In a verified complaint[1] dated June 15, 1997, Rimeo S. Gustilo charged respondent Judge
Ricardo S. Real, Sr., of the Municipal Circuit Trial Court of Victorias-Manapla, Negros
Occidental with gross misconduct, gross incompetence, gross ignorance of the law, and violation
of the Anti-Graft and Corrupt Practices Act relative to Civil Case No. 703-M entitled Weddy C.

Libo-on v. Rimeo S. Gustilo, et al. for recounting of ballots of Precinct Nos. 27 and 27-A,
Barangay Punta Mesa, Manapla, Negros Occidental.
Complainant avers that he was a candidate for punong barangay of Barangay Punta Mesa,
Manapla, Negros Occidental in the May 12, 1997 elections. His lone opponent was Weddy C.
Libo-on, then the incumbent punong barangay and the representative of the Association of
Barangay Captains (ABC) to the Sangguniang Bayan of Manapla and the Sangguniang
Panlalawigan of Negros Occidental. Both complainant and Libo-on garnered eight hundred
nineteen (819) votes during the elections, resulting in a tie. The breaking of the tie by the Board
of Canvassers was in complainants favor and he was proclaimed duly elected punong
barangay of Punta Mesa, Manapla.[2]
On May 20, 1997, his opponent filed an election protest case, docketed as Civil Case No.
703-M, before the MCTC of Victorias-Manapla, Negros Occidental. Libo-on sought the
recounting of ballots in two precincts, preliminary prohibitory injunction, and damages.
On May 21, 1997, respondent ordered the issuance of summons to the parties and set the
hearing on June 6, 1997.[3]
On May 27, 1997, however, Libo-on filed a motion to advance the hearing to May 29 and
30, 1997.
The next day, respondent granted Libo-ons motion. The hearing was advanced to May 29
and 30, 1997 cancelling the hearing for June 6, 1997. [4] Complainant avers that he was not
furnished a copy of this Order dated May 28, 1997.
On May 29, 1997, respondent judge issued a temporary restraining order (TRO) and
annulled the proclamation of complainant as the duly elected punong barangay of Punta Mesa,
Manapla.[5]Complainant declares that no copy of this Order dated May 29, 1997 was served on
him. That same day, however, he was able to secure copies of the orders of respondent dated
May 28 and May 29, 1997 from the COMELEC Registrar of Manapla, Negros Occidental and
the Department of Interior and Local Government (DILG). Moreover, it was only in the
afternoon of May 29, 1997 that complainant received a copy of Libo-ons petition in Civil Case
No. 703-M and respondents Order dated May 21, 1997.
On May 30, 1997, complainant took his oath of office as punong barangay.[6] That same day,
he also filed a petition for certiorari before the Regional Trial Court of Silay City, Negros
Occidental, Branch 69 docketed as Special Civil Action No. 1936-69.
On June 5, 1997, the RTC lifted the TRO issued by respondent and declared as null and void
the order nullifying complainants proclamation as duly elected punong barangay.[7]
Believing that respondent could not decide Civil Case No. 703-M impartially, complainant
moved for his inhibition.
On June 11, 1997, respondent denied complainants motion for inhibition and after hearing
Libo-ons motion for permanent injunction, issued a second TRO to maintain the
status quo between the contending parties.[8]
Complainant argues that by issuing the second TRO, respondent reversed the order of the
RTC of Silay City dated June 5, 1997. He also claims that by preventing him from assuming

office, he was excluded by the DILG from participating in the election of the Liga ng Mga
Barangay on June 14, 1997.
In his Comment, respondent denied the allegations. He claimed that when Libo-on filed his
motion to advance the hearing of the prayer for injunction on May 27, 1997 in Civil Case No.
703-M, complainant was served a copy by registered mail as shown by the registry receipts
attached to said motion. Considering the urgency of the matter and since there was substantial
compliance with due process, he issued the Order of May 28, 1997 which cancelled the hearing
set for June 6, 1997 and advanced it to May 29 and 30, 1997.
Respondent claims that on May 29, 1997, Libo-on and his counsel appeared but complainant
did not, despite due notice. The hearing then proceeded, with Libo-on presenting his evidence.
As a result, he issued the TRO prayed for and annulled complainants proclamation. Respondent
admits that the Order of May 29, 1997, particularly the annulment of complainants proclamation,
was outside the jurisdiction of his court. But since the COMELEC ignored Libo-ons petition for
correction of erroneous tabulation and Libo-on had no other remedy under the law, he was
constrained to annul complainants proclamation, which from the very beginning was illegal. He
justified his action by our rulings in Bince, Jr. v. COMELEC, 312 Phil. 316 (1995)
and Tatlonghari v. COMELEC, 199 SCRA 849 (1991), which held that a faulty tabulation cannot
be the basis of a valid proclamation.
Respondent also faults the RTC of Silay City for issuing the Order dated June 5, 1997,
which lifted the TRO he issued and declared void his nullification of complainants proclamation.
Respondent contends that complainant should first have exhausted all remedies in his court
before resorting to the special civil action for certiorari with the RTC. The latter court, in turn,
should have dismissed the action for certiorari for failure to exhaust judicial remedies.
With respect to his Order of June 11, 1997, respondent explains that it was never meant to
reverse the Order of the RTC of Silay City dated June 5, 1997. He points out that both parties in
Civil Case No. 703-M were present during the hearing after due notice. After receiving their
evidence, he found that unless a TRO was issued, Libo-on would suffer a grave injustice and
irreparable injury. He submits that absent fraud, dishonesty, or corruption, his acts, even if
erroneous, are not the subject of disciplinary action.
In its evaluation and recommendation report dated November 29, 1999, the Office of the
Court Administrator (OCA) found that respondents errors were not honest mistakes in the
performance of his duties. Rather, his actions showed a bias in favor of Libo-on and evinced a
pattern to prevent the complainant from assuming office as the duly elected punong
barangay despite his having been proclaimed as such by the Board of Canvassers. The OCA
recommends that respondent be fined P20,000.00 and warned that a repetition of similar acts in
the future will be dealt with more severely.
Supreme Court Administrative Circular No. 20-95 provides:

2. The application for a TRO shall be acted upon only after all parties are heard in
a summary hearing conducted within twenty-four (24) hours after the records are
transmitted to the branch selected by raffle. The records shall be transmitted
immediately after raffle (Emphasis supplied).

xxx

4. With the exception of the provisions which necessarily involve multiple-sala

stations, these rules shall apply to single-sala stations especially with regard to
immediate notice to all parties of all applications for TRO.
The foregoing clearly show that whenever an application for a TRO is filed, the court may
act on the application only after all parties have been notified and heard in a summary hearing. In
other words, a summary hearing may not be dispensed with. [9] In the instant case, respondent
admits that he issued the injunctive writ sought on May 29, 1997 after receiving the applicants
evidence ex parte. His failure to abide by Administrative Circular No. 20-95 in issuing the first
TRO is grave abuse of authority, misconduct, and conduct prejudicial to the proper
administration of justice.
Worse, he compounded the infraction by annulling complainants proclamation as the duly
elected punong barangay of Punta Mesa, Manapla and prohibiting him from assuming office.
Respondent admits that his court was not vested with the power or jurisdiction to annul the
proclamation, but seeks to justify his action on the ground that the proclamation was void ab
initio. In so doing, respondent wantonly usurped a power exclusively vested by law in the
COMELEC.[10] A judge is expected to know the jurisdictional boundaries of courts and quasijudicial bodies like the COMELEC as mapped out by the Constitution and statutes and to act
only within said limits. A judge who wantonly arrogates unto himself the authority and power
vested in other agencies not only acts in oppressive disregard of the basic requirements of due
process, but also creates chaos and contributes to confusion in the administration of justice.
Respondent, in transgressing the jurisdictional demarcation lines between his court and the
COMELEC, clearly failed to realize the position that his court occupies in the interrelation and
operation of the countrys justice system. He displayed a marked ignorance of basic laws and
principles. Rule 3.01 of the Code of Judicial Conduct provides that a judge shall be faithful to the
law and maintain professional competence. By annulling complainants proclamation as the duly
elected punong barangay, despite being aware of the fact that his court had no power to do so,
not only is respondent guilty of grave abuse of authority, he also manifests unfaithfulness to a
basic legal rule as well as injudicious conduct.
Moreover, in willfully nullifying complainants proclamation despite his courts want of
authority, respondent knowingly issued an unjust order.
Note that the RTC of Silay City corrected respondents errors by declaring null and void his
Order dated May 29, 1997. Nonetheless, he compounded his previous errors of judgment by
proceeding to hear Libo-ons motion for permanent injunction and issuing a second TRO on June
11, 1997 on the ground that extreme urgency and grave injustice and irreparable injury will arise
if no injunctive remedy were granted. Respondent insists that his act did not reverse the Order of
the RTC in Special Civil Action No. 1936-69, since the second TRO he issued satisfied the
notice and hearing requirements of Circular No. 20-95.
Before an injunctive writ can be issued, it is essential that the following requisites be
present: (1) there must be a right in esse or the existence of a right to be protected; and (2) the act
against which injunction to be directed is a violation of such right.[11] The onus probandi is on
movant to show that there exists a right to be protected, which is directly threatened by the act

sought to be enjoined. Further, there must be a showing that the invasion of the right is material
and substantial and that there is an urgent and paramount necessity for the writ to prevent a
serious damage.[12] In this case, complainant had been duly proclaimed as the winning candidate
for punong barangay. He had taken his oath of office. Unless his election was annulled, he was
entitled to all the rights of said office. We do not see how the complainants exercise of such
rights would cause an irreparable injury or violate the right of the losing candidate so as to justify
the issuance of a temporary restraining order to maintain the status quo. We see no reason to
disagree with the finding of the OCA that the evident purpose of the second TRO was to prevent
complainant from participating in the election of the Liga ng mga Barangay. Respondent must
be held liable for violating Rule 3.02 of the Code of Judicial Conduct which provides that, In
every case, a judge shall endeavor diligently to ascertain the facts and the applicable law
unswayed by partisan interests, public opinion, or fear of criticism.
In a similar case, a judge was fined P5,000.00 for failure to observe the requirements of
Administrative Circular No. 20-95 when he issued a TRO enjoining a duly proclaimed barangay
captain from participating in the elections of officers of the ABC of Taft, Eastern Samar.[13] Note,
however, that in the instant case, the respondents infractions are not limited to the mere issuance
of a restraining order without conducting the summary conference required by Administrative
Circular No. 20-95. He also annulled the proclamation of the complainant knowing very well
that he had no such authority. When his first restraining order was set aside and nullification of
complainants proclamation was declared null and void by the RTC of Silay City, a superior
court, he again issued a TRO, which showed his partiality to complainants political rival.
Respondent is thus guilty of violating Rules 3.01 and 3.02 of the Code of Judicial Conduct;
knowingly rendering an unjust order; gross ignorance of the law or procedure; as well as bias and
partiality. All of the foregoing are serious charges under Rule 140, Section 3 of the Rules of
Court. We agree with the sanction recommended by the OCA, finding it to be in accord with
Rule 140, Section 10 (A) of the Rules of Court.
WHEREFORE, this COURT finds respondent judge GUILTY of violating Rules 3.01 and
3.02 of the Code of Judicial Conduct, knowingly rendering an unjust order, gross ignorance of
the law and procedure, and bias and partiality. Accordingly, a fine of Twenty Thousand Pesos
(P20,000.00) is hereby imposed upon respondent with a STERN WARNING that a repetition of
the same or similar acts will be dealt with more severely.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

SECOND DIVISION
MICHAEL J. LAGROSAS,
Petitioner,
- versus -

G.R. No. 168637

Present:
QUISUMBING, J., Chairperson,

CARPIO MORALES,
BRISTOL-MYERS SQUIBB (PHIL.), TINGA,
INC./MEAD
JOHNSON
PHIL., VELASCO, JR., and
RICHARD SMYTH as General
BRION, JJ.
Manager and FERDIE SARFATI, as
Medical Sales Director,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - -x
BRISTOL-MYERS SQUIBB (PHIL.), G.R. No. 170684
INC./MEAD JOHNSON PHIL.,
Petitioner,
- versus COURT
OF
APPEALS
and Promulgated:
MICHAEL J. LAGROSAS,
Respondents.
September 12, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.:
Before this Court are two consolidated petitions. The first petition, docketed
as G.R. No. 168637, filed by Michael J. Lagrosas, assails the
Decision[1] datedJanuary 28, 2005 and the Resolution[2] dated June 23, 2005 of the
Court of Appeals in CA-G.R. SP No. 83885. The second petition, docketed as G.R.
No. 170684, filed by Bristol-Myers Squibb (Phil.), Inc./Mead Johnson Phil., assails
the Resolutions[3] dated August 12, 2005 and October 28, 2005 of the Court of
Appeals in CA-G.R. SP No. 83885.
The facts are undisputed.
Michael J. Lagrosas was employed by Bristol-Myers Squibb (Phil.),
Inc./Mead Johnson Phil. from January 6, 1997 until March 23, 2000 as Territory
Manager in its Medical Sales Force Division.[4]

On February 4, 2000, Ma. Dulcinea S. Lim, also a Territory Manager and

Lagrosas former girlfriend, attended a district meeting of territory managers at
McDonalds Alabang Town Center. After the meeting, she dined out with her
friends. She left her car at McDonalds and rode with Cesar R. Menquito, Jr. When
they returned to McDonalds, Lim saw Lagrosas car parked beside her car. Lim told
Menquito not to stop his car but Lagrosas followed them and slammed Menquitos
car thrice. Menquito and Lim alighted from the car. Lagrosas approached them and
hit Menquito with a metal steering wheel lock. When Lim tried to intervene,
Lagrosas accidentally hit her head.
Upon learning of the incident, Bristol-Myers required Lagrosas to explain in
writing why he should not be dismissed for assaulting a co-employee outside of
business hours. While the offense is not covered by the Code of Discipline for
Territory Managers, the Code states that other infractions not provided for herein
shall be penalized in the most appropriate manner at the discretion of management.
[5]
In his memo, Lagrosas admitted that he accidentally hit Lim when she tried to
intervene. He explained that he did not intend to hit her as shown by the fact that
he never left the hospital until he was assured that she was all right.[6]
In the disciplinary hearing that followed, it was established that Lagrosas
and Lim had physical confrontations prior to the incident. But Lagrosas denied
saying that he might not be able to control himself and hurt Lim and her boyfriend
if he sees them together.
On March 23, 2000, Bristol-Myers dismissed Lagrosas effective
immediately.[7] Lagrosas then filed a complaint[8] for illegal dismissal, non-payment
of vacation and sick leave benefits, 13th month pay, attorneys fees, damages and
fair market value of his Team Share Stock Option Grant.
On February 28, 2002, Labor Arbiter Renaldo O. Hernandez rendered a
Decision[9] in NLRC NCR Case No. 00-03-02821-99, declaring the
dismissal
illegal. He noted that while Lagrosas committed a misconduct, it was not connected
with his work. The incident occurred outside of company premises and office
hours. He also observed that the misconduct was not directed against a co-employee
who just happened to be accidentally hit in the process. Nevertheless, Labor Arbiter
Hernandez imposed a penalty of three months suspension or forfeiture of pay to
remind Lagrosas not to be carried away by the mindless dictates of his
passion. Thus, the Arbiter ruled:

WHEREFORE, premises considered, judgment is hereby [rendered]

finding that respondent company illegally dismissed complainant
thus, ORDERING it:
1) [t]o reinstate him to his former position without loss of seniority rights,
privileges and benefits and to pay him full backwages reckoned from [the] date of
his illegal dismissal on 23 March 2000 including the monetary value of his
vacation/sick leave of 16 days per year reckoned from July 1, 2000 until actually
reinstated, less three (3) months salary as penalty for his infraction;
2) to pay him the monetary equivalent of his accrued and unused
combined sick/vacation leaves as of June 30, 2000 of 16 days x 3 years and 4
months 10 days x P545.45 = P23,636.16 and the present fair market value of his
Team Share stock option grant for eight hundred (800) BMS common shares of
stock listed in the New York Stock Exchange which vested in complainant as of
01 July 1997, provisionally computed as 90% (800 shares x US$40.00 per share x
P43.20/US$ = P1,244,160.00).
3) to pay him Attorneys fee of 10% on the entire computable amount.
All other claims of complainant are dismissed for lack of merit.
SO ORDERED.[10]

On appeal, the National Labor Relations Commission (NLRC) set aside the
Decision of Labor Arbiter Hernandez in its Decision[11] dated September 24,
2002.It held that Lagrosas was validly dismissed for serious misconduct in hitting
his co-employee and another person with a metal steering wheel lock. The gravity
and seriousness of his misconduct is clear from the fact that he deliberately waited
for Lim and Menquito to return to McDonalds. The NLRC also ruled that the
misconduct was committed in connection with his duty as Territory Manager since
it occurred immediately after the district meeting of territory managers.
Lagrosas moved for reconsideration. On May 7, 2003, the NLRC issued a
Resolution[12] reversing its earlier ruling. It ratiocinated that the incident was not
work-related since it occurred only after the district meeting of territory
managers. It emphasized that for a serious misconduct to merit dismissal, it must
be connected with the employees work. The dispositive portion of the Resolution
states:
WHEREFORE, premises considered, We find this time no reason to alter
the Labor Arbiters Decision of February 28, 2002 and hereby affirm the same in
toto. We vacate our previous Decision of September 24, 2002.

SO ORDERED.[13]

Bristol-Myers filed a motion for reconsideration which the NLRC denied in

an Order dated February 4, 2004 in NLRC NCR Case No. 00-03-02821-99 (NLRC
NCR CA No. 031646-02).[14] Later, Labor Arbiter Hernandez issued a writ of
execution.[15] Notices of garnishment were then served upon the Philippine British
Assurance Co., Inc. for the supersedeas bond posted by Bristol-Myers and the
Bank of the Philippine Islands for the balance of the judgment award.[16]
Bristol-Myers moved to quash the writ of execution contending that it timely
filed a petition for certiorari with the Court of Appeals. The appellate court gave
due course to Bristol-Myers petition and issued a temporary restraining order
(TRO)[17] enjoining the enforcement of the writ of execution and notices of
garnishment.Upon the expiration of the TRO, the appellate court issued a writ of
preliminary injunction dated September 17, 2004.[18]
Bristol-Myers then moved to discharge and release the TRO cash bond. It
argued that since it has posted an injunction cash bond, the TRO cash bond should
be legally discharged and released.
On January 28, 2005, the appellate court rendered the following Decision:
WHEREFORE, the petition is GRANTED. The Resolution of May 7,
2003 and the Order of February 4, 2004 in NLRC NCR Case No. [00-03-0282199] (NLRC NCR CA No. [031646-02]), are REVERSED and SET ASIDE. The
public respondent NLRCs Decision dated September 24, 2002 which reversed the
Labor Arbiters decision and in effect sustained the legality of the private
respondents termination and the dismissal of his claim for the fair market value of
the
[Team
Share]
stock
option
grant
is REINSTATED and AFFIRMED,with MODIFICATION that the petitioner
shall pay the private respondent the monetary equivalent of his accrued and
unused combined sick/vacation leave plus ten (10%) percent thereof, as attorneys
fees. The injunction bond and the TRO bond previously posted by the petitioner
are DISCHARGED.
SO ORDERED.[19]

The appellate court considered the misconduct as having been committed in

connection with Lagrosas duty as Territory Manager since it occurred immediately
after the district meeting of territory managers. It also held that the gravity and
seriousness of the misconduct cannot be denied. Lagrosas employed such a degree

of violence that caused damage not only to Menquitos car but also physical injuries
to Lim and Menquito.
Lagrosas filed a motion for reconsideration which the appellate court denied.
In the meantime, Bristol-Myers moved to release the TRO cash bond and
injunction cash bond in view of the Decision dated January 28, 2005. On August
12, 2005, the appellate court denied the motion as premature since the decision is
not yet final and executory due to Lagrosas appeal to this Court.[20]
Bristol-Myers filed a motion for reconsideration. On October 28, 2005, the
appellate court resolved:
WHEREFORE, the
petitioners Motion
[f]or
Reconsideration dated September 6, 2005 is PARTIALLY GRANTED and the
Resolution of August 12, 2005 isRECONSIDERED and SET ASIDE. The
temporary restraining order cash bond in the amount of SIX HUNDRED
THOUSAND PESOS (P600,000.00) which was posted by the petitioners on July
19, 2004 is ordered DISCHARGED and RELEASED to the petitioners.
SO ORDERED.[21]

The appellate court held that upon the expiration of the TRO, the cash bond
intended for it also expired. Thus, the discharge and release of the cash bond for
the expired TRO is proper. But the appellate court disallowed the discharge of the
injunction cash bond since the writ of preliminary injunction was
issued pendente lite.Since there is a pending appeal with the Supreme Court, the
Decision dated January 28, 2005 is not yet final and executory.
Hence, the instant petitions.
In G.R. No. 168637, Lagrosas assigns the following errors:
I.
THE HONORABLE COURT OF APPEALS IN DECLARING THAT THE
TERMINATION OF EMPLOYMENT OF THE PETITIONER-APPELLANT
WAS LEGAL HAD DECIDED A QUESTION OF SUBSTANCE IN A WAY
NOT IN ACCORD WITH THE LABOR LAWS AND JURISPRUDENCE AND
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS, AS TO CALL FOR THE EXERCISE OF THIS HONORABLE
COURTS POWER OF REVIEW AND/OR SUPERVISION.

II.
THE HONORABLE COURT OF APPEALS IN IMPOSING THE PENALTY OF
DISMISSAL, BEING A PENALTY TOO HARSH IN THIS CASE, DECIDED A
QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH THE
LABOR LAWS AND JURISPRUDENCE AND DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS, AS TO
CALL FOR THE EXERCISE OF THIS HONORABLE COURTS POWER OF
REVIEW AND/OR SUPERVISION.[22]

In G.R. No. 170684, Bristol-Myers raises the following issue:

[WHETHER OR NOT THE HONORABLE] COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN DISALLOWING THE RELEASE AND
DISCHARGE OF PETITIONERS INJUNCTION BOND.[23]

Simply put, the basic issues in the instant petitions are: (1) Did the Court of
Appeals err in finding the dismissal of Lagrosas legal? and (2) Did the Court of
Appeals err in disallowing the discharge and release of the injunction cash bond?
On the first issue, serious misconduct as a valid cause for the dismissal of an
employee is defined simply as improper or wrong conduct. It is a transgression of
some established and definite rule of action, a forbidden act, a dereliction of duty,
willful in character, and implies wrongful intent and not mere error of
judgment. To be serious within the meaning and intendment of the law, the
misconduct must be of such grave and aggravated character and not merely trivial
or unimportant.However serious such misconduct, it must, nevertheless, be in
connection with the employees work to constitute just cause for his separation. The
act complained of must be related to the performance of the employees duties such
as would show him to be unfit to continue working for the employer.[24]
Thus, for misconduct or improper behavior to be a just cause for dismissal, it
(a) must be serious; (b) must relate to the performance of the employees duties;
and (c) must show that the employee has become unfit to continue working for the
employer.[25]
Tested against the foregoing standards, it is clear that Lagrosas was not
guilty of serious misconduct. It may be that the injury sustained by Lim was
serious since it rendered her unconscious and caused her to suffer cerebral
contusion that necessitated hospitalization for several days. But we fail to see how

such misconduct could be characterized as work-related and reflective of Lagrosas

unfitness to continue working for Bristol-Myers.
Although we have recognized that fighting within company premises may
constitute serious misconduct, we have also held that not every fight within
company premises in which an employee is involved would automatically warrant
dismissal from service.[26] More so, in this case where the incident occurred outside
of company premises and office hours and not intentionally directed against a coemployee, as hereafter explained.
First, the incident occurred outside of company premises and after office
hours since the district meeting of territory managers which Lim attended at
McDonalds had long been finished. McDonalds may be considered an extension of
Bristol-Myers office and any business conducted therein as within office hours, but
the moment the district meeting was concluded, that ceased too. When Lim dined
with her friends, it was no longer part of the district meeting and considered
official time. Thus, when Lagrosas assaulted Lim and Menquito upon their return,
it was no longer within company premises and during office hours. Second,
Bristol-Myers itself admitted that Lagrosas intended to hit Menquito only. In the
Memorandum[27] dated March 23, 2000, it was stated that You got out from your
car holding an umbrella steering wheel lock and proceeded to hit Mr.
Menquito. Dulce tried to intervene, but you accidentally hit her on the head,
knocking her unconscious.[28]Indeed, the misconduct was not directed against a coemployee who unfortunately got hit in the process. Third, Lagrosas was not
performing official work at the time of the incident. He was not even a participant
in the district meeting. Hence, we fail to see how his action could have reflected
his unfitness to continue working for Bristol-Myers.
In light of Bristol-Myers failure to adduce substantial evidence to prove that
Lagrosas was guilty of serious misconduct, it cannot use this ground to justify his
dismissal. Thus, the dismissal of Lagrosas employment was without factual and
legal basis.
On the second issue, it is settled that the purpose of a preliminary injunction
is to prevent threatened or continuous irremediable injury to some of the parties
before their claims can be thoroughly studied and adjudicated. Its sole aim is to
preserve the status quo until the merits of the case can be heard fully.[29]

A preliminary injunction may be granted only when, among other things, the
applicant, not explicitly exempted, files with the court where the action or
proceeding is pending, a bond executed to the party or person enjoined, in an
amount to be fixed by the court, to the effect that the applicant will pay such party
or person all damages which he may sustain by reason of the injunction or
temporary restraining order if the court should finally decide that the applicant was
not entitled thereto.Upon approval of the requisite bond, a writ of preliminary
injunction shall be issued.[30]
The injunction bond is intended as a security for damages in case it is finally
decided that the injunction ought not to have been granted. Its principal purpose is
to protect the enjoined party against loss or damage by reason of the injunction,
and the bond is usually conditioned accordingly.[31]
In this case, the Court of Appeals issued the writ of preliminary injunction to
enjoin the implementation of the writ of execution and notices of garnishment
pending final resolution of this case or unless the [w]rit is sooner lifted by the
Court.[32]
By its Decision dated January 28, 2005, the appellate court disposed of the
case by granting Bristol-Myers petition and reinstating the Decision
dated September 24, 2002 of the NLRC which dismissed the complaint for
dismissal. It also ordered the discharge of the TRO cash bond and injunction cash
bond. Thus, both conditions of the writ of preliminary injunction were satisfied.
Notably, the appellate court ruled that Lagrosas had no right to the monetary
awards granted by the labor arbiter and the NLRC, and that the implementation of
the writ of execution and notices of garnishment was properly enjoined. This in
effect amounted to a finding that Lagrosas did not sustain any damage by reason of
the injunction. To reiterate, the injunction bond is intended to protect Lagrosas
against loss or damage by reason of the injunction only. Contrary to Lagrosas
claim, it is not a security for the judgment award by the labor arbiter.[33]
Considering the foregoing, we hold that the appellate court erred in
disallowing the discharge and release of the injunction cash bond.
WHEREFORE, the two consolidated petitions are GRANTED. In G.R.
No. 168637, filed by Michael J. Lagrosas, the Decision dated January 28, 2005,
and the Resolution dated June 23, 2005 of the Court of Appeals in CA-G.R. SP No.

83885 are REVERSED. The Resolution dated May 7, 2003, and the Order
datedFebruary 4, 2004 of the NLRC in NLRC NCR Case No. 00-03-02821-99
(NLRC NCR CA No. 031646-02) are REINSTATED and hereby AFFIRMED.
In G.R. No. 170684, filed by Bristol-Myers Squibb (Phil.), Inc./Mead
Johnson Phil., the Resolutions dated August 12, 2005 and October 28, 2005 of the
Court of Appeals in CA-G.R. SP No. 83885 are REVERSED. The injunction cash
bond in the amount of SIX HUNDRED THOUSAND PESOS (P600,000) which
was posted by Bristol-Myers Squibb (Phil.), Inc./Mead Johnson Phil. on September
17, 2004 is hereby ordered DISCHARGED and RELEASED to it.
No pronouncement as to costs.
SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice

DANTE O. TINGA
Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ARTURO D. BRION
Associate Justice

AT T E S TAT I O N
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

SECOND DIVISION
NELSON JENOSA and his
G.R. No. 172138
sonNIO CARLO
JENOSA,SOCORRO
Present:
CANTO and her sonPATRICK
CANTO, CYNTHIA
CARPIO, J., Chairperson,
APALISOK and her
NACHURA,
daughterCYNDY
PERALTA,
APALISOK, EDUARDO
ABAD, and
VARGAS and his son CLINT
MENDOZA, JJ.
EDUARD VARGAS, and NELIA
DURO and her son NONELL
GREGORY DURO,
Petitioners,
- versus REV. FR. JOSE RENE C.
DELARIARTE, O.S.A., in his
capacity as the incumbent Principal
of the High School Department of Promulgated:
the University of San Agustin, and
theUNIVERSITY OF SAN
September 8, 2010
AGUSTIN, herein represented by
its incumbent President REV. FR.
MANUEL G. VERGARA,
O.S.A.,
Respondents.
x--------------------------------------------------x

DECISION
CARPIO, J.:
The Case
This is a petition for review[1] of the 16 June 2005 Decision[2] and 22 March
2006[3] Resolution of the Court of Appeals in CA-G.R. SP No. 78894. In its 16
June 2005 Decision, the Court of Appeals granted the petition of respondents
University of San Augustin (University), represented by its incumbent President
Rev. Fr. Manuel G. Vergara, O.S.A. (University President), and Rev. Fr. Jose Rene
C. Delariarte, O.S.A. (Principal), in his capacity as the incumbent Principal of the
High School Department of the University (respondents) and ordered the dismissal
of Civil Case Nos. 03-27460 and 03-27646 for lack of jurisdiction over the subject
matter.In its 22 March 2006 Resolution, the Court of Appeals denied the motion for
reconsideration of petitioners Nelson Jenosa and his son Nio Carlo Jenosa, Socorro
Canto and her son Patrick Canto, Cynthia Apalisok and her daughter Cyndy
Apalisok, Eduardo Vargas and his son Clint Eduard Vargas, and Nelia Duro and her
son Nonell Gregory Duro (petitioners).
The Facts
On 22 November 2002, some students of the University, among them petitioners
Nio Carlo Jenosa, Patrick Canto, Cyndy Apalisok, Clint Eduard Vargas, and Nonell
Gregory Duro (petitioner students), were caught engaging in hazing outside the
school premises. The hazing incident was entered into the blotter of the Iloilo City
Police.[4]
Thereafter, dialogues and consultations were conducted among the school
authorities, the apprehended students and their parents. During the 28 November
2002 meeting, the parties agreed that, instead of the possibility of being charged
and found guilty of hazing, the students who participated in the hazing incident as
initiators, including petitioner students, would just transfer to another school, while
those who participated as neophytes would be suspended for one month. The

parents of the apprehended students, including petitioners, affixed their signatures

to the minutes of the meeting to signify their conformity.[5] In view of the
agreement, the University did not anymore convene the Committee on Student
Discipline (COSD) to investigate the hazing incident.
On 5 December 2002, the parents of petitioner students (petitioner parents) sent a
letter to the University President urging him not to implement the 28 November
2002 agreement.[6] According to petitioner parents, the Principal, without
convening the COSD, decided to order the immediate transfer of petitioner
students.
On 10 December 2002, petitioner parents also wrote a letter to Mrs. Ida B.
Endonila, School Division Superintendent, Department of Education (DepEd),
Iloilo City, seeking her intervention and prayed that petitioner students be allowed
to take the home study program instead of transferring to another school. [7] The
DepEd asked the University to comment on the letter.[8] The University replied and
attached the minutes of the 28 November 2002 meeting.[9]
On 3 January 2003, petitioners filed a complaint for injunction and damages with
the Regional Trial Court, Branch 29, Iloilo City (trial court) docketed as Civil Case
No. 03-27460.[10] Petitioners assailed the Principals decision to order the immediate
transfer of petitioner students as a violation of their right to due process because
the COSD was not convened.
On 5 February 2003, the trial court issued a writ of preliminary injunction and
directed respondents to admit petitioner students during the pendency of the case.
[11]
The 5 February 2003 Order reads:
WHEREFORE, let [a] Writ of Preliminary Mandatory Injunction
issue. The defendants are hereby directed to allow the plaintiffs minor
children to attend their classes during the pendency of this case, without
prejudice to any disciplinary proceeding to which any or all of them may
be liable.
SO ORDERED.[12]

Respondents filed a motion for reconsideration and asked for the dissolution of the
writ. The trial court denied respondents motion. Respondents complied but with
reservations.
On 25 March 2003, respondents filed a motion to dismiss. Respondents alleged
that the trial court had no jurisdiction over the subject matter of the case and that
petitioners were guilty of forum shopping. On 19 May 2003, the trial court denied
respondents motion. Respondents filed a motion for reconsideration.
On 21 April 2003, petitioners wrote the DepEd and asked that it direct the
University to release the report cards and other credentials of petitioner students.
[13]
On 8 May 2003, the DepEd sent a letter to the University advising it to release
petitioner students report cards and other credentials if there was no valid reason to
withhold the same.[14] On 14 May 2003, the DepEd sent another letter to the
University to follow-up petitioners request.[15] On 20 May 2003, the University
replied that it could not release petitioner students report cards due to their pending
disciplinary case with the COSD.[16]
On 28 May 2003, petitioners filed another complaint for mandatory injunction
praying for the release of petitioner students report cards and other credentials
docketed as Civil Case No. 03-27646.[17]
The trial court consolidated the two cases.[18]
On 17 June 2003, the trial court issued a writ of preliminary injunction and
directed the University to release petitioner students report cards and other
credentials.[19]Respondents filed a motion for reconsideration. Respondents alleged
that they could not comply with the writ because of the on-going disciplinary case
against petitioner students.
On 26 June 2003, the COSD met with petitioners for a preliminary conference on
the hazing incident. On 7 July 2003, the University, through the COSD, issued its
report finding petitioner students guilty of hazing. The COSD also recommended
the exclusion of petitioner students from its rolls effective 28 November 2002.

On 14 July 2003, the trial court issued an Order denying both motions for
reconsideration.[20]
On 1 September 2003, respondents filed a special civil action for certiorari with the
Court of Appeals. Respondents insisted that the trial court had no jurisdiction
overthe subject matter of Civil Case Nos. 03-27460 and 03-27646. Respondents
also alleged that petitioners were guilty of forum shopping.

The Ruling of the Court of Appeals

In its 16 June 2005 Decision, the Court of Appeals granted respondents petition
and ordered the trial court to dismiss Civil Case Nos. 03-27460 and 03-27646 for
lack of jurisdiction over the subject matter because of petitioners failure to exhaust
administrative remedies or for being premature. According to the Court of Appeals,
petitioners should have waited for the action of the DepEd or of the University
President before resorting to judicial action. The Court of Appeals held:
From the foregoing, it is clear that the court a quo committed grave [abuse]
of discretion amounting to LACK OF JURISDICTION in
INTERFERING, pre-maturely, with the exclusive and inherent authority of
educational institutions to discipline.
In directing herein petitioners [respondents in this case] to re-admit herein
private respondents [petitioners in this case] and eventually, to release the
report cards and other school credentials, prior to the action of the
President of USA and of the recommendation of the COSD, the court a
quo is guilty of improper judicial intrusion by encroaching into the
exclusive prerogative of educational institutions. [21]

Petitioners filed a motion for reconsideration. [22] In its 22 March 2006 Resolution,
the Court of Appeals denied petitioners motion for lack of merit.
The Issues
Petitioners raise the following issues:

1. Was the Court of Appeals correct in holding that Branch 29 of the

Regional Trial Court of Iloilo City in Civil Case Nos. 03-27460 and
03-27646 did not acquire jurisdiction over the subject matter of this
case for failure of petitioners to exhaust administrative remedies?
2. Was the recommendation/report/order of the Committee on Student
Discipline dated 7 July 2003 valid, and did it justify the order of
exclusion of petitioner students retroactive to 28 November 2002?[23]
The Ruling of the Court
The petition has no merit.
Discipline in education is specifically mandated by the 1987 Constitution which
provides that all educational institutions shall teach the rights and duties of
citizenship, strengthen ethical and spiritual values, develop moral character and
personal discipline.[24] Schools and school administrators have the authority to
maintain school discipline[25] and the right to impose appropriate and reasonable
disciplinary measures.[26] On the other hand, students have the duty and the
responsibility to promote and maintain the peace and tranquility of the school by
observing the rules of discipline.[27]
In this case, we rule that the Principal had the authority to order the immediate
transfer of petitioner students because of the 28 November 2002 agreement.
[28]
Petitioner parents affixed their signatures to the minutes of the 28 November
2002 meeting and signified their conformity to transfer their children to another
school.Petitioners Socorro Canto and Nelia Duro even wrote a letter to inform the
University that they would transfer their children to another school and requested
for the pertinent papers needed for the transfer.[29] In turn, the University did not
anymore convene the COSD. The University agreed that it would no longer
conduct disciplinary proceedings and instead issue the transfer credentials of
petitioner students. Then petitioners reneged on their agreement without any
justifiable reason.Since petitioners present complaint is one for injunction, and
injunction is the strong arm of equity, petitioners must come to court with clean
hands. In University of the Philippines v. Hon. Catungal, Jr.,[30] a case involving
student misconduct, this Court ruled:

Since injunction is the strong arm of equity, he who must apply for it
must come with equity or with clean hands. This is so because among the
maxims of equity are (1) he who seeks equity must do equity, and (2) he
who comes into equity must come with clean hands. The latter is a
frequently stated maxim which is also expressed in the principle that he
who has done inequity shall not have equity. It signifies that a litigant
may be denied relief by a court of equity on the ground that his conduct
has been inequitable, unfair and dishonest, or fraudulent, or deceitful as
to the controversy in issue.[31]

Here, petitioners, having reneged on their agreement without any justifiable reason,
come to court with unclean hands. This Court may deny a litigant relief if his
conduct has been inequitable, unfair and dishonest as to the controversy in issue.
Since petitioners have come to court with inequitable and unfair conduct, we deny
them relief. We uphold the validity of the 28 November 2002 agreement and rule
that the Principal had the authority to order the immediate transfer of petitioner
students based on the 28 November 2002 agreement.

WHEREFORE, we DENY the petition. We AFFIRM the 16 June 2005 Decision

and the 22 March 2006 Resolution of the Court of Appeals.
SO ORDERED.

ANTONIO T. CARPIO
Associate Justice
WE CONCUR:

ANTONIO EDUARDO B. NACHURA

Associate Justice

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE C. MENDOZA
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO

Associate Justice
Chairperson

CERTIFICATION
Pursuant

to

Section

13,

Article

VIII

of

the

Constitution,

and

the

Division Chairpersons Attestation, I certify that the conclusions in the above

Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 179665

April 3, 2013

SOLID BUILDERS, INC. and MEDINA FOODS INDUSTRIES, INC., Petitioners,

vs.
CHINA BANKING CORPORATION, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This petition for review on certiorari 1 assails the Decision2 dated April 16, 2007 and the
Resolution3 dated September 18, 2007 of the Court of Appeals in CA-G.R. SP No. 81968.
During the period from September 4, 1992 to March 27, 1996, China Banking Corporation (CBC)
granted several loans to Solid Builders, Inc. (SBI), which amounted to P139,999,234.34, exclusive of

interests and other charges. To secure the loans, Medina Foods Industries, Inc. (MFII) executed in
CBCs favor several surety agreements and contracts of real estate mortgage over parcels of land in
the Loyola Grand Villas in Quezon City and New Cubao Central in Cainta, Rizal. 4
Subsequently, SBI proposed to CBC a scheme through which SBI would sell the mortgaged
properties and share the proceeds with CBC on a 50-50 basis until such time that the whole
obligation would be fully paid. SBI also proposed that there be partial releases of the certificates of
title of the mortgaged properties without the burden of updating interests on all loans. 5
In a letter dated March 20, 2000 addressed to CBC, SBI requested the restructuring of its loans, a
reduction of interests and penalties and the implementation of a dacion en pago of the New Cubao
Central property.6
The letter reads:
March 20, 2000
CHINA BANKING CORPORATION
Dasmarinas cor. Juan Luna Sts.
Binondo, Manila
Attn: Mr. George Yap
Account Officer
Dear Mr. Yap,
This is to refer to our meeting held at your office last March 10, 2000.
In this regard, please allow us to call your attention on the following important matters we have
discussed:
1. With respect to the penalties, we are requesting for a reduction in the rates as we
find it onerous considering the big amount of our loan (P218,540,648.00). The
interest together with the penalties that you are imposing is similar to the ones being
charged by private lending institutions, i.e., 4.5%/month total.
2. As I had discussed with you regarding Dacion en Pago, which you categorically
stated that it could be a possibility, we are considering putting our New Cubao
Central (NCC) on Dacion and restructuring our loan with regards to our Loyola Grand
Villas.
Considering that you had stated that our restructuring had not been finalized, we find it timely to
raise these urgent matters and possibly agree on a realistic and workable scheme that we can
incorporate on our final agreement.
Thank you and we strongly hope for your prompt consideration on our request.
Very truly yours,
V. BENITO R. SOLIVEN (Sgd.)
President7

In response, CBC sent SBI a letter dated April 17, 2000 stating that the loans had been completely
restructured effective March 1, 1999 in the amount of P218,540,646.00. On the aspect of interests
and charges, CBC suggested the updating of the obligation to avoid paying interests and
charges.8 The relevant portion of the letter dated April 17, 2000 reads:
First of all, to clarify, the loans restructuring has been finalized and completed on 3/01/99 with the
booking of the Restructured loan of P218,540,646. Only two Amendments of Real Estate Mortgages
remain to be registered to date. Certain documents that we requested from your company since last
year, that could facilitate this amendment have not yet been forwarded to us until now. Nevertheless,
this does not change the fact that the restructuring of the loan has been done with and finalized.
This in turn is with regards to statement[s] no. 1 & 2 of your letter, referring to the interest rates and
penalties. As per our records, the rates are actually the prevailing bank interest rates. In addition,
penalty charges are imposed in the event of non-payment. To avoid experiencing having to pay more
due to the penalty charges, updating of obligations is necessary. Thus, we advise updating of your
obligations to avoid penalty charges. However, should you be able to update both interest and
penalty through a "one-time" payment, we shall present your request to Senior Management for
possible reduction in penalty charges.
Concerning statement no. 3 containing your request for the possible Dacion en Pago of your NCC
properties, as was discussed already in the meeting, it is a concern that has to be discussed with
Senior Management and approved by the Executive Committee before we can commit to you on the
matter. We suggest that your company, Solid Builders, exhaust all possibilities to sell the NCC
properties yourselves because, being a real estate company, Solid has better ways and means of
selling the properties.9
This was followed by another communication from CBC to SBI reiterating, among others, that the
loan has been restructured effective March 1, 1999 upon issuance by SBI of promissory notes in
favor of CBC. The relevant portion of that letter dated May 19, 2000 reads:
Again, in response to your query with regards the issue of the loans restructuring, to reiterate, the
loan restructuring has been finalized and completed on 3/01/99 with the booking of the Restructured
loan ofP231,716,646. The Restructured Loan was effective ever since the new Promissory Note was
signed on the said date.
The interest rates for the loans are actually rates booked since the new Promissory Notes were
effective. Any move of changing it or "re-pricing" the interest is only possible every 90 days from the
booking date, which represents the interest amortization payment dates. No change or "re-pricing" in
interest rates is possible since interest payment/obligations have not yet been paid.
1wphi1

With regards to the possible Dacion en Pago of your NCC properties, as was discussed already in
the meeting, it is a concern that has to be discussed with Senior Management and approved by the
Executive Committee before we can commit to you on the matter. We suggest that your company,
Solid Builders, exhaust all possibilities to sell the NCC properties yourselves because, being a real
estate company, Solid has better ways and means of selling the properties. 10
Subsequently, in a letter dated September 18, 2000, CBC demanded SBI to settle its outstanding
account within ten days from receipt thereof. The letter dated September 18, 2000 reads:
September 18, 2000

SOLID BUILDERS, INC.

V.V. Soliven Bldg., I
EDSA, San Juan, Metro Manila
1wphi1

PN NUMBER

O/S BALANCE

DUE DATE INTEREST

PN-MK-TS-342924

PHP 89,700,000.00 03/01/2004 04/13/1999

PN-MK-TS-342931

19,350,000.00 03/01/2004 08/05/1999

PN-MK-TS-342948

35,888,000.00 03/01/2004 ---------------

PN-MK-TS-342955

6,870,000.00 03/01/2004 ---------------

PN-MK-TS-342962

5,533,646.00 03/01/2004 07/26/1999

PN-MK-TS-342979

21,950,000.00 03/01/2004 ---------------

PN-MK-TS-342986

3,505,000.00 03/01/2004 08/09/1999

PN-MK-TS-342993

19,455,000.00 03/01/2004 ---------------

PN-MK-TS-343002

4,168,000.00 03/01/2004 ---------------

PN-MK-TS-343026

12,121,000.00 03/01/2004 --------------PHP218,540,646.00

================

Greetings!
We refer again to the balances of the abovementioned Promissory Notes amounting to
PHP218,540,646.00 excluding interest, penalties and other charges signed by you jointly and
severally in our favor, which remains unpaid up to this date despite repeated demands for payment.
In view of the strict regulations of Bangko Sentral ng Pilipinas on past due accounts, we regret that
we cannot hold these accounts further in abeyance. Accordingly, we are reiterating our request that
arrangements to have these accounts settled within ten (10) days from receipt hereof, otherwise, we
shall be constrained to refer the matter to our lawyers for collection.
We enclose a Statement of Account as of September 30, 2000 for your reference and guidance.
Very truly yours,
MERCEDES E. GERMAN (Sgd.)
Manager
Loans & Discounts Department H.O.11
On October 5, 2000, claiming that the interests, penalties and charges imposed by CBC were
iniquitous and unconscionable and to enjoin CBC from initiating foreclosure proceedings, SBI and
MFII filed a Complaint "To Compel Execution of Contract and for Performance and Damages, With
Prayer for Writ of Preliminary Injunction and Ex-Parte Temporary Restraining Order" in the Regional
Trial Court (RTC) of Pasig City. The case was docketed as Civil Case No. 68105 and assigned to
Branch 264.12

In support of their application for the issuance of writ of preliminary injunction, SBI and MFII alleged:
IV. APPLICATION FOR PRELIMINARY INJUNCTION WITH EX- PARTE TEMPORARY
RESTRAINING ORDER
A. GROUNDS FOR PRELIMINARY INJUNCTION
1. That SBI and MFII are entitled to the reliefs demanded, among which is
enjoining/restraining the commission of the acts complained of, the continuance of which will
work injustice to the plaintiffs; that such acts are in violation of the rights of plaintiffs and, if
not enjoined/restrained, will render the judgment sought herein ineffectual.
2. That under the circumstances, it is necessary to require, through preliminary injunction,
CBC to refrain from immediately enforcing its letters dated April 17, 2000 and May 19, 2000
and September 18, 2000 during the pendency of this complaint, and
3. That SBI and MFII submit that they are exempt from filing of a bond considering that the
letters dated April 17, 2000, May 19, 2000 and September 18, 2000 are a patent nullity, and
in the event they are not, they are willing to post such bond this Honorable Court may
determine and under the conditions required by Section 4, Rule 58. 13
In its Answer and Opposition to the issuance of the writ of preliminary injunction, CBC alleged that to
implement the agreed restructuring of the loan, SBI executed ten promissory notes stipulating that
the interest rate shall be at 18.5% per annum. For its part, MFII executed third party real estate
mortgage over its properties in favor of CBC to secure the payment of SBIs restructured loan. As
SBI was delinquent in the payment of the principal as well as the interest thereon, CBC demanded
settlement of SBIs account.14
After hearing the parties, the trial court issued an Order dated December 14, 2000 granting the
application of SBI and MFII for the issuance of a writ of preliminary injunction. The trial court held
that SBI and MFII were able to sufficiently comply with the requisites for the issuance of an injunctive
writ:
It is well-settled that to be entitled to an injunctive writ, a party must show that: (1) the invasion of
right sought to be protected is material and substantial; (2) the right of complainant is clear and
unmistakable; and, (3) there is an urgent and paramount necessity for the writ to prevent serious
damage.
The Court opines that the above-mentioned requisites have been sufficiently shown by plaintiffs in
this case, accordingly, a writ of preliminary injunction is in order.
The three subject letters, particularly the letter dated September 18, 2000, indicate that the
promissory notes executed by Benito Soliven as President of plaintiff SBI amounted
to P218,540,646.00, excluding interest, penalties and other charges remained unpaid, and demand
that the account be settled within ten days, else defendant bank shall refer the latter to its lawyers for
collection.
The message in the letter is clear: If the account is not settled within the grace period, defendant
bank will resort to foreclosure of mortgage on the subject properties.

The actual or imminent damage to plaintiffs is likewise clear. Considering the number of parcels of
land and area involved, if these are foreclosed by defendant bank, plaintiffs properties and source of
income will be effectively diminished, possibly to the point of closure.
The only issue remaining is whether or not plaintiffs have the right to ask for an injunctive writ in
order to prevent defendant bank from taking over their properties.
Plaintiffs argued that the interest and penalties charged them in the subject letters and attached
statements of account increased during a seven-month period to an amount they described as
"onerous", "usurious" ad "greedy".
They likewise asserted that there were on-going talks between officers of the corporations involved
to treat or restructure the contracts to a dacion en pago, as there was a proposed plan of action by
representatives of plaintiffs during the meetings.
Defendant, on the other hand, sought to explain the increase in the interest as contained in the
promissory notes which were voluntarily and willingly signed by Soliven, therefore, binding on
plaintiffs and that the proposed plan of action is merely an oral contract still in the negotiation stage
and not binding.
The condition on the interest payments as contained in the promissory notes are as follows:
"Interest for the first quarter shall be @ 18.5% P.A. Thereafter, it shall be payable quarterly in arrears
based on three months average rate."
In its Memorandum, defendant bank tried to show that the questioned increase in the interests was
merely in compliance with the above condition. To this Court, the explanation is insufficient. A more
detailed rationalization is required to convince the court of the fairness of the increase in interests
and penalties.
However, the coming explanation may probably be heard only during trial on the merits, and by then
this pending incident or the entire case, may already be moot and academic if the injunctive writ is
not issued.15
The dispositive portion of the trial courts Order dated December 14, 2000 reads:
WHEREFORE, premises considered, the application for issuance of writ of preliminary injunction is
GRANTED.
Defendant CHINA BANKING CORPORATION, its representatives, agents and all persons working in
its behalf are hereby enjoined from enforcing the contents of its letters to plaintiffs dated April 17,
2000, May 19, 2000 and September 18, 2000, particularly the banks legal department or other
counsel commencing collection proceedings against plaintiffs in the amount stated in the letters and
statements of account.
The Writ of Preliminary Injunction shall be issued upon plaintiffs posting of a bond executed to
defendant in the amount of Two Million Pesos (P2,000,000.00) to the effect [that] the plaintiffs will
pay defendant all damages which the latter may sustain by reason of the injunction if it be ultimately
decided that the injunction is unwarranted. 16
CBC sought reconsideration but the trial court denied it in an Order 17 dated December 10, 2001.

Subsequently, CBC filed a "Motion to Dissolve Injunction Order" but this was denied in an
Order18 dated November 10, 2003. The trial court ruled that the motion was in the nature of a mere
belated second motion for reconsideration of the Order dated December 14, 2000. It also declared
that CBC failed to substantiate its prayer for the dissolution of the injunctive writ.
Aggrieved, CBC filed a Petition for Certiorari docketed as CA-G.R. SP No. 81968 in the Court of
Appeals where it claimed that the Orders dated December 14, 2000 (granting the application of
petitioners SBI and MFII for the issuance of writ of preliminary injunction), December 10, 2001
(denying reconsideration of the order dated December 14, 2000), and November 10, 2003 (denying
the CBCs motion to dissolve injunction order) were all issued with grave abuse of discretion
amounting to lack of jurisdiction. 19
In a Decision dated April 16, 2007, the Court of Appeals found that, on its face, the trial courts Order
dated December 14, 2000 granting the application of SBI and MFII for the issuance of a writ of
preliminary injunction had no basis as there were no findings of fact or law which would indicate the
existence of any of the requisites for the grant of an injunctive writ. It appeared to the Court of
Appeals that, in ordering the issuance of a writ of injunction, the trial court simply relied on the
imposition by CBC of the interest rates to the loans obtained by SBI and MFII. According to the Court
of Appeals, however, the records do not reveal a clear and unmistakable right on the part of SBI and
MFII that would entitle them to the protection of a writ of preliminary injunction. Thus, the Court of
Appeals granted the petition of CBC, set aside the Orders dated December 14, 2000, December 10,
2001, and November 10, 2003 and dissolved the injunctive writ issued by the RTC of Pasig City.20
SBI and MFII filed a motion for reconsideration but it was denied by the Court of Appeals in a
Resolution dated September 18, 2007.
Hence, this petition.
SBI and MFII assert that the Decision dated April 16, 2007 of the Court of Appeals is legally infirm as
its conclusions are contrary to the judicial admissions of CBC. They allege that, in its Answer, CBC
admitted paragraphs 25 and 26 of the Complaint regarding the interests and charges amounting
to P35,093,980.14 andP80,614,525.15, respectively, which constituted more than 50% of the total
obligation of P334,249,151.29 as of February 15, 2000. For SBI and MFII, CBCs admission of
paragraphs 25 and 26 of the Complaint is an admission that the interest rate imposed by CBC is
usurious, exorbitant and confiscatory. Thus, when the Court of Appeals granted the petition of CBC
and ordered the lifting of the writ of preliminary injunction it effectively disposed of the main case,
Civil Case No. 68105, without trial on the merits and rendered moot and academic as it enabled
CBC to foreclose on the mortgages despite the usurious, exorbitant and confiscatory interest rates. 21
SBI and MFII also claim that the Court of Appeals either overlooked or disregarded undisputed and
admitted facts which, if properly considered, would have called for the maintenance and preservation
of the preliminary injunction issued by the trial court. They argue that the Court of Appeals did not
even consider Article 1229 of the Civil Code which provides:
Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly
or irregularly complied with by the debtor. Even if there has been no performance, the penalty may
also be reduced by the courts if it is iniquitous or unconscionable.
For SBI and MFII, the failure of the Court of Appeals to take into account Article 1229 of the Civil
Code and its act of lifting the preliminary injunction "would definitely pave the way for CBCs
unbridled imposition of illegal rates of interest and immediate foreclosure" of the properties of SBI
and MFII "without the benefit of a full blown trial." 22

For its part, CBC assails the petition contending that it is not allowed under Rule 45 of the Rules of
Court because it simply raises issues of fact and not issues of law. CBC further asserts that the
Decision of the Court of Appeals is an exercise of sound judicial discretion as it is in accord with the
law and the applicable provisions of this Court.23
The petition fails.
This Court has recently reiterated the general principles in issuing a writ of preliminary injunction in
Palm Tree Estates, Inc. v. Philippine National Bank24:
A preliminary injunction is an order granted at any stage of an action prior to judgment of final order,
requiring a party, court, agency, or person to refrain from a particular act or acts. It is a preservative
remedy to ensure the protection of a partys substantive rights or interests pending the final
judgment in the principal action. A plea for an injunctive writ lies upon the existence of a claimed
emergency or extraordinary situation which should be avoided for otherwise, the outcome of a
litigation would be useless as far as the party applying for the writ is concerned.
At times referred to as the "Strong Arm of Equity," we have consistently ruled that there is no power
the exercise of which is more delicate and which calls for greater circumspection than the issuance
of an injunction. It should only be extended in cases of great injury where courts of law cannot afford
an adequate or commensurate remedy in damages; "in cases of extreme urgency; where the right is
very clear; where considerations of relative inconvenience bear strongly in complainants favor;
where there is a willful and unlawful invasion of plaintiffs right against his protest and remonstrance,
the injury being a continuing one, and where the effect of the mandatory injunction is rather to
reestablish and maintain a preexisting continuing relation between the parties, recently and
arbitrarily interrupted by the defendant, than to establish a new relation."
A writ of preliminary injunction is an extraordinary event which must be granted only in the face of
actual and existing substantial rights. The duty of the court taking cognizance of a prayer for a writ of
preliminary injunction is to determine whether the requisites necessary for the grant of an injunction
are present in the case before it.25 In this connection, a writ of preliminary injunction is issued to
preserve the status quo ante, upon the applicants showing of two important requisite conditions,
namely: (1) the right to be protected exists prima facie, and (2) the acts sought to be enjoined are
violative of that right. It must be proven that the violation sought to be prevented would cause an
irreparable injury.26
Here, SBI and MFII basically claim a right to have their mortgaged properties shielded from
foreclosure by CBC on the ground that the interest rate and penalty charges imposed by CBC on the
loans availed of by SBI are iniquitous and unconscionable. In particular, SBI and MFII assert:
There is therefore an urgent necessity for the issuance of a writ of preliminary injunction or at least a
status quo [order], otherwise, respondent bank will definitely foreclose petitioners properties without
awaiting the trial of the main case on the merits, with said usurious and confiscatory rates of interest
as basis.27
and
There is therefore no legal justification for the Honorable Court of Appeals to lift/dissolve the
injunction issued by the trial court, otherwise, respondent bank on the basis of this illegal
imposition of interest can already foreclose the properties of petitioners and render the whole case
(sans trial on the merits) moot and academic.28

On this matter, the Order dated December 14, 2000 of the trial court enumerates as the first
argument raised by SBI and MFII in support of their application for the issuance of a writ of
preliminary injunction:
1. Their rights basically are for the protection of their properties put up as collateral for the loans
extended by defendant bank to them.29
As debtor-mortgagors, however, SBI and MFII do not have a right to prevent the creditor-mortgagee
CBC from foreclosing on the mortgaged properties simply on the basis of alleged "usurious,
exorbitant and confiscatory rate of interest."30 First, assuming that the interest rate agreed upon by
the parties is usurious, the nullity of the stipulation of usurious interest does not affect the lenders
right to recover the principal loan, nor affect the other terms thereof. 31 Thus, in a usurious loan with
mortgage, the right to foreclose the mortgage subsists, and this right can be exercised by the
creditor upon failure by the debtor to pay the debt due. 32
Second, even the Order dated December 14, 2000 of the trial court, which granted the application
for the issuance of a writ of preliminary injunction, recognizes that the parties still have to be heard
on the alleged lack of "fairness of the increase in interests and penalties" during the trial on the
merits.33 Thus, the basis of the right claimed by SBI and MFII remains to be controversial or
disputable as there is still a need to determine whether or not, upon consideration of the various
circumstances surrounding the agreement of the parties, the interest rates and penalty charges are
unconscionable. Therefore, such claimed right cannot be considered clear, actual and subsisting. In
the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of
discretion.34
The Order dated December 10, 2001 also shows the reasoning of the trial court which betrays that
its grant of the application of SBI and MFII for the issuance of a writ of preliminary injunction was not
based on a clear legal right. Said the trial court:
It was likewise shown that plaintiffs SBI and MFII had the clear right and urgency to ask for injunction
because of the issue of validity of the increase in the amount of the loan obligation. 35 (Emphasis
supplied.)
At most, the above finding of the trial court that the validity of the increase in the amount of the loan
obligation is in issue simply amounted to a finding that the rights of SBI and MFII vis--vis that of
CBC are disputed and debatable. In such a case where the complainant-movants right is doubtful or
disputed, the issuance of an injunctive writ is not proper.36
Even assuming that SBI and MFII are correct in claiming their supposed right, it nonetheless
disintegrates in the face of the ten promissory notes in the total amount of P218,540,648.00,
exclusive of interest and penalties, issued by SBI in favor of CBC on March 1, 1999 which until now
remain unpaid despite the maturity of the said notes on March 1, 2004 and CBCs repeated
demands for payment.37 Foreclosure is but a necessary consequence of nonpayment of mortgage
indebtedness.38 As this Court held in Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc.39:
Where the parties stipulated in their credit agreements, mortgage contracts and promissory notes
that the mortgagee is authorized to foreclose the mortgaged properties in case of default by the
mortgagors, the mortgagee has a clear right to foreclosure in case of default, making the issuance of
a Writ of Preliminary Injunction improper. x x x. (Citation omitted.)
In addition, the default of SBI and MFII to pay the mortgage indebtedness disqualifies them from
availing of the equitable relief that is the injunctive writ. In particular, SBI and MFII have stated in

their Complaint that they have made various requests to CBC for restructuring of the loan. 40 The trial
courts Order dated December 14, 2000 also found that SBI wrote several letters to CBC
"requesting, among others, for a reduction of interests and penalties and restructuring of the
loan."41 A debtors various and constant requests for deferment of payment and restructuring of loan,
without actually paying the amount due, are clear indications that said debtor was unable to settle
his obligation.42 SBIs default or failure to settle its obligation is a breach of contractual obligation
which tainted its hands and disqualified it from availing of the equitable remedy of preliminary
injunction.
As SBI is not entitled to the issuance of a writ of preliminary injunction, so is MFII. The accessory
follows the principal. The accessory obligation of MFII as accommodation mortgagor and surety is
tied to SBIs principal obligation to CBC and arises only in the event of SBIs default.
Thus, MFIIs interest in the issuance of the writ of preliminary injunction is necessarily prejudiced by
SBIs wrongful conduct and breach of contract.
Even Article 1229 of the Civil Code, which SBI and MFII invoke, works against them. Under that
provision, the equitable reduction of the penalty stipulated by the parties in their contract will be
based on a finding by the court that such penalty is iniquitous or unconscionable. Here, the trial court
has not yet made a ruling as to whether the penalty agreed upon by CBC with SBI and MFII is
unconscionable. Such finding will be made by the trial court only after it has heard both parties and
weighed their respective evidence in light of all relevant circumstances. Hence, for SBI and MFII to
claim any right or benefit under that provision at this point is premature.
As no clear right that warrants the extraordinary protection of an injunctive writ has been shown by
SBI and MFII to exist in their favor, the first requirement for the grant of a preliminary injunction has
not been satisfied. In the absence of any requisite, and where facts are shown to be wanting in
bringing the matter within the conditions for its issuance, the ancillary writ of injunction must be
struck down for having been rendered in grave abuse of discretion. 43 Thus, the Court of Appeals did
not err when it granted the petition for certiorari of CBC and ordered the dissolution of the writ of
preliminary injunction issued by the trial court.
Neither has there been a showing of irreparable injury. An injury is considered irreparable if it is of
such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a
court of law, or where there is no standard by which their amount can be measured with reasonable
accuracy, that is, it is not susceptible of mathematical computation. The provisional remedy of
preliminary injunction may only be resorted to when there is a pressing necessity to avoid injurious
consequences which cannot be remedied under any standard of compensation. 44
In the first place, any injury that SBI and MFII may suffer in case of foreclosure of the mortgaged
properties will be purely monetary and compensable by an appropriate judgment in a proper case
against CBC. Moreover, where there is a valid cause to foreclose on the mortgages, it cannot be
correctly claimed that the irreparable damage sought to be prevented by the application for
preliminary injunction is the loss of the mortgaged properties to auction sale. 45 The alleged
entitlement of SBI and MFII to the "protection of their properties put up as collateral for the loans"
they procured from CBC is not the kind of irreparable injury contemplated by law. Foreclosure of
mortgaged property is not an irreparable damage that will merit for the debtor-mortgagor the
extraordinary provisional remedy of preliminary injunction. As this Court stated in Philippine National
Bank v. Castalloy Technology Corporation46:
All is not lost for defaulting mortgagors whose properties were foreclosed by creditors-mortgagees.
The respondents will not be deprived outrightly of their property, given the right of redemption

granted to them under the law. Moreover, in extrajudicial foreclosures, mortgagors have the right to
receive any surplus in the selling price. Thus, if the mortgagee is retaining more of the proceeds of
the sale than he is entitled to, this fact alone will not affect the validity of the sale but will give the
mortgagor a cause of action to recover such surplus. (Citation omitted.)
The En Banc Resolution in A.M. No. 99-10-05-0, Re: Procedure in Extrajudicial or Judicial
Foreclosure of Real Estate Mortgages, further stacks the odds against SBI and MFII. Issued on
February 20, 2007, or some two months before the Court of Appeals promulgated its decision in this
case, the resolution embodies the additional guidelines intended to aid courts in foreclosure
proceedings, specifically limiting the instances, and citing the conditions, when a writ against
foreclosure of a mortgage may be issued, to wit:
(1) No temporary restraining order or writ of preliminary injunction against the extrajudicial
foreclosure of real estate mortgage shall be issued on the allegation that the loan secured by
the mortgage has been paid or is not delinquent unless the application is verified and
supported by evidence of payment.
(2) No temporary restraining order or writ of preliminary injunction against the extrajudicial
foreclosure of real estate mortgage shall be issued on the allegation that the interest on the
loan is unconscionable, unless the debtor pays the mortgagee at least twelve percent per
annum interest on the principal obligation as stated in the application for foreclosure sale,
which shall be updated monthly while the case is pending.
(3) Where a writ of preliminary injunction has been issued against a foreclosure of mortgage,
the disposition of the case shall be speedily resolved. To this end, the court concerned shall
submit to the Supreme Court, through the Office of the Court Administrator, quarterly reports
on the progress of the cases involving ten million pesos and above.
(4) All requirements and restrictions prescribed for the issuance of a temporary restraining
order/writ of preliminary injunction, such as the posting of a bond, which shall be equal to the
amount of the outstanding debt, and the time limitation for its effectivity, shall apply as well to
a status quo order.47
The guidelines speak of strict exceptions and conditions. 48 To reverse the decision of the Court of
Appeals and reinstate the writ of preliminary injunction issued by the trial court will be to allow SBI
and MFII to circumvent the guidelines and conditions provided by the En Banc Resolution in A.M.
No. 99-10-05-0 dated February 20, 2007 and prevent CBC from foreclosing on the mortgaged
properties based simply on the allegation that the interest on the loan is unconscionable. This Court
will not permit such a situation. What cannot be done directly cannot be done indirectly.49
All told, the relevant circumstances in this case show that there was failure to satisfy the requisites
for the issuance of a writ of preliminary injunction. The injunctive writ issued by the trial court should
therefore be lifted and dissolved. That was how the Court of Appeals decided. That is how it should
be.
WHEREFORE, the petition is hereby DENIED.
SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
Chairperson
LUCAS P. BERSAMIN
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

BIENVENIDO L. REYES
Associate Justice
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 172909

March 5, 2014

SPOUSES SILVESTRE O. PLAZA AND ELENA Y. PLAZA, Petitioners,

vs.
GUILLERMO LUSTIVA, ELEODORA VDA. DE MARTINEZ AND VICKY SAYSON
GOLOSENO, Respondents.
DECISION
BRION, J.:
Through a petition for review on certiorari, filed under Rule 45 of the Rules of Court, the petitioners,
spouses Silvestre O. Plaza and Elena Y. Plaza, seek the reversal of the decision dated October 24,
2005 and the Resolution dated April 6, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 59859.
1

THE FACTS
On August 28, 1997, the CA ruled that among the Plaza siblings, namely: Aureliano, Emiliana, Vidal,
Marciano, and Barbara, Barbara was the owner of the subject agricultural land. The decision
4

became final and executory and Barbara's successors, respondents Guillermo Lustiva, Eleodora
Vda. de Martinez and Vicky Sayson Goloseno, have continued occupying the property.
On September 14, 1999, Vidals son and daughter-in-law, the petitioners, filed a Complaint for
Injunction, Damages, Attorneys Fees with Prayer for the Issuance of the Writ of Preliminary
Injunction and/or Temporary Restraining Order against the respondents and the City Government of
Butuan. They prayed that the respondents be enjoined from unlawfully and illegally threatening to
take possession of the subject property. According to the petitioners, they acquired the land from
Virginia Tuazon in 1997; Tuazon was the sole bidder and winner in a tax delinquency sale conducted
by the City of Butuan on December 27, 1996.
In their answer, the respondents pointed out that they were never delinquent in paying the land taxes
and were in fact not aware that their property had been offered for public auction. Moreover, Tuazon,
being a government employee, was disqualified to bid in the public auction, as stated in Section 89
of the Local Government Code of 1991. As Tuazons participation in the sale was void, she could
have not transferred ownership to the petitioners. Equally important, the petitioners merely falsified
the property tax declaration by inserting the name of the petitioners father, making him appear as a
co-owner of the auctioned land. Armed with the falsified tax declaration, the petitioners, as heirs of
their father, fraudulently redeemed the land from Tuazon. Nonetheless, there was nothing to redeem
as the land was not sold. For these irregularities, the petitioners had no right to the Writ of
Preliminary Injunction and/or Temporary Restraining Order prayed for against them.
5

THE RTCS RULING

In its December 14, 1999 order, the Regional Trial Court (RTC) of Butuan City, Branch 5,
reconsidered its earlier order, denied the prayer for a Writ of Preliminary Injunction, and ordered that
the possession and occupation of the land be returned to the respondents. The RTC found that the
auction sale was tainted with irregularity as the bidder was a government employee disqualified in
accordance with Section 89 of the Local Government Code of 1991. The petitioners are not buyers
in good faith either. On the contrary, they were in bad faith for having falsified the tax declaration
they redeemed the property with.
6

THE CAS RULING

Through a petition for review on certiorari under Rule 65, the petitioners challenged the RTCs order
before the CA.
While the petition for review on certiorari was pending before the CA, the petitioners filed an action
for specific performance against the City Government of Butuan. According to the petitioners, they
acquired possession and ownership over the auctioned property when they redeemed it from
Tuazon. The City Government of Butuan must therefore issue them a certificate of sale.
8

In its October 24, 2005 decision, the CA affirmed the RTCs ruling, found the petitioners guilty of
forum shopping, dismissed the case, and referred the case to the Court and to the Integrated Bar of
the Philippines for investigation and institution of the appropriate administrative action. The CA,
after legal analysis, similarly concluded that for being disqualified to bid under Section 89 of the
Local Government Code of 1991, Tuazon never obtained ownership over the property; much less
transmit any proprietary rights to the petitioners. Clearly, the petitioners failed to establish any clear
and unmistakable right enforceable by the injunctive relief.
10

11

On April 6, 2006, the CA rejected the petitioners motion for reconsideration.

THE PARTIES ARGUMENTS

The petitioners filed the present petition for review on certiorari with this Court to challenge the CA
rulings. The petitioners maintain that they did not falsify the tax declaration in acquiring the auctioned
property. Moreover, assuming that Tuazon, the sole bidder, was indeed disqualified from
participating in the public auction, Section 181 of the Local Government Code of 1991 finds
application. Applying the law, it is as if there was no bidder, for which the City Government of Butuan
was to be considered the purchaser of the land in auction. Therefore, when the petitioners bought
the land, they bought it directly from the purchaser - City Government of Butuan - and not from
Tuazon, as redeemers.
12

Also, the respondents may not question the validity of the public auction for failing to deposit with the
court the amount required by Section 267 of the Local Government Code of 1991.
13

Finally, the petitioners argue that they did not commit forum shopping, as the reliefs prayed for in the
present case and in the specific performance case are not the same. In the present case, they
merely impleaded the City Government of Butuan as a nominal party to pay for the value of the land
only if possession of the land was awarded to the respondents. On the other hand, the complaint for
specific performance prayed that the City Government of Butuan execute the necessary certificate of
sale and other relevant documents pertaining to the auction.
The respondents, for their part, reiterate the lower courts findings that there could have been no
legal redemption in favor of the petitioners as the highest bidder was disqualified from bidding.
Moreover, the CA correctly applied the law in finding the petitioners guilty of forum shopping. Most
importantly, the grant of preliminary injunction lies in the sound discretion of the court and the
petitioners failed to show proof that they are entitled to it.
Meanwhile, on August 8, 2013, the RTC dismissed the main action and ordered the petitioners to
pay the respondents attorneys fees and litigation expenses.
14

THE COURTS RULING

We resolve to deny the petition for lack of merit.
The petitioners may not
raise factual issues
The petitioners maintain that they did not falsify the tax declaration they reimbursed the property
with. According to them, the document already existed in 1987, way before they acquired the land in
1997. Contrary likewise to the lower courts finding, they did not purchase the land from Tuazon as
redemptioners; they directly bought the property from the City Government of Butuan.
These factual contests are not appropriate for a petition for review on certiorari under Rule 45. The
Court is not a trier of facts. The Court will not revisit, re-examine, and re-evaluate the evidence and
the factual conclusions arrived at by the lower courts. In the absence of compelling reasons, the
Court will not disturb the rule that factual findings of the lower tribunals are final and binding on this
Court.
15

16

17

Sections 181 and 267 of the Local Government Code of 1991 are inapplicable; these provisions do
not apply to the present case

The petitioners may not invoke Section 181 of the Local Government Code of 1991 to validate their
alleged title. The law authorizes the local government unit to purchase the auctioned property only in
instances where "there is no bidder" or "the highest bid is xxx insufficient." A disqualified bidder is not
among the authorized grounds. The local government also never undertook steps to purchase the
property under Section 181 of the Local Government Code of 1991, presumably because it knew the
invoked provision does not apply.
18

Neither can the Court agree with the petitioners stance that the respondents defense the
petitioners defective title must fail for want of deposit to the court the amount required by Section
267 of the Local Government Code. The provision states:
Section 267. Action Assailing Validity of Tax Sale. - No court shall entertain any action assailing the
validity or any sale at public auction of real property or rights therein under this Title until the
taxpayer shall have deposited with the court the amount for which the real property was sold,
together with interest of two percent (2%) per month from the date of sale to the time of the
institution of the action. The amount so deposited shall be paid to the purchaser at the auction sale if
the deed is declared invalid but it shall be returned to the depositor if the action fails.
Neither shall any court declare a sale at public auction invalid by reason or irregularities or
informalities in the proceedings unless the substantive rights of the delinquent owner of the real
property or the person having legal interest therein have been impaired. [underscores ours; italics
supplied]
A simple reading of the title readily reveals that the provision relates to actions for annulment of tax
sales. The section likewise makes use of terms "entertain" and "institution" to mean that the deposit
requirement applies only to initiatory actions assailing the validity of tax sales. The intent of the
provision to limit the deposit requirement to actions for annulment of tax sales led to the Courts
ruling in National Housing Authority v. Iloilo City, et al. that the deposit requirement is jurisdictional
a condition necessary for the court to entertain the action:
19

As is apparent from a reading of the foregoing provision, a deposit equivalent to the amount of the
sale at public auction plus two percent (2%) interest per month from the date of the sale to the time
the court action is instituted is a condition a "prerequisite," to borrow the term used by the
acknowledged father of the Local Government Code which must be satisfied before the court can
entertain any action assailing the validity of the public auction sale. The law, in plain and unequivocal
language, prevents the court from entertaining a suit unless a deposit is made. xxx. Otherwise
stated, the deposit is a jurisdictional requirement the nonpayment of which warrants the failure of the
action.
xxxx
Clearly, the deposit precondition is an ingenious legal device to guarantee the satisfaction of the tax
delinquency, with the local government unit keeping the payment on the bid price no matter the final
outcome of the suit to nullify the tax sale.
20

The Court would later reiterate the jurisdictional nature of the deposit in Wong v. City of Iloilo, and
pronounce:
21

In this regard, National Housing Authority v. Iloilo City holds that the deposit required under Section
267 of the Local Government Code is a jurisdictional requirement, the nonpayment of which
warrants the dismissal of the action. Because petitioners in this case did not make such deposit, the
RTC never acquired jurisdiction over the complaints.
22

These rulings clearly render inapplicable the petitioners insistence that the respondents should have
made a deposit to the court. The suit filed by the petitioners was an action for injunction and
damages; the issue of nullity of the auction was raised by the respondents themselves merely as a
defense and in no way converted the action to an action for annulment of a tax sale.
The petitioners failed to show clear
and unmistakable rights to be protected
by the writ; the present action has been
rendered moot and academic by the
dismissal of the main action
As the lower courts correctly found, Tuazon had no ownership to confer to the petitioners despite the
latters reimbursement of Tuazons purchase expenses. Because they were never owners of the
property, the petitioners failed to establish entitlement to the writ of preliminary injunction. "[T]o be
entitled to an injunctive writ, the right to be protected and the violation against that right must be
shown. A writ of preliminary injunction may be issued only upon clear showing of an actual existing
right to be protected during the pendency of the principal action. When the complainants right or title
is doubtful or disputed, he does not have a clear legal right and, therefore, the issuance of injunctive
relief is not proper."
23

Likewise, upon the dismissal of the main case by the RTC on August 8, 2013, the question of
issuance of the writ of preliminary injunction has become moot and academic. In Arevalo v. Planters
Development Bank, the Court ruled that a case becomes moot and academic when there is no
more issue between the parties or object that can be served in deciding the merits of the case. Upon
the dismissal of the main action, the question of the non-issuance of a writ of preliminary injunction
automatically died with it. A writ of preliminary injunction is a provisional remedy; it is auxiliary, an
adjunct of, and subject to the determination of the main action. It is deemed lifted upon the dismissal
of the main case, any appeal therefrom notwithstanding.
24

25

The petitioners are guilty

of forum shopping
We agree with the CA that the petitioners committed forum shopping when they filed the specific
performance case despite the pendency of the present case before the CA. In the recent case of
Heirs of Marcelo Sotto, etc., et al. v. Matilde S. Palicte, the Court laid down the three ways forum
shopping may be committed: 1) through litis pendentia filing multiple cases based on the same
cause of action and with the same prayer, the previous case not having been resolved yet; 2)
through res judicata filing multiple cases based on the same cause of action and the same prayer,
the previous case having been finally resolved; and 3) splitting of causes of action filing multiple
cases based on the same cause of action but with different prayers the ground to dismiss being
either litis pendentia or res judicata. "The requisites of litis pendentia are: (a) the identity of parties,
or at least such as representing the same interests in both actions; (b) the identity of rights asserted
and relief prayed for, the relief being founded on the same facts; and (c) the identity of the two cases
such that judgment in one, regardless of which party is successful, would amount to res judicata in
the other."
26

27

Noticeable among these three types of forum shopping is the identity of the cause of action in the
different cases filed. Cause of action is "the act or omission by which a party violates the right of
another."
28

The cause of action in the present case (and the main case) is the petitioners claim of ownership of
the land when they bought it, either from the City Government of Butuan or from Tuazon. This

ownership is the petitioners basis in enjoining the respondents from dispossessing them of the
property. On the other hand, the specific performance case prayed that the City Government of
Butuan be ordered to issue the petitioners the certificate of sale grounded on the petitioners
ownership of the land when they had bought it, either from the City Government of Butuan or from
Tuazon. While it may appear that the main relief prayed for in the present injunction case is different
from what was prayed for in the specific performance case, the cause of action which serves as the
basis for the reliefs remains the same the petitioners alleged ownership of the property after its
purchase in a public auction.
Thus, the petitioners' subsequent filing of the specific performance action is forum shopping of the
third kind-splitting causes of action or filing multiple cases based on the same cause of action, but
with different prayers. As the Court has held in the past, "there is still forum shopping even if the
reliefs prayed for in the two cases are different, so long as both cases raise substantially the same
issues."
29

Similarly, the CA correctly found that the petitioners and their counsel were guilty of forum shopping
based on litis pendentia. Not only were the parties in both cases the same insofar as the City
Government of Butuan is concerned, there was also identity of rights asserted and identity of facts
alleged. The cause of action in the specific performance case had already been ruled upon in the
present case, although it was still pending appeal before the CA. Likewise, the prayer sought in the
specific performance case-for the City Government ofButuan to execute a deed of sale in favor of
the petitioners - had been indirectly ruled upon in the present case when the R TC declared that no
certificate of sale could be issued because there had been no valid sale.
WHEREFORE, premises considered, the Court DENIES the petition for review on certiorari. The
decision dated October 24, 2005 and the resolution dated April 6, 2006 of the Court of Appeals in
CA-G.R. SP No. 59859 are hereby AFFIRMED.
1wphi1

SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
MARIANO C. DEL CASTILLO
Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Acting Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 172206

July 3, 2013

OFFICE OF THE OMBUDSMAN, PETITIONER,

vs.
ERNESTO M. DE CHAVEZ, ROLANDO L. LONTOC, SR., DR. PORFIRIO C. LIGAYA, ROLANDO
L. LONTOC, JR. AND GLORIA M. MENDOZA, RESPONDENTS.
DECISION
PERALTA, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that
the Resolution1 of the Court of Appeals (CA), dated April 7, 2006, be reversed and set aside.
The crux of the controversy is whether the Batangas State University Board of Regents (BSU-BOR)
could validly enforce the Office of the Ombudsman's Joint Decision dated February 14, 2005 and
Supplemental Resolution dated July 12, 2005, finding herein respondents guilty of dishonesty and
grave misconduct and imposing the penalty of dismissal from service with its accessory penalties,
despite the fact that said Joint Decision and Supplemental Resolution are pending appeal before the
CA.
On August 18, 2005, the BSU-BOR received an Order from Deputy Ombudsman Victor Fernandez
directing the former to enforce the aforementioned Office of the Ombudsman's Joint Decision and
Supplemental Resolution. Pursuant to said Order, the BSU-BOR issued Resolution No. 18, series of
2005, dated August 22, 2005, resolving to implement the Order of the Office of the Ombudsman.
Thus, herein respondents filed a petition for injunction with prayer for issuance of a temporary
restraining order or preliminary injunction before the Regional Trial Court of Batangas City, Branch 4
(RTC), against the BSU-BOR. The gist of the petition before the RTC is that the BSU-BOR should be
enjoined from enforcing the Ombudsman's Joint Decision and Supplemental Resolution because the
same are still on appeal and, therefore, are not yet final and executory.
On September 26, 2005, the RTC ordered the dismissal of herein respondents' petition for injunction
on the ground of lack of cause of action. Respondents filed their notice of appeal and promptly filed
a Motion for Issuance of a Temporary Restraining Order and/or Injunction dated December 8, 2005
with the CA. On February 17, 2006, the CA issued a Resolution granting respondents' prayer for a
temporary restraining order enjoining the BSU-BOR from enforcing its Resolution No. 18, series of
2005.

Thereafter, on March 7, 2006, the Office of the Ombudsman filed a Motion to Intervene and to Admit
Attached Motion to Recall Temporary Restraining Order, with the Motion to Recall Temporary
Restraining Order attached thereto. Respondents opposed said motion and then filed an Urgent
Motion for Issuance of a Writ of Preliminary Injunction. On April 7, 2006, the CA issued the
Resolution subject of the present petition, pertinent portions of which are reproduced below:
At the outset, let it be emphasized that We are accepting and taking cognizance of the pleadings
lodged by the Office of the Ombudsman only in so far as to afford it with ample opportunity to
comment on and oppose appellants' application for injunctive relief, but not for the purpose of
allowing the Ombudsman to formally and actively intervene in the instant appeal. Basically, this is a
regular appeal impugning the disposition of the trial court, the pivotal issue of which is only for the
appellants and the Board of Regents of BSU to settle and contest, and which may be completely
adjudicated upon without the active participation of the Office of the Ombudsman.
xxxx
In the final reckoning, We stand firm by Our conclusion that the administrative penalty of dismissal
from the service imposed upon herein appellants is not yet final and immediately executory in nature
in view of the appeal interposed therefrom by the appellants before this Court, and this fact, in the
end, impelled Us to act with favor upon appellants' prayer for injunctive relief to stay the execution of
the impugned Resolution of the Board of Regents of BSU.
Wherefore, premises considered, the Ombudsman's Motion to Recall the TRO is denied. On the
other hand, appellants' Urgent Motion for Issuance of a Writ of Preliminary Injunction is granted.
Accordingly, let a Writ of Preliminary Injunction be issued, as it is hereby issued, conditioned upon
the posting by the appellants of an Injunction Bond in the sum of Php10,000.00, enjoining the Board
of Regents of BSU, and all other persons and agents acting under its command authority, pending
the complete resolution of this appeal, from effecting the enforcement and implementation of its
Resolution No. 18, Series of 2005 issued pursuant to the July 12, 2005 Supplemental Resolution of
the Ombudsman, Central Office.
SO ORDERED.2
Petitioners then filed a petition for review on certiorari before this Court, assailing the aforequoted
CA Resolution dated April 7, 2006, alleging that:
I.
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS DISREGARDED THE WELLENTRENCHED RULE AGAINST FORUM SHOPPING WHEN, INSTEAD OF OUTRIGHTLY
DISMISSING RESPONDENTS' PETITION, THE SAID COURT TOOK COGNIZANCE OF THE
PETITION AND SUBSEQUENTLY ISSUED ITS RESOLUTIONS DATED 17 FEBRUARY 2006 AND
7 APRIL 2006, RESPECTIVELY;
II.
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY OVERLOOKED
THE PROVISIONS OF RULE 58 OF THE 1997 REVISED RULES OF CIVIL PROCEDURE WHEN
IT TOOK COGNIZANCE OF RESPONDENTS' UNVERIFIED PETITION AND SUBSEQUENTLY
ISSUED ITS 17 FEBRUARY 2006 AND 7 APRIL 2006 RESOLUTIONS;

III.
THE ISSUANCE BY THE HONORABLE COURT OF APPEALS OF THE 17 FEBRUARY 2006 AND
7 APRIL 2006 RESOLUTIONS ENJOINING THE IMPLEMENTATION OF BOARD RESOLUTION
NO. 18, SERIES OF 2005 ISSUED BY THE BOARD OF REGENTS OF BATANGAS STATE
UNIVERSITY UNDULY DISREGARDS THE ESTABLISHED RULES RELATIVE TO
IMPLEMENTATION OF OMBUDSMAN DECISION PENDING APPEAL, CONSIDERING THAT:
BOARD RESOLUTION NO. 18, SERIES OF 2005 WAS ISSUED BY THE BOARD OF REGENTS
OF THE BATANGAS STATE UNIVERSITY PURSUANT TO THE JOINT DECISION AND
SUPPLEMENTAL RESOLUTION ISSUED BY THE OFFICE OF THE OMBUDSMAN.
UNDER THE OMBUDSMAN RULES OF PROCEDURE, AN APPEAL DOES NOT STAY THE
EXECUTION OF DECISIONS, RESOLUTIONS OR ORDERS ISSUED BY THE OFFICE OF THE
OMBUDSMAN.
IV.
RESPONDENTS ARE NOT ENTITLED TO THE INJUNCTIVE RELIEF PRAYED FOR IN THEIR
UNVERIFIED MOTION FILED BEFORE THE HONORABLE COURT OF APPEALS. 3
Controverting petitioner's claims, respondents in turn allege that:
1. PETITIONER (OMBUDSMAN) HAS NO LEGAL PERSONALITY TO INSTITUTE THE
INSTANT PETITION INASMUCH AS IT IS NOT A PARTY TO THE APPEALED CASE
PENDING BEFORE THE COURT OF APPEALS;
2. ASSUMING THAT THE PETITIONER HAS THE LEGAL PERSONALITY TO INTERVENE
IN THE APPEALED CASE BEFORE THE COURT OF APPEALS, THE INSTANT PETITION
IS NOT THE PROPER RECOURSE AVAILABLE TO THE PETITIONER; AND
3. THE COURT OF APPEALS DID NOT COMMIT ANY GRAVE ABUSE OF DISCRETION IN
ISSUING THE ASSAILED RESOLUTIONS.4
At the outset, the Court must clarify that a petition for review on certiorari is not the proper remedy to
question the CA Resolution dated April 7, 2006 granting the Writ of Preliminary Injunction and
denying petitioner's motion for intervention. Said Resolution did not completely dispose of the case
on the merits, hence, it is merely an interlocutory order. As such, Section 1, Rule 41 of the Rules of
Court provides that no appeal may be taken therefrom. However, where the assailed interlocutory
order is patently erroneous and the remedy of appeal would not afford adequate and expeditious
relief, the Court allows certiorari as a mode of redress.5
In this case, the discussion below will show that the assailed Resolution is patently erroneous, and
that granting the Office of the Ombudsman the opportunity to be heard in the case pending before
the lower court is of primordial importance. Thus, the Court resolves to relax the application of
procedural rules by treating the petition as one for certiorari under Rule 65 of the Rules of Court.
The CA should have allowed the Office of the Ombudsman to intervene in the appeal pending with
the lower court. The wisdom of this course of action has been exhaustively explained in Office of the
Ombudsman v. Samaniego.6In said case, the CA also issued a Resolution denying the Office of the

Ombudsman's motion to intervene. In resolving the issue of whether the Office of the Ombudsman
has legal interest to intervene in the appeal of its Decision, the Court expounded, thus:
x x x the Ombudsman is in a league of its own. It is different from other investigatory and prosecutory
agencies of the government because the people under its jurisdiction are public officials who,
through pressure and influence, can quash, delay or dismiss investigations directed against them. Its
function is critical because public interest (in the accountability of public officers and employees) is at
stake.
xxxx
The Office of the Obudsman sufficiently alleged its legal interest in the subject matter of litigation.
Paragraph 2 of its motion for intervention and to admit the attached motion to recall writ of
preliminary injunction averred:
"2. As a competent disciplining body, the Ombudsman has the right to seek redress on the
apparently erroneous issuance by this Honorable Court of the Writ of Preliminary Injunction enjoining
the implementation of the Ombudsman's Joint Decision x x x."
In asserting that it was a "competent disciplining body," the Office of the Ombudsman correctly
summed up its legal interest in the matter in controversy. In support of its claim, it invoked its role as
a constitutionally mandated "protector of the people," a disciplinary authority vested with quasijudicial function to resolve administrative disciplinary cases against public officials. To hold otherwise
would have been tantamount to abdicating its salutary functions as the guardian of public trust and
accountability.
Moreover, the Office of the Ombudsman had a clear legal interest in the inquiry into whether
respondent committed acts constituting grave misconduct, an offense punishable under the Uniform
Rules in Administrative Cases in the Civil Service. It was in keeping with its duty to act as a
champion of the people and preserve the integrity of public service that petitioner had to be given the
opportunity to act fully within the parameters of its authority.
It is true that under our rule on intervention, the allowance or disallowance of a motion to intervene is
left to the sound discretion of the court after a consideration of the appropriate circumstances.
However, such discretion is not without limitations. One of the limits in the exercise of such discretion
is that it must not be exercised in disregard of law and the Constitution. The CA should have
considered the nature of the Ombudsman's powers as provided in the Constitution and RA 6770.
xxxx
Both the CA and respondent likened the Office of the Ombudsman to a judge whose decision was in
question. This was a tad too simplistic (or perhaps even rather disdainful) of the power, duties and
functions of the Office of the Ombudsman. The Office of the Ombudsman cannot be detached,
disinterested and neutral specially when defending its decisions. Moreover, in administrative cases
against government personnel, the offense is committed against the government and public interest.
What further proof of a direct constitutional and legal interest in the accountability of public officers is
necessary?7
Here, since its power to ensure enforcement of its Joint Decision and Supplemental Resolution is in
danger of being impaired, the Office of the Ombudsman had a clear legal interest in defending its

right to have its judgment carried out. The CA patently erred in denying the Office of the
Ombudsman's motion for intervention.
A discussion of the next issue of the propriety of the issuance of a writ of preliminary injunction in this
case would necessarily touch on the very merits of the case, i.e., whether the concerned
government agencies and instrumentalities may execute the Office of the Ombudsman's order to
dismiss a government employee from service even if the Ombudsman's decision is pending appeal.
It would also be a great waste of time to remand the case back to the CA, considering that the entire
records of the proceedings have already been elevated to this Court. Thus, at this point, the Court
shall fully adjudicate the main issue in the case.
Note that for a writ of preliminary injunction to issue, the following essential requisites must concur,
to wit: (1) that the invasion of the right is material and substantial; (2) that the right of complainant is
clear and unmistakable; and, (3) that there is an urgent and paramount necessity for the writ to
prevent serious damage.8 In the present case, the right of respondents cannot be said to be clear
and unmistakable, because the prevailing jurisprudence is that the penalty of dismissal from the
service meted on government employees or officials is immediately executory in accordance with the
valid rule of execution pending appeal uniformly observed in administrative disciplinary cases. In
Facura v. Court of Appeals,9 the Court fully threshed out this matter, thus:
The issue of whether or not an appeal of the Ombudsman decision in an administrative case carries
with it the immediate suspension of the imposed penalty has been laid to rest in the recent resolution
of the case of Ombudsman v. Samaniego, where this Court held that the decision of the
Ombudsman is immediately executory pending appeal and may not be stayed by the filing of an
appeal or the issuance of an injunctive writ, to wit:
"Section 7, Rule III of the Rules of Procedure of the Office of the Ombudsman, as amended by
Administrative Order No. 17 dated September 15, 2003, provides:
SEC. 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 receipt of the written Notice of the Decision or Order denying the
motion for reconsideration.
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.
A decision of the Office of the Ombudsman in administrative cases shall be executed as a matter of
course. The Office of the Ombudsman shall ensure that the decision shall be strictly enforced and
properly implemented. The refusal or failure by any officer without just cause to comply with an order
of the Office of the Ombudsman to remove, suspend, demote, fine, or censure shall be a ground for
disciplinary action against such officer. [Emphases supplied]
1wphi1

The Ombudsman's decision imposing the penalty of suspension for one year is immediately
executory pending appeal. It cannot be stayed by the mere filing of an appeal to the CA. This rule is
similar to that provided under Section 47 of the Uniform Rules on Administrative Cases in the Civil
Service.

In the case of In the Matter to Declare in Contempt of Court Hon. Simeon A. Datumanong, Secretary
of the DPWH, we held:
The Rules of Procedure of the Office of the Ombudsman are clearly procedural and no vested right
of the petitioner is violated as he is considered preventively suspended while his case is on appeal.
Moreover, in the event he wins on appeal, he shall be paid the salary and such other emoluments
that he did not receive by reason of the suspension or removal. Besides, there is no such thing as a
vested interest in an office, or even an absolute right to hold office. Excepting constitutional offices
which provide for special immunity as regards salary and tenure, no one can be said to have any
vested right in an office.
xxxx
x x x Here, Section 7, Rule III of the Rules of Procedure of the Office of the Ombudsman, as
amended, is categorical, an appeal shall not stop the decision from being executory.
Moreover, Section 13 (8), Article XI of the Constitution authorizes the Office of the Ombudsman to
promulgate its own rules of procedure. In this connection, Sections 18 and 27 of the Ombudsman
Act of 1989 also provide that the Office of the Ombudsman has the power to "promulgate its rules of
procedure for the effective exercise or performance of its powers, functions and duties" and to
amend or modify its rules as the interest of justice may require. For the CA to issue a preliminary
injunction that will stay the penalty imposed by the Ombudsman in an administrative case would be
to encroach on the rule-making powers of the Office of the Ombudsman under the Constitution and
RA 6770 as the injunctive writ will render nugatory the provisions of Section 7, Rule III of the Rules
of Procedure of the Office of the Ombudsman.
Clearly, Section 7, Rule III of the Rules of Procedure of the Office of the Ombudsman supersedes
the discretion given to the CA in Section 12, Rule 43 of the Rules of Court when a decision of the
Ombudsman in an administrative case is appealed to the CA. The provision in the Rules of
Procedure of the Office of the Ombudsman that a decision is immediately executory is a special rule
that prevails over the provisions of the Rules of Court. Specialis derogat generali. When two rules
apply to a particular case, that which was specially designed for the said case must prevail over the
other. [Emphases supplied]
Thus, Section 7, Rule III of the Rules of Procedure of the Office of the Ombudsman, as amended by
Administrative Order (A.O.) No. 17, is categorical in providing that an appeal shall not stop an
Ombudsman decision from being executory. This rule applies to the appealable decisions of the
Ombudsman, namely, those where the penalty imposed is other than public censure or reprimand,
or a penalty of suspension of more than one month, or a fine equivalent to more than one month's
salary. Hence, the dismissal of De Jesus and Parungao from the government service is immediately
executory pending appeal.
The aforementioned Section 7 is also clear in providing that in case the penalty is removal and the
respondent wins his 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
removal. As explained above, there is no such thing as a vested interest in an office, or an absolute
right to hold office, except constitutional offices with special provisions on salary and tenure. The
Rules of Procedure of the Ombudsman being procedural, no vested right of De Jesus and Parungao
would be violated as they would be considered under preventive suspension, and entitled to the
salary and emoluments they did not receive in the event that they would win their appeal.

The ratiocination above also clarifies the application of Rule 43 of the Rules of Court in relation to
Section 7 of the Rules of Procedure of the Office of the Ombudsman. The CA, even on terms it may
deem just, has no discretion to stay a decision of the Ombudsman, as such procedural matter is
governed specifically by the Rules of Procedure of the Office of the Ombudsman.
The CA's issuance of a preliminary mandatory injunction, staying the penalty of dismissal imposed
by the Ombudsman in this administrative case, is thus an encroachment on the rule-making powers
of the Ombudsman under Section 13 (8), Article XI of the Constitution, and Sections 18 and 27 of
R.A. No. 6770, which grants the Office of the Ombudsman the authority to promulgate its own rules
of procedure. The issuance of an injunctive writ renders nugatory the provisions of Section 7, Rule III
of the Rules of Procedure of the Office of the Ombudsman. 10
From the foregoing elaboration, there can be no cavil that respondents do not have any right to a
stay of the Ombudsman's decision dismissing them from service. Perforce, the BSU-BOR acted
properly in issuing Resolution No. 18, series of 2005, dated August 22, 2005, pursuant to the order
of the Ombudsman, as its legally-mandated duty. The CA's Resolution granting respondents' prayer
for a writ of preliminary injunction is patently erroneous.
WHEREFORE, the petition is GRANTED. The Resolution of the Court of Appeals, dated April 7,
2006, is SET ASIDE. The Order of the Regional Trial Court of Batangas City, Branch 4, dated
September 26, 2005 in Civil Case No. 7775, is REINSTATED.
SO ORDERED.
Velasco, Jr., (Chairperson), Abad, Mendoza, and Leonen, JJ., concur.
July 12, 2013
N O T I C E OF J U D G M E N T
Sirs/Mesdames:
Please take notice that on ___July 3, 2013___ a Decision, copy attached herewith, was rendered by
the Supreme Court in the above-entitled case, the original of which was received by this Office on
July 12, 2013 at 10:35 a.m.
Very truly yours,
(SGD)
LUCITA ABJELINA SORIANO
Division Clerk of Court

THIRD DIVISION
OFFICE
OF
OMBUDSMAN,
Petitioner,

THE

G.R. No. 185954

Present:

- versus MAXIMO D. SISON,

Respondent.

CORONA, J., Chairperson,

VELASCO, JR.,
NACHURA,
PERALTA, and
MENDOZA, JJ.

Promulgated:
February 16, 2010
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
Before us is a Petition for Review on Certiorari under Rule 45
assailing and seeking to set aside the Resolution [1] dated
December 18, 2008 of the Court of Appeals (CA) in CA-G.R. SP No.
96611, entitled Maximo D. Sison v. Fr. Noel Labendia for Himself
and in Representation of Isog Han Samar Movement, Diocese of
Calbayog, Catbalogan, Samar. The CA Resolution denied
petitioner Office of the Ombudsmans Omnibus Motion for
Intervention and to Admit Attached Motion for Reconsideration of
the CAs June 26, 2008 Decision.[2]

The Facts
On October 11, 2004, the Isog Han Samar Movement,
represented by Fr. Noel Labendia of the Diocese of Calbayog,
Catbalogan, Samar, filed a letter-complaint addressed to then
Ombudsman, Hon. Simeon Marcelo, accusing Governor Milagrosa
T. Tan and other local public officials [3] of the Province of Samar,
including respondent Maximo D. Sison, of highly anomalous

transactions entered into by them amounting to several millions

of pesos. Sison was the Provincial Budget Officer.
The letter-complaint stemmed from the audit investigation
dated August 13, 2004 conducted by the Legal and Adjudication
Office (LAO), Commission on Audit (COA), which found, among
others, that various purchases totaling PhP 29.34 million went
without proper bidding procedures and documentations; that
calamity funds were expended without a State of Calamity having
been declared by the President; and that purchases for rice,
medicines, electric fans, and cement were substantially
overpriced.
The Special Audit Team, which was created under LAO Office
Order No. 2003-059 dated July 7, 2003, summarized the
corresponding COA audit findings and observations, to wit:
1.

Rules and regulations pertaining to procurement of

supplies and materials were consciously and
continually violated as disclosed in the verification of
selected purchases of the Province. Below were the
findings and observations:
a.

Purchases of various items, totaling at least PhP

29.34 million and allegedly procured through
public bidding, were found highly irregular for lack
of proper bidding procedures and documentation;
b. At least PhP 28.165 million worth of purchases
through repeat orders were made by the Province
without observing the pertinent law, rules and
regulations governing this mode of procurement;
and
c. Emergency purchases of medicines and assorted
goods totaling PhP 14.67 million were found not
complying with the requirements set forth under
the Rules and Regulations on Supplies and
Property Management in Local Governments
(RRSPMLG). Moreover, the purchases were

charged against the calamity fund, despite

absence of any declaration from the President
that Samar was under a state of calamity, in
violation of Sec. 324(d) of R.A. 7160.
2.

Inconsistencies in the dates of supporting documents

relating to the purchases discussed in finding No. 1
were so glaring that they raised doubts on the validity
of the transactions per se;

3.

The use of the 5% budgetary reserves for calamity as

funding source of emergency purchases was not legally
established, there being no declaration from the Office
of the President that Samar was under a state of
calamity, as required under Sec. 324(d) of R.A. 7160;

4.

Splitting of requisitions and purchase orders was

resorted to in violation of COA Circular No. 76-41 dated
July 30, 1976;

5.

There was overpricing in the purchase of rice,

medicines, electric fans and cement in the amount of
PhP 580,000.00, PhP 322,760.00, PhP 341,040.00, and
PhP 3.6 million, respectively. An overpayment was also
committed in the payments of cement in the amount of
PhP 96,364.09;

6.

Other observations gathered

purchases made are the following:
a.

corollary

to

the

Purchase Orders were not duly accomplished to

include a complete description of the items to be
purchased, the delivery date and the terms of
payment, in violation of the provisions of Section
74 and other corollary provisions of RRSPMLG.
Some were even acknowledged by suppliers;
b. At least 36 vouchers/claims were not supported
with an official receipt, in violation of the
provisions of Section 4 of PD 1445 that all
disbursements must be supported with complete
documentation; and

c.

Advanced deliveries of medicines and assorted

goods were made on some purchases even before
the purchase orders were prepared and before
the public biddings were conducted.

7.

The necessity and veracity of the distribution of tshirts/caps, medicines, assorted goods and cement
purchased by the Province of Samar could not be
established due to rampant inconsistencies in dates,
quantities, as well as the signatures of the alleged
recipients in the Requisition and Issue Slip; and,

8.

Financial Assistance (FA)/Assistance to Individuals in

Crisis Situation (AICS) totaling at least PhP 5.4 million
in 2002 and PhP 2.78 million as of April 2003 were
granted to various applicant-recipients without
subjecting them to the guidelines set forth by the
Department of Social Welfare and Development
(DSWD).[4] x x x

On January 24, 2005, the Office of the Ombudsman, through

Director Jose T. De Jesus, Jr., found basis to proceed with the
administrative case against the impleaded provincial officials
of Samar, docketed as OMB-C-A-05-0051-B. The latter were then
required to file their counter-affidavits and countervailing
evidence against the complaint.
In his counter-affidavit, Sison vehemently denied the
accusations contained in the letter-complaint and claimed his
innocence on the charges. He asserted that his function is limited
to the issuance of a certification that an appropriation for the
requisition exists, that the corresponding amount has been
obligated, and that funds are available. He did not, in any way,
vouch for the truthfulness of the certification issued by the
requesting parties. In addition, he averred that he never
participated in the alleged irregularities as shown in the minutes
and attendance sheet of the bidding.

Further, he alleged that not one of the documentary

evidences so far attached in the letter-complaint bore his
signature and that he was neither factually connected nor directly
implicated in the complaint.
On May 6, 2005, Sison submitted his Position Paper to the
Office of the Ombudsman and reiterated that he had not
participated in the alleged anomalous purchases and use of public
funds by the Province of Samar.
On August 22, 2006, the Office of the Ombudsman rendered
a Decision, finding Sison and several other local officials of
the Province of Samar guilty of grave misconduct, dishonesty, and
conduct prejudicial to the best interest of the service and
dismissing him from service. The dispositive portion of the
Decision reads:
VIEWED IN THE FOREGOING LIGHT, DECISION is
hereby rendered as follows:
1.

Respondents ROLANDO B. MONTEJO, DAMIANO

Z. CONDE, JR., ROMEO C. REALES, MAXIMO D.
SISON, AURELIO A. BARDAJE and NUMERIANO C.
LEGASPI
are
FOUND
GUILTY
of
GRAVE
MISCONDUCT,
DISHONESTY
and
CONDUCT
PREJUDICIAL TO THE BEST INTEREST OF THE
SERVICE, and are METED the penalty of
DISMISSAL FROM SERVICE, and shall carry with it
the cancellation of eligibility, forfeiture of
retirement
benefits,
and
the
perpetual
disqualification
for
re-employment
in
the
government service.

Accordingly, Governor Milagrosa T. Tan and

Executive Director Presentacion R. Montesa of the Bureau
of Local Government Finance, Department of Finance, are
respectfully directed to implement this Order upon receipt

hereof and to forthwith inform the Office of compliance

herewith.
2.

The
administrative
complaint
against
respondents MILAGROSA T. TAN, FE ORTEGA TAN
ARCALES,
SUSANO
DIMAKILING
SALURIO,
BARTOLOME P. FIGUEROA, ANTONIO DE LEON
BOLASTIG, III, ROSENAIDA A. ROSALES and
BARTOLOME R. CASTILLO III is DISMISSED in view
of their re-election in May 2004;

3.

The administrative complaint against ERNESTO

CARCILLAR ARCALES, FELIX T. BABALCON, JR.,
JIMMY R. DY, JUAN COLINARES LATORRE, JR.,
MARIA LOURDES CORTEZ UY, BIENVENIDA P.
REPOL and RAMON P. DEAN, JR., who are no
longer public officials, is DISMISSED.

4.

For insufficiency of evidence, the administrative

complaint against ANAMIE P. MANATAD-NUNEZ
and ROSIE AMARO VILLACORTE is DISMISSED.

5.

The Fact-Finding and Intelligence Office is

DIRECTED
to
conduct
further
fact-finding
investigations on the following:
a.

On DV Nos. 221-2002-12-083 and 2212002-11-065: (a) to DETERMINE the other

public
officials
who
may
be
held
administratively liable; and (b) to FILE, if
necessary, the corresponding Complaint;
b. On Bid Nos. 079-2002, 442-2002, 5542002, 861-2002, 937-2002, 947-2002, 12212002, 1375-2002, 1411-2002, 007-2003,
014-2003, 023-2003, 047-2003 and 0822002: (a) to VERIFY whether actual public
biddings took place relative to the
transactions covered by these bids; (b) to
CHECK the veracity of the documents
relative to the repeat orders made; (c) to
DETERMINE the other public officials who

may appear to be administratively liable

therefor; and (d) to FILE, if warranted, the
corresponding Complaint; and
c. On Bid Nos. 078-2002, 448-2002, 9312002, 1230-2001, 411-2002, 944-2002,
1244-2002, 1407-2001, 198-2002, 316-2002
and 431-2002: (a) to DETERMINE whether
actual public biddings were held relative to
the above-mentioned transactions; (b) to
CHECK the veracity of the documents
relative to the repeat orders made; (c) to
ASCERTAIN the other public officials who
may be held administratively liable therefor;
and (d) to FILE the corresponding Complaint,
if warranted.
Accordingly, let a copy of this Memorandum be
furnished the Fact- Finding and Intelligence Office for its
appropriate action.
SO ORDERED.[5] (Emphasis supplied.)

Aggrieved, Sison appealed to the CA via a Petition for Review

under Rule 43, docketed as CA-G.R. SP No. 96611.
On June 26, 2008, the CA rendered a decision reversing and
setting aside the decision of the Office of the Ombudsman against
Sison. The fallo of the CA decision reads:
WHEREFORE, the decision of the Ombudsman dated
22 August 2006 in OMB-C-A-05-0051-B in so far as it finds
the herein petitioner MAXIMO D. SISON administratively
liable for grave misconduct, dishonesty and conduct
prejudicial to the best interest of service is hereby
REVERSED and SET ASIDE for insufficiency of evidence.
Accordingly, he is absolved from administrative liability as
charged.
SO ORDERED.[6]

In ruling thus, the CA held that the Office of the Ombudsman

failed to adduce substantial evidence in order to convict
Sison. Moreover, it reasoned that Sisons responsibility as
Provincial Budget Officer was to ensure that appropriations exist
in relation to the emergency purchase being made and that he
had no hand or discretion in characterizing a particular purchase
as emergency in nature. Hence, he cannot be held
administratively liable for simply attesting to the existence of
appropriations for a certain purpose, save if such certification is
proved to be false.
On July 22, 2008, the Office of the Ombudsman filed an
Omnibus Motion for Intervention and to Admit Attached Motion for
Reconsideration, which was subsequently denied by the CA in its
assailed resolution of December 18, 2008.
Hence, we have this petition.
The Issues
I
Whether the [CA] gravely erred in denying petitioners
right to intervene in the proceedings, considering that (a)
the Office of the Ombudsman has sufficient legal interest
warranting its intervention in the proceedings before the
[CA] since it rendered the subject decision pursuant to its
administrative authority over public officials and
employees; and (b) contrary to the appellate court a
quos ruling, petitioner Office of the Ombudsman filed its
Omnibus Motion to Intervene and to Admit Attached
Motion for Reconsideration on a patently erroneous
decision of the [CA] which has not yet attained finality.
II
Whether the [CA] erred in ruling that the finding of the
Office of the Ombudsman was not supported by
substantial evidence.

III
Whether the [CA] erred in giving due course to
respondents petition for review when this was
prematurely filed as it disregarded the well-entrenched
jurisprudential doctrine of exhaustion of administrative
remedies.

Our Ruling
The appeal lacks merit.
Intervention Is Discretionary upon the Court
The pivotal issue in this case is whether the Office of the
Ombudsman may be allowed to intervene and seek
reconsideration of the adverse decision rendered by the CA.
In its Decision, the CA did not allow the Office of the
Ombudsman to intervene, because (1) the Office of the
Ombudsman is not a third party who has a legal interest in the
administrative case against petitioner; (2) the Omnibus Motion for
Intervention was filed after the CA rendered its Decision; and (3)
the Office of the Ombudsman was the quasi-judicial body which
rendered the impugned decision.
In its Petition, however, the Office of the Ombudsman asserts
that it has sufficient legal interest to warrant its intervention in
the proceedings, since it rendered the subject decision pursuant
to its administrative authority over public officials and employees.
Further, it contends that the Omnibus Motion to Intervene was
timely filed, since, at the time of its filing, the decision of the CA
had not yet attained finality.
We are not persuaded.

It is fundamental that the allowance or disallowance of a

Motion to Intervene is addressed to the sound discretion of the
court.[7] The permissive tenor of the rules shows the intention to
give to the court the full measure of discretion in permitting or
disallowing the intervention,[8] thus:
SECTION 1. Who may intervene. A person who has
a legal interest in the matter in litigation, or in the
success of either of the parties, or an interest against
both, or is so situated as to be adversely affected by a
distribution or other disposition of property in the custody
of the court or of an officer thereof may, with leave of
court, be allowed to intervene in the action. The court
shall consider whether or not the intervention will unduly
delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenors rights
may be fully protected in a separate proceeding.
SECTION 2. Time to intervene. The motion to
intervene may be filed at any time before rendition
of judgment by the trial court. A copy of the pleadingin-intervention shall be attached to the motion and
served on the original parties.[9] (Emphasis supplied.)

Simply, intervention is a procedure by which third persons,

not originally parties to the suit but claiming an interest in the
subject matter, come into the case in order to protect their right
or interpose their claim.[10] Its main purpose is to settle in one
action and by a single judgment all conflicting claims of, or the
whole controversy among, the persons involved. [11]
To warrant intervention under Rule 19 of the Rules of Court,
two requisites must concur: (1) the movant has a legal interest in
the matter in litigation; and (2) intervention must not unduly
delay or prejudice the adjudication of the rights of the parties, nor
should the claim of the intervenor be capable of being properly

decided in a separate proceeding. The interest, which entitles one

to intervene, must involve the matter in litigation and of such
direct and immediate character that the intervenor will either gain
or lose by the direct legal operation and effect of the judgment. [12]
In support of its argument that it has legal interest, the
Office of the Ombudsman cites Philippine National Bank v. Garcia,
Jr. (Garcia). [13] In the said case, the Philippine National Bank (PNB)
imposed upon its employee, Garcia, the penalty of forced
resignation for gross neglect of duty. On appeal, the Civil Service
Commission (CSC) exonerated Garcia from the administrative
charges against him. In accordance with the ruling in Civil Service
Commission v. Dacoycoy,[14] this Court affirmed the standing of
the PNB to appeal to the CA the CSC resolution exonerating
Garcia. After all, PNB was the aggrieved party which complained
of Garcias acts of dishonesty. Should Garcia be finally exonerated,
it might then be incumbent upon PNB to take him back into its
fold. PNB should, therefore, be allowed to appeal a decision that,
in its view, hampered its right to select honest and trustworthy
employees, so that it can protect and preserve its name as a
premier banking institution in the country.
Based on the facts above, the Office of the Ombudsman
cannot use Garcia to support its intervention in the appellate
court for the following reasons:
First, Sison was not exonerated from the administrative
charges against him, and was, in fact, dismissed for grave
misconduct, dishonesty, and conduct prejudicial to the best
interest of the service by the Office of the Ombudsman in the
administrative case, OMB-C-A-05-0051-B. Thus, it was Sison who
appealed to the CA being, unquestionably, the party aggrieved by
the judgment on appeal.

Second, the issue here is the right of the Office of the

Ombudsman to intervene in the appeal of its decision, not its right
to appeal.
And third, Garcia should be read along with Mathay, Jr. v.
Court of Appeals[15] and National Appellate Board of the National
Police Commission v. Mamauag (Mamauag),[16] in which this Court
qualified and clarified the exercise of the right of a government
agency to actively participate in the appeal of decisions in
administrative cases. In Mamauag, this Court ruled:
RA 6975 itself does not authorize a private
complainant to appeal a decision of the disciplining
authority. Sections 43 and 45 of RA 6975 authorize either
party to appeal in the instances that the law allows
appeal. One party is the PNP member-respondent when
the disciplining authority imposes the penalty of demotion
or dismissal from the service. The other party is the
government when the disciplining authority imposes the
penalty of demotion but the government believes that
dismissal from the service is the proper penalty.
However, the government party that can appeal is
not the disciplining authority or tribunal which previously
heard the case and imposed the penalty of demotion or
dismissal from the service. The government party
appealing must be the one that is prosecuting the
administrative case against the respondent. Otherwise,
an anomalous situation will result where the disciplining
authority or tribunal hearing the case, instead of being
impartial and detached, becomes an active participant in
prosecuting the respondent. Thus, in Mathay, Jr. v. Court
of Appeals, decided after Dacoycoy, the Court declared:
To be sure when the resolutions of the Civil
Service Commission were brought to the Court of
Appeals, the Civil Service Commission was included
only as a nominal party. As a quasi-judicial body, the
Civil Service Commission can be likened to a judge

who should detach himself from cases where his

decision is appealed to a higher court for review.
In instituting G.R. No. 126354, the Civil Service
Commission dangerously departed from its role as
adjudicator and became an advocate. Its mandated
function is to hear and decide administrative cases
instituted by or brought before it directly or on
appeal, including contested appointments and to
review decisions and actions of its offices and
agencies, not to litigate.

Clearly, the Office of the Ombudsman is not an appropriate

party to intervene in the instant case. It must remain partial and
detached. More importantly, it must be mindful of its role as an
adjudicator, not an advocate.
It is an established doctrine that judges should detach
themselves from cases where their decisions are appealed to a
higher court for review. The raison detre for such a doctrine is the
fact that judges are not active combatants in such proceeding and
must leave the opposing parties to contend their individual
positions and the appellate court to decide the issues without the
judges active participation.[17] When judges actively participate in
the appeal of their judgment, they, in a way, cease to be judicial
and have become adversarial instead. [18]
In Pleyto v. Philippine National Police Criminal Investigation
and Detection Group (PNP-CIDG),[19] the Court applied this
doctrine when it held that the CA erred in granting the Motion to
Intervene filed by the Office of the Ombudsman, to wit:
The court or the quasi-judicial agency must be
detached and impartial, not only when hearing and
resolving the case before it, but even when its judgment
is brought on appeal before a higher court. The judge of a
court or the officer of a quasi-judicial agency must keep in

mind that he is an adjudicator who must settle the

controversies between parties in accordance with the
evidence and applicable laws, regulations and/or
jurisprudence. His judgment should already clearly and
completely state his findings of fact and law. There must
be no more need for him to justify further his judgment
when it is appealed before appellate courts. When the
court judge or the quasi-judicial officer intervenes as a
party in the appealed case, he inevitably forsakes his
detachment and impartiality, and his interest in the case
becomes personal since his objective now is no longer
only to settle the controversy between the original parties
(which he had already accomplished by rendering his
judgment), but more significantly, to refute the appellants
assignment of errors, defend his judgment, and prevent it
from being overturned on appeal.

Likewise, the facts reveal that this case was elevated to the
CA via a verified Petition for Review under Rule 43 of the Rules of
Court and Supreme Court Administrative Circular No. 1-95 dated
May 16, 1995, which govern appeals to the CA from judgments or
final orders of quasi-judicial agencies.
Rule 43, as well as Administrative Circular No. 1-95, provides
that the petition for review shall state the full names of the
parties to the case without impleading the court or agencies
either as petitioners or respondents.[20] Thus, the only parties
in such an appeal are the appellant as petitioner and appellee as
respondent. The court or, in this case, the administrative agency
that rendered the judgment appealed from, is not a party in the
said appeal.
Therefore, the Office of the Ombudsman does not have the
legal interest to intervene. As the CA held correctly:

The Office of the Ombudsman is not a third party

who has a legal interest in the administrative case against
the petitioner such that it would be directly affected by
the judgment that this Court had rendered. It must be
remembered that the legal interest required for an
intervention must be direct and immediate in character.
Lest it be forgotten, what was brought on appeal before
this Court is the very Decision by the Office of the
Ombudsman. Plainly, the Office of the Ombudsman, as an
adjudicator, and not an advocate, has no legal interest at
stake in the outcome of this Rule 43 Petition.[21]

Motion for Intervention Was Not Filed on Time

Furthermore, the Rules provides explicitly that a motion to
intervene may be filed at any time before rendition of
judgment by the trial court. In the instant case, the Omnibus
Motion for Intervention was filed only on July 22, 2008, after the
Decision of the CA was promulgated on June 26, 2008.
In support of its position, petitioner cites Office of the
Ombudsman v. Samaniego.[22] That case, however, is not
applicable here, since the Office of the Ombudsman filed the
motion for intervention during the pendency of the proceedings
before the CA.
It should be noted that the Office of the Ombudsman was
aware of the appeal filed by Sison. The Rules of Court provides
that the appeal shall be taken by filing a verified petition for
review with the CA, with proof of service of a copy on the
court or agency a quo.[23] Clearly, the Office of the Ombudsman
had sufficient time within which to file a motion to intervene. As
such, its failure to do so should not now be countenanced. The

Office of the Ombudsman is expected to be an activist watchman,

not merely a passive onlooker.[24]
In this case, it cannot be denied that the Omnibus Motion for
Intervention was belatedly filed. As we held in Rockland
Construction Co., Inc. v. Singzon, Jr., no intervention is permitted
after a decision has already been rendered. [25]

In light of the foregoing considerations, all other issues

raised in the petition are rendered moot and academic and no
further discussion is necessary.
WHEREFORE, the petition is DENIED. The CA Resolution
dated December 18, 2008 in CA-G.R. SP No. 96611 is AFFIRMED.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice

WE CONCUR:

RENATO C. CORONA
Associate Justice
Chairperson

ANTONIO EDUARDO B. NACHURA DIOSDADO M. PERALTA

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

RENATO C. CORONA
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the
Division Chairpersons Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts
Division.

REYNATO S. PUNO
Chief Justice

SECOND DIVISION

[G.R. No. 135706. October 1, 2004]

SPS.

CESAR
A.
LARROBIS,
JR.
and
LARROBIS, petitioners,
vs. PHILIPPINE
BANK, respondent.

VIRGINIA
S.
VETERANS

DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review of the decision of the Regional Trial Court (RTC),
Cebu City, Branch 24, dated April 17, 1998, and the order denying petitioners motion
for reconsideration dated August 25, 1998, raising pure questions of law.
[1]

[2]

The following facts are uncontroverted:

On March 3, 1980, petitioner spouses contracted a monetary loan with respondent
Philippine Veterans Bank in the amount of P135,000.00, evidenced by a promissory
note, due and demandable on February 27, 1981, and secured by a Real Estate
Mortgage executed on their lot together with the improvements thereon.
On March 23, 1985, the respondent bank went bankrupt and was placed under
receivership/liquidation by the Central Bank from April 25, 1985 until August 1992.
[3]

On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand
letter for accounts receivable in the total amount of P6,345.00 as of August 15, 1984,
which pertains to the insurance premiums advanced by respondent bank over the
mortgaged property of petitioners.
[4]

[5]

On August 23, 1995, more than fourteen years from the time the loan became due
and demandable, respondent bank filed a petition for extrajudicial foreclosure of
mortgage of petitioners property. On October 18, 1995, the property was sold in a
public auction by Sheriff Arthur Cabigon with Philippine Veterans Bank as the lone
bidder.
[6]

On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare
the extra-judicial foreclosure and the subsequent sale thereof to respondent bank null
and void.
[7]

In the pre-trial conference, the parties agreed to limit the issue to whether or not the
period within which the bank was placed under receivership and liquidation was a
fortuitous event which suspended the running of the ten-year prescriptive period in
bringing actions.
[8]

On April 17, 1998, the RTC rendered its decision, the fallo of which reads:
WHEREFORE, premises considered judgment is hereby rendered dismissing the
complaint for lack of merit. Likewise the compulsory counterclaim of defendant is
dismissed for being unmeritorious.
[9]

It reasoned that:
defendant bank was placed under receivership by the Central Bank from April 1985 until
1992. The defendant bank was given authority by the Central Bank to operate as a
private commercial bank and became fully operational only on August 3, 1992. From
April 1985 until July 1992, defendant bank was restrained from doing its business.
Doing business as construed by Justice Laurel in 222 SCRA 131 refers to:
.a continuity of commercial dealings and arrangements and contemplates to that extent,
the performance of acts or words or the exercise of some of the functions normally
incident to and in progressive prosecution of the purpose and object of its organization.
The defendant banks right to foreclose the mortgaged property prescribes in ten (10)
years but such period was interrupted when it was placed under receivership. Article
1154 of the New Civil Code to this effect provides:
The period during which the obligee was prevented by a fortuitous event from enforcing
his right is not reckoned against him.
In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131, the
Supreme Court said.
Having arrived at the conclusion that a foreclosure is part of a banks activity which could
not have been pursued by the receiver then because of the circumstances discussed in
the Central Bank case, we are thus convinced that the prescriptive period was legally
interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the
Monetary Board against petitioner from transacting business, until the directive of the
Board was nullified in 1981. Indeed, the period during which the obligee was prevented
by a caso fortuito from enforcing his right is not reckoned against him. (Art. 1154, NCC)
When prescription is interrupted, all the benefits acquired so far from the possession
cease and when prescription starts anew, it will be entirely a new one. This concept
should not be equated with suspension where the past period is included in the
computation being added to the period after the prescription is presumed (4 Tolentino,
Commentaries and Jurisprudence on the Civil Code of the Philippines 1991 ed. pp. 1819), consequently, when the closure of the petitioner was set aside in 1981, the period
of ten years within which to foreclose under Art. 1142 of the N.C.C. began to run and,
therefore, the action filed on August 21, 1986 to compel petitioner to release the
mortgage carried with it the mistaken notion that petitioners own suit for foreclosure has
prescribed.

Even assuming that the liquidation of defendant bank did not affect its right to foreclose
the plaintiffs mortgaged property, the questioned extrajudicial foreclosure was well
within the ten (10) year prescriptive period. It is noteworthy to mention at this point in
time, that defendant bank through authorized Deputy Francisco Go made the first
extrajudicial demand to the plaintiffs on August 1985. Then on March 24, 1995
defendant bank through its officer-in-charge Llanto made the second extrajudicial
demand. And we all know that a written extrajudicial demand wipes out the period that
has already elapsed and starts anew the prescriptive period. (Ledesma vs. C.A., 224
SCRA 175.)
[10]

Petitioners filed a motion for reconsideration which the RTC denied on August 25,
1998. Thus, the present petition for review where petitioners claim that the RTC erred:
[11]

IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS PUT
UNDER RECEIVERSHIP AND LIQUIDATION WAS A FORTUITOUS EVENT THAT
INTERRUPTED THE RUNNING OF THE PRESCRIPTIVE PERIOD.
II

IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY

RESPONDENT ON PETITIONERS WIPED OUT THE PERIOD THAT HAD ALREADY
ELAPSED.
III

IN DENYING PETITIONERS MOTION FOR RECONSIDERATION OF ITS HEREIN

ASSAILED DECISION.
[12]

Petitioners argue that: since the extra-judicial foreclosure of the real estate
mortgage was effected by the bank on October 18, 1995, which was fourteen years
from the date the obligation became due on February 27, 1981, said foreclosure and the
subsequent sale at public auction should be set aside and declared null and void ab
initio since they are already barred by prescription; the court a quo erred in sustaining
the respondents theory that its having been placed under receivership by the Central
Bank between April 1985 and August 1992 was a fortuitous event that interrupted the
running of the prescriptive period; the court a quos reliance on the case
of Provident Savings Bank vs. Court of Appeals is misplaced since they have different
sets of facts; in the present case, a liquidator was duly appointed for respondent bank
and there was no judgment or court order that would legally or physically hinder or
prohibit it from foreclosing petitioners property; despite the absence of such legal or
physical hindrance, respondent banks receiver or liquidator failed to foreclose
petitioners property and therefore such inaction should bind respondent bank;
foreclosure of mortgages is part of the receivers/liquidators duty of administering the
banks assets for the benefit of its depositors and creditors, thus, the ten-year
prescriptive period which started on February 27, 1981, was not interrupted by the time
[13]

[14]

[15]

during which the respondent bank was placed under receivership; and the Monetary
Boards prohibition from doing business should not be construed as barring any and all
business dealings and transactions by the bank, otherwise, the specific mandate to
foreclose mortgages under Sec. 29 of R.A. No. 265 as amended by Executive Order
No. 65 would be rendered nugatory. Said provision reads:
[16]

Section 29. Proceedings upon Insolvency Whenever, upon examination by the head of
the appropriate supervising or examining department or his examiners or agents into
the condition of any bank or non-bank financial intermediary performing quasi-banking
functions, it shall be disclosed that the condition of the same is one of insolvency, or that
its continuance in business would involve probable loss to its depositors or creditors, it
shall be the duty of the department head concerned forthwith, in writing, to inform the
Monetary Board of the facts. The Board may, upon finding the statements of the
department head to be true, forbid the institution to do business in the Philippines and
designate the official of the Central Bank or a person of recognized competence in
banking or finance, as receiver to immediately take charge its assets and liabilities, as
expeditiously as possible, collect and gather all the assets and administer the same for
the benefit of its creditors, and represent the bank personally or through counsel as he
may retain in all actions or proceedings for or against the institution, exercising all the
powers necessary for these purposes including, but not limited to, bringing and
foreclosing mortgages in the name of the bank.
Petitioners further contend that: the demand letter, dated March 24, 1995, was sent
after the ten-year prescriptive period, thus it cannot be deemed to have revived a period
that has already elapsed; it is also not one of the instances enumerated by Art. 1115 of
the Civil Code when prescription is interrupted; and the August 23, 1985 letter by
Francisco Go demanding P6,345.00, refers to the insurance premium on the house of
petitioners, advanced by respondent bank, thus such demand letter referred to another
obligation and could not have the effect of interrupting the running of the prescriptive
period in favor of herein petitioners insofar as foreclosure of the mortgage is concerned.
[17]

[18]

Petitioners then prayed that respondent bank be ordered to pay them P100,000.00
as moral damages, P50,000.00 as exemplary damages and P100,000.00 as attorneys
fees.
[19]

Respondent for its part asserts that: the period within which it was placed under
receivership and liquidation was a fortuitous event that interrupted the running of the
prescriptive period for the foreclosure of petitioners mortgaged property; within such
period, it was specifically restrained and immobilized from doing business which
includes foreclosure proceedings; the extra-judicial demand it made on March 24, 1995
wiped out the period that has already lapsed and started anew the prescriptive period;
respondent through its authorized deputy Francisco Go made the first extra-judicial
demand on the petitioners on August 23, 1985; while it is true that the first demand letter
of August 1985 pertained to the insurance premium advanced by it over the mortgaged
property of petitioners, the same however formed part of the latters total loan obligation
with respondent under the mortgage instrument and therefore constitutes a valid extrajudicial demand made within the prescriptive period.
[20]

In their Reply, petitioners reiterate their earlier arguments and add that it was
respondent that insured the mortgaged property thus it should not pass the obligation to
petitioners through the letter dated August 1985.
[21]

To resolve this petition, two questions need to be answered: (1) Whether or not the
period within which the respondent bank was placed under receivership and liquidation
proceedings may be considered a fortuitous event which interrupted the running of the
prescriptive period in bringing actions; and (2) Whether or not the demand letter sent by
respondent banks representative on August 23, 1985 is sufficient to interrupt the
running of the prescriptive period.
Anent the first issue, we answer in the negative.
One characteristic of a fortuitous event, in a legal sense and consequently in
relations to contract, is that its occurrence must be such as to render it impossible for a
party to fulfill his obligation in a normal manner.
[22]

Respondents claims that because of a fortuitous event, it was not able to exercise
its right to foreclose the mortgage on petitioners property; and that since it was banned
from pursuing its business and was placed under receivership from April 25, 1985 until
August 1992, it could not foreclose the mortgage on petitioners property within such
period since foreclosure is embraced in the phrase doing business, are without merit.
While it is true that foreclosure falls within the broad definition of doing business,
that is:
a continuity of commercial dealings and arrangements and contemplates to that extent,
the performance of acts or words or the exercise of some of the functions normally
incident to and in progressive prosecution of the purpose and object of its organization.
[23]

it should not be considered included, however, in the acts prohibited whenever banks
are prohibited from doing business during receivership and liquidation proceedings.
This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary
Board, Central Bank of the Philippines where we explained that:
[24]

Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act,
provides that when a bank is forbidden to do business in the Philippines and placed
under receivership, the person designated as receiver shall immediately take charge of
the banks assets and liabilities, as expeditiously as possible, collect and gather all the
assets and administer the same for the benefit of its creditors, and represent the bank
personally or through counsel as he may retain in all actions or proceedings for or
against the institution, exercising all the powers necessary for these purposes including,
but not limited to, bringing and foreclosing mortgages in the name of the bank.
[25]

This is consistent with the purpose of receivership proceedings, i.e., to receive

collectibles and preserve the assets of the bank in substitution of its former
management, and prevent the dissipation of its assets to the detriment of the creditors
of the bank.
[26]

When a bank is declared insolvent and placed under receivership, the Central Bank,
through the Monetary Board, determines whether to proceed with the liquidation or
reorganization of the financially distressed bank. A receiver, who concurrently
represents the bank, then takes control and possession of its assets for the benefit of
the banks creditors. A liquidator meanwhile assumes the role of the receiver upon the
determination by the Monetary Board that the bank can no longer resume business. His
task is to dispose of all the assets of the bank and effect partial payments of the banks
obligations in accordance with legal priority. In both receivership and liquidation
proceedings, the bank retains its juridical personality notwithstanding the closure of its
business and may even be sued as its corporate existence is assumed by the receiver
or liquidator. The receiver or liquidator meanwhile acts not only for the benefit of the
bank, but for its creditors as well.
[27]

In Provident Savings Bank vs. Court of Appeals, we further stated that:

[28]

When a bank is prohibited from continuing to do business by the Central Bank and a
receiver is appointed for such bank, that bank would not be able to do new
business, i.e., to grantnew loans or to accept new deposits. However, the receiver of
the bank is in fact obliged to collect debts owing to the bank, which debts form
part of the assets of the bank. The receiver must assemble the assets and pay the
obligation of the bank under receivership, and take steps to prevent dissipation
of such assets. Accordingly, the receiver of the bank is obliged to collect preexisting debts due to the bank, and in connection therewith, to foreclose
mortgages securing such debts. (Emphasis supplied.)
[29]

It is true that we also held in said case that the period during which the bank was
placed under receivership was deemed fuerza mayor which validly interrupted the
prescriptive period. This is being invoked by the respondent and was used as basis by
the trial court in its decision. Contrary to the position of the respondent and court a
quo however, such ruling does not find application in the case at bar.
[30]

A close scrutiny of the Provident case, shows that the Court arrived at said
conclusion, which is an exception to the general rule, due to the peculiar circumstances
of Provident Savings Bank at the time. In said case, we stated that:
Having arrived at the conclusion that a foreclosure is part of a banks business
activity which could not have been pursued by the receiver then because of the
circumstances discussed in the Central Bank case, we are thus convinced that the
prescriptive period was legally interrupted by fuerza mayor in 1972 on account of the
prohibition imposed by the Monetary Board against petitioner from transacting business,
until the directive of the Board was nullified in 1981. (Emphasis supplied.)
[31]

Further examination of the Central Bank case reveals that the circumstances of
Provident Savings Bank at the time were peculiar because after the Monetary Board
issued MB Resolution No. 1766 on September 15, 1972, prohibiting it from doing
business in the Philippines, the banks majority stockholders immediately went to the
Court of First Instance of Manila, which prompted the trial court to issue its judgment

dated February 20, 1974, declaring null and void the resolution and ordering the Central
Bank to desist from liquidating Provident. The decision was appealed to and affirmed by
this Court in 1981. Thus, the Superintendent of Banks, which was instructed to take
charge of the assets of the bank in the name of the Monetary Board, had no power to
act as a receiver of the bank and carry out the obligations specified in Sec. 29 of the
Central Bank Act.
[32]

In this case, it is not disputed that Philippine Veterans Bank was placed under
receivership by the Monetary Board of the Central Bank by virtue of Resolution No. 364
on April 25, 1985, pursuant to Section 29 of the Central Bank Act on insolvency of
banks.
[33]

Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein
respondent to deter its receiver and liquidator from performing their obligations under
the law. Thus, the ruling laid down in the Provident case cannot apply in the case at bar.
There is also no truth to respondents claim that it could not continue doing business
from the period of April 1985 to August 1992, the time it was under receivership. As
correctly pointed out by petitioner, respondent was even able to send petitioners a
demand letter, through Francisco Go, on August 23, 1985 for accounts receivable in the
total amount ofP6,345.00 as of August 15, 1984 for the insurance premiums advanced
by respondent bank over the mortgaged property of petitioners. How it could send a
demand letter on unpaid insurance premiums and not foreclose the mortgage during the
time it was prohibited from doing business was not adequately explained by respondent.
Settled is the principle that a bank is bound by the acts, or failure to act of its
receiver. As we held in Philippine Veterans Bank vs. NLRC, a labor case which also
involved respondent bank,
[34]

[35]

all the acts of the receiver and liquidator pertain to petitioner, both having assumed
petitioners corporate existence. Petitioner cannot disclaim liability by arguing that the
non-payment of MOLINAs just wages was committed by the liquidators during the
liquidation period.
[36]

However, the bank may go after the receiver who is liable to it for any culpable or
negligent failure to collect the assets of such bank and to safeguard its assets.
[37]

Having reached the conclusion that the period within which respondent bank was
placed under receivership and liquidation proceedings does not constitute a fortuitous
event which interrupted the prescriptive period in bringing actions, we now turn to the
second issue on whether or not the extra-judicial demand made by respondent bank,
through Francisco Go, on August 23, 1985 for the amount of P6,345.00, which
pertained to the insurance premiums advanced by the bank over the mortgaged
property, constitutes a valid extra-judicial demand which interrupted the running of the
prescriptive period. Again, we answer this question in the negative.
Prescription of actions is interrupted when they are filed before the court, when
there is a written extra-judicial demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor.
[38]

Respondents claim that while its first demand letter dated August 23, 1985
pertained to the insurance premium it advanced over the mortgaged property of
petitioners, the same formed part of the latters total loan obligation with respondent
under the mortgage instrument, and therefore, constitutes a valid extra-judicial demand
which interrupted the running of the prescriptive period, is not plausible.
The real estate mortgage signed by the petitioners expressly states that:
This mortgage is constituted by the Mortgagor to secure the payment of the loan and/or
credit accommodation granted to the spouses Cesar A. Larrobis, Jr. and Virginia S.
Larrobis in the amount of ONE HUNDRED THIRTY FIVE THOUSAND (P135,000.00)
PESOS ONLY Philippine Currency in favor of the herein Mortgagee.
[39]

The promissory note, executed by the petitioners, also states that:

FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO PAY THE
PHILIPPINE VETERANS BANK, OR ORDER, AT ITS OFFICE AT CEBU CITY THE
SUM OF ONE HUNDRED THIRTY FIVE THOUSAND PESOS (P135,000.00),
PHILIPPINE CURRENCY WITH INTEREST AT THE RATE OF FOURTEEN PER CENT
(14%) PER ANNUM FROM THIS DATE UNTIL FULLY PAID.
[40]

Considering that the mortgage contract and the promissory note refer only to the
loan of petitioners in the amount of P135,000.00, we have no reason to hold that the
insurance premiums, in the amount of P6,345.00, which was the subject of the August
1985 demand letter, should be considered as pertaining to the entire obligation of
petitioners.
In Quirino Gonzales Logging Concessionaire vs. Court of Appeals, we held that
the notices of foreclosure sent by the mortgagee to the mortgagor cannot be considered
tantamount to written extrajudicial demands, which may validly interrupt the running of
the prescriptive period, where it does not appear from the records that the notes are
covered by the mortgage contract.
[41]

[42]

In this case, it is clear that the advanced payment of the insurance premiums is not
part of the mortgage contract and the promissory note signed by petitioners. They
pertain only to the amount of P135,000.00 which is the principal loan of petitioners plus
interest. The arguments of respondent bank on this point must therefore fail.
As to petitioners claim for damages, however, we find no sufficient basis to award
the same. For moral damages to be awarded, the claimant must satisfactorily prove the
existence of the factual basis of the damage and its causal relation to defendants acts.
Exemplary damages meanwhile, which are imposed as a deterrent against or as a
negative incentive to curb socially deleterious actions, may be awarded only after the
claimant has proven that he is entitled to moral, temperate or compensatory damages.
Finally, as to attorneys fees, it is demanded that there be factual, legal and equitable
justification for its award. Since the bases for these claims were not adequately proven
by the petitioners, we find no reason to grant the same.
[43]

[44]

[45]

WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch 24,
dated April 17, 1998, and the order denying petitioners motion for reconsideration dated
August 25, 1998 are hereby REVERSED and SET ASIDE. The extra-judicial foreclosure
of the real estate mortgage on October 18, 1995, is hereby declared null and void and
respondent is ordered to return to petitioners their owners duplicate certificate of title.
Costs against respondent.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., and Tinga, JJ., concur.
Chico-Nazario, J., on leave.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 203585

July 29, 2013

MILA CABOVERDE TANTANO and ROSELLER CABOVERDE, Petitioners,

vs.
DOMINALDA ESPINA-CABOVERDE, EVE CABOVERDE-YU, FE CABOVERDE-LABRADOR,
and JOSEPHINE E. CABOVERDE, Respondents.
DECISION
VELASCO, JR., J.:
The Case
Assailed in this petition for review under Rule 45 are the Decision and Resolution of the Court of
Appeals (CA) rendered on June 25, 2012 and September 21, 2012, respectively, in CA-G.R. SP. No.
03834, which effectively affirmed the Resolutions dated February 8, 20 I 0 and July 19, 2010 of the
Regional Trial Court (RTC) of Sindangan, Zamboanga del Norte, Branch 11, in Civil Case No. S-760,
approving respondent Dominalda Espina-Caboverde's application for receivership and appointing
the receivers over the disputed properties.
The Facts
Petitioners Mila Caboverde Tantano (Mila) and Roseller Caboverde (Roseller) are children of
respondent Dominalda Espina-Caboverde (Dominalda) and siblings of other respondents in this
case, namely: Eve Caboverde-Yu (Eve), Fe Caboverde-Labrador (Fe), and Josephine E. Caboverde
(Josephine).

Petitioners and their siblings, Ferdinand, Jeanny and Laluna, are the registered owners and in
possession of certain parcels of land, identified as Lots 2, 3 and 4 located at Bantayan, Sindangan
and Poblacion, Sindangan in Zamboanga del Norte, having purchased them from their parents,
Maximo and Dominalda Caboverde. 1
The present controversy started when on March 7, 2005, respondents Eve and Fe filed a complaint
before the RTC of Sindangan, Zamboanga del Norte where they prayed for the annulment of the
Deed of Sale purportedly transferring Lots 2, 3 and 4 from their parents Maximo and Dominalda in
favor of petitioners Mila and Roseller and their other siblings, Jeanny, Laluna and Ferdinand.
Docketed as Civil Case No. S-760, the case was raffled to Branch 11 of the court.
In their verified Answer, the defendants therein, including Maximo and Dominalda, posited the
validity and due execution of the contested Deed of Sale.
During the pendency of Civil Case No. S-760, Maximo died. On May 30, 2007, Eve and Fe filed an
Amended Complaint with Maximo substituted by his eight (8) children and his wife Dominalda. The
Amended Complaint reproduced the allegations in the original complaint but added eight (8) more
real properties of the Caboverde estate in the original list.
As encouraged by the RTC, the parties executed a Partial Settlement Agreement (PSA) where they
fixed the sharing of the uncontroverted properties among themselves, in particular, the adverted
additional eight (8) parcels of land including their respective products and improvements. Under the
PSA, Dominaldas daughter, Josephine, shall be appointed as Administrator. The PSA provided that
Dominalda shall be entitled to receive a share of one-half (1/2) of the net income derived from the
uncontroverted properties. The PSA also provided that Josephine shall have special authority,
among others, to provide for the medicine of her mother.
The parties submitted the PSA to the court on or about March 10, 2008 for approval. 2
Before the RTC could act on the PSA, Dominalda, who, despite being impleaded in the case as
defendant, filed a Motion to Intervene separately in the case. Mainly, she claimed that the verified
Answer which she filed with her co-defendants contained several material averments which were not
representative of the true events and facts of the case. This document, she added, was never
explained to her or even read to her when it was presented to her for her signature.
On May 12, 2008, Dominalda filed a Motion for Leave to Admit Amended Answer, attaching her
Amended Answer where she contradicted the contents of the aforesaid verified Answer by declaring
that there never was a sale of the three (3) contested parcels of land in favor of Ferdinand, Mila,
Laluna, Jeanny and Roseller and that she and her husband never received any consideration from
them. She made it clear that they intended to divide all their properties equally among all their
children without favor. In sum, Dominalda prayed that the reliefs asked for in the Amended
Complaint be granted with the modification that her conjugal share and share as intestate heir of
Maximo over the contested properties be recognized. 3
The RTC would later issue a Resolution granting the Motion to Admit Amended Answer.4
On May 13, 2008, the court approved the PSA, leaving three (3) contested properties, Lots 2, 3, and
4, for further proceedings in the main case.
Fearing that the contested properties would be squandered, Dominalda filed with the RTC on July
15, 2008 a Verified Urgent Petition/Application to place the controverted Lots 2, 3 and 4 under

receivership. Mainly, she claimed that while she had a legal interest in the controverted properties
and their produce, she could not enjoy them, since the income derived was solely appropriated by
petitioner Mila in connivance with her selected kin. She alleged that she immediately needs her legal
share in the income of these properties for her daily sustenance and medical expenses. Also, she
insisted that unless a receiver is appointed by the court, the income or produce from these
properties is in grave danger of being totally dissipated, lost and entirely spent solely by Mila and
some of her selected kin. Paragraphs 5, 6, 7, and 8 of the Verified Urgent Petition/Application for
Receivership5(Application for Receivership) capture Dominaldas angst and apprehensions:
5. That all the income of Lot Nos. 2, 3 and 4 are collected by Mila Tantano, thru her collector
Melinda Bajalla, and solely appropriated by Mila Tantano and her selected kins, presumably
with Roseller E. Caboverde, Ferdinand E. Caboverde, Jeanny Caboverde and Laluna
Caboverde, for their personal use and benefit;
6. That defendant Dominalda Espina Caboverde, who is now sickly, in dire need of constant
medication or medical attention, not to mention the check-ups, vitamins and other basic
needs for daily sustenance, yet despite the fact that she is the conjugal owner of the said
land, could not even enjoy the proceeds or income as these are all appropriated solely by
Mila Tantano in connivance with some of her selected kins;
7. That unless a receiver is appointed by the court, the income or produce from these lands,
are in grave danger of being totally dissipated, lost and entirely spent solely by Mila Tantano
in connivance with some of her selected kins, to the great damage and prejudice of
defendant Dominalda Espina Caboverde, hence, there is no other most feasible, convenient,
practicable and easy way to get, collect, preserve, administer and dispose of the legal share
or interest of defendant Dominalda Espina Caboverde except the appointment of a receiver x
x x;
xxxx
9. That insofar as the defendant Dominalda Espina Caboverde is concerned, time is of the
utmost essence. She immediately needs her legal share and legal interest over the income
and produce of these lands so that she can provide and pay for her vitamins, medicines,
constant regular medical check-up and daily sustenance in life. To grant her share and
interest after she may have passed away would render everything that she had worked for to
naught and waste, akin to the saying "aanhin pa ang damo kung patay na ang kabayo."
On August 27, 2009, the court heard the Application for Receivership and persuaded the parties to
discuss among themselves and agree on how to address the immediate needs of their mother.6
On October 9, 2009, petitioners and their siblings filed a Manifestation formally expressing their
concurrence to the proposal for receivership on the condition, inter alia, that Mila be appointed the
receiver, and that, after getting the 2/10 share of Dominalda from the income of the three (3) parcels
of land, the remainder shall be divided only by and among Mila, Roseller, Ferdinand, Laluna and
Jeanny. The court, however, expressed its aversion to a party to the action acting as receiver and
accordingly asked the parties to nominate neutral persons. 7
On February 8, 2010, the trial court issued a Resolution granting Dominaldas application for
receivership over Lot Nos. 2, 3 and 4. The Resolution reads:
As regards the second motion, the Court notes the urgency of placing Lot 2 situated at Bantayan,
covered by TCT No. 46307; Lot 3 situated at Poblacion, covered by TCT No. T-8140 and Lot 4 also

situated at Poblacion covered by TCT No. T-8140, all of Sindangan, Zamboanga del Norte under
receivership as defendant Dominalda Espina Caboverde (the old and sickly mother of the rest of the
parties) who claims to be the owner of the one-half portion of the properties under litigation as her
conjugal share and a portion of the estate of her deceased husband Maximo, is in dire need for her
medication and daily sustenance. As agreed by the parties, Dominalda Espina Caboverde shall be
given 2/10 shares of the net monthly income and products of the said properties. 8
In the same Resolution, the trial court again noted that Mila, the nominee of petitioners, could not
discharge the duties of a receiver, she being a party in the case. 9 Thus, Dominalda nominated her
husbands relative, Annabelle Saldia, while Eve nominated a former barangay kagawad, Jesus Tan. 10
Petitioners thereafter moved for reconsideration raising the arguments that the concerns raised by
Dominalda in her Application for Receivership are not grounds for placing the properties in the hands
of a receiver and that she failed to prove her claim that the income she has been receiving is
insufficient to support her medication and medical needs. By Resolution 11 of July 19, 2010, the trial
court denied the motion for reconsideration and at the same time appointed Annabelle Saldia as the
receiver for Dominalda and Jesus Tan as the receiver for Eve. The trial court stated:
As to the issue of receivership, the Court stands by its ruling in granting the same, there being no
cogent reason to overturn it. As intimated by the movant-defendant Dominalda Caboverde, Lots 2, 3
and 4 sought to be under receivership are not among those lots covered by the adverted Partial
Amicable Settlement. To the mind of the Court, the fulfilment or non-fulfilment of the terms and
conditions laid therein nonetheless have no bearing on these three lots. Further, as correctly pointed
out by her, there is possibility that these Lots 2, 3, and 4, of which the applicant has interest, but are
in possession of other defendants who are the ones enjoying the natural and civil fruits thereof which
might be in the danger of being lost, removed or materially injured. Under this precarious condition,
they must be under receivership, pursuant to Sec. 1 (a) of Rule 59. Also, the purpose of the
receivership is to procure money from the proceeds of these properties to spend for medicines and
other needs of the movant defendant Dominalda Caboverde who is old and sickly. This circumstance
falls within the purview of Sec. 1(d), that is, "Whenever in other cases it appears that the
appointment of a receiver is the most convenient and feasible means of preserving, administering, or
disposing of the property in litigation."
Both Annabelle Saldia and Jesus Tan then took their respective oaths of office and filed a motion to
fix and approve bond which was approved by the trial court over petitioners opposition.
Undaunted, petitioners filed an Urgent Precautionary Motion to Stay Assumption of Receivers dated
August 9, 2010 reiterating what they stated in their motion for reconsideration and expressing the
view that the grant of receivership is not warranted under the circumstances and is not consistent
with applicable rules and jurisprudence. The RTC, on the postulate that the motion partakes of the
nature of a second motion for reconsideration, thus, a prohibited pleading, denied it via a Resolution
dated October 7, 2011 where it likewise fixed the receivers bond at PhP 100,000 each. The RTC
stated:
[1] The appointed receivers, JESUS A. TAN and ANNABELLE DIAMANTE-SALDIA, are considered
duly appointed by this Court, not only because their appointments were made upon their proper
nomination from the parties in this case, but because their appointments have been duly upheld by
the Court of Appeals in its Resolution dated 24 May 2011 denying the herein defendants (petitioners
therein) application for a writ of preliminary injunction against the 8 February 2010 Resolution of this
Court placing the properties (Lots 2, 3 and 4) under receivership by the said JESUS A. TAN and
ANNABELLE DIAMANTE-SALDIA, and Resolution dated 29 July 2011 denying the herein

defendants (petitioners therein) motion for reconsideration of the 24 May 2011 Resolution, both, for
lack of merit. In its latter Resolution, the Court of Appeals states:
A writ of preliminary injunction, as an ancillary or preventive remedy, may only be resorted to by a
litigant to protect or preserve his rights or interests and for no other purpose during the pendency of
the principal action. But before a writ of preliminary injunction may be issued, there must be a clear
showing that there exists a right to be protected and that the acts against which the writ is to be
directed are violative of the said right and will cause irreparable injury.
Unfortunately, petitioners failed to show that the acts of the receivers in this case are inimical to their
rights as owners of the property. They also failed to show that the non-issuance of the writ of
injunction will cause them irreparable injury. The court-appointed receivers merely performed their
duties as administrators of the disputed lots. It must be stressed that the trial court specifically
appointed these receivers to preserve the properties and its proceeds to avoid any prejudice to the
parties until the main case is resolved, Hence, there is no urgent need to issue the injunction.
ACCORDINGLY, the motion for reconsideration is DENIED for lack of merit.
SO ORDERED.
xxxx
WHEREFORE, premises considered, this Court RESOLVES, as it is hereby RESOLVED, that:
1. The defendants "Urgent Precautionary Motion to Stay Assumption of Receivers" be
DENIED for lack of merit. Accordingly, it being patently a second motion for reconsideration,
a prohibited pleading, the same is hereby ordered EXPUNGED from the records;
2. The "Motion to Fix the Bond, Acceptance and Approval of the Oath of Office, and Bond of
the Receiver" of defendant Dominalda Espina Caboverde, be GRANTED with the receivers
bond set and fixed at ONE HUNDRED THOUSAND PESOS (PhP100,000.00) each.12
It should be stated at this juncture that after filing their Urgent Precautionary Motion to Stay
Assumption of Receivers but before the RTC could rule on it, petitioners filed a petition for certiorari
with the CA dated September 29, 2010 seeking to declare null and void the February 8, 2010
Resolution of the RTC granting the Application for Receivership and its July 19, 2010 Resolution
denying the motion for reconsideration filed by petitioners and appointing the receivers nominated by
respondents. The petition was anchored on two grounds, namely: (1) non-compliance with the
substantial requirements under Section 2, Rule 59 of the 1997 Rules of Civil
Procedure because the trial court appointed a receiver without requiring the applicant to file a bond;
and (2) lack of factual or legal basis to place the properties under receivership because the applicant
presented support and medication as grounds in her application which are not valid grounds for
receivership under the rules.
On June 25, 2012, the CA rendered the assailed Decision denying the petition on the strength of the
following premises and ratiocination:
Petitioners harp on the fact that the court a quo failed to require Dominalda to post a bond prior to
the issuance of the order appointing a receiver, in violation of Section 2, Rule 59 of the Rules of
court which provides that:

SEC. 2. Bond on appointment of receiver.-- Before issuing the order appointing a receiver the court
shall require the applicant to file a bond executed to the party against whom the application is
presented, in an amount to be fixed by the court, to the effect that the applicant will pay such party
all damages he may sustain by reason of the appointment of such receiver in case the applicant
shall have procured such appointment without sufficient cause; and the court may, in its discretion, at
any time after the appointment, require an additional bond as further security for such damages.
The Manifestation dated September 30, 2009 filed by petitioners wherein "they formally manifested
their concurrence" to the settlement on the application for receivership estops them from questioning
the sufficiency of the cause for the appointment of the receiver since they themselves agreed to
have the properties placed under receivership albeit on the condition that the same be placed under
the administration of Mila. Thus, the filing of the bond by Dominalda for this purpose becomes
unnecessary.
It must be emphasized that the bond filed by the applicant for receivership answers only for all
damages that the adverse party may sustain by reason of the appointment of such receiver in case
the applicant shall have procured such appointment without sufficient cause; it does not answer for
damages suffered by reason of the failure of the receiver to discharge his duties faithfully or to obey
the orders of the court, inasmuch as such damages are covered by the bond of the receiver.
As to the second ground, petitioners insist that there is no justification for placing the properties
under receivership since there was neither allegation nor proof that the said properties, not the fruits
thereof, were in danger of being lost or materially injured. They believe that the public respondent
went out of line when he granted the application for receivership for the purpose of procuring money
for the medications and basic needs of Dominalda despite the income shes supposed to receive
under the Partial Settlement Agreement.
The court a quo has the discretion to decide whether or not the appointment of a receiver is
necessary. In this case, the public respondent took into consideration that the applicant is already an
octogenarian who may not live up to the day when this conflict will be finally settled. Thus, We find
that he did not act with grave abuse of discretion amounting to lack or excess of jurisdiction when he
granted the application for receivership based on Section 1(d) of Rule 59 of the Rules of Court.
A final note, a petition for certiorari may be availed of only when there is no appeal, nor any plain,
speedy and adequate remedy in the ordinary course of law. In this case, petitioners may still avail of
the remedy provided in Section 3, Rule 59 of the said Rule where they can seek for the discharge of
the receiver.
FOR REASONS STATED, the petition for certiorari is DENIED.
SO ORDERED.13
Petitioners Motion for Reconsideration was also denied by the CA on September 21, 2012. 14
Hence, the instant petition, petitioners effectively praying that the approval of respondent
Dominaldas application for receivership and necessarily the concomitant appointment of receivers
be revoked.
The Issues
Petitioners raise the following issues in their petition:

(1) Whether or not the CA committed grave abuse of discretion in sustaining the appointment
of a receiver despite clear showing that the reasons advanced by the applicant are not any
of those enumerated by the rules; and
(2) Whether or not the CA committed grave abuse of discretion in upholding the Resolution
of the RTC and ruling that the receivership bond is not required prior to appointment despite
clear dictates of the rules.
The Courts Ruling
The petition is impressed with merit.
We have repeatedly held that receivership is a harsh remedy to be granted with utmost
circumspection and only in extreme situations. The doctrinal pronouncement in Velasco & Co. v.
Gochico & Co is instructive:
The power to appoint a receiver is a delicate one and should be exercised with extreme caution and
only under circumstances requiring summary relief or where the court is satisfied that there is
imminent danger of loss, lest the injury thereby caused be far greater than the injury sought to be
averted. The court should consider the consequences to all of the parties and the power should not
be exercised when it is likely to produce irreparable injustice or injury to private rights or the facts
demonstrate that the appointment will injure the interests of others whose rights are entitled to as
much consideration from the court as those of the complainant. 15
To recall, the RTC approved the application for receivership on the stated rationale that receivership
was the most convenient and feasible means to preserve and administer the disputed properties. As
a corollary, the RTC, agreeing with the applicant Dominalda, held that placing the disputed
properties under receivership would ensure that she would receive her share in the income which
she supposedly needed in order to pay for her vitamins, medicines, her regular check-ups and daily
sustenance. Considering that, as the CA put it, the applicant was already an octogenarian who may
not live up to the day when the conflict will be finally settled, the RTC did not act with grave abuse of
discretion amounting to lack or excess of jurisdiction when it granted the application for receivership
since it was justified under Sec. 1(d), Rule 59 of the Rules of Court, which states:
Section 1. Appointment of a receiver. Upon a verified application, one or more receivers of the
property subject of the action or proceeding may be appointed by the court where the action is
pending, or by the Court of Appeals or by the Supreme Court, or a member thereof, in the following
cases:
xxxx
(d) Whenever in other cases it appears that the appointment of a receiver is the most convenient
and feasible means of preserving, administering, or disposing of the property in litigation. (Emphasis
supplied.)
Indeed, Sec. 1(d) above is couched in general terms and broad in scope, encompassing instances
not covered by the other grounds enumerated under the said section. 16 However, in granting
applications for receivership on the basis of this section, courts must remain mindful of the basic
principle that receivership may be granted only when the circumstances so demand, either because
the property sought to be placed in the hands of a receiver is in danger of being lost or because they
run the risk of being impaired,17 and that being a drastic and harsh remedy, receivership must be

granted only when there is a clear showing of necessity for it in order to save the plaintiff from grave
and immediate loss or damage.18
Before appointing a receiver, courts should consider: (1) whether or not the injury resulting from such
appointment would probably be greater than the injury ensuing if the status quo is left undisturbed;
and (2) whether or not the appointment will imperil the interest of others whose rights deserve as
much a consideration from the court as those of the person requesting for receivership. 19
Moreover, this Court has consistently ruled that where the effect of the appointment of a receiver is
to take real estate out of the possession of the defendant before the final adjudication of the rights of
the parties, the appointment should be made only in extreme cases.20
After carefully considering the foregoing principles and the facts and circumstances of this case, We
find that the grant of Dominaldas Application for Receivership has no leg to stand on for reasons
discussed below.
First, Dominaldas alleged need for income to defray her medical expenses and support is not a valid
justification for the appointment of a receiver. The approval of an application for receivership merely
on this ground is not only unwarranted but also an arbitrary exercise of discretion because financial
need and like reasons are not found in Sec. 1 of Rule 59 which prescribes specific grounds or
reasons for granting receivership. The RTCs insistence that the approval of the receivership is
justified under Sec. 1(d) of Rule 59, which seems to be a catch-all provision, is far from convincing.
To be clear, even in cases falling under such provision, it is essential that there is a clear showing
that there is imminent danger that the properties sought to be placed under receivership will be lost,
wasted or injured.
Second, there is no clear showing that the disputed properties are in danger of being lost or
materially impaired and that placing them under receivership is most convenient and feasible means
to preserve, administer or dispose of them.
Based on the allegations in her application, it appears that Dominalda sought receivership mainly
because she considers this the best remedy to ensure that she would receive her share in the
income of the disputed properties. Much emphasis has been placed on the fact that she needed this
income for her medical expenses and daily sustenance. But it can be gleaned from her application
that, aside from her bare assertion that petitioner Mila solely appropriated the fruits and rentals
earned from the disputed properties in connivance with some of her siblings, Dominalda has not
presented or alleged anything else to prove that the disputed properties were in danger of being
wasted or materially injured and that the appointment of a receiver was the most convenient and
feasible means to preserve their integrity.
Further, there is nothing in the RTCs February 8 and July 19, 2010 Resolutions that says why the
disputed properties might be in danger of being lost, removed or materially injured while in the hands
of the defendants a quo. Neither did the RTC explain the reasons which compelled it to have them
placed under receivership. The RTC simply declared that placing the disputed properties under
receivership was urgent and merely anchored its approval on the fact that Dominalda was an elderly
in need of funds for her medication and sustenance. The RTC plainly concluded that since the
purpose of the receivership is to procure money from the proceeds of these properties to spend for
medicines and other needs of the Dominalda, who is old and sickly, this circumstance falls within the
purview of Sec. 1(d), that is, "Whenever in other cases it appears that the appointment of a receiver
is the most convenient and feasible means of preserving, administering, or disposing of the property
in litigation."

Verily, the RTCs purported determination that the appointment of a receiver is the most convenient
and feasible means of preserving, administering or disposing of the properties is nothing but a
hollow conclusion drawn from inexistent factual considerations.
Third, placing the disputed properties under receivership is not necessary to save Dominalda from
grave and immediate loss or irremediable damage. Contrary to her assertions, Dominalda is assured
of receiving income under the PSA approved by the RTC providing that she was entitled to receive a
share of one-half (1/2) of the net income derived from the uncontroverted properties. Pursuant to the
PSA, Josephine, the daughter of Dominalda, was appointed by the court as administrator of the
eight (8) uncontested lots with special authority to provide for the medicine of her mother. Thus, it
was patently erroneous for the RTC to grant the Application for Receivership in order to ensure
Dominalda of income to support herself because precisely, the PSA already provided for that. It
cannot be over-emphasized that the parties in Civil Case No. S-760 were willing to make
arrangements to ensure that Dominalda was provided with sufficient income. In fact, the RTC, in its
February 8, 2010 Resolution granting the Application for Receivership, noted the agreement of the
parties that "Dominalda Espina Caboverde shall be given 2/10 shares of the net monthly income and
products of said properties."21
Finally, it must be noted that the defendants in Civil Case No. S-760 are the registered owners of the
disputed properties that were in their possession. In cases such as this, it is settled jurisprudence
that the appointment should be made only in extreme cases and on a clear showing of necessity in
order to save the plaintiff from grave and irremediable loss or damage. 22
This Court has held that a receiver should not be appointed to deprive a party who is in possession
of the property in litigation, just as a writ of preliminary injunction should not be issued to transfer
property in litigation from the possession of one party to another where the legal title is in dispute
and the party having possession asserts ownership in himself, except in a very clear case of evident
usurpation.23
Furthermore, this Court has declared that the appointment of a receiver is not proper when the rights
of the parties, one of whom is in possession of the property, depend on the determination of their
respective claims to the title of such property 24 unless such property is in danger of being materially
injured or lost, as by the prospective foreclosure of a mortgage on it or its portions are being
occupied by third persons claiming adverse title.25
It must be underscored that in this case, Dominaldas claim to the disputed properties and her share
in the properties income and produce is at best speculative precisely because the ownership of the
disputed properties is yet to be determined in Civil Case No. S-760. Also, except for Dominaldas
claim that she has an interest in the disputed properties, Dominalda has no relation to their produce
or income.
1wphi1

By placing the disputed properties and their income under receivership, it is as if the applicant has
obtained indirectly what she could not obtain directly, which is to deprive the other parties of the
possession of the property until the controversy between them in the main case is finally
settled.26 This Court cannot countenance this arrangement.
To reiterate, the RTCs approval of the application for receivership and the deprivation of petitioners
of possession over the disputed properties would be justified only if compelling reasons exist.
Unfortunately, no such reasons were alleged, much less proved in this case.

In any event, Dominaldas rights may be amply protected during the pendency of Civil Case No. S760 by causing her adverse claim to be annotated on the certificates of title covering the disputed
properties.27
As regards the issue of whether or not the CA was correct in ruling that a bond was not required
prior to the appointment of the receivers in this case, We rule in the negative.
Respondents Eve and Fe claim that there are sufficient grounds for the appointment of receivers in
this case and that in fact, petitioners agreed with them on the existence of these grounds when they
acquiesced to Dominaldas Application for Receivership. Thus, respondents insist that where there is
sufficient cause to appoint a receiver, there is no need for an applicants bond because under Sec. 2
of Rule 59, the very purpose of the bond is to answer for all damages that may be sustained by a
party by reason of the appointment of a receiver in case the applicant shall have procured such
appointment without sufficient cause. Thus, they further argue that what is needed is the receivers
bond which was already fixed and approved by the RTC.28 Also, the CA found that there was no
need for Dominalda to file a bond considering that petitioners filed a Manifestation where they
formally consented to the receivership. Hence, it was as if petitioners agreed that there was sufficient
cause to place the disputed properties under receivership; thus, the CA declared that petitioners
were estopped from challenging the sufficiency of such cause.
The foregoing arguments are misplaced. Sec. 2 of Rule 59 is very clear in that before issuing the
order appointing a receiver the court shall require the applicant to file a bond executed to the party
against whom the application is presented. The use of the word "shall" denotes its mandatory nature;
thus, the consent of the other party, or as in this case, the consent of petitioners, is of no moment.
Hence, the filing of an applicants bond is required at all times. On the other hand, the requirement of
a receivers bond rests upon the discretion of the court. Sec. 2 of Rule 59 clearly states that the court
may, in its discretion, at any time after the appointment, require an additional bond as further security
for such damages.
WHEREFORE, upon the foregoing considerations, this petition is GRANTED. The assailed CA June
25, 2012 Decision and September 21, 2012 Resolution in CA-G.R. SP No. 03834 are hereby
REVERSED and SET ASIDE. The Resolutions dated February 8, 2010 and July 19, 2010 of the
RTC, Branch 11 in Sindangan, Zamboanga del Norte, in Civil Case No. S-760, approving respondent
Dominalda Espina-Caboverdes application for receivership and appointing the receivers over the
disputed properties are likewise SET ASIDE.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
WE CONCUR:
DIOSDADO M. PERALTA
Associate Justice
ROBERTO A. ABAD
Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

ATT E S TATI O N
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice

THIRD DIVISION

ANA MARIA A. KORUGA,

Petitioner,

G.R. No. 168332

- versus TEODORO O. ARCENAS, JR., ALBERT

C. AGUIRRE, CESAR S. PAGUIO,
FRANCISCO A. RIVERA, and THE
HONORABLE COURT OF APPEALS,
THIRD DIVISION,
Respondents.
x-----------------------------x
TEODORO O. ARCENAS, JR., ALBERT G.R. No. 169053
C. AGUIRRE, CESAR S. PAGUIO, and
FRANCISCO A. RIVERA,
Present:
Petitioners,
YNARES-SANTIAGO, J.,
Chairperson,
CARPIO,*
- versus CORONA,**
NACHURA, and

HON. SIXTO MARELLA, JR., Presiding PERALTA, JJ.

Judge, Branch
138, Regional Trial Courtof Makati City, Promulgated:
and ANA MARIA A. KORUGA,
Respondents.
June 19, 2009
x------------------------------------------------------------------------------------x

DECISION
NACHURA, J.:

Before this Court are two petitions that originated from a Complaint filed by
Ana Maria A. Koruga (Koruga) before the Regional Trial Court (RTC) of Makati
City against the Board of Directors of Banco Filipino and the Members of the
Monetary Board of the Bangko Sentral ng Pilipinas (BSP) for violation of the
Corporation Code, for inspection of records of a corporation by a stockholder, for
receivership, and for the creation of a management committee.
G.R. No. 168332
The first is a Petition for Certiorari under Rule 65 of the Rules of Court,
docketed as G.R. No. 168332, praying for the annulment of the Court of Appeals
(CA) Resolution[1] in CA-G.R. SP No. 88422 dated April 18, 2005 granting the
prayer for a Writ of Preliminary Injunction of therein petitioners Teodoro O.
Arcenas, Jr., Albert C. Aguirre, Cesar S. Paguio, and Francisco A. Rivera (Arcenas,
et al.).
Koruga is a minority stockholder of Banco Filipino Savings and Mortgage
Bank. On August 20, 2003, she filed a complaint before the Makati RTC which
was raffled to Branch 138, presided over by Judge Sixto Marella, Jr.[2] Korugas
complaint alleged:
10. 1 Violation of Sections 31 to 34 of the Corporation
Code (Code) which prohibit self-dealing and conflicts of interest of
directors and officers, thus:
(a)
For engaging in unsafe, unsound, and fraudulent
banking practices that have jeopardized the welfare of the Bank,
its shareholders, who includes among others, the Petitioner, and
depositors. (sic)

(b)
For granting and approving loans and/or loaned
sums
of
money
to
six
(6)
dummy
borrower
corporations (Borrower Corporations) which, at the time of loan
approval, had no financial capacity to justify the loans. (sic)
(c)
For approving and accepting a dacion en pago, or
payment of loans with property instead of cash, resulting to a
diminished future cumulative interest income by the Bank and a
decline in its liquidity position. (sic)
(d)
For knowingly giving favorable treatment to the
Borrower Corporations in which some or most of them have
interests, i.e. interlocking directors/officers thereof, interlocking
ownerships. (sic)
(e)
For employing their respective offices and
functions as the Banks officers and directors, or omitting to
perform their functions and duties, with negligence, unfaithfulness
or abuse of confidence of fiduciary duty, misappropriated or
misapplied or ratified by inaction the misappropriation or
misappropriations, of (sic) almost P1.6 Billion Pesos (sic)
constituting the Banks funds placed under their trust and
administration, by unlawfully releasing loans to the Borrower
Corporations or refusing or failing to impugn these, knowing
before the loans were released or thereafter that the Banks cash
resources would be dissipated thereby, to the prejudice of the
Petitioner, other Banco Filipino depositors, and the public.
10.2 Right of a stockholder to inspect the records of a corporation
(including financial statements) under Sections 74 and 75 of the Code, as
implemented by the Interim Rules;
(a)
Unlawful refusal to allow the Petitioner from
inspecting or otherwise accessing the corporate records of the
bank despite repeated demand in writing, where she is a
stockholder. (sic)
10.3 Receivership and Creation of a Management Committee
pursuant to:
(a)
Rule
Procedure (Rules);

59

of

the

1997

Rules

of

Civil

(b)

Section 5.2 of R.A. No. 8799;

(c)

Rule 1, Section 1(a)(1) of the Interim Rules;

(d)

Rule 1, Section 1(a)(2) of the Interim Rules;

(e)

Rule 7 of the Interim Rules;

(f)

Rule 9 of the Interim Rules; and

(g)
The General Banking Law of 2000 and the New
Central Bank Act.[3]

On September 12, 2003, Arcenas, et al. filed their Answer raising, among
others, the trial courts lack of jurisdiction to take cognizance of the case. They also
filed a Manifestation and Motion seeking the dismissal of the case on the following
grounds: (a) lack of jurisdiction over the subject matter; (b) lack of jurisdiction
over the persons of the defendants; (c) forum-shopping; and (d) for being a
nuisance/harassment suit. They then moved that the trial court rule on their
affirmative defenses, dismiss the intra-corporate case, and set the case for
preliminary hearing.
In an Order dated October 18, 2004, the trial court denied the Manifestation
and Motion, ruling thus:
The result of the procedure sought by defendants Arcenas, et al. (sic) is
for the Court to conduct a preliminary hearing on the affirmative
defenses raised by them in their Answer. This [is] proscribed by the
Interim Rules of Procedure on Intracorporate (sic) Controversies because
when a preliminary hearing is conducted it is as if a Motion to Dismiss
was filed (Rule 16, Section 6, 1997 Rules of Civil Procedure). A Motion
to Dismiss is a prohibited pleading under the Interim Rules, for which
reason, no favorable consideration can be given to the Manifestation and
Motion of defendants, Arcenas, et al.
The Court finds no merit to (sic) the claim that the instant case is a
nuisance or harassment suit.

WHEREFORE, the Court defers resolution of the affirmative defenses

raised by the defendants Arcenas, et al.[4]

Arcenas, et al. moved for reconsideration[5] but, on January 18, 2005, the
RTC denied the motion.[6] This prompted Arcenas, et al. to file before the CA a
Petition for Certiorari and Prohibition under Rule 65 of the Rules of Court with a
prayer for the issuance of a writ of preliminary injunction and a temporary
retraining order (TRO).[7]
On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella
from conducting further proceedings in the case.[8]
On February 22, 2005, the RTC issued a Notice of Pre-trial [9] setting the case
for pre-trial on June 2 and 9, 2005. Arcenas, et al. filed a Manifestation and
Motion[10] before the CA, reiterating their application for a writ of preliminary
injunction. Thus, on April 18, 2005, the CA issued the assailed Resolution, which
reads in part:
(C)onsidering that the Temporary Restraining Order issued by this Court
on February 9, 2005 expired on April 10, 2005, it is necessary that a writ
of preliminary injunction be issued in order not to render ineffectual
whatever final resolution this Court may render in this case, after the
petitioners shall have posted a bond in the amount of FIVE HUNDRED
THOUSAND (P500,000.00) PESOS.
SO ORDERED.[11]

Dissatisfied, Koruga filed this Petition for Certiorari under Rule 65 of the
Rules of Court. Koruga alleged that the CA effectively gave due course to Arcenas,
et al.s petition when it issued a writ of preliminary injunction without factual or
legal basis, either in the April 18, 2005 Resolution itself or in the records of the
case. She prayed that this Court restrain the CA from implementing the writ of
preliminary injunction and, after due proceedings, make the injunction against the
assailed CA Resolution permanent.[12]

In their Comment, Arcenas, et al. raised several procedural and substantive

issues. They alleged that the Verification and Certification against Forum-Shopping
attached to the Petition was not executed in the manner prescribed by Philippine
law since, as admitted by Korugas counsel himself, the same was only a facsimile.
They also averred that Koruga had admitted in the Petition that she never
asked for reconsideration of the CAs April 18, 2005 Resolution, contending that
the Petition did not raise pure questions of law as to constitute an exception to the
requirement of filing a Motion for Reconsideration before a Petition
for Certiorari is filed.
They, likewise, alleged that the Petition may have already been rendered
moot and academic by the July 20, 2005 CA Decision, [13] which denied their
Petition, and held that the RTC did not commit grave abuse of discretion in issuing
the assailed orders, and thus ordered the RTC to proceed with the trial of the case.
Meanwhile, on March 13, 2006, this Court issued a Resolution granting the
prayer for a TRO and enjoining the Presiding Judge of Makati RTC, Branch 138,
from proceeding with the hearing of the case upon the filing by Arcenas, et al. of
a P50,000.00 bond. Koruga filed a motion to lift the TRO, which this Court denied
on July 5, 2006.
On the other hand, respondents Dr. Conrado P. Banzon and Gen. Ramon
Montao also filed their Comment on Korugas Petition, raising substantially the
same arguments as Arcenas, et al.
G.R. No. 169053
G.R. No. 169053 is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, with prayer for the issuance of a TRO and a writ of preliminary
injunction filed by Arcenas, et al.
In their Petition, Arcenas, et al. asked the Court to set aside the
Decision[14] dated July 20, 2005 of the CA in CA-G.R. SP No. 88422, which denied
their petition, having found no grave abuse of discretion on the part of the Makati
RTC. The CA said that the RTC Orders were interlocutory in nature and, thus, may

be assailed by certiorari or prohibition only when it is shown that the court acted
without or in excess of jurisdiction or with grave abuse of discretion. It added that
the Supreme Court frowns upon resort to remedial measures against interlocutory
orders.
Arcenas, et al. anchored their prayer on the following grounds: that, in their
Answer before the RTC, they had raised the issue of failure of the court to acquire
jurisdiction over them due to improper service of summons; that the Koruga action
is a nuisance or harassment suit; that there is another case involving the same
parties for the same cause pending before the Monetary Board of the BSP, and this
constituted forum-shopping; and that jurisdiction over the subject matter of the
case is vested by law in the BSP.[15]
Arcenas, et al. assign the following errors:
I.

THE COURT OF APPEALS, IN FINDING NO GRAVE ABUSE

OF DISCRETION COMMITTED BY PUBLIC RESPONDENT
REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN
ISSUING THE ASSAILED ORDERS, FAILED TO CONSIDER
AND
MERELY
GLOSSED
OVER
THE
MORE
TRANSCENDENT
ISSUES
OF
THE
LACK
OF
JURISDICTION ON THE PART OF SAID PUBLIC
RESPONDENT OVER THE SUBJECT MATTER OF THE
CASE BEFORE IT, LITIS PENDENTIA AND FORUM
SHOPPING, AND THE CASE BELOW BEING A NUISANCE
OR HARASSMENT SUIT, EITHER ONE AND ALL OF
WHICH GOES/GO TO RENDER THE ISSUANCE BY PUBLIC
RESPONDENT OF THE ASSAILED ORDERS A GRAVE
ABUSE OF DISCRETION.

II.

THE FINDING OF THE COURT OF APPEALS OF NO

GRAVE ABUSE OF DISCRETION COMMITTED BY PUBLIC
RESPONDENT REGIONAL TRIAL COURT OF MAKATI,
BRANCH 138, IN ISSUING THE ASSAILED ORDERS, IS
NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THIS HONORABLE COURT.[16]

Meanwhile, in a Manifestation and Motion filed on August 31, 2005, Koruga

prayed for, among others, the consolidation of her Petition with the Petition for
Review on Certiorari under Rule 45 filed by Arcenas, et al., docketed as G.R. No.
169053. The motion was granted by this Court in a Resolution dated September 26,
2005.
Our Ruling
Initially, we will discuss the procedural issue.
Arcenas, et al. argue that Korugas petition should be dismissed for its
defective Verification and Certification Against Forum-Shopping, since only a
facsimile of the same was attached to the Petition. They also claim that the
Verification and Certification Against Forum-Shopping, allegedly executed
in Seattle, Washington, was not authenticated in the manner prescribed by
Philippine law and not certified by the Philippine Consulate in the United States.
This contention deserves scant consideration.
On the last page of the Petition in G.R. No. 168332, Korugas counsel
executed an Undertaking, which reads as follows:
In view of that fact that the Petitioner is currently in the United
States, undersigned counsel is attaching a facsimile copy of the
Verification and Certification Against Forum-Shopping duly signed by
the Petitioner and notarized by Stephanie N. Goggin, a Notary Public for
the Sate (sic) of Washington. Upon arrival of the original copy of the
Verification and Certification as certified by the Office of the Philippine
Consul, the undersigned counsel shall immediately provide duplicate
copies thereof to the Honorable Court.[17]

Thus, in a Compliance[18] filed with the Court on September 5, 2005,

petitioner submitted the original copy of the duly notarized and authenticated
Verification and Certification Against Forum-Shopping she had executed. [19] This
Court noted and considered the Compliance satisfactory in its Resolution dated
November 16, 2005. There is, therefore, no need to further belabor this issue.

We now discuss the substantive issues in this case.

First, we resolve the prayer to nullify the CAs April 18, 2005 Resolution.
We hold that the Petition in G.R. No. 168332 has become moot and
academic. The writ of preliminary injunction being questioned had effectively been
dissolved by the CAs July 20, 2005 Decision. The dispositive portion of the
Decision reads in part:
The case is REMANDED to the court a quo for further
proceedings and to resolve with deliberate dispatch the intra-corporate
controversies and determine whether there was actually a valid service of
summons. If, after hearing, such service is found to have been improper,
then new summons should be served forthwith.[20]

Accordingly, there is no necessity to restrain the implementation of the writ of

preliminary injunction issued by the CA on April 18, 2005, since it no longer
exists.
However, this Court finds that the CA erred in upholding the jurisdiction of,
and remanding the case to, the RTC.
The resolution of these petitions rests mainly on the determination of one
fundamental issue: Which body has jurisdiction over the Koruga Complaint, the
RTC or the BSP?
We hold that it is the BSP that has jurisdiction over the case.
A reexamination of the Complaint is in order.
Korugas Complaint charged defendants with violation of Sections 31 to 34
of the Corporation Code, prohibiting self-dealing and conflict of interest of
directors and officers; invoked her right to inspect the corporations records under
Sections 74 and 75 of the Corporation Code; and prayed for Receivership and
Creation of a Management Committee, pursuant to Rule 59 of the Rules of Civil

Procedure, the Securities Regulation Code, the Interim Rules of Procedure

Governing Intra-Corporate Controversies, the General Banking Law of 2000, and
the New Central Bank Act. She accused the directors and officers of Banco
Filipino of engaging in unsafe, unsound, and fraudulent banking practices, more
particularly, acts that violate the prohibition on self-dealing.
It is clear that the acts complained of pertain to the conduct of Banco
Filipinos banking business. A bank, as defined in the General Banking Law,
[21]
refers to an entity engaged in the lending of funds obtained in the form of
deposits.[22] The banking business is properly subject to reasonable regulation
under the police power of the state because of its nature and relation to the fiscal
affairs of the people and the revenues of the state. Banks are affected with public
interest because they receive funds from the general public in the form of deposits.
It is the Governments responsibility to see to it that the financial interests of those
who deal with banks and banking institutions, as depositors or otherwise, are
protected. In this country, that task is delegated to the BSP, which pursuant to its
Charter, is authorized to administer the monetary, banking, and credit system of
the Philippines. It is further authorized to take the necessary steps against any
banking institution if its continued operation would cause prejudice to its
depositors, creditors and the general public as well.[23]
The law vests in the BSP the supervision over operations and activities of
banks. The New Central Bank Act provides:
Section 25. Supervision and Examination. - The Bangko Sentral
shall have supervision over, and conduct periodic or special
examinations of, banking institutions and quasi-banks, including their
subsidiaries and affiliates engaged in allied activities. [24]

Specifically, the BSPs supervisory and regulatory powers include:

4.1 The issuance of rules of conduct or the establishment of standards
of operation for uniform application to all institutions or functions
covered, taking into consideration the distinctive character of the
operations of institutions and the substantive similarities of

specific functions to which such rules, modes or standards are to

be applied;
4.2 The conduct of examination to determine compliance with laws
and regulations if the circumstances so warrant as determined
by the Monetary Board;
4.3 Overseeing to ascertain that laws and Regulations are complied
with;
4.4 Regular investigation which shall not be oftener than once a
year from the last date of examination to determine
whether an institution is conducting its business ona safe or
sound basis: Provided, That the deficiencies/irregularities found
by or discovered by an audit shall be immediately addressed;
4.5 Inquiring into the solvency and liquidity of the institution (2-D);
or
4.6 Enforcing prompt corrective action.[25]

Koruga alleges that the dispute in the trial court involves the manner with
which the Directors (sic) have handled the Banks affairs, specifically the fraudulent
loans and dacion en pago authorized by the Directors in favor of several dummy
corporations known to have close ties and are indirectly controlled by the
Directors.[26]Her allegations, then, call for the examination of the allegedly
questionable loans. Whether these loans are covered by the prohibition on selfdealing is a matter for the BSP to determine. These are not ordinary intra-corporate
matters; rather, they involve banking activities which are, by law, regulated and
supervised by the BSP. As the Court has previously held:
It is well-settled in both law and jurisprudence that the Central
Monetary Authority, through the Monetary Board, is vested with
exclusive authority to assess, evaluate and determine the condition of
any bank, and finding such condition to be one of insolvency, or that its
continuance in business would involve a probable loss to its depositors
or creditors, forbid bank or non-bank financial institution to do business
in the Philippines; and shall designate an official of the BSP or other

competent person as receiver to immediately take charge of its assets and

liabilities.[27]

Correlatively, the General Banking Law of 2000 specifically deals with loans
contracted by bank directors or officers, thus:
SECTION 36. Restriction on Bank Exposure to Directors,
Officers, Stockholders and Their Related Interests. No director or
officer of any bank shall, directly or indirectly, for himself or as the
representative or agent of others, borrow from such bank nor shall he
become a guarantor, indorser or surety for loans from such bank to
others, or in any manner be an obligor or incur any contractual liability
to the bank except with the written approval of the majority of all the
directors of the bank, excluding the director concerned: Provided, That
such written approval shall not be required for loans, other credit
accommodations and advances granted to officers under a fringe benefit
plan approved by the Bangko Sentral. The required approval shall be
entered upon the records of the bank and a copy of such entry shall be
transmitted forthwith to the appropriate supervising and examining
department of the Bangko Sentral.
Dealings of a bank with any of its directors, officers or
stockholders and their related interests shall be upon terms not less
favorable to the bank than those offered to others.
After due notice to the board of directors of the bank, the office of
any bank director or officer who violates the provisions of this Section
may be declared vacant and the director or officer shall be subject to the
penal provisions of the New Central Bank Act.
The Monetary Board may regulate the amount of loans, credit
accommodations and guarantees that may be extended, directly or
indirectly, by a bank to its directors, officers, stockholders and their
related interests, as well as investments of such bank in enterprises
owned or controlled by said directors, officers, stockholders and
their related interests. However, the outstanding loans, credit
accommodations and guarantees which a bank may extend to each of its
stockholders, directors, or officers and their related interests, shall be
limited to an amount equivalent to their respective unencumbered
deposits and book value of their paid-in capital contribution in the bank:

Provided, however, That loans, credit accommodations and guarantees

secured by assets considered as non-risk by the Monetary Board shall be
excluded from such limit: Provided, further, That loans, credit
accommodations and advances to officers in the form of fringe benefits
granted in accordance with rules as may be prescribed by the Monetary
Board shall not be subject to the individual limit.
The Monetary Board shall define the term related interests.
The limit on loans, credit accommodations and guarantees
prescribed herein shall not apply to loans, credit accommodations and
guarantees extended by a cooperative bank to its cooperative
shareholders.[28]

Furthermore, the authority to determine whether a bank is conducting

business in an unsafe or unsound manner is also vested in the Monetary
Board. TheGeneral Banking Law of 2000 provides:
SECTION 56. Conducting Business in an Unsafe or Unsound
Manner. In determining whether a particular act or omission, which is
not otherwise prohibited by any law, rule or regulation affecting banks,
quasi-banks or trust entities, may be deemed as conducting business in
an unsafe or unsound manner for purposes of this Section, the Monetary
Board shall consider any of the following circumstances:
56.1. The act or omission has resulted or may result in material
loss or damage, or abnormal risk or danger to the safety,
stability, liquidity or solvency of the institution;
56.2. The act or omission has resulted or may result in material
loss or damage or abnormal risk to the institution's
depositors, creditors, investors, stockholders or to the
Bangko Sentral or to the public in general;
56.3. The act or omission has caused any undue injury, or has
given any unwarranted benefits, advantage or preference to
the bank or any party in the discharge by the director or
officer of his duties and responsibilities through manifest
partiality, evident bad faith or gross inexcusable
negligence; or

56.4. The act or omission involves entering into any contract or

transaction manifestly and grossly disadvantageous to the
bank, quasi-bank or trust entity, whether or not the director
or officer profited or will profit thereby.
Whenever a bank, quasi-bank or trust entity persists in conducting
its business in an unsafe or unsound manner, the Monetary Board may,
without prejudice to the administrative sanctions provided in Section 37
of the New Central Bank Act, take action under Section 30 of the same
Act and/or immediately exclude the erring bank from clearing, the
provisions of law to the contrary notwithstanding.

Finally, the New Central Bank Act grants the Monetary Board the power to
impose administrative sanctions on the erring bank:
Section 37. Administrative Sanctions on Banks and Quasibanks. - Without prejudice to the criminal sanctions against the culpable
persons provided in Sections 34, 35, and 36 of this Act, the Monetary
Board may, at its discretion, impose upon any bank or quasi-bank,
their directors and/or officers, for any willful violation of its charter or
by-laws, willful delay in the submission of reports or publications
thereof as required by law, rules and regulations; any refusal to permit
examination into the affairs of the institution; any willful making of a
false or misleading statement to the Board or the appropriate supervising
and examining department or its examiners; any willful failure or refusal
to comply with, or violation of, any banking law or any order, instruction
or regulation issued by the Monetary Board, or any order, instruction or
ruling by the Governor; or any commission of irregularities,
and/or conducting business in an unsafe or unsound manner as may
be determined by the Monetary Board, the following administrative
sanctions, whenever applicable:
(a) fines in amounts as may be determined by the Monetary Board
to be appropriate, but in no case to exceed Thirty thousand pesos
(P30,000) a day for each violation, taking into consideration the
attendant circumstances, such as the nature and gravity of the
violation or irregularity and the size of the bank or quasi-bank;

(b) suspension of rediscounting privileges or access to Bangko

Sentral credit facilities;
(c) suspension of lending or foreign exchange operations or
authority to accept new deposits or make new investments;
(d) suspension of interbank clearing privileges; and/or
(e) revocation of quasi-banking license.
Resignation or termination from office shall not exempt such
director or officer from administrative or criminal sanctions.
The Monetary Board may, whenever warranted by circumstances,
preventively suspend any director or officer of a bank or quasi-bank
pending an investigation: Provided, That should the case be not finally
decided by the Bangko Sentral within a period of one hundred twenty
(120) days after the date of suspension, said director or officer shall be
reinstated in his position: Provided, further, That when the delay in the
disposition of the case is due to the fault, negligence or petition of the
director or officer, the period of delay shall not be counted in computing
the period of suspension herein provided.
The above administrative sanctions need not be applied in the
order of their severity.
Whether or not there is an administrative proceeding, if the
institution and/or the directors and/or officers concerned continue with or
otherwise persist in the commission of the indicated practice or
violation, the Monetary Board may issue an order requiring the
institution and/or the directors and/or officers concerned to cease and
desist from the indicated practice or violation, and may further order that
immediate action be taken to correct the conditions resulting from such
practice or violation. The cease and desist order shall be immediately
effective upon service on the respondents.
The respondents shall be afforded an opportunity to defend their
action in a hearing before the Monetary Board or any committee chaired
by any Monetary Board member created for the purpose, upon request
made by the respondents within five (5) days from their receipt of the
order. If no such hearing is requested within said period, the order shall

be final. If a hearing is conducted, all issues shall be determined on the

basis of records, after which the Monetary Board may either reconsider
or make final its order.
The Governor is hereby authorized, at his discretion, to impose
upon banking institutions, for any failure to comply with the
requirements of law, Monetary Board regulations and policies, and/or
instructions issued by the Monetary Board or by the Governor, fines not
in excess of Ten thousand pesos (P10,000) a day for each violation, the
imposition of which shall be final and executory until reversed, modified
or lifted by the Monetary Board on appeal. [29]

Koruga also accused Arcenas, et al. of violation of the Corporation Codes

provisions on self-dealing and conflict of interest. She invoked Section 31 of the
Corporation Code, which defines the liability of directors, trustees, or officers of a
corporation for, among others, acquiring any personal or pecuniary interest in
conflict with their duty as directors or trustees, and Section 32, which prescribes
the conditions under which a contract of the corporation with one or more of its
directors or trustees the so-called self-dealing directors[30] would be valid. She also
alleged that Banco Filipinos directors violated Sections 33 and 34 in approving the
loans of corporations with interlocking ownerships, i.e., owned, directed, or
managed by close associates of Albert C. Aguirre.
Sections 31 to 34 of the Corporation Code provide:
Section 31. Liability of directors, trustees or officers. - Directors
or trustees who wilfully and knowingly vote for or assent to patently
unlawful acts of the corporation or who are guilty of gross negligence or
bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such directors
or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and
other persons.
When a director, trustee or officer attempts to acquire or acquires,
in violation of his duty, any interest adverse to the corporation in respect
of any matter which has been reposed in him in confidence, as to which
equity imposes a disability upon him to deal in his own behalf, he shall
be liable as a trustee for the corporation and must account for the profits
which otherwise would have accrued to the corporation.
Section 32. Dealings of directors, trustees or officers with the
corporation. - A contract of the corporation with one or more of its
directors or trustees or officers is voidable, at the option of such
corporation, unless all the following conditions are present:
1. That the presence of such director or trustee in the board
meeting in which the contract was approved was not necessary to
constitute a quorum for such meeting;

2. That the vote of such director or trustee was not necessary for
the approval of the contract;
3. That the contract is fair and reasonable under the
circumstances; and
4. That in case of an officer, the contract has been previously
authorized by the board of directors.
Where any of the first two conditions set forth in the preceding
paragraph is absent, in the case of a contract with a director or trustee,
such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or
of at least two-thirds (2/3) of the members in a meeting called for the
purpose: Provided, That full disclosure of the adverse interest of the
directors or trustees involved is made at such meeting: Provided,
however, That the contract is fair and reasonable under the
circumstances.
Section 33. Contracts between corporations with interlocking
directors. - Except in cases of fraud, and provided the contract is fair and
reasonable under the circumstances, a contract between two or more
corporations having interlocking directors shall not be invalidated on
that ground alone: Provided, That if the interest of the interlocking
director in one corporation is substantial and his interest in the other
corporation or corporations is merely nominal, he shall be subject to the
provisions of the preceding section insofar as the latter corporation or
corporations are concerned.
Stockholdings exceeding twenty (20%) percent of the outstanding
capital stock shall be considered substantial for purposes of interlocking
directors.
Section 34. Disloyalty of a director. - Where a director, by virtue
of his office, acquires for himself a business opportunity which should
belong to the corporation, thereby obtaining profits to the prejudice of
such corporation, he must account to the latter for all such profits by
refunding the same, unless his act has been ratified by a vote of the
stockholders owning or representing at least two-thirds (2/3) of the
outstanding capital stock. This provision shall be applicable,

notwithstanding the fact that the director risked his own funds in the
venture.

Korugas invocation of the provisions of the Corporation Code is

misplaced. In an earlier case with similar antecedents, we ruled that:
The Corporation Code, however, is a general law applying to all types of
corporations, while the New Central Bank Act regulates specifically
banks and other financial institutions, including the dissolution and
liquidation thereof. As between a general and special law, the latter shall
prevail generalia specialibus non derogant.[31]

Consequently, it is not the Interim Rules of Procedure on Intra-Corporate

Controversies,[32] or Rule 59 of the Rules of Civil Procedure on Receivership, that
would apply to this case. Instead, Sections 29 and 30 of the New Central Bank
Act should be followed, viz.:
Section 29. Appointment of Conservator. - Whenever, on the basis
of a report submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or a quasi-bank is in a
state of continuing inability or unwillingness to maintain a condition of
liquidity deemed adequate to protect the interest of depositors and
creditors, the Monetary Board may appoint a conservator with such
powers as the Monetary Board shall deem necessary to take charge of
the assets, liabilities, and the management thereof, reorganize the
management, collect all monies and debts due said institution, and
exercise all powers necessary to restore its viability. The conservator
shall report and be responsible to the Monetary Board and shall have the
power to overrule or revoke the actions of the previous management and
board of directors of the bank or quasi-bank.
xxxx
The Monetary Board shall terminate the conservatorship when it
is satisfied that the institution can continue to operate on its own and the
conservatorship is no longer necessary. The conservatorship shall
likewise be terminated should the Monetary Board, on the basis of the
report of the conservator or of its own findings, determine that the

continuance in business of the institution would involve probable loss to

its depositors or creditors, in which case the provisions of Section 30
shall apply.
Section 30. Proceedings in Receivership and Liquidation. Whenever, upon report of the head of the supervising or examining
department, the Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the
ordinary course of business: Provided, That this shall not
include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the
Bangko Sentral, to meet its liabilities; or
(c) cannot continue in business without involving probable
losses to its depositors or creditors; or
(d) has willfully violated a cease and desist order under
Section 37 that has become final, involving acts or
transactions which amount to fraud or a dissipation of the
assets of the institution; in which cases, the Monetary
Board may summarily and without need for prior
hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit
Insurance Corporation as receiver of the banking
institution.
xxxx
The actions of the Monetary Board taken under this section or
under Section 29 of this Act shall be final and executory, and may
not be restrained or set aside by the court except on petition
for certiorari on the ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as to amount to
lack or excess of jurisdiction. The petition for certiorari may only be
filed by the stockholders of record representing the majority of the
capital stock within ten (10) days from receipt by the board of directors
of the institution of the order directing receivership, liquidation or
conservatorship.

The designation of a conservator under Section 29 of this Act

or the appointment of a receiver under this section shall be vested
exclusively with the Monetary Board. Furthermore, the designation of
a conservator is not a precondition to the designation of a receiver.[33]

On the strength of these provisions, it is the Monetary Board that exercises

exclusive jurisdiction over proceedings for receivership of banks.
Crystal clear in Section 30 is the provision that says the appointment of a
receiver under this section shall be vested exclusively with the Monetary
Board. The term exclusively connotes that only the Monetary Board can resolve
the issue of whether a bank is to be placed under receivership and, upon an
affirmative finding, it also has authority to appoint a receiver. This is further
affirmed by the fact that the law allows the Monetary Board to take action
summarily and without need for prior hearing.
And, as a clincher, the law explicitly provides that actions of the Monetary
Board taken under this section or under Section 29 of this Act shall be final and
executory, and may not be restrained or set aside by the court except on a petition
for certiorari on the ground that the action taken was in excess of jurisdiction or
with such grave abuse of discretion as to amount to lack or excess of jurisdiction.
From the foregoing disquisition, there is no doubt that the RTC has no
jurisdiction to hear and decide a suit that seeks to place Banco Filipino under
receivership.
Koruga herself recognizes the BSPs power over the allegedly unlawful acts
of Banco Filipinos directors. The records of this case bear out that Koruga, through
her legal counsel, wrote the Monetary Board[34] on April 21, 2003 to bring to its
attention the acts she had enumerated in her complaint before the RTC. The letter
reads in part:
Banco Filipino and the current members of its Board of Directors
should be placed under investigation for violations of banking laws, the
commission of irregularities, and for conducting business in an unsafe or

unsound manner. They should likewise be placed under preventive

suspension by virtue of the powers granted to the Monetary Board under
Section 37 of the Central Bank Act. These blatant violations of banking
laws should not go by without penalty. They have put Banco Filipino, its
depositors and stockholders, and the entire banking system (sic) in
jeopardy.
xxxx
We urge you to look into the matter in your capacity as regulators.
Our clients, a minority stockholders, (sic) and many depositors of Banco
Filipino are prejudiced by a failure to regulate, and taxpayers are
prejudiced by accommodations granted by the BSP to Banco Filipino [35]

In a letter dated May 6, 2003, BSP Supervision and Examination

Department III Director Candon B. Guerrero referred Korugas letter to Arcenas for
comment.[36] On June 6, 2003, Banco Filipinos then Executive Vice President and
Corporate Secretary Francisco A. Rivera submitted the banks comments essentially
arguing that Korugas accusations lacked legal and factual bases.[37]
On the other hand, the BSP, in its Answer before the RTC, said that it had
been looking into Banco Filipinos activities. An October 2002 Report of
Examination (ROE) prepared by the Supervision and Examination Department
(SED) noted certain dacion payments, out-of-the-ordinary expenses, among other
dealings. On July 24, 2003, the Monetary Board passed Resolution No. 1034
furnishing Banco Filipino a copy of the ROE with instructions for the bank to file
its comment or explanation within 30 to 90 days under threat of being fined or of
being subjected to other remedial actions. The ROE, the BSP said, covers
substantially the same matters raised in Korugas complaint. At the time of the
filing of Korugas complaint on August 20, 2003, the period for Banco Filipino to
submit its explanation had not yet expired.[38]
Thus, the courts jurisdiction could only have been invoked after the
Monetary Board had taken action on the matter and only on the ground that the
action taken was in excess of jurisdiction or with such grave abuse of discretion as
to amount to lack or excess of jurisdiction.

Finally, there is one other reason why Korugas complaint before the RTC
cannot prosper. Given her own admission and the same is likewise supported by
evidence that she is merely a minority stockholder of Banco Filipino, she would
not have the standing to question the Monetary Boards action. Section 30 of the
New Central Bank Act provides:
The petition for certiorari may only be filed by the stockholders of
record representing the majority of the capital stock within ten (10) days
from receipt by the board of directors of the institution of the order
directing receivership, liquidation or conservatorship.

All the foregoing discussion yields the inevitable conclusion that the CA
erred in upholding the jurisdiction of, and remanding the case to, the RTC. Given
that the RTC does not have jurisdiction over the subject matter of the case, its
refusal to dismiss the case on that ground amounted to grave abuse of discretion.
WHEREFORE, the foregoing premises considered, the Petition in G.R. No.
168332 is DISMISSED, while the Petition in G.R. No. 169053 is GRANTED.The
Decision of the Court of Appeals dated July 20, 2005 in CA-G.R. SP No. 88422 is
hereby SET ASIDE. The Temporary Restraining Order issued by this Court on
March 13, 2006 is made PERMANENT. Consequently, Civil Case No. 03-985,
pending before the Regional Trial Court of Makati City, is DISMISSED.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice

Chairperson

ANTONIO T. CARPIO
Associate Justice

RENATO C. CORONA
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

AT T E S TAT I O N
I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

FIRST DIVISION
[G.R. No. 111080. April 5, 2000]

JOSE S. OROSA and MARTHA P. OROSA, petitioners, vs. HON. COURT

OF APPEALS, FCP CREDIT CORPORATION, respondents.francis
DECISION
YNARES_SANTIAGO, J.:
On December 6, 1984, private respondent FCP Credit Corporation filed a complaint for
replevin and damages in the Regional Trial Court of Manila against petitioner Jose S.
Orosa and one John Doe to recover possession of a 1983 Ford Laser 1.5 Sedan with
Motor and Serial No. SUNKBT-14584. The complaint alleged that on September 28,
1983, petitioner purchased the subject motor vehicle on installment from Fiesta Motor
Sales Corporation. He executed and delivered to Fiesta Motor Sales Corp. a promissory
note in the sum of P133,824.00 payable in monthly installments. To secure payment,
petitioner executed a chattel mortgage over the subject motor vehicle in favor of Fiesta
Motor Sales Corp. On September 28, 1983, Fiesta Motor Sales assigned the
promissory note and chattel mortgage to private respondent FCP Credit Corporation.
The complaint further alleged that petitioner failed to pay part of the installment which
fell due on July 28, 1984 as well as three (3) consecutive installments which fell due on
August 28, September 28, and October 28, 1984. Consequently, private respondent
FCP Credit Corporation demanded from petitioner payment of the entire outstanding
balance of the obligation amounting to P106,154.48 with accrued interest and to
surrender the vehicle which petitioner was allegedly detaining. ella
[1]

[2]

After trial, the lower court dismissed private respondent's complaint in a Decision dated
March 25, 1988, the decretal portion of which reads:
WHEREFORE, judgment is rendered for the defendant, and against the
plaintiff:
1) Dismissing the complaint for lack of merit;
2) Declaring that the plaintiff was not entitled to the Writ of Replevin,
issued on January 7,1985, and is now liable to the defendant for actual
damages under the Replevin bond it filed; nigel
3) On defendant's counter-claim, ordering the plaintiff to pay the defendant
the sum of P400,000.00 as moral damages, P100,000.00 as exemplary
damages, and P50,000.00 as, and for, attorney's fees;

4) Ordering the plaintiff to return to the defendant the subject 1983 Ford
Laser Sedan, with Motor or Serial No. SUNKBT-l4584, or its equivalent, in
kind or value, in cash, as of this date, and to pay the costs.
SO ORDERED. iska
The trial court ruled that private respondent FCP had no reason to file the present action
since petitioner already paid the installments for the months of July to November 1984,
which are the sole bases of the complaint. The lower court declared that private
respondent was not entitled to the writ of replevin, and was liable to petitioner for actual
damages under the replevin bond it filed.
[3]

Ruling on petitioner's counterclaim, the trial court stated that there was no legal or
factual basis for the writ of replevin and that its enforcement by the sheriff was "highly
irregular, and unlawful, done, as it was, under shades of extortion, threats and
force." The trial court ordered private respondent to pay the sum of P400,000.00 as
moral damages; P100,000.00 as exemplary damages and P50,000.00 as attorney's
fees. Private respondent was also ordered to return to petitioner the 1983 Ford Laser
1.5 Sedan, or its equivalent, in kind or value in cash, as of date of judgment and to pay
the costs of the suit. rodoflo
[4]

[5]

On June 7, 1988, a "Supplemental Decision" was rendered by the trial court ordering
private respondent's surety, Stronghold Insurance Co., Inc. to jointly and severally [with
private respondent] return to petitioner the 1983 Ford Laser 1.5 Sedan or its equivalent
in kind or in cash and to pay the damages specified in the main decision to the extent of
the value of the replevin bond in the amount of P210,000.00.
[6]

The surety company filed with the Court of Appeals a petition for certiorari to annul the
Order of the trial court denying its motion for partial reconsideration, as well as the
Supplemental Decision. On the other hand, private respondent appealed the decision of
the RTC Manila to the Court of Appeals.
The surety company's petition for certiorari, docketed as CA-G.R. SP No. 14938, was
dismissed by the Court of Appeals' First Division which upheld the trial court's order of
execution pending appeal. On November 6, 1989, this Court affirmed the Court of
Appeals decision, but deleted the order for the issuance of a writ of execution pending
appeal.
[7]

[8]

Meanwhile, in private respondent's appeal, the Court of Appeals' Eighth Division

partially affirmed the ruling of the trial court, in a Decision dated April 19, 1993, the
dispositive portion of which reads:
[9]

WHEREFORE, the Decision of 25 March 1988 of the Regional Trial Court,

Branch 3, Manila is hereby AFFIRMED with the following
modifications: brando

(1) The award of moral damages, exemplary damages and attorney's fees
is DELETED;
(2) The order directing plaintiff-appellant FCP Credit Corporation to return
to defendant-appellee Jose S. Orosa the subject 1983 Ford Laser Sedan,
with Motor and Serial No. SUNKBT-14584, its equivalent, in kind or value
in cash, as of 25 March 1988, and to pay the costs is DELETED; and;
(3) Plaintiff-appellant FCP Credit Corporation is ordered to pay defendantappellee Jose S. Orosa the amount equivalent to the value of the fourteen
(14) monthly installments made by the latter to the former on the subject
motor vehicle, with interest from the time of filing of the complaint or from
6 December 1984.
No costs. micks
SO ORDERED.
Hence, this petition for review, on the following assignments of error:

[10]

(1) The Hon. Court of Appeals (former Eighth Division) acted without or in
excess of jurisdiction when it reversed a final decision dated September 9,
1988, of a co-equal division of the Hon. Court of Appeals (Special First
Division) promulgated in CA G.R. No. 14938, and which was sustained by
the Hon. Supreme Court in a final decision promulgated in G.R. No. 84979
dated November 6, 1989 which cases have the same causes of action,
same set of facts, the same parties and the same relief. novero
(2) The Hon. Court of Appeals (former Eighth Division) acted with grave
abuse of discretion and authority when it considered causes of actions not
allege in the complaint and which were raised for the first time on appeal
in deciding this case.
(3) The Hon. Court of Appeals (former Eighth Division) committed serious
error in applying the case of Filinvest Credit Corporation vs. Ivans
Mendez, 152 SCRA 598, as basis in deciding this case when said case
has a different set of facts from this case.
In its first assignment of error, petitioner alleges that the Eighth Division of the Court of
Appeals had no jurisdiction to review the present case since the First Division of the
Court of Appeals already passed upon the law and the facts of the same. Petitioner
alleges that the present appeal involves the same causes of action, same parties, same
facts and same relief involved in the decision rendered by the First Division and affirmed
by this Court in G.R. No. 84979.
[11]

Petitioner's argument is untenable. Jurisdiction is simply the power or authority to hear a

case. The appellate jurisdiction of the Court of Appeals to review decisions and orders
of lower courts is conferred by Batas Pambansa Blg. 129. More importantly, petitioner
cannot now assail the Court of Appeals' jurisdiction after having actively participated in
the appeal and after praying for affirmative relief.
[12]

Neither can petitioner argue that res judicata bars the determination of the present case.
The two cases involve different subject matters, parties and seek different reliefs. decision
The petition docketed as CA-G.R. SP No. 14938 was for certiorari with injunction,
brought by Stronghold Insurance Company, Inc. alleging that there was grave abuse of
discretion when the trial court adjudged it liable for damages without due process, in
violation of Rule 60, Section 10 in relation to Rule 57, Section 20, of the Rules of Court.
The surety also questioned the propriety of the writ of execution issued by the trial court
pending appeal.
[13]

On the other hand, CA-G.R. CV No. 25929 was filed by petitioner Orosa under Rule 45
of the Revised Rules of Court raising alleged errors of law on the part of the trial court.
The subject of the appeal was the main decision, while the subject of the petition in CAG.R. SP No. 14938 was the Supplemental Decision.
We agree with the Court of Appeals that:

[14]

The decisions of the Court of Appeals in CA-G.R. SP No. 14938 and the
Supreme Court in G.R. No. 84979 did not pass on the merits of this
case. It merely ruled on the issues of whether the surety, Stronghold
Insurance Co., Inc., can be held jointly and solidarily liable with
plaintiff-appellant and whether execution pending appeal is
proper under the facts and circumstances of this case. Consequently, this
Court is not marinellaestopped from reviewing the conclusions reached by the
court a quo. (underscoring ours)
In its second assigned error, petitioner posits that the Court of Appeals committed grave
abuse of discretion when it considered causes of actions which were raised for the first
time on appeal.
[15]

True, private respondent submitted issues to the Court of Appeals which were not raised
in the original complaint. Private respondent belatedly pointed out that:
[16]

1.1. It is pertinent to note that Defendant-Appellee has waived prior notice

and demand in order to be rendered in default, as in fact the Promissory
Note expressly stipulates that the monthly installments shall be paid on
the date they fall due, without need of prior notice or demand. alonzo

1.2. Said Promissory Note likewise expressly stipulates that a late

payment charge of 2% per month shall be added on each unpaid
installment from maturity thereof until fully paid.
1.3. Of equal significance is the Acceleration Clause in the Promissory
Note which states that if default be made in the payment of any of the
installments or late payment charges thereon when the same became
due and payable, the total principal sum then remaining unpaid, together
with the agreed late payment charges thereon, shall at once become due
and payable.
Private respondent argued that based on the provisions of the Promissory Note itself,
petitioner incurred in default since, even though there was actual payment of the
installments which fell due on July 28, 1984, as well as the three installments on August
28 to October 28, 1984, the payments were all late and irregular. Private respondent
also argued that petitioner assigned the subject car to his daughter without the written
consent of the obligee, and hence, violated the terms of the chattel mortgage.
Meritorious as these arguments are, they come too late in the day. Basic is the rule
that matters not raised in the complaint cannot be raised for the first time on appeal. calr
[17]

[18]

Contrary to petitioner's accusation, the Court of Appeals restricted the determination of

the case to matters alleged in the complaint and raised during trial. Citing
jurisprudence, the Court of Appeals held that "it would be offensive to the basic rule of
fair play, justice and due process" if it considered issue raised for the first time on
appeal.
[19]

[20]

[21]

The Court of Appeals' statement that "under the terms and conditions of the chattel
mortgage, defendant-appellee Jose S. Orosa was already in default," was made only to
justify the deletion of the trial court's award of moral, exemplary damages and attorney's
fees, in consonance with its finding that private respondent was motivated by a sincere
belief that it had sufficient basis an acted in good faith when it filed the claim. jojo
[22]

We now come to the matter of moral damages. Petitioner insists that he suffered untold
embarrassment when the complaint was filed against him. According to petitioner, the
car subject of this case was being used by his daughter, married to Jose Concepcion III,
a scion of a prominent family. Petitioner laments that he assigned the car to his
daughter so that she could "approximate without equaling the status of her in-laws."
This being the case, petitioner experienced anguish and unquantifiable humiliation
when he had to face his daughter's wealthy in-laws to explain the "why and the whats of
the subject case." Petitioner further insists that an award of moral damages is especially
justified since he is no ordinary man, but a businessman of high social standing, a
graduate of De La Salle University and belongs to a well known family of bankers.
[23]

We must deny the claim. The law clearly states that one may only recover moral
damages if they are the proximate result of the other party's wrongful act or omission.
Two elements are required. First, the act or omission must be the proximate result of
[24]

the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation and similar injury. Second, the act
must be wrongful. manikan
Petitioner maintains that embarrassment resulted when he had to explain the suit to his
daughter's in-laws. However, that could have been avoided had he not assigned the car
to his daughter and had he been faithful and prompt in paying the installments required.
Petitioner brought the situation upon himself and cannot now complain that private
respondent is liable for the mental anguish and humiliation he suffered.
Furthermore, we agree with the appellate court that when private respondent brought
the complaint, it did so only to exercise a legal right, believing that it had a meritorious
cause of action clearly borne out by a mere perusal of the promissory note and chattel
mortgage. To constitute malicious prosecution, there must be proof that the prosecution
was prompted by a sinister design to vex and humiliate a person, and that it was
initiated deliberately, knowing that the charges were false and groundless. Such was
not the case when the instant complaint was filed. The rule has always been that moral
damages cannot be recovered from a person who has filed a complaint against another
in good faith. The law always presumes good faith such that any person who seeks to
be awarded damages due to acts of another has the burden of proving that the latter
acted in bad faith or with ill motive. juris
[25]

[26]

[27]

Anent the award of exemplary damages, jurisprudence provides that where a party is
not entitled to actual or moral damages, an award of exemplary damages is likewise
baseless.
[28]

In the matter of attorney's fees, petitioner avers that to prosecute and defend this case
in the lower court and in the appellate court, he incurred expenses amounting
to P50,000.00, and as such, attorney's fees should be granted. We deny the claim. No
premium should be placed on the right to litigate and not every winning party is entitled
to an automatic grant of attorney's fees. The party must show that he falls under one
of the instances enumerated in Article 2208 of the Civil Code. This, petitioner failed to
do. Furthermore, where the award of moral and exemplary damages is eliminated, so
must the award for attorney's fees be deleted.
[29]

[30]

[31]

[32]

We also agree with the Court of Appeals that the trial court erred when it ordered private
respondent to return the subject car or its equivalent considering that petitioner had not
yet fully paid the purchase price. Verily, to sustain the trial court's decision would
amount to unjust enrichment. The Court of Appeals was correct when it instead ordered
private respondent to return, not the car itself, but only the amount equivalent to the
fourteen installments actually paid with interest. criminal
[33]

WHEREFORE, above premises considered, the petition is DENIED, and the Court of
Appeals' Decision of April 19, 1993 and its Resolution of July 22, 1993 are
AFFIRMED in toto.

No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, and Pardo, JJ., concur.
Puno, J., no part.

THIRD DIVISION
SMART COMMUNICATIONS, INC.,
Petitioner,

G.R. No. 148132

- versus REGINA M. ASTORGA,

Respondent.
x---------------------------------------------------x
G.R. No. 151079
SMART COMMUNICATIONS, INC.,
Petitioner,
- versus REGINA M. ASTORGA,
Respondent.
x---------------------------------------------------x
REGINA M. ASTORGA,
G.R. No. 151372
Petitioner,
Present:
- versus -

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CORONA,*
NACHURA, and
REYES, JJ.

SMART COMMUNICATIONS, INC. and Promulgated:

ANN MARGARET V. SANTIAGO,

Respondents.

____________________

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

For the resolution of the Court are three consolidated petitions for review
on certiorari under Rule 45 of the Rules of Court. G.R. No. 148132 assails
theFebruary 28, 2000 Decision[1] and the May 7, 2001 Resolution[2] of the Court of
Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question
the June 11, 2001 Decision[3] and the December 18, 2001 Resolution[4] in CA-G.R.
SP. No. 57065.
Regina M. Astorga (Astorga) was employed by respondent Smart
Communications, Incorporated (SMART) on May 8, 1997 as District Sales
Manager of the Corporate Sales Marketing Group/ Fixed Services Division
(CSMG/FSD). She was receiving a monthly salary of P33,650.00. As District Sales
Manager, Astorga enjoyed additional benefits, namely, annual performance
incentive equivalent to 30% of her annual gross salary, a group life and
hospitalization insurance coverage, and a car plan in the amount of P455,000.00.[5]
In February 1998, SMART launched an organizational realignment to
achieve more efficient operations. This was made known to the employees
on February 27, 1998.[6] Part of the reorganization was the outsourcing of the
marketing and sales force. Thus, SMART entered into a joint venture agreement
with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated
(SNMI). Since SNMI was formed to do the sales and marketing work, SMART
abolished the CSMG/FSD, Astorgas division.

To soften the blow of the realignment, SNMI agreed to absorb the CSMG
personnel who would be recommended by SMART. SMART then conducted a
performance evaluation of CSMG personnel and those who garnered the highest
ratings were favorably recommended to SNMI. Astorga landed last in the
performance evaluation, thus, she was not recommended by SMART. SMART,
nonetheless, offered her a supervisory position in the Customer Care Department,
but she refused the offer because the position carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for
work. But on March 3, 1998, SMART issued a memorandum advising Astorga of
the termination of her employment on ground of redundancy, effective April 3,
1998. Astorga received it on March 16, 1998.[7]
The termination of her employment prompted Astorga to file a
Complaint[8] for illegal dismissal, non-payment of salaries and other benefits with
prayer for moral and exemplary damages against SMART and Ann Margaret V.
Santiago (Santiago). She claimed that abolishing CSMG and, consequently,
terminating her employment was illegal for it violated her right to security of
tenure. She also posited that it was illegal for an employer, like SMART, to
contract out services which will displace the employees, especially if the contractor
is an in-house agency.[9]
SMART responded that there was valid termination. It argued that Astorga
was dismissed by reason of redundancy, which is an authorized cause for
termination of employment, and the dismissal was effected in accordance with the
requirements of the Labor Code. The redundancy of Astorgas position was the
result of the abolition of CSMG and the creation of a specialized and more
technically equipped SNMI, which is a valid and legitimate exercise of
management prerogative.[10]
In the meantime, on May 18, 1998, SMART sent a letter to Astorga
demanding that she pay the current market value of the Honda Civic Sedan which
was given to her under the companys car plan program, or to surrender the same to
the company for proper disposition.[11] Astorga, however, failed and refused to do
either, thus prompting SMART to file a suit for replevin with the Regional Trial

Court of Makati (RTC) on August 10, 1998. The case was docketed as Civil Case
No. 98-1936 and was raffled to Branch 57.[12]
Astorga moved to dismiss the complaint on grounds of (i) lack of
jurisdiction; (ii) failure to state a cause of action; (iii) litis pendentia; and (iv)
forum-shopping.Astorga posited that the regular courts have no jurisdiction over
the complaint because the subject thereof pertains to a benefit arising from an
employment contract; hence, jurisdiction over the same is vested in the labor
tribunal and not in regular courts.[13]
Pending resolution of Astorgas motion to dismiss the replevin case, the
Labor Arbiter rendered a Decision[14] dated August 20, 1998, declaring Astorgas
dismissal from employment illegal. While recognizing SMARTs right to abolish
any of its departments, the Labor Arbiter held that such right should be exercised in
good faith and for causes beyond its control. The Arbiter found the abolition of
CSMG done neither in good faith nor for causes beyond the control of SMART,
but a ploy to terminate Astorgas employment. The Arbiter also ruled that
contracting out the functions performed by Astorga to an in-house agency like
SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the
Labor Code.
Accordingly, the Labor Arbiter ordered:
WHEREFORE, judgment is hereby rendered declaring the dismissal of
[Astorga] to be illegal and unjust. [SMART and Santiago] are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a substantially
equivalent position, without loss of seniority rights and other privileges, with full
backwages, inclusive of allowances and other benefits from the time of [her]
dismissal to the date of reinstatement, which computed as of this date, are as
follows:
(a) Astorga
BACKWAGES; (P33,650.00 x 4 months) = P134,600.00
UNPAID SALARIES (February 15, 1998April 3, 1998
February 15-28, 1998 = P 16,823.00
March 1-31, [1998] = P 33,650.00
April 1-3, 1998 = P 3,882.69
CAR MAINTENANCE ALLOWANCE

(P2,000.00 x 4) = P 8,000.00
FUEL ALLOWANCE (300 liters/mo. x
4 mos. at P12.04/liter) = P 14,457.83
TOTAL = P211,415.52
xxxx
3. Jointly and severally pay moral damages in the amount of P500,000.00
x x x and exemplary damages in the amount of P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as attorneys fees.
SO ORDERED.[15]

Subsequently, on March 29, 1999, the RTC issued an Order[16] denying

Astorgas motion to dismiss the replevin case. In so ruling, the RTC ratiocinated
that:
Assessing the [submission] of the parties, the Court finds no merit in the
motion to dismiss.
As correctly pointed out, this case is to enforce a right of possession over a
company car assigned to the defendant under a car plan privilege
arrangement. The car is registered in the name of the plaintiff. Recovery thereof
via replevin suit is allowed by Rule 60 of the 1997 Rules of Civil Procedure,
which is undoubtedly within the jurisdiction of the Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the company car and
despite demand, defendant refused to return said car. This is clearly sufficient
statement of plaintiffs cause of action.
Neither is there forum shopping. The element of litis penden[t]ia does not
appear to exist because the judgment in the labor dispute will not constitute res
judicata to bar the filing of this case.
WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit.
SO ORDERED.[17]

Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.
[18]

Astorga elevated the denial of her motion via certiorari to the CA, which, in
its February 28, 2000 Decision,[19] reversed the RTC ruling. Granting the petition
and, consequently, dismissing the replevin case, the CA held that the case is
intertwined with Astorgas complaint for illegal dismissal; thus, it is the labor
tribunal that has rightful jurisdiction over the complaint. SMARTs motion for
reconsideration having been denied,[20] it elevated the case to this Court, now
docketed as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor
Arbiter in the illegal dismissal case to the National Labor Relations Commission
(NLRC).In its September 27, 1999 Decision,[21] the NLRC sustained Astorgas
dismissal. Reversing the Labor Arbiter, the NLRC declared the abolition of CSMG
and the creation of SNMI to do the sales and marketing services for SMART a
valid organizational action. It overruled the Labor Arbiters ruling that SNMI is an
in-house agency, holding that it lacked legal basis. It also declared that contracting,
subcontracting and streamlining of operations for the purpose of increasing
efficiency are allowed under the law. The NLRC further found erroneous the Labor
Arbiters disquisition that redundancy to be valid must be impelled by economic
reasons, and upheld the redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and
set aside. [Astorga] is further ordered to immediately return the company vehicle
assigned to her. [Smart andSantiago] are hereby ordered to pay the final wages of
[Astorga] after [she] had submitted the required supporting papers therefor.
SO ORDERED.[22]

Astorga filed a motion for reconsideration, but the NLRC denied it

on December 21, 1999.[23]
Astorga then went to the CA via certiorari. On June 11, 2001, the CA
rendered a Decision[24] affirming with modification the resolutions of the NLRC. In
gist, the CA agreed with the NLRC that the reorganization undertaken by SMART
resulting in the abolition of CSMG was a legitimate exercise of management

prerogative. It rejected Astorgas posturing that her non-absorption into SNMI was
tainted with bad faith. However, the CA found that SMART failed to comply with
the mandatory one-month notice prior to the intended termination. Accordingly,
the CA imposed a penalty equivalent to Astorgas one-month salary for this noncompliance. The CA also set aside the NLRCs order for the return of the company
vehicle holding that this issue is not essentially a labor concern, but is civil in
nature, and thus, within the competence of the regular court to decide. It added that
the matter had not been fully ventilated before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought partial
reconsideration, of the Decision. On December 18, 2001, the CA resolved the
motions,viz.:
WHEREFORE, [Astorgas] motion for reconsideration is hereby PARTIALLY
GRANTED. [Smart] is hereby ordered to pay [Astorga] her backwages from 15
February 1998 to 06 November 1998. [Smarts] motion for reconsideration is
outrightly DENIED.
SO ORDERED.[25]

Astorga and SMART came to us with their respective petitions for review
assailing the CA ruling, docketed as G.R Nos. 151079 and 151372. On February
27, 2002, this Court ordered the consolidation of these petitions with G.R. No.
148132.[26]
In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF
ASTORGAS DISMISSAL DESPITE THE FACT THAT HER DISMISSAL WAS
EFFECTED IN CLEAR VIOLATION OF THE CONSTITUTIONAL RIGHT TO
SECURITY OF TENURE, CONSIDERING THAT THERE WAS NO GENUINE
GROUND FOR HER DISMISSAL.
II
SMARTS REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY
OF THE APPEAL AS REQUIRED BY ARTICLE 223 OF THE LABOR CODE,

ENTITLES ASTORGA TO HER SALARIES DURING THE PENDENCY OF

THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE
REGIONAL TRIAL COURT HAS NO JURISDICTION OVER THE
COMPLAINT FOR RECOVERY OF A CAR WHICH ASTORGA ACQUIRED
AS PART OF HER EMPLOYEE (sic) BENEFIT.[27]

On the other hand, Smart in its Memoranda raises the following issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A
QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD
WITH LAW OR WITH APPLICABLE DECISION OF THE HONORABLE
SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT
SMART DID NOT COMPLY WITH THE NOTICE REQUIREMENTS PRIOR
TO TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE
DEPARTMENT OF LABOR AND EMPLOYMENT ARE SUBSTANTIAL
COMPLIANCE WITH THE NOTICE REQUIREMENTS BEFORE
TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL
LABOR RELATIONS COMMISSION FINDS APPLICATION IN THE CASE
AT BAR CONSIDERING THAT IN THE SERRANO CASE THERE WAS
ABSOLUTELY NO NOTICE AT ALL.[28]
IV
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A
QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD
WITH LAW OR WITH APPLICABLE DECISION[S] OF THE HONORABLE
SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN

EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT

THE REGIONAL TRIAL COURT DOES NOT HAVE JURISDICTION OVER
THE COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS
OWN COMPANY VEHICLE FROM A FORMER EMPLOYEE WHO WAS
LEGALLY DISMISSED.
V
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO
APPRECIATE THAT THE SUBJECT OF THE REPLEVIN CASE IS NOT THE
ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT SIMPLY THE
RECOVERY OF A COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO
APPRECIATE THAT ASTORGA CAN NO LONGER BE CONSIDERED AS
AN EMPLOYEE OF SMART UNDER THE LABOR CODE.[29]

The Court shall first deal with the propriety of dismissing the replevin case
filed with the RTC of Makati City allegedly for lack of jurisdiction, which is the
issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to repossession
of goods or chattels may recover those goods or chattels from one who has
wrongfully distrained or taken, or who wrongfully detains such goods or
chattels. It is designed to permit one having right to possession to recover property
in specie from one who has wrongfully taken or detained the property.[30] The term
may refer either to the action itself, for the recovery of personalty, or to the
provisional remedy traditionally associated with it, by which possession of the
property may be obtained by the plaintiff and retained during the pendency of the
action.[31]
That the action commenced by SMART against Astorga in the RTC of
Makati City was one for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of
jurisdiction, the CA made the following disquisition, viz.:

[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as
part of the employment package. We doubt that [SMART] would extend [to
Astorga] the same car plan privilege were it not for her employment as district
sales manager of the company. Furthermore, there is no civil contract for a loan
between [Astorga] and [Smart]. Consequently, We find that the car plan privilege
is a benefit arising out of employer-employee relationship. Thus, the claim for
such falls squarely within the original and exclusive jurisdiction of the labor
arbiters and the NLRC.[32]

We do not agree. Contrary to the CAs ratiocination, the RTC rightfully

assumed jurisdiction over the suit and acted well within its discretion in denying
Astorgas motion to dismiss. SMARTs demand for payment of the market value of
the car or, in the alternative, the surrender of the car, is not a labor, but a civil,
dispute. It involves the relationship of debtor and creditor rather than employeeemployer relations.[33] As such, the dispute falls within the jurisdiction of the
regular courts.
In Basaya, Jr. v. Militante,[34] this Court, in upholding the jurisdiction of the
RTC over the replevin suit, explained:
Replevin is a possessory action, the gist of which is the right of possession in the
plaintiff. The primary relief sought therein is the return of the property in specie
wrongfully detained by another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property. The question of
whether or not a party has the right of possession over the property involved and
if so, whether or not the adverse party has wrongfully taken and detained said
property as to require its return to plaintiff, is outside the pale of competence of a
labor tribunal and beyond the field of specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in the
Replevin Case. The respective issues raised in each forum can be resolved
independently on the other. In fact in 18 November 1986, the NLRC in the case
before it had issued an Injunctive Writ enjoining the petitioners from blocking the
free ingress and egress to the Vessel and ordering the petitioners to disembark and
vacate. That aspect of the controversy is properly settled under the Labor
Code. So also with petitioners right to picket. But the determination of the
question of who has the better right to take possession of the Vessel and whether
petitioners can deprive the Charterer, as the legal possessor of the Vessel, of that
right to possess in addressed to the competence of Civil Courts.

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

The CA, therefore, committed reversible error when it overturned the RTC ruling
and ordered the dismissal of the replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorgas
dismissal.
Astorga was terminated due to redundancy, which is one of the authorized
causes for the dismissal of an employee. The nature of redundancy as an
authorized cause for dismissal is explained in the leading case of Wiltshire File
Co., Inc. v. National Labor Relations Commission,[35] viz:
x x x redundancy in an employers personnel force necessarily or even ordinarily
refers to duplication of work. That no other person was holding the same position
that private respondent held prior to termination of his services does not show that
his position had not become redundant. Indeed, in any well organized business
enterprise, it would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that redundancy, for purposes of
the Labor Code, exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise. Succinctly put,
a position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as overhiring of
workers, decreased volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the enterprise.

The characterization of an employees services as superfluous or no longer

necessary and, therefore, properly terminable, is an exercise of business judgment
on the part of the employer. The wisdom and soundness of such characterization or
decision is not subject to discretionary review provided, of course, that a violation
of law or arbitrary or malicious action is not shown.[36]
Astorga claims that the termination of her employment was illegal and
tainted with bad faith. She asserts that the reorganization was done in order to get
rid of her. But except for her barefaced allegation, no convincing evidence was
offered to prove it. This Court finds it extremely difficult to believe that SMART
would enter into a joint venture agreement with NTT, form SNMI and abolish

CSMG/FSD simply for the sole purpose of easing out a particular employee, such
as Astorga.Moreover, Astorga never denied that SMART offered her a supervisory
position in the Customer Care Department, but she refused the offer because the
position carried a lower salary rank and rate. If indeed SMART simply wanted to
get rid of her, it would not have offered her a position in any department in the
enterprise.
Astorga also states that the justification advanced by SMART is not true
because there was no compelling economic reason for redundancy. But contrary to
her claim, an employer is not precluded from adopting a new policy conducive to a
more economical and effective management even if it is not experiencing
economic reverses. Neither does the law require that the employer should suffer
financial losses before he can terminate the services of the employee on the ground
of redundancy. [37]
We agree with the CA that the organizational realignment introduced by
SMART, which culminated in the abolition of CSMG/FSD and termination of
Astorgas employment was an honest effort to make SMARTs sales and marketing
departments more efficient and competitive. As the CA had taken pains to
elucidate:
x x x a careful and assiduous review of the records will yield no other conclusion
than that the reorganization undertaken by SMART is for no purpose other than its
declared objective as a labor and cost savings device. Indeed, this Court finds no
fault in SMARTs decision to outsource the corporate sales market to SNMI in
order to attain greater productivity. [Astorga] belonged to the Sales Marketing
Group under the Fixed Services Division (CSMG/FSD), a distinct sales force of
SMART in charge of selling SMARTs telecommunications services to the
corporate market. SMART, to ensure it can respond quickly, efficiently and
flexibly to its customers requirement, abolished CSMG/FSD and shortly
thereafter assigned its functions to newly-created SNMI Multimedia Incorporated,
a joint venture company of SMART and NTT of Japan, for the reason that
CSMG/FSD does not have the necessary technical expertise required for the value
added services. By transferring the duties of CSMG/FSD to SNMI, SMART has
created a more competent and specialized organization to perform the work
required for corporate accounts. It is also relieved SMART of all administrative
costs management, time and money-needed in maintaining the CSMG/FSD. The
determination to outsource the duties of the CSMG/FSD to SNMI was, to Our
mind, a sound business judgment based on relevant criteria and is therefore a
legitimate exercise of management prerogative.

Indeed, out of our concern for those lesser circumstanced in life, this Court
has inclined towards the worker and upheld his cause in most of his conflicts with
his employer. This favored treatment is consonant with the social justice policy of
the Constitution. But while tilting the scales of justice in favor of workers, the
fundamental law also guarantees the right of the employer to reasonable returns for
his investment.[38] In this light, we must acknowledge the prerogative of the
employer to adopt such measures as will promote greater efficiency, reduce
overhead costs and enhance prospects of economic gains, albeit always within the
framework of existing laws. Accordingly, we sustain the reorganization and
redundancy program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the
mandated one (1) month notice prior to termination. The record is clear that
Astorga received the notice of termination only on March 16, 1998[39] or less than a
month prior to its effectivity on April 3, 1998. Likewise, the Department of Labor
and Employment was notified of the redundancy program only on March 6, 1998.
[40]

Article 283 of the Labor Code clearly provides:

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

SMARTs assertion that Astorga cannot complain of lack of notice because

the organizational realignment was made known to all the employees as early as
February 1998 fails to persuade. Astorgas actual knowledge of the reorganization
cannot replace the formal and written notice required by the law. In the written
notice, the employees are informed of the specific date of the termination, at least a
month prior to the effectivity of such termination, to give them sufficient time to
find other suitable employment or to make whatever arrangements are needed to

cushion the impact of termination. In this case, notwithstanding Astorgas

knowledge of the reorganization, she remained uncertain about the status of her
employment until SMART gave her formal notice of termination. But such notice
was received by Astorga barely two (2) weeks before the effective date of
termination, a period very much shorter than that required by law.
Be that as it may, this procedural infirmity would not render the termination
of Astorgas employment illegal. The validity of termination can exist
independently of the procedural infirmity of the dismissal. [41] In DAP Corporation
v. CA,[42] we found the dismissal of the employees therein valid and for authorized
cause even if the employer failed to comply with the notice requirement under
Article 283 of the Labor Code. This Court upheld the dismissal, but held the
employer liable for non-compliance with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining Astorgas
dismissal and at the same time, awarding indemnity for violation of Astorga's
statutory rights.
However, we find the need to modify, by increasing, the indemnity awarded
by the CA to Astorga, as a sanction on SMART for non-compliance with the onemonth mandatory notice requirement, in light of our ruling in Jaka Food
Processing Corporation v. Pacot,[43] viz.:
[I]f the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction to be
imposed upon him should be temperedbecause the dismissal process was, in
effect, initiated by an act imputable to the employee, and (2) if the dismissal is
based on an authorized cause under Article 283 but the employer failed to comply
with the notice requirement, the sanction should be stiffer because the dismissal
process was initiated by the employers exercise of his management prerogative.

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

As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled
to separation pay equivalent to at least one (1) month salary or to at least one (1)
months pay for every year of service, whichever is higher. The records show that

Astorgas length of service is less than a year. She is, therefore, also entitled to
separation pay equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from February
15, 1998. This assertion was never rebutted by SMART in the proceedings a
quo.No proof of payment was presented by SMART to disprove the allegation. It is
settled that in labor cases, the burden of proving payment of monetary claims rests
on the employer.[44] SMART failed to discharge the onus probandi. Accordingly, it
must be held liable for Astorgas salary from February 15, 1998 until the effective
date of her termination, on April 3, 1998.
However, the award of backwages to Astorga by the CA should be deleted
for lack of basis. Backwages is a relief given to an illegally dismissed
employee.Thus, before backwages may be granted, there must be a finding of
unjust or illegal dismissal from work.[45] The Labor Arbiter ruled that Astorga was
illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiters ruling
and categorically declared Astorgas dismissal valid. This ruling was affirmed by
the CA in its assailed Decision. Since Astorgas dismissal is for an authorized cause,
she is not entitled to backwages. The CAs award of backwages is totally
inconsistent with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No. 148132
is GRANTED. The February 28, 2000 Decision and the May 7, 2001 Resolution
of the Court of Appeals in CA-G.R. SP. No. 53831 are SET
ASIDE. The Regional Trial Court of Makati City, Branch 57 is DIRECTED to
proceed with the trial of Civil Case No. 98-1936 and render its Decision with
reasonable dispatch.
On the other hand, the petitions of SMART and Astorga docketed as G.R.
Nos. 151079 and 151372 are DENIED. The June 11, 2001 Decision and the
December 18, 2001 Resolution in CA-G.R. SP. No. 57065,
are AFFIRMED with MODIFICATION.
Astorga
is
declared
validly
dismissed. However, SMART is ordered to pay Astorga P50,000.00 as indemnity
for its non-compliance with procedural due process, her separation pay equivalent
to one (1) month pay, and her salary from February 15, 1998 until the effective

date of her termination on April 3, 1998. The award of backwages

is DELETED for lack of basis.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice
WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

RENATO C. CORONA
Associate Justice

RUBEN T. REYES
Associate Justice

AT T E S TAT I O N
I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

SECOND DIVISION
KENNETH HAO, Complainant,

A.M. No. P-07-2384

Present:

- versus -

ABE C. ANDRES, Sheriff IV,

Regional Trial Court, Branch
16,Davao City,
Respondent.

QUISUMBING, J., Chairperson,

TINGA,
REYES,
LEONARDO-DE CASTRO, and
BRION, JJ.
Promulgated:
June 18, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

RESOLUTION
QUISUMBING, J.:
Before us is an administrative complaint for gross neglect of duty, grave
abuse of authority (oppression) and violation of Republic Act No. 3019 [1] filed by

complainant Kenneth Hao against respondent Abe C. Andres, Sheriff IV of the

Regional Trial Court (RTC) of Davao City, Branch 16.
The antecedent facts are as follows:
Complainant Hao is one of the defendants in a civil case for replevin docketed as
Civil Case No. 31, 127-2005[2] entitled Zenaida Silver, doing trade and business
under the name and style ZHS Commercial v. Loreto Hao, Atty. Amado Cantos,
Kenneth Hao and John Does, pending before the RTC of Davao City, Branch 16.
On October 17, 2005, Judge Renato A. Fuentes[3] issued an Order of
Seizure[4] against 22 motor vehicles allegedly owned by the complainant. On the
strength of the said order, Andres was able to seize two of the subject motor
vehicles on October 17, 2005; four on October 18, 2005, and another three
on October 19, 2005, or a total of nine motor vehicles.[5]
In his Affidavit-Complaint[6] against Andres before the Office of the Court
Administrator (OCA), Hao alleged that Andres gave undue advantage
to ZenaidaSilver in the implementation of the order and that Andres seized the nine
motor vehicles in an oppressive manner. Hao also averred that Andres was
accompanied by unidentified armed personnel on board a military vehicle which
was excessive since there were no resistance from them. Hao also discovered that
the compound where the seized motor vehicles were placed is actually owned by
Silver.[7]
On October 21, 2005, in view of the approval of the complainants counterreplevin bond, Judge Emmanuel C. Carpio[8] ordered Andres to immediately cease
and desist from further implementing the order of seizure, and to return the seized
motor vehicles including its accessories to their lawful owners.[9]
However, on October 24, 2005, eight of the nine seized motor vehicles were
reported missing. In his report,[10] Andres stated that he was shocked to find that the
motor vehicles were already missing when he inspected it on October 22, 2005. He
narrated that on October 21, 2005, PO3 Rodrigo Despe, one of the policemen
guarding the subject motor vehicles, reported to him that a certain Nonoy entered
the compound and caused the duplication of the vehicles keys.[11] But Andres

claimed the motor vehicles were still intact when he inspected it on October 21,
2005.
Subsequently, Hao reported that three of the carnapped vehicles were recovered by
the police.[12] He then accused Andres of conspiring and conniving with
Atty.Oswaldo Macadangdang (Silvers counsel) and the policemen in
the carnapping of the motor vehicles. Hao also accused Andres of concealing the
depository receipts from them and pointed out that the depository receipts show
that Silver and Atty. Macadangdang were the ones who chose the policemen who
will guard the motor vehicles.
In his Comment[13] dated March 3, 2006, Andres vehemently denied violating Rep.
Act No. 3019 and committing gross neglect of duty.
Andres denied implementing the Order of Seizure in an oppressive manner. He said
he took the vehicles because they were the specific vehicles ordered to be seized
after checking their engine and chassis numbers. Andres likewise denied that he was
accompanied by military personnel in the implementation of the order. He claimed
that he was merely escorted by policemen pursuant to the directive of Police Senior
Supt. Catalino S. Cuy, Chief of the Davao City Police Office. Andres also
maintained that no form of harassment or oppression was committed during the
implementation of the order, claiming that the presence of the policemen was only
for the purpose of preserving peace and order, considering there were 22 motor
vehicles specified in the Order of Seizure. Andres added that he exercised no
discretion in the selection of the policemen who assisted in the implementation of
the order, much less of those who will guard the seized motor vehicles.
Andres disputed the allegation that he neglected his duty to safeguard the seized
vehicles by pointing out that he placed all the motor vehicles under police
watch. He added that the policemen had control of the compound where the seized
motor vehicles were kept.
Andres likewise contended that after the unauthorized duplication of the
vehicles keys was reported to him, he immediately advised the policemen on duty
to watch the motor vehicles closely.[14] He negated the speculations that he was

involved in the disappearance of the seized motor vehicles as he claims to be the

one who reported the incident to the court and the police.
As to the allegation of undisclosed depository receipts, Andres maintained that he
never denied the existence of the depository receipts. He said the existence of the
depository receipts was immediately made known on the same day that the subject
motor vehicles were discovered missing. He even used the same in the filing of
thecarnapping case against Silver and her co-conspirators.
Finally, Andres insisted that the guarding of properties under custodia legis by
policemen is not prohibited, but is even adopted by the court. Hence, he prays that
he be held not liable for the loss of the vehicles and that he be relieved of his duty
to return the vehicles.[15]
After the OCA recommended that the matter be investigated, we referred the case
to Executive Judge Renato A. Fuentes for investigation, report and
recommendation.[16]
In his Investigation Report[17] dated September 21, 2006, Judge Fuentes found
Andres guilty of serious negligence in the custody of the nine motor vehicles. He
recommended that Andres be suspended from office.
Judge Fuentes found numerous irregularities in the implementation of the writ
of replevin/order of seizure, to wit: (1) at the time of the implementation of the
writ, Andres knew that the vehicles to be seized were not in the names of any of
the parties to the case; (2) one vehicle was taken without the knowledge of its
owner, a certain Junard Escudero; (3) Andres allowed Atty. Macadangdang to get
a keymaster to duplicate the vehicles keys in order to take one motor vehicle; and
(4) Andres admitted that prior to the implementation of the writ of seizure, he
consulted Silver and Atty. Macadangdang regarding the implementation of the writ
and was accompanied by the latter in the course of the implementation. Judge
Fuentes observed that the motor vehicles were speedily seized without strictly
observing fairness and regularity in its implementation.[18]
Anent the safekeeping of the seized motor vehicles, Judge Fuentes pointed out
several instances where Andres lacked due diligence to wit: (1) the seized motor

vehicles were placed in a compound surrounded by an insufficiently locked seethrough fence; (2) three motor vehicles were left outside the compound; (3) Andres
turned over the key of the gate to the policemen guarding the motor vehicles; (4)
Andres does not even know the full name of the owner of the compound, who was
merely known to him as Gloria; (5) except for PO3 Despe and SPO4
Nelson Salcedo, the identities of the other policemen tapped to guard the
compound were unknown to Andres; (6) Andres also admitted that he only stayed
at least one hour each day from October 19-21, 2005 during his visits to the
compound; and (7) even after it was reported to him that a certain Nonoy entered
the compound and duplicated the keys of the motor vehicles, he did not exert his
best effort to look for that Nonoy and to confiscate the duplicated keys.[19]
Judge Fuentes also observed that Andres appeared to be more or less
accommodating to Silver and her counsel but hostile and uncooperative to the
complainant. He pointed out that Andres depended solely on Silver in the selection
of the policemen who would guard the seized motor vehicles. He added that even
the depository receipts were not turned over to the defendants/third-party claimants
in the replevin case but were in fact concealed from them. Andres also gave
inconsistent testimonies as to whether he has in his possession the depository
receipts.[20]
The OCA disagreed with the observations of Judge Fuentes. It recommended that
Andres be held liable only for simple neglect of duty and be suspended for one (1)
month and one (1) day.[21]
We adopt the recommendation of the investigating judge.
Being an officer of the court, Andres must be aware that there are well-defined
steps provided in the Rules of Court regarding the proper implementation of a writ
ofreplevin and/or an order of seizure. The Rules, likewise, is explicit on the duty of
the sheriff in its implementation. To recapitulate what should be common
knowledge to sheriffs, the pertinent provisions of Rule 60, of the Rules of Court
are quoted hereunder:
SEC. 4. Duty of the sheriff.Upon receiving such order, the sheriff must
serve a copy thereof on the adverse party, together with a copy of the

application, affidavit and bond, and must forthwith take the property,
if it be in the possession of the adverse party, or his agent, and retain
it in his custody. If the property or any part thereof be concealed in a
building or enclosure, the sheriff must demand its delivery, and if it be
not delivered, he must cause the building or enclosure to be broken open
and take the property into his possession. After the sheriff has taken
possession of the property as herein provided, he must keep it in a
secure place and shall be responsible for its delivery to the party
entitled thereto upon receiving his fees and necessary expenses for
taking and keeping the same. (Emphasis supplied.)
SEC. 6. Disposition of property by sheriff.If within five (5) days after
the taking of the property by the sheriff, the adverse party does not
object to the sufficiency of the bond, or of the surety or sureties thereon;
or if the adverse party so objects and the court affirms its approval of the
applicants bond or approves a new bond, or if the adverse party requires
the return of the property but his bond is objected to and found insufficient
and he does not forthwith file an approved bond, the property shall be
delivered to the applicant. If for any reason the property is not delivered to
the applicant, the sheriff must return it to the adverse party. (Emphasis
supplied.)

First, the rules provide that property seized under a writ of replevin is not to be
delivered immediately to the plaintiff.[22] In accordance with the said rules, Andres
should have waited no less than five days in order to give the complainant an
opportunity to object to the sufficiency of the bond or of the surety or sureties
thereon, or require the return of the seized motor vehicles by filing a counterbond. This, he failed to do.
Records show that Andres took possession of two of the subject motor
vehicles on October 17, 2005, four on October 18, 2005, and another three
on October 19, 2005. Simultaneously, as evidenced by the depository receipts,
on October 18, 2005, Silver received from Andres six of the seized motor vehicles,
and three more motor vehicles on October 19, 2005. Consequently, there is no
question that Silver was already in possession of the nine seized vehicles
immediately after seizure, or no more than three days after the taking of the
vehicles. Thus, Andres committed a clear violation of Section 6, Rule 60 of the
Rules of Court with regard to the proper disposal of the property.

It matters not that Silver was in possession of the seized vehicles merely for
safekeeping as stated in the depository receipts. The rule is clear that the property
seized should not be immediately delivered to the plaintiff, and the sheriff must
retain custody of the seized property for at least five days. [23] Hence, the act of
Andres in delivering the seized vehicles immediately after seizure to Silver for
whatever purpose, without observing the five-day requirement finds no legal
justification.
In Pardo v. Velasco,[24] this Court held that
Respondent as an officer of the Court is charged with certain
ministerial duties which must be performed faithfully to the letter. Every
provision in the Revised Rules of Court has a specific reason or
objective. In this case, the purpose of the five (5) days is to give a
chance to the defendant to object to the sufficiency of the bond or
the surety or sureties thereon or require the return of the property
by filing a counterbond.[25] (Emphasis supplied.)

In Sebastian v. Valino,[26] this Court reiterated that

Under the Revised Rules of Court, the property seized under a
writ of replevin is not to be delivered immediately to the
plaintiff. The sheriff must retain it in his custody for five days and he
shall return it to the defendant, if the latter, as in the instant case, requires
its return and files a counterbond.[27] (Emphasis supplied.)

Likewise, Andres claim that he had no knowledge that the compound is

owned by Silver fails to convince us. Regardless of who actually owns the
compound, the fact remains that Andres delivered the vehicles to Silver
prematurely. It violates the rule requiring him to safekeep the vehicles in his
custody.[28] The alleged lack of facility to store the seized vehicles is unacceptable
considering that he should have deposited the same in a bonded warehouse. If this
was not feasible, he should have sought prior authorization from the court issuing
the writ before delivering the vehicles to Silver.
Second, it must be stressed that from the moment an order of delivery
in replevin is executed by taking possession of the property specified therein, such
property is in custodia legis. As legal custodian, it is Andres duty to safekeep the

seized motor vehicles. Hence, when he passed his duty to safeguard the motor
vehicles to Silver, he committed a clear neglect of duty.
Third, we are appalled that even after PO3 Despe reported the unauthorized
duplication of the vehicles keys, Andres failed to take extra precautionary
measures to ensure the safety of the vehicles. It is obvious that the vehicles were
put at risk by the unauthorized duplication of the keys of the vehicles. Neither did
he immediately report the incident to the police or to the court. The loss of the
motor vehicles could have been prevented if Andres immediately asked the court
for an order to transfer the vehicles to another secured place as soon as he
discovered the unauthorized duplication. Under these circumstances, even an
ordinary prudent man would have exercised extra diligence. His warning to the
policemen to closely watch the vehicles was insufficient. Andres cannot toss back
to Silver or to the policemen the responsibility for the loss of the motor vehicles
since he remains chiefly responsible for their safekeeping as legal custodian
thereof. Indeed, Andres failure to take the necessary precaution and proper
monitoring of the vehicles to ensure its safety constitutes plain negligence.
Fourth, despite the cease and desist order, Andres failed to return the motor
vehicles to their lawful owners. Instead of returning the motor vehicles
immediately as directed, he opted to write Silver and demand that she put up an
indemnity bond to secure the third-party claims. Consequently, due to his delay, the
eventual loss of the motor vehicles rendered the order to return the seized vehicles
ineffectual to the prejudice of the complaining owners.
It must be stressed that as court custodian, it was Andres responsibility to
ensure that the motor vehicles were safely kept and that the same were readily
available upon order of the court or demand of the parties concerned. Specifically,
sheriffs, being ranking officers of the court and agents of the law, must discharge
their duties with great care and diligence. In serving and implementing court writs,
as well as processes and orders of the court, they cannot afford to err without
affecting adversely the proper dispensation of justice. Sheriffs play an important
role in the administration of justice and as agents of the law, high standards of
performance are expected of them. [29] Hence, his failure to return the motor
vehicles at the time when its return was still feasible constitutes another instance of
neglect of duty.

Fifth, as found by the OCA, we agree that Andres also disregarded the
provisions of Rule 141[30] of the Rules of Court with regard to payment of
expenses.
Under Section 9,[31] Rule 141 of the Rules of Court, the procedure for the
execution of writs and other processes are: First, the sheriff must make an estimate
of the expenses to be incurred by him; Second, he must obtain court approval for
such estimated expenses; Third, the approved estimated expenses shall be
deposited by the interested party with the Clerk of Court and ex officio sheriff;
Fourth, the Clerk of Court shall disburse the amount to the executing sheriff; and
Fifth, the executing sheriff shall liquidate his expenses within the same period for
rendering a return on the writ.
In this case, no estimate of sheriffs expenses was submitted to the court by
Andres. Without approval of the court, he also allowed Silver to pay directly to the
policemen the expenses for the safeguarding of the motor vehicles including their
meals.[32] Obviously, this practice departed from the accepted procedure provided
in the Rules of Court.
In view of the foregoing, there is no doubt that Andres failed to live up to the
standards required of his position. The number of instances that Andres strayed
from the regular course observed in the proper implementation of the orders of the
court cannot be countenanced. Thus, taking into account the numerous times he
was found negligent and careless of his duties coupled with his utter disregard of
legal procedures, he cannot be considered guilty merely of simple negligence. His
acts constitute gross negligence.
As we have previously ruled:
Gross negligence refers to negligence characterized by the want
of even slight care, acting or omitting to act in a situation where
there is a duty to act, not inadvertently but willfully and
intentionally, with a conscious indifference to consequences in so far
as other persons may be affected. It is the omission of that care
which even inattentive and thoughtless men never fail to take on
their own property.[33] (Emphasis supplied.)

Gross neglect, on the other hand, is such neglect from the gravity of
the case, or the frequency of instances, becomes so serious in its
character as to endanger or threaten the public welfare. The term
does not necessarily include willful neglect or intentional official
wrongdoing.[34] (Emphasis supplied.)

Good faith on the part of Andres, or lack of it, in proceeding to properly

execute his mandate would be of no moment, for he is chargeable with the
knowledge that being an officer of the court tasked therefor, it behooves him to
make due compliance. He is expected to live up to the exacting standards of his
office and his conduct must at all times be characterized by rectitude and
forthrightness, and so above suspicion and mistrust as well. [35] Thus, an act of gross
neglect resulting in loss of properties in custodia legis ruins the confidence lodged
by the parties to a suit or the citizenry in our judicial process. Those responsible for
such act or omission cannot escape the disciplinary power of this Court.
Anent the allegation of grave abuse of authority (oppression), we likewise
agree with the observations of the investigating judge. Records show that Andres
started enforcing the writ of replevin/order of seizure on the same day that the
order of seizure was issued. He also admitted that he took the vehicles of persons
who are not parties to the replevin case.[36] He further admitted that he took one
vehicle belonging to a certain Junard Escudero without the latters knowledge and
even caused the duplication of its keys in order that it may be taken by Andres.
[37]
Certainly, these are indications that Andres enforced the order of seizure with
undue haste and without giving the complainant prior notice or reasonable time to
deliver the motor vehicles. Hence, Andres is guilty of grave abuse of authority
(oppression).
When a writ is placed in the hands of a sheriff, it is his duty, in the absence
of any instructions to the contrary, to proceed with reasonable celerity and
promptness to execute it according to its mandate. However, the prompt
implementation of an order of seizure is called for only in instances where there is
no question regarding the right of the plaintiff to the property.[38] Where there is
such a question, the prudent recourse for Andres is to desist from executing the
order and convey the information to his judge and to the plaintiff.

True, sheriffs must comply with their mandated ministerial duty to implement
writs promptly and expeditiously, but equally true is the principle that sheriffs by the
nature of their functions must at all times conduct themselves with propriety and
decorum and act above suspicion. There must be no room for anyone to conjecture
that sheriffs and deputy sheriffs as officers of the court have conspired with any of the
parties to a case to obtain a favorable judgment or immediate execution. The sheriff is
at the front line as representative of the judiciary and by his act he may build or
destroy the institution.[39]
However, as to the charge of graft and corruption, it must be stressed that the
same is criminal in nature, thus, the resolution thereof cannot be threshed out in the
instant administrative proceeding. We also take note that there is a pending
criminal case for carnapping against Andres;[40] hence, with more reason that we
cannot rule on the allegation of graft and corruption as it may preempt the court in
its resolution of the said case.
We come to the matter of penalties. The imposable penalty for gross neglect
of duty is dismissal. While the penalty imposable for grave abuse of authority
(oppression) is suspension for six (6) months one (1) day to one (1) year.[41] Section
55, Rule IV, of the Uniform Rules on Administrative Cases in the Civil
Serviceprovides that if the respondent is found guilty of two or more charges or
counts, the penalty to be imposed should be that corresponding to the most serious
charge or count and the rest shall be considered as aggravating circumstances.
In the instant case, the penalty for the more serious offense which is
dismissal should be imposed on Andres. However, following Sections 53[42] and 54,
[43]
Rule IV of the Uniform Rules on Administrative Cases in the Civil Service, we
have to consider that Andres is a first-time offender; hence, a lighter penalty than
dismissal from the service would suffice. Consequently, instead of imposing the
penalty of dismissal, the penalty of suspension from office for one (1) year without
pay is proper for gross neglect of duty, and another six (6) months should be added
for the aggravating circumstance of grave abuse of authority (oppression).
WHEREFORE, the Court finds Abe C. Andres, Sheriff IV, RTC
of Davao City, Branch 16, GUILTY of gross neglect of duty and grave abuse of
authority(oppression) and is SUSPENDED for one (1) year and six (6) months

without pay. He is also hereby WARNED that a repetition of the same or similar
offenses in the future shall be dealt with more severely.
SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice

WE CONCUR:

DANTE O. TINGA
Associate Justice

RUBEN T. REYES
Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ARTURO D. BRION
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
G.R. No. 153788

November 27, 2009

ROGER V. NAVARRO, Petitioner,

vs.
HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and
KAREN T. GO, doing business under the name KARGO ENTERPRISES, Respondents.
DECISION
BRION, J.:

This is a petition for review on certiorari1 that seeks to set aside the Court of Appeals (CA)
Decision2 dated October 16, 2001 and Resolution 3 dated May 29, 2002 in CA-G.R. SP. No. 64701.
These CA rulings affirmed the July 26, 2000 4 and March 7, 20015 orders of the Regional Trial Court
(RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarros (Navarro)
motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos.
98-599 (first complaint)6 and 98-598 (second complaint), 7 before the RTC for replevin and/or sum of
money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue
writs of replevin for the seizure of two (2) motor vehicles in Navarros possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident
of Cagayan de Oro City and doing business under the trade name KARGO ENTERPRISES,
an entity duly registered and existing under and by virtue of the laws of the Republic of the
Philippines, which has its business address at Bulua, Cagayan de Oro City; that defendant
ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth,
Cagayan de Oro City, where he may be served with summons and other processes of the
Honorable Court; that defendant "JOHN DOE" whose real name and address are at present
unknown to plaintiff is hereby joined as party defendant as he may be the person in whose
possession and custody the personal property subject matter of this suit may be found if the
same is not in the possession of defendant ROGER NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among others, buying and selling
motor vehicles, including hauling trucks and other heavy equipment;
3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that
on August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle which is
more particularly described as follows
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and
between KARGO ENTERPRISES, then represented by its Manager, the aforementioned GLENN O.
GO, and defendant ROGER NAVARRO xxx; that in accordance with the provisions of the above
LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO delivered
unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND THREE
HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were supposedly in payment of
the agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF
COMMUNICATIONS CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113,
respectively dated January 8, 1998 and February 8, 1998, were presented for payment and/or credit,
the same were dishonored and/or returned by the drawee bank for the common reason that the
current deposit account against which the said checks were issued did not have sufficient funds to
cover the amounts thereof; that the total amount of the two (2) checks, i.e. the sum of ONE
HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66)

therefore represents the principal liability of defendant ROGER NAVARRO unto plaintiff on the basis
of the provisions of the above LEASE AGREEMENT WITH RIGHT TO PURCHASE; that demands,
written and oral, were made of defendant ROGER NAVARRO to pay the amount of ONE HUNDRED
THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return
the subject motor vehicle as also provided for in the LEASE AGREEMENT WITH RIGHT TO
PURCHASE, but said demands were, and still are, in vain to the great damage and injury of herein
plaintiff; xxx
4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine
pursuant to law, or seized under an execution or an attachment as against herein plaintiff;
xxx
8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate
delivery of the above-described motor vehicle from defendants unto plaintiff pending the final
determination of this case on the merits and, for that purpose, there is attached hereto an affidavit
duly executed and bond double the value of the personal property subject matter hereof to answer
for damages and costs which defendants may suffer in the event that the order for replevin prayed
for may be found out to having not been properly issued.
The second complaint contained essentially the same allegations as the first complaint, except that
the Lease Agreement with Option to Purchase involved is dated October 1, 1997 and the motor
vehicle leased is described as follows:
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-dated checks, each for the
amount ofP100,000.00, to Karen Go in payment of the agreed rentals; however, the third check was
dishonored when presented for payment. 8
On October 12, 19989 and October 14, 1998,10 the RTC issued writs of replevin for both cases; as a
result, the Sheriff seized the two vehicles and delivered them to the possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no
cause of action, since Karen Go was not a party to the Lease Agreements with Option to Purchase
(collectively, the lease agreements) the actionable documents on which the complaints were
based.
On Navarros motion, both cases were duly consolidated on December 13, 1999.
In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state
a cause of action.
In response to the motion for reconsideration Karen Go filed dated May 26, 2000, 11 the RTC issued
another order dated July 26, 2000 setting aside the order of dismissal. Acting on the presumption
that Glenn Gos leasing business is a conjugal property, the RTC held that Karen Go had sufficient
interest in his leasing business to file the action against Navarro. However, the RTC held that Karen
Go should have included her husband, Glenn Go, in the complaint based on Section 4, Rule 3 of the

Rules of Court (Rules).12 Thus, the lower court ordered Karen Go to file a motion for the inclusion of
Glenn Go as co-plaintiff.
1avvphi1

When the RTC denied Navarros motion for reconsideration on March 7, 2001, Navarro filed a
petition for certiorari with the CA, essentially contending that the RTC committed grave abuse of
discretion when it reconsidered the dismissal of the case and directed Karen Go to amend her
complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a complaint
which failed to state a cause of action could not be converted into one with a cause of action by
mere amendment or supplemental pleading.
On October 16, 2001, the CA denied Navarros petition and affirmed the RTCs order.13 The CA also
denied Navarros motion for reconsideration in its resolution of May 29, 2002, 14 leading to the filing of
the present petition.
THE PETITION
Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it
did not have the requisite juridical personality to sue, the actual parties to the agreement are himself
and Glenn Go. Since it was Karen Go who filed the complaints and not Glenn Go, she was not a real
party-in-interest and the complaints failed to state a cause of action.
Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn
Go as a co-plaintiff, instead of dismissing the complaint outright because a complaint which does not
state a cause of action cannot be converted into one with a cause of action by a mere amendment or
a supplemental pleading. In effect, the lower court created a cause of action for Karen Go when
there was none at the time she filed the complaints.
Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the
theory of the complaints, to his great prejudice. Navarro claims that the lower court gravely abused
its discretion when it assumed that the leased vehicles are part of the conjugal property of Glenn and
Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of the
complaint are her paraphernal properties and the RTC gravely erred when it ordered the inclusion of
Glenn Go as a co-plaintiff.
Navarro likewise faults the lower court for setting the trial of the case in the same order that required
Karen Go to amend her complaints, claiming that by issuing this order, the trial court violated Rule
10 of the Rules.
Even assuming the complaints stated a cause of action against him, Navarro maintains that the
complaints were premature because no prior demand was made on him to comply with the
provisions of the lease agreements before the complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints,
the vehicles were illegally seized from his possession and should be returned to him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real
interest in the subject of the complaint, even if the lease agreements were signed only by her
husband, Glenn Go; she is the owner of Kargo Enterprises and Glenn Go signed the lease
agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that
Navarros insistence that Kargo Enterprises is Karen Gos paraphernal property is without basis.
Based on the law and jurisprudence on the matter, all property acquired during the marriage is

presumed to be conjugal property. Finally, Karen Go insists that her complaints sufficiently
established a cause of action against Navarro. Thus, when the RTC ordered her to include her
husband as co-plaintiff, this was merely to comply with the rule that spouses should sue jointly, and
was not meant to cure the complaints lack of cause of action.
THE COURTS RULING
We find the petition devoid of merit.
Karen Go is the real party-in-interest
The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the
name of the real party-in-interest, i.e., the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. 15
Interestingly, although Navarro admits that Karen Go is the registered owner of the business name
Kargo Enterprises, he still insists that Karen Go is not a real party-in-interest in the case. According
to Navarro, while the lease contracts were in Kargo Enterprises name, this was merely a trade name
without a juridical personality, so the actual parties to the lease agreements were Navarro and Glenn
Go, to the exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered
the inclusion of Glenn Go as co-plaintiff, since this in effect created a cause of action for the
complaints when in truth, there was none.
We do not find Navarros arguments persuasive.
The central factor in appreciating the issues presented in this case is the business name Kargo
Enterprises. The name appears in the title of the Complaint where the plaintiff was identified as
"KAREN T. GO doing business under the name KARGO ENTERPRISES," and this identification was
repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO
ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant "leased
from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the Complaint
specifies and attaches as its integral part the Lease Agreement that underlies the transaction
between the plaintiff and the defendant. Again, the name KARGO ENTERPRISES entered the
picture as this Lease Agreement provides:
This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the
LESSOR-SELLER; representing KARGO ENTERPRISES as its Manager,
xxx
thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented.
In other words, by the express terms of this Lease Agreement, Glenn Go did sign the agreement
only as the manager of Kargo Enterprises and the latter is clearly the real party to the lease
agreements.
As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural
person, nor a juridical person, as defined by Article 44 of the Civil Code:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose, created by law;
their personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the
law grants a juridical personality, separate and distinct from that of each shareholder, partner
or member.
Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises cannot be a party to a civil
action. This legal reality leads to the question: who then is the proper party to file an action based on
a contract in the name of Kargo Enterprises?
We faced a similar question in Juasing Hardware v. Mendoza, 17 where we said:
Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law
merely recognizes the existence of a sole proprietorship as a form of business organization
conducted for profit by a single individual, and requires the proprietor or owner thereof to secure
licenses and permits, register the business name, and pay taxes to the national government. It does
not vest juridical or legal personality upon the sole proprietorship nor empower it to file or defend an
action in court.
Thus, the complaint in the court below should have been filed in the name of the owner of Juasing
Hardware. The allegation in the body of the complaint would show that the suit is brought by such
person as proprietor or owner of the business conducted under the name and style Juasing
Hardware. The descriptive words "doing business as Juasing Hardware" may be added to the title of
the case, as is customarily done. 18 [Emphasis supplied.]
This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:
SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized
by law or these Rules, every action must be prosecuted or defended in the name of the real party in
interest.
As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or
be injured by a judgment in this case. Thus, contrary to Navarros contention, Karen Go is the real
party-in-interest, and it is legally incorrect to say that her Complaint does not state a cause of action
because her name did not appear in the Lease Agreement that her husband signed in behalf of
Kargo Enterprises. Whether Glenn Go can legally sign the Lease Agreement in his capacity as a
manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, as this is a
matter for the trial court to consider in a trial on the merits.
Glenn Gos Role in the Case
We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go, 19 who
described herself in the Complaints to be "a Filipino, of legal age, married to GLENN O. GO, a
resident of Cagayan de Oro City, and doing business under the trade name KARGO
ENTERPRISES."20 That Glenn Go and Karen Go are married to each other is a fact never brought in

issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of a
married woman, a fact material to the side issue of whether Kargo Enterprises and its properties are
paraphernal or conjugal properties. To restate the parties positions, Navarro alleges that Kargo
Enterprises is Karen Gos paraphernal property, emphasizing the fact that the business is registered
solely in Karen Gos name. On the other hand, Karen Go contends that while the business is
registered in her name, it is in fact part of their conjugal property.
The registration of the trade name in the name of one person a woman does not necessarily lead
to the conclusion that the trade name as a property is hers alone, particularly when the woman is
married. By law, all property acquired during the marriage, whether the acquisition appears to have
been made, contracted or registered in the name of one or both spouses, is presumed to be
conjugal unless the contrary is proved. 21 Our examination of the records of the case does not show
any proof that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all,
only the bare allegation of Navarro to this effect exists in the records of the case. As we emphasized
in Castro v. Miat:22
Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the
marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to
the husband or to the wife." This article does not require proof that the property was acquired
with funds of the partnership.The presumption applies even when the manner in which the
property was acquired does not appear.23[Emphasis supplied.]
Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a
sole proprietorship is conjugal or paraphernal property, we hold that it is conjugal property.
Article 124 of the Family Code, on the administration of the conjugal property, provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong
to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which must be availed of within five years from
the date of the contract implementing such decision.
xxx
This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in
managing their conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain
the consent of the other before performing an act of administration or any act that does not dispose
of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the
contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or
by the spouses in their marriage settlements. In other words, the property relations of the husband
and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family
Code and, suppletorily, by the spouses marriage settlement and by the rules on partnership under
the Civil Code. In the absence of any evidence of a marriage settlement between the spouses Go,
we look at the Civil Code provision on partnership for guidance.
A rule on partnership applicable to the spouses circumstances is Article 1811 of the Civil Code,
which states:
Art. 1811. A partner is a co-owner with the other partners of specific partnership property.

The incidents of this co-ownership are such that:

(1) A partner, subject to the provisions of this Title and to any agreement between the partners, has
an equal right with his partners to possess specific partnership property for partnership
purposes; xxx
Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the
properties registered under this name; hence, both have an equal right to seek possession of these
properties. Applying Article 484 of the Civil Code, which states that "in default of contracts, or special
provisions, co-ownership shall be governed by the provisions of this Title," we find further support in
Article 487 of the Civil Code that allows any of the co-owners to bring an action in ejectment with
respect to the co-owned property.
While ejectment is normally associated with actions involving real property, we find that this rule can
be applied to the circumstances of the present case, following our ruling in Carandang v. Heirs of De
Guzman.24 In this case, one spouse filed an action for the recovery of credit, a personal property
considered conjugal property, without including the other spouse in the action. In resolving the issue
of whether the other spouse was required to be included as a co-plaintiff in the action for the
recovery of the credit, we said:
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the
spouses Carandang, seems to be either an indispensable or a necessary party. If she is an
indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is not
warranted, whether or not there was an order for her inclusion in the complaint pursuant to Section
9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all
that is not in conflict with what is expressly determined in this Chapter or by the spouses in their
marriage settlements.
This provision is practically the same as the Civil Code provision it superseded:
Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all
that is not in conflict with what is expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with the
other partners of specific partnership property." Taken with the presumption of the conjugal nature of
the funds used to finance the four checks used to pay for petitioners stock subscriptions, and with
the presumption that the credits themselves are part of conjugal funds, Article 1811 makes Quirino
and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an
action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan,
we held that, in a co-ownership, co-owners may bring actions for the recovery of co-owned property
without the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumed
to have been filed for the benefit of his co-owners. In the latter case and in that of De Guia v. Court
of Appeals, we also held that Article 487 of the Civil Code, which provides that any of the co-owners
may bring an action for ejectment, covers all kinds of action for the recovery of possession.

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to
Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, any
kind of action, for the recovery of co-owned properties. Therefore, only one of the co-owners, namely
the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party
thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for
a complete relief can be accorded in the suit even without their participation, since the suit is
presumed to have been filed for the benefit of all co-owners. 25[Emphasis supplied.]
Under this ruling, either of the spouses Go may bring an action against Navarro to recover
possession of the Kargo Enterprises-leased vehicles which they co-own. This conclusion is
consistent with Article 124 of the Family Code, supporting as it does the position that either spouse
may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the
property in question without the other spouses consent.
On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to
recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to
the suit, based on Section 4, Rule 4 of the Rules, which states:
Section 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided
by law.
Non-joinder of indispensable parties not ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of
cases26 that the misjoinder or non-joinder of indispensable parties in a complaint is not a ground for
dismissal of action. As we stated in Macababbad v. Masirag: 27
Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is
a ground for the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground
for dismissal of an action. Parties may be dropped or added by order of the court on motion of any
party or on its own initiative at any stage of the action and on such terms as are just. Any claim
against a misjoined party may be severed and proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead
the indispensable party at any stage of the action. The court, either motu proprio or upon the motion
of a party, may order the inclusion of the indispensable party or give the plaintiff opportunity to
amend his complaint in order to include indispensable parties. If the plaintiff to whom the order to
include the indispensable party is directed refuses to comply with the order of the court, the
complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only
upon unjustified failure or refusal to obey the order to include or to amend is the action dismissed.
In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a
party plaintiff is fully in order.
Demand not required prior
to filing of replevin action
In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro
apparently likens a replevin action to an unlawful detainer.

For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant
to Section 2, Rule 60 of the Rules, which states:
Sec. 2. Affidavit and bond.
The applicant must show by his own affidavit or that of some other person who personally knows the
facts:
(a) That the applicant is the owner of the property claimed, particularly describing it, or is
entitled to the possession thereof;
(b) That the property is wrongfully detained by the adverse party, alleging the cause of
detention thereof according to the best of his knowledge, information, and belief;
(c) That the property has not been distrained or taken for a tax assessment or a fine
pursuant to law, or seized under a writ of execution or preliminary attachment, or otherwise
placed under custodia legis, or if so seized, that it is exempt from such seizure or custody;
and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the adverse party in double the value of the
property as stated in the affidavit aforementioned, for the return of the property to the adverse party
if such return be adjudged, and for the payment to the adverse party of such sum as he may recover
from the applicant in the action.
We see nothing in these provisions which requires the applicant to make a prior demand on the
possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is not
a condition precedent to an action for a writ of replevin.
More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as
he has already admitted in his Answers that he had received the letters that Karen Go sent him,
demanding that he either pay his unpaid obligations or return the leased motor vehicles. Navarros
position that a demand is necessary and has not been made is therefore totally unmeritorious.
WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs
against petitioner Roger V. Navarro.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ROBERTO A. ABAD
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it
is hereby certified that the conclusions in the above Decision were reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 182963

June 3, 2013

SPOUSES DEO AGNER and MARICON AGNER, Petitioners,

vs.
BPI FAMILY SAVINGS BANK, INC., Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari assailing the April 30, 2007 Decision 1 and May 19, 2008
Resolution2of the Court of Appeals in CAG.R. CV No. 86021, which affirmed the August 11, 2005
Decision3 of the Regional Trial Court, Branch 33, Manila City.
On February 15, 2001, petitioners spouses Deo Agner and Maricon Agner executed a Promissory
Note with Chattel Mortgage in favor of Citimotors, Inc. The contract provides, among others, that: for
receiving the amount of Php834, 768.00, petitioners shall pay Php 17,391.00 every 15th day of each
succeeding month until fully paid; the loan is secured by a 2001 Mitsubishi Adventure Super Sport;
and an interest of 6% per month shall be imposed for failure to pay each installment on or before the
stated due date.4

On the same day, Citimotors, Inc. assigned all its rights, title and interests in the Promissory Note
with Chattel Mortgage to ABN AMRO Savings Bank, Inc. (ABN AMRO), which, on May 31, 2002,
likewise assigned the same to respondent BPI Family Savings Bank, Inc.5
For failure to pay four successive installments from May 15, 2002 to August 15, 2002, respondent,
through counsel, sent to petitioners a demand letter dated August 29, 2002, declaring the entire
obligation as due and demandable and requiring to pay Php576,664.04, or surrender the mortgaged
vehicle immediately upon receiving the letter.6 As the demand was left unheeded, respondent filed
on October 4, 2002 an action for Replevin and Damages before the Manila Regional Trial Court
(RTC).
A writ of replevin was issued.7 Despite this, the subject vehicle was not seized.8 Trial on the merits
ensued. On August 11, 2005, the Manila RTC Br. 33 ruled for the respondent and ordered petitioners
to jointly and severally pay the amount of Php576,664.04 plus interest at the rate of 72% per annum
from August 20, 2002 until fully paid, and the costs of suit.
Petitioners appealed the decision to the Court of Appeals (CA), but the CA affirmed the lower courts
decision and, subsequently, denied the motion for reconsideration; hence, this petition.
Before this Court, petitioners argue that: (1) respondent has no cause of action, because the Deed
of Assignment executed in its favor did not specifically mention ABN AMROs account receivable
from petitioners; (2) petitioners cannot be considered to have defaulted in payment for lack of
competent proof that they received the demand letter; and (3) respondents remedy of resorting to
both actions of replevin and collection of sum of money is contrary to the provision of Article 1484 9 of
the Civil Code and the Elisco Tool Manufacturing Corporation v. Court of Appeals 10 ruling.
The contentions are untenable.
With respect to the first issue, it would be sufficient to state that the matter surrounding the Deed of
Assignment had already been considered by the trial court and the CA. Likewise, it is an issue of fact
that is not a proper subject of a petition for review under Rule 45. An issue is factual when the doubt
or difference arises as to the truth or falsehood of alleged facts, or when the query invites calibration
of the whole evidence, considering mainly the credibility of witnesses, existence and relevancy of
specific surrounding circumstances, their relation to each other and to the whole, and the
probabilities of the situation.11 Time and again, We stress that this Court is not a trier of facts and
generally does not weigh anew evidence which lower courts have passed upon.
As to the second issue, records bear that both verbal and written demands were in fact made by
respondent prior to the institution of the case against petitioners. 12 Even assuming, for arguments
sake, that no demand letter was sent by respondent, there is really no need for it because petitioners
legally waived the necessity of notice or demand in the Promissory Note with Chattel Mortgage,
which they voluntarily and knowingly signed in favor of respondents predecessor-in-interest. Said
contract expressly stipulates:
In case of my/our failure to pay when due and payable, any sum which I/We are obliged to pay
under this note and/or any other obligation which I/We or any of us may now or in the future owe to
the holder of this note or to any other party whether as principal or guarantor x x x then the entire
sum outstanding under this note shall, without prior notice or demand, immediately become due and
payable. (Emphasis and underscoring supplied)
A provision on waiver of notice or demand has been recognized as legal and valid in Bank of the
Philippine Islands v. Court of Appeals,13 wherein We held:

The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time the
obligor demands the fulfillment of the obligation from the obligee. However, the law expressly
provides that demand is not necessary under certain circumstances, and one of these
circumstances is when the parties expressly waive demand. Hence, since the co-signors expressly
waived demand in the promissory notes, demand was unnecessary for them to be in default. 14
Further, the Court even ruled in Navarro v. Escobido15 that prior demand is not a condition precedent
to an action for a writ of replevin, since there is nothing in Section 2, Rule 60 of the Rules of Court
that requires the applicant to make a demand on the possessor of the property before an action for a
writ of replevin could be filed.
Also, petitioners representation that they have not received a demand letter is completely
inconsequential as the mere act of sending it would suffice. Again, We look into the Promissory Note
with Chattel Mortgage, which provides:
All correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or
notifications of any judicial or extrajudicial action shall be sent to the MORTGAGOR at the address
indicated on this promissory note with chattel mortgage or at the address that may hereafter be
given in writing by the MORTGAGOR to the MORTGAGEE or his/its assignee. The mere act of
sending any correspondence by mail or by personal delivery to the said address shall be valid and
effective notice to the mortgagor for all legal purposes and the fact that any communication is not
actually received by the MORTGAGOR or that it has been returned unclaimed to the MORTGAGEE
or that no person was found at the address given, or that the address is fictitious or cannot be
located shall not excuse or relieve the MORTGAGOR from the effects of such notice. 16 (Emphasis
and underscoring supplied)
The Court cannot yield to petitioners denial in receiving respondents demand letter. To note, their
postal address evidently remained unchanged from the time they executed the Promissory Note with
Chattel Mortgage up to time the case was filed against them. Thus, the presumption that "a letter
duly directed and mailed was received in the regular course of the mail" 17 stands in the absence of
satisfactory proof to the contrary.
Petitioners cannot find succour from Ting v. Court of Appeals 18 simply because it pertained to
violation of Batas Pambansa Blg. 22 or the Bouncing Checks Law. As a higher quantum of proof
that is, proof beyond reasonable doubt is required in view of the criminal nature of the case, We
found insufficient the mere presentation of a copy of the demand letter allegedly sent through
registered mail and its corresponding registry receipt as proof of receiving the notice of dishonor.
Perusing over the records, what is clear is that petitioners did not take advantage of all the
opportunities to present their evidence in the proceedings before the courts below. They miserably
failed to produce the original cash deposit slips proving payment of the monthly amortizations in
question. Not even a photocopy of the alleged proof of payment was appended to their Answer or
shown during the trial. Neither have they demonstrated any written requests to respondent to furnish
them with official receipts or a statement of account. Worse, petitioners were not able to make a
formal offer of evidence considering that they have not marked any documentary evidence during
the presentation of Deo Agners testimony.19
Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of proving it; the
burden rests on the defendant to prove payment, rather than on the plaintiff to prove nonpayment.20 When the creditor is in possession of the document of credit, proof of non-payment is not
needed for it is presumed.21 Respondent's possession of the Promissory Note with Chattel Mortgage

strongly buttresses its claim that the obligation has not been extinguished. As held in Bank of the
Philippine Islands v. Spouses Royeca:22
x x x The creditor's possession of the evidence of debt is proof that the debt has not been
discharged by payment. A promissory note in the hands of the creditor is a proof of indebtedness
rather than proof of payment. In an action for replevin by a mortgagee, it is prima facie evidence that
the promissory note has not been paid. Likewise, an uncanceled mortgage in the possession of the
mortgagee gives rise to the presumption that the mortgage debt is unpaid. 23
Indeed, when the existence of a debt is fully established by the evidence contained in the record, the
burden of proving that it has been extinguished by payment devolves upon the debtor who offers
such defense to the claim of the creditor.24 The debtor has the burden of showing with legal certainty
that the obligation has been discharged by payment. 25
Lastly, there is no violation of Article 1484 of the Civil Code and the Courts decision in Elisco Tool
Manufacturing Corporation v. Court of Appeals. 26
In Elisco, petitioner's complaint contained the following prayer:
WHEREFORE, plaintiffs pray that judgment be rendered as follows:
ON THE FIRST CAUSE OF ACTION
Ordering defendant Rolando Lantan to pay the plaintiff the sum of P39,054.86 plus legal interest
from the date of demand until the whole obligation is fully paid;
ON THE SECOND CAUSE OF ACTION
To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more particularly
described in paragraph 3 of the Complaint, from defendant Rolando Lantan and/or defendants Rina
Lantan, John Doe, Susan Doe and other person or persons in whose possession the said motor
vehicle may be found, complete with accessories and equipment, and direct deliver thereof to
plaintiff in accordance with law, and after due hearing to confirm said seizure and plaintiff's
possession over the same;
PRAYER COMMON TO ALL CAUSES OF ACTION
1. Ordering the defendant Rolando Lantan to pay the plaintiff an amount equivalent to
twenty-five percent (25%) of his outstanding obligation, for and as attorney's fees;
2. Ordering defendants to pay the cost or expenses of collection, repossession, bonding fees
and other incidental expenses to be proved during the trial; and
3. Ordering defendants to pay the costs of suit.
Plaintiff also prays for such further reliefs as this Honorable Court may deem just and equitable
under the premises.27
The Court therein ruled:

The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the
exercise of the others. This limitation applies to contracts purporting to be leases of personal
property with option to buy by virtue of Art. 1485. The condition that the lessor has deprived the
lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in
this case by the filing by petitioner of the complaint for replevin to recover possession of movable
property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle
on August 6, 1986 and thereby deprived private respondents of its use. The car was not returned to
private respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance by
the Court of Appeals of a writ of execution.
Petitioner prayed that private respondents be made to pay the sum of P39,054.86, the amount that
they were supposed to pay as of May 1986, plus interest at the legal rate. At the same time, it
prayed for the issuance of a writ of replevin or the delivery to it of the motor vehicle "complete
with accessories and equipment." In the event the car could not be delivered to petitioner, it was
prayed that private respondent Rolando Lantan be made to pay petitioner the amount of P60,000.00,
the "estimated actual value" of the car, "plus accrued monthly rentals thereof with interests at the
rate of fourteen percent (14%) per annum until fully paid." This prayer of course cannot be granted,
even assuming that private respondents have defaulted in the payment of their obligation. This led
the trial court to say that petitioner wanted to eat its cake and have it too. 28
In contrast, respondent in this case prayed:
(a) Before trial, and upon filing and approval of the bond, to forthwith issue a Writ of Replevin
ordering the seizure of the motor vehicle above-described, complete with all its accessories
and equipments, together with the Registration Certificate thereof, and direct the delivery
thereof to plaintiff in accordance with law and after due hearing, to confirm the said seizure;
(b) Or, in the event that manual delivery of the said motor vehicle cannot be effected to
render judgment in favor of plaintiff and against defendant(s) ordering them to pay to plaintiff,
jointly and severally, the sum ofP576,664.04 plus interest and/or late payment charges
thereon at the rate of 72% per annum from August 20, 2002 until fully paid;
(c) In either case, to order defendant(s) to pay jointly and severally:
(1) the sum of P297,857.54 as attorneys fees, liquidated damages, bonding fees and
other expenses incurred in the seizure of the said motor vehicle; and
(2) the costs of suit.
Plaintiff further prays for such other relief as this Honorable Court may deem just and equitable in
the premises.29
Compared with Elisco, the vehicle subject matter of this case was never recovered and delivered to
respondent despite the issuance of a writ of replevin. As there was no seizure that transpired, it
cannot be said that petitioners were deprived of the use and enjoyment of the mortgaged vehicle or
that respondent pursued, commenced or concluded its actual foreclosure. The trial court, therefore,
rightfully granted the alternative prayer for sum of money, which is equivalent to the remedy of
"exacting fulfillment of the obligation." Certainly, there is no double recovery or unjust enrichment 30 to
speak of.
1wphi1

All the foregoing notwithstanding, We are of the opinion that the interest of 6% per month should be
equitably reduced to one percent (1%) per month or twelve percent (12%) per annum, to be
reckoned from May 16, 2002 until full payment and with the remaining outstanding balance of their
car loan as of May 15, 2002 as the base amount.
Settled is the principle which this Court has affirmed in a number of cases that stipulated interest
rates of three percent (3%) per month and higher are excessive, iniquitous, unconscionable, and
exorbitant.31 While Central Bank Circular No. 905-82, which took effect on January 1, 1983,
effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of
maturity, nothing in the said circular could possibly be read as granting carte blanche authority to
lenders to raise interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets.32 Since the stipulation on the interest rate is void for being contrary to
morals, if not against the law, it is as if there was no express contract on said interest rate; thus, the
interest rate may be reduced as reason and equity demand. 33
WHEREFORE, the petition is DENIED and the Court AFFIRMS WITH MODIFICATION the April 30,
2007 Decision and May 19, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 86021.
Petitioners spouses Deo Agner and Maricon Agner are ORDERED to pay, jointly and severally,
respondent BPI Family Savings Bank, Inc. ( 1) the remaining outstanding balance of their auto loan
obligation as of May 15, 2002 with interest at one percent ( 1 o/o) per month from May 16, 2002 until
fully paid; and (2) costs of suit.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson
ROBERTO A. ABAD
Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice
ATT E S TATI O N
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson, Third Division
C E R TI F I C ATI O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice

THIRD DIVISION

[G.R. No. 127578. February 15, 1999]

MANUEL DE ASIS, petitioner, vs. COURT OF APPEALS, HON. JAIME T.

HAMOY, Branch 130, RTC, Kalookan City and GLEN CAMIL
ANDRES DE ASIS represented by her mother/guardian VIRCEL D.
ANDRES, respondents.
DECISION
PURISIMA, J.:

Petition for certiorari under Rule 65 of the Revised Rules of Court seeking to nullify the
decision of the Court of Appeals which affirmed the trial courts Orders, dated November 25,
1993 and February 4, 1994, respectively, denying petitioners Motion to Dismiss the Complaint in
Civil Case No. C-16107, entitled Glen Camil Andres de Asis, etc. vs. Manuel de Asis, and the
motion for reconsideration.
The pertinent facts leading to the filing of the petition at bar are, as follows:
On October 14, 1988, Vircel D. Andres, (the herein private respondent) in her capacity as
the legal guardian of the minor, Glen Camil Andres de Asis, brought an action for maintenance
and support against Manuel de Asis, docketed as Civil Case No. Q-88-935 before the Regional
Trial Court of Quezon City, Branch 94, alleging that the defendant Manuel de Asis (the
petitioner here) is the father of subject minor Glen Camil Andres de Asis, and the former refused
and/or failed to provide for the maintenance of the latter, despite repeated demands.
In his Answer, petitioner denied his paternity of the said minor and theorized that he cannot
therefore be required to provide support for him.
On July 4, 1989, private respondent Vircel D. Andres, through counsel, sent in a
manifestation the pertinent portion of which, reads;

1. That in his proposed Amended Answer, defendant (herein petitioner) has made
a judicial admission/declaration that 1) defendant denies that the said minor
child (Glen Camil) is his child; 2) he (petitioner) has no obligation to the plaintiff
Glen Camil xxx.
2. That with the aforesaid judicial admissions/declarations by the defendant, it
seems futile and a useless exercise to claim support from said defendant.
3. That under the foregoing circumstances it would be more practical that plaintiff
withdraws the complaint against the defendant subject to the condition that the
defendant should not pursue his counterclaim in the above-entitled case, xxx. [1]
By virtue of the said manifestation, both the plaintiff and the defendant agreed to move for
the dismissal of the case. Acting thereupon, the Regional Trial Court a quo issued the following
Order of August 8, 1989, dismissing Civil Case No. Q-88-935 with prejudice, to wit:

Acting on the manifestation of Atty. Romualdo C. delos Santos, counsel for the
defendant, that counsel for the plaintiff Atty. Ismael J. Andres has no objection that
this case be withdrawn provided that the defendant will withdraw the counterclaim, as
prayed for, let the case be dismissed with prejudice.
SO ORDERED.[2]
On September 7, 1995, another Complaint for maintenance and support was brought against
Manuel A. de Asis, this time in the name of Glen Camil Andres de Asis, represented by her legal
guardian/mother, Vircel D. Andres. Docketed as Civil Case No. C-16107 before Branch 130 of
the Regional Trial Court of Kalookan, the said Complaint prayed, thus:

WHEREFORE, premises considered, it is respectfully prayed that judgment be

rendered ordering defendant:
1. To pay plaintiff the sum of not less than P2,000.00 per month for every month since
June 1, 1987 as support in arrears which defendant failed to provide plaintiff shortly
after her birth in June 1987 up to the present;
2. To give plaintiff a monthly allowance of P5,000.00 to be paid in advance on or
before the 5th of each and every month;
3. To give plaintiff by way of support pendente lite, a monthly allowance of P5,000.00
per month, the first monthly allowance to start retroactively from the first day of this
month and the subsequent ones to be paid in advance on or before the 5th of each
succeeding month;

4. To pay the costs of suit.

Plaintiff prays for such other relief just and equitable under the premises. [3]
On October 8, 1993, petitioner moved to dismiss the Complaint on the ground of res
judicata, alleging that Civil Case C-16107 is barred by the prior judgment which dismissed with
prejudice Civil Case Q-88-935.
In the Order dated November 25, 1993 denying subject motion to dismiss, the trial court
ruled that res judicata is inapplicable in an action for support for the reason that renunciation or
waiver of future support is prohibited by law. Petitioners motion for reconsideration of the said
Order met the same fate. It was likewise denied.
Petitioner filed with the Court of Appeals a Petition for Certiorari. But on June 7, 1996, the
Court of Appeals found the said Petition devoid of merit and dismissed the same.
Undaunted, petitioner found his way to this court via the present petition, posing the
question whether or not the public respondent acted with grave abuse of discretion amounting to
lack or excess of jurisdiction in upholding the denial of the motion to dismiss by the trial court,
and holding that an action for support cannot be barred by res judicata.
To buttress his submission, petitioner invokes the previous dismissal of the Complaint for
maintenance and support, Civil Case Q-88-935, filed by the mother and guardian of the minor,
Glen Camil Andres de Asis, (the herein private respondent). In said case, the complainant
manifested that because of the defendants judicial declaration denying that he is the father of
subject minor child, it was futile and a useless exercise to claim support from defendant. Because
of such manifestation, and defendants assurance that he would not pursue his counterclaim
anymore, the parties mutually agreed to move for the dismissal of the complaint. The motion was
granted by the Quezon City Regional Trial Court, which then dismissed the case with prejudice.
Petitioner contends that the aforecited manifestation, in effect, admitted the lack of filiation
between him and the minor child, which admission binds the complainant, and since the
obligation to give support is based on the existence of paternity and filiation between the child
and the putative parent, the lack thereof negates the right to claim for support. Thus, petitioner
maintains that the dismissal of the Complaint by the lower court on the basis of the said
manifestation bars the present action for support, especially so because the order of the trial court
explicitly stated that the dismissal of the case was with prejudice.
The petition is not impressed with merit.
The right to receive support can neither be renounced nor transmitted to a third
person. Article 301 of the Civil Code, the law in point, reads:

Art. 301. The right to receive support cannot be renounced, nor can it be transmitted
to a third person. Neither can it be compensated with what the recipient owes the
obligor. xxx
Furthermore, future support cannot be the subject of a compromise.
Article 2035, ibid, provides, that:

No compromise upon the following questions shall be valid:

(1) The civil status of persons;
(2) The validity of a marriage or legal separation;
(3) Any ground for legal separation
(4) Future support;
(5) The jurisdiction of courts;
(6) Future legitime.
The raison d etre behind the proscription against renunciation, transmission and/or
compromise of the right to support is stated, thus:

The right to support being founded upon the need of the recipient to maintain his
existence, he is not entitled to renounce or transfer the right for this would mean
sanctioning the voluntary giving up of life itself. The right to life cannot be
renounced; hence, support, which is the means to attain the former, cannot be
renounced.
xxx

To allow renunciation or transmission or compensation of the family right of a person

to support is virtually to allow either suicide or the conversion of the recipient to a
public burden. This is contrary to public policy.[4]
In the case at bar, respondent minors mother, who was the plaintiff in the first case,
manifested that she was withdrawing the case as it seemed futile to claim support from petitioner
who denied his paternity over the child. Since the right to claim for support is predicated on the
existence of filiation between the minor child and the putative parent, petitioner would like us to
believe that such manifestation admitting the futility of claiming support from him puts the issue
to rest and bars any and all future complaint for support.
The manifestation sent in by respondents mother in the first case, which acknowledged that
it would be useless to pursue its complaint for support, amounted to renunciation as it severed
the vinculum that gives the minor, Glen Camil, the right to claim support from his putative
parent, the petitioner. Furthermore, the agreement entered into between the petitioner and
respondents mother for the dismissal of the complaint for maintenance and support conditioned
upon the dismissal of the counterclaim is in the nature of a compromise which cannot be
countenanced. It violates the prohibition against any compromise of the right to support.

Thus, the admission made by counsel for the wife of the facts alleged in a motion of
the husband, in which the latter prayed that his obligation to support be extinguished
cannot be considered as an assent to the prayer, and much less, as a waiver of the
right to claim for support.[5]
It is true that in order to claim support, filiation and/or paternity must first be shown between
the claimant and the parent. However, paternity and filiation or the lack of the same is a
relationship that must be judicially established and it is for the court to declare its existence or
absence. It cannot be left to the will or agreement of the parties.

The civil status of a son having been denied, and this civil status, from which the right
to support is derived being in issue, it is apparent that no effect can be given to such a
claim until an authoritative declaration has been made as to the existence of the
cause.[6]
Although in the case under scrutiny, the admission may be binding upon the respondent,
such an admission is at most evidentiary and does not conclusively establish the lack of filiation.
Neither are we persuaded by petitioners theory that the dismissal with prejudice of Civil
Case Q-88-935 has the effect of res judicata on the subsequent case for support. The case
of Advincula vs. Advincula[7] comes to the fore. In Advincula, the minor, Manuela Advincula,
instituted a case for acknowledgment and support against her putative father, Manuel
Advincula. On motion of both parties and for the reason that the plaintiff has lost interest and is
no longer interested in continuing the case against the defendant and has no further evidence to
introduce in support of the complaint, the case was dismissed. Thereafter, a similar case was
instituted by Manuela, which the defendant moved to dismiss, theorizing that the dismissal of the
first case precluded the filing of the second case.
In disposing such case, this Court ruled, thus:

The new Civil Code provides that the allowance for support is provisional because the
amount may be increased or decreased depending upon the means of the giver and
the needs of the recipient (Art. 297); and that the right to receive support cannot be
renounced nor can it be transmitted to a third person; neither can it be compensated
with what the recipient owes the obligator (Art. 301). Furthermore, the right to
support can not be waived or transferred to third parties and future support cannot be
the subject of compromise (Art. 2035; Coral v. Gallego, 38 O.G. 3135, cited in IV
Civil Code by Padilla, p. 648, 1956 Ed.). This being true, it is indisputable that the
present action for support can be brought, notwithstanding the fact the previous case
filed against the same defendant was dismissed. And it also appearing that the
dismissal of Civil Case No. 3553, was not an adjudication upon the merits, as
heretofore shown, the right of herein plaintiff-appellant to reiterate her suit for
support and acknowledgment is available, as her needs arise. Once the needs of
plaintiff arise, she has the right to bring an action for support, for it is only then that
her cause of action accrues.xxx

xxx

It appears that the former dismissal was predicated upon a

compromise. Acknowledgment, affecting as it does the civil status of persons and
future support, cannot be the subject of compromise.(pars. 1 & 4, Art. 2035, Civil
Code). Hence, the first dismissal cannot have force and effect and can not bar the
filing of another action, asking for the same relief against the same defendant.
(emphasis supplied)
Conformably, notwithstanding the dismissal of Civil Case 88-935 and the lower courts
pronouncement that such dismissal was with prejudice, the second action for support may still
prosper.
WHEREFORE, the petition under consideration is hereby DISMISSED and the decision of
the Court of Appeals AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Romero, (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.

EN BANC

[G.R. No. 128157. September 29, 1999]

PEOPLE
OF THE
PHILIPPINES, plaintiff-appellee,
MANAHAN, alias Maning, defendant-appellant.

vs. MANUEL

DECISION
BELLOSILLO, J.:

MANUEL MANAHAN alias Maning was found guilty of rape and sentenced to death by
the court a quo. He was also ordered to indemnify the victim P50,000.00 as moral damages, pay
the costs, and acknowledge and support the offspring of his indiscretion. [1] This case is now
before us on automatic review.
Complainant Teresita Tibigar, 16 years old, worked at the Espiritu Canteen in Dagupan
City. As a stay-in waitress she slept at the second floor of the canteen. Manuel Manahan is the
brother-in-law of Josefina Espiritu, owner of the canteen. His wife Primadonna is the sister of

Josefina Espiritu. Manuel and Primadonna temporarily reside at the canteen together with the
family of Josefina as Primadonna was then pregnant.
On 5 January 1995, at about two oclock in the morning, Teresita who was asleep was
suddenly awakened when she felt someone beside her. Upon opening her eyes she saw accused
Manuel Manahan as he immediately placed himself on top of her. She tried to shout but the
accused covered her mouth. He then forcibly spread her legs. She cried; she pushed and kicked
him many times in an effort to free herself but the accused proved too strong for her. Soon
enough she became weary and exhausted. Her condition enabled the accused to pursue his
immoral intentions. He lifted her skirt, removed her panty and then inserted his penis into her
vagina. He succeeded in having carnal knowledge of her. After satisfying his lust, the accused
warned the victim not to report the incident to anyone and threatened her that should she squeal
he would kill her and her family. Thereafter, he left her. She was terribly afraid and shaken and
could do nothing but cry until dawn.[2]
Within the month Teresita left the canteen and returned home to her parents in Mangaldan,
Pangasinan. The sexual encounter resulted in her pregnancy. When her parents discovered it and
learned of her story, they brought her to the hospital where she was examined by Dr. Casimero
Bacugan. From there they proceeded to the police station where a statement of Teresita was
taken by SPO1 Isagani L. Ico.Police Chief Inspector Wendy G. Rosario later endorsed the
complaining witness to the Office of the City Prosecutor of Dagupan City for appropriate legal
action. Thereafter, with the assistance of her mother, Teresita filed a criminal complaint accusing
Manuel Manahan alias Maning of rape.[3]
Meanwhile, on 2 October 1995, she gave birth to a healthy baby girl and christened her
Melanie Tibigar.
Accused Manuel Manahan has a different story. He denied having raped Teresita. He
claimed they were lovers. According to him, he met Teresita at the Espiritu Canteen in August
1994 and began courting her. Subsequently, they became sweethearts and their first sexual
intercourse occurred on 27 December 1994 followed by another on 28 December 1994. In the
first week of January 1995 they again had a tryst in the house of Teresitas Aunt Fely, their last
intercourse being on 7 May 1995 in the house of one Maura Manahan-Quinto, his sister.
Manuel further alleged that even after Teresita left the Espiritu Canteen there were several
occasions when they saw each other in front of the DBP in Dagupan City. In one of those
assignations Teresita allegedly told him that she wanted to have the child aborted as her father
might kill her if he discovered she was pregnant, but accused did not agree.
In September 1995, the accused was arrested in connection with the case filed by Teresita
but was later released. We fail to discern from the records the reason for his release. But on 15
March 1996 he was again arrested and detained at the Dagupan City Jail where Estrella, Teresitas
mother, supposedly visited him at least five (5) times to ask about his condition and whether he
was tortured in detention. The accused maintained that Estrella was trying to conceal Teresitas
condition from her father. She purportedly proposed to the accused to sell his land and give the
proceeds to Teresitas father as a form of settlement.
The accused assails in his appeal brief the credibility of the complaining witness. He asserts
that the prosecution failed to prove his guilt beyond reasonable doubt and reiterates that he and
the complaining witness were lovers, and that their sexual congress was consensual.

We have painstakingly reviewed the records and we sustain the conviction of the
accused. The prosecution for rape almost always involves sharply contrasting and irreconcilable
declarations of the victim and the accused. At the heart of almost all rape cases is the issue of
credibility of the witnesses, to be resolved primarily by the trial court which is in a better
position to decide the question, having heard the witnesses and observed their deportment and
manner of testifying. Accordingly, its findings are entitled to the highest degree of respect and
will not be disturbed on appeal in the absence of any showing that the trial court overlooked,
misunderstood or misapplied some facts or circumstances of weight or substance which would
otherwise affect the result of the case. The exception is nowhere perceivable in the present case.
The accused banks heavily on his "sweetheart theory," a usual defense in rape cases, and
vigorously maintains that the sexual intercourse between him and Teresita was but the
culmination of a mutual passion. But we find otherwise primarily because the accused miserably
failed to prove that he and the complaining witness indeed had a romantic liaison as this claim
was categorically denied by her.Moreover, there was no substantial evidence, e.g., love notes,
mementos or pictures, presented to support it.
The testimony of defense witnesses Nelson de Venecia and Arvin Sereban that they used to
see Manuel and Teresita together in front of the DBP in Dagupan City, even if true, did not
confirm that there was indeed an amorous relationship between the two. [4] Likewise, the
testimony of Isabel Remandaban, another defense witness, that she saw the accused and the
complaining witness embracing each other in the house of Maura Manahan-Quinto can hardly be
given weight. The trifling manner by which she answered the questions propounded to her at the
witness stand even prompted the trial court to remark that she was not serious with her
testimony. Thus COURT: This is not a joke. The penalty [for] the accused [if convicted] is death. Do not testify here as
if you are joking, or you will be the one to [be] sen[t] to jail ahead of Manahan. You want to be
sent to jail?
WITNESS: No sir.
COURT: Why are you smiling? This is a serious matter. Put that on record the witness is smiling. Not
serious about her testimony (underscoring supplied).

Ultimately, the trial court disregarded altogether, and rightly so, the testimony of Isabel
Remandaban. To emphasize, the task of assigning values to the testimonies of witnesses in the
stand and weighing their credibility is best left to the trial court which forms first-hand
impressions of the witnesses testifying before it, and therefore more competent to discriminate
between the true and the false.[5] We find no trace of whim or arbitrariness on the court a quo in its assessment
of the testimony of this witness.

Also, Exh. "1" of the defense, a photograph showing Estrella talking to the accused while
carrying Melanie, the offspring of Teresita and Manuel, does not establish anything. As Estrella
explained, she visited the accused in jail not to show him Melanie but to ascertain that he was in
fact incarcerated,[6] and that she only brought the child with her incidentally during her visit because Teresita was
sick at that time and there was no one else to take care of the baby.[7]

Even assuming ex gratia argumenti that the accused and the victim were really lovers, that
fact alone would not negate the commission of rape. A sweetheart cannot be forced to have sex

against her will. Definitely, a man cannot demand sexual gratification from a fiancee and, worse,
employ violence upon her on the pretext of love. Love is not a license for lust.[8]
Equally untenable is the accused's contention that there can be no rape since the prosecution
failed to prove beyond reasonable doubt the element of intimidation. One of the modes of
committing the crime of rape is by having carnal knowledge of a woman
using force and intimidation. Even if we concede the absence of intimidation in this case, the fact
remains that the accused employed force against his victim. Thus, testifying in a clear, definitive
and convincing manner as concluded by the trial court, Teresita established beyond any scintilla
of doubt the presence of force essential in rape Q: What were you doing then when Manuel Manahan accosted you?
A: I was sleeping, then suddenly I felt somebody near me and when I opened my eyes I saw Manuel
Manahan and then he immediately laid on top of me, sir.
Q: How did you come to know that it was Manuel Manahan who went, who laid on top of you?
A: I know him, sir.
Q: What did you do when Manuel Manahan laid on top of you?
A: I was about to shout but he covered my mouth and then he immediately spread my legs, sir.
Q: What did you do when he did that to you?
A: I cried, sir.
Q: Before Manuel Manahan spread your legs, what did you do? Before he was able to spread your
legs?
A: I pushed him and I kicked him several times, sir.
Q: What happened when you pushed him and kicked him several times?
A: I got weakened because he was strong that is why he was able to abuse me, sir.
Q: After Manuel Manahan was able to spread your legs, what did he do?
A: And then he inserted his penis, sir x x x x[9]

Again, during the cross-examination the victim recounted how she was forced to have
sexual intercourse with the accused, thus Q: Did you spread your legs voluntarily or did he force open your legs?
A: He forced me, sir.
Q: What did he do to force open your legs?
A: By the use of his legs, sir.
Q: He did that while he was on top of you?
A: Yes, sir.
Q: What legs did he use, was it the right leg or both legs?
A: Both legs, sir.

Q: You mentioned about crossing his legs and then forced open your legs, will you please demonstrate
how he forced open your legs by the use of this pencil and ballpen illustrate your legs with these
two other ballpens where the legs of Manuel Manahan, will you please demonstrate how he
forced open his legs when you said first he put together his legs and then open your legs, will you
please do it?
A: He went on top of me and he put his legs between my legs and also his legs, sir.
INTERPRETER: Witness demonstrating by spreading both ends of the ballpen.
Q: And then by doing so, by spreading his legs between your legs, he was able to insert his penis?
A: Yes, sir.
Q: At that precise moment when he was on top of you and also your legs, where was the right hand of
Manuel Manahan?
A: He closed my mouth with his right hand.
Q: What about his left hand?
A: He used his left hand in pulling up my dress.
Q: At that precise moment when he was doing the push and pull, was his right hand still with your
mouth?
A: Yes, sir.
Q: What about his left hand after raising your skirt, what was his left hand doing?
A: He was squeezing my neck, sir x x x x
Q: During your direct testimony you mentioned about having resisted him, now, at what precise
moment did you try to resist him?
A: When he went on top of me I struggled, sir.
Q: Were you able to dislodge him from being on top of you?
A: Yes, sir.
COURT: Then what did he do when you were able to dislodge him on top of you?
A: He went again on top of me, sir.
Q: Did you again struggle to resist him or no more?
A: No more because I already felt weak, sir x x x x[10]

Evidently, complainant offered a tenacious resistance to the criminal acts of the accused, but
the serious determination of the latter to accomplish what he intended to do eventually weakened
complainant and shocked her into insensibility. It is quite understandable that, at a tender age of
16 and innocent in the ways of the world, complainant is no match to the accused, a 28-year old
married man endowed with physical strength she could not possibly overcome.
Neither could she shout to alert the other occupants of the house as the accused prevented
her by covering her mouth with his right hand. The accused however claims that complainant
had the opportunity to shout for help at that precise moment he was removing his pants and brief,
but she did not. Suffice it to say, in this connection, that not every victim of a crime can be

expected to act reasonably and conformably with the expectations of mankind. Different people
react to similar situations dissimilarly. While the normal response of a woman about to be defiled
may be to shout and put up a wild struggle, others become virtually catatonic because of the
mental shock they experience and the fear engendered by the unexpected occurrence. Yet it can
never be successfully argued that the latter are any less sexual victims than the former.[11]
The failure of complainant to disclose the outrage on her person to anybody, including her
parents, is due to the threats on her life and that of her family. Indeed, one cannot expect her to
act like an adult or a mature experienced woman who would have the courage and intelligence to
disregard the threat to her life and complain immediately that she had been sexually assaulted. It
is not uncommon for young girls to conceal for sometime the assaults on their virtue because of
the rapists threats to their lives. Delay or vacillation in making a criminal accusation does not
necessarily impair the credibility of the witness if such delay is satisfactorily explained, as in this
case.[12]
In the instant case, the complaining witness may not have even filed the rape charge had she
not become pregnant. This Court has taken cognizance of the fact that many of the victims of
rape never complain or file criminal charges against the rapists. They prefer to bear the ignominy
in painful silence rather than reveal their shame to the world and risk the rapists making good
their threats to kill or hurt their victims.[13]
That accused also asserts that the rape case is a mere face-saving device of the victim to
escape the anger of her father. Again, we are not convinced. It taxes credulity that a
simple barrio lass[14] like the victim, a minor and a mere elementary graduate at that, could contrive such an
unthinkable solution to save herself from the imagined wrath of her father; what is more, concoct such a good rape
story convincing enough to withstand the rigors of cross-examination, and sway the judge to impose on the accused
the extreme penalty of death.

Indeed, it is very unlikely that the victim would make up a story of rape with all its attendant
scandal and humiliation. Considering the modesty and timidity of a typical Filipina, especially
one from the rural areas, it is hard to accept that the victim would fabricate facts which would
seriously cast dishonor on her maidenhood. No young Filipina of decent repute would publicly
admit she had been raped unless that was the truth. It is her natural instinct to protect her
honor. As we have long held, when a woman says that she has been raped, she says in effect all
that is necessary to show that rape has been committed.Her testimony is credible where she has
no motive to testify against the accused.[15]
On the matter of acknowledgment and support of the child, a correction of the view of the
court a quo is in order. Article 345 of The Revised Penal Code provides that persons guilty of
rape shall also be sentenced to "acknowledge the offspring, unless the law should prevent him
from doing so," and "in every case to support the offspring." In the case before us, compulsory
acknowledgment of the child Melanie Tibigar is not proper there being a legal impediment in
doing so as it appears that the accused is a married man. As pronounced by this Court in People
v. Guerrero,[16] "the rule is that if the rapist is a married man, he cannot be compelled to recognize the offspring of
the crime, should there be any, as his child, whether legitimate or illegitimate." Consequently, that portion of the
judgment under review is accordingly deleted. In any case, we sustain that part ordering the accused to support the
child as it is in accordance with law.

Finally, we do not agree with the trial court that the proper penalty to be imposed on the
accused is death, it appearing that the crime committed was merely simple rape, i.e., not

committed with or effectively qualified by any of the circumstances enumerated under Art. 335
of The Revised Penal Code, as amended by Sec. 11, RA 7659, under which the death penalty is
authorized.[17] In this case, the proper imposable penalty should only be reclusion perpetua.
WHEREFORE, the Decision of the Regional Trial Court of Dagupan City, Branch 40,
dated 28 November 1996, convicting accused MANUEL MANAHAN alias Maning of the crime
of rape is AFFIRMED subject however to the modification that the death sentence imposed on
the accused is reduced to reclusion perpetua. The portion of the decision of the trial court
ordering the accused, a married man, to acknowledge the child Melanie Tibigar is DELETED
being contrary to law and jurisprudence.
SO ORDERED.
Davide, Jr. C.J., Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing,
Purisima, Pardo, Buena, Gonzaga-Reyes, and Ynares-Santiago, JJ., concur.

THIRD DIVISION
SPOUSES PRUDENCIO and G.R. No. 163209
FILOMENA LIM,
Petitioners,
Present:
CARPIO, J., Chairperson,
QUISUMBING,*
CHICO-NAZARIO,
- versus - PERALTA, and
ABAD,** JJ.
MA. CHERYL S. LIM,
for herself and on behalf of
her minor children LESTER
EDWARD S. LIM, CANDICE
GRACE S. LIM, and MARIANO Promulgated:
S. LIM, III,
Respondents. October 30, 2009
x --------------------------------------------------------------------------------------- x
DECISION
CARPIO, J.:
The Case

For review[1] is the Decision[2] of the Court of Appeals, dated 28

April 2003, ordering petitioners Prudencio and Filomena Lim
(petitioners)
to
provide
legal
support
to
respondents Cheryl, Lester Edward, Candice Grace and Mariano
III, all surnamed Lim (respondents).
The Facts
In 1979, respondent Cheryl S. Lim (Cheryl) married Edward
Lim (Edward), son of petitioners. Cheryl bore Edward three
children, respondents Lester Edward, Candice Grace and Mariano
III. Cheryl, Edward and their children resided at the house of
petitioners in Forbes Park, Makati City, together with Edwards
ailing grandmother, Chua Giak and her husband Mariano Lim
(Mariano). Edwards family business, which provided him with a
monthly salary of P6,000, shouldered the family expenses. Cheryl
had no steady source of income.
On 14 October 1990, Cheryl abandoned the Forbes Park
residence, bringing the children with her (then all minors), after a
violent confrontation with Edward whom she caught with the inhouse midwife of Chua Giak in what the trial court described a
very compromising situation.[3]
Cheryl, for herself and her children, sued petitioners, Edward,
Chua Giak and Mariano (defendants) in the Regional Trial Court of
Makati City, Branch 140 (trial court) for support. The trial court
ordered Edward to provide monthly support of P6,000 pendente
lite.[4]
The Ruling of the Trial Court
On 31 January 1996, the trial court rendered judgment
ordering Edward and petitioners to jointly provide P40,000

monthly support to respondents, with Edward shouldering P6,000

and petitioners the balance of P34,000 subject to Chua Giaks
subsidiary liability.[5]
The defendants sought reconsideration, questioning their
liability. The trial court, while denying reconsideration, clarified
that petitioners and Chua Giak were held jointly liable with
Edward because of the latters inability x x x to give sufficient
support x x x.[6]

Petitioners appealed to the Court of Appeals assailing, among

others, their liability to support respondents. Petitioners argued
that while Edwards income is insufficient, the law itself sanctions
its effects by providing that legal support should be in keeping
with the financial capacity of the family under Article 194 of the
Civil Code, as amended by Executive Order No. 209 (The Family
Code of the Philippines).[7]
The Ruling of the Court of Appeals
In its Decision dated 28 April 2003, the Court of Appeals affirmed
the trial court. On the issue material to this appeal, that is,
whether there is basis to hold petitioners, as Edwards parents,
liable with him to support respondents, the Court of Appeals held:
The law on support under Article 195 of the Family Code
is clear on this matter. Parents and their legitimate
children are obliged to mutually support one another and
this obligation extends down to the legitimate
grandchildren and great grandchildren.
In connection with this provision, Article 200 paragraph
(3) of the Family Code clearly provides that should the
person obliged to give support does not have sufficient

means to satisfy all claims, the other persons enumerated

in Article 199 in its order shall provide the necessary
support. This is because the closer the relationship of the
relatives, the stronger the tie that binds them. Thus, the
obligation to support is imposed first upon the shoulders
of the closer relatives and only in their default is the
obligation moved to the next nearer relatives and so on.[8]

Petitioners
sought
reconsideration
but
the
Court
of
Appeals denied their motion in the Resolution dated 12 April
2004.
Hence, this petition.
The Issue
The issue is whether petitioners are concurrently liable with
Edward to provide support to respondents.
The Ruling of the Court
We rule in the affirmative. However, we modify the appealed
judgment by limiting petitioners liability to the amount of monthly
support needed by respondents Lester Edward, Candice Grace
and Mariano III only.
Petitioners Liable to Provide Support
but only to their Grandchildren
By statutory[9] and jurisprudential mandate,[10] the liability of
ascendants to provide legal support to their descendants is
beyond cavil. Petitioners themselves admit as much they limit
their petition to the narrow question of when their liability is
triggered, not if they are liable. Relying on provisions [11] found in
Title IX of the Civil Code, as amended, on Parental Authority,

petitioners theorize that their liability is activated only

upon default of parental authority, conceivably either by its
termination[12] or suspension[13] during the childrens minority.
Because at the time respondents sued for support, Cheryl and
Edward exercised parental authority over their children,
[14]
petitioners submit that the obligation to support the
latters offspring ends with them.
Neither the text of the law nor the teaching of jurisprudence
supports this severe constriction of the scope of familial obligation
to give support. In the first place, the governing text are the
relevant provisions in Title VIII of the Civil Code, as amended, on
Support, not the provisions in Title IX on Parental Authority. While
both areas share a common ground in that parental authority
encompasses the obligation to provide legal support, [15] they differ
in other concerns including the duration of the obligation and
its concurrence among relatives of differing degrees. [16] Thus,
although the obligation to provide support arising from parental
authority ends upon the emancipation of the child, [17] the same
obligation arising from spousal and general familial ties ideally
lasts during the obligee's lifetime. . Also, while parental authority
under Title IX (and the correlative parental rights) pertains to
parents, passing to ascendants only upon its termination or
suspension, the obligation to provide legal support passes on to
ascendants not only upon default of the parents but also for the
latters inability to provide sufficient support. As we observed in
another case raising the ancillary issue of an ascendants
obligation to give support in light of the fathers sufficient means:
Professor Pineda is of the view that grandchildren cannot
demand support directly from their grandparents if they
have parents (ascendants of nearest degree) who are
capable of supporting them. This is so because we
have to follow the order of support under Art. 199. We
agree with this view.
xxxx

There is no showing that private respondent is without

means to support his son; neither is there any
evidence to prove that petitioner, as the paternal
grandmother, was willing to voluntarily provide for her
grandson's legal support. x x x[18] (Emphasis supplied;
internal citations omitted)

Here, there is no question that Cheryl is unable to discharge her

obligation to provide sufficient legal support to her children, then
all school-bound. It is also undisputed that the amount of support
Edward is able to give to respondents, P6,000 a month, is
insufficient to meet respondents basic needs. This inability of
Edward and Cheryl to sufficiently provide for their children shifts a
portion of their obligation to the ascendants in the nearest
degree, both in the paternal (petitioners) and maternal [19]lines,
following the ordering in Article 199. To hold otherwise, and thus
subscribe to petitioners theory, is to sanction the anomalous
scenario of tolerating extreme material deprivation of children
because of parental inability to give adequate support even if
ascendants one degree removed are more than able to fill the
void.
However, petitioners partial concurrent obligation extends only to
their descendants as this word is commonly understood to refer to
relatives, by blood of lower degree. As petitioners grandchildren
by blood, only respondents Lester Edward, Candice Grace and
Mariano III belong to this category. Indeed, Cheryls right to receive
support from the Lim family extends only to her husband Edward,
arising from their marital bond.[20] Unfortunately, Cheryls share
from the amount of monthly support the trial court awarded
cannot be determined from the records. Thus, we are constrained
to remand the case to the trial court for this limited purpose. [21]
Petitioners Precluded from Availing
of the Alternative Option Under
Article 204 of the Civil Code, as Amended

As an alternative proposition, petitioners wish to avail of the

option in Article 204 of the Civil Code, as amended, and pray that
they be allowed to fulfill their obligation by maintaining
respondents at petitioners Makati residence. The option is
unavailable to petitioners.
The application of Article 204 which provides that
The person obliged to give support shall have the option
to fulfill the obligation either by paying the allowance
fixed, or by receiving and maintaining in the family
dwelling the person who has a right to receive
support. The latter alternative cannot be availed of
in case there is a moral or legal obstacle thereto.
(Emphasis supplied)

is subject to its exception clause. Here, the persons entitled to

receive support are petitioners grandchildren and daughter-in-law.
Granting petitioners the option in Article 204 will secure to the
grandchildren a well-provided future; however, it will also force
Cheryl to return to the house which, for her, is the scene of her
husbands infidelity. While not rising to the level of
a legal obstacle, as indeed, Cheryls charge against Edward for
concubinage did not prosper for insufficient evidence, her
steadfast
insistence
on
its
occurrence
amounts
to
a moral impediment bringing the case within the ambit of the
exception clause of Article 204, precluding its application.

WHEREFORE, we DENY the petition. We AFFIRM the Decision of

the Court of Appeals, dated 28 April 2003, and its Resolution
dated 12 April 2004 with theMODIFICATION that petitioners
Prudencio and Filomena Lim are liable to provide support only to
respondents Lester Edward, Candice Grace and Mariano III, all
surnamed Lim. We REMAND the case to the Regional Trial Court

of Makati City, Branch 140, for further proceedings consistent with

this ruling.
SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice

MINITA V. CHICO NAZARIO DIOSDADO M. PERALTA

Associate Justice Associate Justice

ROBERTO A. ABAD
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION
Pursuant

to

Section

13,

Article

VIII

of

the

Constitution,

and

the

Division Chairpersons Attestation, I certify that the conclusions in the above

Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 165166

August 15, 2012

CHARLES GOTARDO, Petitioner,

vs.
DIVINA BULING, Respondent.
VILLARAMA, JR.,*

DECISION
BRION, J.:
We resolve the petition for review on certiorari, 1 filed by petitioner Charles Gotardo, to challenge the
March 5, 2004 decision2 and the July 27, 2004 resolution3 of the Court of Appeals (CA) in CA GR CV
No. 76326. The CA decision ordered the petitioner to recognize and provide legal support to his
minor son, Gliffze 0. Buling. The CA resolution denied the petitioner's subsequent motion for
reconsideration.
FACTUAL BACKGROUND
On September 6, 1995, respondent Divina Buling filed a complaint with the Regional Trial Court
(RTC) of Maasin, Southern Leyte, Branch 25, for compulsory recognition and support pendente
lite, claiming that the petitioner is the father of her child Gliffze. 4
In his answer, the petitioner denied the imputed paternity of Gliffze. 5 For the parties failure to
amicably settle the dispute, the RTC terminated the pre-trial proceedings. 6 Trial on the merits
ensued.
The respondent testified for herself and presented Rodulfo Lopez as witness. Evidence for the
respondent showed that she met the petitioner on December 1, 1992 at the Philippine Commercial
and Industrial Bank, Maasin, Southern Leyte branch where she had been hired as a casual
employee, while the petitioner worked as accounting supervisor.7 The petitioner started courting the
respondent in the third week of December 1992 and they became sweethearts in the last week of
January 1993.8 The petitioner gave the respondent greeting cards on special occasions, such as on
Valentines Day and her birthday; she reciprocated his love and took care of him when he was ill. 9
Sometime in September 1993, the petitioner started intimate sexual relations with the respondent in
the formers rented room in the boarding house managed by Rodulfo, the respondents uncle, on
Tomas Oppus St., Agbao, Maasin, Southern Leyte. 10 The petitioner rented the room from March 1,
1993 to August 30, 1994.11 The sexual encounters occurred twice a month and became more
frequent in June 1994; eventually, on August 8, 1994, the respondent found out that she was
pregnant.12 When told of the pregnancy, the petitioner was happy and made plans to marry the
respondent.13 They in fact applied for a marriage license.14 The petitioner even inquired about the
costs of a wedding reception and the bridal gown. 15 Subsequently, however, the petitioner backed out
of the wedding plans.16
The respondent responded by filing a complaint with the Municipal Trial Court of Maasin, Southern
Leyte for damages against the petitioner for breach of promise to marry.17 Later, however, the
petitioner and the respondent amicably settled the case.18
The respondent gave birth to their son Gliffze on March 9, 1995. 19 When the petitioner did not show
up and failed to provide support to Gliffze, the respondent sent him a letter on July 24, 1995
demanding recognition of and support for their child. 20 When the petitioner did not answer the
demand, the respondent filed her complaint for compulsory recognition and support pendente lite.21
The petitioner took the witness stand and testified for himself. He denied the imputed
paternity,22 claiming that he first had sexual contact with the respondent in the first week of August
1994 and she could not have been pregnant for twelve (12) weeks (or three (3) months) when he
was informed of the pregnancy on September 15, 1994. 23

During the pendency of the case, the RTC, on the respondents motion, 24 granted a P2,000.00
monthly child support, retroactive from March 1995. 25
THE RTC RULING
In its June 25, 2002 decision, the RTC dismissed the complaint for insufficiency of evidence proving
Gliffzes filiation. It found the respondents testimony inconsistent on the question of when she had
her first sexual contact with the petitioner, i.e., "September 1993" in her direct testimony while "last
week of January 1993" during her cross-testimony, and her reason for engaging in sexual contact
even after she had refused the petitioners initial marriage proposal. It ordered the respondent to
return the amount of support pendente lite erroneously awarded, and to pay P 10,000.00 as
attorneys fees.26
The respondent appealed the RTC ruling to the CA.27
THE CA RULING
In its March 5, 2004 decision, the CA departed from the RTC's appreciation of the respondents
testimony, concluding that the latter merely made an honest mistake in her understanding of the
questions of the petitioners counsel. It noted that the petitioner and the respondent had sexual
relationship even before August 1994; that the respondent had only one boyfriend, the petitioner,
from January 1993 to August 1994; and that the petitioners allegation that the respondent had
previous relationships with other men remained unsubstantiated. The CA consequently set aside the
RTC decision and ordered the petitioner to recognize his minor son Gliffze. It also reinstated the
RTC order granting a P 2,000.00 monthly child support. 28
When the CA denied29 the petitioners motion for reconsideration,30 the petitioner filed the present
petition for review on certiorari.
THE PETITION
The petitioner argues that the CA committed a reversible error in rejecting the RTCs appreciation of
the respondents testimony, and that the evidence on record is insufficient to prove paternity.
THE CASE FOR THE RESPONDENT
The respondent submits that the CA correctly explained that the inconsistency in the respondents
testimony was due to an incorrect appreciation of the questions asked, and that the record is replete
with evidence proving that the petitioner was her lover and that they had several intimate sexual
encounters during their relationship, resulting in her pregnancy and Gliffzes birth on March 9, 1995.
THE ISSUE
The sole issue before us is whether the CA committed a reversible error when it set aside the RTCs
findings and ordered the petitioner to recognize and provide legal support to his minor son Gliffze.
OUR RULING
We do not find any reversible error in the CAs ruling.

We have recognized that "[f]iliation proceedings are usually filed not just to adjudicate paternity but
also to secure a legal right associated with paternity, such as citizenship, support (as in this case) or
inheritance. [In paternity cases, the burden of proof] is on the person who alleges that the putative
father is the biological father of the child."31
One can prove filiation, either legitimate or illegitimate, through the record of birth appearing in the
civil register or a final judgment, an admission of filiation in a public document or a private
handwritten instrument and signed by the parent concerned, or the open and continuous possession
of the status of a legitimate or illegitimate child, or any other means allowed by the Rules of Court
and special laws.32 We have held that such other proof of one's filiation may be a "baptismal
certificate, a judicial admission, a family bible in which his name has been entered, common
reputation respecting [his] pedigree, admission by silence, the [testimonies] of witnesses, and other
kinds of proof admissible under Rule 130 of the Rules of Court." 33
In Herrera v. Alba,34 we stressed that there are four significant procedural aspects of a traditional
paternity action that parties have to face: a prima facie case, affirmative defenses, presumption of
legitimacy, and physical resemblance between the putative father and the child. 35 We explained that
a prima facie case exists if a woman declares supported by corroborative proof that she had
sexual relations with the putative father; at this point, the burden of evidence shifts to the putative
father.36 We explained further that the two affirmative defenses available to the putative father are:
(1) incapability of sexual relations with the mother due to either physical absence or impotency, or
(2) that the mother had sexual relations with other men at the time of conception. 37
In this case, the respondent established a prima facie case that the petitioner is the putative father of
Gliffze through testimony that she had been sexually involved only with one man, the petitioner, at
the time of her conception.38 Rodulfo corroborated her testimony that the petitioner and the
respondent had intimate relationship. 39
On the other hand, the petitioner did not deny that he had sexual encounters with the respondent,
only that it occurred on a much later date than the respondent asserted, such that it was physically
impossible for the respondent to have been three (3) months pregnant already in September 1994
when he was informed of the pregnancy.40 However, the petitioner failed to substantiate his
allegations of infidelity and insinuations of promiscuity. His allegations, therefore, cannot be given
credence for lack of evidentiary support. The petitioners denial cannot overcome the respondents
clear and categorical assertions.
The petitioner, as the RTC did, made much of the variance between the respondents direct
testimony regarding their first sexual contact as "sometime in September 1993" and her crosstestimony when she stated that their first sexual contact was "last week of January 1993," as follows:
ATTY. GO CINCO:
When did the defendant, according to you, start courting you?
A Third week of December 1992.
Q And you accepted him?
A Last week of January 1993.
Q And by October you already had your sexual intercourse?

A Last week of January 1993.

COURT: What do you mean by accepting?
A I accepted his offer of love.41
We find that the contradictions are for the most part more apparent than real, having resulted from
the failure of the respondent to comprehend the question posed, but this misunderstanding was later
corrected and satisfactorily explained. Indeed, when confronted for her contradictory statements, the
respondent explained that that portion of the transcript of stenographic notes was incorrect and she
had brought it to the attention of Atty. Josefino Go Cinco (her former counsel) but the latter took no
action on the matter.42
Jurisprudence teaches that in assessing the credibility of a witness, his testimony must be
considered in its entirety instead of in truncated parts. The technique in deciphering a testimony is
not to consider only its isolated parts and to anchor a conclusion based on these parts. "In
ascertaining the facts established by a witness, everything stated by him on direct, cross and
redirect examinations must be calibrated and considered." 43 Evidently, the totality of the respondent's
testimony positively and convincingly shows that no real inconsistency exists. The respondent has
consistently asserted that she started intimate sexual relations with the petitioner sometime in
September 1993.44
Since filiation is beyond question, support follows as a matter of obligation; a parent is obliged to
support his child, whether legitimate or illegitimate. 45 Support consists of everything indispensable for
sustenance, dwelling, clothing, medical attendance, education and transportation, in keeping with
the financial capacity of the family.46Thus, the amount of support is variable and, for this reason, no
final judgment on the amount of support is made as the amount shall be in proportion to the
resources or means of the giver and the necessities of the recipient. 47It may be reduced or increased
proportionately according to the reduction or increase of the necessities of the recipient and the
resources or means of the person obliged to support. 48
In this case, we sustain the award of P 2,000.00 monthly child support, without prejudice to the filing
of the proper motion in the RTC for the determination of any support in arrears, considering the
needs of the child, Gliffze, during the pendency of this case.
WHEREFORE, we hereby DENY the petition for lack of merit. The March 5, 2004 decision and the
July 27, 2004 resolution of the Court of Appeals in CA GR CV No. 76326 are
hereby AFFIRMED. Costs against the petitioner.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Senior Associate Justice
Chairperson
MARTIN S. VILLARAMA, JR.

JOSE PORTUGAL PEREZ

Associate Justice

Associate Justice
BIENVENIDO L. REYES
Associate Justice
C E R TI F I C ATI O N

I certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296,
The Judiciary Act of 1948, as amended)

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. Nos. 175279-80

June 5, 2013

SUSAN LIM-LUA, Petitioner,

vs.
DANILO Y. LUA, Respondent.
DECISION
VILLARAMA, JR., J.:
In this petition for review on certiorari under Rule 45, petitioner seeks to set aside the
Decision1 dated April 20, 2006 and Resolution2 dated October 26, 2006 of the Court of Appeals (CA)
dismissing her petition for contempt (CA-G.R. SP No. 01154) and granting respondent's petition for
certiorari (CA-G.R. SP No. 01315).
The factual background is as follows:
On September 3, 2003,3 petitioner Susan Lim-Lua filed an action for the declaration of nullity of her
marriage with respondent Danilo Y. Lua, docketed as Civil Case No. CEB-29346 of the Regional
Trial Court (RTC) of Cebu City, Branch 14.
In her prayer for support pendente lite for herself and her two children, petitioner sought the amount
ofP500,000.00 as monthly support, citing respondents huge earnings from salaries and dividends in
several companies and businesses here and abroad. 4

After due hearing, Judge Raphael B. Yrastorza, Sr. issued an Order 5 dated March 31, 2004 granting
support pendente lite, as follows:
From the evidence already adduced by the parties, the amount of Two Hundred Fifty (P250,000.00)
Thousand Pesos would be sufficient to take care of the needs of the plaintiff. This amount excludes
the One hundred thirty-five (P135,000.00) Thousand Pesos for medical attendance expenses
needed by plaintiff for the operation of both her eyes which is demandable upon the conduct of such
operation. The amounts already extended to the two (2) children, being a commendable act of
defendant, should be continued by him considering the vast financial resources at his disposal.
According to Art. 203 of the Family Code, support is demandable from the time plaintiff needed the
said support but is payable only from the date of judicial demand. Since the instant complaint was
filed on 03 September 2003, the amount of Two Hundred Fifty (P250,000.00) Thousand should be
paid by defendant to plaintiff retroactively to such date until the hearing of the support pendente
lite. P250,000.00 x 7 corresponding to the seven (7) months that lapsed from September, 2003 to
March 2004 would tantamount to a total of One Million Seven Hundred Fifty (P1,750,000.00)
Thousand Pesos. Thereafter, starting the month of April 2004, until otherwise ordered by this Court,
defendant is ordered to pay a monthly support of Two Hundred Fifty Thousand (P250,000.00) Pesos
payable within the first five (5) days of each corresponding month pursuant to the third paragraph of
Art. 203 of the Family Code of the Philippines. The monthly support of P250,000.00 is without
prejudice to any increase or decrease thereof that this Court may grant plaintiff as the circumstances
may warrant i.e. depending on the proof submitted by the parties during the proceedings for the
main action for support.6
Respondent filed a motion for reconsideration, 7 asserting that petitioner is not entitled to spousal
support considering that she does not maintain for herself a separate dwelling from their children
and respondent has continued to support the family for their sustenance and well-being in
accordance with familys social and financial standing. As to the P250,000.00 granted by the trial
court as monthly support pendente lite, as well as theP1,750,000.00 retroactive support, respondent
found it unconscionable and beyond the intendment of the law for not having considered the needs
of the respondent.
In its May 13, 2004 Order, the trial court stated that the March 31, 2004 Order had become final and
executory since respondents motion for reconsideration is treated as a mere scrap of paper for
violation of the threeday notice period under Section 4, Rule 15 of the 1997 Rules of Civil Procedure,
as amended, and therefore did not interrupt the running of the period to appeal. Respondent was
given ten (10) days to show cause why he should not be held in contempt of the court for
disregarding the March 31, 2004 order granting support pendente lite. 8
His second motion for reconsideration having been denied, respondent filed a petition for certiorari in
the CA.
On April 12, 2005, the CA rendered its Decision,9 finding merit in respondents contention that the
trial court gravely abused its discretion in granting P250,000.00 monthly support to petitioner without
evidence to prove his actual income. The said court thus decreed:
WHEREFORE, foregoing premises considered, this petition is given due course. The assailed
Orders dated March 31, 2004, May 13, 2004, June 4, 2004 and June 18, 2004 of the Regional Trial
Court, Branch 14, Cebu City issued in Civil Case No. CEB No. 29346 entitled "Susan Lim Lua
versus Danilo Y. Lua" are hereby nullified and set aside and instead a new one is entered ordering
herein petitioner:

a) to pay private respondent a monthly support pendente lite of P115,000.00 beginning the
month of April 2005 and every month thereafter within the first five (5) days thereof;
b) to pay the private respondent the amount of P115,000.00 a month multiplied by the
number of months starting from September 2003 until March 2005 less than the amount
supposedly given by petitioner to the private respondent as her and their two (2) children
monthly support; and
c) to pay the costs.
SO ORDERED.10
Neither of the parties appealed this decision of the CA. In a Compliance 11 dated June 28, 2005,
respondent attached a copy of a check he issued in the amount of P162,651.90 payable to
petitioner. Respondent explained that, as decreed in the CA decision, he deducted from the amount
of support in arrears (September 3, 2003 to March 2005) ordered by the CA -- P2,185,000.00 -plus P460,000.00 (April, May, June and July 2005), totalingP2,645,000.00, the advances given by
him to his children and petitioner in the sum of P2,482,348.16 (with attached photocopies of
receipts/billings).
In her Comment to Compliance with Motion for Issuance of a Writ of Execution, 12 petitioner asserted
that none of the expenses deducted by respondent may be chargeable as part of the monthly
support contemplated by the CA in CA-G.R. SP No. 84740.
On September 27, 2005, the trial court issued an Order 13 granting petitioners motion for issuance of
a writ of execution as it rejected respondents interpretation of the CA decision. Respondent filed a
motion for reconsideration and subsequently also filed a motion for inhibition of Judge Raphael B.
Yrastorza, Sr. On November 25, 2005, Judge Yrastorza, Sr. issued an Order 14 denying both motions.
WHEREFORE, in view of the foregoing premises, both motions are DENIED. Since a second motion
for reconsideration is prohibited under the Rules, this denial has attained finality; let, therefore, a writ
of execution be issued in favor of plaintiff as against defendant for the accumulated support in
arrears pendente lite.
Notify both parties of this Order.
SO ORDERED.15
Since respondent still failed and refused to pay the support in arrears pendente lite, petitioner filed in
the CA a Petition for Contempt of Court with Damages, docketed as CA-G.R. SP No. 01154 ("Susan
Lim Lua versus Danilo Y. Lua"). Respondent, on the other hand, filed CA-G.R. SP No. 01315, a
Petition for Certiorari under Rule 65 of the Rules of Court ("Danilo Y. Lua versus Hon. Raphael B.
Yrastorza, Sr., in his capacity as Presiding Judge of Regional Trial Court of Cebu, Branch 14, and
Susan Lim Lua"). The two cases were consolidated.
By Decision dated April 20, 2006, the CA set aside the assailed orders of the trial court, as follows:
WHEREFORE, judgment is hereby rendered:
a) DISMISSING, for lack of merit, the case of Petition for Contempt of Court with Damages
filed by Susan Lim Lua against Danilo Y. Lua with docket no. SP. CA-GR No. 01154;

b) GRANTING Danilo Y. Luas Petition for Certiorari docketed as SP. CA-GR No. 01315.
Consequently, the assailed Orders dated 27 September 2005 and 25 November 2005 of the
Regional Trial Court, Branch 14, Cebu City issued in Civil Case No. CEB-29346 entitled
"Susan Lim Lua versus Danilo Y. Lua, are hereby NULLIFIED and SET ASIDE, and instead a
new one is entered:
i. ORDERING the deduction of the amount of PhP2,482,348.16 plus 946,465.64, or a
total of PhP3,428,813.80 from the current total support in arrears of Danilo Y. Lua to
his wife, Susan Lim Lua and their two (2) children;
ii. ORDERING Danilo Y. Lua to resume payment of his monthly support of
PhP115,000.00 pesos starting from the time payment of this amount was deferred by
him subject to the deductions aforementioned.
iii. DIRECTING the issuance of a permanent writ of preliminary injunction.
SO ORDERED.16
The appellate court said that the trial court should not have completely disregarded the expenses
incurred by respondent consisting of the purchase and maintenance of the two cars, payment of
tuition fees, travel expenses, and the credit card purchases involving groceries, dry goods and
books, which certainly inured to the benefit not only of the two children, but their mother (petitioner)
as well. It held that respondents act of deferring the monthly support adjudged in CA-G.R. SP No.
84740 was not contumacious as it was anchored on valid and justifiable reasons. Respondent said
he just wanted the issue of whether to deduct his advances be settled first in view of the different
interpretation by the trial court of the appellate courts decision in CA-G.R. SP No. 84740. It also
noted the lack of contribution from the petitioner in the joint obligation of spouses to support their
children.
Petitioner filed a motion for reconsideration but it was denied by the CA.
Hence, this petition raising the following errors allegedly committed by the CA:
I.
THE HONORABLE COURT ERRED IN NOT FINDING RESPONDENT GUILTY OF
INDIRECT CONTEMPT.
II.
THE HONORABLE COURT ERRED IN ORDERING THE DEDUCTION OF THE AMOUNT
OF PHP2,482,348.16 PLUS 946,465.64, OR A TOTAL OF PHP3,428,813.80 FROM THE
CURRENT TOTAL SUPPORT IN ARREARS OF THE RESPONDENT TO THE PETITIONER
AND THEIR CHILDREN.17
The main issue is whether certain expenses already incurred by the respondent may be deducted
from the total support in arrears owing to petitioner and her children pursuant to the Decision dated
April 12, 2005 in CA-G.R. SP No. 84740.
The pertinent provision of the Family Code of the Philippines provides:

Article 194. Support comprises everything indispensable for sustenance, dwelling, clothing, medical
attendance, education and transportation, in keeping with the financial capacity of the family.
The education of the person entitled to be supported referred to in the preceding paragraph shall
include his schooling or training for some profession, trade or vocation, even beyond the age of
majority. Transportation shall include expenses in going to and from school, or to and from place of
work. (Emphasis supplied.)
Petitioner argues that it was patently erroneous for the CA to have allowed the deduction of the
value of the two cars and their maintenance costs from the support in arrears, as these items are not
indispensable to the sustenance of the family or in keeping them alive. She points out that in the
Decision in CA-G.R. SP No. 84740, the CA already considered the said items which it deemed
chargeable to respondent, while the monthly support pendente lite (P115,000.00) was fixed on the
basis of the documentary evidence of respondents alleged income from various businesses and
petitioners testimony that she needed P113,000.00 for the maintenance of the household and other
miscellaneous expenses excluding the P135,000.00 medical attendance expenses of petitioner.
Respondent, on the other hand, contends that disallowing the subject deductions would result in
unjust enrichment, thus making him pay for the same obligation twice. Since petitioner and the
children resided in one residence, the groceries and dry goods purchased by the children using
respondents credit card, totallingP594,151.58 for the period September 2003 to June 2005 were not
consumed by the children alone but shared with their mother. As to the Volkswagen Beetle and
BMW 316i respondent bought for his daughter Angelli Suzanne Lua and Daniel Ryan Lua,
respectively, these, too, are to be considered advances for support, in keeping with the financial
capacity of the family. Respondent stressed that being children of parents belonging to the upperclass society, Angelli and Daniel Ryan had never in their entire life commuted from one place to
another, nor do they eat their meals at "carinderias". Hence, the cars and their maintenance are
indispensable to the childrens day-to-day living, the value of which were properly deducted from the
arrearages in support pendente lite ordered by the trial and appellate courts.
As a matter of law, the amount of support which those related by marriage and family relationship is
generally obliged to give each other shall be in proportion to the resources or means of the giver and
to the needs of the recipient. 18 Such support comprises everything indispensable for sustenance,
dwelling, clothing, medical attendance, education and transportation, in keeping with the financial
capacity of the family.
Upon receipt of a verified petition for declaration of absolute nullity of void marriage or for annulment
of voidable marriage, or for legal separation, and at any time during the proceeding, the court, motu
proprio or upon verified application of any of the parties, guardian or designated custodian, may
temporarily grant support pendente lite prior to the rendition of judgment or final order.19 Because of
its provisional nature, a court does not need to delve fully into the merits of the case before it can
settle an application for this relief. All that a court is tasked to do is determine the kind and amount of
evidence which may suffice to enable it to justly resolve the application. It is enough that the facts be
established by affidavits or other documentary evidence appearing in the record. 20
In this case, the amount of monthly support pendente lite for petitioner and her two children was
determined after due hearing and submission of documentary evidence by the parties. Although the
amount fixed by the trial court was reduced on appeal, it is clear that the monthly support pendente
lite of P115,000.00 ordered by the CA was intended primarily for the sustenance of petitioner and her
children, e.g., food, clothing, salaries of drivers and house helpers, and other household expenses.
Petitioners testimony also mentioned the cost of regular therapy for her scoliosis and
vitamins/medicines.

ATTY. ZOSA:
xxxx
Q How much do you spend for your food and your two (2) children every month?
A Presently, Sir?
ATTY. ZOSA:
Yes.
A For the food alone, I spend not over P40,000.00 to P50,000.00 a month for the food alone.
xxxx
ATTY. ZOSA:
Q What other expenses do you incur in living in that place?
A The normal household and the normal expenses for a family to have a decent living, Sir.
Q How much other expenses do you incur?
WITNESS:
A For other expenses, is around over a P100,000.00, Sir.
Q Why do you incur that much amount?
A For the clothing for the three (3) of us, for the vitamins and medicines. And also I am having a
special therapy to straighten my back because I am scoliotic. I am advised by the Doctor to hire a
driver, but I cannot still afford it now. Because my eyesight is not reliable for driving. And I still need
another househelp to accompany me whenever I go marketing because for my age, I cannot carry
anymore heavy loads.
xxxx
ATTY. FLORES:
xxxx
Q On the issue of the food for you and the two (2) children, you mentioned P40,000.00
to P50,000.00?
A Yes, for the food alone.
Q Okay, what other possible expenses that you would like to include in those two (2) items? You
mentioned of a driver, am I correct?

A Yes, I might need two (2) drivers, Sir for me and my children.
Q Okay. How much would you like possibly to pay for those two (2) drivers?
A I think P10,000.00 a month for one (1) driver. So I need two (2) drivers. And I need another
househelp.
Q You need another househelp. The househelp nowadays would charge you something
between P3,000.00 toP4,000.00. Thats quite
A Right now, my househelp is receiving P8,000.00. I need another which I will give a compensation
of P5,000.00.
Q Other than that, do you still have other expenses?
A My clothing.
COURT:
How about the schooling for your children?
WITNESS:
A The schooling is shouldered by my husband, Your Honor.
COURT:
Everything?
A Yes, Your Honor.
xxxx
ATTY. FLORES:
Q Madam witness, let us talk of the present needs. x x x. What else, what specific need that you
would like to add so I can tell my client, the defendant.
WITNESS:
A I need to have an operation both of my eyes. I also need a special therapy for my back because I
am scoliotic, three (3) times a week.
Q That is very reasonable. [W]ould you care to please repeat that?
A Therapy for my scoliotic back and then also for the operation both of my eyes. And I am also
taking some vitamins from excel that will cost P20,000.00 a month.
Q Okay. Lets have piece by piece. Have you asked the Doctor how much would it cost you for the
operation of that scoliotic?

A Yes before because I was already due last year. Before, this eye will cost P60,000.00 and the
other eyesP75,000.00.
Q So for both eyes, you are talking of P60,000.00 plus P75,000.00 is P135,000.00?
A Yes.
xxxx
Q You talk of therapy?
A Yes.
Q So how much is that?
A Around P5,000.00 a week.21
As to the financial capacity of the respondent, it is beyond doubt that he can solely provide for the
subsistence, education, transportation, health/medical needs and recreational activities of his
children, as well as those of petitioner who was then unemployed and a full-time housewife. Despite
this, respondents counsel manifested during the same hearing that respondent was willing to grant
the amount of only P75,000.00 as monthly support pendente lite both for the children and petitioner
as spousal support. Though the receipts of expenses submitted in court unmistakably show how
much respondent lavished on his children, it appears that the matter of spousal support was a
different matter altogether. Rejecting petitioners prayer for P500,000.00 monthly support and finding
the P75,000.00 monthly support offered by respondent as insufficient, the trial court fixed the
monthly support pendente lite at P250,000.00. However, since the supposed income in millions of
respondent was based merely on the allegations of petitioner in her complaint and registration
documents of various corporations which respondent insisted are owned not by him but his parents
and siblings, the CA reduced the amount of support pendente lite to P115,000.00, which ruling was
no longer questioned by both parties.
Controversy between the parties resurfaced when respondents compliance with the final CA
decision indicated that he deducted from the total amount in arrears (P2,645,000.00) the sum
of P2,482,348.16, representing the value of the two cars for the children, their cost of maintenance
and advances given to petitioner and his children. Respondent explained that the deductions were
made consistent with the fallo of the CA Decision in CA-G.R. SP No. 84740 ordering him to pay
support pendente lite in arrears less the amount supposedly given by him to petitioner as her and
their two childrens monthly support.
The following is a summary of the subject deductions under Compliance dated June 28, 2005, duly
supported by receipts22:
Car purchases for Angelli Suzanne and Daniel Ryan Car Maintenance fees of Angelli Suzanne
Credit card statements of Daniel Ryan -

Php1,350,000.00
613,472.86
51,232.50
348,682.28

Car Maintenance fees of Daniel Ryan -

118,960.52
Php2,482,348.16

After the trial court disallowed the foregoing deductions, respondent filed a motion for
reconsideration further asserting that the following amounts, likewise with supporting receipts, be
considered as additional advances given to petitioner and the children 23:
Medical expenses of Susan Lim-Lua

Php 42,450.71

Dental Expenses of Daniel Ryan

11,500.00

Travel expenses of Susan Lim-Lua

14,611.15

Credit card purchases of Angelli

Suzanne

408,891.08

Salon and travel expenses of Angelli

Suzanne

87,112.70

School expenses of Daniel Ryan Lua

260,900.00

Cash given to Daniel and Angelli

121,000.00

TOTAL GRAND TOTAL -

Php 946,465.64
Php 3,428,813.80

The CA, in ruling for the respondent said that all the foregoing expenses already incurred by the
respondent should, in equity, be considered advances which may be properly deducted from the
support in arrears due to the petitioner and the two children. Said court also noted the absence of
petitioners contribution to the joint obligation of support for their children.
We reverse in part the decision of the CA.
Judicial determination of support pendente lite in cases of legal separation and petitions for
declaration of nullity or annulment of marriage are guided by the following provisions of the Rule on
Provisional Orders24
Sec. 2. Spousal Support.In determining support for the spouses, the court may be guided by the
following rules:
(a) In the absence of adequate provisions in a written agreement between the spouses, the
spouses may be supported from the properties of the absolute community or the conjugal
partnership.
(b) The court may award support to either spouse in such amount and for such period of time
as the court may deem just and reasonable based on their standard of living during the
marriage.

(c) The court may likewise consider the following factors: (1) whether the spouse seeking
support is the custodian of a child whose circumstances make it appropriate for that spouse
not to seek outside employment; (2) the time necessary to acquire sufficient education and
training to enable the spouse seeking support to find appropriate employment, and that
spouses future earning capacity; (3) the duration of the marriage; (4) the comparative
financial resources of the spouses, including their comparative earning abilities in the labor
market; (5) the needs and obligations of each spouse; (6) the contribution of each spouse to
the marriage, including services rendered in home-making, child care, education, and career
building of the other spouse; (7) the age and health of the spouses; (8) the physical and
emotional conditions of the spouses; (9) the ability of the supporting spouse to give support,
taking into account that spouses earning capacity, earned and unearned income, assets,
and standard of living; and (10) any other factor the court may deem just and equitable.
(d) The Family Court may direct the deduction of the provisional support from the salary of
the spouse.
Sec. 3. Child Support.The common children of the spouses shall be supported from the properties
of the absolute community or the conjugal partnership.
Subject to the sound discretion of the court, either parent or both may be ordered to give an amount
necessary for the support, maintenance, and education of the child. It shall be in proportion to the
resources or means of the giver and to the necessities of the recipient.
In determining the amount of provisional support, the court may likewise consider the following
factors: (1) the financial resources of the custodial and non-custodial parent and those of the child;
(2) the physical and emotional health of the child and his or her special needs and aptitudes; (3) the
standard of living the child has been accustomed to; (4) the non-monetary contributions that the
parents will make toward the care and well-being of the child.
The Family Court may direct the deduction of the provisional support from the salary of the parent.
Since the amount of monthly support pendente lite as fixed by the CA was not appealed by either
party, there is no controversy as to its sufficiency and reasonableness. The dispute concerns the
deductions made by respondent in settling the support in arrears.
On the issue of crediting of money payments or expenses against accrued support, we find as
relevant the following rulings by US courts.
In Bradford v. Futrell,25 appellant sought review of the decision of the Circuit Court which found him in
arrears with his child support payments and entered a decree in favor of appellee wife. He
complained that in determining the arrearage figure, he should have been allowed full credit for all
money and items of personal property given by him to the children themselves, even though he
referred to them as gifts. The Court of Appeals of Maryland ruled that in the suit to determine amount
of arrears due the divorced wife under decree for support of minor children, the husband (appellant)
was not entitled to credit for checks which he had clearly designated as gifts, nor was he entitled to
credit for an automobile given to the oldest son or a television set given to the children. Thus, if the
children remain in the custody of the mother, the father is not entitled to credit for money paid directly
to the children if such was paid without any relation to the decree.
In the absence of some finding of consent by the mother, most courts refuse to allow a husband to
dictate how he will meet the requirements for support payments when the mode of payment is fixed
by a decree of court. Thus he will not be credited for payments made when he unnecessarily

interposed himself as a volunteer and made payments direct to the children of his own accord. Wills
v. Baker, 214 S. W. 2d 748 (Mo. 1948); Openshaw v. Openshaw, 42 P. 2d 191 (Utah 1935). In the
latter case the court said in part: "The payments to the children themselves do not appear to have
been made as payments upon alimony, but were rather the result of his fatherly interest in the
welfare of those children. We do not believe he should be permitted to charge them to plaintiff. By so
doing he would be determining for Mrs. Openshaw the manner in which she should expend her
allowances. It is a very easy thing for children to say their mother will not give them money,
especially as they may realize that such a plea is effective in attaining their ends. If she is not
treating them right the courts are open to the father for redress."26
In Martin, Jr. v. Martin,27 the Supreme Court of Washington held that a father, who is required by a
divorce decree to make child support payments directly to the mother, cannot claim credit for
payments voluntarily made directly to the children. However, special considerations of an equitable
nature may justify a court in crediting such payments on his indebtedness to the mother, when such
can be done without injustice to her.
The general rule is to the effect that when a father is required by a divorce decree to pay to the
mother money for the support of their dependent children and the unpaid and accrued installments
become judgments in her favor, he cannot, as a matter of law, claim credit on account of payments
voluntarily made directly to the children. Koon v. Koon, supra; Briggs v. Briggs, supra. However,
special considerations of an equitable nature may justify a court in crediting such payments on his
indebtedness to the mother, when that can be done without injustice to her. Briggs v. Briggs, supra.
The courts are justifiably reluctant to lay down any general rules as to when such credits may be
allowed.28 (Emphasis supplied.)
Here, the CA should not have allowed all the expenses incurred by respondent to be credited
against the accrued support pendente lite. As earlier mentioned, the monthly support pendente lite
granted by the trial court was intended primarily for food, household expenses such as salaries of
drivers and house helpers, and also petitioners scoliosis therapy sessions. Hence, the value of two
expensive cars bought by respondent for his children plus their maintenance cost, travel expenses of
petitioner and Angelli, purchases through credit card of items other than groceries and dry goods
(clothing) should have been disallowed, as these bear no relation to the judgment awarding support
pendente lite. While it is true that the dispositive portion of the executory decision in CA-G.R. SP No.
84740 ordered herein respondent to pay the support in arrears "less than the amount supposedly
given by petitioner to the private respondent as her and their two (2) children monthly support," the
deductions should be limited to those basic needs and expenses considered by the trial and
appellate courts. The assailed ruling of the CA allowing huge deductions from the accrued monthly
support of petitioner and her children, while correct insofar as it commends the generosity of the
respondent to his children, is clearly inconsistent with the executory decision in CA-G.R. SP No.
84740. More important, it completely ignores the unfair consequences to petitioner whose
sustenance and well-being, was given due regard by the trial and appellate courts. This is evident
from the March 31, 2004 Order granting support pendente lite to petitioner and her children, when
the trial court observed:
While there is evidence to the effect that defendant is giving some forms of financial assistance to
his two (2) children via their credit cards and paying for their school expenses, the same is, however,
devoid of any form of spousal support to the plaintiff, for, at this point in time, while the action for
nullity of marriage is still to be heard, it is incumbent upon the defendant, considering the physical
and financial condition of the plaintiff and the overwhelming capacity of defendant, to extend support
unto the latter. x x x29

On appeal, while the Decision in CA-G.R. SP No. 84740 reduced the amount of monthly support
fixed by the trial court, it nevertheless held that considering respondents financial resources, it is but
fair and just that he give a monthly support for the sustenance and basic necessities of petitioner
and his children. This would imply that any amount respondent seeks to be credited as monthly
support should only cover those incurred for sustenance and household expenses.
1avvphi1

In the case at bar, records clearly show and in fact has been admitted by petitioner that aside from
paying the expenses of their two (2) childrens schooling, he gave his two (2) children two (2) cars
and credit cards of which the expenses for various items namely: clothes, grocery items and repairs
of their cars were chargeable to him which totaled an amount of more than One Hundred Thousand
(P100,000.00) for each of them and considering that as testified by the private respondent that she
needs the total amount of P113,000.00 for the maintenance of the household and other
miscellaneous expenses and considering further that petitioner can afford to buy cars for his two (2)
children, and to pay the expenses incurred by them which are chargeable to him through the credit
cards he provided them in the amount of P100,000.00 each, it is but fair and just that the monthly
support pendente lite for his wife, herein private respondent, be fixed as of the present in the amount
of P115,000.00 which would be sufficient enough to take care of the household and other needs.
This monthly support pendente lite to private respondent in the amount of P115,000.00 excludes the
amount of One Hundred ThirtyFive (P135,000.00) Thousand Pesos for medical attendance
expenses needed by private respondent for the operation of both her eyes which is demandable
upon the conduct of such operation. Likewise, this monthly support ofP115,000.00 is without
prejudice to any increase or decrease thereof that the trial court may grant private respondent as the
circumstances may warrant i.e. depending on the proof submitted by the parties during the
proceedings for the main action for support.
The amounts already extended to the two (2) children, being a commendable act of petitioner,
should be continued by him considering the vast financial resources at his disposal. 30 (Emphasis
supplied.)
Accordingly, only the following expenses of respondent may be allowed as deductions from the
accrued support pendente lite for petitioner and her children:
1wphi1

Medical expenses of Susan Lim-Lua

Php 42,450.71

Dental Expenses of Daniel Ryan

11,500.00

Credit card purchases of Angelli

365,282.20

(Groceries and Dry Goods)

Credit Card purchases of Daniel Ryan

228,869.38

TOTAL

Php 648,102.29

As to the contempt charge, we sustain the CA in holding that respondent is not guilty of indirect
contempt.
Contempt of court is defined as a disobedience to the court by acting in opposition to its authority,
justice, and dignity. It signifies not only a willful disregard or disobedience of the courts order, but
such conduct which tends to bring the authority of the court and the administration of law into
disrepute or, in some manner, to impede the due administration of justice. 31 To constitute contempt,
the act must be done willfully and for an illegitimate or improper purpose. 32 The good faith, or lack of
it, of the alleged contemnor should be considered. 33

Respondent admittedly ceased or suspended the giving of monthly support pendente lite granted by
the trial court, which is immediately executory. However, we agree with the CA that respondents act
was not contumacious considering that he had not been remiss in actually providing for the needs of
his children. It is a matter of record that respondent continued shouldering the full cost of their
education and even beyond their basic necessities in keeping with the familys social status.
Moreover, respondent believed in good faith that the trial and appellate courts, upon equitable
grounds, would allow him to offset the substantial amounts he had spent or paid directly to his
children.
Respondent complains that petitioner is very much capacitated to generate income on her own
because she presently maintains a boutique at the Ayala Center Mall in Cebu City and at the same
time engages in the business of lending money. He also claims that the two children have finished
their education and are now employed in the family business earning their own salaries.
Suffice it to state that the matter of increase or reduction of support should be submitted to the trial
court in which the action for declaration for nullity of marriage was filed, as this Court is not a trier of
facts. The amount of support may be reduced or increased proportionately according to the
reduction or increase of the necessities of the recipient and the resources or means of the person
obliged to support.34 As we held in Advincula v. Advincula35
Judgment for support does not become final. The right to support is of such nature that its
allowance is essentially provisional; for during the entire period that a needy party is entitled to
support, his or her alimony may be modified or altered, in accordance with his increased or
decreased needs, and with the means of the giver. It cannot be regarded as subject to final
determination.36
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 20, 2006 of the Court of
Appeals in CA-G.R. SP Nos. 01154 and 01315 is hereby MODIFIED to read as follows:
"WHEREFORE, judgment is hereby rendered:
a) DISMISSING, for lack of merit, the case of Petition for Contempt of Court with Damages
filed by Susan Lim Lua against Danilo Y. Lua with docket no. SP. CA-G.R. No. 01154;
b) GRANTING IN PART Danilo Y. Lua's Petition for Certiorari docketed as SP. CA-G.R. No.
01315. Consequently, the assailed Orders dated 27 September 2005 and 25 November
2005 of the Regional Trial Court, Branch 14, Cebu City issued in Civil Case No. CEB-29346
entitled "Susan Lim Lua versus Danilo Y. Lua, are hereby NULLIFIED and SET ASIDE, and
instead a new one is entered:
i. ORDERING the deduction of the amount of Php 648,102.29 from the support
pendente lite in arrears of Danilo Y. Lua to his wife, Susan Lim Lua and their two (2)
children;
ii. ORDERING Danilo Y. Lua to resume payment of his monthly support of
PhP115,000.00 pesos starting from the time payment of this amount was deferred by
him subject to the deduction aforementioned.
iii. DIRECTING the immediate execution of this judgment.
SO ORDERED."

No pronouncement as to costs.
SO ORDERED.
MARTIN S. VILLARAMA, JR.
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
Chairperson
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

BIENVENIDO L. REYES
Associate Justice
C E R TI F I C ATI O N
Pursuant to Section 13, Article V III of the 1987 Constitution, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Court's DIVISION
MARIA LOURDES P. A. SERENO
Chief Justice
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-23851 March 26, 1976
WACK WACK GOLF & COUNTRY CLUB, INC., plaintiff-appellant,
vs.
LEE E. WON alias RAMON LEE and BIENVENIDO A. TAN, defendants-appellees.
Leonardo Abola for appellant.
Alfonso V. Agcaoli & Ramon A. Barcelona for appellee Lee E. Won.
Bienvenido A. Tan in his own behalf.

CASTRO, C.J.:

This is an appeal from the order of the Court of First Instance of Rizal, in civil case 7656, dismissing
the plaintiff-appellant's complaint of interpleader upon the grounds of failure to state a cause of
action and res judicata.
In its amended and supplemental complaint of October 23, 1963, the Wack Wack Golf & Country
Club, Inc., a non-stock, civic and athletic corporation duly organized under the laws of the
Philippines, with principal office in Mandaluyong, Rizal (hereinafter referred to as the Corporation),
alleged, for its first cause of action, that the defendant Lee E. Won claims ownership of its
membership fee certificate 201, by virtue of the decision rendered in civil case 26044 of the CFI of
Manila, entitled "Lee E. Won alias Ramon Lee vs. Wack Wack Golf & Country Club, Inc." and also by
virtue of membership fee certificate 201-serial no. 1478 issued on October 17, 1963 by Ponciano B.
Jacinto, deputy clerk of court of the said CFI of Manila, for and in behalf of the president and the
secretary of the Corporation and of the People's Bank & Trust Company as transfer agent of the said
Corporation, pursuant to the order of September 23, 1963 in the said case; that the defendant
Bienvenido A. Tan, on the other hand, claims to be lawful owner of its aforesaid membership fee
certificate 201 by virtue of membership fee certificate 201-serial no. 1199 issued to him on July 24,
1950 pursuant to an assignment made in his favor by "Swan, Culbertson and Fritz," the original
owner and holder of membership fee certificate 201; that under its articles of incorporation and bylaws the Corporation is authorized to issue a maximum of 400 membership fee certificates to
persons duly elected or admitted to proprietary membership, all of which have been issued as early
as December 1939; that it claims no interest whatsoever in the said membership fee certificate 201;
that it has no means of determining who of the two defendants is the lawful owner thereof; that it is
without power to issue two separate certificates for the same membership fee certificate 201, or to
issue another membership fee certificate to the defendant Lee, without violating its articles of
incorporation and by-laws; and that the membership fee certificate 201-serial no. 1199 held by the
defendant Tan and the membership fee certificate 201-serial No. 1478 issued to the defendant Lee
proceed from the same membership fee certificate 201, originally issued in the name of "Swan,
Culbertson and Fritz".
For its second cause of action. it alleged that the membership fee certificate 201-serial no. 1478
issued by the deputy clerk of court of court of the CFI of Manila in behalf of the Corporation is null
and void because issued in violation of its by-laws, which require the surrender and cancellation of
the outstanding membership fee certificate 201 before issuance may be made to the transferee of a
new certificate duly signed by its president and secretary, aside from the fact that the decision of the
CFI of Manila in civil case 26044 is not binding upon the defendant Tan, holder of membership fee
certificate 201-serial no. 1199; that Tan is made a party because of his refusal to join it in this action
or bring a separate action to protect his rights despite the fact that he has a legal and beneficial
interest in the subject matter of this litigation; and that he is made a part so that complete relief may
be accorded herein.
The Corporation prayed that (a) an order be issued requiring Lee and Tan to interplead and litigate
their conflicting claims; and (b) judgment. be rendered, after hearing, declaring who of the two is the
lawful owner of membership fee certificate 201, and ordering the surrender and cancellation of
membership fee certificate 201-serial no. 1478 issued in the name of Lee.
In separate motions the defendants moved to dismiss the complaint upon the grounds of res
judicata, failure of the complaint to state a cause of action, and bar by prescription. 1 These motions
were duly opposed by the Corporation. Finding the grounds of bar by prior judgment and failure to state a
cause of action well taken, the trial court dismissed the complaint, with costs against the Corporation.
In this appeal, the Corporation contends that the court a quo erred (1) in finding that the allegations
in its amended and supplemental complaint do not constitute a valid ground for an action of

interpleader, and in holding that "the principal motive for the present action is to reopen the Manila
Case and collaterally attack the decision of the said Court"; (2) in finding that the decision in civil
case 26044 of the CFI of Manila constitutes res judicata and bars its present action; and (3) in
dismissing its action instead of compelling the appellees to interplead and litigate between
themselves their respective claims.
The Corporations position may be stated elsewise as follows: The trial court erred in dismissing the
complaint, instead of compelling the appellees to interplead because there actually are conflicting
claims between the latter with respect to the ownership of membership fee certificate 201, and, as
there is not Identity of parties, of subject-matter, and of cause of action, between civil case 26044 of
the CFI of Manila and the present action, the complaint should not have been dismissed upon the
ground of res judicata.
On the other hand, the appellees argue that the trial court properly dismissed the complaint,
because, having the effect of reopening civil case 26044, the present action is barred by res
judicata.
Although res judicata or bar by a prior judgment was the principal ground availed of by the appellees
in moving for the dismissal of the complaint and upon which the trial court actually dismissed the
complaint, the determinative issue, as can be gleaned from the pleadings of the parties, relates to
the propriety and timeliness of the remedy of interpleader.
The action of interpleader, under section 120 of the Code of Civil Procedure, 2 is a remedy whereby a
person who has personal property in his possession, or an obligation to render wholly or partially, without
claiming any right to either, comes to court and asks that the persons who claim the said personal
property or who consider themselves entitled to demand compliance with the obligation, be required to
litigate among themselves in order to determine finally who is entitled to tone or the one thing. The
remedy is afforded to protect a person not against double liability but against double vexation in respect of
one liability. 3 The procedure under the Rules of Court 4 is the same as that under the Code of Civil
Procedure, 5except that under the former the remedy of interpleader is available regardless of the nature
of the subject-matter of the controversy, whereas under the latter an interpleader suit is proper only if the
subject-matter of the controversy is personal property or relates to the performance of an obligation.
There is no question that the subject matter of the present controversy, i.e., the membership fee
certificate 201, is proper for an interpleader suit. What is here disputed is the propriety and
timeliness of the remedy in the light of the facts and circumstances obtaining.
A stakeholder 6 should use reasonable diligence to hale the contending claimants to court. 7 He need not
await actual institution of independent suits against him before filing a bill of interpleader. 8 He should file
an action of interpleader within a reasonable time after a dispute has arisen without waiting to be sued by
either of the contending claimants. 9 Otherwise, he may be barred by laches 10 or undue delay. 11 But
where he acts with reasonable diligence in view of the environmental circumstances, the remedy is not
barred. 12
Has the Corporation in this case acted with diligence, in view of all the circumstances, such that it
may properly invoke the remedy of interpleader? We do not think so. It was aware of the conflicting
claims of the appellees with respect to the membership fee certificate 201 long before it filed the
present interpleader suit. It had been recognizing Tan as the lawful owner thereof. It was sued by
Lee who also claimed the same membership fee certificate. Yet it did not interplead Tan. It preferred
to proceed with the litigation (civil case 26044) and to defend itself therein. As a matter of fact, final
judgment was rendered against it and said judgment has already been executed. It is not therefore
too late for it to invoke the remedy of interpleader.

It has been held that a stakeholder's action of interpleader is too late when filed after judgment has
been rendered against him in favor of one of the contending claimants, 13 especially where he had
notice of the conflicting claims prior to the rendition of the judgment and neglected the opportunity to
implead the adverse claimants in the suit where judgment was entered. This must be so, because once
judgment is obtained against him by one claimant he becomes liable to the latter. 14 In once case, 15 it was
declared:
The record here discloses that long before the rendition of the judgment in favor of
relators against the Hanover Fire Insurance Company the latter had notice of the
adverse claim of South to the proceeds of the policy. No reason is shown why the
Insurance Company did not implead South in the former suit and have the conflicting
claims there determined. The Insurance Company elected not to do so and that suit
proceeded to a final judgment in favor of relators. The Company thereby became
independently liable to relators. It was then too late for such company to invoke the
remedy of interpleader
The Corporation has not shown any justifiable reason why it did not file an application for
interpleader in civil case 26044 to compel the appellees herein to litigate between themselves their
conflicting claims of ownership. It was only after adverse final judgment was rendered against it that
the remedy of interpleader was invoked by it. By then it was too late, because to he entitled to this
remedy the applicant must be able to show that lie has not been made independently liable to any of
the claimants. And since the Corporation is already liable to Lee under a final judgment, the present
interpleader suit is clearly improper and unavailing.
It is the general rule that before a person will be deemed to be in a position to ask for
an order of intrepleader, he must be prepared to show, among other prerequisites,
that he has not become independently liable to any of the claimants. 25 Tex. Jur. p.
52, Sec. 3; 30 Am. Jur. p. 218, Section 8.
It is also the general rule that a bill of interpleader comes too late when it is filed after
judgment has been rendered in favor of one of the claimants of the fund, this being
especially true when the holder of the funds had notice of the conflicting claims prior
to the rendition of the judgment and had an opportunity to implead the adverse
claimants in the suit in which the judgment was rendered. United Procedures Pipe
Line Co. v. Britton, Tex. Civ. App. 264 S.W. 176; Nash v. McCullum, Tex. Civ. 74 S.W.
2d 1046; 30 Am. Jur. p. 223, Sec. 11; 25 Tex. Jur. p. 56, Sec. 5; 108 A.L.R., note 5, p.
275. 16
Indeed, if a stakeholder defends a suit filed by one of the adverse claimants and allows said suit to
proceed to final judgment against him, he cannot later on have that part of the litigation repeated in
an interpleader suit. In the case at hand, the Corporation allowed civil case 26044 to proceed to final
judgment. And it offered no satisfactory explanation for its failure to implead Tan in the same
litigation. In this factual situation, it is clear that this interpleader suit cannot prosper because it was
filed much too late.
If a stakeholder defends a suit by one claimant and allows it to proceed so far as a
judgment against him without filing a bill of interpleader, it then becomes too late for
him to do so. Union Bank v. Kerr, 2 Md. Ch. 460; Home Life Ins. Co. v. Gaulk, 86 Md.
385, 390, 38 A. 901; Gonia v. O'Brien, 223 Mass. 177, 111 N.E. 787. It is one o the
main offices of a bill of interpleader to restrain a separate proceeding at law by
claimant so as to avoid the resulting partial judgment; and if the stakeholder
acquiesces in one claimant's trying out his claim and establishing it at law, he cannot

then have that part of the litigation repeated in an interpleader suit. 4 Pomeroy's Eq.
Juris. No. 162; Mitfor's Eq. Pleading (Tyler's Ed.) 147 and 236; Langdell's Summary
of Eq. Pleading, No. 162' De Zouche v. Garrizon, 140 Pa. 430, 21 A/450. 17
It is the general rule that a bill of interpleader comes too late when application therefore is
delayed until after judgment has been rendered in favor of one of the claimants of the
fund, and that this is especially true where the holder of the fund had notice of the
conflicting claims prior to the rendition of such judgment and an opportunity to implead
the adverse claimants in the suit in which such judgment was rendered. (See notes and
cases cited 36 Am. Dec. 703, Am. St. Rep. 598, also 5 Pomeroy's Eq. Juris. Sec. 41.)

The evidence in the opinion of the majority shows beyond dispute that the appellant
permitted the Parker county suit to proceed to judgment in favor of Britton with full
notice of the adverse claims of the defendants in the present suit other than the
assignees of the judgment (the bank and Mrs. Pabb) and no excuse is shown why he
did not implead them in the suit. 18
To now permit the Corporation to bring Lee to court after the latter's successful establishment of his
rights in civil case 26044 to the membership fee certificate 201, is to increase instead of to diminish
the number of suits, which is one of the purposes of an action of interpleader, with the possibility that
the latter would lose the benefits of the favorable judgment. This cannot be done because having
elected to take its chances of success in said civil case 26044, with full knowledge of all the fact, the
Corporation must submit to the consequences of defeat.
The act providing for the proceeding has nothing to say touching the right of one,
after contesting a claim of one of the claimants to final judgment unsuccessfully, to
involve the successful litigant in litigation anew by bringing an interpleader action.
The question seems to be one of first impression here, but, in other jurisdictions,
from which the substance of the act was apparently taken, the rule prevails that the
action cannot be resorted to after an unsuccessful trial against one of the claimants.
It is well settled, both by reasons and authority, that one who asks the interposition of
a court of equity to compel others, claiming property in his hands, to interplead, must
do so before putting them to the test of trials at law. Yarborough v. Thompson, 3
Smedes & M. 291 (41 Am. Dec. 626); Gornish v. Tanner, 1 You. & Jer. 333; Haseltine
v. Brickery, 16 Grat. (Va.) 116. The remedy by interpleader is afforded to protect the
party from the annoyance and hazard of two or more actions touching the same
property or demand; but one who, with knowledge of all the facts, neglects to avail
himself of the relief, or elects to take the chances for success in the actions at law,
ought to submit to the consequences of defeat. To permit an unsuccessful defendant
to compel the successful plaintiffs to interplead, is to increase instead of to diminish
the number of suits; to put upon the shoulders of others the burden which he asks
may be taken from his own. ....'
It is urged, however, that the American Surety Company of New York was not in
position to file an interpleader until it had tested the claim of relatrix to final judgment,
and that, failing to meet with success, it promptly filed the interpleader. The reason
why, it urges, it was not in such position until then is that had it succeeded before this
court in sustaining its construction of the bond and the law governing the bond, it
would not have been called upon to file an interpleader, since there would have been
sufficient funds in its hands to have satisfied all lawful claimants. It may be observed,
however, that the surety company was acquainted with all of the facts, and hence

that it simply took its chances of meeting with success by its own construction of the
bond and the law. Having failed to sustain it, it cannot now force relatrix into litigation
anew with others, involving most likely a repetition of what has been decided, or
force her to accept a pro rata part of a fund, which is far from benefits of the
judgment. 19
Besides, a successful litigant cannot later be impleaded by his defeated adversary in an interpleader
suit and compelled to prove his claim anew against other adverse claimants, as that would in effect
be a collateral attack upon the judgment.
The jurisprudence of this state and the common law states is well-settled that a
claimant who has been put to test of a trial by a surety, and has establish his claim,
may not be impleaded later by the surety in an interpleader suit, and compelled to
prove his claim again with other adverse claimants.American Surety Company of
New York v. Brim, 175 La. 959, 144 So. 727; American Surety Company of New York
v. Brim (In Re Lyong Lumber Company), 176 La. 867, 147 So. 18; Dugas v. N.Y.
Casualty Co., 181 La. 322, 159 So. 572; 15 Ruling Case Law, 228; 33 Corpus Juris,
477; 4 Pomeroy's Jurisprudence, 1023; Royal Neighbors of America v. Lowary (D.C.)
46 F2d 565; Brackett v. Graves, 30 App. Div. 162, 51 N.Y.S. 895; De Zouche v.
Garrison, 140 Pa. 430, 21 A. 450, 451;Manufacturer's Finance Co. v. W.I. Jones Co.
141 Ga., 519, 81 S.E. 1033; Hancock Mutual Life Ins. Co. v. Lawder, 22 R.I. 416, 84
A. 383.
There can be no doubt that relator's claim has been finally and definitely established,
because that matter was passed upon by three courts in definitive judgments. The
only remaining item is the value of the use of the land during the time that relator
occupied it. The case was remanded solely and only for the purpose of determining
the amount of that credit. In all other aspects the judgment is final. 20
It is generally held by the cases it is the office of interpleader to protect a party, not
against double liability, but against double vexation on account of one liability. Gonia v.
O'Brien, 223 Mass. 177, 111 N.E. 787. And so it is said that it is too late for the remedy of
interpleader if the party seeking this relef has contested the claim of one of the parties
and suffered judgment to be taken.

In United P.P.I. Co. v. Britton (Tex. Civ. App.) 264 S.W. 576. 578, it was said: 'It is the
general rule that a bill of interpleader comes too late when application therefor is
delayed until after judgment has been rendered in favor of one of the claimants of the
fund, and this is especially true where the holder of the fund had notice of the
conflicting claims prior to the rendition of such judgment and an opportunity to
implead the adverse claimants in the suit in which such judgment was rendered. See
notes and cases cited 35 Am. Dec. 703; 91 An. St. Rep. 598; also 5 Pomeroy's
Equity Jurisprudence No. 41.'
The principle thus stated has been recognized in many cases in other jurisdictions,
among which may be cited American Surety Co. v. O'Brien, 223 Mass. 177, 111 N.E.
787; Phillips v. Taylor, 148 Md. 157, 129 A. 18; Moore v. Hill, 59 Ga. 760,
761; Yearborough v. Thompson, 3 Smedes & M. (11 Miss.) 291, 41 Am. Dec. 626.
See, also, 33 C.J. p. 447, No. 30; Nash v. McCullum, (Tex. Civ. App.) 74 S.W. 2d
1042, 1047.

It would seem that this rule should logically follow since, after the recovery of
judgment, the interpleading of the judgment creditor is in effect a collateral attack
upon the judgment. 21
In fine, the instant interpleader suit cannot prosper because the Corporation had already been made
independently liable in civil case 26044 and, therefore, its present application for interpleader would
in effect be a collateral attack upon the final judgment in the said civil case; the appellee Lee had
already established his rights to membership fee certificate 201 in the aforesaid civil case and,
therefore, this interpleader suit would compel him to establish his rights anew, and thereby increase
instead of diminish litigations, which is one of the purposes of an interpleader suit, with the possiblity
that the benefits of the final judgment in the said civil case might eventually be taken away from him;
and because the Corporation allowed itself to be sued to final judgment in the said case, its action of
interpleader was filed inexcusably late, for which reason it is barred by laches or unreasonable
delay.
ACCORDINGLY, the order of May 28, 1964, dismissing the complaint, is affirmed, at appellant's cost.
Teehankee, Makasiar, Antonio, Esguerra, Muoz Palma, Aquino and Concepcion, Jr., JJ., concur.
Barredo and Martin, JJ., took no part.
Fernando, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 73794 September 19, 1988
ETERNAL GARDENS MEMORIAL PARKS CORPORATION, petitioner,
vs.
FIRST SPECIAL CASES DIVISION INTERMEDIATE APPELLATE COURT and NORTH
PHILIPPINE UNION MISSION OF THE SEVENTH-DAY ADVENTISTS, respondents.

PARAS, J.:
This is a special civil action for certiorari, prohibition and mandamus seeking to set aside the two
resolutions of public respondent First Special Cases Division of the then Intermediate Appellate
Court in AC-G.R. No. 04869 entitled "North Philippine Union Mission of the Seventh Day Adventists
versus Hon. Antonia Corpus-Macandog, Presiding Judge, Branch CXX, Regional Trial Court,
Caloocan City and Eternal Gardens Memorial Park Corporation, (a) dated September 5, 1985 (Rollo,
pp. 21-25) reconsidering its Decision 1 of February 27, 1985 (Rollo, pp. 38-48) and ordering petitioner to
deposit whatever amounts due from it under the Land Development Agreement, and (b) dated February
13, 1986 (Rollo, p. 27) denying for lack of merit petitioner's motion for reconsideration.

Petitioner Eternal Gardens Memorial Parks Corporation and private respondent North Philippine
Union Mission Corporation of the Seventh Day Adventists (MISSION for short) are corporations duly
organized and existing under and by virtue of the laws of the Republic of the Philippines.
They executed a Land Development Agreement (Rollo, pp. 179-182) on October 6, 1976 whereby
the former undertook to introduce and construct at its own expense and responsibility necessary
improvements on the property owned by private respondent into a memorial park to be subdivided
into and sold as memorial plot lots, at a stipulated area and price per lot. Out of the proceeds from
the sale, private respondent is entitled to receive 40% of the net gross collection from the project to
be remitted monthly by petitioner to private respondent through a designated depositary trustee
bank. On the same date private respondent executed in petitioner's favor a Deed of Absolute Sale
with Mortgage (Rollo, pp. 183-186) on the lots with titles involved in the land development project.
The deed was supplemented by a Sale of Real Property with Mortgage and Special Conditions
dated October 28, 1978 (Rollo, pp. 189-194 The amounts totalling about P984,110.82 paid by
petitioner were to be considered as part of the 40% due private respondent under the Land
Development Agreement. All went well until Maysilo Estate asserted its claim of ownership over the
parcel of land in question. Confronted with such conflicting claims, petitioner as plaintiff filed a
complaint for interpleader (Rollo, pp. 169-179) against private respondent MISSION and Maysilo
Estate, docketed as Special Court Case No. C-9556 of the then CFI of Rizal, Branch XII, Caloocan,
alleging among others, that in view of the conflicting claims of ownership of the defendants (herein
private respondent and Maysilo Estate) over the properties subject matter of the contracts, over
which plaintiff corporation (herein petitioner) has no claim of ownership except as a purchaser
thereof, and to protect the interests of plaintiff corporation which has no interest in the subject matter
of the dispute and is willing to pay whoever is entitled or declared to be the owners of said
properties, the defendants should be required to interplead and litigate their several claims between
themselves (Rollo, p. 177).
An order was issued by the presiding judge 2 requiring defendants to interplead on October 22, 1981.
MISSION filed a motion to dismiss dated November 10, 1981 for lack of cause of action but also
presented an answer dated November 12, 1981. The motion to dismiss was denied in an Order dated
January 12, 1982. The heirs of Maysilo Estate filed their own answer dated November 11, 1981 and an
amended answer dated October 20, 1983 thru the estate's special receiver. The heirs of Pedro Banon
filed an "Answer in Intervention with Special and Affirmative Defenses" dated October 24, 1983, while Lilia
B. Sevilla and husband Jose Seelin filed their "Answer in Cross-claim" dated October 31, 1983 (Rollo, p.
30). The heirs of Sofia O'Farrel y Patino, et al. filed their Answer in Intervention dated November 10,
1983.
However, earlier on November 21, 1982, private respondent presented a motion for the placing on
judicial deposit the amounts due and unpaid from petitioner. Acting on such motion, the trial
court 3 denied judicial deposit in its order dated February 13, 1984, the decretal portion of which reads:
PREMISES CONSIDERED, all or the full amount the plaintiff, Eternal Gardens
Memorial Parks Corporation have already paid the North Philippine Union Mission
Corporation of the Seventh Day Adventist is hereby ordered to deposit the same to
this Court within thirty (30) days from receipt of this order considering that real or true
owner of the subject properties in question, due hearing of this court has yet to be
undergone in order to decide as to who is the true owner which is a prejudicial
question. Hence the motion dated November 21, 1983 of the NPUM for the Eternal
Gardens Corporation to deposit the balance due and unpaid is hereby ordered
denied and the opposition thereto dated December 19, 1983 is hereby ordered
granted.

The contract between the Eternal Gardens Corporation and the North Philippine
Union Mission dated October 16, 1976 is ordered and declared ineffective as of
today, February 13, 1984 because the subject matter of the sale is not existing
between the contracting parties until after the question of ownership is resolved by
this court. The court will order the revival of the contract if the North Philippine Union
Mission will win.
If not, the declared winner among the intervenors will be the party to enter into a
contract of sale with the plaintiff as aforementioned. (Rollo, p. 66).
Another order dated October 26, 1984 was issued amending the February 13, 1984 order and
setting aside the order for private respondent's deposit of the amounts it had previously received
from petitioner, thus:
WHEREFORE IN VIEW OF ALL THE FOREGOING CONSIDERATIONS the order of
February 13, 1984, is hereby ordered amended, reconsidered and modified by this
same Court as follows:
(a) The order directing the NORTH PHILIPPINE UNION MISSION CORPORATION
OF SEVENTH-DAY ADVENTISTS to deposit the amounts it received under the
implementation of the LAND DEVELOPMENT AGREEMENT which is not questioned
by the plaintiff, Eternal Gardens, is hereby ordered set aside for the reason that the
titles to ownership, the North Philippine Union Mission Corporation of Seventh Day
Adventists on the lots subject matter of the aforesaid agreement is not established
invalid, and the alleged titles of intervenors are not proven yet by competent
evidence;
(b) The motion to require Eternal Gardens to deposit the balance under the Land
Development Agreement is likewise hereby ordered denied considering the fact the
aforesaid plaintiff had not denied its obligations under the aforesaid contract; and
(c) The trial or hearing is hereby ordered as scheduled to proceed on November 29,
1984 and on December 6, 1984 at 8:30 in the morning per order of this Court dated
October 4, 1984 in order to determine the alleged claims of ownership by the
intervenors and all claims and allegations of each party to the instant" case will be
considered and decided carefully by this court on just and meritorious grounds.
(Rollo, p. 39)
Said Orders were assailed twice in the Intermediate Appellate Court (Court of Appeals) and in the
Supreme Court as follows:
In G.R. No. 73569 it appeared that on January 11, 1985, MISSION filed a motion to dismiss the
Interpleader and the claims of the Maysilo Estate and the Intervenors and to order the Eternal
Gardens to comply with its Land Management with MISSION.
On January 28, 1985, the trial court passed a resolution, the dispositive portion of which reads:
WHEREFORE, premises considered, this Court, after a lengthy, careful judicious
study and perusal of all the stand of each and everyone of all the parties participating
in this case, hereby orders the dismissal of the interpleader, and the interventions
filed by the intervenors, heirs of Pedro Banon, heirs of O'Farrel, heirs of Rivera, heirs

of Maria del Concepcion Vidal, consolidated with the Maysilo Estate as represented
by receiver Arturo Salientes the heirs of Vicente Singson Encarnacion, and Lilia
Sevilla Seeling
This Court likewise orders the plaintiff, Eternal Gardens Memorial Parks Corporation
to comply with the Land Development Agreement dated October 6, 1978, it entered
into with the North Philippine Union Mission Corporation of the Seventh-Day
Adventists. (Rollo. p. 68)
The heirs of the Maysilo Estate moved for reconsideration of the aforementioned order of dismissal,
the hearing of which was requested to be set on February, 28, 1985. However, the trial judge, on
February 14, 1985 issued the following orders:
Considering Motions for Reconsideration filed, the Court resolves that the same be
GRANTED and instead of a hearing of the said motions on February 20, 1985, at
8:30 a.m., a hearing on the merits shall be held. (Rollo, p. 68)
In spite of the February 14, 1985 order, MISSION filed on March 6, 1985 a motion for Writ of
Execution of the resolution of January 28, 1985. This was denied on June 25, 1985. The said court
further set the case for pre-trial and trial on July 18, 1985.
It was elevated on certiorari and mandamus to the Intermediate Appellate Court (Court of Appeals),
docketed as AC-G.R. Sp No. 06696 "North Philippine Union Mission of the Seventh Day Adventists,
vs. Hon. Antonia Corpus-Macandog Presiding Judge, Branch CXX, Regional Trial Court, Caloocan
City, Eternal Gardens Memorial Parks Corporation, and Heirs of Vicente Singson Encarnacion It was
raffled to the Second Special Division. MISSION assailed the February 14, 1985 and June 25, 1985
orders as violative of due process and attended by grave abuse of discretion amounting to lack of
jurisdiction. The petition was however dismissed in the decision of said Appellate Court, promulgated
on December 4, 1985, the dispositive portion of which reads:
WHEREFORE, for want of merit the petition for certiorari and mandamus under
consideration cannot be given due course and is accordingly, DISMISSED, without
any pronouncement, as to costs. The restraining order embodied in Our Resolution
of July 31, 1985, is hereby lifted. (Rollo, G.R. No. 73569 p. 232)
The private respondent challenged the above decision in the Supreme Court in G.R. No. 73569. In
its resolution dated June 11, 1986, the Supreme Court denied the petition for review on certiorari for
lack of merit, as follows:
G.R. No. 73569 (North Philippine Union Mission Corporation of the Seventh Day
Adventists vs. Intermediate Appellate Court, et al.) considering the allegations,
issues, and arguments adduced in the petition for review on certiorari, the Court
Resolved to DENY the same for lack of merit. (Ibid p. 263)
Said resolution has become final and executory on July 16, 1986. (Ibid p. 269)
Earlier in 1983, the heirs of the late spouses Vicente Singson Encarnacion and Lucila Conde filed
Civil Case No. C-11836 for quieting of title with Branch CXXII, Regional Trial Court, Caloocan City,
where petitioner and private respondent were named as defendants.
Said case is still pending in the lower Court.

In the case at bar, G.R. No. 73794, MISSION, herein private respondent filed a petition for certiorari
with the then Intermediate Appellate Court docketed as AC-G.R. No. 04869 praying that the
aforementioned Orders of February 13, 1984 and October 26, 1984 of the Regional Trial Court be
set aside and that an order be issued to deposit in court or in a depositor trustee bank of any and all
payments, plus interest thereon, due the private respondent MISSION under the Land Development
Agreement, said amounts deposited to be paid to whomever may be found later to be entitled
thereto, with costs. (Rollo, G.R. No. 73794 p. 38)
The Intermediate Appelate Court, acting through its First Special Cases Division 4 dismissed the
petition in its decision on February 27, 1985 (Rollo, pp. 38-48). In its Resolution 5 promulgated on
September 5, 1985, the Court however, reversed its decision, thus:
WHEREFORE, the Court reconsiders its decision of February 27, 1986, and sets
aside the questioned portions of the respondent Court's orders of February 13 and
October 26, 1984. The private respondent is hereby ordered to deposit whatever
amounts are due from it under the Land Development Agreement of October 6, 1976
with a reputable bank to be designated by the respondent court to be the depository
trustee of the said amounts to be paid to whoever shall be found entitled thereto. No
costs. (Rollo, p. 25)
Eternal Gardens moved for a reconsideration of the above decision but it was denied for lack of
merit in a resolution promulgated on February 13, 1986, which states:
The private respondent Eternal Gardens Memorial Park Corporation's Motion for
Reconsideration of the Court's resolution promulgated September 5, 1985 requiring it
"to deposit whatever amounts are due from it under the Land Development
Agreement of October 6, 1976 ...," which was strongly opposed by the petitioner
North Philippine Union Mission of the Seventh Day Adventists, is hereby denied for
lack of merit, reiterating as it does, the very same issues and arguments that were
passed upon and considered by the Court in the very same resolution sought to be
reconsidered. (Rollo, p. 27)
Hence, this petition. On July 8,1987, the Third Division of this Court issued the following resolution:
... the court RESOLVED to give due course to this petition and require the parties to
file memoranda.
In the meantime, to avoid possible wastage of funds, the Court RESOLVED to
require the private respondent 6 to DEPOSIT its accruing installments within ten (10)
days from notice with a reputable commercial bank in a savings deposit account, in the
name of the Supreme Court of the Philippines, with the details to be reported or
manifested to this Court within ten (10) days from the time the deposit/deposits are made,
such deposits not to be withdrawn without authority from this Court. (Rollo, p. 162)
Petitioner's Memorandum With Prayer for the Deferment of Time to Make Deposit (Rollo, p. 218-236)
was filed on July 14, 1987. Its prayer was granted for a period of ten (10) days for the purpose, in the
resolution of July 29, 1987 (Rollo, p. 238). Private respondent filed its Opposition to Deferment of
Time to Make Deposit (Rollo, pp. 239-253) on July 24, 1987 to which petitioner filed its Reply to
Opposition on August 4, 1987 (Rollo, pp. 256-267). Both were noted by the Court in its resolution
dated September 7, 1987 (Rollo, p. 270). On August 25, 1987, private respondent filed its Rejoinder
to Petitioner's Reply to Opposition (Rollo, pp. 271-292).

Petitioner filed its Supplemental Memorandum with Reply to Opposition (To Deferment of time to
Make Deposit) on August 31, 1987 (Rollo, pp. 294-313) and a Sur-rejoinder on September 1, 1987
(Rollo, pp. 304-315).
The main issues in this case are:
I
Whether or not respondent Court of Appeals abused its discretion amounting to lack
of jurisdiction in reconsidering its resolution of February 27, 1985 and in requiring
instead in the resolution of September 5, 1985, that petitioner Eternal Gardens
deposit whatever amounts are due from it under the Land Development Agreement
with a reputable bank to be designated by the respondent court.
II
Whether or not the dismissal of AC-G.R. SP No. 06696 (North Philippine Union
Mission of the Seventh Day Adventists vs. Hon. Macandog, et al.) by the Second
Special Cases Division of the IAC which was affirmed by the Supreme Court in G.R.
No. 73569 constitutes a basis for the dismissal of the case at bar on the ground
of res adjudicata.
I
There is no question that courts have inherent power to amend their judgments, to make them
conformable to the law applicable provided that said judgments have not yet attained finality
(Villanueva v. Court of First Instance of Oriental Mindoro, Pinamalayan Branch II, 119 SCRA 288
[1982]). In fact, motions for reconsideration are allowed to convince the courts that their rulings are
erroneous and improper Siy v. Court of Appeals, 138 SCRA 543-544 [1985]; Guerra Enterprises Co.,
Inc. v. CFI of Lanao del Sur (32 SCRA 317 [1970]) and in so doing, said courts are given sufficient
opportunity to correct their errors.
In the case at bar, a careful analysis of the records will show that petitioner admitted among others in
its complaint in Interpleader that it is still obligated to pay certain amounts to private respondent; that
it claims no interest in such amounts due and is willing to pay whoever is declared entitled to said
amounts. Such admissions in the complaint were reaffirmed in open court before the Court of
Appeals as stated in the latter court's resolution dated September 5, 1985 in A.C. G.R. No. 04869
which states:
The private respondent (MEMORIAL) then reaffirms before the Court its original
position that it is a disinterested party with respect to the property now the subject of
the interpleader case ...
In the light of the willingness, expressly made before the court, affirming the
complaint filed below, that the private respondent (MEMORIAL) will pay whatever is
due on the Land Development Agreement to the rightful owner/owners, there is no
reason why the amount due on subject agreement has not been placed in the
custody of the Court. (Rollo, p. 227).
Under the circumstances, there appears to be no plausible reason for petitioner's objections to the
deposit of the amounts in litigation after having asked for the assistance of the lower court by filing a

complaint for interpleader where the deposit of aforesaid amounts is not only required by the nature
of the action but is a contractual obligation of the petitioner under the Land Development Program
(Rollo, p. 252).
As correctly observed by the Court of Appeals, the essence of an interpleader, aside from the
disavowal of interest in the property in litigation on the part of the petitioner, is the deposit of the
property or funds in controversy with the court. it is a rule founded on justice and equity: "that the
plaintiff may not continue to benefit from the property or funds in litigation during the pendency of the
suit at the expense of whoever will ultimately be decided as entitled thereto." (Rollo, p. 24).
The case at bar was elevated to the Court of Appeals on certiorari with prohibitory and mandatory
injunction. Said appellate court found that more than twenty million pesos are involved; so that on
interest alone for savings or time deposit would be considerable, now accruing in favor of the Eternal
Gardens. Finding that such is violative of the very essence of the complaint for interpleader as it
clearly runs against the interest of justice in this case, the Court of Appeals cannot be faulted for
finding that the lower court committed a grave abuse of discretion which requires correction by the
requirement that a deposit of said amounts should be made to a bank approved by the Court. (Rollo,
p.-25)
Petitioner would now compound the issue by its obvious turn-about, presently claiming in its
memorandum that there is a novation of contract so that the amounts due under the Land
Development Agreement were allegedly extinguished, and the requirement to make a deposit of said
amounts in a depositary bank should be held in abeyance until after the conflicting claims of
ownership now on trial before Branch CXXII RTC-Caloocan City, has finally been resolved.
All these notwithstanding, the need for the deposit in question has been established, riot only in the
lower courts and in the Court of Appeals but also in the Supreme Court where such deposit was
required in "the resolution of July 8, 1987 to avoid wastage of funds.
II
The claim that this case should be barred by res judicata is even more untenable.
The requisite of res judicata are: (1) the presence of a final former judgment; (2) the former judgment
was rendered by a court having jurisdiction over the subject matter and the parties; (3) the former
judgment is a judgment on the merits; and (4) there is between the first and the second action
identity of parties, of subject matter, and of causes of action Arguson v. Miclat 135 SCRA 678
[1985]; Carandang v. Venturanza, 133 SCRA 344 [1984]).
There is no argument against the rule that parties should not be permitted to litigate the same issue
more than once and when a right or fact has been judicially tried and determined by a court of
competent jurisdiction, so long as it remains unreversed, it should be conclusive upon the parties
and those in privity with them in law or estate (Sy Kao v. Court of Appeals, 132 SCRA 302 [1984]).
But a careful review of the records shows that there is no judgment on the merits in G.R. No. 73569
and in the case at bar, G.R. No. 73794; both of which deal on mere incidents arising therefrom.
In G.R. No 73569, the issue raised is the propriety of the grant of the motion for reconsideration
without a hearing thereon and the denial of the motion for execution, while in the case at bar, what is
assailed is the propriety of the order of respondent appellant court that petitioner Eternal Gardens
should deposit whatever amounts are due from it under the Land Development Agreement with a

reputable bank to be designated by the Court. In fact, there is a pending trial on the merits in the trial
court which the petitioner insists is a prejudicial question which should first be resolved. Moreover,
while there may be Identity of parties and of subject matter, the Land Development Contract, there is
no Identity of issues as clearly shown by the petitions filed.
PREMISES CONSIDERED, (a) the petition is DISMISSED for lack of merit; (b) this case (together
with all the claims of the intervenors on the merits) is REMANDED to the lower court for further
proceedings; and (c) the resolution of the Third Division of this Court of July 8, 1987 requiring the
deposit by the petitioner (see footnote No. 6) of the amounts contested in a depositary bank
STANDS (the Motion for Reconsideration thereof being hereby DENIED for reasons already
discussed) until after the decision on the merits shall have become final and executory.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION
SUBHASH C. PASRICHA and
JOSEPHINE A. PASRICHA,
Petitioners,

- versus -

G.R. No. 136409

Present:
YNARES-SANTIAGO, J.,
Chairperson,
QUISUMBING,*
AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
NACHURA, JJ.
.

DON LUIS DISON REALTY, INC.,

Respondent.
Promulgated:
March 14, 2008
x------------------------------------------------------------------------------------x

DECISION
NACHURA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking the reversal of the Decision[1] of the Court of Appeals (CA)
dated May 26, 1998 and its Resolution[2] dated December 10, 1998 in CA-G.R. SP
No. 37739 dismissing the petition filed by petitioners Josephine and Subhash
Pasricha.
The facts of the case, as culled from the records, are as follows:
Respondent Don Luis Dison Realty, Inc. and petitioners executed two
Contracts of Lease[3] whereby the former, as lessor, agreed to lease to the latter
Units 22, 24, 32, 33, 34, 35, 36, 37 and 38 of the San Luis Building, located at
1006 M.Y. Orosa cor. T.M. Kalaw Streets, Ermita, Manila. Petitioners, in turn,
agreed to pay monthly rentals, as follows:
For Rooms 32/35:
From March 1, 1991 to August 31, 1991 P5,000.00/P10,000.00
From September 1, 1991 to February 29, 1992 P5,500.00/P11,000.00
From March 1, 1992 to February 28, 1993 P6,050.00/P12,100.00
From March 1, 1993 to February 28, 1994 P6,655.00/P13,310.00
From March 1, 1994 to February 28, 1995 P7,320.50/P14,641.00
From March 1, 1995 to February 28, 1996 P8,052.55/P16,105.10
From March 1, 1996 to February 29, 1997 P8,857.81/P17,715.61
From March 1, 1997 to February 28, 1998 P9,743.59/P19,487.17
From March 1, 1998 to February 28, 1999 P10,717.95/P21,435.89
From March 1, 1999 to February 28, 2000 P11,789.75/P23,579.48[4]
For Rooms 22 and 24:
Effective July 1, 1992 P10,000.00 with an increment of 10% every two years.[5]
For Rooms 33 and 34:
Effective April 1, 1992 P5,000.00 with an increment of 10% every two years.[6]

For Rooms 36, 37 and 38:

Effective when tenants vacate said premises P10,000.00 with an increment of
10% every two years.[7]

Petitioners were, likewise, required to pay for the cost of electric consumption,
water bills and the use of telephone cables.[8]
The lease of Rooms 36, 37 and 38 did not materialize leaving only Rooms 22, 24,
32, 33, 34 and 35 as subjects of the lease contracts. [9] While the contracts were in
effect, petitioners dealt with Francis Pacheco (Pacheco), then General Manager of
private respondent. Thereafter, Pacheco was replaced by Roswinda Bautista (Ms.
Bautista).[10] Petitioners religiously paid the monthly rentals until May 1992.
[11]
After that, however, despite repeated demands, petitioners continuously refused
to pay the stipulated rent. Consequently, respondent was constrained to refer the
matter to its lawyer who, in turn, made a final demand on petitioners for the
payment of the accrued rentals amounting to P916,585.58.[12] Because petitioners
still refused to comply, a complaint for ejectment was filed by private respondent
through its representative, Ms. Bautista, before the Metropolitan Trial Court
(MeTC) of Manila.[13] The case was raffled to Branch XIX and was docketed as
Civil Case No. 143058-CV.
Petitioners admitted their failure to pay the stipulated rent for the leased premises
starting July until November 1992, but claimed that such refusal was justified
because of the internal squabble in respondent company as to the person authorized
to receive payment.[14] To further justify their non-payment of rent, petitioners
alleged that they were prevented from using the units (rooms) subject matter of the
lease contract, except Room 35. Petitioners eventually paid their monthly rent for
December 1992 in the amount of P30,000.00, and claimed that respondent waived
its right to collect the rents for the months of July to November 1992 since
petitioners were prevented from using Rooms 22, 24, 32, 33, and 34. [15] However,
they again withheld payment of rents starting January 1993 because of respondents

refusal to turn over Rooms 36, 37 and 38. [16] To show good faith and willingness to
pay the rents, petitioners alleged that they prepared the check vouchers for their
monthly rentals from January 1993 to January 1994.[17] Petitioners further averred
in their Amended Answer[18] that the complaint for ejectment was prematurely
filed, as the controversy was not referred to the barangay for conciliation.
For failure of the parties to reach an amicable settlement, the pre-trial conference
was terminated. Thereafter, they submitted their respective position papers.
On November 24, 1994, the MeTC rendered a Decision dismissing the complaint
for ejectment.[19] It considered petitioners non-payment of rentals as
unjustified. The court held that mere willingness to pay the rent did not amount to
payment of the obligation; petitioners should have deposited their payment in the
name of respondent company. On the matter of possession of the subject premises,
the court did not give credence to petitioners claim that private respondent failed to
turn over possession of the premises. The court, however, dismissed the complaint
because of Ms. Bautistas alleged lack of authority to sue on behalf of the
corporation.
Deciding the case on appeal, the Regional Trial Court (RTC) of Manila, Branch 1,
in Civil Case No. 94-72515, reversed and set aside the MeTC Decision in this
wise:
WHEREFORE, the appealed decision is hereby reversed and set aside and
another one is rendered ordering defendants-appellees and all persons claiming
rights under them, as follows:
(1) to vacate the leased premised (sic) and restore possession thereof to
plaintiff-appellant;
(2) to pay plaintiff-appellant the sum of P967,915.80 representing the
accrued rents in arrears as of November 1993, and the rents on the
leased premises for the succeeding months in the amounts stated in
paragraph 5 of the complaint until fully paid; and
(3) to pay an additional sum equivalent to 25% of the rent accounts as
and for attorneys fees plus the costs of this suit.

SO ORDERED.[20]

The court adopted the MeTCs finding on petitioners unjustified refusal to pay the
rent, which is a valid ground for ejectment. It, however, faulted the MeTC in
dismissing the case on the ground of lack of capacity to sue. Instead, it upheld Ms.
Bautistas authority to represent respondent notwithstanding the absence of a board
resolution to that effect, since her authority was implied from her power as a
general manager/treasurer of the company.[21]
Aggrieved, petitioners elevated the matter to the Court of Appeals in a petition for
review on certiorari.[22] On March 18, 1998, petitioners filed an Omnibus
Motion[23] to cite Ms. Bautista for contempt; to strike down the MeTC and RTC
Decisions as legal nullities; and to conduct hearings and ocular inspections or
delegate the reception of evidence. Without resolving the aforesaid motion,
on May 26, 1998, the CA affirmed [24] the RTC Decision but deleted the award of
attorneys fees.[25]
Petitioners moved for the reconsideration of the aforesaid decision.
[26]
Thereafter, they filed several motions asking the Honorable Justice Ruben T.
Reyes to inhibit from further proceeding with the case allegedly because of his
close association with Ms. Bautistas uncle-in-law.[27]
In a Resolution[28] dated December 10, 1998, the CA denied the motions for lack of
merit. The appellate court considered said motions as repetitive of their previous
arguments, irrelevant and obviously dilatory.[29] As to the motion for inhibition of
the Honorable Justice Reyes, the same was denied, as the appellate court justice
stressed that the decision and the resolution were not affected by extraneous
matters.[30] Lastly, the appellate court granted respondents motion for execution and
directed the RTC to issue a new writ of execution of its decision, with the
exception of the award of attorneys fees which the CA deleted.[31]

Petitioners now come before this Court in this petition for review
on certiorari raising the following issues:
I.
Whether this ejectment suit should be dismissed and whether petitioners
are entitled to damages for the unauthorized and malicious filing by Rosario (sic)
Bautista of this ejectment case, it being clear that [Roswinda] whether as general
manager or by virtue of her subsequent designation by the Board of Directors as
the corporations attorney-in-fact had no legal capacity to institute the ejectment
suit, independently of whether Director Pacanas Order setting aside the SEC
revocation Order is a mere scrap of paper.
II.
Whether the RTCs and the Honorable Court of Appeals failure and refusal to
resolve the most fundamental factual issues in the instant ejectment case render
said decisions void on their face by reason of the complete abdication by the
RTC and the Honorable Justice Ruben Reyes of their constitutional duty not
only to clearly and distinctly state the facts and the law on which a decision is
based but also to resolve the decisive factual issues in any given case.
III.
Whether the (1) failure and refusal of Honorable Justice Ruben Reyes to inhibit
himself, despite his admission by reason of his silence of petitioners accusation
that the said Justice enjoyed a $7,000.00 scholarship grant courtesy of the unclein-law of respondent corporations purported general manager and (2), worse, his
act of ruling against the petitioners and in favor of the respondent corporation
constitute an unconstitutional deprivation of petitioners property without due
process of law.[32]

In addition to Ms. Bautistas lack of capacity to sue, petitioners insist that

respondent company has no standing to sue as a juridical person in view of the
suspension and eventual revocation of its certificate of registration. [33] They
likewise question the factual findings of the court on the bases of their ejectment
from the subject premises. Specifically, they fault the appellate court for not
finding that: 1) their non-payment of rentals was justified; 2) they were deprived of
possession of all the units subject of the lease contract except Room 35; and 3)
respondent violated the terms of the contract by its continued refusal to turn over

possession of Rooms 36, 37 and 38. Petitioners further prayed that a Temporary
Restraining Order (TRO) be issued enjoining the CA from enforcing its Resolution
directing the issuance of a Writ of Execution. Thus, in a
Resolution[34] dated January 18, 1999, this Court directed the parties to maintain
the status quo effective immediately until further orders.
The petition lacks merit.
We uphold the capacity of respondent company to institute the ejectment
case. Although the Securities and Exchange Commission (SEC) suspended and
eventually revoked respondents certificate of registration on February 16, 1995,
records show that it instituted the action for ejectment on December 15,
1993. Accordingly, when the case was commenced, its registration was not yet
revoked.[35] Besides, as correctly held by the appellate court, the SEC later set aside
its earlier orders of suspension and revocation of respondents certificate, rendering
the issue moot and academic.[36]
We likewise affirm Ms. Bautistas capacity to sue on behalf of the company despite
lack of proof of authority to so represent it. A corporation has no powers except
those expressly conferred on it by the Corporation Code and those that are implied
from or are incidental to its existence. In turn, a corporation exercises said powers
through its board of directors and/or its duly authorized officers and
agents. Physical acts, like the signing of documents, can be performed only by
natural persons duly authorized for the purpose by corporate by-laws or by a
specific act of the board of directors.[37] Thus, any person suing on behalf of the
corporation should present proof of such authority. Although Ms. Bautista initially
failed to show that she had the capacity to sign the verification and institute the
ejectment case on behalf of the company, when confronted with such question, she
immediately presented the Secretarys Certificate [38] confirming her authority to
represent the company.

There is ample jurisprudence holding that subsequent and substantial

compliance may call for the relaxation of the rules of procedure in the interest of
justice.[39]In Novelty Phils., Inc. v. Court of Appeals,[40] the Court faulted the
appellate court for dismissing a petition solely on petitioners failure to timely
submit proof of authority to sue on behalf of the corporation. In Pfizer, Inc. v.
Galan,[41] we upheld the sufficiency of a petition verified by an employment
specialist despite the total absence of a board resolution authorizing her to act for
and on behalf of the corporation. Lastly, in China Banking Corporation v.
Mondragon International Philippines, Inc,[42] we relaxed the rules of procedure
because the corporation ratified the managers status as an authorized signatory. In
all of the above cases, we brushed aside technicalities in the interest of justice. This
is not to say that we disregard the requirement of prior authority to act in the name
of a corporation. The relaxation of the rules applies only to highly meritorious
cases, and when there is substantial compliance. While it is true that rules of
procedure are intended to promote rather than frustrate the ends of justice, and
while the swift unclogging of court dockets is a laudable objective, we should not
insist on strict adherence to the rules at the expense of substantial justice.
[43]
Technical and procedural rules are intended to help secure, not suppress, the
cause of justice; and a deviation from the rigid enforcement of the rules may be
allowed to attain that prime objective, for, after all, the dispensation of justice is
the core reason for the existence of courts.[44]
As to the denial of the motion to inhibit Justice Reyes, we find the same to be in
order. First, the motion to inhibit came after the appellate court rendered the
assailed decision, that is, after Justice Reyes had already rendered his opinion on
the merits of the case. It is settled that a motion to inhibit shall be denied if filed
after a member of the court had already given an opinion on the merits of the case,
the rationale being that a litigant cannot be permitted to speculate on the action of
the court x x x (only to) raise an objection of this sort after the decision has been
rendered.[45] Second, it is settled that mere suspicion that a judge is partial to one of
the parties is not enough; there should be evidence to substantiate the

suspicion. Bias and prejudice cannot be presumed, especially when weighed

against a judges sacred pledge under his oath of office to administer justice without
regard for any person and to do right equally to the poor and the rich. There must
be a showing of bias and prejudice stemming from an extrajudicial source,
resulting in an opinion on the merits based on something other than what the judge
learned from his participation in the case.[46]We would like to reiterate, at this point,
the policy of the Court not to tolerate acts of litigants who, for just about any
conceivable reason, seek to disqualify a judge (or justice) for their own purpose,
under a plea of bias, hostility, prejudice or prejudgment.[47]
We now come to the more substantive issue of whether or not the petitioners may
be validly ejected from the leased premises.
Unlawful detainer cases are summary in nature. In such cases, the elements to be
proved and resolved are the fact of lease and the expiration or violation of its
terms.[48] Specifically, the essential requisites of unlawful detainer are: 1) the fact of
lease by virtue of a contract, express or implied; 2) the expiration or termination of
the possessors right to hold possession; 3) withholding by the lessee of possession
of the land or building after the expiration or termination of the right to possess; 4)
letter of demand upon lessee to pay the rental or comply with the terms of the lease
and vacate the premises; and 5) the filing of the action within one year from the
date of the last demand received by the defendant.[49]
It is undisputed that petitioners and respondent entered into two separate contracts
of lease involving nine (9) rooms of the San Luis Building. Records, likewise,
show that respondent repeatedly demanded that petitioners vacate the premises, but
the latter refused to heed the demand; thus, they remained in possession of the
premises.The only contentious issue is whether there was indeed a violation of the
terms of the contract: on the part of petitioners, whether they failed to pay the
stipulated rent without justifiable cause; while on the part of respondent, whether it
prevented petitioners from occupying the leased premises except Room 35.

This issue involves questions of fact, the resolution of which requires the
evaluation of the evidence presented. The MeTC, the RTC and the CA all found
that petitioners failed to perform their obligation to pay the stipulated rent. It is
settled doctrine that in a civil case, the conclusions of fact of the trial court,
especially when affirmed by the Court of Appeals, are final and conclusive, and
cannot be reviewed on appeal by the Supreme Court.[50] Albeit the rule admits of
exceptions, not one of them obtains in this case.[51]
To settle this issue once and for all, we deem it proper to assess the array of factual
findings supporting the courts conclusion.
The evidence of petitioners non-payment of the stipulated rent is
overwhelming. Petitioners, however, claim that such non-payment is justified by
the following: 1) the refusal of respondent to allow petitioners to use the leased
properties, except room 35; 2) respondents refusal to turn over Rooms 36, 37 and
38; and 3) respondents refusal to accept payment tendered by petitioners.
Petitioners justifications are belied by the evidence on record. As correctly held by
the CA, petitioners communications to respondent prior to the filing of the
complaint never mentioned their alleged inability to use the rooms. [52] What they
pointed out in their letters is that they did not know to whom payment should be
made, whether to Ms. Bautista or to Pacheco.[53] In their July 26 and October 30,
1993 letters, petitioners only questioned the method of computing their electric
billings without, however, raising a complaint about their failure to use the rooms.
[54]
Although petitioners stated in their December 30, 1993 letter that respondent
failed to fulfill its part of the contract,[55] nowhere did they specifically refer to their
inability to use the leased rooms. Besides, at that time, they were already in default
on their rentals for more than a year.

If it were true that they were allowed to use only one of the nine (9) rooms
subject of the contract of lease, and considering that the rooms were intended for a
business purpose, we cannot understand why they did not specifically assert their
right. If we believe petitioners contention that they had been prevented from using
the rooms for more than a year before the complaint for ejectment was filed, they
should have demanded specific performance from the lessor and commenced an
action in court. With the execution of the contract, petitioners were already in a
position to exercise their right to the use and enjoyment of the property according
to the terms of the lease contract.[56] As borne out by the records, the fact is that
respondent turned over to petitioners the keys to the leased premises and
petitioners, in fact, renovated the rooms. Thus, they were placed in possession of
the premises and they had the right to the use and enjoyment of the same. They,
likewise, had the right to resist any act of intrusion into their peaceful possession of
the property, even as against the lessor itself. Yet, they did not lift a finger to
protect their right if, indeed, there was a violation of the contract by the lessor.
What was, instead, clearly established by the evidence was petitioners nonpayment of rentals because ostensibly they did not know to whom payment should
be made. However, this did not justify their failure to pay, because if such were the
case, they were not without any remedy. They should have availed of the
provisions of the Civil Code of the Philippines on the consignation of payment and
of the Rules of Court on interpleader.
Article 1256 of the Civil Code provides:
Article 1256. If the creditor to whom tender of payment has been made
refuses without just cause to accept it, the debtor shall be released from
responsibility by the consignation of the thing or sum due.
Consignation alone shall produce the same effect in the following cases:
xxxx
(4) When two or more persons claim the same right to collect;
x x x x.

Consignation shall be made by depositing the things due at the disposal of a

judicial authority, before whom the tender of payment shall be proved in a proper
case, and the announcement of the consignation in other cases.[57]
In the instant case, consignation alone would have produced the effect of
payment of the rentals. The rationale for consignation is to avoid the performance
of an obligation becoming more onerous to the debtor by reason of causes not
imputable to him.[58] Petitioners claim that they made a written tender of payment
and actually prepared vouchers for their monthly rentals. But that was insufficient
to constitute a valid tender of payment. Even assuming that it was valid tender,
still, it would not constitute payment for want of consignation of the amount. Wellsettled is the rule that tender of payment must be accompanied by consignation in
order that the effects of payment may be produced.[59]
Moreover, Section 1, Rule 62 of the Rules of Court provides:
Section 1. When interpleader proper. Whenever conflicting claims upon the same
subject matter are or may be made against a person who claims no interest
whatever in the subject matter, or an interest which in whole or in part is not
disputed by the claimants, he may bring an action against the conflicting
claimants to compel them to interplead and litigate their several claims among
themselves.

Otherwise stated, an action for interpleader is proper when the lessee does not
know to whom payment of rentals should be made due to conflicting claims on the
property (or on the right to collect). [60] The remedy is afforded not to protect a
person against double liability but to protect him against double vexation in respect
of one liability.[61]
Notably, instead of availing of the above remedies, petitioners opted to
refrain from making payments.

Neither can petitioners validly invoke the non-delivery of Rooms 36, 37 and 38 as
a justification for non-payment of rentals. Although the two contracts embraced the
lease of nine (9) rooms, the terms of the contracts - with their particular reference
to specific rooms and the monthly rental for each - easily raise the inference that
the parties intended the lease of each room separate from that of the others. There
is nothing in the contract which would lead to the conclusion that the lease of one
or more rooms was to be made dependent upon the lease of all the nine (9)
rooms. Accordingly, the use of each room by the lessee gave rise to the
corresponding obligation to pay the monthly rental for the same. Notably,
respondent demanded payment of rentals only for the rooms actually delivered to,
and used by, petitioners.
It may also be mentioned that the contract specifically provides that the lease of
Rooms 36, 37 and 38 was to take effect only when the tenants thereof would vacate
the premises. Absent a clear showing that the previous tenants had vacated the
premises, respondent had no obligation to deliver possession of the subject rooms
to petitioners. Thus, petitioners cannot use the non-delivery of Rooms 36, 37 and
38 as an excuse for their failure to pay the rentals due on the other rooms they
occupied.
In light of the foregoing disquisition, respondent has every right to exercise his
right to eject the erring lessees. The parties contracts of lease contain identical
provisions, to wit:
In case of default by the LESSEE in the payment of rental on the fifth (5 th) day of
each month, the amount owing shall as penalty bear interest at the rate of FOUR
percent (4%) per month, to be paid, without prejudice to the right of the LESSOR
to terminate his contract, enter the premises, and/or eject the LESSEE as
hereinafter set forth;[62]

Moreover, Article 1673[63] of the Civil Code gives the lessor the right to judicially
eject the lessees in case of non-payment of the monthly rentals. A contract of lease
is a consensual, bilateral, onerous and commutative contract by which the owner

temporarily grants the use of his property to another, who undertakes to pay the
rent therefor.[64] For failure to pay the rent, petitioners have no right to remain in
the leased premises.
WHEREFORE, premises considered, the petition is DENIED and the Status
Quo Order dated January 18, 1999 is hereby LIFTED. The Decision of the Court
of Appeals dated May 26, 1998 and its Resolution dated December 10, 1998 in
CA-G.R. SP No. 37739 are AFFIRMED.
SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice
WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

LEONARDO A. QUISUMBING MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of the opinion of
the Courts Division.

REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. Nos. 154470-71

September 24, 2012

BANK OF COMMERCE, Petitioner,

vs.
PLANTERS DEVELOPMENT BANK and BANGKO SENTRAL NG PILIPINAS, Respondent.
x-----------------------x
G.R. Nos. 154589-90
BANGKO SENTRAL NG PILIPINAS, Petitioner,
vs.
PLANTERS DEVELOPMENT BANK, Respondent.
DECISION
BRION, J.:
Before the Court are two consolidated petitions for review on certiorari under Rule 45,1 on pure
questions of law, filed by the petitioners Bank of Commerce (BOC) and the Bangko Sentral ng
Pilipinas (BSP). They assail the January 10, 2002 and July 23, 2002 Orders (assailed orders) of the
Regional Trial Court (RTC) of Makati City, Branch 143, in Civil Case Nos. 94-3233 and 94-3254.
These orders dismissed (i) the petition filed by the Planters Development Bank (PDB), (ii) the
"counterclaim" filed by the BOC, and (iii) the counter-complaint/cross-claim for interpleader filed
bythe BSP; and denied the BOCs and the BSPs motions for reconsideration.
THE ANTECEDENTS
The Central Bank bills
I. First set of CB bills
The Rizal Commercial Banking Corporation (RCBC) was the registered owner of seven Central
Bank (CB) bills with a total face value of P 70 million, issued on January 2, 1994 and would mature
on January 2, 1995.2 As evidenced by a "Detached Assignment" dated April 8, 1994, 3 the RCBC sold
these CB bills to the BOC.4 As evidenced by another "Detached Assignment" 5 of even date, the
BOC, in turn, sold these CB bills to the PDB.6 The BOC delivered the Detached Assignments to the
PDB.7
On April 15, 1994 (April 15 transaction), the PDB, in turn, sold to the BOC Treasury Bills worth P 70
million, with maturity date of June 29, 1994, as evidenced by a Trading Order 8 and a Confirmation of
Sale.9 However, instead of delivering the Treasury Bills, the PDB delivered the seven CB bills to the
BOC, as evidenced by a PDB Security Delivery Receipt, bearing a "note: ** substitution in lieu of 0629-94" referring to the Treasury Bills.10Nevertheless, the PDB retained possession of the Detached
Assignments. It is basically the nature of this April 15 transaction that the PDB and the BOC cannot
agree on.
The transfer of the first set of seven CB bills
i. CB bill nos. 45351-53
On April 20, 1994, according to the BOC, it "sold back"11 to the PDB three of the seven CB bills. In
turn, the PDB transferred these three CB bills to Bancapital Development Corporation (Bancap). On

April 25, 1994, the BOC bought the three CB bills from Bancap so, ultimately, the BOC reacquired
these three CB bills,12 particularly described as follows:
Serial No.:

2BB XM 045351
2BB XM 045352
2BB XM 045353

Quantity:

Three (3)

Denomination:

Php 10 million

Total Face Value:

Php 30 million

ii. CB bill nos. 45347-50

On April 20, 1994, the BOC sold the remaining four (4) CB bills to Capital One Equities
Corporation13 which transferred them to All-Asia Capital and Trust Corporation (All Asia). On
September 30, 1994, All Asia further transferred the four CB bills back to the RCBC. 14
On November 16, 1994, the RCBC sold back to All Asia one of these 4 CB bills. When the BSP
refused to release the amount of this CB bill on maturity, the BOC purchased from All Asia this lone
CB bill,15 particularly described as follows: 16
Serial No.:

2BB XM 045348

Quantity:

One (1)

Denomination:

Php 10 million

Total Face Value:

Php 10 million

As the registered owner of the remaining three CB bills, the RCBC sold them to IVI Capital and
Insular Savings Bank. Again, when the BSP refused to release the amount of this CB bill on maturity,
the RCBC paid back its transferees, reacquired these three CB bills and sold them to the BOC
ultimately, the BOC acquired these three CB bills.
All in all, the BOC acquired the first set of seven CB bills.
II. Second set of CB bills
On April 19, 1994, the RCBC, as registered owner, (i) sold two CB bills with a total face value of P 20
million to the PDB and (ii) delivered to the PDB the corresponding Detached Assignment. 17 The two
CB bills were particularly described as follows:
Serial No.:

BB XM 045373
BB XM 045374

Issue date:

January 3, 1994

Maturity date:

January 2, 1995

Denomination:

Php 10 million

Total Face value:

Php 20 million

On even date, the PDB delivered to Bancap the two CB bills 18 (April 19 transaction). In turn, Bancap
sold the CB bills to Al-Amanah Islamic Investment Bank of the Philippines, which in turn sold it to the
BOC.19
PDBs move against the transfer of
the first and second sets of CB bills
On June 30, 1994, upon learning of the transfers involving the CB bills, the PDB informed 20 the
Officer-in-Charge of the BSPs Government Securities Department, 21 Lagrimas Nuqui, of the PDBs
claim over these CB bills, based on the Detached Assignments in its possession. The PDB
requested the BSP22 to record its claim in the BSPs books, explaining that its non-possession of the
CB bills is "on account of imperfect negotiations thereof and/or subsequent setoff or transfer." 23
Nuqui denied the request, invoking Section 8 of CB Circular No. 28 (Regulations Governing Open
Market Operations, Stabilization of the Securities Market, Issue, Servicing and Redemption of the
Public Debt)24 which requires the presentation of the bond before a registered bond may be
transferred on the books of the BSP.25
In a July 25, 1994 letter, the PDB clarified to Nuqui that it was not "asking for the transfer of the CB
Bills. rather it intends to put the BSP on formal notice that whoever is in possession of said bills is
not a holder in due course," and, therefore the BSP should not make payment upon the presentation
of the CB bills on maturity.26 Nuqui responded that the BSP was "not in a position at that point in time
to determine who is and who is not the holder in due course since it is not privy to all acts and time
involving the transfers or negotiation" of the CB bills. Nuqui added that the BSPs action shall be
governed by CB Circular No. 28, as amended. 27
On November 17, 1994, the PDB also asked BSP Deputy Governor Edgardo Zialcita that (i) a
notation in the BSPs books be made against the transfer, exchange, or payment of the bonds and
the payment of interest thereon; and (ii) the presenter of the bonds upon maturity be required to
submit proof as a holder in due course (of the first set of CB bills). The PDB relied on Section 10 (d)
4 of CB Circular No. 28.28 This provision reads:
(4) Assignments effected by fraud Where the assignment of a registered bond is secured by
fraudulent representations, the Central Bank can grant no relief if the assignment has been honored
without notice of fraud. Otherwise, the Central Bank, upon receipt of notice that the assignment is
claimed to have been secured by fraudulent representations, or payment of the bond the payment of
interest thereon, and when the bond is presented, will call upon the owner and the person presenting
the bond to substantiate their respective claims.If it then appears that the person presenting the
bond stands in the position of bonafide holder for value, the Central Bank, after giving the owner an
opportunity to assert his claim, will pass the bond for transfer, exchange or payments, as the case
may be, without further question.
In a December 29, 1994 letter, Nuqui again denied the request, reiterating the BSPs previous stand.
In light of these BSP responses and the impending maturity of the CB bills, the PDB filed 29 with the
RTC two separate petitions for Mandamus, Prohibition and Injunction with prayer for Preliminary
Injunction and Temporary Restraining Order, docketed as Civil Case No. 94-3233 (covering the first
set of CB bills) and Civil Case 94-3254 (covering the second set of CB bills) against Nuqui, the BSP
and the RCBC.30

The PDB essentially claims that in both the April 15 transaction (involving the first set of CB bills) and
the April 19 transaction (involving the second set of CB bills), there was no intent on its part to
transfer title of the CB bills, as shown by its non-issuance of a detached assignment in favor of the
BOC and Bancap, respectively. The PDB particularly alleges that it merely "warehoused" 31 the first
set of CB bills with the BOC, as security collateral.
On December 28, 1994, the RTC temporarily enjoined Nuqui and the BSP from paying the face
value of the CB bills on maturity.32 On January 10, 1995, the PDB filed an Amended Petition,
additionally impleading the BOC and All Asia.33 In a January 13, 1995 Order, the cases were
consolidated.34 On January 17, 1995, the RTC granted the PDBs application for a writ of preliminary
prohibitory injunction.35 In both petitions, the PDB identically prayed:
WHEREFORE, it is respectfully prayed x x x that, after due notice and hearing, the Writs of
Mandamus, Prohibition and Injunction, be issued; (i) commanding the BSP and Nuqui, or whoever
may take her place (a) to record forthwith in the books of BSP the claim of x x x PDB on the [two sets of] CB Bills in
accordance with Section 10 (d) (4) of revised C.B. Circular No. 28; and
(b) also pursuant thereto, when the bills are presented on maturity date for payment, to call (i) x x x
PDB, (ii) x x x RCBC x x x, (iii) x x x BOC x x x, and (iv) x x x ALL-ASIA x x x; or whoever will present
the [first and second sets of] CB Bills for payment, to submit proof as to who stands as the holder in
due course of said bills, and, thereafter, act accordingly;
and (ii) ordering the BSP and Nuqui to pay jointly and severally to x x x PDB the following:
(a) the sum of P 100,000.00, as and for exemplary damages;
(b) the sum of at least P 500,000.00, or such amount as shall be proved at the trial, as and
for attorneys fees;
(c) the legal rate of interest from the filing of this Petition until full payment of the sums
mentioned in this Petition; and
(d) the costs of suit.36
After the petitions were filed, the BOC acquired/reacquired all the nine CB bills the first and second
sets of CB bills (collectively, subject CB bills).
Defenses of the BSP and of the BOC37
The BOC filed its Answer, praying for the dismissal of the petition. It argued that the PDB has no
cause of action against it since the PDB is no longer the owner of the CB bills. Contrary to the PDBs
"warehousing theory,"38 the BOC asserted that the (i) April 15 transaction and the (ii) April 19
transaction covering both sets of CB bills - were valid contracts of sale, followed by a transfer of
title (i) to the BOC (in the April 15 transaction) upon the PDBs delivery of the 1st set of CB bills in
substitution of the Treasury Bills the PDB originally intended to sell, and (ii) to Bancap (in the April 19
transaction) upon the PDBs delivery of the 2nd set of CB bills to Bancap, likewise by way of
substitution.

The BOC adds that Section 10 (d) 4 of CB Circular No. 28 cannot apply to the PDBs case because
(i) the PDB is not in possession of the CB bills and (ii) the BOC acquired these bills from the PDB, as
to the 1st set of CB bills, and from Bancap, as to the 2nd set of CB bills, in good faith and for value.
The BOC also asserted a compulsory counterclaim for damages and attorneys fees.
On the other hand, the BSP countered that the PDB cannot invoke Section 10 (d) 4 of CB Circular
No. 28 because this section applies only to an "owner" and a "person presenting the bond," of which
the PDB is neither. The PDB has not presented to the BSP any assignment of the subject CB bills,
duly recorded in the BSPs books, in its favor to clothe it with the status of an "owner." 39 According to
the BSP
Section 10 d. (4) applies only to a registered bond which is assigned. And the issuance of CB Bills x
x x are required to be recorded/registered in BSPs books. In this regard, Section 4 a. (1) of CB
Circular 28 provides that registered bonds "may be transferred only by an assignment thereon duly
executed by the registered owner or his duly authorized representative x x x and duly recorded on
the books of the Central Bank."
xxxx
The alleged assignment of subject CB Bills in PDBs favor is not recorded/registered in BSPs
books.40(underscoring supplied)
Consequently, when Nuqui and the BSP refused the PDBs request (to record its claim), they were
merely performing their duties in accordance with CB Circular No. 28.
Alternatively, the BSP asked that an interpleader suit be allowed between and among the claimants
to the subject CB bills on the position that while it is able and willing to pay the subject CB bills face
value, it is duty bound to ensure that payment is made to the rightful owner. The BSP prayed that
judgment be rendered:
a. Ordering the dismissal of the PDBs petition for lack of merit;
b. Determining which between/among [PDB] and the other claimants is/are lawfully entitled
to the ownership of the subject CB bills and the proceeds thereof;
c. x x x;
d. Ordering PDB to pay BSP and Nuqui such actual/compensatory and exemplary
damages as the RTC may deem warranted; and
e. Ordering PDB to pay Nuqui moral damages and to pay the costs of the suit. 41
Subsequent events
The PDB agreed with the BSPs alternative response for an interpleader
4. PDB agrees that the various claimants should now interplead and substantiate their respective
claims on the subject CB bills. However, the total face value of the subject CB bills should be
deposited in escrow with a private bank to be disposed of only upon order of the RTC. 42

Accordingly, on June 9, 199543 and August 4, 1995,44 the BOC and the PDB entered into two
separate Escrow Agreements.45 The first agreement covered the first set of CB bills, while the
second agreement covered the second set of CB bills. The parties agreed to jointly collect from the
BSP the maturity proceeds of these CB bills and to deposit said amount in escrow, "pending final
determination by Court judgment, or amicable settlement as to who shall be eventually entitled
thereto."46 The BOC and the PDB filed a Joint Motion, 47 submitting these Escrow Agreements for
court approval. The RTC gave its approval to the parties Joint Motion. 48 Accordingly, the BSP
released the maturity proceeds of the CB bills by crediting the Demand Deposit Account of the PDB
and of the BOC with 50% each of the maturity proceeds of the amount in escrow.49
In view of the BOCs acquisition of all the CB bills, All Asia50 moved to be dropped as a respondent
(with the PDBs conformity51), which the RTC granted.52 The RCBC subsequently followed suit.53
In light of the developments, on May 4, 1998, the RTC required the parties to manifest their intention
regarding the case and to inform the court of any amicable settlement; "otherwise, th[e] case shall be
dismissed for lack of interest."54 Complying with the RTCs order, the BOC moved (i) that the case be
set for pre-trial and (ii) for further proceeding to resolve the remaining issues between the BOC and
the PDB, particularly on "who has a better right over the subject CB bills." 55 The PDB joined the BOC
in its motion.56
On September 28, 2000, the RTC granted the BSPs motion to interplead and, accordingly, required
the BOC to amend its Answer and for the conflicting claimants to comment thereon. 57 In October
2000, the BOC filed its Amended Consolidated Answer with Compulsory Counterclaim, reiterating its
earlier arguments asserting ownership over the subject CB bills. 58
In the alternative, the BOC added that even assuming that there was no effective transfer of the nine
CB bills ultimately to the BOC, the PDB remains obligated to deliver to the BOC, as buyer in the April
15 transaction and ultimate successor-in-interest of the buyer (Bancap) in the April 19 transaction,
either the original subjects of the sales or the value thereof, plus whatever income that may have
been earned during the pendency of the case.59
That BOC prayed:
1. To declare BOC as the rightful owner of the nine (9) CB bills and as the party entitled to
the proceeds thereof as well as all income earned pursuant to the two (2) Escrow
Agreements entered into by BOC and PDB.
2. In the alternative, ordering PDB to deliver the original subject of the sales transactions or
the value thereof and whatever income earned by way of interest at prevailing rate.
Without any opposition or objection from the PDB, on February 23, 2001, the RTC admitted 60 the
BOCs Amended Consolidated Answer with Compulsory Counterclaims.
In May 2001, the PDB filed an Omnibus Motion,61 questioning the RTCs jurisdiction over the BOCs
"additional counterclaims." The PDB argues that its petitions pray for the BSP (not the RTC) to
determine who among the conflicting claimants to the CB bills stands in the position of the bona fide
holder for value. The RTC cannot entertain the BOCs counterclaim, regardless of its nature,
because it is the BSP which has jurisdiction to determine who is entitled to receive the proceeds of
the CB bills.
The BOC opposed62 the PDBs Omnibus Motion. The PDB filed its Reply.63

In a January 10, 2002 Order, the RTC dismissed the PDBs petition, the BOCs counterclaim and the
BSPs counter-complaint/cross-claim for interpleader, holding that under CB Circular No. 28, it has
no jurisdiction (i) over the BOCs "counterclaims" and (ii) to resolve the issue of ownership of the CB
bills.64 With the denial of their separate motions for Reconsideration, 65 the BOC and the BSP
separately filed the present petitions for review on certiorari. 66
THE BOCS and THE BSPS PETITIONS
The BOC argues that the present cases do not fall within the limited provision of Section 10 (d) 4 of
CB Circular No. 28, which contemplates only of three situations: first, where the fraudulent
assignment is not coupled with a notice to the BSP, it can grant no relief; second, where the
fraudulent assignment is coupled with a notice of fraud to the BSP, it will make a notation against the
assignment and require the owner and the holder to substantiate their claims; and third, where the
case does not fall on either of the first two situations, the BSP will have to await action on the
assignment pending settlement of the case, whether by agreement or by court order.
The PDBs case cannot fall under the first two situations. With particular regard to the second
situation, CB Circular No. 28 requires that the conflict must be between an "owner" and a "holder,"
for the BSP to exercise its limited jurisdiction to resolve conflicting claims; and the word "owner" here
refers to the registered owner giving notice of the fraud to the BSP. The PDB, however, is not the
registered owner nor is it in possession (holder) of the CB bills. 67 Consequently, the PDBs case can
only falls under the third situation which leaves the RTC, as a court of general jurisdiction, with the
authority to resolve the issue of ownership of a registered bond (the CB bills) not falling in either of
the first two situations.
The BOC asserts that the policy consideration supportive of its interpretation of CB Circular No. 28 is
to have a reliable system to protect the registered owner; should he file a notice with the BSP about
a fraudulent assignment of certain CB bills, the BSP simply has to look at its books to determine who
is the owner of the CB bills fraudulently assigned. Since it is only the registered owner who complied
with the BSPs requirement of recording an assignment in the BSPs books, then "the protective
mantle of administrative proceedings" should necessarily benefit him only, without extending the
same benefit to those who chose to ignore the Circulars requirement, like the PDB. 68
Assuming arguendo that the PDBs case falls under the second situation i.e., the BSP has
jurisdiction to resolve the issue of ownership of the CB bills the more recent CB Circular No. 76980 (Rules and Regulations Governing Central Bank Certificates of Indebtedness) already
superseded CB Circular No. 28, and, in particular, effectively amended Section 10 (d) 4 of CB
Circular No. 28. The pertinent provisions of CB Circular No. 769-80 read:
Assignment Affected by Fraud. Any assignment for transfer of ownership of registered certificate
obtained through fraudulent representation if honored by the Central Bank or any of its authorized
service agencies shall not make the Central Bank or agency liable therefore unless it has previous
formal notice of the fraud. The Central Bank, upon notice under oath that the assignment was
secured through fraudulent means, shall immediately issue and circularize a "stop order" against the
transfer, exchange, redemption of the Certificate including the payment of interest coupons. The
Central Bank or service agency concerned shall continue to withhold action on the certificate until
such time that the conflicting claims have been finally settled either by amicable settlement between
the parties or by order of the Court.
Unlike CB Circular No. 28, CB Circular No. 769-80 limited the BSPs authority to the mere issuance
and circularization of a "stop order" against the transfer, exchange and redemption upon sworn
notice of a fraudulent assignment. Under this Circular, the BSP shall only continue to withhold action

until the dispute is ended by an amicable settlement or by judicial determination. Given the more
passive stance of the BSP the very agency tasked to enforce the circulars involved - under CB
Circular No. 769-80, the RTCs dismissal of the BOCs counterclaims is palpably erroneous.
Lastly, since Nuquis office (Government Securities Department) had already been abolished, 69 it can
no longer adjudicate the dispute under the second situation covered by CB Circular No. 28. The
abolition of Nuquis office is not only consistent with the BSPs Charter but, more importantly, with CB
Circular No. 769-80, which removed the BSPs adjudicative authority over fraudulent assignments.
THE PDBS COMMENT
The PDB claims that jurisdiction is determined by the allegations in the complaint/petition and not by
the defenses set up in the answer.70 In filing the petition with the RTC, the PDB merely seeks to
compel the BSP to determine, pursuant to CB Circular No. 28, the party legally entitled to the
proceeds of the subject CB bills, which, as the PDB alleged, have been transferred through
fraudulent representations an allegation which properly recognized the BSPs jurisdiction to
resolve conflicting claims of ownership over the CB bills.
The PDB adds that under the doctrine of primary jurisdiction, courts should refrain from determining
a controversy involving a question whose resolution demands the exercise of sound administrative
discretion. In the present case, the BSPs special knowledge and experience in resolving disputes on
securities, whose assignment and trading are governed by the BSPs rules, should be upheld.
The PDB counters that the BOCs tri-fold interpretation of Section 10 (d) 4 of CB Circular No. 28
sanctions split jurisdiction which is not favored;but even this tri-fold interpretation which, in the
second situation, limits the meaning of the "owner" to the registered owner is flawed. Section 10 (d)
4 aims to protect not just the registered owner but anyone who has been deprived of his bond by
fraudulent representation in order to deter fraud in the secondary trading of government securities.
The PDB asserts that the existence of CB Circular No. 769-80 or the abolition of Nuquis office does
not result in depriving the BSP of its jurisdiction: first, CB Circular No. 769-80 expressly provides that
CB Circular No. 28 shall have suppletory application to CB Circular No. 769-80; and second, the
BSP can always designate an office to resolve the PDBs claim over the CB bills.
Lastly, the PDB argues that even assuming that the RTC has jurisdiction to resolve the issue of
ownership of the CB bills, the RTC has not acquired jurisdiction over the BOCs so-called
"compulsory" counterclaims (which in truth is merely "permissive") because of the BOCs failure to
pay the appropriate docket fees. These counterclaims should, therefore, be dismissed and
expunged from the record.
THE COURTS RULING
We grant the petitions.
At the outset, we note that the parties have not raised the validity of either CB Circular No. 28 or CB
Circular No. 769-80 as an issue. What the parties largely contest is the applicable circular in case of
an allegedly fraudulently assigned CB bill. The applicable circular, in turn, is determinative of the
proper remedy available to the PDB and/or the BOC as claimants to the proceeds of the subject CB
bills.

Indisputably, at the time the PDB supposedly invoked the jurisdiction of the BSP in 1994 (by
requesting for the annotation of its claim over the subject CB bills in the BSPs books), CB Circular
No. 769-80 has long been in effect. Therefore, the parties respective interpretations of the provision
of Section 10 (d) 4 of CB Circular No. 28 do not have any significance unless it is first established
that that Circular governs the resolution of their conflicting claims of ownership. This conclusion is
important, given the supposed repeal or modification of Section 10 (d) 4 of CB Circular No. 28 by the
following provisions of CB Circular No. 769-80:
ARTICLE XI
SUPPLEMENTAL RULES
Section 1. Central Bank Circular No. 28 The provisions of Central Bank Circular No. 28 shall have
suppletory application to matters not specially covered by these Rules.
ARTICLE XII
EFFECTIVITY
Effectivity The rules and regulations herein prescribed shall take effect upon approval by the
Monetary Board, Central Bank of the Philippines, and all circulars, memoranda, or office orders
inconsistent herewith are revoked or modified accordingly. (Emphases added)
We agree with the PDB that in view of CB Circular No. 28s suppletory application, an attempt to
harmonize the apparently conflicting provisions is a prerequisite before one may possibly conclude
that an amendment or a repeal exists.71 Interestingly, however, even the PDB itself failed to submit
an interpretation based on its own position of harmonization.
The repealing clause of CB Circular No. 769-80 obviously did not expressly repeal CB Circular No.
28; in fact, it even provided for the suppletory application of CB Circular No. 28 on "matters not
specially covered by" CB Circular No. 769-80. While no express repeal exists, the intent of CB
Circular No. 769-80 to operate as an implied repeal, 72 or at least to amend earlier CB circulars, is
supported by its text "revoking" or "modif[ying" "all circulars" which are inconsistent with its terms.
At the outset, we stress that none of the parties disputes that the subject CB bills fall within the
category of a certificate or evidence of indebtedness and that these were issued by the Central
Bank, now the BSP. Thus, even without resorting to statutory construction aids, matters involving the
subject CB bills should necessarily be governed by CB Circular No. 769-80. Even granting, however,
that reliance on CB Circular No. 769-80 alone is not enough, we find that CB Circular No. 769-80
impliedly repeals CB Circular No. 28.
An implied repeal transpires when a substantial conflict exists between the new and the prior laws.
In the absence of an express repeal, a subsequent law cannot be construed as repealing a prior law
unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and the old
laws.73 Repeal by implication is not favored, unless manifestly intended by the legislature, or unless it
is convincingly and unambiguously demonstrated, that the laws or orders are clearly repugnant and
patently inconsistent with one another so that they cannot co-exist; the legislature is presumed to
know the existing law and would express a repeal if one is intended. 74
There are two instances of implied repeal. One takes place when the provisions in the two acts on
the same subject matter are irreconcilably contradictory, in which case, the later act, to the extent of
the conflict, constitutes an implied repeal of the earlier one. The other occurs when the later act
covers the whole subject of the earlier one and is clearly intended as a substitute; thus, it will operate
to repeal the earlier law.75

A general reading of the two circulars shows that the second instance of implied repeal is present in
this case. CB Circular No. 28, entitled "Regulations Governing Open Market Operations,
Stabilization of Securities Market, Issue, Servicing and Redemption of Public Debt," is a regulation
governing the servicing and redemption of public debt, including the issue, inscription, registration,
transfer, payment and replacement of bonds and securities representing the public debt. 76 On the
other hand, CB Circular No. 769-80, entitled "Rules and Regulations Governing Central Bank
Certificate of Indebtedness," is the governing regulation on matters 77 (i) involving certificate of
indebtedness78 issued by the Central Bank itself and (ii) which are similarly covered by CB Circular
No. 28.
The CB Monetary Board issued CB Circular No. 28 to regulate the servicing and redemption of
public debt, pursuant to Section 124 (now Section 119 of Republic Act R.A. No. 7653) of the old
Central Bank law79 which provides that "the servicing and redemption of the public debt shall also be
effected through the Bangko Sentral." However, even as R.A. No. 7653 continued to recognize this
role by the BSP, the law required a phase-out of all fiscal agency functions by the BSP, including
Section 119 of R.A. No. 7653.
In other words, even if CB Circular No. 28 applies broadly to both government-issued bonds and
securities and Central Bank-issued evidence of indebtedness, given the present state of law, CB
Circular No. 28 and CB Circular No. 769-80 now operate on the same subject Central Bank-issued
evidence of indebtedness. Under Section 1, Article XI of CB Circular No. 769-80, the continued
relevance and application of CB Circular No. 28 would depend on the need to supplement any
deficiency or silence in CB Circular No. 769-80 on a particular matter.
In the present case, both CB Circular No. 28 and CB Circular No. 769-80 provide the BSP with a
course of action in case of an allegedly fraudulently assigned certificate of indebtedness. Under CB
Circular No. 28, in case of fraudulent assignments, the BSP would have to "call upon the owner and
the person presenting the bond to substantiate their respective claims" and, from there, determine
who has a better right over the registered bond. On the other hand, under CB Circular No. 769-80,
the BSP shall merely "issue and circularize a stop order against the transfer, exchange, redemption
of the [registered] certificate" without any adjudicative function (which is the precise root of the
present controversy). As the two circulars stand, the patent irreconcilability of these two provisions
does not require elaboration. Section 5, Article V of CB Circular No. 769-80 inescapably repealed
Section 10 (d) 4 of CB Circular No. 28.
The issue of BSPs jurisdiction, lay hidden
On that note, the Court could have written finis to the present controversy by simply sustaining the
BSPs hands-off approach to the PDBs problem under CB Circular No. 769-80. However, the
jurisdictional provision of CB Circular No. 769-80 itself, in relation to CB Circular No. 28, on the
matter of fraudulent assignment, has given rise to a question of jurisdiction - the core question of law
involved in these petitions - which the Court cannot just treat sub-silencio.
Broadly speaking, jurisdiction is the legal power or authority to hear and determine a cause. 80 In the
exercise of judicial or quasi-judicial power, it refers to the authority of a court to hear and decide a
case.81 In the context of these petitions, we hark back to the basic principles governing the question
of jurisdiction over the subject matter.
First, jurisdiction over the subject matter is determined only by the Constitution and by law.82 As a
matter of substantive law, procedural rules alone can confer no jurisdiction to courts or administrative
agencies.83 In fact, an administrative agency, acting in its quasi-judicial capacity, is a tribunal of
limited jurisdiction and, as such, could wield only such powers that are specifically granted to it by

the enabling statutes. In contrast, an RTC is a court of general jurisdiction, i.e., it has jurisdiction over
cases whose subject matter does not fall within the exclusive original jurisdiction of any court,
tribunal or body exercising judicial or quasi-judicial functions. 84
Second, jurisdiction over the subject matter is determined not by the pleas set up by the defendant in
his answer85but by the allegations in the complaint, 86 irrespective of whether the plaintiff is entitled to
favorable judgment on the basis of his assertions. 87 The reason is that the complaint is supposed to
contain a concise statement of the ultimate facts constituting the plaintiff's causes of action. 88
Third, jurisdiction is determined by the law in force at the time of the filing of the complaint. 89
Parenthetically, the Court observes that none of the parties ever raised the issue of whether the BSP
can simply disown its jurisdiction, assuming it has, by the simple expedient of promulgating a new
circular (specially applicable to a certificate of indebtedness issued by the BSP itself), inconsistent
with an old circular, assertive of its limited jurisdiction over ownership issues arising from fraudulent
assignments of a certificate of indebtedness. The PDB, in particular, relied solely and heavily on CB
Circular No. 28.
In light of the above principles pointing to jurisdiction as a matter of substantive law, the provisions of
the law itself that gave CB Circular 769-80 its life and jurisdiction must be examined.
The Philippine Central Bank
On January 3, 1949, Congress created the Central Bank of the Philippines (Central Bank) as a
corporate body with the primary objective of (i) maintaining the internal and external monetary
stability in the Philippines; and (ii) preserving the international value and the convertibility of the
peso.90 In line with these broad objectives, the Central Bank was empowered to issue rules and
regulations "necessary for the effective discharge of the responsibilities and exercise of the powers
assigned to the Monetary Board and to the Central Bank." 91Specifically, the Central Bank is
authorized to organize (other) departments for the efficient conduct of its business and whose
powers and duties "shall be determined by the Monetary Board, within the authority granted to the
Board and the Central Bank"92 under its original charter.
With the 1973 Constitution, the then Central Bank was constitutionally made as the countrys central
monetary authority until such time that Congress 93 shall have established a central bank. The 1987
Constitution continued to recognize this function of the then Central Bank until Congress, pursuant to
the Constitution, created a new central monetary authority which later came to be known as the
Bangko Sentral ng Pilipinas.
Under the New Central Bank Act (R.A. No. 7653), 94 the BSP is given the responsibility of providing
policy directions in the areas of money, banking and credit; it is given, too, the primary objective of
maintaining price stability, conducive to a balanced and sustainable growth of the economy, and of
promoting and maintaining monetary stability and convertibility of the peso. 95
The Constitution expressly grants the BSP, as the countrys central monetary authority, the power of
supervision over the operation of banks, while leaving with Congress the authority to define the
BSPs regulatory powers over the operations of finance companies and other institutions performing
similar functions. Under R.A. No. 7653, the BSPs powers and functions include (i) supervision over
the operation of banks; (ii) regulation of operations of finance companies and non-bank financial
institutions performing quasi banking functions; (iii) sole power and authority to issue currency within
the Philippine territory; (iv) engaging in foreign exchange transactions; (v) making rediscounts,
discounts, loans and advances to banking and other financial institutions to influence the volume of

credit consistent with the objective of achieving price stability; (vi) engaging in open market
operations; and (vii) acting as banker and financial advisor of the government.
1wphi1

On the BSPs power of supervision over the operation of banks, Section 4 of R.A. No. 8791 (The
General Banking Law of 2000) elaborates as follows:
CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL
SECTION 4. Supervisory Powers. The operations and activities of banks shall be subject to
supervision of the Bangko Sentral. "Supervision" shall include the following:
4.1. The issuance of rules of conduct or the establishment of standards of operation for
uniform application to all institutions or functions covered, taking into consideration the
distinctive character of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be applied;
4.2. The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;
4.3. Overseeing to ascertain that laws and regulations are complied with;
4.4. Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or
sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit
shall be immediately addressed;
4.5. Inquiring into the solvency and liquidity of the institution (2-D); or
4.6. Enforcing prompt corrective action. (n)
The Bangko Sentral shall also have supervision over the operations of and exercise regulatory
powers over quasi-banks, trust entities and other financial institutions which under special laws are
subject to Bangko Sentral supervision. (2-Ca)
For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of funds
through the issuance, endorsement or assignment with recourse or acceptance of deposit
substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank Act")
for purposes of relending or purchasing of receivables and other obligations. [emphasis ours]
While this provision empowers the BSP to oversee the operations and activities of banks to
"ascertain that laws and regulations are complied with," the existence of the BSPs jurisdiction in the
present dispute cannot rely on this provision. The fact remains that the BSP already made known to
the PDB its unfavorable position on the latters claim of fraudulent assignment due to the latters own
failure to comply96 with existing regulations:
In this connection, Section 10 (b) 2 also requires that a "Detached assignment will be recognized or
accepted only upon previous notice to the Central Bank x x x." In fact, in a memo dated September
23, 1991 xxx then CB Governor Jose L. Cuisia advised all banks (including PDB) xxx as follows:

In view recurring incidents ostensibly disregarding certain provisions of CB circular No. 28 (as
amended) covering assignments of registered bonds, all banks and all concerned are enjoined to
observe strictly the pertinent provisions of said CB Circular as hereunder quoted:
xxxx
Under Section 10.b. (2)
x x x Detached assignment will be recognized or accepted only upon previous notice to the Central
Bank and its use is authorized only under the following circumstances:
(a) x x x
(b) x x x
(c) assignments of treasury notes and certificates of indebtedness in registered form which
are not provided at the back thereof with assignment form.
(d) Assignment of securities which have changed ownership several times.
(e) x x x
Non-compliance herewith will constitute a basis for non-action or withholding of action on
redemption/payment of interest coupons/transfer transactions or denominational exchange that may
be directly affected thereby. [Boldfacing supplied]
Again, the books of the BSP do not show that the supposed assignment of subject CB Bills was ever
recorded in the BSPs books. [Boldfacing supplied]
However, the PDB faults the BSP for not recording the assignment of the CB bills in the PDBs favor
despite the fact that the PDB already requested the BSP to record its assignment in the BSPs books
as early as June 30, 1994.97
The PDBs claim is not accurate. What the PDB requested the BSP on that date was not the
recording of the assignment of the CB bills in its favor but the annotation of its claim over the CB bills
at the time when (i) it was no longer in possession of the CB bills, having been transferred from one
entity to another and (ii) all it has are the detached assignments, which the PDB has not shown to be
compliant with Section 10 (b) 2 above-quoted. Obviously, the PDB cannot insist that the BSP take
cognizance of its plaint when the basis of the BSPs refusal under existing regulation, which the PDB
is bound to observe, is the PDBs own failure to comply therewith.
True, the BSP exercises supervisory powers (and regulatory powers) over banks (and quasi banks).
The issue presented before the Court, however, does not concern the BSPs supervisory power over
banks as this power is understood under the General Banking Law. In fact, there is nothing in the
PDBs petition (even including the letters it sent to the BSP) that would support the BSPs jurisdiction
outside of CB Circular No. 28, under its power of supervision, over conflicting claims to the proceeds
of the CB bills.
BSP has quasi-judicial powers over a
class of cases which does not include

the adjudication of ownership of the

CB bills in question
In United Coconut Planters Bank v. E. Ganzon, Inc.,98 the Court considered the BSP as an
administrative agency,99 exercising quasi-judicial functions through its Monetary Board. It held:
A quasi-judicial agency or body is an organ of government other than a court and other than a
legislature, which affects the rights of private parties through either adjudication or rule-making. The
very definition of an administrative agency includes its being vested with quasi-judicial powers. The
ever increasing variety of powers and functions given to administrative agencies recognizes the
need for the active intervention of administrative agencies in matters calling for technical knowledge
and speed in countless controversies which cannot possibly be handled by regular courts. A "quasijudicial function" is a term which applies to the action, discretion, etc., of public administrative officers
or bodies, who are required to investigate facts, or ascertain the existence of facts, hold hearings,
and draw conclusions from them, as a basis for their official action and to exercise discretion of a
judicial nature.
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers or
functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is an independent
central monetary authority and a body corporate with fiscal and administrative autonomy, mandated
to provide policy directions in the areas of money, banking and credit. It has power to issue
subpoena, to sue for contempt those refusing to obey the subpoena without justifiable reason, to
administer oaths and compel presentation of books, records and others, needed in its examination,
to impose fines and other sanctions and to issue cease and desist order. Section 37 of Republic Act
No. 7653, in particular, explicitly provides that the BSP Monetary Board shall exercise its discretion
in determining whether administrative sanctions should be imposed on banks and quasi-banks,
which necessarily implies that the BSP Monetary Board must conduct some form of investigation or
hearing regarding the same. [citations omitted]
The BSP is not simply a corporate entity but qualifies as an administrative agency created, pursuant
to constitutional mandate,100 to carry out a particular governmental function.101 To be able to perform
its role as central monetary authority, the Constitution granted it fiscal and administrative autonomy.
In general, administrative agencies exercise powers and/or functions which may be characterized as
administrative, investigatory, regulatory, quasi-legislative, or quasi-judicial, or a mix of these five, as
may be conferred by the Constitution or by statute. 102
While the very nature of an administrative agency and the raison d'tre for its creation 103 and
proliferation dictate a grant of quasi-judicial power to it, the matters over which it may exercise this
power must find sufficient anchorage on its enabling law, either by express provision or by necessary
implication. Once found, the quasi-judicial power partakes of the nature of a limited and special
jurisdiction, that is, to hear and determine a class of cases within its peculiar competence and
expertise. In other words, the provisions of the enabling statute are the yardsticks by which the Court
would measure the quantum of quasi-judicial powers an administrative agency may exercise, as
defined in the enabling act of such agency.104
Scattered provisions in R.A. No. 7653 and R.A. No. 8791, inter alia, exist, conferring jurisdiction on
the BSP on certain matters.105 For instance, under the situations contemplated under Section 36, par.
2106 (where a bank or quasi bank persists in carrying on its business in an unlawful or unsafe
manner) and Section 37107 (where the bank or its officers willfully violate the banks charter or bylaws, or the rules and regulations issued by the Monetary Board) of R.A. No. 7653, the BSP may
place an entity under receivership and/or liquidation or impose administrative sanctions upon the
entity or its officers or directors.

Among its several functions under R.A. No. 7653, the BSP is authorized to engage in open market
operations and thereby "issue, place, buy and sell freely negotiable evidences of indebtedness of the
Bangko Sentral" in the following manner.
SEC. 90. Principles of Open Market Operations. The open market purchases and sales of
securities by the Bangko Sentral shall be made exclusively in accordance with its primary objective
of achieving price stability.
xxxx
SEC. 92. Issue and Negotiation of Bangko Sentral Obligations. In order to provide the Bangko
Sentral with effective instruments for open market operations, the Bangko Sentral may, subject to
such rules and regulations as the Monetary Board may prescribe and in accordance with the
principles stated in Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral: Provided, That issuance of such certificates of indebtedness
shall be made only in cases of extraordinary movement in price levels. Said evidences of
indebtedness may be issued directly against the international reserve of the Bangko Sentral or
against the securities which it has acquired under the provisions of Section 91 of this Act, or may be
issued without relation to specific types of assets of the Bangko Sentral.
The Monetary Board shall determine the interest rates, maturities and other characteristics of said
obligations of the Bangko Sentral, and may, if it deems it advisable, denominate the obligations in
gold or foreign currencies.
Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the
Bangko Sentral to which this section refers may be acquired by the Bangko Sentral before their
maturity, either through purchases in the open market or through redemptions at par and by lot if the
Bangko Sentral has reserved the right to make such redemptions. The evidences of indebtedness
acquired or redeemed by the Bangko Sentral shall not be included among its assets, and shall be
immediately retired and cancelled.108 (italics supplied; emphases ours)
The primary objective of the BSP is to maintain price stability.109 The BSP has a number of monetary
policy instruments at its disposal to promote price stability. To increase or reduce liquidity in the
financial system, the BSP uses open market operations, among others. 110 Open market operation is
a monetary tool where the BSP publicly buys or sells government securities 111 from (or to) banks and
financial institutions in order to expand or contract the supply of money. By controlling the money
supply, the BSP is able to exert some influence on the prices of goods and services and achieve its
inflation objectives.112
Once the issue and/or sale of a security is made, the BSP would necessarily make a determination,
in accordance with its own rules, of the entity entitled to receive the proceeds of the security upon its
maturity. This determination by the BSP is an exercise of its administrative powers 113 under the law
as an incident to its power to prescribe rules and regulations governing open market operations to
achieve the "primary objective of achieving price stability." 114 As a matter of necessity, too, the same
rules and regulations facilitate transaction with the BSP by providing for an orderly manner of,
among others, issuing, transferring, exchanging and paying securities representing public debt.
Significantly, when competing claims of ownership over the proceeds of the securities it has issued
are brought before it, the law has not given the BSP the quasi-judicial power to resolve these
competing claims as part of its power to engage in open market operations. Nothing in the BSPs
charter confers on the BSP the jurisdiction or authority to determine this kind of claims, arising out of
a subsequent transfer or assignment of evidence of indebtedness a matter that appropriately falls

within the competence of courts of general jurisdiction. That the statute withholds this power from the
BSP is only consistent with the fundamental reasons for the creation of a Philippine central bank,
that is, to lay down stable monetary policy and exercise bank supervisory functions. Thus, the BSPs
assumption of jurisdiction over competing claims cannot find even a stretched-out justification under
its corporate powers "to do and perform any and all things that may be necessary or proper to carry
out the purposes" of R.A. No. 7653. 115
To reiterate, open market operation is a monetary policy instrument that the BSP employs, among
others, to regulate the supply of money in the economy to influence the timing, cost and availability
of money and credit, as well as other financial factors, for the purpose of stabilizing the price
level.116 What the law grants the BSP is a continuing role to shape and carry out the countrys
monetary policy not the authority to adjudicate competing claims of ownership over the securities it
has issued since this authority would not fall under the BSPs purposes under its charter.
While R.A. No. 7653117 empowers the BSP to conduct administrative hearings and render judgment
for or against an entity under its supervisory and regulatory powers and even authorizes the BSP
Governor to "render decisions, or rulings x x x on matters regarding application or enforcement of
laws pertaining to institutions supervised by the BSP and laws pertaining to quasi-banks, as well as
regulations, policies or instructions issued by the Monetary Board," it is precisely the text of the
BSPs own regulation (whose validity is not here raised as an issue) that points to the BSPs limited
role in case of an allegedly fraudulent assignment to simply (i) issuing and circularizing a "stop
order" against the transfer, exchange, redemption of the certificate of indebtedness, including the
payment of interest coupons, and (ii) withholding action on the certificate.
A similar conclusion can be drawn from the BSPs administrative adjudicatory power in cases of
"willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or
regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor." 118 The
non-compliance with the pertinent requirements under CB Circular No. 28, as amended, deprives a
party from any right to demand payment from the BSP.
In other words, the grant of quasi-judicial authority to the BSP cannot possibly extend to situations
which do not call for the exercise by the BSP of its supervisory or regulatory functions over entities
within its jurisdiction.119
The fact alone that the parties involved are banking institutions does not necessarily call for the
exercise by the BSP of its quasi-judicial powers under the law.120
The doctrine of primary jurisdiction
argues against BSPs purported
authority to adjudicate ownership
issues over the disputed CB bills
Given the preceding discussions, even the PDBs invocation of the doctrine of primary jurisdiction is
misplaced.
In the exercise of its plenary legislative power, Congress may create administrative agencies
endowed with quasi-legislative and quasi-judicial powers. Necessarily, Congress likewise defines the
limits of an agencys jurisdiction in the same manner as it defines the jurisdiction of courts. 121 As a
result, it may happen that either a court or an administrative agency has exclusive jurisdiction over a
specific matter or both have concurrent jurisdiction on the same. It may happen, too, that courts and
agencies may willingly relinquish adjudicatory power that is rightfully theirs in favor of the other. One

of the instances when a court may properly defer to the adjudicatory authority of an agency is the
applicability of the doctrine of primary jurisdiction. 122
As early as 1954, the Court applied the doctrine of primary jurisdiction under the following terms:
6. In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative
commissions and boards the power to resolve specialized disputes xxx ruled that Congress in
requiring the Industrial Court's intervention in the resolution of labor-management controversies xxx
meant such jurisdiction to be exclusive, although it did not so expressly state in the law. The Court
held that under the "sense-making and expeditious doctrine of primary jurisdiction ... the courts
cannot or will not determine a controversy involving a question which is within the jurisdiction of an
administrative tribunal, where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience, and services of the administrative tribunal to determine
technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the
purposes of the regulatory statute administered."123 (emphasis ours)
In Industrial Enterprises, Inc. v. Court of Appeals,124 the Court ruled that while an action for rescission
of a contract between coal developers appears to be an action cognizable by regular courts, the trial
court remains to be without jurisdiction to entertain the suit since the contract sought to be rescinded
is "inextricably tied up with the right to develop coal-bearing lands and the determination of whether
or not the reversion of the coal operating contract over the subject coal blocks to [the plaintiff] would
be in line with the countrys national program and objective on coal-development and over-all coalsupply-demand balance." It then applied the doctrine of primary jurisdiction
In recent years, it has been the jurisprudential trend to apply the doctrine of primary jurisdiction in
many cases involving matters that demand the special competence of administrative agencies. It
may occur that the Court has jurisdiction to take cognizance of a particular case, which means that
the matter involved is also judicial in character. However, if the case is such that its determination
requires the expertise, specialized skills and knowledge of the proper administrative bodies because
technical matters or intricate questions of facts are involved, then relief must first be obtained in an
administrative proceeding before a remedy will be supplied by the courts even though the matter is
within the proper jurisdiction of a court. This is the doctrine of primary jurisdiction. It applies "where a
claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim
requires the resolution of issues which, under a regulatory scheme, have been placed within the
special competence of an administrative body."
Clearly, the doctrine of primary jurisdiction finds application in this case since the question of what
coal areas should be exploited and developed and which entity should be granted coal operating
contracts over said areas involves a technical determination by the Bureau of Energy Development
as the administrative agency in possession of the specialized expertise to act on the matter. The
Trial Court does not have the competence to decide matters concerning activities relative to the
exploration, exploitation, development and extraction of mineral resources like coal. These issues
preclude an initial judicial determination. [emphases ours]
The absence of any express or implied statutory power to adjudicate conflicting claims of ownership
or entitlement to the proceeds of its certificates of indebtedness finds complement in the similar
absence of any technical matter that would call for the BSPs special expertise or competence. 125 In
fact, what the PDBs petitions bear out is essentially the nature of the transaction it had with the
subsequent transferees of the subject CB bills (BOC and Bancap) and not any matter more
appropriate for special determination by the BSP or any administrative agency.

In a similar vein, it is well-settled that the interpretation given to a rule or regulation by those charged
with its execution is entitled to the greatest weight by the courts construing such rule or
regulation.126 While there are exceptions127 to this rule, the PDB has not convinced us that a
departure is warranted in this case. Given the non-applicability of the doctrine of primary jurisdiction,
the BSPs own position, in light of Circular No. 769-80, deserves respect from the Court.
Ordinarily, cases involving the application of doctrine of primary jurisdiction are initiated by an action
invoking the jurisdiction of a court or administrative agency to resolve the substantive legal conflict
between the parties. In this sense, the present case is quite unique since the courts jurisdiction was,
originally, invoked to compel an administrative agency (the BSP) to resolve the legal conflict of
ownership over the CB bills - instead of obtaining a judicial determination of the same dispute.
The remedy of interpleader
Based on the unique factual premise of the present case, the RTC acted correctly in initially
assuming jurisdiction over the PDBs petition for mandamus, prohibition and injunction. 128 While the
RTC agreed (albeit erroneously) with the PDBs view (that the BSP has jurisdiction), it, however,
dismissed not only the BOCs/the BSPs counterclaims but the PDBs petition itself as well, on the
ground that it lacks jurisdiction.
This is plain error.
Not only the parties themselves, but more so the courts, are bound by the rule on non-waiver of
jurisdiction.129believes that jurisdiction over the BOCs counterclaims and the BSPs
counterclaim/crossclaim for interpleader calls for the application of the doctrine of primary
jurisdiction, the allowance of the PDBs petition even becomes imperative because courts may raise
the issue of primary jurisdiction sua sponte.130
Of the three possible options available to the RTC, the adoption of either of these two would lead the
trial court into serious legal error: first, if it granted the PDBs petition, its decision would have to be
set aside on appeal because the BSP has no jurisdiction as previously discussed; and second when
it dismissed the PDBs petitions and the BOCs counterclaims on the ground that it lacks jurisdiction,
the trial court seriously erred because precisely, the resolution of the conflicting claims over the CB
bills falls within its general jurisdiction.
Without emasculating its jurisdiction, the RTC could have properly dismissed the PDBs petition but
on the ground that mandamus does not lie against the BSP; but even this correct alternative is no
longer plausible since the BSP, as a respondent below, already properly brought before the RTC the
remaining conflicting claims over the subject CB bills by way of a counterclaim/crossclaim for
interpleader. Section 1, Rule 62 of the Rules of Court provides when an interpleader is proper:
SECTION 1. When interpleader proper. Whenever conflicting claims upon the same subject matter
are or may be made against a person who claims no interest whatever in the subject matter, or an
interest which in whole or in part is not disputed by the claimants, he may bring an action against the
conflicting claimants to compel them to interplead and litigate their several claims among
themselves.
The remedy of an action of interpleader 131 is designed to protect a person against double vexation in
respect of a single liability.7 It requires, as an indispensable requisite, that conflicting claims upon the
same subject matter are or may be made against the stakeholder (the possessor of the subject
matter) who claims no interest whatever in the subject matter or an interest which in whole or in part
is not disputed by the claimants.132

Through this remedy, the stakeholder can join all competing claimants in a single proceeding to
determine conflicting claims without exposing the stakeholder to the possibility of having to pay more
than once on a single liability.133
When the court orders that the claimants litigate among themselves, in reality a new action
arises,134 where the claims of the interpleaders themselves are brought to the fore, the stakeholder
as plaintiff is relegated merely to the role of initiating the suit. In short, the remedy of interpleader,
when proper, merely provides an avenue for the conflicting claims on the same subject matter to be
threshed out in an action. Section 2 of Rule 62 provides:
SEC. 2. Order. Upon the filing of the complaint, the court shall issue an order requiring the
conflicting claimants to interplead with one another. If the interests of justice so require, the court
may direct in such order that the subject matter be paid or delivered to the court.
This is precisely what the RTC did by granting the BSPs motion to interplead. The PDB itself
"agreed that the various claimants should now interplead." Thus, the PDB and the BOC
subsequently entered into two separate escrow agreements, covering the CB bills, and submitted
them to the RTC for approval.
In granting the BSPs motion, the RTC acted on the correct premise that it has jurisdiction to resolve
the parties conflicting claims over the CB bills - consistent with the rules and the parties conduct and accordingly required the BOC to amend its answer and for the PDB to comment thereon.
Suddenly, however, the PDB made an about-face and questioned the jurisdiction of the RTC.
Swayed by the PDBs argument, the RTC dismissed even the PDBs petition - which means that it
did not actually compel the BSP to resolve the BOCs and the PDBs claims.
Without the motion to interplead and the order granting it, the RTC could only dismiss the PDBs
petition since it is the RTC which has jurisdiction to resolve the parties conflicting claims not the
BSP. Given that the motion to interplead has been actually filed, the RTC could not have really
granted the relief originally sought in the PDBs petition since the RTCs order granting the BSPs
motion to interplead - to which the PDB in fact acquiesced into - effectively resulted in the dismissal
of the PDBs petition. This is not altered by the fact that the PDB additionally prayed in its petition for
damages, attorneys fees and costs of suit "against the public respondents" because the grant of the
order to interplead effectively sustained the propriety of the BSPs resort to this procedural device.
Interpleader
1. as a special civil action
What is quite unique in this case is that the BSP did not initiate the interpleader suit through an
original complaint but through its Answer. This circumstance becomes understandable if it is
considered that insofar as the BSP is concerned, the PDB does not possess any right to have its
claim recorded in the BSPs books; consequently, the PDB cannot properly be considered even as a
potential claimant to the proceeds of the CB bills upon maturity. Thus, the interpleader was only an
alternative position, made only in the BSPs Answer.135
The remedy of interpleader, as a special civil action, is primarily governed by the specific provisions
in Rule 62 of the Rules of Court and secondarily by the provisions applicable to ordinary civil
actions.136 Indeed, Rule 62 does not expressly authorize the filing of a complaint-in-interpleader as
part of, although separate and independent from, the answer. Similarly, Section 5, Rule 6, in relation
to Section 1, Rule 9 of the Rules of Court137 does not include a complaint-in-interpleader as a
claim,138 a form of defense,139 or as an objection that a defendant may be allowed to put up in his

answer or in a motion to dismiss. This does not mean, however, that the BSPs "countercomplaint/cross-claim for interpleader" runs counter to general procedures.
Apart from a pleading,140 the rules141 allow a party to seek an affirmative relief from the court through
the procedural device of a motion. While captioned "Answer with counter complaint/cross-claim for
interpleader," the RTC understood this as in the nature of a motion, 142 seeking relief which essentially
consists in an order for the conflicting claimants to litigate with each other so that "payment is made
to the rightful or legitimate owner"143 of the subject CB bills.
The rules define a "civil action" as "one by which a party sues another for the enforcement or
protection of a right, or the prevention or redress of a wrong." Interpleader may be considered as a
stakeholders remedy to prevent a wrong, that is, from making payment to one not entitled to it,
thereby rendering itself vulnerable to lawsuit/s from those legally entitled to payment.
Interpleader is a civil action made special by the existence of particular rules to govern the
uniqueness of its application and operation. Under Section 2, Rule 6 of the Rules of Court, governing
ordinary civil actions, a partys claim is asserted "in a complaint, counterclaim, cross-claim, third
(fourth, etc.)-party complaint, or complaint-in-intervention." In an interpleader suit, however, a claim
is not required to be contained in any of these pleadings but in the answer-(of the conflicting
claimants)-in-interpleader. This claim is different from the counter-claim (or cross-claim, third partycomplaint) which is separately allowed under Section 5, par. 2 of Rule 62.
2. the payment of docket fees covering BOCs counterclaim
The PDB argues that, even assuming that the RTC has jurisdiction over the issue of ownership of
the CB bills, the BOCs failure to pay the appropriate docket fees prevents the RTC from acquiring
jurisdiction over the BOCs "counterclaims."
We disagree with the PDB.
To reiterate and recall, the order granting the "PDBs motion to interplead," already resulted in the
dismissal of the PDBs petition. The same order required the BOC to amend its answer and for the
conflicting claimants to comment, presumably to conform to the nature of an answer-in interpleader.
Perhaps, by reason of the BOCs denomination of its claim as a "compulsory counterclaim" and the
PDBs failure to fully appreciate the RTCs order granting the "BSPs motion for interpleader" (with
the PDBs conformity), the PDB mistakenly treated the BOCs claim as a "permissive counterclaim"
which necessitates the payment of docket fees.
As the preceding discussions would show, however, the BOCs "claim" - i.e., its assertion of
ownership over the CB bills is in reality just that, a "claim" against the stakeholder and not as a
"counterclaim,"144 whether compulsory145 or permissive. It is only the BOCs alternative prayer (for the
PDB to deliver to the BOC, as the buyer in the April 15 transaction and the ultimate successor-ininterest of the buyer in the April 19 transaction, either the original subjects of the sales or the value
thereof plus whatever income that may have been earned pendente lite) and its prayer for damages
that are obviously compulsory counterclaims against the PDB and, therefore, does not require
payment of docket fees.146
The PDB takes a contrary position through its insistence that a compulsory counterclaim should be
one where the presence of third parties, of whom the court cannot acquire jurisdiction, is not
required. It reasons out that since the RCBC and All Asia (the intervening holders of the CB bills)
have already been dropped from the case, then the BOCs counterclaim must only be permissive in
nature and the BOC should have paid the correct docket fees.

We see no reason to belabor this claim. Even if we gloss over the PDBs own conformity to the
dropping of these entities as parties, the BOC correctly argues that a remedy is provided under the
Rules. Section 12, Rule 6 of the Rules of Court reads:
SEC. 12. Bringing new parties. When the presence of parties other than those to the original action
is required for the granting of complete relief in the determination of a counterclaim or cross-claim,
the court shall order them to be brought in as defendants, if jurisdiction over them can be obtained.
Even then, the strict characterization of the BOCs counterclaim is no longer material in disposing of
the PDBs argument based on non-payment of docket fees.
When an action is filed in court, the complaint must be accompanied by the payment of the requisite
docket and filing fees by the party seeking affirmative relief from the court. It is the filing of the
complaint or appropriate initiatory pleading, accompanied by the payment of the prescribed docket
fee, that vests a trial court with jurisdiction over the claim or the nature of the action. 147 However, the
non-payment of the docket fee at the time of filing does not automatically cause the dismissal of the
case, so long as the fee is paid within the applicable prescriptive or reglementary period, especially
when the claimant demonstrates a willingness to abide by the rules prescribing such payment. 148
In the present case, considering the lack of a clear guideline on the payment of docket fee by the
claimants in an interpleader suit, compounded by the unusual manner in which the interpleader suit
was initiated and the circumstances surrounding it, we surely cannot deduce from the BOCs mere
failure to specify in its prayer the total amount of the CB bills it lays claim to (or the value of the
subjects of the sales in the April 15 and April 19 transactions, in its alternative prayer) an intention to
defraud the government that would warrant the dismissal of its claim. 149
At any rate, regardless of the nature of the BOCs "counterclaims," for purposes of payment of filing
fees, both the BOC and the PDB, properly as defendants-in-interpleader, must be assessed the
payment of the correct docket fee arising from their respective claims. The seminal case of Sun
Insurance Office, Ltd. v. Judge Asuncion150provides us guidance in the payment of docket fees, to
wit:
1. x x x Where the filing of the initiatory pleading is not accompanied by payment of the
docket fee, the court may allow payment of the fee within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed
therefor is paid. The court may also allow payment of said fee within a reasonable time but
also in no case beyond its applicable prescriptive or reglementary period. [underscoring
ours]
This must be the rule considering that Section 7, Rule 62 of which reads:
SEC. 7. Docket and other lawful fees, costs and litigation expenses as liens. The docket and other
lawful fees paid by the party who filed a complaint under this Rule, as well as the costs and litigation
expenses, shall constitute a lien or charge upon the subject matter of the action, unless the court
shall order otherwise.
only pertain to the docket and lawful fees to be paid by the one who initiated the interpleader suit,
and who, under the Rules, actually "claims no interest whatever in the subject matter." By

constituting a lien on the subject matter of the action, Section 7 in effect only aims to actually
compensate the complainant-in-interpleader, who happens to be the stakeholder unfortunate enough
to get caught in a legal crossfire between two or more conflicting claimants, for the faultless trouble it
found itself into. Since the defendants-in-interpleader are actually the ones who make a claim - only
that it was extraordinarily done through the procedural device of interpleader - then to them devolves
the duty to pay the docket fees prescribed under Rule 141 of the Rules of Court, as amended. 151
The importance of paying the correct amount of docket fee cannot be overemphasized:
The matter of payment of docket fees is not a mere triviality. These fees are necessary to defray
court expenses in the handling of cases. Consequently, in order to avoid tremendous losses to the
judiciary, and to the government as well, the payment of docket fees cannot be made dependent on
the outcome of the case, except when the claimant is a pauper-litigant. 152
WHEREFORE, premises considered the consolidated PETITIONS are GRANTED. The Planters
Development Bank is hereby REQUIRED to file with the Regional Trial Court its comment or answerin-interpleader to Bank of Commerces Amended Consolidated Answer with Compulsory
Counterclaim, as previously ordered by the Regional Trial Court. The Regional Trial Court of Makati
City, Branch 143, is hereby ORDERED to assess the docket fees due from Planters Development
Bank and Bank of Commerce and order their payment, and to resolve with DELIBERATE DISPATCH
the parties conflicting claims of ownership over the proceeds of the Central Bank bills.
The Clerk of Court of the Regional Trial Court of Makati City, Branch 143, or his duly authorized
representative is hereby ORDERED to assess and collect the appropriate amount of docket fees
separately due the Bank of Commerce and Planters Development Bank as conflicting claimants in
Bangko Sentral ng Pilipinas interpleader suit, in accordance with this decision.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
LUCAS P. BERSAMIN*
Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice
ATT E S TATI O N
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer or the opinion or the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
C E R TI F I C ATI O N
Pursuant to Section 13, Article VII I of the Constitution, and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice

Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
EUFEMIA ALMEDA and
ROMEL ALMEDA,
Petitioners,

- versus -

BATHALA MARKETING
INDUSTRIES, INC.,
Respondent.

G.R. No. 150806

Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CORONA,*
NACHURA, and
REYES, JJ.
Promulgated:
January 28, 2008

x----------------------------------------------------------------------------------------------x

DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, of the Decision[1] of the Court of Appeals (CA), dated September 3, 2001, in
CA-G.R. CV No. 67784, and its Resolution[2] dated November 19, 2001. The
assailed Decision affirmed with modification the Decision [3] of the Regional Trial
Court (RTC), Makati City, Branch 136, dated May 9, 2000 in Civil Case No. 98411.
Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee,
represented by its president Ramon H. Garcia, renewed its Contract of Lease[4] with
Ponciano L. Almeda (Ponciano), as lessor, husband of petitioner Eufemia and
father of petitioner Romel Almeda. Under the said contract, Ponciano agreed to
lease a portion of the Almeda Compound, located at 2208 Pasong Tamo Street,
Makati City, consisting of 7,348.25 square meters, for a monthly rental
of P1,107,348.69, for a term of four (4) years from May 1, 1997 unless sooner
terminated as provided in the contract.[5] The contract of lease contained the
following pertinent provisions which gave rise to the instant case:
SIXTH It is expressly understood by the parties hereto that the rental rate
stipulated is based on the present rate of assessment on the property, and that in
case the assessment should hereafter be increased or any new tax, charge or
burden be imposed by authorities on the lot and building where the leased
premises are located, LESSEE shall pay, when the rental herein provided becomes
due, the additional rental or charge corresponding to the portion hereby leased;
provided, however, that in the event that the present assessment or tax on said
property should be reduced, LESSEE shall be entitled to reduction in the
stipulated rental, likewise in proportion to the portion leased by him;
SEVENTH In case an extraordinary inflation or devaluation of Philippine
Currency should supervene, the value of Philippine peso at the time of the
establishment of the obligation shall be the basis of payment;[6]

During the effectivity of the contract, Ponciano died. Thereafter, respondent

dealt with petitioners. In a letter[7] dated December 29, 1997, petitioners advised
respondent that the former shall assess and collect Value Added Tax (VAT) on its
monthly rentals. In response, respondent contended that VAT may not be imposed
as the rentals fixed in the contract of lease were supposed to include the VAT

therein, considering that their contract was executed on May 1, 1997 when the VAT
law had long been in effect.[8]
On January 26, 1998, respondent received another letter from petitioners
informing the former that its monthly rental should be increased by 73% pursuant
to condition No. 7 of the contract and Article 1250 of the Civil Code. Respondent
opposed petitioners demand and insisted that there was no extraordinary inflation
to warrant the application of Article 1250 in light of the pronouncement of this
Court in various cases.[9]
Respondent refused to pay the VAT and adjusted rentals as demanded by
petitioners but continued to pay the stipulated amount set forth in their contract.
On February 18, 1998, respondent instituted an action for declaratory relief
for purposes of determining the correct interpretation of condition Nos. 6 and 7 of
the lease contract to prevent damage and prejudice. [10] The case was docketed as
Civil Case No. 98-411 before the RTC of Makati.
On March 10, 1998, petitioners in turn filed an action for ejectment,
rescission and damages against respondent for failure of the latter to vacate the
premises after the demand made by the former.[11] Before respondent could file an
answer, petitioners filed a Notice of Dismissal. [12] They subsequently refiled the
complaint before the Metropolitan Trial Court of Makati; the case was raffled to
Branch 139 and was docketed as Civil Case No. 53596.
Petitioners later moved for the dismissal of the declaratory relief case for
being an improper remedy considering that respondent was already in breach of the
obligation and that the case would not end the litigation and settle the rights of the
parties. The trial court, however, was not persuaded, and consequently, denied the
motion.
After trial on the merits, on May 9, 2000, the RTC ruled in favor of
respondent and against petitioners. The pertinent portion of the decision reads:
WHEREFORE, premises considered, this Court renders judgment on the
case as follows:

1) declaring that plaintiff is not liable for the payment of Value-Added Tax
(VAT) of 10% of the rent for [the] use of the leased premises;
2) declaring that plaintiff is not liable for the payment of any rental
adjustment, there being no [extraordinary] inflation or devaluation, as provided in
the Seventh Condition of the lease contract, to justify the same;
3) holding defendants liable to plaintiff for the total amount
of P1,119,102.19, said amount representing payments erroneously made by
plaintiff as VAT charges and rental adjustment for the months of January,
February and March, 1999; and
4) holding defendants liable to plaintiff for the amount of P1,107,348.69,
said amount representing the balance of plaintiffs rental deposit still with
defendants.
SO ORDERED.[13]

The trial court denied petitioners their right to pass on to respondent the burden of
paying the VAT since it was not a new tax that would call for the application of the
sixth clause of the contract. The court, likewise, denied their right to collect the
demanded increase in rental, there being no extraordinary inflation or devaluation
as provided for in the seventh clause of the contract. Because of the payment made
by respondent of the rental adjustment demanded by petitioners, the court ordered
the restitution by the latter to the former of the amounts paid, notwithstanding the
well-established rule that in an action for declaratory relief, other than a declaration
of rights and obligations, affirmative reliefs are not sought by or awarded to the
parties.
Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with
modification the RTC decision. The fallo reads:
WHEREFORE, premises considered, the present appeal is DISMISSED and the
appealed decision in Civil Case No. 98-411 is hereby AFFIRMED with
MODIFICATION in that the order for the return of the balance of the rental
deposits and of the amounts representing the 10% VAT and rental adjustment, is
hereby DELETED.
No pronouncement as to costs.
SO ORDERED.[14]

The appellate court agreed with the conclusions of law and the application of the
decisional rules on the matter made by the RTC. However, it found that the trial
court exceeded its jurisdiction in granting affirmative relief to the respondent,
particularly the restitution of its excess payment.
Petitioners now come before this Court raising the following issues:
I.
WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS
APPLICABLE TO THE CASE AT BAR.
II.
WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO PIPE
AND FOUNDRY CORP. VS. NAWASA CASE, 161 SCRA 32 AND
COMPANION CASES ARE (sic) APPLICABLE IN THE CASE AT BAR.
III.
WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE CASE
OF DEL ROSARIO VS. THE SHELL COMPANY OF THE PHILIPPINES, 164
SCRA 562, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED
ON A QUESTION OF LAW.
IV.
WHETHER OR NOT THE FINDING OF THE HONORABLE COURT OF
APPEALS THAT RESPONDENT IS NOT LIABLE TO PAY THE 10% VALUE
ADDED TAX IS IN ACCORDANCE WITH THE MANDATE OF RA 7716.

V.
WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE
PLAINTIFF-APPELLEE WAS IN BREACH WHEN THE PETITION FOR
DECLARATORY RELIEF WAS FILED BEFORE THE TRIAL COURT.

In fine, the issues for our resolution are as follows: 1) whether the action for
declaratory relief is proper; 2) whether respondent is liable to pay 10% VAT
pursuant to Republic Act (RA) 7716; and 3) whether the amount of rentals due the
petitioners should be adjusted by reason of extraordinary inflation or devaluation.
Declaratory relief is defined as an action by any person interested in a deed,
will, contract or other written instrument, executive order or resolution, to
determine any question of construction or validity arising from the instrument,
executive order or regulation, or statute, and for a declaration of his rights and
duties thereunder.The only issue that may be raised in such a petition is the
question of construction or validity of provisions in an instrument or
statute. Corollary is the general rule that such an action must be justified, as no
other adequate relief or remedy is available under the circumstances. [15]
Decisional law enumerates the requisites of an action for declaratory relief,
as follows: 1) the subject matter of the controversy must be a deed, will, contract or
other written instrument, statute, executive order or regulation, or ordinance; 2) the
terms of said documents and the validity thereof are doubtful and require judicial
construction; 3) there must have been no breach of the documents in question; 4)
there must be an actual justiciable controversy or the ripening seeds of one between
persons whose interests are adverse; 5) the issue must be ripe for judicial
determination; and 6) adequate relief is not available through other means or other
forms of action or proceeding.[16]
It is beyond cavil that the foregoing requisites are present in the instant case,
except that petitioners insist that respondent was already in breach of the contract
when the petition was filed.
We do not agree.
After petitioners demanded payment of adjusted rentals and in the months that
followed, respondent complied with the terms and conditions set forth in their
contract of lease by paying the rentals stipulated therein. Respondent religiously

fulfilled its obligations to petitioners even during the pendency of the present
suit. There is no showing that respondent committed an act constituting a breach of
the subject contract of lease. Thus, respondent is not barred from instituting before
the trial court the petition for declaratory relief.
Petitioners claim that the instant petition is not proper because a separate action for
rescission, ejectment and damages had been commenced before another court; thus,
the construction of the subject contractual provisions should be ventilated in the
same forum.
We are not convinced.
It is true that in Panganiban v. Pilipinas Shell Petroleum Corporation [17] we held
that the petition for declaratory relief should be dismissed in view of the pendency
of a separate action for unlawful detainer. However, we cannot apply the same
ruling to the instant case. In Panganiban, the unlawful detainer case had already
been resolved by the trial court before the dismissal of the declaratory relief case;
and it was petitioner in that case who insisted that the action for declaratory relief
be preferred over the action for unlawful detainer. Conversely, in the case at bench,
the trial court had not yet resolved the rescission/ejectment case during the
pendency of the declaratory relief petition. In fact, the trial court, where the
rescission case was on appeal, itself initiated the suspension of the proceedings
pending the resolution of the action for declaratory relief.
We are not unmindful of the doctrine enunciated in Teodoro, Jr. v. Mirasol[18] where
the declaratory relief action was dismissed because the issue therein could be
threshed out in the unlawful detainer suit. Yet, again, in that case, there was already
a breach of contract at the time of the filing of the declaratory relief petition. This
dissimilar factual milieu proscribes the Court from applying Teodoro to the instant
case.
Given all these attendant circumstances, the Court is disposed to entertain the
instant declaratory relief action instead of dismissing it, notwithstanding the
pendency of the ejectment/rescission case before the trial court. The resolution of
the present petition would write finis to the parties dispute, as it would settle once

and for all the question of the proper interpretation of the two contractual
stipulations subject of this controversy.
Now, on the substantive law issues.
Petitioners repeatedly made a demand on respondent for the payment of VAT
and for rental adjustment allegedly brought about by extraordinary inflation or
devaluation. Both the trial court and the appellate court found no merit in
petitioners claim. We see no reason to depart from such findings.
As to the liability of respondent for the payment of VAT, we cite with approval the
ratiocination of the appellate court, viz.:
Clearly, the person primarily liable for the payment of VAT is the lessor who may
choose to pass it on to the lessee or absorb the same. Beginning January 1, 1996,
the lease of real property in the ordinary course of business, whether for
commercial or residential use, when the gross annual receipts
exceed P500,000.00, is subject to 10% VAT. Notwithstanding the mandatory
payment of the 10% VAT by the lessor, the actual shifting of the said tax burden
upon the lessee is clearly optional on the part of the lessor, under the terms of the
statute. The word may in the statute, generally speaking, denotes that it is
directory in nature. It is generally permissive only and operates to confer
discretion. In this case, despite the applicability of the rule under Sec. 99 of the
NIRC, as amended by R.A. 7716, granting the lessor the option to pass on to the
lessee the 10% VAT, to existing contracts of lease as of January 1, 1996, the
original lessor, Ponciano L. Almeda did not charge the lessee-appellee the 10%
VAT nor provided for its additional imposition when they renewed the contract of
lease in May 1997. More significantly, said lessor did not actually collect a 10%
VAT on the monthly rental due from the lessee-appellee after the execution of the
May 1997 contract of lease. The inevitable implication is that the lessor intended
not to avail of the option granted him by law to shift the 10% VAT upon the
lessee-appellee. x x x.[19]

In short, petitioners are estopped from shifting to respondent the burden of paying
the VAT.
Petitioners reliance on the sixth condition of the contract is, likewise,
unavailing. This provision clearly states that respondent can only be held liable
for new taxes imposed after the effectivity of the contract of lease, that is, after
May 1997, and only if they pertain to the lot and the building where the leased

premises are located. Considering that RA 7716 took effect in 1994, the VAT
cannot be considered as a new tax in May 1997, as to fall within the coverage of
the sixth stipulation.
Neither can petitioners legitimately demand rental adjustment because of
extraordinary inflation or devaluation.
Petitioners contend that Article 1250 of the Civil Code does not apply to this
case because the contract stipulation speaks of extraordinary inflation or
devaluation while the Code speaks of extraordinary inflation or deflation. They
insist that the doctrine pronounced in Del Rosario v. The Shell Company,
Phils.Limited[20] should apply.
Essential to contract construction is the ascertainment of the intention of the
contracting parties, and such determination must take into account the
contemporaneous and subsequent acts of the parties. This intention, once
ascertained, is deemed an integral part of the contract.[21]
While, indeed, condition No. 7 of the contract speaks of extraordinary inflation or
devaluation as compared to Article 1250s extraordinary inflation or deflation, we
find that when the parties used the term devaluation, they really did not intend to
depart from Article 1250 of the Civil Code. Condition No. 7 of the contract should,
thus, be read in harmony with the Civil Code provision.
That this is the intention of the parties is evident from petitioners letter [22] dated
January 26, 1998, where, in demanding rental adjustment ostensibly based on
condition No. 7, petitioners made explicit reference to Article 1250 of the Civil
Code, even quoting the law verbatim. Thus, the application of Del Rosario is not
warranted.Rather, jurisprudential rules on the application of Article 1250 should be
considered.
Article 1250 of the Civil Code states:
In case an extraordinary inflation or deflation of the currency stipulated should
supervene, the value of the currency at the time of the establishment of the
obligation shall be the basis of payment, unless there is an agreement to the
contrary.

Inflation has been defined as the sharp increase of money or credit, or both, without
a corresponding increase in business transaction. There is inflation when there is an
increase in the volume of money and credit relative to available goods, resulting in
a substantial and continuing rise in the general price level. [23] In a number of cases,
this Court had provided a discourse on what constitutes extraordinary inflation,
thus:
[E]xtraordinary inflation exists when there is a decrease or increase in the
purchasing power of the Philippine currency which is unusual or beyond the
common fluctuation in the value of said currency, and such increase or decrease
could not have been reasonably foreseen or was manifestly beyond the
contemplation of the parties at the time of the establishment of the obligation.[24]

The factual circumstances obtaining in the present case do not make out a case of
extraordinary inflation or devaluation as would justify the application of Article
1250 of the Civil Code. We would like to stress that the erosion of the value of the
Philippine peso in the past three or four decades, starting in the mid-sixties, is
characteristic of most currencies. And while the Court may take judicial notice of
the decline in the purchasing power of the Philippine currency in that span of time,
such downward trend of the peso cannot be considered as the extraordinary
phenomenon contemplated by Article 1250 of the Civil Code. Furthermore, absent
an official pronouncement or declaration by competent authorities of the existence
of extraordinary inflation during a given period, the effects of extraordinary
inflation are not to be applied. [25]
WHEREFORE, premises considered, the petition is DENIED. The Decision of
the Court of Appeals in CA-G.R. CV No. 67784, dated September 3, 2001, and its
Resolution dated November 19, 2001, are AFFIRMED.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA Associate Justice
WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

RENATO C. CORONA
Associate Justice

RUBEN T. REYES
Associate Justice

AT T E S TAT I O N
I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

FIRST DIVISION
REPUBLIC
PHILIPPINES,
Petitioner,

OF

THE G.R. No. 154380

Present:
- versus -

CIPRIANO ORBECIDO III,

Respondent.

Davide, Jr., C.J.,

(Chairman),
Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
Promulgated:
October 5, 2005

x-------------------------------------------------x

DECISION
QUISUMBING, J.:

Given a valid marriage between two Filipino citizens, where

one party is later naturalized as a foreign citizen and obtains a

valid divorce decree capacitating him or her to remarry, can the

Filipino spouse likewise remarry under Philippine law?
Before us is a case of first impression that behooves the
Court to make a definite ruling on this apparently novel question,
presented as a pure question of law.
In this petition for review, the Solicitor General assails
the Decision[1] dated May 15, 2002, of the Regional Trial Court of
Molave,

Zamboanga

del

Sur,

Branch

23

and

its Resolution[2] dated July 4, 2002 denying the motion for

reconsideration.

The

court a

quo had

declared

that

herein

respondent Cipriano Orbecido III is capacitated to remarry.

The fallo of the impugned Decision reads:
WHEREFORE, by virtue of the provision of the second paragraph of Art.
26 of the Family Code and by reason of the divorce decree obtained
against him by his American wife, the petitioner is given the capacity
to remarry under the Philippine Law.
IT IS SO ORDERED.[3]

The factual antecedents, as narrated by the trial court, are as

follows.
On May 24, 1981, Cipriano Orbecido III married Lady Myros M.
Villanueva at the United Church of Christ in the Philippines in Laman, Ozamis City. Their marriage was blessed with a son and a

daughter, Kristoffer Simbortriz V. Orbecido and Lady Kimberly V.

Orbecido.
In 1986, Ciprianos wife left for the United States bringing
along their son Kristoffer. A few years later, Cipriano discovered
that his wife had been naturalized as an American citizen.
Sometime in 2000, Cipriano learned from his son that his
wife had obtained a divorce decree and then married a certain
Innocent Stanley. She, Stanley and her child by him currently live
at 5566 A. Walnut Grove Avenue, San Gabriel, California.
Cipriano thereafter filed with the trial court a petition for authority
to remarry invoking Paragraph 2 of Article 26 of the Family Code.
No opposition was filed. Finding merit in the petition, the court
granted the same. The Republic, herein petitioner, through the
Office of the Solicitor General (OSG), sought reconsideration but it
was denied.
In this petition, the OSG raises a pure question of law:
WHETHER OR NOT RESPONDENT CAN REMARRY UNDER ARTICLE 26 OF
THE FAMILY CODE[4]

The OSG contends that Paragraph 2 of Article 26 of the Family

Code is not applicable to the instant case because it only applies
to a valid mixed marriage; that is, a marriage celebrated between

a Filipino citizen and an alien. The proper remedy, according to

the OSG, is to file a petition for annulment or for legal separation.
[5]

Furthermore, the OSG argues there is no law that governs

respondents situation. The OSG posits that this is a matter of

legislation and not of judicial determination. [6]
For his part, respondent admits that Article 26 is not directly
applicable to his case but insists that when his naturalized alien
wife obtained a divorce decree which capacitated her to remarry,
he is likewise capacitated by operation of law pursuant to Section
12, Article II of the Constitution.[7]
At the outset, we note that the petition for authority to remarry
filed before the trial court actually constituted a petition for
declaratory relief. In this connection, Section 1, Rule 63 of the
Rules of Court provides:
RULE 63
DECLARATORY RELIEF AND SIMILAR REMEDIES
Section 1. Who may file petitionAny person interested under a deed,
will, contract or other written instrument, or whose rights are affected
by a statute, executive order or regulation, ordinance, or other
governmental regulation may, before breach or violation thereof, bring
an action in the appropriate Regional Trial Court to determine any
question of construction or validity arising, and for a declaration of his
rights or duties, thereunder.
...

The requisites of a petition for declaratory relief are: (1) there

must be a justiciable controversy; (2) the controversy must be

between persons whose interests are adverse; (3) that the party
seeking the relief has a legal interest in the controversy; and (4)
that the issue is ripe for judicial determination. [8]
This case concerns the applicability of Paragraph 2 of Article
26 to a marriage between two Filipino citizens where one later
acquired alien citizenship, obtained a divorce decree, and
remarried while in the U.S.A. The interests of the parties are also
adverse, as petitioner representing the State asserts its duty to
protect the institution of marriage while respondent, a private
citizen, insists on a declaration of his capacity to remarry.
Respondent,

praying

for

relief,

has

legal

interest

in

the

controversy. The issue raised is also ripe for judicial determination

inasmuch as when respondent remarries, litigation ensues and
puts into question the validity of his second marriage.
Coming now to the substantive issue, does Paragraph 2 of Article
26 of the Family Code apply to the case of respondent?
Necessarily, we must dwell on how this provision had come about
in the first place, and what was the intent of the legislators in its
enactment?

Brief Historical Background

On July 6, 1987, then President Corazon Aquino signed into

law Executive Order No. 209, otherwise known as the Family
Code, which took effect on August 3, 1988. Article 26 thereof
states:
All marriages solemnized outside the Philippines in accordance
with the laws in force in the country where they were solemnized, and
valid there as such, shall also be valid in this country, except those
prohibited under Articles 35, 37, and 38.

On July 17, 1987, shortly after the signing of the original

Family Code, Executive Order No. 227 was likewise signed into
law, amending Articles 26, 36, and 39 of the Family Code. A
second paragraph was added to Article 26. As so amended, it now
provides:
ART. 26. All marriages solemnized outside the Philippines in
accordance with the laws in force in the country where they were
solemnized, and valid there as such, shall also be valid in this country,
except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37
and 38.
Where a marriage between a Filipino citizen and a foreigner is
validly celebrated and a divorce is thereafter validly obtained abroad
by the alien spouse capacitating him or her to remarry, the Filipino
spouse shall have capacity to remarry under Philippine law. (Emphasis
supplied)

On its face, the foregoing provision does not appear to

govern the situation presented by the case at hand. It seems to
apply only to cases where at the time of the celebration of the
marriage, the parties are a Filipino citizen and a foreigner. The
instant case is one where at the time the marriage was

solemnized, the parties were two Filipino citizens, but later on, the
wife was naturalized as an American citizen and subsequently
obtained a divorce granting her capacity to remarry, and indeed
she remarried an American citizen while residing in the U.S.A.
Noteworthy, in the Report of the Public Hearings [9] on the
Family Code, the Catholic Bishops Conference of the Philippines
(CBCP) registered the following objections to Paragraph 2 of
Article 26:
1.

The rule is discriminatory. It discriminates against those

whose spouses are Filipinos who divorce them abroad. These
spouses who are divorced will not be able to re-marry, while the
spouses of foreigners who validly divorce them abroad can.

2.

This is the beginning of the recognition of the validity of

divorce even for Filipino citizens. For those whose foreign
spouses validly divorce them abroad will also be considered to
be validly divorced here and can re-marry. We propose that this
be deleted and made into law only after more widespread
consultation. (Emphasis supplied.)

Legislative Intent
Records of the proceedings of the Family Code deliberations
showed that the intent of Paragraph 2 of Article 26, according to
Judge Alicia Sempio-Diy, a member of the Civil Code Revision
Committee, is to avoid the absurd situation where the Filipino
spouse remains married to the alien spouse who, after obtaining a
divorce, is no longer married to the Filipino spouse.

Interestingly, Paragraph 2 of Article 26 traces its origin to the

1985

case

of Van

Dorn

v.

Romillo, Jr.[10] The Van

Dorn case

involved a marriage between a Filipino citizen and a foreigner. The

Court held therein that a divorce decree validly obtained by the
alien spouse is valid in the Philippines, and consequently, the
Filipino spouse is capacitated to remarry under Philippine law.
Does the same principle apply to a case where at the time of
the celebration of the marriage, the parties were Filipino citizens,
but later on, one of them obtains a foreign citizenship by
naturalization?
The jurisprudential answer lies latent in the 1998 case
of Quita v. Court of Appeals.[11] In Quita, the parties were, as in
this case, Filipino citizens when they got married. The wife
became a naturalized American citizen in 1954 and obtained a
divorce in the same year. The Court therein hinted, by way
of obiter dictum, that a Filipino divorced by his naturalized foreign
spouse is no longer married under Philippine law and can thus
remarry.
Thus, taking into consideration the legislative intent and
applying the rule of reason, we hold that Paragraph 2 of Article 26
should be interpreted to include cases involving parties who, at

the time of the celebration of the marriage were Filipino citizens,

but later on, one of them becomes naturalized as a foreign citizen
and obtains a divorce decree. The Filipino spouse should likewise
be allowed to remarry as if the other party were a foreigner at the
time of the solemnization of the marriage. To rule otherwise would
be to sanction absurdity and injustice. Where the interpretation of
a statute according to its exact and literal import would lead to
mischievous results or contravene the clear purpose of the
legislature, it should be construed according to its spirit and
reason, disregarding as far as necessary the letter of the law. A
statute may therefore be extended to cases not within the literal
meaning of its terms, so long as they come within its spirit or
intent.[12]
If we are to give meaning to the legislative intent to avoid
the absurd situation where the Filipino spouse remains married to
the alien spouse who, after obtaining a divorce is no longer
married to the Filipino spouse, then the instant case must be
deemed as coming within the contemplation of Paragraph 2 of
Article 26.
In view of the foregoing, we state the twin elements for the
application of Paragraph 2 of Article 26 as follows:

1.

There is a valid marriage that has been celebrated between a

Filipino citizen and a foreigner; and

2.

A valid divorce is obtained abroad by the alien spouse

capacitating him or her to remarry.

The reckoning point is not the citizenship of the parties at the

time of the celebration of the marriage, but their citizenship at the
time a valid divorce is obtained abroad by the alien spouse
capacitating the latter to remarry.
In this case, when Ciprianos wife was naturalized as an
American citizen, there was still a valid marriage that has been
celebrated between her and Cipriano. As fate would have it, the
naturalized alien wife subsequently obtained a valid divorce
capacitating her to remarry. Clearly, the twin requisites for the
application of Paragraph 2 of Article 26 are both present in this
case. Thus Cipriano, the divorced Filipino spouse, should be
allowed to remarry.
We are also unable to sustain the OSGs theory that the
proper remedy of the Filipino spouse is to file either a petition for
annulment or a petition for legal separation. Annulment would be
a long and tedious process, and in this particular case, not even
feasible, considering that the marriage of the parties appears to
have all the badges of validity. On the other hand, legal
separation would not be a sufficient remedy for it would not sever

the marriage tie; hence, the legally separated Filipino spouse

would still remain married to the naturalized alien spouse.
However, we note that the records are bereft of competent
evidence duly submitted by respondent concerning the divorce
decree and the naturalization of respondents wife. It is settled
rule that one who alleges a fact has the burden of proving it and
mere allegation is not evidence.[13]
Accordingly, for his plea to prosper, respondent herein must prove
his allegation that his wife was naturalized as an American citizen.
Likewise, before a foreign divorce decree can be recognized by
our own courts, the party pleading it must prove the divorce as a
fact and demonstrate its conformity to the foreign law allowing it.
[14]

Such foreign law must also be proved as our courts cannot take

judicial notice of foreign laws. Like any other fact, such laws must
be alleged and proved.[15]Furthermore, respondent must also
show that the divorce decree allows his former wife to remarry as
specifically required in Article 26. Otherwise, there would be no
evidence sufficient to declare that he is capacitated to enter into
another marriage.
Nevertheless, we are unanimous in our holding that Paragraph 2
of Article 26 of the Family Code (E.O. No. 209, as amended by E.O.

No. 227), should be interpreted to allow a Filipino citizen, who has

been divorced by a spouse who had acquired foreign citizenship
and remarried, also to remarry. However, considering that in the
present petition there is no sufficient evidence submitted and on
record, we are unable to declare, based on respondents bare
allegations that his wife, who was naturalized as an American
citizen, had obtained a divorce decree and had remarried an
American, that respondent is now capacitated to remarry. Such
declaration could only be made properly upon respondents
submission of the aforecited evidence in his favor.
ACCORDINGLY, the petition by the Republic of the Philippines
is GRANTED. The assailed Decision dated May 15, 2002, and
Resolution dated July 4, 2002, of the Regional Trial Court of
Molave, Zamboanga del Sur, Branch 23, are hereby SET ASIDE.
No pronouncement as to costs.
SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice
WE CONCUR:

HILARIO G. DAVIDE, JR.

Chief Justice
Chairman

CONSUELO YNARES-SANTIAGO ANTONIO T. CARPIO

Associate Justice Associate Justice

ADOLFO S. AZCUNA
Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby
certified that the conclusions in the above Decision were reached
in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

HILARIO G. DAVIDE, JR.

Chief Justice

THIRD DIVISION
CARMEN
DANAO
MALANA, MARIA DANAO
ACORDA,
EVELYN
DANAO,
FERMINA

G.R. No. 181303

Present:

DANAO, LETICIA DANAO

and LEONORA DANAO,
the
last
twoare
represented herein by
their
Attorney-in-Fact,
MARIA DANAO ACORDA,
Petitioners,

YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

- versus Promulgated:
BENIGNO TAPPA, JERRY
REYNA,
SATURNINO
CAMBRI and SPOUSES
September 17, 2009
FRANCISCO AND MARIA
LIGUTAN,
Respondents.
x---------------------------- --------------------x
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Certiorari under Rule 65 of the Rules of Court,
assailing the Orders[1] dated 4 May 2007, 30 May 2007, and 31
October 2007, rendered by Branch 3 of the Regional Trial Court
(RTC) of Tuguegarao City, which dismissed, for lack of jurisdiction,
the Complaint of petitioners Carmen Danao Malana, Leticia
Danao, Maria Danao Accorda, Evelyn Danao, Fermina Danao, and
Leonora Danao, against respondents Benigno Tappa, Jerry Reyna,
Saturnino Cambri, Francisco Ligutan and Maria Ligutan, in Civil
Case No. 6868.

Petitioners filed before the RTC their Complaint for

Reivindicacion, Quieting of Title, and Damages [2] against
respondents on 27 March 2007, docketed as Civil Case No.
6868. Petitioners alleged in their Complaint that they are the
owners of a parcel of land covered by Transfer Certificate of Title
(TCT) No. T-127937[3]situated in Tuguegarao City, Cagayan
(subject property). Petitioners inherited the subject property from
Anastacio Danao (Anastacio), who died intestate. [4] During the
lifetime of Anastacio, he had allowed Consuelo Pauig (Consuelo),
who was married to Joaquin Boncad, to build on and occupy the
southern portion of the subject property. Anastacio and Consuelo
agreed that the latter would vacate the said land at any time that
Anastacio and his heirs might need it. [5]
Petitioners claimed that respondents, Consuelos family
members,[6] continued to occupy the subject property even after
her death, already building their residences thereon using
permanent materials. Petitioners also learned that respondents
were claiming ownership over the subject property. Averring that
they already needed it, petitioners demanded that respondents
vacate the same. Respondents, however, refused to heed
petitioners demand.[7]
Petitioners referred their land dispute with respondents to
the Lupong Tagapamayapa of Barangay Annafunan West for
conciliation. During the conciliation proceedings, respondents
asserted that they owned the subject property and presented
documents ostensibly supporting their claim of ownership.
According to petitioners, respondents documents were highly
dubious, falsified, and incapable of proving the latters claim of
ownership over the subject property; nevertheless, they created a
cloud upon petitioners title to the property. Thus, petitioners were
compelled to file before the RTC a Complaint to remove such
cloud from their title.[8] Petitioners additionally sought in their
Complaint an award against respondents for actual damages, in

the amount of P50,000.00, resulting from the latters baseless

claim over the subject property that did not actually belong to
them, in violation of Article 19 of the Civil Code on Human
Relations.[9] Petitioners likewise prayed for an award against
respondents
for
exemplary
damages,
in
the
amount
of P50,000.00, since the latter had acted in bad faith and resorted
to unlawful means to establish their claim over the subject
property. Finally,
petitioners
asked
to
recover
from
respondents P50,000.00 as attorneys fees, because the latters
refusal to vacate the property constrained petitioners to engage
the services of a lawyer.[10]
Before respondents could file their answer, the RTC issued an
Order dated 4 May 2007 dismissing petitioners Complaint on the
ground of lack of jurisdiction.The RTC referred to Republic Act No.
7691,[11] amending Batas Pambansa Blg. 129, otherwise known as
the Judiciary Reorganization Act of 1980, which vests the RTC with
jurisdiction over real actions, where the assessed value of the
property involved exceeds P20,000.00. It found that the subject
property had a value of less than P20,000.00; hence, petitioners
action to recover the same was outside the jurisdiction of the
RTC. The RTC decreed in its 4 May 2007 Order that:
The Court has no jurisdiction over the action, it
being a real action involving a real property with assessed
value less than P20,000.00 and hereby dismisses the
same without prejudice.[12]

Petitioners filed a Motion for Reconsideration of the

aforementioned RTC Order dismissing their Complaint. They
argued that their principal cause of action was for quieting of title;
the accion reivindicacion was included merely to enable them to
seek complete relief from respondents. Petitioners Complaint
should not have been dismissed, since Section 1, Rule 63 of the

Rules of Court[13] states that an action to quiet title falls under the
jurisdiction of the RTC.[14]
In an Order dated 30 May 2007, the RTC denied petitioners
Motion for Reconsideration. It reasoned that an action to quiet
title is a real action. Pursuant to Republic Act No. 7691, it is the
Municipal Trial Court (MTC) that exercises exclusive jurisdiction
over real actions where the assessed value of real property does
not exceed P20,000.00. Since the assessed value of subject
property per Tax Declaration No, 02-48386 was P410.00, the real
action involving the same was outside the jurisdiction of the RTC.
[15]

Petitioners filed another pleading, simply designated as

Motion, in which they prayed that the RTC Orders dated 4 May
2007 and 30 May 2007, dismissing their Complaint, be set
aside. They reiterated their earlier argument that Section 1, Rule
63 of the Rules of Court states that an action to quiet title falls
under the exclusive jurisdiction of the RTC. They also contended
that there was no obstacle to their joining the two causes of
action, i.e., quieting of title and reivindicacion, in a single
Complaint, citing Rumarate v. Hernandez.[16] And even if the two
causes of action could not be joined, petitioners maintained that
the misjoinder of said causes of action was not a ground for the
dismissal of their Complaint.[17]
The RTC issued an Order dated 31 October 2007 denying
petitioners Motion. It clarified that their Complaint was dismissed,
not on the ground of misjoinder of causes of action, but for lack of
jurisdiction. The RTC dissected Section 1, Rule 63 of the Rules of
Court, which provides:
Section 1. Who may file petition. Any person
interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute,
executive order or regulation, ordinance, or any other

governmental regulation may, before breach or violation

thereof, bring an action in the appropriate Regional Trial
Court to determine any question of construction or
validity arising, and for a declaration of his rights or
duties, thereunder.
An action for the reformation of an instrument, to
quiet title to real property or remove clouds therefrom, or
to consolidate ownership under Article 1607 of the Civil
Code, may be brought under this Rule.

The RTC differentiated between the first and the second

paragraphs of Section 1, Rule 63 of the Rules of Court. The first
paragraph refers to an action for declaratory relief, which should
be brought before the RTC. The second paragraph, however,
refers to a different set of remedies, which includes an action to
quiet title to real property. The second paragraph must be read in
relation to Republic Act No. 7691, which vests the MTC with
jurisdiction over real actions, where the assessed value of the real
property involved does not exceed P50,000.00 in Metro Manila
and P20,000.00 in all other places.[18] The dispositive part of
the 31 October 2007Order of the RTC reads:
This Court maintains that an action to quiet title is a
real action. [Herein petitioners] do not dispute the
assessed value of the property at P410.00 under Tax
Declaration No. 02-48386.Hence, it has no jurisdiction
over the action.
In view of the foregoing considerations, the Motion is
hereby denied.[19]

Hence, the present Petition, where petitioners raise the sole

issue of:

I
WHETHER OR NOT THE RESPONDENT JUDGE COMMITTED
GRAVE ABUSE OF DISCRETION IN DISMISSING THE
COMPLAINT OF THE PETITIONERS MOTU PROPRIO. [20]

Petitioners statement of the issue is misleading. It would

seem that they are only challenging the fact that their Complaint
was dismissed by the RTC motu proprio. Based on the facts and
arguments set forth in the instant Petition, however, the Court
determines that the fundamental issue for its resolution is
whether the RTC committed grave abuse of discretion in
dismissing petitioners Complaint for lack of jurisdiction.
The Court rules in the negative.
An action for declaratory relief should be filed by a person
interested under a deed, a will, a contract or other written
instrument, and whose rights are affected by a statute, an
executive order, a regulation or an ordinance. The relief sought
under this remedy includes the interpretation and determination
of the validity of the written instrument and the judicial
declaration of the parties rights or duties thereunder. [21]
Petitions for declaratory relief are governed by Rule 63 of the
Rules of Court. The RTC correctly made a distinction between the
first and the second paragraphs of Section 1, Rule 63 of the Rules
of Court.
The first paragraph of Section 1, Rule 63 of the Rules of
Court, describes the general circumstances in which a person may
file a petition for declaratory relief, to wit:

Any person interested under a deed, will, contract or

other written instrument, or whose rights are affected by
a statute, executive order or regulation, ordinance, or any
other governmental regulation may, before breach or
violation thereof, bring an action in the appropriate
Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of
his rights or duties, thereunder. (Emphasis ours.)

As the afore-quoted provision states, a petition for

declaratory relief under the first paragraph of Section 1, Rule 63
may be brought before the appropriate RTC.
Section 1, Rule 63 of the Rules of Court further provides in its
second paragraph that:
An action for the reformation of an instrument, to
quiet title to real property or remove clouds therefrom, or
to consolidate ownership under Article 1607 of the Civil
Code, may be brought under this Rule. (Emphasis ours.)

The second paragraph of Section 1, Rule 63 of the Rules of

Court specifically refers to (1) an action for the reformation of an
instrument, recognized under Articles 1359 to 1369 of the Civil
Code; (2) an action to quiet title, authorized by Articles 476 to 481
of the Civil Code; and (3) an action to consolidate ownership
required by Article 1607 of the Civil Code in a sale with a right to
repurchase. These three remedies are considered similar to
declaratory relief because they also result in the adjudication of
the legal rights of the litigants, often without the need of
execution to carry the judgment into effect. [22]
To determine which court has jurisdiction over the actions
identified in the second paragraph of Section 1, Rule 63 of the
Rules of Court, said provision must be read together with those of
the Judiciary Reorganization Act of 1980, as amended.

It is important to note that Section 1, Rule 63 of the Rules of

Court does not categorically require that an action to quiet title be
filed before the RTC. It repeatedly uses the word may that an
action for quieting of title may be brought under [the] Rule on
petitions for declaratory relief, and a person desiring to file a
petition for declaratory relief may x x x bring an action in the
appropriate Regional Trial Court. The use of the word may in a
statute denotes that the provision is merely permissive and
indicates a mere possibility, an opportunity or an option. [23]
In contrast, the mandatory provision of the Judiciary
Reorganization Act of 1980, as amended, uses the word shall and
explicitly requires the MTC to exerciseexclusive original
jurisdiction over all civil actions which involve title to or
possession of real property where the assessed value does not
exceed P20,000.00, thus:
Section 33. Jurisdiction of Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts in
Civil Cases.Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts shall exercise:
xxxx
(3) Exclusive original jurisdiction in all civil actions
which involve title to, possession of, real property, or any
interest therein where the assessed value of the property
or interest therein does not exceed Twenty thousand
pesos (P20,000.00) or, in civil actions in Metro Manila,
where such assessed value does not exceeds Fifty
thousand pesos (P50,000.00) exclusive of interest,
damages of whatever kind, attorneys fees, litigation
expenses and costs: x x x (Emphasis ours.)

As found by the RTC, the assessed value of the subject

property as stated in Tax Declaration No. 02-48386 is
only P410.00; therefore, petitioners Complaint involving title to

and possession of the said property is within the exclusive original

jurisdiction of the MTC, not the RTC.
Furthermore, an action for declaratory relief presupposes
that there has been no actual breach of the instruments involved
or of rights arising thereunder. [24]Since the purpose of an action
for declaratory relief is to secure an authoritative statement of the
rights and obligations of the parties under a statute, deed, or
contract for their guidance in the enforcement thereof, or
compliance therewith, and not to settle issues arising from an
alleged breach thereof, it may be entertained only beforethe
breach or violation of the statute, deed, or contract to which it
refers. A petition for declaratory relief gives a practical remedy for
ending controversies that have not reached the state where
another relief is immediately available; and supplies the need for
a form of action that will set controversies at rest before they
lead to a repudiation of obligations, an invasion of rights,
and a commission of wrongs.[25]
Where the law or contract has already been contravened
prior to the filing of an action for declaratory relief, the courts can
no longer assume jurisdiction over the action. In other words, a
court has no more jurisdiction over an action for declaratory relief
if its subject has already been infringed or transgressed before
the institution of the action.[26]
In the present case, petitioners Complaint for quieting of title
was filed after petitioners already demanded and respondents
refused to vacate the subject property. In fact, said Complaint was
filed only subsequent to the latters express claim of ownership
over the subject property before the Lupong Tagapamayapa, in
direct challenge to petitioners title.
Since petitioners averred in the Complaint that they had
already been deprived of the possession of their property, the
proper remedy for them is the filing of anaccion publiciana or

an accion
reivindicatoria,
not
a
case
for
declaratory
relief. An accion publiciana is a suit for the recovery of possession,
filed one year after the occurrence of the cause of action or from
the unlawful withholding of possession of the realty. An accion
reivindicatoria is a suit that has for its object ones recovery of
possession over the real property as owner. [27]
Petitioners Complaint contained sufficient allegations for
an accion reivindicatoria. Jurisdiction over such an action would
depend on the value of the property involved. Given that the
subject property herein is valued only at P410.00, then the MTC,
not the RTC, has jurisdiction over an action to recover the
same. The RTC, therefore, did not commit grave abuse of
discretion in dismissing, without prejudice, petitioners Complaint
in Civil Case No. 6868 for lack of jurisdiction.
As for the RTC dismissing petitioners Complaint motu
proprio, the following pronouncements of the Court in Laresma v.
Abellana[28] proves instructive:
It is axiomatic that the nature of an action and the
jurisdiction of a tribunal are determined by the material
allegations of the complaint and the law at the time the
action was commenced. Jurisdiction of the tribunal over
the subject matter or nature of an action is conferred only
by law and not by the consent or waiver upon a court
which, otherwise, would have no jurisdiction over the
subject matter or nature of an action. Lack of jurisdiction
of the court over an action or the subject matter of an
action cannot be cured by the silence, acquiescence, or
even by express consent of the parties. If the court has
no jurisdiction over the nature of an action, it may
dismiss the same ex mero motu or motu proprio. x
x x. (Emphasis supplied.)

Since the RTC, in dismissing petitioners Complaint, acted in

complete accord with law and jurisprudence, it cannot be said to

have done so with grave abuse of discretion amounting to lack or

excess of jurisdiction. An act of a court or tribunal may only be
considered to have been committed in grave abuse of discretion
when the same was performed in a capricious or whimsical
exercise of judgment, which is equivalent to lack of jurisdiction.
The abuse of discretion must be so patent and gross as to amount
to an evasion of a positive duty or to a virtual refusal to perform a
duty enjoined by law or to act at all in contemplation of law, as
where the power is exercised in an arbitrary and despotic manner
by reason of passion or personal hostility. [29] No such
circumstances exist herein as to justify the issuance of a writ
ofcertiorari.
IN VIEW OF THE FOREGOING, the instant Petition
is DISMISSED. The
Orders
dated 4
May
2007, 30
May
2007 and 31
October
2007 of
the RegionalTrial Court of Tuguegarao City, Branch 3, dismissing
the Complaint in Civil Case No. 6868, without prejudice,
are AFFIRMED. The
Regional
Trial
Court
is
ordered
to REMAND the records of this case to the Municipal Trial Court or
the court of proper jurisdiction for proper disposition. Costs
against the petitioners.
SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

PRESBITERO J. VELASCO, JR.

Associate Justice

ANTONIO EDUARDO B.
NACHURA
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision were reached
in consultation before the case was assigned to the writer of the
opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairpersons Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the
Courts Division.

REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 202242

April 16, 2013

FRANCISCO I. CHAVEZ, Petitioner,

vs.
JUDICIALAND BAR COUNCIL, SEN. FRANCIS JOSEPH G. ESCUDERO and REP. NIEL C.
TUPAS, JR.,Respondents.
RESOLUTION
MENDOZA, J.:
This resolves the Motion for Reconsideration1 filed by the Office of the Solicitor General (OSG) on
behalf of the respondents, Senator Francis Joseph G. Escudero and Congressman Niel C. Tupas,
Jr. (respondents), duly opposed2 by the petitioner, former Solicitor General Francisco I. Chavez
(petitioner).
By way of recapitulation, the present action stemmed from the unexpected departure of former Chief
Justice Renato C. Corona on May 29, 2012, and the nomination of petitioner, as his potential
successor. In his initiatory pleading, petitioner asked the Court to determine 1] whether the first
paragraph of Section 8, Article VIII of the 1987 Constitution allows more than one (1) member of
Congress to sit in the JBC; and 2] if the practice of having two (2) representatives from each House
of Congress with one (1) vote each is sanctioned by the Constitution.
On July 17, 2012, the Court handed down the assailed subject decision, disposing the same in the
following manner:

WHEREFORE, the petition is GRANTED. The current numerical composition of the Judicial and Bar
Council is declared UNCONSTITUTIONAL. The Judicial and Bar Council is hereby enjoined to
reconstitute itself so that only one (1) member of Congress will sit as a representative in its
proceedings, in accordance with Section 8(1), Article VIII of the 1987 Constitution.
This disposition is immediately executory.
SO ORDERED.
On July 31, 2012, following respondents motion for reconsideration and with due regard to Senate
Resolution Nos. 111,3 112,4 113,5 and 114,6 the Court set the subject motion for oral arguments on
August 2, 2012.7 On August 3, 2012, the Court discussed the merits of the arguments and agreed, in
the meantime, to suspend the effects of the second paragraph of the dispositive portion of the July
17, 2012 Decision which decreed that it was immediately executory. The decretal portion of the
August 3, 2012 Resolution8 reads:
WHEREFORE, the parties are hereby directed to submit their respective MEMORANDA within ten
(10) days from notice. Until further orders, the Court hereby SUSPENDS the effect of the second
paragraph of the dispositive portion of the Courts July 17, 2012 Decision, which reads: "This
disposition is immediately executory." 9
Pursuant to the same resolution, petitioner and respondents filed their respective memoranda. 10
Brief Statement of the Antecedents
In this disposition, it bears reiterating that from the birth of the Philippine Republic, the exercise of
appointing members of the Judiciary has always been the exclusive prerogative of the executive and
legislative branches of the government. Like their progenitor of American origins, both the Malolos
Constitution11 and the 1935 Constitution12 vested the power to appoint the members of the Judiciary
in the President, subject to confirmation by the Commission on Appointments. It was during these
times that the country became witness to the deplorable practice of aspirants seeking confirmation of
their appointment in the Judiciary to ingratiate themselves with the members of the legislative body.13
Then, under the 1973 Constitution, 14 with the fusion of the executive and legislative powers in one
body, the appointment of judges and justices ceased to be subject of scrutiny by another body. The
power became exclusive and absolute to the Executive, subject only to the condition that the
appointees must have all the qualifications and none of the disqualifications.
Prompted by the clamor to rid the process of appointments to the Judiciary of the evils of political
pressure and partisan activities,15 the members of the Constitutional Commission saw it wise to
create a separate, competent and independent body to recommend nominees to the President.
Thus, it conceived of a body, representative of all the stakeholders in the judicial appointment
process, and called it the Judicial and Bar Council (JBC). The Framers carefully worded Section 8,
Article VIII of the 1987 Constitution in this wise:
Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme
Court composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a
representative of the Congress as ex officio Members, a representative of the Integrated Bar, a
professor of law, a retired Member of the Supreme Court, and a representative of the private sector.

From the moment of the creation of the JBC, Congress designated one (1) representative to sit in
the JBC to act as one of the ex-officio members.16 Pursuant to the constitutional provision that
Congress is entitled to one (1) representative, each House sent a representative to the JBC, not
together, but alternately or by rotation.
In 1994, the seven-member composition of the JBC was substantially altered. An eighth member
was added to the JBC as the two (2) representatives from Congress began sitting simultaneously in
the JBC, with each having one-half (1/2) of a vote. 17
1wphi1

In 2001, the JBC En Banc decided to allow the representatives from the Senate and the House of
Representatives one full vote each.18 It has been the situation since then.
Grounds relied upon by Respondents
Through the subject motion, respondents pray that the Court reconsider its decision and dismiss the
petition on the following grounds: 1] that allowing only one representative from Congress in the JBC
would lead to absurdity considering its bicameral nature; 2] that the failure of the Framers to make
the proper adjustment when there was a shift from unilateralism to bicameralism was a plain
oversight; 3] that two representatives from Congress would not subvert the intention of the Framers
to insulate the JBC from political partisanship; and 4] that the rationale of the Court in declaring a
seven-member composition would provide a solution should there be a stalemate is not exactly
correct.
While the Court may find some sense in the reasoning in amplification of the third and fourth
grounds listed by respondents, still, it finds itself unable to reverse the assailed decision on the
principal issues covered by the first and second grounds for lack of merit. Significantly, the
conclusion arrived at, with respect to the first and second grounds, carries greater bearing in the final
resolution of this case.
As these two issues are interrelated, the Court shall discuss them jointly.
Ruling of the Court
The Constitution evinces the direct action of the Filipino people by which the fundamental powers of
government are established, limited and defined and by which those powers are distributed among
the several departments for their safe and useful exercise for the benefit of the body politic. 19 The
Framers reposed their wisdom and vision on one suprema lex to be the ultimate expression of the
principles and the framework upon which government and society were to operate. Thus, in the
interpretation of the constitutional provisions, the Court firmly relies on the basic postulate that the
Framers mean what they say. The language used in the Constitution must be taken to have been
deliberately chosen for a definite purpose. Every word employed in the Constitution must be
interpreted to exude its deliberate intent which must be maintained inviolate against disobedience
and defiance. What the Constitution clearly says, according to its text, compels acceptance and bars
modification even by the branch tasked to interpret it.
For this reason, the Court cannot accede to the argument of plain oversight in order to justify
constitutional construction. As stated in the July 17, 2012 Decision, in opting to use the singular letter
"a" to describe "representative of Congress," the Filipino people through the Framers intended that
Congress be entitled to only one (1) seat in the JBC. Had the intention been otherwise, the
Constitution could have, in no uncertain terms, so provided, as can be read in its other provisions.

A reading of the 1987 Constitution would reveal that several provisions were indeed adjusted as to
be in tune with the shift to bicameralism. One example is Section 4, Article VII, which provides that a
tie in the presidential election shall be broken "by a majority of all the Members of both Houses of the
Congress, voting separately."20 Another is Section 8 thereof which requires the nominee to replace
the Vice-President to be confirmed "by a majority of all the Members of both Houses of the
Congress, voting separately."21 Similarly, under Section 18, the proclamation of martial law or the
suspension of the privilege of the writ of habeas corpus may be revoked or continued by the
Congress, voting separately, by a vote of at least a majority of all its Members." 22 In all these
provisions, the bicameral nature of Congress was recognized and, clearly, the corresponding
adjustments were made as to how a matter would be handled and voted upon by its two Houses.
Thus, to say that the Framers simply failed to adjust Section 8, Article VIII, by sheer inadvertence, to
their decision to shift to a bicameral form of the legislature, is not persuasive enough. Respondents
cannot just lean on plain oversight to justify a conclusion favorable to them. It is very clear that the
Framers were not keen on adjusting the provision on congressional representation in the JBC
because it was not in the exercise of its primary function to legislate. JBC was created to support
the executive power to appoint, and Congress, as one whole body, was merely assigned a
contributory non-legislative function.
The underlying reason for such a limited participation can easily be discerned. Congress has two (2)
Houses. The need to recognize the existence and the role of each House is essential considering
that the Constitution employs precise language in laying down the functions which particular House
plays, regardless of whether the two Houses consummate an official act by voting jointly or
separately. Whether in the exercise of its legislative23 or its non-legislative functions such as inter
alia, the power of appropriation, 24 the declaration of an existence of a state of war,25 canvassing of
electoral returns for the President and Vice-President, 26 and impeachment,27 the dichotomy of each
House must be acknowledged and recognized considering the interplay between these two Houses.
In all these instances, each House is constitutionally granted with powers and functions peculiar to
its nature and with keen consideration to 1) its relationship with the other chamber; and 2) in
consonance with the principle of checks and balances, as to the other branches of government.
In checkered contrast, there is essentially no interaction between the two Houses in their
participation in the JBC. No mechanism is required between the Senate and the House of
Representatives in the screening and nomination of judicial officers. Rather, in the creation of the
JBC, the Framers arrived at a unique system by adding to the four (4) regular members, three (3)
representatives from the major branches of government - the Chief Justice as ex-officio Chairman
(representing the Judicial Department), the Secretary of Justice (representing the Executive
Department), and a representative of the Congress (representing the Legislative Department). The
total is seven (7), not eight. In so providing, the Framers simply gave recognition to the Legislature,
not because it was in the interest of a certain constituency, but in reverence to it as a major branch
of government.
On this score, a Member of Congress, Hon. Simeon A. Datumanong, from the Second District of
Maguindanao, submitted his well-considered position28 to then Chief Justice Reynato S. Puno:
I humbly reiterate my position that there should be only one representative of Congress in the JBC in
accordance with Article VIII, Section 8 (1) of the 1987 Constitution x x x.
The aforesaid provision is clear and unambiguous and does not need any further interpretation.
Perhaps, it is apt to mention that the oft-repeated doctrine that "construction and interpretation come
only after it has been demonstrated that application is impossible or inadequate without them."

Further, to allow Congress to have two representatives in the Council, with one vote each, is to
negate the principle of equality among the three branches of government which is enshrined in the
Constitution.
In view of the foregoing, I vote for the proposition that the Council should adopt the rule of single
representation of Congress in the JBC in order to respect and give the right meaning to the abovequoted provision of the Constitution. (Emphases and underscoring supplied)
On March 14, 2007, then Associate Justice Leonardo A. Quisumbing, also a JBC Consultant,
submitted to the Chief Justice and ex-officio JBC Chairman his opinion, 29 which reads:
8. Two things can be gleaned from the excerpts and citations above: the creation of the JBC is
intended to curtail the influence of politics in Congress in the appointment of judges, and the
understanding is that seven (7) persons will compose the JBC. As such, the interpretation of two
votes for Congress runs counter to the intendment of the framers. Such interpretation actually gives
Congress more influence in the appointment of judges. Also, two votes for Congress would increase
the number of JBC members to eight, which could lead to voting deadlock by reason of evennumbered membership, and a clear violation of 7 enumerated members in the Constitution.
(Emphases and underscoring supplied)
In an undated position paper,30 then Secretary of Justice Agnes VST Devanadera opined:
As can be gleaned from the above constitutional provision, the JBC is composed of seven (7)
representatives coming from different sectors. From the enumeration it is patent that each category
of members pertained to a single individual only. Thus, while we do not lose sight of the bicameral
nature of our legislative department, it is beyond dispute that Art. VIII, Section 8 (1) of the 1987
Constitution is explicit and specific that "Congress" shall have only "xxx a representative." Thus, two
(2) representatives from Congress would increase the number of JBC members to eight (8), a
number beyond what the Constitution has contemplated. (Emphases and underscoring supplied)
In this regard, the scholarly dissection on the matter by retired Justice Consuelo Ynares-Santiago, a
former JBC consultant, is worth reiterating. 31 Thus:
A perusal of the records of the Constitutional Commission reveals that the composition of the JBC
reflects the Commissions desire "to have in the Council a representation for the major elements of
the community." xxx The ex-officio members of the Council consist of representatives from the three
main branches of government while the regular members are composed of various stakeholders in
the judiciary. The unmistakeable tenor of Article VIII, Section 8(1) was to treat each ex-officio
member as representing one co-equal branch of government. xxx Thus, the JBC was designed to
have seven voting members with the three ex-officio members having equal say in the choice of
judicial nominees.
xxx
No parallelism can be drawn between the representative of Congress in the JBC and the exercise by
Congress of its legislative powers under Article VI and constituent powers under Article XVII of the
Constitution. Congress, in relation to the executive and judicial branches of government, is
constitutionally treated as another co-equal branch in the matter of its representative in the JBC. On
the other hand, the exercise of legislative and constituent powers requires the Senate and the House
of Representatives to coordinate and act as distinct bodies in furtherance of Congress role under
our constitutional scheme. While the latter justifies and, in fact, necessitates the separateness of the

two Houses of Congress as they relate inter se, no such dichotomy need be made when Congress
interacts with the other two co-equal branches of government.
It is more in keeping with the co-equal nature of the three governmental branches to assign the
same weight to considerations that any of its representatives may have regarding aspiring nominees
to the judiciary. The representatives of the Senate and the House of Representatives act as such for
one branch and should not have any more quantitative influence as the other branches in the
exercise of prerogatives evenly bestowed upon the three. Sound reason and principle of equality
among the three branches support this conclusion. [Emphases and underscoring supplied]
The argument that a senator cannot represent a member of the House of Representatives in the
JBC and vice-versa is, thus, misplaced. In the JBC, any member of Congress, whether from the
Senate or the House of Representatives, is constitutionally empowered to represent the entire
Congress. It may be a constricted constitutional authority, but it is not an absurdity.
From this score stems the conclusion that the lone representative of Congress is entitled to one full
vote. This pronouncement effectively disallows the scheme of splitting the said vote into half (1/2),
between two representatives of Congress. Not only can this unsanctioned practice cause disorder in
the voting process, it is clearly against the essence of what the Constitution authorized. After all,
basic and reasonable is the rule that what cannot be legally done directly cannot be done indirectly.
To permit or tolerate the splitting of one vote into two or more is clearly a constitutional circumvention
that cannot be countenanced by the Court. Succinctly put, when the Constitution envisioned one
member of Congress sitting in the JBC, it is sensible to presume that this representation carries with
him one full vote.
It is also an error for respondents to argue that the President, in effect, has more influence over the
JBC simply because all of the regular members of the JBC are his appointees. The principle of
checks and balances is still safeguarded because the appointment of all the regular members of the
JBC is subject to a stringent process of confirmation by the Commission on Appointments, which is
composed of members of Congress.
Respondents contention that the current irregular composition of the JBC should be accepted,
simply because it was only questioned for the first time through the present action, deserves scant
consideration. Well-settled is the rule that acts done in violation of the Constitution no matter how
frequent, usual or notorious cannot develop or gain acceptance under the doctrine of estoppel or
laches, because once an act is considered as an infringement of the Constitution it is void from the
very beginning and cannot be the source of any power or authority.
It would not be amiss to point out, however, that as a general rule, an unconstitutional act is not a
law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is
inoperative as if it has not been passed at all. This rule, however, is not absolute. Under the doctrine
of operative facts, actions previous to the declaration of unconstitutionality are legally recognized.
They are not nullified. This is essential in the interest of fair play. To reiterate the doctrine enunciated
in Planters Products, Inc. v. Fertiphil Corporation: 32
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity
and fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a
statute prior to a determination of unconstitutionality is an operative fact and may have
consequences which cannot always be ignored. The past cannot always be erased by a new judicial
declaration. The doctrine is applicable when a declaration of unconstitutionality will impose an undue
burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a

declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the
acts done by a municipality in reliance upon a law creating it.33
Under the circumstances, the Court finds the exception applicable in this case and holds that
notwithstanding its finding of unconstitutionality in the current composition of the JBC, all its prior
official actions are nonetheless valid.
Considering that the Court is duty bound to protect the Constitution which was ratified by the direct
action of the Filipino people, it cannot correct what respondents perceive as a mistake in its
mandate. Neither can the Court, in the exercise of its power to interpret the spirit of the Constitution,
read into the law something that is contrary to its express provisions and justify the same as
correcting a perceived inadvertence. To do so would otherwise sanction the Court action of making
amendment to the Constitution through a judicial pronouncement.
In other words, the Court cannot supply the legislative omission. According to the rule of casus
omissus "a case omitted is to be held as intentionally omitted." 34 "The principle proceeds from a
reasonable certainty that a particular person, object or thing has been omitted from a legislative
enumeration."35 Pursuant to this, "the Court cannot under its power of interpretation supply the
omission even though the omission may have resulted from inadvertence or because the case in
question was not foreseen or contemplated."36 "The Court cannot supply what it thinks the legislature
would have supplied had its attention been called to the omission, as that would be judicial
legislation."37
Stated differently, the Court has no power to add another member by judicial construction.
The call for judicial activism fails to stir the sensibilities of the Court tasked to guard the Constitution
against usurpation. The Court remains steadfast in confining its powers in the sphere granted by the
Constitution itself. Judicial activism should never be allowed to become judicial exuberance. 38 In
cases like this, no amount of practical logic or convenience can convince the Court to perform either
an excision or an insertion that will change the manifest intent of the Framers. To broaden the scope
of congressional representation in the JBC is tantamount to the inclusion of a subject matter which
was not included in the provision as enacted. True to its constitutional mandate, the Court cannot
craft and tailor constitutional provisions in order to accommodate all of situations no matter how ideal
or reasonable the proposed solution may sound. To the exercise of this intrusion, the Court declines.
WHEREFORE, the Motion for Reconsideration filed by respondents is hereby DENIED.
The suspension of the effects of the second paragraph of the dispositive portion of the July 17, 2012
Decision of the Court, which reads, "This disposition is immediately executory," is hereby LIFTED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice

ANTONIO T. CARPIO
Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ROBERTO A. ABAD
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

BIENVENIDO L. REYES
Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, T hereby certify that the conclusions in the
above Resolution had been reached in consultation before the case was assigned to the writer of the
opinion of the Court.
MARIA LOURDES P. A. SERENO
Chief Justice

Footnotes
1

Rollo, pp. 257-286.

Id. at 287-298.

Entitled "Resolution expressing the sense of the Senate that the Judicial and Bar Council
(JBC) defer the consideration of all nominees and the preparation of the short list to be
submitted to the President for the position of Chief Justice of the Supreme Court;" id. at 303304.
3

Entitled "Resolution expressing anew the sense of the Senate that the Senate and House
of Representatives should have one (1) representative each in the Judicial and Bar Council
(JBC) and that each representative is entitled to a full vote;" id. at 305-307.
4

Entitled "Resolution to file an urgent motion with the Supreme Court to set for oral argument
the motion for reconsideration filed by the representatives of Congress to the Judicial and
Bar Council (JBC) in the case of Francisco Chavez v. Judicial and Bar Council, Sen. Francis
Joseph G.. Escudero and Rep. Niel Tupas Jr., G.R. No. 2022242 considering the primordial
importance of the constitutional issues involved;" id. at 308-310.
5

Entitled "Resolution authorizing Senator Joker P. Arroyo to argue, together with the
Counsel-of-record, the motion for reconsideration filed by the representative of the Senate to
the Judicial and Bar Council in the case of Francisco Chavez v. Judicial and Bar Council,
Sen. Francis Joseph G. Escudero and Rep. Niel Tupas, Jr.;" id. at 311-312.
6

Id. at 313-314.

Id. at (318-I)-(318-K).

Id. at 318-J.

10

Petitioners Memorandum, id. at 326-380; Respondents Memorandum, id. at 381-424.

Malolos Constitution Article 80 Title X. The Chief Justice of the Supreme Court and the
Solicitor-General shall be chosen by the National Assembly in concurrence with the
President of the Republic and the Secretaries of the Government, and shall be absolutely
independent of the Legislative and Executive Powers."
11

1935 Constitution Article VIII, Section 5. The Members of the Supreme Court and all
judges of inferior courts shall be appointed by the President with the consent of the
Commission on Appointments."
12

13

1 Records of the Constitutional Commission Proceedings and Debates, 437.

Section 4 Article X of the 1973 Constitution provides: "The Members of the Supreme Court
and judges of inferior courts shall be appointed by the President."
14

15

1 Records, Constitutional Commission, Proceedings and Debates, p. 487.

List of JBC Chairpersons, Ex-Officio and Regular Members, Ex Officio Secretaries and
Consultants, issued by the Office of the Executive Officer, Judicial and Bar Council, rollo, pp.
62-63.
16

17

Id.

Id. at 80, citing Minutes of the 1st En Banc Executive Meeting, January 12, 2000 and
Minutes of the 12th En Banc Meeting, May 30, 2001.
18

19

Malcolm, The Constitutional Law of the Philippine Islands (2nd ed. 1926), p. 26.

1987 Constitution, Article VII, Section 4. The President and the Vice-President shall be
elected by direct vote of the people for a term of six years which shall begin at noon on the
thirtieth day of June next following the day of the election and shall end at noon of the same
date, six years thereafter. The President shall not be eligible for any re-election. No person
20

who has succeeded as President and has served as such for more than four years shall be
qualified for election to the same office at any time.
xxx
The person having the highest number of votes shall be proclaimed elected, but in
case two or more shall have an equal and highest number of votes, one of them shall
forthwith be chosen by the vote of a majority of all the Members of both Houses of
the Congress, voting separately. (Emphasis supplied)
x x x.
1987 Constitution, Article VII, Section 9. Whenever there is a vacancy in the Office of the
Vice-President during the term for which he was elected, the President shall nominate a
Vice-President from among the Members of the Senate and the House of Representatives
who shall assume office upon confirmation by a majority vote of all the Members of both
Houses of the Congress, voting separately. (Emphasis supplied)
21

1987 Constitution, Article VII, Section 18. The President shall be the Commander-inChief of all armed forces of the Philippines and whenever it becomes necessary, he may call
out such armed forces to prevent or suppress lawless violence, invasion or rebellion. In case
of invasion or rebellion, when the public safety requires it, he may, for a period not exceeding
sixty days, suspend the privilege of the writ of habeas corpus or place the Philippines or any
part thereof under martial law. Within forty-eight hours from the proclamation of martial law or
the suspension of the privilege of the writ of habeas corpus, the President shall submit a
report in person or in writing to the Congress. The Congress, voting jointly, by a vote of at
least a majority of all its Members in regular or special session, may revoke such
proclamation or suspension, which revocation shall not be set aside by the President. Upon
the initiative of the President, the Congress may, in the same manner, extend such
proclamation or suspension for a period to be determined by the Congress, if the invasion or
rebellion shall persist and public safety requires it. (Emphasis supplied)
22

1987 Constitution, Article VI Section 27(1). Every bill passed by the Congress shall,
before it becomes a law, be presented to the President. If he approves the same, he shall
sign it; otherwise, he shall veto it and return the same with his objections to the House where
it originated, which shall enter the objections at large in its Journal and proceed to reconsider
it. If, after such reconsideration, two-thirds of all the Members of such House shall agree to
pass the bill, it shall be sent, together with the objections, to the other House by which it shall
likewise be reconsidered, and if approved by two-thirds of all the Members of that House, it
shall become a law. In all such cases, the votes of each House shall be determined by yeas
or nays, and the names of the Members voting for or against shall be entered in its Journal.
The President shall communicate his veto of any bill to the House where it originated within
thirty days after the date of receipt thereof; otherwise, it shall become a law as if he had
signed it.
23

1987 Constitution, Article VI Section 24. All appropriation, revenue or tariff bills, bills
authorizing increase of public debt, bills of local application, and private bills shall originate
exclusively in the House of Representatives, but the Senate may propose or concur with
amendments.
24

1987 Constitution, Article VI Section 23 (1). The Congress, by a vote of two-thirds of both
Houses in joint session assembled, voting separately, shall have the sole power to declare
the existence of a state of war.
25

1987 Constitution, Article VII Section 4. The returns of every election for President and
Vice-President, duly certified by the board of canvassers of each province or city, shall be
transmitted to the Congress, directed to the President of the Senate. Upon receipt of the
certificates of canvass, the President of the Senate shall, not later than thirty days after the
day of the election, open all certificates in the presence of the Senate and the House of
Representatives in joint public session, and the Congress, upon determination of the
authenticity and due execution thereof in the manner provided by law, canvass the votes.
26

The person having the highest number of votes shall be proclaimed elected, but in
case two or more shall have an equal and highest number of votes, one of them shall
forthwith be chosen by the vote of a majority of all the Members of both Houses of
the Congress, voting separately.
1987 Constitution, Article XI Section 3 (1). The House of Representatives shall have the
exclusive power to initiate all cases of impeachment.
27

xxx
(6) The Senate shall have the sole power to try and decide all cases of
impeachment. When sitting for that purpose, the Senators shall be on oath or
affirmation. When the President of the Philippines is on trial, the Chief Justice of the
Supreme Court shall preside, but shall not vote. No person shall be convicted without
the concurrence of two-thirds of all the Members of the Senate.
28

Dated March 27, 2007; Annex "D," rollo, p. 104.

Annex C, id. at 95. Quoting the interpretation of Article VIII, Section (1) of the Constitution
by Fr. Joaquin Bernas in page 984 of his book, The 1987 Constitution of the Republic of the
Philippines, A Commentary. He quoted another author, Hector de Leon, and portions of the
decisions of this Court in Flores v. Drilon, and Escalante v. Santos, before extensively
quoting the Record of the Constitutional Commission of 1986 (pages 444 to 491).
29

30

Annex "E," id. at 1205.

31

Rollo, pp. 91-93.

32

G.R. No. 166006, March 14, 2008, 548 SCRA 485.

33

Id. at 516-517. (Citations omitted.)

34

Blacks Law Dictionary, Fifth ed., p. 198.

35

Agpalo, Statutory Construction, 2009 ed., p. 231.

36

Id., citing Cartwrite v. Cartwrite, 40 A2d 30, 155 ALR 1088 (1944).

37

Id., Agpalo, p. 232

Dissenting Opinion, Chief Justice Panganiban, Central Bank (Now Bangko Sentral Ng
Pilipinas) Employees Association, Inc. v. Bangko Sentral ng Pilipinas, G.R. No. 148208,
December 15, 2004, 446 SCRA 299, citing Peralta v. COMELEC. No. L-47771, March 11,
1978, 82 SCRA 30, 77, citing concurring and dissenting opinion of former Chief Justice
Fernando, citing Malcolm.
38

The Lawphil Project - Arellano Law Foundation

DISSENTING OPINION
ABAD, J.:
On July 17, 2012, the Court rendered a Decision1 granting the petition for declaration of
unconstitutionality, prohibition, and injunction filed by petitioner Francisco I. Chavez, and declaring
that the current numerical composition of the Judicial and Bar Council (JBC) is unconstitutional. The
Court also enjoined the JBC to reconstitute itself so that only one member of Congress will sit as a
representative in its proceedings, in accordance with Section 8(1), Article VIII of the 1987
Constitution.
On July 24, 2012, respondents Senator Francis Joseph G. Escudero and Congressman Niel C.
Tupas, Jr. moved for reconsideration.2 The Court then conducted and heard the parties in oral
arguments on the following Issues:
1. Whether or not the current practice of the JBC to perform its functions with eight members, two of
whom are members of Congress, runs counter to the letter and spirit of Section 8(1), Article VIII of
the 1987 Constitution.
A. Whether or not the JBC should be composed of seven members only.
B. Whether or not Congress is entitled to more than one seat in the JBC.
C. Assuming Congress is entitled to more than one seat, whether or not each representative of
Congress should be entitled to exercise one whole vote.
I maintain my dissent to the majority opinion now being reconsidered.
To reiterate, the vital question that needs to be resolved is: whether or not the Senate and the House
of Representatives are entitled to one representative each in the JBC, both with the right to cast one
full vote in its deliberations.
At the core of the present controversy is Section 8(1), Article VIII of the 1987 Constitution, which
provides that:
Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme
Court composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a
representative of the Congress as ex officio Members, a representative of the Integrated Bar, a

professor of law, a retired Member of the Supreme Court, and a representative of the private sector.
(Emphasis supplied)
In interpreting Section 8(1) above, the majority opinion reiterated that in opting to use the singular
letter "a" to describe "representative of the Congress," the Filipino people through the framers of the
1987 Constitution intended Congress to just have one representative in the JBC. The majority
opinion added that there could not have been any plain oversight in the wordings of the provision
since the other provisions of the 1987 Constitution were amended accordingly with the shift to a
bicameral legislative body.
The mere fact, however, that adjustments were made in some provisions should not mislead the
Court into concluding that all provisions have been amended to recognize the bicameral nature of
Congress. As I have previously noted in my dissenting opinion, Fr. Joaquin G. Bernas, a member of
the Constitutional Commission himself, admitted that the committee charged with making
adjustments in the previously passed provisions covering the JBC, failed to consider the impact of
the changed character of the Legislature on the inclusion of "a representative of the Congress" in the
membership of the JBC.3
Indeed, to insist that only one member of Congress from either the Senate or the House of
Representatives should sit at any time in the JBC, is to ignore the fact that they are still separate and
distinct from each other although they are both involved in law-making. Both legislators are elected
differently, maintain separate administrative organizations, and deliberate on laws independently. In
fact, neither the Senate nor the House of Representatives can by itself claim to represent the
Congress.
Again, that the framers of the 1987 Constitution did not intend to limit the term "Congress" to just
either of the two Houses can be seen from the words that they used in crafting Section 8(1 ). While
the provision provides for just "a representative of the Congress," it also provides that such
representation is "ex officio" or "by virtue of one's office, or position." 4
Under the Senate rules, the Chairperson of its Justice Committee is automatically the Senate
representative to the JBC. In the same way, under the House of Representatives rules, the
Chairperson of its Justice Committee is the House representative to the JBC. Consequently, there
are actually two persons in Congress who hold separate offices or positions with the attached
function of sitting in the JBC. If the Court adheres to a literal translation of Section 8(1 ), no
representative from Congress will qualify as "ex officio" member of the JBC. This would deny
Congress the representation that the framers of the 1987 Constitution intended it to have.
Having said that the Senate and the House of Representatives should have one representative each
in the JBC, it is logical to conclude that each should also have the right to cast one full vote in its
deliberations. To split the vote between the two legislators would be an absurdity since it would
diminish their standing and make them second class members of the JBC, something that the
Constitution clearly does not contemplate. Indeed, the JBC abandoned the half-a-vote practice on
January 12, 2000 and recognized the right of both legislators to cast one full vote each. Only by
recognizing this right can the true spirit and reason of Section 8(1) be attained.
For the above reasons, I vote to GRANT the motion for reconsideration.
ROBERTO A. ABAD
Associate Justice

Footnotes
1

Rollo, pp. 226-250.

Id. at 257-284.

http://opinion.inquirer.net/31813/jbc-odds-and-ends (last accessed February 15, 2013).

Webster's New World College Dictionary, 3rd Edition, p. 477.

The Lawphil Project - Arellano Law Foundation

DISSENTING OPINION
LEONEN, J.:
I dissent.
Both the Senate and the House of Representatives must be represented in the Judicial and Bar
Council. This is the Constitution's mandate read as a whole and in the light of the ordinary and
contemporary understanding of our people of the structure of our government. Any other
interpretation diminishes Congress and negates the effectivity of its representation in the Judicial
and Bar Council.
It is a Constitution we are interpreting. More than privileging a textual preposition, our duty is to
ensure that the constitutional project ratified by our people is given full effect.
At issue in this case is the interpretation of Article VIII, Section 8 of the Constitution which provides
the following:
Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme
Court composed of the Chief Justice as ex officio Chairman, the Secretary of
Justice, and a representative of the Congress as ex officio Members, a representative of the
Integrated Bar, a professor of law, a retired Member of the Supreme Court, and a representative of
the private sector. (Emphasis provided)
Mainly deploying verba legis as its interpretative modality, the main opinion chooses to focus on the
article "a." As correctly pointed out in the original dissent of Justice Robert A bad, the entire phrase
includes the words "representative of Congress" and "ex officio Members." In the context of the
constitutional plan involving a bicameral Congress, these words create ambiguity.
A Bicameral Congress

Our Constitution creates a Congress consisting of two chambers. Thus, in Article VI, Section 1, the
Constitution provides the following:
The legislative power shall be vested in the Congress of the Philippines which shall consist of a
Senate and a House of Representatives x x x. (Emphasis provided)
Senators are "elected at large by the qualified voters of the Philippines". 1 Members of the House of
Representatives, on the other hand, are elected by legislative districts 2 or through the party list
system.3 The term of a Senator4 is different from that of a Member of the House of
Representatives.5 Therefore, the Senate and the House of Representatives while component parts
of the Congress are not the same in terms of their representation. The very rationale of a bicameral
system is to have the Senators represent a national constituency. Representatives of the House of
Representatives, on the other hand, are dominantly from legislative districts except for one fifth
which are from the party list system.
Each chamber is organized separately.6 The Senate and the House each promulgates their own
rules of procedure.7 Each chamber maintains separate Journals. 8 They each have separate Records
of their proceedings.9 The Senate and the House of Representatives discipline their own respective
members.10
To belabor the point: There is no presiding officer for the Congress of the Philippines, but there is a
Senate President and a Speaker of the House of Representatives. There is no single journal for the
Congress of the Philippines, but there is a journal for the Senate and a journal for the House of
Representatives. There is no record of proceedings for the entire Congress of the Philippines, but
there is a Record of proceedings for the Senate and a Record of proceedings for the House of
Representatives. The Congress of the Philippines does not discipline its members. It is the Senate
that promulgates its own rules and disciplines its members. Likewise, it is the House that
promulgates its own rules and disciplines its members.
No Senator reports to the Congress of the Philippines. Rather, he or she reports to the Senate. No
Member of the House of Representatives reports to the Congress of the Philippines. Rather, he or
she reports to the House of Representatives.
Congress, therefore, is the Senate and the House of Representatives. Congress does not exist
separate from the Senate and the House of Representatives.
Any Senator acting ex officio or as a representative of the Senate must get directions from the
Senate. By constitutional design, he or she cannot get instructions from the House of
Representatives. If a Senator represents the Congress rather than simply the Senate, then he or she
must be open to amend or modify the instructions given to him or her by the Senate if the House of
Representatives instructions are different. Yet, the Constitution vests disciplinary power only on the
Senate for any Senator.
The same argument applies to a Member of the House of Representatives.
No Senator may carry instructions from the House of Representatives. No Member of the House of
Representatives may carry instructions from the Senate. Neither Senator nor Member of the House
of Representatives may therefore represent Congress as a whole.
The difference between the Senate and the House of Representative was a subject of discussion in
the Constitutional Commission. In the July 21, 1986 Records of the Constitutional Commission,

Commissioner Jose F. S. Bengzon presented the following argument during the discussion on
bicameralism, on the distinction between Congressmen and Senators, and the role of the Filipino
people in making these officials accountable:
I grant the proposition that the Members of the House of Representatives are closer to the people
that they represent. I grant the proposition that the Members of the House of Representatives
campaign on a one-to-one basis with the people in the barrios and their constituencies. I also grant
the proposition that the candidates for Senator do not have as much time to mingle around with their
constituencies in their respective home bases as the candidates for the House. I also grant the
proposition that the candidates for the Senate go around the country in their efforts to win the votes
of all the members of the electorate at a lesser time than that given to the candidates for the House
of Representatives. But then the lesson of the last 14 years has made us mature in our political
thinking and has given us political will and self-determination. We really cannot disassociate the fact
that the Congressman, the Member of the House of Representatives, no matter how national he
would like to think, is very much strongly drawn into the problems of his local constituents in his own
district.
Due to the maturity of the Filipinos for the last 14 years and because of the emergence of people
power, I believe that this so-called people power can be used to monitor not only the Members of the
House of Representatives but also the Members of the Senate. As I said we may have probably
adopted the American formula in the beginning but over these years, I think we have developed that
kind of a system and adopted it to our own needs. So at this point in time, with people power
working, it is not only the Members of the House who can be subjected to people power but also the
Members of the Senate because they can also be picketed and criticized through written articles and
talk shows. And even the people not only from their constituencies in their respective regions and
districts but from the whole country can exercise people power against the Members of the Senate
because they are supposed to represent the entire country. So while the Members of Congress
become unconsciously parochial in their desire to help their constituencies, the Members of the
Senate are there to take a look at all of these parochial proposals and coordinate them with the
national problems. They may be detached in that sense but they are not detached from the people
because they themselves know and realize that they owe their position not only to the people from
their respective provinces but also to the people from the whole country. So, I say that people power
now will be able to monitor the activities of the Members of the House of Representatives and that
very same people power can be also used to monitor the activities of the Members of the Senate. 11
Commissioner Bengzon provided an illustration of the fundamental distinction between the House of
Representatives and the Senate, particularly regarding their respective constituencies and
electorate. These differences, however, only illustrate that the work of the Senate and the House of
Representatives taken together results in a Congress functioning as one branch of government.
Article VI, Section 1, as approved by the Commission, spoke of one Congress whose powers are
vested in both the House of Representatives and the Senate.
Thus, when the Constitution provides that a "representative of Congress" should participate in the
Judicial and Bar Council, it cannot mean a Senator carrying out the instructions of the House or a
Member of the House of Representative carrying out instructions from the Senate. It is not the kind
of a single Congress contemplated by our Constitution. The opinion therefore that a Senator or a
Member of the House of Representative may represent the Congress as a whole is contrary to the
intent of the Constitution. It is unworkable.
One mechanism used in the past to work out the consequence of the majoritys opinion is to allow a
Senator and a Member of the House of Representative to sit in the Judicial and Bar Council but to
each allow them only half a vote.

Within the Judicial and Bar Council, the Chief Justice is entitled to one vote. The Secretary of Justice
is also entitled to one whole vote and so are the Integrated Bar of the Philippines, the private sector,
legal academia, and retired justices. Each of these sectors are given equal importance and
rewarded with one whole vote. However, in this view, the Senate is only worth fifty percent of the
wisdom of these sectors. Likewise, the wisdom of the House of Representatives is only worth fifty
percent of these institutions.
This is constitutionally abominable. It is inconceivable that our people, in ratifying the Constitution
granting awesome powers to Congress, intended to diminish its component parts. After all, they are
institutions composed of people who have submitted themselves to the electorate. In creating
shortlists of possible candidates to the judiciary, we can safely suppose that their input is not less
than the input of the professor of law or the member of the Integrated Bar of the Philippines or the
member from the private sector.
The other solution done in the past was to alternate the seat between a Senator and a Member of
the House of Representatives.
To alternate the seat given to Congress between the Senate and the House of Representatives
would mean not giving a seat to the Congress at all. Again, when a Senator is seated, he or she
represents the Senate and not Congress as a whole. When a Member of the House of
Representative is seated, he or she can only represent Congress as a whole. Thus, alternating the
seat not only diminishes congressional representation; it negates it.
Constitutional Interpretation
The argument that swayed the majority in this cases original decision was that if those who crafted
our Constitution intended that there be two representatives from Congress, it would not have used
the preposition "a" in Article VIII, Section 8 (1). However, beyond the number of representatives, the
Constitution intends that in the Judicial and Bar Council, there will be representation from Congress
and that it will be "ex officio", i.e., by virtue of their positions or offices. We note that the provision did
not provide for a number of members to the Judicial and Bar Council. This is unlike the provisions
creating many other bodies in the Constitution.12
In other words, we could privilege or start our interpretation only from the preposition "a" and from
there provide a meaning that ensures a difficult and unworkable result -- one which undermines the
concept of a bicameral congress implied in all the other 114 other places in the Constitution that
uses the word "Congress".
Or, we could give the provision a reasonable interpretation that is within the expectations of the
people who ratified the Constitution by also seeing and reading the words "representative of
Congress" and "ex officio."
This proposed interpretation does not violate the basic tenet regarding the authoritativeness of the
text of the Constitution. It does not detract from the text. It follows the canonical requirement of verba
legis. But in doing so, we encounter an ambiguity.
In Macalintal v. Presidential Electoral Tribunal,13 we said:
As the Constitution is not primarily a lawyers document, it being essential for the rule of law to
obtain that it should ever be present in the peoples consciousness, its language as much as
possible should be understood in the sense they have in common use. What it says according to the

text of the provision to be construed compels acceptance and negates the power of the courts to
alter it, based on the postulate that the framers and the people mean what they say. Thus these are
cases where the need for construction is reduced to a minimum.
However, where there is ambiguity or doubt, the words of the Constitution should be interpreted in
accordance with the intent of its framers or ratio legis et anima. A doubtful provision must be
examined in light of the history of the times, and the condition and circumstances surrounding the
framing of the Constitution. In following this guideline, courts should bear in mind the object sought
to be accomplished in adopting a doubtful constitutional provision, and the evils sought to be
prevented or remedied. Consequently, the intent of the framers and the people ratifying the
constitution, and not the panderings of self-indulgent men, should be given effect.
Last, ut magis valeat quam pereat the Constitution is to be interpreted as a whole. We intoned thus
in the landmark case of Civil Liberties Union v. Executive Secretary:
It is a well-established rule in constitutional construction that no one provision of the Constitution is
to be separated from all the others, to be considered alone, but that all the provisions bearing upon a
particular subject are to be brought into view and to be so interpreted as to effectuate the great
purposes of the instrument. Sections bearing on a particular subject should be considered and
interpreted together as to effectuate the whole purpose of the Constitution and one section is not to
be allowed to defeat another, if by any reasonable construction, the two can be made to stand
together.
In other words, the court must harmonize them, if practicable, and must lean in favor of a
construction which will render every word operative, rather than one which may make the words idle
and nugatory. (Emphasis provided)
And in Civil Liberties Union v. Executive Secretary,13 we said:
A foolproof yardstick in constitutional construction is the intention underlying the provision under
consideration. Thus, it has been held that the Court in construing a Constitution should bear in mind
the object sought to be accomplished by its adoption, and the evils, if any, sought to be prevented or
remedied. A doubtful provision will be examined in the light of the history of the times, and the
condition and circumstances under which the Constitution was framed. The object is to ascertain the
reason which induced the framers of the Constitution to enact the particular provision and the
purpose sought to be accomplished thereby, in order to construe the whole as to make the words
consonant to that reason and calculated to effect that purpose.
The authoritativeness of text is no excuse to provide an unworkable result or one which undermines
the intended structure of government provided in the Constitution. Text is authoritative, but it is not
exhaustive of the entire universe of meaning.
There is no compelling reason why we should blind ourselves as to the meaning of "representative
of Congress" and "ex officio." There is no compelling reason why there should only be one
representative of a bicameral Congress.
Proposed Reasons for Only One Representative of Congress
The first reason to support the need for only one representative of Congress is the belief that there
needs to be an odd number in the Judicial and Bar Council.

This is true only if the decision of the constitutional organ in question is a dichotomous one, i.e., a
yes or a no. It is in this sense that a tie-breaker will be necessary.
However, the Judicial and Bar Council is not that sort of a constitutional organ. Its duty is to provide
the President with a shortlist of candidates to every judicial position. We take judicial notice that for
vacancies, each member of the Judicial and Bar Council is asked to list at least three (3) names. All
these votes are tallied and those who garner a specific plurality are thus put on the list and
transmitted to the President. There had been no occasion when the Judicial and Bar Council ever
needed to break a tie. The Judicial and Bar Councils functions proceed regardless of whether they
have seven or eight members.
The second reason that the main opinion accepted as persuasive was the opinion that Congress
does not discharge its function to check and balance the power of both the Judiciary and the
Executive in the Judicial and Bar Council. From this premise, it then proceeds to argue that the
Representative of Congress, who is ex officio, does not need to consult with Congress as a whole.
This is very perplexing and difficult to accept.
By virtue of the fundamental premise of separation of powers, the appointing power in the judiciary
should be done by the Supreme Court. However, for judicial positions, this is vested in the
Executive. Furthermore, because of the importance of these appointments, the Presidents discretion
is limited to a shortlist submitted to him by the Judicial and Bar Council which is under the
supervision of the Supreme Court but composed of several components.
The Judicial and Bar Council represents the constituents affected by judicial appointments and by
extension, judicial decisions. It provides for those who have some function vis a vis the law that
should be applied and interpreted by our courts. Hence, represented are practicing lawyers
(Integrated Bar of the Philippines), prosecutors (Secretary of the Department of Justice), legal
academia (professor of law), and judges or justices (retired justice and the Chief Justice). Also
represented in some way are those that will be affected by the interpretation directly (private sector
representative).
Congress is represented for many reasons.
One, it crafts statutes and to that extent may want to ensure that those who are appointed to the
judiciary are familiar with these statutes and will have the competence, integrity, and independence
to read its meaning.
Two, the power of judicial review vests our courts with the ability to nullify their acts. Congress,
therefore, has an interest in the judicial philosophy of those considered for appointment into our
judiciary.
Three, Congress is a political organ. As such, it is familiar with the biases of our political leaders
including that of the President. Thus, it will have greater sensitivity to the necessity for political
accommodations if there be any. Keeping in mind the independence required of our judges and
justices, the Members of Congress may be able to appreciate the kind of balance that will be
necessary -- the same balance that the President might be able to likewise appreciate -- when
putting a person in the shortlist of judicial candidates. Not only do they appreciate this balance, they
embody it. Senators and Members of the House of Representatives (unlike any of the other
members of the Judicial and Bar Council), periodically submit themselves to the electorate.

It is for these reasons that the Congressional representatives in the Judicial and Bar Council may be
instructed by their respective chambers to consider some principles and directions. Through
resolutions or actions by the Congressional Committees they represent, the JBC Congressional
representatives choices may be constrained. Therefore, they do not sit there just to represent
themselves. Again, they are "representatives of Congress" "ex officio".
The third reason to support only one representative of Congress is the belief that there is the
"unmistakable tenor" in the provision in question that one co-equal branch should be represented
only by one Representative.14 It may be true that the Secretary of Justice is the political alter ego of
the President or the Executive. However, Congress as a whole does not have a political alter ego. In
other words, while the Executive may be represented by a single individual, Congress cannot be
represented by an individual. Congress, as stated earlier, operates through the Senate and the
House of Representatives. Unlike the Executive, the Legislative branch cannot be represented by
only one individual.
A Note on the Work of the Constitutional Commission
Time and again, we have clarified the interpretative value to Us of the deliberations of the
Constitutional Commission. Thus in Civil Liberties Union v. Executive Secretary, we emphasized:
While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional
convention in order to arrive at the reason and purpose of the resulting Constitution, resort thereto
may be had only when other guides fail as said proceedings are powerless to vary the terms of the
Constitution when the meaning is clear. Debates in the constitutional convention are of value as
showing the views of the individual members, and as indicating the reason for their votes, but they
give Us no light as to the views of the large majority who did not talk, much less of the mass or our
fellow citizens whose votes at the polls gave that instrument the force of fundamental law. We think it
safer to construe the constitution from what appears upon its face.The proper interpretation
therefore depends more on how it was understood by the people adopting it than in the
framers understanding thereof.15 (Emphasis provided)
Also worth Our recall is the celebrated comment of Charles P. Curtis, Jr. on the role of history in
constitutional exegesis:16
The intention of the framers of the Constitution, even assuming we could discover what it was, when
it is not adequately expressed in the Constitution, that is to say, what they meant when they did not
say it, surely that has no binding force upon us. If we look behind or beyond what they set down
in the document, prying into what else they wrote and what they said, anything we may find
is only advisory. They may sit in at our councils. There is no reason why we should
eavesdrop on theirs.17 (Emphasis provided)
In addition to the interpretative value of the discussion in the Constitutional Commission, we should
always be careful when we quote from their records without understanding their context.
The Committees of the Constitutional Commission were all tasked to finish their reports not later
than July 7, 1986.18 The Second and Third Readings were scheduled to finish not later than August
15, 1986.19 The members of the Sponsorship and Style Committee were tasked to finish their work of
formulating and polishing the style of the final draft of the new Constitution scheduled for submission
to the entire membership of the Commission not later than August 25, 1986. 20
The Rules of the Constitutional Commission also provided for a process of approving resolutions
and amendments.

Constitutional proposals were embodied in resolutions signed by the author.21 If they emanated from
a committee, the resolution was signed by its chairman. 22 Resolutions were filed with the SecretaryGeneral.23 The First Reading took place when the titles of the resolutions were read and referred to
the appropriate committee.24
The Committees then submitted a Report on each resolution. 25 The Steering Committee took charge
of including the committee report in the Calendar for Second Reading. 26 The Second Reading took
place on the day set for the consideration of a resolution. 27 The provisions were read in full with the
amendments proposed by the committee, if there were any.28
A motion to close debate took place after three speeches for and two against, or if only one speech
has been raised and none against it.29 The President of the Constitutional Commission had the
prerogative to allow debates among those who had indicated that they intended to be heard on
certain matters.30 After the close of the debate, the Constitutional Commission proceeded to consider
the Committee amendments.31
After a resolution was approved on Second Reading, it was included in the Calendar for Third
Reading.32 Neither further debate nor amendment shall be made on the resolution on its Third
Reading.33 All constitutional proposals approved by the Commission after Third Reading were
referred to the Committees on Sponsorship and Style for collation, organization, and consolidation
into a complete and final draft of the Constitution.34 The final draft was submitted to the Commission
for the sole purpose of determining whether it reflects faithfully and accurately the proposals as
approved on Second Reading.35
With respect to the provision which is now Article VIII, Section 8 (1), the timetable was as follows:
On July 10, 1986, the Committee on the Judiciary presented its Report to the
Commission.36 Deliberations then took place on the same day; on July 11, 1986; and on July 14,
1986. It was on July 10 that Commissioner Rodrigo raised points regarding the Judicial and Bar
Council.37 The discussion spoke of the Judicial and Bar Council having seven members.
Numerous mentions of the Judicial and Bar Council being comprised of seven members were also
made by Commissioners on July 14, 1986. On the same day, the amended article was approved by
unanimous voting.38
On July 19, 1986, the vote on Third Reading on the Article on the Judiciary took place. 39 The vote
was 43 and none against.40
Committee Report No. 22 proposing an article on a National Assembly was reported out by July 21,
1986.41 It provided for a unicameral assembly. Commissioner Hilario Davide, Jr., made the
presentation and stated that they had a very difficult decision to make regarding bicameralism and
unicameralism.42 The debate occupied the Commission for the whole day.
Then, a vote on the structure of Congress took place. 43 Forty four (44) commissioners cast their
votes during the roll call.44 The vote was 23 to 22.45
On October 8, 1986, the Article on the Judiciary was reopened for purposes of introducing
amendments to the proposed Sections 3, 7, 10, 11, 13, and 14. 46
On October 9, 1986, the entire Article on the Legislature was approved on Third Reading. 47

By October 10, 1986, changes in style on the Article on the Legislature were introduced. 48
On October 15, 1986, Commissioner Guingona presented the 1986 Constitution to the President of
the Constitutional Commission, Cecilia Munoz-Palma. 49
It is apparent that the Constitutional Commission either through the Style and Sponsorship
Committee or the Committees on the Legislature and the Judiciary was not able to amend the
provision concerning the Judicial and Bar Council after the Commission had decided to propose a
bicameral Congress. We can take judicial notice of the chronology of events during the deliberations
of the Constitutional Commission. The chronology should be taken as much as the substance of
discussions exchanged between the Commissioners.
The quotations from the Commissioners mentioned in the main opinion and in the proposed
resolution of the present Motion for Reconsideration should thus be appreciated in its proper context.
The interpellation involving Commissioners Rodrigo and Concepcion took place on July 10, 1986
and on July 14, 1986.50 These discussions were about Committee Report No. 18 on the Judiciary.
Thus:
MR. RODRIGO: Let me go to another point then.
On page 2, Section 5, there is a novel provision about appointments of members of the Supreme
Court and of judges of lower courts. At present it is the President who appoints them. If there is a
Commission on Appointments, then it is the President with the confirmation of the Commission on
Appointments. In this proposal, we would like to establish a new office, a sort of a board composed
of seven members, called the Judicial and Bar Council. And while the President will still appoint the
members of the judiciary, he will be limited to the recommendees of this Council.
xxxx
MR. RODRIGO: Of the seven members of the Judicial and Bar Council, the President appoints four
of them who are the regular members.
xxxx
MR. CONCEPCION: The only purpose of the Committee is to eliminate partisan politics. 51
xxxx
It must also be noted that during the same day and in the same discussion, both Commissioners
Rodrigo and Concepcion later on referred to a National Assembly and not a Congress, as can be
seen here:
MR. RODRIGO: Another point. Under our present Constitution, the National Assembly may enact
rules of court, is that right? On page 4, the proviso on lines 17 to 19 of the Article on the Judiciary
provides:
The National Assembly may repeal, alter, or supplement the said rules with the advice and
concurrence of the Supreme Court.
MR. CONCEPCION: Yes.

MR. RODRIGO: So, two things are required of the National Assembly before it can repeal, alter or
supplement the rules concerning the protection and enforcement of constitutional rights, pleading,
etc. it must have the advice and concurrence of the Supreme Court.
MR. CONCEPCION: That is correct.52
On July 14, 1986, the Commission proceeded with the Period of Amendments. This was when the
exchange noted in the main opinion took place. Thus:
MR. RODRIGO: If my amendment is approved, then the provision will be exactly the same as the
provision in the 1935 Constitution, Article VIII, Section 5.
xxxx
If we do not remove the proposed amendment on the creation of the Judicial and Bar Council, this
will be a diminution of the appointing power of the highest magistrate of the land, of the President of
the Philippines elected by all the Filipino people. The appointing power will be limited by a group of
seven people who are not elected by the people but only appointed.
Mr. Presiding Officer, if this Council is created, there will be no uniformity in our constitutional
provisions on appointments. The members of the Judiciary will be segregated from the rest of the
government. Even a municipal judge cannot be appointed by the President except upon
recommendation or nomination of three names by this committee of seven people, commissioners of
the Commission on Elections, the COA and Commission on Civil Service x x x even ambassadors,
generals of the Army will not come under this restriction. Why are we going to segregate the
Judiciary from the rest of our government in the appointment of the high-ranking officials?
Another reason is that this Council will be ineffective. It will just besmirch the honor of our President
without being effective at all because this Council will be under the influence of the President. Four
out of seven are appointees of the President, and they can be reappointed when their term ends.
Therefore, they would kowtow to the President. A fifth member is the Minister of Justice, an alter ego
of the President. Another member represents the legislature. In all probability, the controlling party in
the legislature belongs to the President and, therefore, this representative from the National
Assembly is also under the influence of the President. And may I say, Mr. Presiding Officer, that even
the Chief Justice of the Supreme Court is an appointee of the President. So, it is futile; he will be
influenced anyway by the President. 53
It must again be noted that during this day and period of amendments after the quoted passage in
the Decision, the Commission later on made use of the term National Assembly and not Congress
again:
MR. MAAMBONG: Presiding Officer and members of the Committee, I propose to delete the last
sentence on Section 16, lines 28 to 30 which reads: "The Chief Justice shall address the National
Assembly at the opening of each regular session."
May I explain that I have gone over the operations of other deliberative assemblies in some parts of
the world, and I noticed that it is only the Chief Executive or head of state who addresses the
National Assembly at its opening. When we say "opening," we are referring to the first convening of
any national assembly. Hence, when the Chief Executive or head of state addresses the National
Assembly on that occasion, no other speaker is allowed to address the body.

So I move for the deletion of this last sentence. 54

Based on the chronology of events, the discussions cited by the main ponencia took place when the
commissioners were still contemplating a unicameral legislature in the course of this discussion.
Necessarily, only one Representative would be needed to fully effect the participation of a
unicameral legislature. Therefore, any mention of the composition of the JBC having seven
members in the records of the Constitutional Commission, particularly during the dates cited, was
obviously within the context that the Commission had not yet voted and agreed upon a bicameral
legislature.
The composition of the Congress as a bilateral legislature became final only after the JBC
discussions as a seven-member Council indicated in the Records of the Constitutional Commission
took place. This puts into the proper context the recognition by Commissioner Christian Monsod on
July 30, 1986, which runs as follows:
Last week, we voted for a bicameral legislature. Perhaps it is symptomatic of what the thinking of
this group is, that all the provisions that were being drafted up to that time assumed a unicameral
government.55
The repeated mentions of the JBC having seven members as indicated in the Records of the
Constitutional Commission do not justify the points raised by petitioner. This is a situation where the
records of the Constitutional Commission do not serve even as persuasive means to ascertain intent
at least in so far as the intended numbers for the Judicial and Bar Council. Certainly they are not
relevant even to advise us on how Congress is to be represented in that constitutional organ.
We should never forget that when we interpret the Constitution, we do so with full appreciation of
every part of the text within an entire document understood by the people as they ratified it and with
all its contemporary consequences. As an eminent author in constitutional theory has observed while
going through the various interpretative modes presented in jurisprudence: "x x x all of the
methodologies that will be discussed, properly understood, figure in constitutional analysis as
opportunities: as starting points, constituent parts of complex arguments, or concluding
evocations." 56
Discerning that there should be a Senator and a Member of the House of Representatives that sit in
the Judicial and Bar Council so that Congress can be fully represented ex officio is not judicial
activism. It is in keeping with the constitutional project of a bicameral Congress that is effective
whenever and wherever it is represented. It is in tune with how our people understand Congress as
described in the fundamental law. It is consistent with our duty to read the authoritative text of the
Constitution so that ordinary people who seek to understand this most basic law through Our
decisions would understand that beyond a single isolated text -- even beyond a prepos1t10n in
Article VIII, Section 8 (1 ), our primordial values and principles are framed, congealed and will be
given full effect.
In a sense, we do not just read words in a legal document; we give meaning to a Constitution.
For these reasons, I vote to grant the Motion for Reconsideration and deny the Petition for lack of
merit.
MARVIC MARIO VICTOR F. LEONEN
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 181359

August 5, 2013

SPOUSES CLEMENCIO C. SABITSANA, JR. and MA. ROSARIO M. SABITSANA, Petitioners,

vs.
JUANITO F. MUERTEGUI, represented by his Attorney-in-Fact DOMINGO A. MUERTEGUI,
JR., Respondent.
DECISION
DEL CASTILLO, J.:
A lawyer may not, for his own personal interest and benefit, gamble on his client's word, believing it
at one time and disbelieving it the next. He owes his client his undivided loyalty.
Assailed in this Petition for Review on Certiorari 1 are the January 25, 2007 Decision 2 of the Court of
Appeals (CA) which denied the appeal in CA-G.R. CV No. 79250, and its January 11, 2008
Resolution3 denying petitioners Motion for Reconsideration.4
Factual Antecedents
On September 2, 1981, Alberto Garcia (Garcia) executed an unnotarized Deed of Sale 5 in favor of
respondent Juanito Muertegui6 (Juanito) over a 7,500-square meter parcel of unregistered land (the
lot) located in Dalutan Island, Talahid, Almeira, Biliran, Leyte del Norte covered by Tax Declaration
(TD) No. 1996 issued in 1985 in Garcias name. 7
Juanitos father Domingo Muertegui, Sr. (Domingo Sr.) and brother Domingo Jr. took actual
possession of the lot and planted thereon coconut and ipil-ipil trees. They also paid the real property
taxes on the lot for the years 1980 up to 1998.
On October 17, 1991, Garcia sold the lot to the Muertegui family lawyer, petitioner Atty. Clemencio C.
Sabitsana, Jr. (Atty. Sabitsana), through a notarized deed of absolute sale. 8 The sale was registered
with the Register of Deeds on February 6, 1992.9 TD No. 1996 was cancelled and a new one, TD
No. 5327,10 was issued in Atty. Sabitsanas name. Although Domingo Jr. and Sr. paid the real estate
taxes, Atty. Sabitsana also paid real property taxes in 1992, 1993, and 1999. In 1996, he introduced
concrete improvements on the property, which shortly thereafter were destroyed by a typhoon.
When Domingo Sr. passed away, his heirs applied for registration and coverage of the lot under the
Public Land Act or Commonwealth Act No. 141. Atty. Sabitsana, in a letter 11 dated August 24, 1998
addressed to the Department of Environment and Natural Resources CENRO/PENRO office in
Naval, Biliran, opposed the application, claiming that he was the true owner of the lot. He asked that

the application for registration be held in abeyance until the issue of conflicting ownership has been
resolved.
On April 11, 2000, Juanito, through his attorney-in-fact Domingo Jr., filed Civil Case No. B-1097 12 for
quieting of title and preliminary injunction, against herein petitioners Atty. Sabitsana and his wife,
Rosario, claiming that they bought the lot in bad faith and are exercising acts of possession and
ownership over the same, which acts thus constitute a cloud over his title. The Complaint 13 prayed,
among others, that the Sabitsana Deed of Sale, the August 24, 1998 letter, and TD No. 5327 be
declared null and void and of no effect; that petitioners be ordered to respect and recognize Juanitos
title over the lot; and that moral and exemplary damages, attorneys fees, and litigation expenses be
awarded to him.
In their Answer with Counterclaim, 14 petitioners asserted mainly that the sale to Juanito is null and
void absent the marital consent of Garcias wife, Soledad Corto (Soledad); that they acquired the
property in good faith and for value; and that the Complaint is barred by prescription and laches.
They likewise insisted that the Regional Trial Court (RTC) of Naval, Biliran did not have jurisdiction
over the case, which involved title to or interest in a parcel of land the assessed value of which is
merely P1,230.00.
The evidence and testimonies of the respondents witnesses during trial reveal that petitioner Atty.
Sabitsana was the Muertegui familys lawyer at the time Garcia sold the lot to Juanito, and that as
such, he was consulted by the family before the sale was executed; that after the sale to Juanito,
Domingo Sr. entered into actual, public, adverse and continuous possession of the lot, and planted
the same to coconut and ipil-ipil; and that after Domingo Sr.s death, his wife Caseldita, succeeded
him in the possession and exercise of rights over the lot.
On the other hand, Atty. Sabitsana testified that before purchasing the lot, he was told by a member
of the Muertegui family, Carmen Muertegui Davies (Carmen), that the Muertegui family had bought
the lot, but she could not show the document of sale; that he then conducted an investigation with
the offices of the municipal and provincial assessors; that he failed to find any document, record, or
other proof of the sale by Garcia to Juanito, and instead discovered that the lot was still in the name
of Garcia; that given the foregoing revelations, he concluded that the Muerteguis were merely
bluffing, and that they probably did not want him to buy the property because they were interested in
buying it for themselves considering that it was adjacent to a lot which they owned; that he then
proceeded to purchase the lot from Garcia; that after purchasing the lot, he wrote Caseldita in
October 1991 to inform her of the sale; that he then took possession of the lot and gathered ipil-ipil
for firewood and harvested coconuts and calamansi from the lot; and that he constructed a rip-rap on
the property sometime in 1996 and 1997.
Ruling of the Regional Trial Court
On October 28, 2002, the trial court issued its Decision 15 which decrees as follows:
WHEREFORE, in view of the foregoing considerations, this Court finds in favor of the plaintiff and
against the defendants, hereby declaring the Deed of Sale dated 2 September 1981 as valid and
preferred while the Deed of Absolute Sale dated 17 October 1991 and Tax Declaration No. 5327 in
the name of Atty. Clemencio C. Sabitsana, Jr. are VOID and of no legal effect.
The Provincial Assessor and the Municipal Assessor of Naval are directed to cancel Tax Declaration
No. 5327 as void and done in bad faith.

Further, Atty. Clemencio C. Sabitsana, Jr. is ordered to pay plaintiff Juanito Muertigui, represented by
his attorney-in-fact Domingo Muertigui, Jr. the amounts of:
a) P30,000.00 as attorneys fees;
b) P10,000.00 as litigation expenses; and
c) Costs.
SO ORDERED.16
The trial court held that petitioners are not buyers in good faith. Petitioner Atty. Sabitsana was the
Muertegui familys lawyer, and was informed beforehand by Carmen that her family had purchased
the lot; thus, he knew of the sale to Juanito. After conducting an investigation, he found out that the
sale was not registered. With this information in mind, Atty. Sabitsana went on to purchase the same
lot and raced to register the sale ahead of the Muerteguis, expecting that his purchase and prior
registration would prevail over that of his clients, the Muerteguis. Applying Article 1544 of the Civil
Code,17 the trial court declared that even though petitioners were first to register their sale, the same
was not done in good faith. And because petitioners registration was not in good faith, preference
should be given to the sale in favor of Juanito, as he was the first to take possession of the lot in
good faith, and the sale to petitioners must be declared null and void for it casts a cloud upon the
Muertegui title.
Petitioners filed a Motion for Reconsideration18 but the trial court denied19 the same.
Ruling of the Court of Appeals
Petitioners appealed to the CA20 asserting that the sale to Juanito was null and void for lack of
marital consent; that the sale to them is valid; that the lower court erred in applying Article 1544 of
the Civil Code; that the Complaint should have been barred by prescription, laches and estoppel;
that respondent had no cause of action; that respondent was not entitled to an award of attorneys
fees and litigation expenses; and that they should be the ones awarded attorneys fees and litigation
expenses.
The CA, through its questioned January 25, 2007 Decision, 21 denied the appeal and affirmed the trial
courts Decision in toto. It held that even though the lot admittedly was conjugal property, the
absence of Soledads signature and consent to the deed did not render the sale to Juanito
absolutely null and void, but merely voidable. Since Garcia and his wife were married prior to the
effectivity of the Family Code, Article 173 of the Civil Code22should apply; and under the said
provision, the disposition of conjugal property without the wifes consent is not void, but merely
voidable. In the absence of a decree annulling the deed of sale in favor of Juanito, the same remains
valid.
The CA added that the fact that the Deed of Sale in favor of Juanito was not notarized could not
affect its validity. As against the notarized deed of sale in favor of petitioners, the CA held that the
sale in favor of Juanito still prevails. Applying Article 1544 of the Civil Code, the CA said that the
determining factor is petitioners good faith, or the lack of it. It held that even though petitioners were
first to register the sale in their favor, they did not do so in good faith, for they already knew
beforehand of Garcias prior sale to Juanito. By virtue of Atty. Sabitsanas professional and
confidential relationship with the Muertegui family, petitioners came to know about the prior sale to
the Muerteguis and the latters possession of the lot, and yet they pushed through with the second

sale. Far from acting in good faith, petitioner Atty. Sabitsana used his legal knowledge to take
advantage of his clients by registering his purchase ahead of them.
Finally, the CA declared that Juanito, as the rightful owner of the lot, possessed the requisite cause
of action to institute the suit for quieting of title and obtain judgment in his favor, and is entitled as
well to an award for attorneys fees and litigation expenses, which the trial court correctly held to be
just and equitable under the circumstances.
The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, the instant appeal is DENIED and the Decision dated October
28, 2002 of the Regional Trial Court, 8th Judicial Region, Branch 16, Naval, Biliran, is hereby
AFFIRMED. Costs against defendants-appellants.
SO ORDERED.23
Issues
Petitioners now raise the following issues for resolution:
I. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE REGIONAL TRIAL
COURT DID NOT HAVE JURISDICTION OVER THE CASE IN VIEW OF THE FACT THAT
THE ASSESSED VALUE OF THE SUBJECT LAND WAS ONLY P1,230.00 (AND STATED
MARKET VALUE OF ONLY P3,450.00).
II. THE COURT OF APPEALS ERRED IN APPLYING ART. 1544 OF THE CIVIL CODE
INSTEAD OF THE PROPERTY REGISTRATION DECREE (P.D. NO. 1529) CONSIDERING
THAT THE SUBJECT LAND WAS UNREGISTERED.
III. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT WAS
ALREADY BARRED [BY] LACHES AND THE STATUTE OF LIMITATIONS.
IV. THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE REGIONAL
TRIAL COURT ORDERING THE PETITIONERS TO PAY ATTORNEYS FEES AND
LITIGATION EXPENSES TO THE RESPONDENT.24
Petitioners Arguments
Petitioners assert that the RTC of Naval, Biliran did not have jurisdiction over the case. They argue
that since the assessed value of the lot was a mere P1,230.00, jurisdiction over the case lies with
the first level courts, pursuant to Republic Act No. 7691, 25 which expanded their exclusive original
jurisdiction to include "all civil actions which involve title to, or possession of, real property, or any
interest therein where the assessed value of the property or interest therein does not exceed Twenty
thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does
not exceed Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever kind,
attorneys fees, litigation expenses and costs."26 Petitioners thus conclude that the Decision in Civil
Case No. B-1097 is null and void for lack of jurisdiction.
Petitioners next insist that the lot, being unregistered land, is beyond the coverage of Article 1544 of
the Civil Code, and instead, the provisions of Presidential Decree (PD) No. 1529 should apply. This

being the case, the Deed of Sale in favor of Juanito is valid only as between him and the seller
Garcia, pursuant to Section 113 of PD 1529;27 it cannot affect petitioners who are not parties thereto.
On the issue of estoppel, laches and prescription, petitioners insist that from the time they informed
the Muerteguis in writing about their purchase of the lot, or in October 1991, the latter did not notify
them of their prior purchase of the lot, nor did respondent interpose any objection to the sale in their
favor. It was only in 1998 that Domingo Jr. showed to petitioners the unnotarized deed of sale.
According to petitioners, this seven-year period of silence and inaction on the Muerteguis part
should be taken against them and construed as neglect on their part to assert their rights for an
unreasonable length of time. As such, their action to quiet title should be deemed barred by laches
and estoppel.
Lastly, petitioners take exception to the award of attorneys fees and litigation expenses, claiming
that since there was no bad faith on their part, such award may not be considered just and equitable
under the circumstances. Still, an award of attorneys fees should remain the exception rather than
the rule; and in awarding the same, there must have been an express finding of facts and law
justifying such award, a requirement that is absent in this case.
Petitioners thus pray for the reversal of the questioned CA Decision and Resolution; the dismissal of
the Complaint in Civil Case No. B-1097; the deletion of the award of attorneys fees and litigation
expenses in respondents favor; and a declaration that they are the true and rightful owners of the
lot.
Respondents Arguments
Respondent, on the other hand, counters that a suit for quieting of title is one whose subject matter
is incapable of pecuniary estimation, and thus falls within the jurisdiction of the RTC. He likewise
insists that Article 1544 applies to the case because there is a clear case of double sale of the same
property to different buyers, and the bottom line thereof lies in petitioners lack of good faith in
entering into the subsequent sale. On the issue of laches/estoppel, respondent echoes the CAs view
that he was persistent in the exercise of his rights over the lot, having previously filed a complaint for
recovery of the lot, which unfortunately was dismissed based on technicality.
On the issue of attorneys fees and litigation expenses, respondent finds refuge in Article 2208 of the
Civil Code,28citing three instances which fortify the award in his favor petitioners acts compelled
him to litigate and incur expenses to protect his interests; their gross and evident bad faith in
refusing to recognize his ownership and possession over the lot; and the justness and equitableness
of his case.
Our Ruling
The Petition must be denied.
The Regional Trial Court has jurisdiction over the suit for quieting of title.
On the question of jurisdiction, it is clear under the Rules that an action for quieting of title may be
instituted in the RTCs, regardless of the assessed value of the real property in dispute. Under Rule
63 of the Rules of Court,29 an action to quiet title to real property or remove clouds therefrom may be
brought in the appropriate RTC.

It must be remembered that the suit for quieting of title was prompted by petitioners August 24, 1998
letter-opposition to respondents application for registration. Thus, in order to prevent 30 a cloud from
being cast upon his application for a title, respondent filed Civil Case No. B-1097 to obtain a
declaration of his rights. In this sense, the action is one for declaratory relief, which properly falls
within the jurisdiction of the RTC pursuant to Rule 63 of the Rules.
Article 1544 of the Civil Code does not apply to sales involving unregistered land.
Both the trial court and the CA are, however, wrong in applying Article 1544 of the Civil Code. Both
courts seem to have forgotten that the provision does not apply to sales involving unregistered land.
Suffice it to state that the issue of the buyers good or bad faith is relevant only where the subject of
the sale is registered land, and the purchaser is buying the same from the registered owner whose
title to the land is clean. In such case, the purchaser who relies on the clean title of the registered
owner is protected if he is a purchaser in good faith for value. 31
Act No. 3344 applies to sale of unregistered lands.
What applies in this case is Act No. 3344,32 as amended, which provides for the system of recording
of transactions over unregistered real estate. Act No. 3344 expressly declares that any registration
made shall be without prejudice to a third party with a better right. The question to be resolved
therefore is: who between petitioners and respondent has a better right to the disputed lot?
Respondent has a better right to the lot.
The sale to respondent Juanito was executed on September 2, 1981 via an unnotarized deed of
sale, while the sale to petitioners was made via a notarized document only on October 17, 1991, or
ten years thereafter. Thus, Juanito who was the first buyer has a better right to the lot, while the
subsequent sale to petitioners is null and void, because when it was made, the seller Garcia was no
longer the owner of the lot. Nemo dat quod non habet.
The fact that the sale to Juanito was not notarized does not alter anything, since the sale between
him and Garcia remains valid nonetheless. Notarization, or the requirement of a public document
under the Civil Code,33 is only for convenience, and not for validity or enforceability.34 And because it
remained valid as between Juanito and Garcia, the latter no longer had the right to sell the lot to
petitioners, for his ownership thereof had ceased.
Nor can petitioners registration of their purchase have any effect on Juanitos rights. The mere
registration of a sale in ones favor does not give him any right over the land if the vendor was no
longer the owner of the land, having previously sold the same to another even if the earlier sale was
unrecorded.35 Neither could it validate the purchase thereof by petitioners, which is null and void.
Registration does not vest title; it is merely the evidence of such title. Our land registration laws do
not give the holder any better title than what he actually has.36
Specifically, we held in Radiowealth Finance Co. v. Palileo37 that:
Under Act No. 3344, registration of instruments affecting unregistered lands is without prejudice to a
third party with a better right. The aforequoted phrase has been held by this Court to mean that the
mere registration of a sale in ones favor does not give him any right over the land if the vendor was
not anymore the owner of the land having previously sold the same to somebody else even if the
earlier sale was unrecorded.

Petitioners defense of prescription, laches and estoppel are unavailing since their claim is based on
a null and void deed of sale. The fact that the Muerteguis failed to interpose any objection to the sale
in petitioners favor does not change anything, nor could it give rise to a right in their favor; their
purchase remains void and ineffective as far as the Muerteguis are concerned.
The award of attorneys fees and litigation expenses is proper because of petitioners bad faith.
Petitioners actual and prior knowledge of the first sale to Juanito makes them purchasers in bad
faith. It also appears that petitioner Atty. Sabitsana was remiss in his duties as counsel to the
Muertegui family. Instead of advising the Muerteguis to register their purchase as soon as possible to
forestall any legal complications that accompany unregistered sales of real property, he did exactly
the opposite: taking advantage of the situation and the information he gathered from his inquiries
and investigation, he bought the very same lot and immediately caused the registration thereof
ahead of his clients, thinking that his purchase and prior registration would prevail. The Court cannot
tolerate this mercenary attitude. Instead of protecting his clients interest, Atty. Sabitsana practically
preyed on him.
Petitioner Atty. Sabitsana took advantage of confidential information disclosed to him by his client,
using the same to defeat him and beat him to the draw, so to speak. He rushed the sale and
registration thereof ahead of his client. He may not be afforded the excuse that he nonetheless
proceeded to buy the lot because he believed or assumed that the Muerteguis were simply bluffing
when Carmen told him that they had already bought the same; this is too convenient an excuse to
be believed. As the Muertegui family lawyer, he had no right to take a position, using information
disclosed to him in confidence by his client, that would place him in possible conflict with his duty. He
may not, for his own personal interest and benefit, gamble on his clients word, believing it at one
time and disbelieving it the next. He owed the Muerteguis his undivided loyalty. He had the duty to
protect the client, at all hazards and costs even to himself. 38
Petitioner Atty. Sabitsana is enjoined to "look at any representation situation from the point of view
that there are possible conflicts, and further to think in terms of impaired loyalty, that is, to evaluate if
his representation in any way will impair his loyalty to a client." 39
Moreover, as the Muertegui familys lawyer, Atty. Sabitsana was under obligation to safeguard his
client's property, and not jeopardize it. Such is his duty as an attorney, and pursuant to his general
agency.40
Even granting that Atty. Sabitsana has ceased to act as the Muertegui family's lawyer, he still owed
them his loyalty. The termination of attorney-client relation provides no justification for a lawyer to
represent an interest adverse to or in conflict with that of the former client on a matter involving
confidential information which the lawyer acquired when he was counsel. The client's confidence
once reposed should not be divested by mere expiration of professional employment. 41 This is
underscored by the fact that Atty. Sabitsana obtained information from Carmen which he used to his
advantage and to the detriment of his client.
1wphi1

from the foregoing disquisition, it can be seen that petitioners are guilty of bad faith in pursuing the
sale of the lot despite being apprised of the prior sale in respondent's favor. Moreover, petitioner Atty.
Sabitsana has exhibited a lack of loyalty toward his clients, the Muerteguis, and by his acts,
jeopardized their interests instead of protecting them. Over and above the trial court's and the CA's
findings, this provides further justification for the award of attorney's fees, litigation expenses and
costs in favor of the respondent.

Thus said, judgment must be rendered in favor of respondent to prevent the petitioners' void sale
from casting a cloud upon his valid title.
WHEREFORE, premises considered, the Petition is DENIED. The January 25, 2007 Decision and
the January 11, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 79250 are AFFIRMED.
Costs against petitioners.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
ARTURO D. BRION
Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice
ATT E S TATI O N
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
G.R. No. 204603

September 24, 2013

REPUBLIC OF THE G.R. No. 204603 PHILIPPINES, represented by THE EXECUTIVE

SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF FOREIGN AFFAIRS, THE
SECRETARY OF NATIONALDEFENSE, THE SECRETARY OF THE INTERIOR AND LOCAL
GOVERNMENT THE SECRETARY OF FINANCE, THE NATIONAL SECURITY ADVISER, THE
SECRETARY OF BUDGET AND MANAGEMENT THE TREASURER OF THE PHILIPPINES, THE
CHIEF OF STAFF OF THE ARMED FORCES OF THE PHILIPPINES, and THE CHIEFOF THE
PHILIPPINE NATIONAL POLICE, Petitioners,
vs.
HERMINIO HARRY ROQUE, MORO CHRISTIAN PEOPLE'S ALLIANCE, FR. JOE DIZON,
RODINIE SORIANO, STEPHANIE ABIERA, MARIA LOURDES ALCAIN, VOLTAIRE ALFEREZ,
CZARINA MAYALTEZ, SHERYL BALOT, RENIZZA BATACAN, EDAN MARRI CAETE, LEANA
CARAMOAN, ALDWIN CAMANCE, RENE DELORINO, PAULYN MAY DUMAN, RODRIGO
FAJARDO III, ANNAMARIE GO, ANNA ARMINDA JIMENEZ, MARY ANN LEE,LUISA
MANALAYSAY, MIGUEL MUSNGI, MICHAEL OCAMPO, NORMAN ROLAND OCANA III,
WILLIAM RAGAMAT, MARICAR RAMOS, CHERRY LOU REYES, MELISSA ANN SICAT,
CRISTINE MAE TABING, VANESSA TORNO, and HON. JUDGE ELEUTERIO L. BATHAN, as
Presiding Judge of Regional Trial Court, Quezon City, Branch 92, Respondents.
RESOLUTION
PERLAS-BERNABE, J.:
Assailed in this petition for certiorari1 are the April 23, 20122 and July 31, 20123 Orders of the
Regional Trial Court of Quezon City, Branch 92(RTC) in Special Civil Action (SCA) No. Q-07-60778,
denying petitioners motion to dismiss (subject motion to dismiss) based on the following grounds:
(a) that the Court had yet to pass upon the constitutionality of Republic Act No. (RA)
9372,4 otherwise known as the "Human Security Act of 2007," in the consolidated cases of Southern
Hemisphere Engagement Network, Inc. v. Anti-Terrorism Council 5 (Southern Hemisphere); and (b)
that private respondents petition for declaratory relief was proper.
The Facts
On July 17, 2007, private respondents filed a Petition6 for declaratory relief before the RTC, assailing
the constitutionality of the following sections of RA 9372: (a) Section 3, 7 for being void for
vagueness;8 (b) Section 7,9for violating the right to privacy of communication and due process and
the privileged nature of priest-penitent relationships; 10 (c)Section 18,11 for violating due process, the
prohibition against ex post facto laws or bills of attainder, the Universal Declaration of Human Rights,
and the International Covenant on Civil and Political Rights, as well as for contradicting Article
12512 of the Revised Penal Code, as amended; 13 (d) Section 26,14 for violating the right to travel;15 and
(e) Section 27,16 for violating the prohibition against unreasonable searches and seizures. 17
Petitioners moved to suspend the proceedings,18 averring that certain petitions (SC petitions) raising
the issue of RA 9372s constitutionality have been lodged before the Court. 19 The said motion was
granted in an Order dated October 19, 2007.20
On October 5, 2010, the Court promulgated its Decision 21 in the Southern Hemisphere cases and
thereby dismissed the SC petitions.

On February 27, 2012, petitioners filed the subject motion to dismiss, 22 contending that private
respondents failed to satisfy the requisites for declaratory relief. Likewise, they averred that the
constitutionality of RA 9372 had already been upheld by the Court in the Southern Hemisphere
cases.
In their Comment/Opposition,23 private respondents countered that: (a) the Court did not resolve the
issue of RA 9372s constitutionality in Southern Hemisphere as the SC petitions were dismissed
based purely on technical grounds; and (b) the requisites for declaratory relief were met.
The RTC Ruling
On April 23, 2012, the RTC issued an Order24 which denied the subject motion to dismiss, finding
that the Court did not pass upon the constitutionality of RA 9372 and that private respondents
petition for declaratory relief was properly filed.
Petitioners moved for reconsideration25 which was, however, denied by the RTC in an Order dated
July 31, 2012.26 The RTC observed that private respondents have personal and substantial interests
in the case and that it would be illogical to await the adverse consequences of the aforesaid laws
implementation considering that the case is of paramount impact to the Filipino people. 27
Hence, the instant petition.
The Issues Before the Court
The present controversy revolves around the issue of whether or not the RTC gravely abused its
discretion when it denied the subject motion to dismiss.
Asserting the affirmative, petitioners argue that private respondents failed to satisfy the requirements
for declaratory relief and that the Court had already sustained with finality the constitutionality of RA
9372.
On the contrary, private respondents maintain that the requirements for declaratory relief have been
satisfied and that the Court has yet to resolve the constitutionality of RA 9372, negating any grave
abuse of discretion on the RTCs part.
The Courts Ruling
The petition is meritorious.
An act of a court or tribunal can only be considered as with grave abuse of discretion when such act
is done in a capricious or whimsical exercise of judgment as is equivalent to lack of jurisdiction. 28 It is
well-settled that the abuse of discretion to be qualified as "grave" must be so patent or gross as to
constitute an evasion of a positive duty or a virtual refusal to perform the duty or to act at all in
contemplation of law.29 In this relation, case law states that not every error in the proceedings, or
every erroneous conclusion of law or fact, constitutes grave abuse of discretion. 30 The degree of
gravity, as above-described, must be met.
Applying these principles, the Court observes that while no grave abuse of discretion could be
ascribed on the part of the RTC when it found that the Court did not pass upon the constitutionality
of RA 9372 in the Southern Hemisphere cases, it, however, exceeded its jurisdiction when it ruled

that private respondents petition had met all the requisites for an action for declaratory relief.
Consequently, its denial of the subject motion to dismiss was altogether improper.
To elucidate, it is clear that the Court, in Southern Hemisphere, did not make any definitive ruling on
the constitutionality of RA 9372. The certiorari petitions in those consolidated cases were dismissed
based solely on procedural grounds, namely: (a) the remedy of certiorari was improper; 31 (b)
petitioners therein lack locus standi;32 and (c) petitioners therein failed to present an actual case or
controversy.33 Therefore, there was no grave abuse of discretion.
The same conclusion cannot, however, be reached with regard to the RTCs ruling on the sufficiency
of private respondents petition for declaratory relief.
Case law states that the following are the requisites for an action for declaratory relief:
first , the subject matter of the controversy must be a deed, will, contract or other written instrument,
statute, executive order or regulation, or ordinance; second , the terms of said documents and the
validity thereof are doubtful and require judicial construction; third , there must have been no breach
of the documents in question; fourth , there must be an actual justiciable controversy or the "ripening
seeds" of one between persons whose interests are adverse; fifth , the issue must be ripe for judicial
determination; and sixth , adequate relief is not available through other means or other forms of
action or proceeding.34
Based on a judicious review of the records, the Court observes that while the first, 35 second,36 and
third37requirements appear to exist in this case, the fourth, fifth, and sixth requirements, however,
remain wanting.
As to the fourth requisite, there is serious doubt that an actual justiciable controversy or the "ripening
seeds" of one exists in this case.
Pertinently, a justiciable controversy refers to an existing case or controversy that is appropriate or
ripe for judicial determination, not one that is conjectural or merely anticipatory.38 Corollary thereto,
by "ripening seeds" it is meant, not that sufficient accrued facts may be dispensed with, but that a
dispute may be tried at its inception before it has accumulated the asperity, distemper, animosity,
passion, and violence of a full blown battle that looms ahead. The concept describes a state of facts
indicating imminent and inevitable litigation provided that the issue is not settled and stabilized by
tranquilizing declaration.39
A perusal of private respondents petition for declaratory relief would show that they have failed to
demonstrate how they are left to sustain or are in immediate danger to sustain some direct injury as
a result of the enforcement of the assailed provisions of RA 9372. Not far removed from the factual
milieu in the Southern Hemisphere cases, private respondents only assert general interests as
citizens, and taxpayers and infractions which the government could prospectively commit if the
enforcement of the said law would remain untrammeled. As their petition would disclose, private
respondents fear of prosecution was solely based on remarks of certain government officials which
were addressed to the general public.40 They, however, failed to show how these remarks tended
towards any prosecutorial or governmental action geared towards the implementation of RA 9372
against them. In other words, there was no particular, real or imminent threat to any of them. As held
in Southern Hemisphere:
Without any justiciable controversy, the petitions have become pleas for declaratory relief, over
which the Court has no original jurisdiction. Then again, declaratory actions characterized by "double

contingency," where both the activity the petitioners intend to undertake and the anticipated reaction
to it of a public official are merely theorized, lie beyond judicial review for lack of ripeness.
1wphi1

The possibility of abuse in the implementation of RA 9372does not avail to take the present petitions
out of the realm of the surreal and merely imagined. Such possibility is not peculiar to RA 9372 since
the exercise of any power granted by law may be abused. Allegations of abuse must be anchored on
real events before courts may step in to settle actual controversies involving rights which are legally
demandable and enforceable.41 (Emphasis supplied; citations omitted)
Thus, in the same light that the Court dismissed the SC petitions in the Southern Hemisphere cases
on the basis of, among others, lack of actual justiciable controversy (or the ripening seeds of one),
the RTC should have dismissed private respondents petition for declaratory relief all the same.
It is well to note that private respondents also lack the required locus standi to mount their
constitutional challenge against the implementation of the above-stated provisions of RA 9372 since
they have not shown any direct and personal interest in the case. 42 While it has been previously held
that transcendental public importance dispenses with the requirement that the petitioner has
experienced or is in actual danger of suffering direct and personal injury,43 it must be stressed that
cases involving the constitutionality of penal legislation belong to an altogether different genus of
constitutional litigation.44 Towards this end, compelling State and societal interests in the proscription
of harmful conduct necessitate a closer judicial scrutiny of locus standi, 45 as in this case. To rule
otherwise, would be to corrupt the settled doctrine of locus standi, as every worthy cause is an
interest shared by the general public.46
As to the fifth requisite for an action for declaratory relief, neither can it be inferred that the
controversy at hand is ripe for adjudication since the possibility of abuse, based on the abovediscussed allegations in private respondents petition, remain highly-speculative and merely
theorized. It is well-settled that a question is ripe for adjudication when the act being challenged has
had a direct adverse effect on the individual challenging it. 47 This private respondents failed to
demonstrate in the case at bar.
1wphi1

Finally, as regards the sixth requisite, the Court finds it irrelevant to proceed with a discussion on the
availability of adequate reliefs since no impending threat or injury to the private respondents exists in
the first place.
All told, in view of the absence of the fourth and fifth requisites for an action for declaratory relief, as
well as the irrelevance of the sixth requisite, private respondents petition for declaratory relief should
have been dismissed. Thus, by giving due course to the same, it cannot be gainsaid that the RTC
gravely abused its discretion.
WHEREFORE, the petition is GRANTED. Accordingly, the April23, 2012 and July 31, 2012 Orders of
the Regional Trial Court of Quezon City, Branch 92 in SCA No. Q-07-60778 are REVERSED and
SET ASIDE and the petition for declaratory relief before the said court is hereby DISMISSED.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice
ANTONIO T. CARPIO
Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

On Leave
ARTURO D. BRION*
Associate Justice

On Official Leave
DIOSDADO M. PERALTA**
Associate Justice

On Official Leave
LUCAS P. BERSAMIN**
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ROBERTO A. ABAD
Associate Justice

On Leave
MARTIN S. VILLARAMA, JR.*
Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

On Official Leave
JOSE CATRAL MENDOZA**
Associate Justice

BIENVENIDO L. REYES
Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice
C E R TI F I C ATI O N
I certify that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Court.
MARIA LOURDES P. A. SERENO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 206987

September 10, 2013

ALLIANCE FOR NATIONALISM AND DEMOCRACY (ANAD), Petitioner,

vs.
COMMISSION ON ELECTIONS, Respondent.
DECISION
PEREZ, J.:
Before the Court is a Petition for Certiorari with Urgent Prayer for the Issuance of a Temporary
Restraining Order and Writ of Mandamus, seeking to compel the Commission on Elections
(COMELEC) to canvass the votes cast for petitioner Alliance for Nationalism and Democracy
(ANAD) in the recently held 2013 Party-List Elections.
On 7 November 2012, the COMELEC En Banc promulgated a Resolution canceling petitioners
Certificate of Registration and/or Accreditation on three grounds, to wit: 1
I.
Petitioner ANAD does not belong to, or come within the ambit of, the marginalized and
underrepresented sectors enumerated in Section 5 of R.A. No. 7941 and espoused in the
cases of Ang Bagong Bayani-OFW Labor Party v. Commission on Elections and Ang Ladlad
LGBT Party v. Commission on Elections.
II.
There is no proof showing that nominees Arthur J. Tariman and Julius D. Labandria are
actually nominated by ANAD itself. The Certificate of Nomination, subscribed and sworn to
by Mr. Domingo M.Balang, shows that ANAD submitted only the names of Pastor Montero
Alcover, Jr., Baltaire Q. Balangauan and Atty. Pedro Leslie B. Salva. It necessarily follows,
that having only three (3) nominees, ANAD failed to comply with the procedural requirements
set forth in Section 4, Rule 3 of Resolution No. 9366.
III.
ANAD failed to submit its Statement of Contributions and Expenditures for the 2007 National and
Local Elections as required by Section 14 of Republic Act No. 7166 ("R.A. No. 7166").
ANAD went before this Court challenging the above-mentioned resolution. In Atong Paglaum, Inc. v.
Comelec,2 the Court remanded the case to the COMELEC for re-evaluation in accordance with the
parameters prescribed in the aforesaid decision.
In the assailed Resolution dated 11 May 2013, 3 the COMELEC affirmed the cancellation of
petitioners Certificate of Registration and/or Accreditation and disqualified it from participating in the
2013 Elections. The COMELEC held that while ANAD can be classified as a sectoral party lacking in
well-defined political constituencies, its disqualification still subsists for violation of election laws and
regulations, particularly for its failure to submit at least five nominees, and for its failure to submit its
Statement of Contributions and Expenditures for the 2007 Elections.
Hence, the present petition raising the issues of whether or not the COMELEC gravely abused its
discretion in promulgating the assailed Resolution without the benefit of a summary evidentiary
hearing mandated by the due process clause, and whether or not the COMELEC erred in finding

that petitioner submitted only three nominees and that it failed to submit its Statement of
Contributions and Expenditures in the 2007Elections. 4
We dismiss the petition.
The only question that may be raised in a petition for certiorari under Section 2, Rule 64 of the Rules
of Court is whether or not the COMELEC acted with grave abuse of discretion amounting to lack or
excess of jurisdiction. For a petition for certiorari to prosper, there must be a clear showing of caprice
and arbitrariness in the exercise of discretion.5
"Grave abuse of discretion," under Rule 65, has a specific meaning. It is the arbitrary or despotic
exercise of power due to passion, prejudice or personal hostility; or the whimsical, arbitrary, or
capricious exercise of power that amounts to an evasion or a refusal to perform a positive duty
enjoined by law or to act at all in contemplation of law. For an act to be struck down as having been
done with grave abuse of discretion, the abuse of discretion must be patent and gross. 6
ANAD claims that the COMELEC gravely abused its discretion when it promulgated the assailed
Resolution without giving ANAD the benefit of a summary evidentiary hearing, thus violating its right
to due process. It is to be noted, however, that ANAD was already afforded a summary hearing on23
August 2013, during which Mr. Domingo M. Balang, ANADs president, authenticated documents and
answered questions from the members of the COMELEC pertinent to ANADs qualifications. 7
ANAD, nonetheless, insists that the COMELEC should have called for another summary hearing
after this Court remanded the case to the COMELEC for re-evaluation in accordance with the
parameters laid down in Atong Paglaum, Inc. v. Comelec . This is a superfluity.
ANAD was already given the opportunity to prove its qualifications during the summary hearing of 23
August 2012, during which ANAD submitted documents and other pieces of evidence to establish
said qualifications. In re-evaluating ANADs qualifications in accordance with the parameters laid
down in Atong Paglaum, Inc. v. COMELEC , the COMELEC need not have called another summary
hearing. The Comelec could, as in fact it did, 8 readily resort to documents and other pieces of
evidence previously submitted by petitioners in re-appraising ANADs qualifications. After all, it can
be presumed that the qualifications, or lack thereof, which were established during the summary
hearing of 23 August2012 continued until election day and even there after.
As to ANADs averment that the COMELEC erred in finding that it violated election laws and
regulations, we hold that the COMELEC, being a specialized agency tasked with the supervision of
elections all over the country, its factual findings, conclusions, rulings and decisions rendered on
matters falling within its competence shall not be interfered with by this Court in the absence of
grave abuse of discretion or any jurisdictional infirmity or error of law.9
As found by the COMELEC, ANAD, for unknown reasons, submitted only three nominees instead of
five, in violation of Sec. 8 of R.A. No. 7941( An Act Providing for the Election of Party-List
Representatives through the Party-List System, and Appropriating Funds Therefor). 10 Such factual
finding of the COMELEC was based on the Certificate of Nomination presented and marked by
petitioner during the 22 and 23 August 2012summary hearings. 11
Compliance with Section 8 of R.A. No. 7941 is essential as the said provision is a safeguard against
arbitrariness. Section 8 of R.A. No. 7941rids a party-list organization of the prerogative to substitute
and replace its nominees, or even to switch the order of the nominees, after submission of the list to
the COMELEC.
1wphi1

In Lokin, Jr. v. Comelec,12 the Court discussed the importance of Sec.8 of R.A. No. 7941 in this wise:
The prohibition is not arbitrary or capricious; neither is it without reason on the part of lawmakers.
The COMELEC can rightly presume from the submission of the list that the list reflects the true will of
the party-list organization. The COMELEC will not concern itself with whether or not the list contains
the real intended nominees of the party-list organization, but will only determine whether the
nominees pass all the requirements prescribed by the law and whether or not the nominees possess
all the qualifications and none of the disqualifications. Thereafter, the names of the nominees will be
published in newspapers of general circulation. Although the people vote for the party-list
organization itself in a party-list system of election, not for the individual nominees, they still have the
right to know who the nominees of any particular party-list organization are. The publication of the
list of the party-list nominees in newspapers of general circulation serves that right of the people,
enabling the voters to make intelligent and informed choices. In contrast, allowing the party-list
organization to change its nominees through withdrawal of their nominations, or to alter the order of
the nominations after the submission of the list of nominees circumvents the voters demand for
transparency. The lawmakers exclusion of such arbitrary withdrawal has eliminated the possibility of
such circumvention.
Moreover, the COMELEC also noted ANADs failure to submit a proper Statement of Contributions
and Expenditures for the 2007 Elections, in violation of COMELEC Resolution No. 9476, viz:
Rule 8, Sec. 3. Form and contents of statements. The statement required in next preceding section
shall be in writing, subscribed and sworn to by the candidate or by the treasurer of the party. It shall
set forth in detail the following:
a. The amount of contribution, the date of receipt, and the full name, profession, business,
taxpayer identification number (TIN) and exact home and business address of the person or
entity from whom the contribution was received; (See Schedule of Contributions Received,
Annex "G")
b. The amount of every expenditure, the date thereof, the full name and exact address of the
person or entity to whom payment was made, and the purpose of the expenditure; (See
Schedule of Expenditures, Annex "H")
A Summary Report of Lawful Expenditure categorized according to the list specified above
shall be submitted by the candidate or party treasurer within thirty (30) days after the day of
the election. The prescribed form for this Summary Report is hereby attached to these Rules
as Annex "H-1."
c. Any unpaid obligation, its nature and amount, the full name and exact home and business
address of the person or entity to whom said obligation is owing; and (See Schedule of
Unpaid Obligations, Annex "I")
d. If the candidate or treasurer of the party has received no contribution, made no
expenditure, or has no pending obligation, the statement shall reflect such fact;
e. And such other information that the Commission may require.
The prescribed form for the Statement of Election Contributions and Expenses is attached to these
Rules as Annex "F." The Schedules of Contributions and Expenditures (Annexes "G" and "H",

respectively) should be supported and accompanied by certified true copies of official receipts,
invoices and other similar documents.
An incomplete statement, or a statement that does not contain all the required information and
attachments, or does not conform to the prescribed form, shall be considered as not filed and shall
subject the candidate or party treasurer to the penalties prescribed by law.
As found by the COMELEC, ANAD failed to comply with the above-mentioned requirements as the
exhibits submitted by ANAD consisted mainly of a list of total contributions from other persons, a list
of official receipts and amounts without corresponding receipts, and a list of expenditures based on
order slips and donations without distinction as to whether the amounts listed were advanced subject
to reimbursement or donated.13 This factual finding was neither contested nor rebutted by ANAD.
We herein take the opportunity to reiterate the well-established principle that the rule that factual
findings of administrative bodies will not be disturbed by the courts of justice except when there is
absolutely no evidence or no substantial evidence in support of such findings should be applied with
greater force when it concerns the COMELEC, as the framers of the Constitution intended to place
the COMELEC created and explicitly made independent by the Constitution itself on a level
higher than statutory administrative organs. The COMELEC has broad powers to ascertain the true
results of the election by means available to it. For the attainment of that end, it is not strictly bound
by the rules of evidence.14
As empowered by law, the COMELEC may motu proprio cancel, after due notice and hearing, the
registration of any party-list organization if it violates or fails to comply with laws, rules or regulations
relating to elections.15 Thus, we find no grave abuse of discretion on the part of the COMELEC when
it issued the assailed Resolution dated 11 May 2013.
In any event, the official tally results of the COMELEC show that ANAD garnered 200,972 votes. 16 As
such, even if petitioner is declared qualified and the votes cast for it are canvassed, statistics show
that it will still fail to qualify for a seat in the House of Representatives.
WHEREFORE, premises considered, the Court Resolves to DISMISS the Petition, finding no grave
abuse of discretion on the part of the Commission on Elections.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice

ANTONIO T. CARPIO
Associate Justice

(No part)
PRESBITERO J. VELASCO, JR.*
Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ROBERTO A. ABAD
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

BIENVENIDO L. REYES
Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court.
MARIA LOURDES P. A. SERENO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 200804

January 22, 2014

A.L. ANG NETWORK, INC., Petitioner,

vs.
EMMA MONDEJAR, accompanied by her husband, EFREN MONDEJAR, Respondent.
RESOLUTION
PERLAS-BERNABE, J.:
This is a direct recourse to the Court from the Decision dated November 23, 2011and Order dated
February 16, 2012 of the Regional Trial Court of Bacolod City, Branch 45 (RTC) in RTC Case No. 1113833 which dismissed, on the ground of improper remedy, petitioner A.L. Ang Network, Inc.'s
(petitioner) petition for certiorari from the Decision dated June 10, 2011 of the Municipal Trial Court
1

in Cities of Bacolod City, Branch 4 (MTCC) in Civil Case No. SCC-1436, a small claims case for sum
of money against respondent Emma Mondejar (respondent).
The Facts
On March 23, 2011, petitioner filed a complaint for sum of money under the Rule of Procedure for
Small Claims Cases before the MTCC, seeking to collect from respondent the amount of P23,111.71
which represented her unpaid water bills for the period June 1, 2002 to September 30, 2005.
5

Petitioner claimed that it was duly authorized to supply water to and collect payment therefor from
the homeowners of Regent Pearl Subdivision, one of whom is respondent who owns and occupies
Lot 8, Block 3 of said subdivision. From June 1, 2002 until September 30, 2005, respondent and her
family consumed a total of 1,150 cubic meters (cu. m.) of water, which upon application of the
agreed rate of P113.00 for every 10 cu. m. of water, plus an additional charge of P11.60 for every
additional cu. m. of water, amounted to P28,580.09. However, respondent only paid the amount
of P5,468.38, thus, leaving a balance of P23,111.71 which was left unpaid despite petitioners
repeated demands.
8

In defense, respondent contended that since April 1998 up to February 2003, she religiously paid
petitioner the agreed monthly flat rate of P75.00 for her water consumption. Notwithstanding their
agreement that the same would be adjusted only upon prior notice to the homeowners, petitioner
unilaterally charged her unreasonable and excessive adjustments (at the average of 40 cu. m. of
water per month or 1.3 cu. m. of water a day) far above the average daily water consumption for a
household of only 3 persons. She also questioned the propriety and/or basis of the
aforesaid P23,111.71 claim.
10

In the interim, petitioner disconnected respondents water line for not paying the adjusted water
charges since March 2003 up to August 2005.
11

The MTCC Ruling

On June 10, 2011, the MTCC rendered a Decision holding that since petitioner was issued a
Certificate of Public Convenience (CPC)13 by the National Water Resources Board (NWRB) only on
August 7, 2003, then, it can only charge respondent the agreed flat rate of P75.00 per month prior
thereto or the sum of P1,050.00 for the period June 1, 2002 to August 7, 2003. Thus, given that
respondent had made total payments equivalent to P1,685.99 for the same period, she should be
considered to have fully paid petitioner.
12

14

The MTCC disregarded petitioners reliance on the Housing and Land Use Regulatory Boards
(HLURB) Decision dated August 17, 2000 in HLURB Case No. REM C6-00-001 entitled Nollie B.
Apura, et al. v. Dona Carmen I Subdivision, et al., as source of its authority to impose new water
consumption rates for water consumed from June 1, 2002 to August 7, 2003 in the absence of proof
(a) that petitioner complied with the directive to inform the HLURB of the result of its consultation
with the concerned homeowners as regards the rates to be charged, and (b) that the HLURB
approved of the same.
15

16

Moreover, the MTCC noted that petitioner failed to submit evidence showing (a) the exact date when
it actually began imposing the NWRB approved rates; and (b) that the parties had a formal
agreement containing the terms and conditions thereof, without which it cannot establish with
certainty respondents obligation. Accordingly, it ruled that the earlier agreed rate of P75.00 per
month should still be the basis for respondents water consumption charges for the period August 8,
2003 to September 30, 2005. Based on petitioners computation, respondent had only paid P300.00
17

18

of her P1,500.00 obligation for said period. Thus, it ordered respondent to pay petitioner the balance
thereof, equivalent to P1,200.00 with legal interest at the rate of 6% per annum from date of receipt
of the extrajudicial demand on October 14, 2010 until fully paid.
19

Aggrieved, petitioner filed a petition for certiorari under Rule 65 of the Rules of Court before the
RTC, ascribing grave abuse of discretion on the part of the MTCC in finding that it (petitioner) failed
to establish with certainty respondents obligation, and in not ordering the latter to pay the full
amount sought to be collected.
20

The RTC Ruling

On November 23, 2011, the RTC issued a Decision dismissing the petition for certiorari, finding that
the said petition was only filed to circumvent the non-appealable nature of small claims cases as
provided under Section 23 of the Rule of Procedure on Small Claims Cases. To this end, the RTC
ruled that it cannot supplant the decision of the MTCC with another decision directing respondent to
pay petitioner a bigger sum than that which has been awarded.
21

22

Petitioner moved for reconsideration but was denied in an Order dated February 16, 2012, hence,
the instant petition.
23

24

The Issue Before the Court

The sole issue in this case is whether or not the RTC erred in dismissing petitioners recourse under
Rule 65 of the Rules of Court assailing the propriety of the MTCC Decision in the subject small
claims case.
The Courts Ruling
The petition is meritorious.
Section 23 of the Rule of Procedure for Small Claims Cases states that:
SEC. 23. Decision. After the hearing, the court shall render its decision on the same day, based
on the facts established by the evidence (Form 13-SCC). The decision shall immediately be entered
by the Clerk of Court in the court docket for civil cases and a copy thereof forthwith served on the
parties.
The decision shall be final and unappealable.
Considering the final nature of a small claims case decision under the above-stated rule, the remedy
of appeal is not allowed, and the prevailing party may, thus, immediately move for its
execution. Nevertheless, the proscription on appeals in small claims cases, similar to other
proceedings where appeal is not an available remedy, does not preclude the aggrieved party from
filing a petition for certiorari under Rule 65 of the Rules of Court. This general rule has been
enunciated in the case of Okada v. Security Pacific Assurance Corporation, wherein it was held that:
25

26

27

In a long line of cases, the Court has consistently ruled that "the extraordinary writ of certiorari is
always available where there is no appeal or any other plain, speedy and adequate remedy in the
ordinary course of law." In Jaca v. Davao Lumber Co., the Court ruled:

x x x Although Section 1, Rule 65 of the Rules of Court provides that the special civil action of
certiorari may only be invoked when "there is no appeal, nor any plain, speedy and adequate
remedy in the course of law," this rule is not without exception. The availability of the ordinary course
of appeal does not constitute sufficient ground to prevent a party from making use of the
extraordinary remedy of certiorari where appeal is not an adequate remedy or equally beneficial,
speedy and sufficient. It is the inadequacy not the mere absence of all other legal remedies and
the danger of failure of justice without the writ that usually determines the propriety of certiorari.
This ruling was reiterated in Conti v. Court of Appeals:
Truly, an essential requisite for the availability of the extraordinary remedies under the Rules is an
absence of an appeal nor any "plain, speedy and adequate remedy" in the ordinary course of law,
one which has been so defined as a "remedy which (would) equally (be) beneficial, speedy and
sufficient not merely a remedy which at some time in the future will bring about a revival of the
judgment x x x complained of in the certiorari proceeding, but a remedy which will promptly relieve
the petitioner from the injurious effects of that judgment and the acts of the inferior court or tribunal"
concerned. x x x (Emphasis supplied)
In this relation, it may not be amiss to placate the RTCs apprehension that respondents recourse
before it (was only filed to circumvent the non-appealable nature of [small claims cases], because it
asks [the court] to supplant the decision of the lower [c]ourt with another decision directing the
private respondent to pay the petitioner a bigger sum than what has been awarded." Verily, a
petition for certiorari, unlike an appeal, is an original action designed to correct only errors of
jurisdiction and not of judgment. Owing to its nature, it is therefore incumbent upon petitioner to
establish that jurisdictional errors tainted the MTCC Decision. The RTC, in turn, could either grant or
dismiss the petition based on an evaluation of whether or not the MTCC gravely abused its
discretion by capriciously, whimsically, or arbitrarily disregarding evidence that is material to the
controversy.
28

29

30

In view of the foregoing, the Court thus finds that petitioner correctly availed of the remedy of
certiorari to assail the propriety of the MTCC Decision in the subject small claims case, contrary to
the RTCs ruling.
Likewise, the Court finds that petitioner filed the said petition before the proper forum (i.e., the
RTC). To be sure, the Court, the Court of Appeals and the Regional Trial Courts have concurrent
jurisdiction to issue a writ of certiorari. Such concurrence of jurisdiction, however, does not give a
party unbridled freedom to choose the venue of his action lest he ran afoul of the doctrine of
hierarchy of courts. Instead, a becoming regard for judicial hierarchy dictates that petitions for the
issuance of writs of certiorari against first level courts should be filed with the Regional Trial Court,
and those against the latter, with the Court of Appeals, before resort may be had before the
Court. This procedure is also in consonance with Section 4, Rule 65 of the Rules of Court.
1wphi1

31

32

33

Hence, considering that small claims cases are exclusively within the jurisdiction of the Metropolitan
Trial Courts, Municipal Trial Courts in Cities, Municipal Trial Courts, and Municipal Circuit Trial
Courts, certiorari petitions assailing its dispositions should be filed before their corresponding
Regional Trial Courts. This petitioner complied with when it instituted its petition for certiorari before
the RTC which, as previously mentioned, has jurisdiction over the same. In fine, the RTC erred in
dismissing the said petition on the ground that it was an improper remedy, and, as such, RTC Case
No. 11-13833 must be reinstated and remanded thereto for its proper disposition.
34

WHEREFORE, the petition is GRANTED. The Decision dated November 23, 2011 and Resolution
dated February 16, 2012 of the Regional Trial Court of Bacolod City, Branch 45 are REVERSED and

SET ASIDE. RTC Case No. 11-13833 is hereby REINSTATED and the court a quo is ordered to
resolve the same with dispatch.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
ARTURO D. BRION
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice
ATT E S TATI O N
I attest that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, I
certify that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice
FIRST DIVISION
G.R. No. 190566, December 11, 2013
MARK JEROME S. MAGLALANG, Petitioners, v.PHILIPPINE AMUSEMENT AND
GAMINGCORPORATION (PAGCOR), AS REPRESENTED BY ITS INCUMBENTCHAIRMAN
EFRAIM GENUINO, Respondent.
DECISION
VILLARAMA, JR., J.:

Before this Court is a petition1 for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, seeking the reversal of the Resolution 2 dated September 30, 2009 issued by
the Court of Appeals (CA) in CA-G.R. SP No. 110048, which outrightly dismissed the petition for
certiorari filed by herein petitioner Mark Jerome S. Maglalang (petitioner). Also assailed is the
appellate courts Resolution3 dated November 26, 2009 which denied petitioners motion for
reconsideration.
The facts follow.
Petitioner was a teller at the Casino Filipino, Angeles City Branch, Angeles City, which was operated by
respondent Philippine Amusement and Gaming Corporation (PAGCOR), a government-owned or
controlled corporation existing by virtue of Presidential Decree (P.D.) No. 1869. 4
Petitioner alleged that in the afternoon of December 13, 2008, while he was performing his functions
as teller, a lady customer identified later as one Cecilia Nakasato 5 (Cecilia) approached him in his
booth and handed to him an undetermined amount of cash consisting of mixed P1,000.00 and
P500.00 bills. There were 45 P1,000.00 and ten P500.00 bills for the total amount of P50,000.00.
Following casino procedure, petitioner laid the bills on the spreading board. However, he erroneously
spread the bills into only four clusters instead of five clusters worth P10,000.00 per cluster. He then
placed markers for P10,000.00 each cluster of cash and declared the total amount of P40,000.00 to
Cecilia. Perplexed, Cecilia asked petitioner why the latter only dished out P40,000.00. She then
pointed to the first cluster of bills and requested petitioner to check the first cluster which she
observed to be thicker than the others. Petitioner performed a recount and found that the said cluster
contained20 pieces of P1,000.00 bills. Petitioner apologized to Cecilia and rectified the error by
declaring the full and correct amount handed to him by the latter. Petitioner, however, averred that
Cecilia accused him of trying to shortchange her and that petitioner tried to deliberately fool her of her
money. Petitioner tried to explain, but Cecilia allegedly continued to berate and curse him. To ease the
tension, petitioner was asked to take a break. After ten minutes, petitioner returned to his booth.
However, Cecilia allegedly showed up and continued to berate petitioner. As a result, the two of them
were invited to the casinos Internal Security Office in order to air their respective sides. Thereafter,
petitioner was required to file an Incident Report which he submitted on the same day of the incident. 6
On January 8, 2009, petitioner received a Memorandum 7issued by the casinos Branch Manager,
Alexander Ozaeta, informing him that he was being charged with Discourtesy towards a casino
customer and directing him to explain within 72 hours upon receipt of the memorandum why he
should not be sanctioned or dismissed. Incompliance therewith, petitioner submitted a letterexplanation8 dated January 10, 2009.
On March 31, 2009, petitioner received another Memorandum 9dated March 19, 2009, stating that the
Board of Directors of PAGCOR found him guilty of Discourtesy towards a casino customer and imposed
on him a 30-day suspension for this first offense. Aggrieved, on April 2, 2009, petitioner filed a Motion

for Reconsideration10 seeking a reversal of the boards decision and further prayed in the alternative
that if he is indeed found guilty as charged, the penalty be only a reprimand as it is the appropriate
penalty. During the pendency of said motion, petitioner also filed a Motion for Production 11 dated April
20, 2009, praying that he be furnished with copies of documents relative to the case including the
recommendation of the investigating committee and the Decision/Resolution of the Board supposedly
containing the latters factual findings. In a letter-reply 12dated June 2, 2009, one Atty. Carlos R.
Bautista, Jr. who did not indicate his authority therein to represent PAGCOR, denied the said motion.
Petitioner received said letter-reply on June 17, 2009.
Subsequently, on June 18, 2009, PAGCOR issued a Memorandum 13 dated June 18, 2009 practically
reiterating the contents of its March 19, 2009 Memorandum. Attached therewith is another
Memorandum14 dated June 8, 2009 issued by PAGCORs Assistant Vice President for Human Resource
and Development, Atty. Lizette F. Mortel, informing petitioner that the Board of Directors in its meeting
on May 13, 2009 resolved to deny his appeal for reconsideration for lack of merit. Petitioner received
said memoranda on the same date of June 18, 2009.
On August 17, 2009, petitioner filed a petition 15 for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure, as amended,before the CA,averring that there is no evidence, much less factual and legal
basis to support the finding of guilt against him. Moreover, petitioner ascribed grave abuse of
discretion amounting to lack or excess of jurisdiction to the acts of PAGCOR in adjudging him guilty of
the charge, in failing to observe the proper procedure in the rendition of its decision and in imposing
the harsh penalty of a 30-day suspension. Justifying his recourse to the CA, petitioner explained that
he did not appeal to the Civil Service Commission (CSC) because the penalty imposed on him was only
a 30-day suspension which is not within the CSCs appellate jurisdiction. He also claimed that
discourtesy in the performance of official duties is classified as a light offense which is punishable only
by reprimand.
In its assailed Resolution16 dated September 30, 2009, the CA outrightly dismissed the petition for
certiorari for being premature as petitioner failed to exhaust administrative remedies before seeking
recourse from the CA.Invoking Section 2(1), Article IX-B of the 1987 Constitution,17 the CA held that
the CSC has jurisdiction over issues involving the employer-employee relationship in all branches,
subdivisions, instrumentalities and agencies of the Government, including government-owned or
controlled corporations with original charters such as PAGCOR. Petitioner filed his Motion for
Reconsideration18 which the CA denied in the assailed Resolution 19 dated November 26, 2009. In
denying the said motion, the CA relied on this Courts ruling in Duty Free Philippines v.
Mojica20 citing Philippine Amusement and Gaming Corp. v. CA,21 where this Court held as follows:
It is now settled that, conformably to Article IX-B, Section 2(1), [of the 1987 Constitution]
government-owned or controlled corporations shall be considered part of the Civil Service only if they
have original charters, as distinguished from those created under general law.
PAGCOR belongs to the Civil Service because it was created directly by PD 1869 on July 11, 1983.
Consequently, controversies concerning the relations of the employee with the management of
PAGCOR should come under the jurisdiction of the Merit System Protection Board and the Civil Service

Commission, conformably to the Administrative Code of 1987.

Section 16(2) of the said Code vest[s] in the Merit System Protection Board the power inter alia to:
a) Hear and decide on appeal administrative cases involving officials and employees of the Civil
Service. Its decision shall be final except those involving dismissal or separation from the service
which may be appealed to the Commission.
Hence, this petitionwhere petitioner argues that the CA committed grave and substantial error of
judgment
1.

IN OUTRIGHTLY DISMISSING THE PETITION FOR CERTIORARI FILED BY PETITIONER AND IN

DENYING THE LATTERS MOTION FOR RECONSIDERATION[;]

2.

IN RULING THAT THE CIVIL SERVICE COMMISSION HAS APPELLATE JURISDICTION OVER THE
SUSPENSION OF THE PETITIONER DESPITE THE FACT THAT THE PENALTY INVOLVED IS NOT
MORE THAN THIRTY (30) DAYS[;]

3.

IN RESOLVING THE PETITION FOR CERTIORARI FILED BY PETITIONER IN A MANNER WHICH

IS UTTERLY CONTRARY TO LAW AND JURISPRUDENCE[;]

4.

IN UNJUSTIFIABLY REFUSING TO RENDER A DECISION AS TO THE PROPRIETY OR VALIDITY

OF THE SUSPENSION OF THE PETITIONER BY THE RESPONDENT[;]

5.

IN UNDULY REFUSING TO RENDER A DECISION DECLARING THAT THE ASSAILED

DECISIONS/RESOLUTIONS OF THE RESPONDENT ARE NOT SUPPORTED BY THE EVIDENCE ON
RECORD[; AND]

6.

IN UNJUSTIFIABLY REFUSING TO RENDER A DECISION DECLARING THAT THE ASSAILED

DECISIONS/RESOLUTIONS OF RESPONDENT WERE ISSUED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION.22

Petitioner claims that the CA clearly overlooked the applicable laws and jurisprudence that provide that
when the penalty involved in an administrative case is suspension for not more than 30 days, the CSC
has no appellate jurisdiction over the said administrative case. As authority, petitioner invokes our
ruling in Geronga v. Hon. Varela23 which cited Section 47,24 Chapter 1, Subtitle A, Title I, Book V of
Executive Order (E.O.) No. 292 otherwise known as The Administrative Code of 1987. Said Section 47
provides that the CSC may entertain appeals only, among others, from a penalty of suspension of
more than 30 days. Petitioner asserts that his case, involving a 30-day suspension penalty, is not
appealable to the CSC. Thus, he submits that his case was properly brought before the CA via a
petition for certiorari. 25
On the other hand, PAGCOR alleges that petitioner intentionally omitted relevant matters in his
statement of facts. PAGCOR essentially claims that petitioner refused to apologize to Cecilia; that he
treated Cecilias complaint with arrogance; and that before taking the aforementioned 10-minute
break, petitioner slammed the cash to the counter window in giving it back to the customer. PAGCOR
argues that the instant petition raises questions of fact which are not reviewable in a petition for
review on certiorari. PAGCOR maintains that the CAs ruling was in accordance with law and

jurisprudence. Moreover, PAGCOR counters that petitioners remedy of appeal is limited as Section 37
of theRevised Uniform Rules on Administrative Cases in the Civil Service provides that a decision
rendered by heads of agencies whereby a penalty of suspension for not more than 30 days is imposed
shall be final and executory. PAGCOR opines that such intent of limiting appeals over such minor
offenses is elucidated in the Concurring Opinion of former Chief Justice Reynato S. Puno in CSC v.
Dacoycoy26and based on the basic premise that appeal is merely a statutory privilege. Lastly, PAGCOR
submits that the 30-day suspension meted on petitioner is justified under its own Code of Discipline. 27
Prescinding from the foregoing, the sole question for resolution is: Was the CA correct in outrightly
dismissing the petition for certiorari filed before it on the ground of non-exhaustion of administrative
remedies?
We resolve the question in the negative.
Our ruling in Public Hearing Committee of the Laguna Lake Development Authority v. SM Prime
Holdings, Inc.28 on the doctrine of exhaustion of administrative remedies is instructive, to wit:
Under the doctrine of exhaustion of administrative remedies, before a party is allowed to seek the
intervention of the court, he or she should have availed himself or herself of all the means of
administrative processes afforded him or her. Hence, if resort to a remedy within the administrative
machinery can still be made by giving the administrative officer concerned every opportunity to decide
on a matter that comes within his or her jurisdiction, then such remedy should be exhausted first
before the courts judicial power can be sought. The premature invocation of the intervention of the
court is fatal to ones cause of action. The doctrine of exhaustion of administrative remedies is based
on practical and legal reasons. The availment of administrative remedy entails lesser expenses and
provides for a speedier disposition of controversies. Furthermore, the courts of justice, for reasons of
comity and convenience, will shy away from a dispute until the system of administrative redress has
been completed and complied with, so as to give the administrative agency concerned every
opportunity to correct its error and dispose of the case.
However, the doctrine of exhaustion of administrative remedies is not absolute as it admits of the
following exceptions:
(1) when there is a violation of due process; (2) when the issue involved is purely a legal question;
(3) when the administrative action is patently illegal amounting to lack or excess of jurisdiction; (4)
when there is estoppel on the part of the administrative agency concerned; (5) when there is
irreparable injury; (6) when the respondent is a department secretary whose acts as an alter ego of
the President bears the implied and assumed approval of the latter; (7) when to require exhaustion of
administrative remedies would be unreasonable; (8) when it would amount to a nullification of a
claim; (9) when the subject matter is a private land in land case proceedings; (10) when the rule does
not provide a plain, speedy and adequate remedy, and (11) when there are circumstances indicating
the urgency of judicial intervention, and unreasonable delay would greatly prejudice the
complainant; (12) where no administrative review is provided by law; (13) where the rule of
qualified political agency applies and (14) where the issue of non-exhaustion of administrative
remedies has been rendered moot.29

The case before us falls squarely under exception number 12 since the law per se provides no
administrative review for administrative cases whereby an employee like petitioner is covered by Civil
Service law, rules and regulations and penalized with a suspension for not more than 30 days.
Section 37 (a) and (b) of P.D. No. 807, otherwise known as the Civil Service Decree of the Philippines,
provides for the unavailability of any appeal:
Section 37. Disciplinary Jurisdiction.
(a) The Commission shall decide upon appeal all administrative disciplinary cases involving
the imposition of a penalty of suspension for more than thirty days, or fine in an amount
exceeding thirty days salary, demotion in rank or salary or transfer, removal or dismissal from Office.
A complaint may be filed directly with the Commission by a private citizen against a government
official or employee in which case it may hear and decide the case or it may deputize any department
or agency or official or group of officials to conduct the investigation. The results of the investigation
shall be submitted to the Commission with recommendation as to the penalty to be imposed or other
action to be taken.
(b) The heads of departments, agencies and instrumentalities, provinces, cities and
municipalities shall have jurisdiction to investigate and decide matters involving
disciplinary action against officers and employees under their jurisdiction. Their decisions
shall be final in case the penalty imposed is suspension for not more than thirty days or fine
in an amount not exceeding thirty days salary. In case the decision rendered by a bureau or
office head is appealable to the Commission, the same may be initially appealed to the
department and finally to the Commission and pending appeal, the same shall be executory except
when the penalty is removal, in which case the same shall be executory only after confirmation by the
department head. (Emphasis supplied.)
Similar provisions are reiterated in the aforequoted Section 4730of E.O. No. 292 essentially providing
that cases of this sort are not appealable to the CSC.
Correlatively, we are not unaware of the Concurring Opinion of then Chief Justice Puno in CSC v.
Dacoycoy,31 where he opined, to wit:
In truth, the doctrine barring appeal is not categorically sanctioned by the Civil Service Law. For what
the law declares as final are decisions of heads of agencies involving suspension for not more than
thirty (30) days or fine in an amount not exceeding thirty (30) days salary. But there is a clear policy
reason for declaring these decisions final. These decisions involve minor offenses. They are numerous
for they are the usual offenses committed by government officials and employees. To allow their
multiple level appeal will doubtless overburden the quasi-judicial machinery of our administrative
system and defeat the expectation of fast and efficient action from these administrative
agencies. Nepotism, however, is not a petty offense. Its deleterious effect on government cannot be
over-emphasized. And it is a stubborn evil. The objective should be to eliminate nepotic acts, hence,
erroneous decisions allowing nepotism cannot be given immunity from review, especially judicial
review. It is thus non sequitur to contend that since some decisions exonerating public officials

from minor offenses can not be appealed, ergo, even a decision acquitting a government official from
a major offense like nepotism cannot also be appealed.
Nevertheless, decisions of administrative agencies which are declared final and unappealable by law
are still subject to judicial review. In Republic of the Phils. v. Francisco,32 we held:
Since the decision of the Ombudsman suspending respondents for one (1) month is final and
unappealable, it follows that the CA had no appellate jurisdiction to review, rectify or reverse the
same. The Ombudsman was not estopped from asserting in this Court that the CA had no appellate
jurisdiction to review and reverse the decision of the Ombudsman via petition for review under Rule 43
of the Rules of Court. This is not to say that decisions of the Ombudsman cannot be
questioned. Decisions of administrative or quasi-administrative agencies which are declared
by law final and unappealable are subject to judicial review if they fail the test of
arbitrariness, or upon proof of gross abuse of discretion, fraud or error of law. When such
administrative or quasi-judicial bodies grossly misappreciate evidence of such nature as to compel a
contrary conclusion, the Court will not hesitate to reverse the factual findings. Thus, the decision of
the Ombudsman may be reviewed, modified or reversed via petition for certiorari under
Rule 65 of the Rules of Court, on a finding that it had no jurisdiction over the complaint, or
of grave abuse of discretion amounting to excess or lack of jurisdiction.
It bears stressing that the judicial recourse petitioner availed of in this case before the CA is a special
civil action for certioraria scribing grave abuse of discretion, amounting to lack or excess of jurisdiction
on the part of PAGCOR, not an appeal. Suffice it to state that an appeal and a special civil action such
as certiorari under Rule 65 are entirely distinct and separate from each other. One cannot file petition
for certiorari under Rule 65 of the Rules where appeal is available, even if the ground availed of is
grave abuse of discretion. A special civil action for certiorari under Rule 65 lies only when there is no
appeal, or plain, speedy and adequate remedy in the ordinary course of law. Certioraricannot be
allowed when a party to a case fails to appeal a judgment despite the availability of that remedy, as
the same should not be a substitute for the lost remedy of appeal. The remedies of appeal and
certiorari are mutually exclusive and not alternative or successive. 33
In sum, there being no appeal or any plain, speedy, and adequate remedy in the ordinary course of
law in view of petitioners allegation that PAGCOR has acted without or in excess of jurisdiction, or
with grave abuse of discretion amounting to lack or excess of jurisdiction, the CAs outright dismissal
of the petition for certiorarion the basis of non-exhaustion of administrative remedies is bereft of any
legal standing and should therefore be set aside.
Finally, as a rule, a petition for certiorari under Rule 65 is valid only when the question involved is an
error of jurisdiction, or when there is grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the court or tribunals exercising quasi-judicial functions. Hence, courts
exercising certiorari jurisdiction should refrain from reviewing factual assessments of the respondent
court or agency. Occasionally, however, they are constrained to wade into factual matters when the
evidence on record does not support those factual findings; or when too much is concluded, inferred
or deduced from the bare or incomplete facts appearing on record. 34 Considering the circumstances
and since this Court is not a trier of facts, 35 remand of this case to the CA for its judicious resolution is
in order.

WHEREFORE, the petition is PARTLY GRANTED. The Resolutions dated September 30, 2009 and
November 26, 2009 of the Court of Appeals in CA-G.R. SP No. 110048 are
hereby REVERSED and SET ASIDE. The instant case is REMANDED to the Court of Appeals for
further proceedings.
No pronouncement as to costs.

chanRoblesvirtualLawlibrary

SO ORDERED.
Sereno, C.J., (Chairperson), Leonardo-De Castro, Bersamin, and Reyes, JJ., concur.

THIRD DIVISION
G.R. No. 208290, December 11, 2013
PEOPLE OF THE PHILIPPINES, Petitioner, v. THE HONORABLE JUANITO C. CASTANEDA, JR.,
HONORABLE CAESAR A. CASANOVA, HONORABLE CIELITO N. MINDAROGRULLA, AS ASSOCIATE
JUSTICES OF THE SPECIAL SECOND DIVISION, COURT OF TAX APPEALS; AND MYRNA M. GARCIA
AND CUSTODIO MENDOZA VESTIDAS, JR., Respondents.
RESOLUTION
PER CURIAM:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking to review the March 26,
20131 and May 15, 20132 Resolutions of the Court of Tax Appeals (CTA) in CTA Crim. Case No. 0285,
ordering the dismissal of the case against the private respondents for violation of Section 3602 3in relation to
Sections 2503 and 2530 (f) (i) and 1, (3) (4) and (5) of the Tariff and Customs Code of the Philippines, as
amended, on the ground of insufficiency of evidence.
The antecedents as culled from the records:
Private respondents Myrna M. Garcia (Garcia) and Custodio Mendoza Vestidas, Jr. (Vestidas Jr.) were
charged before the CTA under an Information which reads:
That on or about November 5, 2011, or prior or subsequent thereto, in the City of Manila, Philippines, and
within the jurisdiction of this Honorable Court, the abovenamed accused Myrna M. Garcia and Custodio
Mendoza Vestidas, Jr. as owner/proprietress and broker of Plinth Enterprise respectively, conspiring and
confederating with each other, with intent to defraud the government, did then and there willfully, unlawfully
and fraudulently import into the Port of Manila, 858 cartons of 17,160 pieces of AntiVirus Software
Kaspersky Internet Security Premium 2012, subject to customs duties, by misdeclaration under Import Entry
No. C181011 and Bill of Lading No. PFCMAN1715, filed with the Bureau of Customs (BOC), covering One
Forty Footer (1x40) container van shipment bearing No. KKFU7195683 which was falsely declared to contain
40 pallets/1,690 cartons of CD kit cleaner and plastic CD case, said imported items having customs duties
amounting to Three Million Three Hundred Forty One Thousand Two Hundred Forty Five Pesos (Php
3,341,245) of which only the amount of One Hundred Thousand Three Hundred Sixty Two Pesos
(Php100,362) was paid, in violation of the abovecaptioned law, and to the prejudice and damage of the
Government in the amount of Three Million Two Hundred Forty Thousand Eight Hundred Eighty Three Pesos
(Php3,240,883).4
chanRoble svirtualLawlibrary

C hanRoblesVirtualawlibrary

In a hearing held on August 1, 2012, Garcia and Vestidas Jr. pleaded Not Guilty to the aforementioned
charge. Thereafter, a preliminary conference was held on September 5, 2012 followed by the pretrial on
September 13, 2012. Both the prosecution and the defense agreed to adopt the joint stipulations of facts
and issues entered in the course of the preliminary conference.
Thereafter, trial ensued.
The prosecution presented a number of witnesses who essentially observed 5 the physical examination of
Container Van No. KKFU 7195638 conducted6 by the Bureau of Customs (BOC) and explained7 the process of
electronic filing under the Electronic to Mobile (E2M) Customs Systems of the BOC and the alleged
misdeclared goods therein.
Subsequent to the presentation of witnesses, the prosecution filed its Formal Offer of Evidence on December
10, 2012.
On January 15, 2013, Garcia and Vestidas, Jr. filed their Omnibus Motion to File Demurrer to Evidence with
Leave of Court to Cancel Hearing Scheduled on January 21, 2013, which was granted by the CTA. Thereafter,
they filed the Demurrer to Evidence, dated January 13, 2012, claiming that the prosecution failed to prove
their guilt beyond reasonable doubt for the following reasons:

a) The pieces of documentary evidence submitted by the

prosecution were inadmissible in court;

b) The object evidence consisting of the allegedly

misdeclared goods were not presented as evidence; and
c) None of the witnesses for the prosecution made a positive
identification of the two accused as the ones responsible
for the supposed misdeclaration.
Despite opposition, the CTA dismissed the case against Garcia and Vestidas Jr. in its March 26, 2013
Resolution, for failure of the prosecution to establish their guilt beyond reasonable doubt.
According to the CTA, no proof whatsoever was presented by the prosecution showing that the certified true
copies of the public documents offered in evidence against both accused were in fact issued by the legal
custodians.8 It cited Section 26, Rule 132 of the Revised Rules of Court, which provides that when the
original of a document is a public record, it should not generally be removed from the office or place in
which it is kept.9 As stated in Section 7, Rule 130,10 its contents may be proven using secondary evidence
and such evidence may pertain to the certified true copy of the original document issued by the public officer
in custody thereof. Hence, the CTA wrote that the certified true copies of the public documents offered in
evidence should have been presented in court.
Anent its offer of private documents,11 the prosecution likewise failed to comply with Section 27, Rule 132 of
the Rules of Court, which reads, [a]n authorized public record of a private document may be proved by the
original record, or by a copy thereof, attested by the legal custodian of the record, with an appropriate
certificate that such officer has the custody. Considering that the private documents were submitted and
filed with the BOC, the same became part of public records. Again, the records show that the prosecution
failed to present the certified true copies of the documents.
The CTA noted that, in its Opposition to the Demurrer, the prosecution even admitted that none of their
witnesses ever positively identified the accused in open court and that the alleged misdeclared goods were
not competently and properly identified in court by any of the prosecution witnesses.
The prosecution filed its motion for reconsideration, but it was denied by the CTA in its May 15, 2013
Resolution, stressing, among others, that to grant it would place the accused in double jeopardy.12
On July 24, 2013, the Run After the Smugglers (RATS) Group, Revenue Collection Monitoring Group (RCMG),
as counsel for the BOC, received a copy of the July 15, 2013 Resolution of the CTA ordering the entry of
judgment in the case.

Hence, this petition for certiorari, ascribing grave abuse of discretion on the part of the CTA when in ruled
that: 1) the pieces of documentary evidence submitted by the prosecution were inadmissible in evidence; 2)
the object evidence consisting of the alleged misdeclared goods were not presented as evidence; and 3) the
witnesses failed to positively identify the accused as responsible for the misdeclaration of goods.
The Court agrees with the disposition of the CTA.
At the outset, it should be noted that the petition was filed beyond the reglementary period for the
filing thereof under Rule 65. The petition itself stated that a copy of the May 15, 2013 Resolution was
received by the BOC two (2) days after its promulgation, or on May 17, 2013. Nonetheless, the RATS was
only alerted by the developments in the case on July 24, 2013, when Atty. Danilo M. Campos Jr. (Atty.
Campos) received the July 15, 2013 Resolution of the CTA ordering the entry of judgment in the case,
considering that no appeal was taken by any of the parties. According to Atty. Campos, it was only on that
occasion when he discovered the May 15, 2013 Resolution of the CTA. Thus, it was prayed that the petition
be given due course despite its late filing.
This belated filing cannot be countenanced by the Court.
Section 4, Rule 65 of the 1997 Rules of Civil Procedure is explicit in stating that certiorari should be
instituted within a period of 60 days from notice of the judgment, order or resolution sought to be assailed.
The 60day period is inextendible to avoid any unreasonable delay that would violate the constitutional
rights of parties to a speedy disposition of their case.13 While there are recognized exceptions14 to such strict
observance, there should be an effort on the part of the party invoking liberality to advance a reasonable or
meritorious explanation for his/her failure to comply with the rules. 15
In the case at bench, no convincing justification for the belated filing of the petition was advanced to warrant
the relaxation of the Rules. Notably, the records show that the petition was filed only on August 12, 2013,
or almost a month late from the due date which fell on July 16, 2013. To excuse this grave procedural
lapse will not only be unfair to the other party, but it will also sanction a seeming rudimentary attempt to
circumvent standing rules of procedure. Suffice it to say, the reasons proffered by the petitioner do not carry
even a tinge of merit that would deserve leniency. The late filing of the petition was borne out of the
petitioners failure to monitor incoming court processes that needed to be addressed by the office. Clearly,
this is an admission of inefficiency, if not lack of zeal, on the part of an office tasked to effectively curb
smuggling activities which rob the government of millions of revenue every year.
The display of patent violations of even the elementary rules leads the Court to suspect that the case
against Garcia and Vestidas Jr. was doomed by design from the start. The failure to present the certified
true copies of documentary evidence; the failure to competently and properly identify the misdeclared
goods; the failure to identify the accused in court; and, worse, the failure to file this petition on time
challenging a judgment of acquittal, are telltale signs of a reluctant and subdued attitude in pursuing the
case. This stance taken by the lawyers in government service rouses the Courts vigilance against
inefficiency in the administration of justice. Verily, the lawyers representing the offices under the executive
branch should be reminded that they still remain as officers of the court from whom a high sense of
competence and fervor is expected. The Court will not close its eyes to this sense of apathy in RATS lawyers,
lest the governments goal of revenue enhancement continues to suffer the blows of smuggling and similar
activities.
Even the error committed by the RATS in filing a motion for reconsideration with the CTA displays gross
ignorance as to the effects of an acquittal in a criminal case and the constitutional proscription on double
jeopardy. Had the RATS been eager and keen in prosecuting the respondents, it would have, in the first
place, presented its evidence with the CTA in strict compliance with the Rules.
In any case, even if the Court decides to suspend the rules and permit this recourse, the end result would
remain the same. While a judgment of acquittal in a criminal case may be assailed in a petition for certiorari
under Rule 65 of the Rules of Court, it must be shown that there was grave abuse of discretion amounting to
lack or excess of jurisdiction or a denial of due process. In this case, a perusal of the challenged resolutions
of the CTA does not disclose any indication of grave abuse of discretion on its part or denial of due process.
The records are replete with indicators that the petitioner actively participated during the trial and, in fact,
presented its offer of evidence and opposed the demurrer.
Grave abuse of discretion is defined as capricious or whimsical exercise of judgment as is equivalent to lack
of jurisdiction. The abuse of discretion must be patent and gross as to amount to an evasion of a positive

duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as where
the power is exercised in an arbitrary and despotic manner by reason of passion and hostility.16 Here, the
subject resolutions of the CTA have been issued in accordance with the rules on evidence and existing
jurisprudence.
On a final note, the Court deems it proper to remind the lawyers in the Bureau of Customs that the canons
embodied in the Code of Professional Responsibility equally apply to lawyers in government service in the
discharge of their official tasks.17 Thus, RATS lawyers should exert every effort and consider it their duty to
assist in the speedy and efficient administration of justice. 18
WHEREFORE, the petition is DISMISSED and the assailed March 26, 2013 and May 15, 2013 Resolutions
of the Court of Tax Appeals are AFFIRMED.
The Office of the Ombudsman is hereby ordered to conduct an investigation for possible criminal or
administrative offenses committed by the Run After the Smugglers (RATS) Group, Revenue Collection
Monitoring Group (RCMG), Bureau of Customs, relative to the filing and handling of the subject complaint for
violations of the Tariff and Customs Code of the Philippines.
Let copies of this resolution be furnished the Office of the President, the Secretary of Finance, the Collector
of Customs, and the Office of the Ombudsman for their guidance and appropriate action.
C hanRoblesVirtualawlibrary

SO ORDERED.
Velasco, Jr., (Chairperson), Peralta, Abad, Mendoza, and Leonen, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 110280 October 12, 1993

UNIVERSITY OF THE PHILIPPINES BOARD OF REGENTS and DR. OLIVIA C. CAOILI in her
capacity as Secretary of the Board, petitioners,
vs.
HON. ELSIE LIGOT-TELAN in her capacity as Presiding Judge of Branch 87, Regional Trial
Court of Quezon City and RAMON P. NADAL, respondents.
U.P. Office of Legal Services for petitioners.
Bonifacio A. Alentajon for private respondent.

ROMERO, J.:
In an effort to make the University of the Philippines (U.P.) truly the university of the people, the U.P.
administration conceptualized and implemented the socialized scheme of tuition fee payments

through the Socialized Tuition Fee and Assistance Program (STFAP), popularly known as the
"Iskolar ng Bayan" program. Spawned by the public clamor to overcome what was perceived as the
sharpening elitist profile of the U.P studentry, the STFAP aspired to expand the coverage of
government educational subsidies so as to include the deserving in the lower rungs of the socioeconomic ladder.
After broad consultations with the various university constituencies by U.P. President Jose V.
Abueva, the U.P. Board of Regents issued on April 28, 1988 a Resolution establishing the STFAP. A
year later, it was granted official recognition when the Congress of the Philippines allocated a portion
of the National Budget for the implementation of the program.
In the interest of democratizing admission to the State University, all students are entitled to apply for
STFAP benefits which include reduction in fees, living and book subsidies and student assistantships
which give undergraduate students the opportunity to earn P12.00 per hour by working for the
University.
Applicants are required to accomplish a questionnaire where, among others, they state the amount
and source of the annual income of the family, their real and personal properties and special
circumstances from which the University may evaluate their financial status and need on the basis of
which they are categorized into brackets. At the end the application form, the student applicant, as
well as his parent, signs a sworn statement, as follows:
Statement of the Student
I hereby certify, upon my honor, that all the data and information which I have
furnished are accurate and complete. I understand that any willful misinformation
and/or withholding of information will automatically disqualify me from receiving any
financial assistance or subsidy, and may serve as ground for my expulsion from the
University. Furthermore, is such misinformation and/or withholding of information on
my part is discovered after I have been awarded tuition scholarship or any form of
financial assistance, I will be required to reimburse all financial benefits plus the legal
rate of interest prevailing at the time of the reimbursement without prejudice to the
filing of charges against me. (Emphasis supplied for emphasis)
Moreover, I understand that the University may send a fact-finding team to visit my
home/residence to verify the veracity of the information provided in this application
and I will give my utmost cooperation in this regard. I also understand that my refusal
to cooperate with the fact-finding team may mean suspension of withdrawal of
STFAP benefits and privileges.

Student's Signature
Statement of the Applicant's Parent or Guardian
I hereby certify to the truthfulness and completeness of the information which my
son/daughter/dependent has furnished in this application together with all the
documents attached. I further recognize that in signing this application form, I share
with my son/daughter/dependent the responsibility for the truthfulness and
completeness of the information supplied herein. (Emphasis supplied for emphasis)

Moreover, I understand that the University may send a fact-finding team to visit my
home/residence to verify the information provided in this application and I will give
my utmost cooperation in this regard. I also understand that my refusal to cooperate
with the fact-finding team may mean suspension or withdrawal of STFAP benefits
and privileges of my son/daughter/dependent.

Parent's/Legal Guardian's/Spouse's
Signature 1
From the early stages of its implementation, measures were adopted to safeguard the integrity of the
program. One such precautionary measure was the inclusion as one of the punishable acts under
Section 2 (a) of the Rules and Regulations on Student Conduct and Discipline of the University the
deliberate falsification or suppression/withholding of any material information required in the
application form.
To further insure the integrity of the program, a random sampling scheme of verification of data
indicated in a student's application form is undertaken. Among those who applied for STFAP benefits
for School Year 1989-90 was Ramon P. Nadal, a student enrolled in the College of Law.
On March 14, 1991, a team composed of Arsenio L. Dona and Jose Carlo Manalo conducted a
home investigation at the residence of Nadal at 31 Twinpeaks Drive, Blue Ridge, Quezon City.
Ms. Cristeta Packing, Nadal's aunt, was interviewed and the team submitted a home visit report.
Consolacion Urbino, Scholarship Affairs Officer II, found discrepancies between the report and
Nadal's application form. Forthwith, she and Bella M. Villanueva, head of the Office of Scholarships
and Student Services, presented the matter to the Diliman Committee on Scholarships and Financial
Assistance. 2
In compliance with the said Committee's directive, Bella Villanueva wrote Nadal informing him that
the investigation showed that he had failed to declare, not only the fact that he had been maintaining
a 1977 Corolla car which was owned by his brother but also the income of his mother who was
supporting his brothers Antonio and Federico. Nadal was likewise informed that the Diliman
Committee had reclassified him to Bracket 9 (from Bracket 4), retroactive to June 1989, unless he
could submit "proofs to the contrary." Nadal was required "to pay back the equivalent amount of full
school fees" with "interest based on current commercial rates." Failure to settle his account would
mean the suspension of his registration privileges and the withholding of clearance and transcript of
records. He was also warned that his case might be referred to the Student Disciplinary Tribunal for
further investigation. 3
On July 12, 1991, Nadal issued a certification stating, among other things, that his mother migrated
to the United States in 1981 but because her residency status had not yet been legalized, she had
not been able to find a "stable, regular, well-paying employment." He also stated that his mother,
jointly with his brother Virgilio, was shouldering the expenses of the college education of his two
younger brothers. 4
Noting further discrepancies between Nadal's application form and the certification, the U.P. charged
Nadal before the Student Disciplinary Tribunal (SDT) on August 23, 1991 with the following:
That respondent RAMON P. NADAL (UP Student No. 83-11640), a student of the
College of Law, UP System, Diliman, Quezon City, and STFAP (ISKOLAR NG
BAYAN) recipient (Bracket 4 for SY 1989-1990; Bracket 5 for SY 1990-1991) in his

applications for STFAP (ISKOLAR NG BAYAN) benefits which he filed for schoolyear
1989-1990, and schoolyear 1990-1991, with the Office of Scholarship and Student
Services (formerly Scholarship and Financial Assistance Service) voluntarily and
willfully withheld and did not declare the following:
(a) That he has and maintains a car (Toyota Corolla, Model 1977);
and
(b) The income of his mother (Natividad Packing Nadal) in the U.S.A.,
in support of the studies of his brothers Antonio and Federico,
which acts of willfully withholding information is tantamount to acts of dishonesty in
relation to his studies, in violation of paragraph (a), Section 2, of the Rules and
Regulations on Student Conduct and Discipline, as amended. (Approved by the
B.O.R. at its 876th meeting on 02 September 1976, amended at the 923rd B.O.R.
meeting on 31 January 1980, and further amended at its 1017th B.O.R. meeting on
08 December 1988). 5
On October 27, 1992, after hearing, the SDT 6 rendered a decision in SDT Case No. 91-026 exculpating
Nadal of the charge of deliberately withholding in his STFAP application form information that he was
maintaining a Toyota Corolla car, but finding him guilty of "wilfully and deliberately withholding information
about the income of his mother, who is living abroad, in support of the studies of his brothers Antonio and
Federico, 7 which is tantamount to acts of dishonesty in relation to his studies in violation of paragraph [a],
Section 2 of the Rules [now covered by paragraph (i), Section 2 of the Rules, as amended 25 June
1992]." As such, the SDT imposed upon Nadal the penalty of expulsion from the University and required
him to reimburse all STFAP benefits he had received but if he does not voluntarily make reimbursement, it
shall be "effected by the University thru outside legal action." 8
The SDT decision was thereafter automatically elevated to the Executive Committee of U.P. Diliman
for review pursuant to Sec. 20 of the U.P. Rules on Student Conduct and Discipline. On November
26, 1992, the Executive Committee, voting 13:4, affirmed the decision of the SDT; whereupon, Nadal
appealed to the Board of Regents (BOR). The appeal was included in the agenda of the BOR
meeting on January 25, 1993. 9
On January 18, 1993, upon her assumption to the Chairmanship of the Senate Committee on
Education, thereby making her automatically a member of the BOR, Senator Leticia Ramos-Shahani
wrote the BOR a letter expressing her view that, after a close review of Nadal s case by her legal
staff, "it is only fair and just to find Mr. Nadal's appeal meritorious and his arguments worthy of belief.
Consequently, he should be allowed to graduate and take the bar examinations this year." 10
At its January 25, 1993 meeting, the BOR affirmed the decision of the SDT but because "the Board
was willing to grant a degree of compassion to the appellant in view of the alleged status and
predicament of the mother as an immigrant 'TNT' in the United States," the penalty was modified
"from Expulsion to One Year- Suspension, effective immediately, plus reimbursement of all benefits
received from the STFAP, with legal interest." The BOR also decided against giving Nadal, a
certification of good moral character. 11
Nadal forthwith filed a motion for reconsideration of the BOR decision, allegedly against the advice
of his counsel.12 The motion was placed on the agenda of the February 25, 1993 meeting of the BOR. A
day before said date, Senator Shahani wrote the BOR another letter requesting that deliberation on
Nadal's case be deferred until such time as she could attend a BOR meeting.

On March 15, 1993, the U.P. filed an opposition to Nadal's motion for reconsideration. Thereafter, the
BOR held a special meeting to accommodate the request of Regent Shahani with Nadal's case as
the sole item on its agenda. Again, Nadal's motion for reconsideration was included in the March 23,
1993 agenda but in view of the absence of Senator Shahani, the decision thereon was deferred.
At the special meeting of the BOR on March 28, 1993 at the Board Room of the Manila Polo Club in
Forbes Park, Makati, Regent Antonio T. Carpio raised the "material importance" of verifying the truth
of Nadal's claim that earlier, he was a beneficiary of a scholarship and financial aid from the Ateneo
de Manila University (AdeMU). Learning that the "certification issued by the AdeMU that it had not
given Nadal financial aid while he was a student there was made through a telephone call," Regent
Carpio declared that there was as yet "no direct evidence in the records to substantiate the charge."
According to Carpio, if it should be disclosed that Nadal Falsely stated that he received such
financial aid, it would be a clear case of gross and material misrepresentation that would even
warrant the penalty of expulsion. Hence, he cast a conditional vote that would depend on the
verification of Nadal's claim on the matter.
U.P. President and concurrently Regent Jose V. Abueva countered by stating that "a decision should
not be anchored solely on one piece of information which he considered irrelevant, and which would
ignore the whole pattern of the respondent's dishonesty and deception from 1989 which had been
established in the investigation and the reviews." He added that "the respondent's eligibility for his
AdeMU high school scholarship and financial assistance from 1979 to 1983 does not in any way
establish that he is 'not guilty as charged' before the SDT," since the formal charges against him do
not include withholding of information regarding scholarship grants received from other schools.
At the said March 28, 1993 special meeting, the Board decided to go into executive session where
the following transpired:
The Chairman of the Board, together with the President, directed the Secretary to
reflect in the minutes of the meeting the following decisions of the Board in executive
session, with only the Board members present.
A vote was held by secret ballot on whether Ramon P. Nadal was guilty or not guilty
as charged of willful withholding of information in relation to his application for
Socialized Tuition and Financial Assistance Program (STFAP) benefits which he filed
for Schoolyears 1989-1990 and 1990-1991 which is tantamount to act of dishonesty
in relation to his studies, in violation of paragraph (a), Section 2 of the Rules and
Regulations on Student Conduct and Discipline, as amended.
The Chairman gave the following results of the Board action during the Executive
Session: four (4) voted guilty; three (3) voted not guilty; and three (3) gave
conditional votes, pending verification with Father Raymond Holscher of Ateneo de
Manila University of Ramon P. Nadal's statement in his STFAP application that he
was granted scholarship while he was in high school. Should Ateneo confirm that
Nadal had not received financial assistance, then the conditional votes would be
considered as guilty, and if otherwise, then not guilty. The Chairman requested the
President to make the verification as soon as possible the next day. In answer to a
query, the Chairman clarified that once the information was received from Ateneo,
there would be no need for another meeting to validate the decision.
The President reiterated his objections to the casting of conditional votes.
The Chairman himself did not vote. 13

In the morning of March 29, 1993, the AdeMU issued a certification to the effect that Nadal was
indeed a recipient of a scholarship grant from 1979 to 1983. That evening, the BOR met again at a
special meeting at the Westin Philippine Plaza Hotel. According to Regent Carpio, in executive
session, the BOR found Nadal "guilty" as the members voted as follows: six members guilty, three
members not guilty, and three members abstained. 14Consequently, the BOR imposed on Nadal the
penalties of suspension for one (1) year effective March 29, 1993, non-issuance of any certificate of good
moral character during the suspension and/or as long as Nadal has not reimbursed the STFAP benefits
he had received with 12% interest per annum from march 30, 1993 and non-issuance of his transcript of
records until he has settled his financial obligations with the university. 15
On March 30, 1993, Nadal wrote President Abueva a handwritten letter stating that "after learning of
the latest decision" of the BOR, he had been "intensely concentrating on (his) job so that (he) can
earn enough to pay for (his) financial obligations to the University." Alleging that he was "now letting
nature take its course," Nadal begged President Abueva not to issue any press release regarding the
case. 16
However, on April 22, 1993, Nadal filed with the Regional Trial Court of Quezon City a petition
for mandamus with preliminary injunction and prayer for a temporary restraining order against
President Abueva, the BOR, Oscar M. Alfonso, Cesar A. Buenaventura, Armand V. Fabella and
Olivia C. Caoili. The petition prayed:
After trial on the merits, judgment be rendered as follows:
a. Making the preliminary injunction permanent;
b. Ordering respondents 'to uphold and implement their decision rendered on 28
March 1993, exonerating petitioner from all the charges against him, and accordingly
dismissing SDT No. 91-026;
c. Ordering respondents jointly and severally to pay petitioner litigation expenses of
at least P150,000.00.
Other just and equitable reliefs are likewise prayed for. 17
The motion for the issuance of a temporary restraining order and the writ of preliminary injunction
was immediately set for hearing. At the May 10, 1993 hearing, the lower court declared that the only
issue to be resolved was "whether or not the respondents in Civil Case No. 93-15665 violated
(Nadal's) right to due process when it rendered a decision finding Nadal guilty of the charges against
him" during the March 29, 1993 meeting. After the respondents had presented their first witness, Dr.
Olivia C. Caoili, the lower court asked respondents' counsel whether they were amenable to
maintaining the status quo. Said counsel replied in the negative, asserting the University's
prerogative to discipline students found guilty of violating its rules of discipline. 18
On the same day, the lower court 19 issued the following Order:
The parties were heard on their respective positions on the incident (application for
preliminary injunction and prayer for temporary restraining order and opposition
thereto). For lack of material time set this for continuation on May 17 and 18, 1993
both at 2:30 p.m.
In the meantime, in order that the proceedings of this case may not be rendered
moot and academic, the respondents herein, namely: Jose V. Abueva, President of

the University of the Philippines and Vice-Chairman of the U.P. Board of Regents,
Oscar M. Alfonso, Cesar A. Buenaventura and Armand V. Fabella, members of the
U.P. Board of Regents, Olivia C. Caoili, the officers, agents, representatives, and all
persons acting in their behalf, are hereby temporarily restrained from implementing
their decision rendered on March 29, 1993 in Administrative SDT Case No. 91-026
entitled University of the Philippines vs. Ramon P. Nadal, as reflected in the Minutes
of the 1062nd meeting of the Board of Regents, U.P. held at the Romblon Room,
Westin Phil. Plaza, Manila, until further order from this Court.
SO ORDERED.
Thereafter, Nadal presented as witnesses Regents Emerenciana Y. Arcellana, Ariel P. Tanangonan,
Leticia R. Shahani and Antonio T. Carpio. The University, on the other hand, presented Dr. Olivia
Caoili and Nadal himself as a hostile witness. On May 29, 1993, the lower court issued the following
Order:
The petitioner complains that he was not afforded due process when, after the Board
Meeting on SDT Case No. 91-026 on March 28, 1993 that resulted in a decision of
"NOT GUILTY" in his favor, the Chairman of the U.P. Board of Regents, without
notice to the herein petitioner, called another meeting the following day to deliberate
on his (the Chairman's) MOTION FOR RECONSIDERATION, which this time
resulted in a decision of "GUILTY." While he main issue of violation of due process
raised in the petition pends trial and resolution, the petitioner prays for the issuance
of a writ of preliminary injunction prohibiting the respondents from further proceeding
with SDT Case No. 21-026 and from suspending the petitioner for one year.
It is a basic requirement in the issuance of the preliminary injunctive writ that there
must be a right to be protected. As the issue in the case at bar is due process in the
March 29 Board meeting, there is, indeed, a right to be protected for, in
administrative proceedings, a respondent's right to due process exists not only at the
early stages but also at the final stage thereof.
With the circulation to the members of the Board of Regents, as well as to other UP
personnel, of the Minutes of the March 29, 1993 meeting, even after this case had
already been filed, the Court is convinced that there now exists a threat to the
petitioner (respondent in SDT Case No, 91-026) that the decision of the Board of
Regents finally finding him guilty of willfully withholding information material to his
application for Socialized Tuition and Financial Assistance Program (STFAP)
benefits, will be implemented at any time, especially during the enrollment period,
and this implementation would work injustice to the petitioner as it would delay him in
finishing his course, and, consequently, in getting a decent and good paying job. The
injury thus caused would be irreparable.
"Damages are irreparable within the meaning of the rule where there
is no standard by which their amount can be measured with
reasonable accuracy. Where the damage is susceptible of
mathematical computation, it is not irreparable." (Social Security
Commission v. Bayona, et al., G.R. No. L-13555, May 30, 1962).
IN VIEW OF THE FOREGOING, and so as not to render moot the issues in the
instant proceedings, let a writ of preliminary injunction be issued restraining the
respondents, their officers, agent(s), representatives, and all persons acting in their

behalf, from further proceeding with SDT Case No. 91-026, and from suspending
petitioner, upon the latter's filing a bond in the amount of P3,000.00.
IT IS SO ORDERED. 20
Dispensing with the filing of a motion for reconsideration, the petitioners filed the instant petition
for certiorari and prohibition with prayer for the issuance of an injunction or temporary restraining
order, raising the following issues: whether or not Nadal was denied due process in the
administrative disciplinary proceedings against him, and, whether or not the respondent judge
gravely abused her discretion in issuing the May 29, 1993 writ of preliminary injunction thereby
preventing the BOR from implementing the suspension penalty it had imposed on Nadal.
Before proceeding with the discussion of the merits of the instant petition, we shall confront a
threshold issue raised by private respondent, namely, that Dr. Caoili, not having been authorized by
the Board of Regents as a collegial body to file the instant petition, and Dr. Abueva, who verified the
petition, not being the "Board of Regents" nor "the University of the Philippines," they are not real
parties in interest who should file the same. 21
A real party in interest is one "who stands to be benefited or injured by the judgment or the party
entitled to the avails of the suit. 'Interest' within the meaning of the rule means material interest, an
interest in issue and to be affected by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest." 22 Undoubtedly, the U.P. Board of Regents has an interest to
protect inasmuch as what is in issue here is its power to impose disciplinary action against a student who
violated the Rules and Regulations on Student Conduct and Discipline by withholding information in
connection with his application for STFAP benefits, which information, if disclosed, would have sufficed to
disqualify him from receiving the financial assistance he sought. Such dishonesty, if left unpunished,
would have the effect of subverting a commendable program into which the University officials had
devoted much time and expended precious resources, from the conceptualization to the implementation
stage, to rationalize the socialized scheme of tuition fee payments in order that more students may benefit
from the public funds allocated to the State University.
Having specifically named Drs. Abueva and Caoili as respondents in the petition for mandamus that
he filed below, Nadal is now estopped from questioning their personality to file the instant
petition. 23 Moreover, under Sec. 7 of the U.P. Charter (Act 1870) and Sec. 11 of the University Code "all
process" against the BOR shall be served on "the president or secretary thereof'." It is in accordance with
these legal provisions that Dr. Caoili is named as a petitioner. Necessarily, Dr. Abueva, the University
President and member of the BOR, has to verify the petition. It is not mandatory, however, that each and
every member of the BOR be named petitioners. As the Court has time and again held, an action may be
entertained, notwithstanding the failure to include an indispensable party where it appears that the
naming of the party would be but a formality. 24
No longer novel, as this is not a case of first impression, is the issue on the right of an academic
institution to refuse admission to a student arising from the imposition upon him of an administrative
disciplinary sanction. In our recent decision in Ateneo de Manila University v. Hon. Ignacio
M. Capulong, 25 wherein certain law students were dismissed for hazing resulting in the death of another,
we held that the matter of admission of students is within the ambit of academic freedom and therefore,
beyond the province of the courts to decide. Certain fundamental principles bear stressing.
One of the arguments of Nadal in his petition for mandamus below was that he was denied due
process. To clarify, the so-called lack of due process referred only to the March 29, 1993 meeting of
the BOR. As stated by respondent's counsel: "What was conceded by undersigned counsel was that
Nadal was afforded due process from the start of the administrative proceeding up to the meeting of
the Board of Regents on March 28, 1993." 26

With respect to the March 29, 1993 meeting, respondent considers the same as "unquestionably
void for lack of due process" inasmuch as he was not sent a notice of said meeting. Counsel cites
the ruling in Non v. Dames II 27that imposition of sanctions on students requires "observance of
procedural due process," 28 the phrase obviously referring to the sending of notice of the meeting.
Attention is drawn to the disparate factual environments obtaining in Non v. Dames II and in the
instant case. In the former case, the students were refused admission for having led or participated
in student mass actions against the school, thereby posing a collision between constitutionally
cherished rights freedom of expression and academic freedom. In the case at bar, Nadal was
suspended for having breached the University's disciplinary rules. In the Non case, the Court ruled
that the students were not afforded due process for even the refusal to re-enroll them appeared to
have been a mere afterthought on part of the school administrators. Here, Nadal does not dispute
the fact that his right to due process was held inviolate until the BOR decided to meet on March 29,
1993 with his case as the sole item on the agenda.
In any event it is gross error to equate due process in the instant case with the sending of notice of
the March 29, 1993 BOR meeting to respondent. University rules do not require the attendance in
BOR meetings of individuals whose cases are included as items on the agenda of the Board. This is
not exclusive of students whose disciplinary cases have been appealed to the Board of Regents as
the final review body. At no time did respondent complain of lack of notice given to him to attend any
of the regular and special BOR meetings where his case was up for deliberation. He would make an
exception of the March 29, 1993 meeting for it was "supposed to reconsider the decision made on
March 28, 1993 exonerating respondent Nadal from all administrative charges against him." 29
Regent Antonio T. Carpio, in his testimony before the lower court on May 25, 1993 admitted that
there was no final verdict at the March 28, 1993 meeting in view of the conditional votes resulting
from his assertion that he was "not morally convinced that there was sufficient evidence to make a
finding of guilty against Nadal because there was no direct evidence that his mother received
income from the United States and this income was sent to the Philippines to support the studies of
the children." 30 Two regents shared the view of Regent Carpio, with the following result: four voted guilty,
three, not guilty, and three cast conditional votes. The BOR agreed that, upon the suggestion of Regent
Carpio, they would still verify from the AdeMU about Nadal's alleged scholarship as a student in said
institution. Consequently, no definitive decision was arrived at by the BOR on March 28, 1993, Much less
was a verdict of exoneration handed down as averred by respondent.
Regent Carpio testified, with respect to the March 29, 1993 meeting where all twelve members of the
BOR were present, that all of them participated in the voting held to reconsider the previous day's
decision. He stated "I remember Regent Arcellana questioning the voting again on the ground that
there was already a final decision, but there was a vote taken on whether a motion for
reconsideration can be decided by the board, and a majority of the board ruled that the matter can
be reconsidered again upon motion of the chairman." 31
At said meeting, six (6) regents voted to find respondent guilty, three (3) voted that he was not guilty
and three (3) abstained. As succinctly announced by Regent Carpio, the final decision was that
which was rendered on March 29, 1993 as "no other decision was made by the Board with respect
to the same issue." 32
Counsel for Nadal charged before the lower court that his client was "not given due process in the
March 29 meeting because the ground upon which he was again convicted was not the same as the
original charge." 33Obviously, he was referring to the basis of the conditional votes on March 28, i.e.,
whether or not Nadal was telling the truth when he claimed that he received a scholarship grant from the
AdeMU. However, Regent Carpio himself testified that the charge considered was "exactly the same
charge" of withholding information on the income of Nadal's mother. 34 It should be stressed that the

reason why Regent Carpio requested a verification of Nadal's claim that he was a scholar at the AdeMU
was that Regent Carpio was not "morally convinced" yet as to the guilt of Nadal. In other words, he
sought additional insights into the character of Nadal through the information that would be obtained from
the AdeMU.

In this regard, we find such information to be irrelevant and a mere superfluity. In his July, 12, 1991
certification aforementioned, Nadal admitted, although inconsistently, that his mother was a "TNT"
who could not find a "stable, regular, well-paying employment" but that she was supporting the
education of his brothers with the help of another son. To our mind, this constitutes sufficient
admission that Nadal withheld information on the income, however measly and irregular, of his
mother. Unlike in criminal cases which require proof beyond reasonable doubt as basis for a
judgment, in administrative or quasi-judicial proceedings, only substantial evidence is required, that
which means more than a mere scintilla or relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds equally reasonable might conceivably opine
otherwise. 35 In light of the foregoing circumstances, we find that Nadal has been sufficiently proven to
have violated his undertaking to divulge all information needed when he applied for the benefits of the
STFAP.
Let it not be forgotten that respondent aspires to join the ranks of the professionals who would
uphold truth at all costs so that justice may prevail. The sentinels who stand guard at the portals
leading to the hallowed Temples of Justice cannot be overzealous in admitting only those who are
intellectually and morally fit. In those who exhibit duplicity in their student days, one spots the shady
character who is bound to sow the seeds of chicanery in the practice of his profession.
Having reached his senior year, respondent is presumably aware that the bedrock axiom, Canon I,
Rule 1.01 of the Code of Professional Responsibility states: "A lawyer shall not engage in
unlawful, dishonest, immoral or deceitful conduct." Further on, Canon 7, Rule 7.01 provides: "A
lawyer shall be answerable for knowingly making a false statement or suppressing a material fact in
connection with his application for admission to the bar." (Emphasis supplied for emphasis)
Surely, it is not too early to warn entrants to the noble profession of law that honesty and integrity are
requirements no less weighty than hurdling the Bar examinations. This is the reason why a
certification of good moral character is one of the documents that must be submitted in applying to
take said examination. In fact, a charge of immoral or deceitful conduct on the part of an applicant,
when proved, is a ground for disqualifying him.
To revert to the instant case, inasmuch as it has been shown sufficiently that respondent has
committed an act of dishonesty in withholding vital information in connection with his application for
STFAP benefits, all in blatant violation of the Rules and Regulations on Student Conduct and
Discipline of petitioner University, the latter's inherent power and authority to impose disciplinary
sanction may be invoked and rightfully exercised.
As a Bohemian proverb puts it: "A school without discipline is like a mill without water." Insofar as the
water turns the mill, so does the school's disciplinary power assure its right to survive and continue
operating. In more relevant terms, through its power to impose disciplinary sanctions, an educational
institution is able to exercise its academic freedom which is, in the case at bar, the right to suspend
and refuse admission to a student who has subverted its authority in the implementation of the
critically important STFAP.
At the risk of being repetitious, the matter of admission to a University is encompassed by the right
of academic freedom. In Garcia v. The Faculty Admission Committee, Loyola School of
Theology 36 the Court stated that a school or college which is possessed of the right of academic freedom

"decides for itself its aims and objectives and how best to attain them. It is free from outside coercion or
interference save possibly when the overriding public welfare calls for some restraint. It has a wide sphere
of autonomy certainly extending to the choice of students." Elucidating, in Ateneo de Manila University
v. Hon. Ignacio M. Capulong, 37 the Court further expounded:

Since Garcia v. Loyola School of Theology, we have consistently upheld the salutary
proposition that admission to an institution of higher learning is discretionary upon a
school, the same being a privilege on the part of the student rather than a right.
While under the Education Act of 1982, students have a right "to freely choose their
field of study, subject to existing curricula and to continue their course therein up to
graduation," such right is subject, as all rights are, to the established academic and
disciplinary standards laid down by the academic institution.
For private schools have the right to establish reasonable rules and regulations for
the admission, discipline and promotion of students. This right . . . extends as well to
parents . . . as parents are under a social and moral (if not legal) obligation,
individually and collectively, to assist and cooperate with the schools.
Such rules are "incident to the very object of incorporation and indispensable to the
successful management of the college. The rules may include those governing
student discipline." Going a step further, the establishment of rules governing
university-student relations, particularly those pertaining to student discipline, may be
regarded as vital, if not merely to the smooth and efficient operation of the institution,
but to its very survival.
Within memory of the current generation is the eruption of militancy in the academic
groves as collectively, the students demanded and plucked for themselves from the
panoply of academic freedom their own rights encapsulized under the rubric of "right
to education" forgetting that, in Hohfeldian terms, they have a concomitant duty, that
is, their duty to learn under the rules laid down by the school. (Emphasis supplied.)
On the second issue presented for adjudication, the Court finds that the lower court gravely abused
its discretion in issuing the writ of preliminary injunction of May 29, 1993. The issuance of the said
writ was based on the lower court's finding that the implementation of the disciplinary sanction of
suspension on Nadal "would work injustice to the petitioner as it would delay him in finishing his
course, and consequently, in getting a decent and good paying job." Sadly, such a ruling considers
only the situation of Nadal without taking into account the circumstances clearly of his own making,
which led him into such a predicament. More importantly, it has completely disregarded the
overriding issue of academic freedom which provides more than ample justification for the imposition
of a disciplinary sanction upon an erring student of an institution of higher learning.
From the foregoing arguments, it is clear that the lower court should have restrained itself from
assuming jurisdiction over the petition filed by Nadal. Mandamus is never issued in doubtful cases, a
showing of a clear and certain right on the part of the petitioner being required. 38 It is of no avail
against an official or government agency whose duty requires the exercise of discretion or judgment. 39
Hence, by issuing the writ of preliminary injunction, the lower court dared to tread upon legally
forbidden grounds. For, by virtue of the writ, the University's exercise of academic freedom was
peremptorily curtailed. Moreover, the door was flung wide open for Nadal to do exactly what the
decision of the BOR prohibited him from doing and that is, to violate the suspension order by
enrolling for the first semester of 1993-1994. It must have been with consternation that the University
officials helplessly watching him complete his academic requirements for taking the Bar. 40 In the

event that he be allowed to continue with his studies he would, in effect render moot and academic the
disciplinary sanction of suspension legally imposed upon him by the BOR's final decision of March 29,
1993. What is to prevent other aspirants for STFAP scholarships from misleading the University
authorities by misrepresenting certain facts or as in instant case, withholding vital information and stating
downright falsehoods, in their application forms with impunity? Not only would this undermine the
authority of the U.P. to discipline its students who violated the rules and regulations of the institution but,
more importantly, subvert the very concept and lofty intent to give financial assistance to poor but
deserving students through the STFAP which, incidentally, has not ceased refining and modifying it's
operations.

WHEREFORE, the instant petition is GRANTED and the lower court is hereby ordered to DISMISS
the petition formandamus.
SO ORDERED.
Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr., Nocon, Bellosillo,
Melo, Quiason, Puno and Vitug, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 70484 January 29, 1988
ROMAN C. TUASON and REMEDIOS V. TUASON, by attorney-in-fact Trinidad S.
Viado, petitioners,
vs.
REGISTER OF DEEDS, CALOOCAN City, MINISTRY OF JUSTICE, and the NATIONAL
TREASURER, respondents. TOMASA BARTOLOME, in her own behalf and in behalf of the
other members of the "Consuelo Heights Homeowners Association," petitioners-intervenors.
Orlando A. Rayos for petitioners-intervenors.
The Solicitor General for respondents.

NARVASA, J.:
A more despotic, capricious, oppressive and unjustifiable exercise of government power than that
manifested in this case can scarcely be found in the sordid annals of the martial law regime. Relief to
the victims must be as it is hereby extended by the grant to them of the extraordinary writ of
certiorari and prohibition condemning as unconstitutional, and annulling and perpetually enjoining
the acts complained of.

Petitioner spouses, the Tuasons, were retired public school teachers. On April 6, 1965, with funds
pooled from their retirement benefits and savings, they bought from Carmel Farms, Inc. (hereafter
simply, Carmel) a piece of land measuring about 8,756 square meters, in the latter's subdivision in
Barrio Makatipo, Caloocan City. In virtue of this sale, Carmel's Torrens title (No. 64007) over the lot
was cancelled and a new one (No. 8314) issued in the name of the Tuasons. The Tuasons took
possession of their property.
Some eight (8) years thereafter, the Tuasons' travails began. They woke up one morning to discover
that by presidential flat, they were no longer the owners of the land they had purchased with their
hard-earned money, and that their land and the other lots in the subdivision had been "declared
open for disposition and sale to the members of the Malacanang Homeowners Association, Inc., the
present bona fide occupants thereof."
On September 14, 1973-a year almost to the day after the declaration of martial law Mr. Ferdinand
Marcos, then president of the country, invoking his emergency powers, issued Presidential Decree
No. 293 with immediate effect. The decree invalidated inter alia the title of the Tuasons' vendor,
Carmel, which had earlier purchased from the Government the land it had subsequently subdivided
into several lots for sale to the public (the Tuasons being among the buyers). The land bought by
Carmel was part of the Tala Estate (one of the so-called "Friar Lands"). Carmel had bought the land
under Act No. 1120 and C.A. No. 32, as amended. Under these statutes:
1) a bona fide settler or occupant was allowed to purchase (if he did not wish to lease) the portion
occupied by him at the price fixed by the Government, in cash or on installment; the interested buyer
was given a certificate of sale, which was regarded as an agreement by him to pay the purchase
price in the and at the interest specified, the acceptance of such certificate making the occupant a
debtor of the government;
2) until the price was fully paid however, title was reserved in the Government, and any sale or
encumbrance made by the purchaser prior to such full payment was explicitly declared to 'be invalid
as against the Government ... and ... in all respects subordinate to its prior claim;"
3) in the event of default by a purchaser to pay any installment of purchase money and interest
thereon, the Chief of the Bureau of Public Lands (now Director of Lands) had the duty at once to
protect the Government from loss by bringing suit to obtain judicial authority to enforce the
Government's lien on the "and by selling it in the same manner as for foreclosure of mortgages, the
purchaser at such sale being deemed to acquire a good and indefeasible title, and the proceeds of
the sale being applied to the payment of the costs of the court and all installments due or to become
due; and
4) in the event of completion of payment, the Government transferred title to the land to the
purchaser "by proper instrument of conveyance," the certificate of title over the land to issue and
become effective in the manner provided by the Land Registration Act. 1
Said Presidential Decree No. 293 made the finding 2 that Carmel had failed to complete payment of the
price. It adjudged that
... according to the records of the Bureau of Lands, neither the original purchasers
nor their subsequent transferees have made full payment of all installments of the
purchase money and interest on the lots claimed by the Carmel Farms,
Inc., including those on which the dwellings of the members of said
Association 3 stand. Hence, title to said land has remained with the Government, and the
land now occupied by the members of said association has never ceased to form part of

the property of the Republic of the Philippines, any and all acts affecting said land and
purporting to segregate it from the said property of the Republic of the Philippines being
therefore null and void ab initio as against the law and public policy.

Upon this adjudgment, Mr. Marcos invalidated the titles of Carmel Farms, Inc. and all those derived
therefrom, and declared as aforestated "the members of the Malacanang Homeowners Association,
Inc. the present bona fide occupants" of the lots which, in consequence, thereby became open to
them for "disposition and sale ... pursuant to Commonwealth Act No. 32, as amended." 4
It seems to have completely escaped Mr. Marcos' attention that his decree contained contradictory
declarations. While acknowledging on the one hand that the lots in the Carmel Subdivision were
occupied by the buyers thereof, and in fact the latter's dwellings stood thereon, he states on the
other that the "members of the Malacanang Homeowners Association, Inc. (are) the present bona
fide occupants" of all said lots. The latter averment is not only essentially inconsistent with the former
but is both a physical and legal fallacy. Well known is the rule of physics that two objects cannot
occupy the same space at the same time. And the absurdity of the subsumed proposition is selfevident for persons not in possession of land, who probably have not even set foot thereon, cannot
be deemed "occupants" thereof, much less "bona fide" occupants.
But this notwithstanding, and upon the factual premise already indicated, Mr. Marcos disposed of the
land of the petitioner spouses and others similarly situated as they, in the following imperious
manner:
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by
virtue of the powers vested in me by the Constitution as Commander-in-Chief of all
the Armed Forces of the Philippines, and pursuant to Proclamation 1081, dated
September 21, 1972, and General Order No. 1, dated September 22, 1972, do
hereby order and decree that any and all sales contracts between the government
and the original purchasers, are hereby cancelled, and those between the latter and
the subsequent transferees, and any and all transfers thereafter, covering lots 979,
981, 982, 985, 988, 989, 990, 991 new, 1226, 1228, 1230, and 980-C-2 (LRC PSD1730), all of Tala Estate, Caloocan City, are hereby declared invalid and null and
void ab initio as against the Government; that Transfer Certificates of Title Nos.
62603, 62604, 62605, covering lots 1, 2 and 3, PCS-4383, all in the name of Carmel
Farms, Inc., which are a consolidation and subdivision survey of the lots hereinbefore
enumerated, are declared invalid and considered cancelled as against the
Government; and that said lots are declared open for disposition and sale to the
members of the Malacanang Homeowners Association, Inc., the present bona fide
occupants thereof, pursuant to Commonwealth Act No. 32, as amended.
On the strength of this presidential decree, the Register of Deeds of Caloocan City caused the
inscription on the Tuasons' title, TCT No. 8314, of the following:
MEMORANDUM. Pursuant to Presidential Decree No. 293, this certificate of title
is declared invalid and null and void ab initio and considered cancelled as against the
Government and the property described herein is declared open for disposition and
sale to the members of the Malacanang Homeowners Association, Inc.
The Tuason Spouses thereupon filed with this Court a petition for certiorari assailing the Marcos
decree as an arbitrary measure which deprived them of their property in favor of a selected group, in
violation not only of the constitutional provisions on due process and eminent domain 5 but also of the
provisions of the Land Registration Act on the indefeasibility of Torrens titles; 6 and they prayed that the

Register of Deeds be directed to cancel the derogatory inscription on their title and restore its efficacy, or
in the alternative, that they be compensated for the loss from the Assurance Fund.

Mr. Marcos' Solicitor General sought to sustain the decree. In his comment on the petition, 7 he
questioned the propriety of the remedy of certiorari resorted to by the petitioners, it not appearing that the
public respondents were being sued as judicial or quasi-judicial officers who had acted without or in
excess of their jurisdiction, or with grave abuse of discretion. He opined that the petitioner spouses had
no cause to complain of unjust deprivation of property because in legal contemplation 8 they had never
become owners thereof because of non-payment of the purchase price by their predecessor-in-interest;
and the decree was justifiable under the social justice clause of the Constitution and the police power,
being in response to the pressing housing need of the employees of the Office of the President who were
left homeless and landless after they were asked to vacate Malacanang Park where they had theretofore
been residing. He expressed the view, too, that petitioner spouses were not entitled to recover anything
from the Assurance Fund.
Petitions for intervention have of late been filed by sixty-four (64) persons, members of the
"Consuelo Heights Homeowners Association" headed by Tomasa Bartolome, on the claim that they,
too, had been divested of their lands by the same Presidential Decree No. 293, adopting as their
own the allegations and prayer embodied in the Tuasons' petition.
The procedural issue is quite easily disposed of. It is true that the extraodinary writ of certiorari 9 may
properly issue to nullify only judicial or quasi-judicial acts, unlike the writ of prohibition which may be
directed against acts either judicial or ministerial. Section 1, Rule 65 of the Rules of Court deals with the
writ of certiorari in relation to "any tribunal, board or officer exercising judicial functions, while Section 2 of
the same Rule treats of the writ of prohibition in relation to "proceedings of any tribunal, corporation,
board, or person ... exercising functions judicial or ministerial." But the petition will be shown upon
analysis to be in reality directed against an unlawful exercise of judicial power.
The decree reveals that Mr. Marcos exercised an obviously judicial function. He made a
determination of facts, and applied the law to those facts, declaring what the legal rights of the
parties were in the premises. These acts essentially constitute a judicial function, 10 or an exercise of
jurisdiction which is the power and authority to hear or try and decide or determine a cause. 11 He
adjudged it to be an established fact that neither the original purchasers nor their subsequent transferees
have made full payment of all installments of the purchase money and interest on the lots claimed by
Carmel Farms, Inc., including those on which the dwellings of the members of ... (the) Association (of
homeowners) stand." And applying the law to that situation, he made the adjudication that "title to said
land has remained with the Government, and the land now occupied by the members of said association
has never ceased to form part of the property of the Republic of the Philippines," and that 'any and all acts
affecting said land and purporting to segregate it from the said property of the Republic ... (were) null and
void ab initio as against the law and public policy.
These acts may thus be properly struck down by the writ of certiorari, because done by an officer in
the performance of what in essence is a judicial function, if it be shown that the acts were done
without or in excess of jurisdiction, or with grave abuse of discretion. Since Mr. Marcos was never
vested with judicial power, such power, as everyone knows, being vested in the Supreme Court and
such inferior courts as may be established by law 12 the judicial acts done by him were in the
circumstances indisputably perpetrated without jurisdiction. The acts were completely alien to his office as
chief executive, and utterly beyond the permissible scope of the legislative power that he had assumed as
head of the martial law regime.
Moreover, he had assumed to exercise power i.e. determined the relevant facts and applied the
law thereto without a trial at which all interested parties were accorded the opportunity to adduce
evidence to furnish the basis for a determination of the facts material to the controversy. He made
the finding ostensibly on the basis of "the records of the Bureau of Lands." Prescinding from the fact

that there is no indication whatever the nature and reliability of these records and that they are in no
sense conclusive, it is undeniable that the petitioner Tuasons (and the petitioners in intervention)
were never confronted with those records and afforded a chance to dispute their trustworthiness and
present countervailing evidence. This is yet another fatal defect. The adjudication was patently and
grossly violative of the right to due process to which the petitioners are entitled in virtue of the
Constitution. Mr. Marcos, in other words, not only arrogated unto himself a power never granted to
him by the Constitution or the laws but had in addition exercised it unconstitutionally.
In any event, this Court has it in its power to treat the petition for certiorari as one for prohibition if the
averments of the former sufficiently made out a case for the latter. 13 Considered in this wise, it will also
appear that an executive officer had acted without jurisdiction exercised judicial power not granted to
him by the Constitution or the laws and had furthermore performed the act in violation of the
constitutional rights of the parties thereby affected. The Court will grant such relief as may be proper and
efficacious in the premises even if not specifically sought or set out in the prayer of the appropriate
pleading, the permissible relief being determined after all not by the prayer but by the basic averments of
the parties' pleadings. 14
There is no dispute about the fact that title to the land purchased by Carmel was actually issued to it
by the Government. This of course gives rise to the strong presumption that official duty has been
regularly performed,15 that official duty being in this case the ascertainment by the Chief of the Bureau of
Public Lands of the fulfillment of the condition prescribed by law for such issuance, i.e., the payment in full
of the price, together with all accrued interest. Against this presumption there is no evidence. It must
hence be accorded full sway in these proceedings. Furthermore, the title having been duly issued to
Carmel, it became "effective in the manner provided in section one hundred and twenty-two of the Land
Registration Act." 16
It may well be the fact that Carmel really did fail to make full payment of the price of the land
purchased by it from the Government pursuant to the provisions of Act 1120. This is a possibility that
cannot be totally discounted. If this be the fact, the Government may bring suit to recover the unpaid
installments and interest, invalidate any sale or encumbrance involving the land subject of the sale,
and enforce the lien of the Government against the land by selling the same in the manner provided
by Act Numbered One Hundred and Ninety for the foreclosure of mortgages. 17 This it can do despite
the lapse of a considerable period of time. Prescription does not lie against the Government. But until and
unless such a suit is brought and results in a judgment favorable to the Government, the acquisition of
title by Carmel and the purchases by the petitioners and the petitioners-intervenors from it of portions of
the land covered by its original title must be respected. At any rate, the eventuation of that contingency
will not and cannot in any manner affect this Court's conclusion, herein affirmed, of the unconstitutionality
and invalidity of Presidential Decree No. 293, and the absolute lack of any right to the land or any portion
thereof on the part of the members of the so-called "Malacanang Homeowners Association, Inc." The
decree was not as claimed a licit instance of the application of social justice principles or the exercise of
police power. It was in truth a disguised, vile stratagem deliberately resorted to favor a few individuals, in
callous and disdainful disregard of the rights of others. It was in reality a taking of private property without
due process and without compensation whatever, from persons relying on the indefeasibility of their titles
in accordance with and as explicitly guaranteed by law.
One last word, respecting the petitioners in intervention, Their petition to intervene substantially
fulfilled the requirements laid down for a class suit 18 and was consequently given due course by the
Court. They are therefore covered by this judgment.
WHEREFORE, Presidential Decree No. 293 is declared to be unconstitutional and void ab initio in all
its parts. The public respondents are commanded to cancel the inscription on the titles of the
petitioners and the petitioners in intervention of the memorandum declaring their titles null and void
and declaring the property therein respectively described open for disposition and sale to the

members of the Malacanang Homeowners Association, Inc. to do whatever else is needful to restore
the titles to full effect and efficacy; and henceforth to refrain, cease and desist from implementing
any provision or part of said Presidential Decree No. 293. No pronouncement as to costs.
Yap, Fernan, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Gancayco, Padilla, Bidin, Sarmiento and
Cortes JJ., concur.

Separate Opinions

TEEHANKEE, C.J., concurring:

I concur fully in the main opinion forcefully written by Mr. Justice Narvasa and the separate opinion
of Mr. Justice Feliciano depicting the unparalleled "despotic, capricious, oppressive and unjustifiable
exercise of government power" by the deposed President Ferdinand E. Marcos, as struck down by
the Court's unanimous judgment in the case at bar. To be sure, this is but one of the many
unconstitutional and void Presidential Decrees of the past unlamented regime which perforce have
been so annulled and relief granted to the victims, as they are brought to the Court's attention.
These arbitrary, capricious and oppressive decrees, tailored to suit the deposed President's every
wish and whim, were the product of unrestrained power, as the deposed President took over the
entire government with the imposition of martial law in September, 1972. Such unrestrained exercise
of power was heightened by the Court's majority pronouncement in April, 1983 (even as martial law
had been lifted at least on paper two years earlier by Proclamation No. 2045 in January, 1981) that
in times of grave emergencies, "The President takes absolute command, for the very life of the
nation and its government, which, incidentally, includes the courts, is in grave peril. In so doing, the
President is answerable only to his conscience, the people and to God. For their part, in giving him
the supreme mandate as their President, the people can only trust and pray that, giving him their
own loyalty with utmost patriotism, the President will not fail them." 1
It certainly cannot be gainsaid that such judicial abdication turned back the clock to lese majeste and
dismantled the intricate system of reenforcing rules, principles and procedures that have evolved
through centuries of struggle for the more efficacious protection through independent courts of the
individual's right to life, liberty and property and due process of law, so that they would no longer
have to depend upon prayers for the purpose.
This concurrence is to express the fervent prayer that we have learned well our lesson that absolute
power corrupts absolutely and that as Thomas Jefferson warned (which sadly proved to be true in
our case), "a single consolidated government would become the most corrupt government on earth."
We have won back our freedoms and restored democracy with three great departments of
government, and separation of powers and checks and balances. As Rizal taught us, freedom must
be nurtured and cherished, not abused, else we lose or forfeit it. We must reconsecrate ourselves to
the supremacy of the Rule of Law and renew once more our faith in and adherence to the force of

law, rather than the law of force-for only in the Rule of Law may a democracy survive and flourish.
This means selfless adherence by all to the basics, for as Brandeis aptly expressed it, "Democracy
is a serious undertaking. It is more difficult to maintain than to achieve. It demands continuous
sacrifice by the individual and more exigent obedience to the moral law than any other form of
government."
FELICIANO, J., concurring:
I quite agree with the constitutional law analysis of my learned brother in the Court, Mr. Justice
Narvasa, in his eloquent opinion. I should like simply to add that Presidential Decree No. 293 is
constitutionally offensive for still another reason: it constitutes a bill of attainder, prohibited not only
under the 1935 and 1987 Constitutions but also under the 1973 Constitution.
Bills of attainder are an ancient instrument of tyranny. In England a few centuries back, Parliament
would at times enact bills or statutes which declared certain persons attainted and their blood
corrupted so that it lost all heritable quality (Ex Parte Garland, 4 Wall. 333, 18 L.Ed. 366 [1867]). In
more modem terms, a bill of attainder is essentially a usurpation of judicial power by a legislative
body. It envisages and effects the imposition of a penalty the deprivation of life or liberty or
property not by the ordinary processes of judicial trial, but by legislative fiat. While cast in the form
of special legislation, a bill of attainder (or bill of pains and penalties, if it prescribed a penalty other
than death) is in intent and effect a penal judgment visited upon an Identified person or group of
persons (and not upon the general community) Without a prior charge or demand, without notice and
healing, without an opportunity to defend, without any of the civilized forms and safeguards of the
judicial process as we know it (People v. Ferrer, 48 SCRA 382 [1972]; Cummings and Missouri, 4
Wall. 277, 18 L.Ed. 356 [1867]; U.S. v. Lovett, 328, U.S. 303, 90 L.Ed. 1252 [1945]; U.S. v. Brown,
381 U.S. 437, 14 L.Ed. 2d. 484 [1965]. Such is the archetypal bill of attainder wielded as a means of
legislative oppression. P.D. No. 293 has clearly been cast from the mould.
Former President Marcos, by establishing martial law, undertook to assume legislative powers in
addition to his regular powers as Chief Executive. He consolidated in his own person the powers of
the Presidency and the powers of Congress. Such was the theory underlying the streams of
decrees, executive orders, executive proclamations, letters of instruction and the like that he
released upon the nation. The emergence of Presidential Decree No. 293 into public light
underscores the fact that Mr. Marcos also purported at times to exercise judicial prerogatives. If one
viewed PD No. 293 as issued by Mr. Marcos in his presidential capacity, as it were, the decree is
constitutionally vitiated as an exercise of a power judicial power- deliberately denied to the Chief
Executive by the Constitution. This is made clear in Mr. Justice Narvasa's opinion. If one viewed PD
No. 293 as rendered by Mr. Marcos in his other, assumed i.e. legislative capacity, the decree is
similarly fundamentally flawed as a bill of attainder and ultimately, again, as an assumption unto
himself of a power and authority clearly withheld by the Constitution from both the Chief Executive
and the legislative body and lodged elsewhere in our Constitutional system.
I vote for the nullification of PD No. 293 by the grant of certiorari.

Separate Opinions
TEEHANKEE, C.J., concurring:

I concur fully in the main opinion forcefully written by Mr. Justice Narvasa and the separate opinion
of Mr. Justice Feliciano depicting the unparalleled "despotic, capricious, oppressive and unjustifiable
exercise of government power" by the deposed President Ferdinand E. Marcos, as struck down by
the Court's unanimous judgment in the case at bar. To be sure, this is but one of the many
unconstitutional and void Presidential Decrees of the past unlamented regime which perforce have
been so annulled and relief granted to the victims, as they are brought to the Court's attention.
These arbitrary, capricious and oppressive decrees, tailored to suit the deposed President's every
wish and whim, were the product of unrestrained power, as the deposed President took over the
entire government with the imposition of martial law in September, 1972. Such unrestrained exercise
of power was heightened by the Court's majority pronouncement in April, 1983 (even as martial law
had been lifted at least on paper two years earlier by Proclamation No. 2045 in January, 1981) that
in times of grave emergencies, "The President takes absolute command, for the very life of the
nation and its government, which, incidentally, includes the courts, is in grave peril. In so doing, the
President is answerable only to his conscience, the people and to God. For their part, in giving him
the supreme mandate as their President, the people can only trust and pray that, giving him their
own loyalty with utmost patriotism, the President will not fail them." 1
It certainly cannot be gainsaid that such judicial abdication turned back the clock to lese majeste and
dismantled the intricate system of reenforcing rules, principles and procedures that have evolved
through centuries of struggle for the more efficacious protection through independent courts of the
individual's right to life, liberty and property and due process of law, so that they would no longer
have to depend upon prayers for the purpose.
This concurrence is to express the fervent prayer that we have learned well our lesson that absolute
power corrupts absolutely and that as Thomas Jefferson warned (which sadly proved to be true in
our case), "a single consolidated government would become the most corrupt government on earth."
We have won back our freedoms and restored democracy with three great departments of
government, and separation of powers and checks and balances. As Rizal taught us, freedom must
be nurtured and cherished, not abused, else we lose or forfeit it. We must reconsecrate ourselves to
the supremacy of the Rule of Law and renew once more our faith in and adherence to the force of
law, rather than the law of force-for only in the Rule of Law may a democracy survive and flourish.
This means selfless adherence by all to the basics, for as Brandeis aptly expressed it, "Democracy
is a serious undertaking. It is more difficult to maintain than to achieve. It demands continuous
sacrifice by the individual and more exigent obedience to the moral law than any other form of
government."
FELICIANO, J., concurring:
I quite agree with the constitutional law analysis of my learned brother in the Court, Mr. Justice
Narvasa, in his eloquent opinion. I should like simply to add that Presidential Decree No. 293 is
constitutionally offensive for still another reason: it constitutes a bill of attainder, prohibited not only
under the 1935 and 1987 Constitutions but also under the 1973 Constitution.
Bills of attainder are an ancient instrument of tyranny. In England a few centuries back, Parliament
would at times enact bills or statutes which declared certain persons attainted and their blood
corrupted so that it lost all heritable quality (Ex Parte Garland, 4 Wall. 333, 18 L.Ed. 366 [1867]). In
more modem terms, a bill of attainder is essentially a usurpation of judicial power by a legislative
body. It envisages and effects the imposition of a penalty the deprivation of life or liberty or
property not by the ordinary processes of judicial trial, but by legislative fiat. While cast in the form
of special legislation, a bill of attainder (or bill of pains and penalties, if it prescribed a penalty other

than death) is in intent and effect a penal judgment visited upon an Identified person or group of
persons (and not upon the general community) Without a prior charge or demand, without notice and
healing, without an opportunity to defend, without any of the civilized forms and safeguards of the
judicial process as we know it (People v. Ferrer, 48 SCRA 382 [1972]; Cummings and Missouri, 4
Wall. 277, 18 L.Ed. 356 [1867]; U.S. v. Lovett, 328, U.S. 303, 90 L.Ed. 1252 [1945]; U.S. v. Brown,
381 U.S. 437, 14 L.Ed. 2d. 484 [1965]. Such is the archetypal bill of attainder wielded as a means of
legislative oppression. P.D. No. 293 has clearly been cast from the mould.
Former President Marcos, by establishing martial law, undertook to assume legislative powers in
addition to his regular powers as Chief Executive. He consolidated in his own person the powers of
the Presidency and the powers of Congress. Such was the theory underlying the streams of
decrees, executive orders, executive proclamations, letters of instruction and the like that he
released upon the nation. The emergence of Presidential Decree No. 293 into public light
underscores the fact that Mr. Marcos also purported at times to exercise judicial prerogatives. If one
viewed PD No. 293 as issued by Mr. Marcos in his presidential capacity, as it were, the decree is
constitutionally vitiated as an exercise of a power judicial power- deliberately denied to the Chief
Executive by the Constitution. This is made clear in Mr. Justice Narvasa's opinion. If one viewed PD
No. 293 as rendered by Mr. Marcos in his other, assumed i.e. legislative capacity, the decree is
similarly fundamentally flawed as a bill of attainder and ultimately, again, as an assumption unto
himself of a power and authority clearly withheld by the Constitution from both the Chief Executive
and the legislative body and lodged elsewhere in our Constitutional system.
I vote for the nullification of PD No. 293 by the grant of certiorari.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 191424

August 7, 2013

ALFEO D. VIVAS, ON HIS BEHALF AND ON BEHALF OF THE SHAREHOLDERS OF

EUROCREDIT COMMUNITY BANK, PETITIONER,
vs.
THE MONETARY BOARD OF THE BANGKO SENTRAL NG PILIPINAS AND THE PHILIPPINE
DEPOSIT INSURANCE CORPORATION, RESPONDENTS.
DECISION
MENDOZA, J.:
This is a petition for prohibition with prayer for the issuance of a status quo ante order or writ of
preliminary injunction ordering the respondents to desist from closing EuroCredit Community Bank,
Incorporated (ECBI) and from pursuing the receivership thereof. The petition likewise prays that the
management and operation of ECBI be restored to its Board of Directors (BOD) and its officers.

The Facts
The Rural Bank of Faire, Incorporated (RBFI) was a duly registered rural banking institution with
principal office in Centro Sur, Sto. Nio, Cagayan. Record shows that the corporate life of RBFI
expired on May 31, 2005.1Notwithstanding, petitioner Alfeo D. Vivas (Vivas) and his principals
acquired the controlling interest in RBFI sometime in January 2006. At the initiative of Vivas and the
new management team, an internal audit was conducted on RBFI and results thereof highlighted the
dismal operation of the rural bank. In view of those findings, certain measures calculated to revitalize
the bank were allegedly introduced. 2 On December 8, 2006, the Bangko Sentral ng Pilipinas (BSP)
issued the Certificate of Authority extending the corporate life of RBFI for another fifty (50) years.
The BSP also approved the change of its corporate name to EuroCredit Community Bank,
Incorporated, as well as the increase in the number of the members of its BOD, from five (5) to
eleven (11).3
Pursuant to Section 28 of Republic Act (R.A.) No. 7653, otherwise known as The New Central Bank
Act, the Integrated Supervision Department II (ISD II) of the BSP conducted a general examination
on ECBI with the cut-off date of December 31, 2007. Shortly after the completion of the general
examination, an exit conference was held on March 27, 2008 at the BSP during which the BSP
officials and examiners apprised Vivas, the Chairman and President of ECBI, as well as the other
bank officers and members of its BOD, of the advance findings noted during the said examination.
The ECBI submitted its comments on BSPs consolidated findings and risk asset classification
through a letter, dated April 8, 2008.4
Sometime in April 2008, the examiners from the Department of Loans and Credit of the BSP arrived
at the ECBI and cancelled the rediscounting line of the bank. Vivas appealed the cancellation to
BSP.5 Thereafter, the Monetary Board (MB) issued Resolution No. 1255, dated September 25, 2008,
placing ECBI under Prompt Corrective Action (PCA) framework because of the following serious
findings and supervisory concerns noted during the general examination: 1] negative capital of ?
14.674 million and capital adequacy ratio of negative 18.42%; 2] CAMEL (Capital Asset
Management Earnings Liquidity) composite rating of "2" with a Management component rating of "1";
and 3] serious supervisory concerns particularly on activities deemed unsafe or unsound. 6 Vivas
claimed that the BSP took the above courses of action due to the joint influence exerted by a certain
hostile shareholder and a former BSP examiner.7
Through its letter, dated September 30, 2008, the BSP furnished ECBI with a copy of the Report of
Examination (ROE) as of December 31, 2007. In addition, the BSP directed the banks BOD and
senior management to: 1] infuse fresh capital of ?22.643 million; 2] book the amount of ?28.563
million representing unbooked valuation reserves on classified loans and other risks assets on or
before October 31, 2008; and 3] take appropriate action necessary to address the
violations/exceptions noted in the examination. 8
Vivas moved for a reconsideration of Resolution No. 1255 on the grounds of non-observance of due
process and arbitrariness. The ISD II, on several instances, had invited the BOD of ECBI to discuss
matters pertaining to the placement of the bank under PCA framework and other supervisory
concerns before making the appropriate recommendations to the MB. The proposed meeting,
however, did not materialize due to postponements sought by Vivas.9
In its letter, dated February 20, 2009, the BSP directed ECBI to explain why it transferred the
majority shares of RBFI without securing the prior approval of the MB in apparent violation of
Subsection X126.2 of the Manual of Regulation for Banks (MORB). 10 Still in another letter,11 dated
March 31, 2009, the ISD II required ECBI to explain why it did not obtain the prior approval of the
BSP anent the establishment and operation of the banks sub-offices.

Also, the scheduled March 31, 2009 general examination of the books, records and general
condition of ECBI with the cut-off date of December 31, 2008, did not push through. According to
Vivas, ECBI asked for the deferment of the examination pending resolution of its appeal before the
MB. Vivas believed that he was being treated unfairly because the letter of authority to examine
allegedly contained a clause which pertained to the Anti-Money Laundering Law and the Bank
Secrecy Act.12
The MB, on the other hand, posited that ECBI unjustly refused to allow the BSP examiners from
examining and inspecting its books and records, in violation of Sections 25 and 34 of R.A. No. 7653.
In its letter,13 dated May 8, 2009, the BSP informed ECBI that it was already due for another annual
examination and that the pendency of its appeal before the MB would not prevent the BSP from
conducting another one as mandated by Section 28 of R.A. No. 7653.
In view of ECBIs refusal to comply with the required examination, the MB issued Resolution No.
726,14 dated May 14, 2009, imposing monetary penalty/fine on ECBI, and referred the matter to the
Office of the Special Investigation (OSI) for the filing of appropriate legal action. The BSP also wrote
a letter,15 dated May 26, 2009, advising ECBI to comply with MB Resolution No. 771, which
essentially required the bank to follow its directives. On May 28, 2009, the ISD II reiterated its
demand upon the ECBI BOD to allow the BSP examiners to conduct a general examination on June
3, 2009.16
In its June 2, 2009 Letter-Reply,17 ECBI asked for another deferment of the examination due to the
pendency of certain unresolved issues subject of its appeal before the MB, and because Vivas was
then out of the country. The ISD II denied ECBIs request and ordered the general examination to
proceed as previously scheduled.18
Thereafter, the MB issued Resolution No. 823,19 dated June 4, 2009, approving the issuance of a
cease and desist order against ECBI, which enjoined it from pursuing certain acts and transactions
that were considered unsafe or unsound banking practices, and from doing such other acts or
transactions constituting fraud or might result in the dissipation of its assets.
On June 10, 2009, the OSI filed with the Department of Justice (DOJ) a complaint for Estafa
Through Falsification of Commercial Documents against certain officials and employees of ECBI.
Meanwhile, the MB issued Resolution No. 1164,20 dated August 13, 2009, denying the appeal of
ECBI from Resolution No. 1255 which placed it under PCA framework. On November 18, 2009, the
general examination of the books and records of ECBI with the cut-off date of September 30, 2009,
was commenced and ended in December 2009. Later, the BSP officials and examiners met with the
representatives of ECBI, including Vivas, and discussed their findings. 21 On December 7, 2009, the
ISD II reminded ECBI of the non-submission of its financial audit reports for the years 2007 and
2008 with a warning that failure to submit those reports and the written explanation for such
omission shall result in the imposition of a monetary penalty.22 In a letter, dated February 1, 2010, the
ISD II informed ECBI of MB Resolution No. 1548 which denied its request for reconsideration of
Resolution No. 726.
On March 4, 2010, the MB issued Resolution No. 27623 placing ECBI under receivership in
accordance with the recommendation of the ISD II which reads:
On the basis of the examination findings as of 30 September 2009 as reported by the Integrated
Supervision Department (ISD) II, in its memorandum dated 17 February 2010, which findings
showed that the Eurocredit Community Bank, Inc. a Rural Bank (Eurocredit Bank) (a) is unable to
pay its liabilities as they become due in the ordinary course of business; (b) has insufficient
realizable assets to meet liabilities; (c) cannot continue in business without involving probable losses

to its depositors and creditors; and (d) has willfully violated a cease and desist order of the Monetary
Board for acts or transactions which are considered unsafe and unsound banking practices and
other acts or transactions constituting fraud or dissipation of the assets of the institution, and
considering the failure of the Board of Directors/management of Eurocredit Bank to restore the
banks financial health and viability despite considerable time given to address the banks financial
problems, and that the bank had been accorded due process, the Board, in accordance with Section
30 of Republic Act No. 7653 (The New Central Bank Act), approved the recommendation of ISD II as
follows:
To prohibit the Eurocredit Bank from doing business in the Philippines and to place its assets and
affairs under receivership; and
To designate the Philippine Deposit Insurance Corporation as Receiver of the bank.
Assailing MB Resolution No. 276, Vivas filed this petition for prohibition before this Court, ascribing
grave abuse of discretion to the MB for prohibiting ECBI from continuing its banking business and for
placing it under receivership. The petitioner presents the following
ARGUMENTS:
(a)
It is grave abuse of discretion amounting to loss of jurisdiction to apply the general law embodied in
Section 30 of the New Central Bank Act as opposed to the specific law embodied in Sections 11 and
14 of the Rural Banks Act of 1992.
(b)
Even if it assumed that Section 30 of the New Central Bank Act is applicable, it is still the gravest
abuse of discretion amounting to lack or excess of jurisdiction to execute the law with manifest
arbitrariness, abuse of discretion, and bad faith, violation of constitutional rights and to further
execute a mandate well in excess of its parameters.
(c)
The power delegated in favor of the Bangko Sentral ng Pilipinas to place rural banks under
receiverships is unconstitutional for being a diminution or invasion of the powers of the Supreme
Court, in violation of Section 2, Article VIII of the Philippine Constitution. 24
Vivas submits that the respondents committed grave abuse of discretion when they erroneously
applied Section 30 of R.A. No. 7653, instead of Sections 11 and 14 of the Rural Bank Act of 1992 or
R.A. No. 7353. He argues that despite the deficiencies, inadequacies and oversights in the conduct
of the affairs of ECBI, it has not committed any financial fraud and, hence, its placement under
receivership was unwarranted and improper. He posits that, instead, the BSP should have taken
over the management of ECBI and extended loans to the financially distrained bank pursuant to
Sections 11 and 14 of R.A. No. 7353 because the BSPs power is limited only to supervision and
management take-over of banks.
He contends that the implementation of the questioned resolution was tainted with arbitrariness and
bad faith, stressing that ECBI was placed under receivership without due and prior hearing in
violation of his and the banks right to due process. He adds that respondent PDIC actually closed

ECBI even in the absence of any directive to this effect. Lastly, Vivas assails the constitutionality of
Section 30 of R.A. No. 7653 claiming that said provision vested upon the BSP the unbridled power to
close and place under receivership a hapless rural bank instead of aiding its financial needs. He is of
the view that such power goes way beyond its constitutional limitation and has transformed the BSP
to a sovereign in its own "kingdom of banks."25
The Courts Ruling
The petition must fail.
Vivas Availed of the Wrong Remedy
To begin with, Vivas availed of the wrong remedy. The MB issued Resolution No. 276, dated March
4, 2010, in the exercise of its power under R.A. No. 7653. Under Section 30 thereof, any act of the
MB placing a bank under conservatorship, receivership or liquidation may not be restrained or set
aside except on a petition for certiorari. Pertinent portions of R.A. 7653 read:
Section 30.
x x x x.
The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be
final and executory, and may not be restrained or set aside by the court except on petition for
certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse
of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may only be filed
by the stockholders of record representing the majority of the capital stock within ten (10) days from
receipt by the board of directors of the institution of the order directing receivership, liquidation or
conservatorship.
x x x x. [Emphases supplied]
Prohibition is already unavailing
Granting that a petition for prohibition is allowed, it is already an ineffective remedy under the
circumstances obtaining. Prohibition or a "writ of prohibition" is that process by which a superior
court prevents inferior courts, tribunals, officers, or persons from usurping or exercising a jurisdiction
with which they have not been vested by law, and confines them to the exercise of those powers
legally conferred. Its office is to restrain subordinate courts, tribunals or persons from exercising
jurisdiction over matters not within its cognizance or exceeding its jurisdiction in matters of which it
has cognizance.26 In our jurisdiction, the rule on prohibition is enshrined in Section 2, Rule 65 of the
Rules on Civil Procedure, to wit:
Sec. 2. Petition for prohibition - When the proceedings of any tribunal, corporation, board, officer or
person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of
its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction,
and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of
law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that the judgment be rendered commanding the respondent to desist from
further proceedings in the action or matter specified therein, or otherwise granting such incidental
reliefs as the law and justice require.

x x x x.
Indeed, prohibition is a preventive remedy seeking that a judgment be rendered which would direct
the defendant to desist from continuing with the commission of an act perceived to be illegal. 27 As a
rule, the proper function of a writ of prohibition is to prevent the doing of an act which is about to be
done. It is not intended to provide a remedy for acts already accomplished. 28
Though couched in imprecise terms, this petition for prohibition apparently seeks to prevent the acts
of closing of ECBI and placing it under receivership. Resolution No. 276, however, had already been
issued by the MB and the closure of ECBI and its placement under receivership by the PDIC were
already accomplished. Apparently, the remedy of prohibition is no longer appropriate. Settled is the
rule that prohibition does not lie to restrain an act that is already a fait accompli. 29
The Petition Should Have Been Filed in the CA
Even if treated as a petition for certiorari, the petition should have been filed with the CA. Section 4
of Rule 65 reads:
Section 4. When and where petition filed. The petition shall be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is
timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from
notice of the denial of said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction
over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals
whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of
its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless
otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the
Court of Appeals. [Emphases supplied]
That the MB is a quasi-judicial agency was already settled and reiterated in the case of Bank of
Commerce v. Planters Development Bank And Bangko Sentral Ng Pilipinas. 30
Doctrine of Hierarchy of Courts
Even in the absence of such provision, the petition is also dismissible because it simply ignored the
doctrine of hierarchy of courts. True, the Court, the CA and the RTC have original concurrent
jurisdiction to issue writs of certiorari, prohibition and mandamus. The concurrence of jurisdiction,
however, does not grant the party seeking any of the extraordinary writs the absolute freedom to file
a petition in any court of his choice. The petitioner has not advanced any special or important reason
which would allow a direct resort to this Court. Under the Rules of Court, a party may directly appeal
to this Court only on pure questions of law.31 In the case at bench, there are certainly factual issues
as Vivas is questioning the findings of the investigating team.
Strict observance of the policy of judicial hierarchy demands that where the issuance of the
extraordinary writs is also within the competence of the CA or the RTC, the special action for the
obtainment of such writ must be presented to either court. As a rule, the Court will not entertain
direct resort to it unless the redress desired cannot be obtained in the appropriate lower courts; or
where exceptional and compelling circumstances, such as cases of national interest and with
serious implications, justify the availment of the extraordinary remedy of writ of certiorari, prohibition,

or mandamus calling for the exercise of its primary jurisdiction. 32 The judicial policy must be
observed to prevent an imposition on the precious time and attention of the Court.
The MB Committed No Grave Abuse of Discretion
In any event, no grave abuse of discretion can be attributed to the MB for the issuance of the
assailed Resolution No. 276.
Vivas insists that the circumstances of the case warrant the application of Section 11 of R.A. No.
7353, which provides:
Sec. 11. The power to supervise the operation of any rural bank by the Monetary Board as herein
indicated shall consist in placing limits to the maximum credit allowed to any individual borrower; in
prescribing the interest rate, in determining the loan period and loan procedures, in indicating the
manner in which technical assistance shall be extended to rural banks, in imposing a uniform
accounting system and manner of keeping the accounts and records of rural banks; in instituting
periodic surveys of loan and lending procedures, audits, test-check of cash and other transactions of
the rural banks; in conducting training courses for personnel of rural banks; and, in general, in
supervising the business operations of the rural banks.
The Central Bank shall have the power to enforce the laws, orders, instructions, rules and
regulations promulgated by the Monetary Board, applicable to rural banks; to require rural banks,
their directors, officers and agents to conduct and manage the affairs of the rural banks in a lawful
and orderly manner; and, upon proof that the rural bank or its Board of Directors, or officers are
conducting and managing the affairs of the bank in a manner contrary to laws, orders, instructions,
rules and regulations promulgated by the Monetary Board or in a manner substantially prejudicial to
the interest of the Government, depositors or creditors, to take over the management of such bank
when specifically authorized to do so by the Monetary Board after due hearing process until a new
board of directors and officers are elected and qualified without prejudice to the prosecution of the
persons responsible for such violations under the provisions of Sections 32, 33 and 34 of Republic
Act No. 265, as amended.
x x x x.
The thrust of Vivas argument is that ECBI did not commit any financial fraud and, hence, its
placement under receivership was unwarranted and improper. He asserts that, instead, the BSP
should have taken over the management of ECBI and extended loans to the financially distrained
bank pursuant to Sections 11 and 14 of R.A. No. 7353 because the BSPs power is limited only to
supervision and management take-over of banks, and not receivership.
Vivas argues that implementation of the questioned resolution was tainted with arbitrariness and bad
faith, stressing that ECBI was placed under receivership without due and prior hearing, invoking
Section 11 of R.A. No. 7353 which states that the BSP may take over the management of a rural
bank after due hearing.33 He adds that because R.A. No. 7353 is a special law, the same should
prevail over R.A. No. 7653 which is a general law.
The Court has taken this into account, but it appears from all over the records that ECBI was given
every opportunity to be heard and improve on its financial standing. The records disclose that BSP
officials and examiners met with the representatives of ECBI, including Vivas, and discussed their
findings.34 There were also reminders that ECBI submit its financial audit reports for the years 2007
and 2008 with a warning that failure to submit them and a written explanation of such omission shall
result in the imposition of a monetary penalty.35 More importantly, ECBI was heard on its motion for

reconsideration. For failure of ECBI to comply, the MB came out with Resolution No. 1548 denying
its request for reconsideration of Resolution No. 726. Having been heard on its motion for
reconsideration, ECBI cannot claim that it was deprived of its right under the Rural Bank Act.
Close Now, Hear Later
At any rate, if circumstances warrant it, the MB may forbid a bank from doing business and place it
under receivership without prior notice and hearing. Section 30 of R.A. No. 7653 provides, viz:
Sec. 30. Proceedings in Receivership and Liquidation. Whenever, upon report of the head of the
supervising or examining department, the Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities; or
(c) cannot continue in business without involving probable losses to its depositors or
creditors; or
(d) has wilfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution; in which cases, the Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking institution. [Emphases
supplied.]
x x x x.
Accordingly, there is no conflict which would call for the application of the doctrine that a special law
should prevail over a general law. It must be emphasized that R.A .No. 7653 is a later law and under
said act, the power of the MB over banks, including rural banks, was increased and expanded. The
Court, in several cases, upheld the power of the MB to take over banks without need for prior
hearing. It is not necessary inasmuch as the law entrusts to the MB the appreciation and
determination of whether any or all of the statutory grounds for the closure and receivership of the
erring bank are present. The MB, under R.A. No. 7653, has been invested with more power of
closure and placement of a bank under receivership for insolvency or illiquidity, or because the
banks continuance in business would probably result in the loss to depositors or creditors. In the
case of Bangko Sentral Ng Pilipinas Monetary Board v. Hon. Antonio-Valenzuela, 36 the Court
reiterated the doctrine of "close now, hear later," stating that it was justified as a measure for the
protection of the public interest. Thus:
The "close now, hear later" doctrine has already been justified as a measure for the protection of the
public interest. Swift action is called for on the part of the BSP when it finds that a bank is in dire
straits. Unless adequate and determined efforts are taken by the government against distressed and
mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the
national economy itself, not to mention the losses suffered by the bank depositors, creditors, and
stockholders, who all deserve the protection of the government. 37[Emphasis supplied]

In Rural Bank of Buhi, Inc. v. Court of Appeals,38 the Court also wrote that
x x x due process does not necessarily require a prior hearing; a hearing or an opportunity to be
heard may be subsequent to the closure. One can just imagine the dire consequences of a prior
hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the process,
fortunes may be wiped out and disillusionment will run the gamut of the entire banking community.39
The doctrine is founded on practical and legal considerations to obviate unwarranted dissipation of
the banks assets and as a valid exercise of police power to protect the depositors, creditors,
stockholders, and the general public.40 Swift, adequate and determined actions must be taken
against financially distressed and mismanaged banks by government agencies lest the public faith in
the banking system deteriorate to the prejudice of the national economy.
Accordingly, the MB can immediately implement its resolution prohibiting a banking institution to do
business in the Philippines and, thereafter, appoint the PDIC as receiver. The procedure for the
involuntary closure of a bank is summary and expeditious in nature. Such action of the MB shall be
final and executory, but may be later subjected to a judicial scrutiny via a petition for certiorari to be
filed by the stockholders of record of the bank representing a majority of the capital stock. Obviously,
this procedure is designed to protect the interest of all concerned, that is, the depositors, creditors
and stockholders, the bank itself and the general public. The protection afforded public interest
warrants the exercise of a summary closure.
In the case at bench, the ISD II submitted its memorandum, dated February 17, 2010, containing the
findings noted during the general examination conducted on ECBI with the cut-off date of September
30, 2009. The memorandum underscored the inability of ECBI to pay its liabilities as they would fall
due in the usual course of its business, its liabilities being in excess of the assets held. Also, it was
noted that ECBIs continued banking operation would most probably result in the incurrence of
additional losses to the prejudice of its depositors and creditors. On top of these, it was found that
ECBI had willfully violated the cease-and-desist order of the MB issued in its June 24, 2009
Resolution, and had disregarded the BSP rules and directives. For said reasons, the MB was forced
to issue the assailed Resolution No. 276 placing ECBI under receivership. In addition, the MB
stressed that it accorded ECBI ample time and opportunity to address its monetary problem and to
restore and improve its financial health and viability but it failed to do so.
In light of the circumstances obtaining in this case, the application of the corrective measures
enunciated in Section 30 of R.A. No. 7653 was proper and justified. Management take-over under
Section 11 of R.A. No. 7353 was no longer feasible considering the financial quagmire that engulfed
ECBI showing serious conditions of insolvency and illiquidity. Besides, placing ECBI under
receivership would effectively put a stop to the further draining of its assets.
No Undue Delegation of Legislative Power
Lastly, the petitioner challenges the constitutionality of Section 30 of R.A. No. 7653, as the
legislature granted the MB a broad and unrestrained power to close and place a financially troubled
bank under receivership. He claims that the said provision was an undue delegation of legislative
power. The contention deserves scant consideration.
Preliminarily, Vivas attempt to assail the constitutionality of Section 30 of R.A. No. 7653 constitutes
collateral attack on the said provision of law. Nothing is more settled than the rule that the
constitutionality of a statute cannot be collaterally attacked as constitutionality issues must be
pleaded directly and not collaterally.41 A collateral attack on a presumably valid law is not permissible.
Unless a law or rule is annulled in a direct proceeding, the legal presumption of its validity stands. 42

Be that as it may, there is no violation of the non-delegation of legislative power. The rationale for
the constitutional proscription is that "legislative discretion as to the substantive contents of the law
cannot be delegated. What can be delegated is the discretion to determine how the law may be
enforced, not what the law shall be. The ascertainment of the latter subject is a prerogative of the
legislature. This prerogative cannot be abdicated or surrendered by the legislature to the delegate." 43
1wphi1

"There are two accepted tests to determine whether or not there is a valid delegation of legislative
power, viz, the completeness test and the sufficient standard test. Under the first test, the law must
be complete in all its terms and conditions when it leaves the legislature such that when it reaches
the delegate the only thing he will have to do is enforce it. Under the sufficient standard test, there
must be adequate guidelines or stations in the law to map out the boundaries of the delegate's
authority and prevent the delegation from running riot. Both tests are intended to prevent a total
transference of legislative authority to the delegate, who is not allowed to step into the shoes of the
legislature and exercise a power essentially legislative." 44
In this case, under the two tests, there was no undue delegation of legislative authority in the
issuance of R.A. No. 7653. To address the growing concerns in the banking industry, the legislature
has sufficiently empowered the MB to effectively monitor and supervise banks and financial
institutions and, if circumstances warrant, to forbid them to do business, to take over their
management or to place them under receivership. The legislature has clearly spelled out the
reasonable parameters of the power entrusted to the MB and assigned to it only the manner of
enforcing said power. In other words, the MB was given a wide discretion and latitude only as to how
the law should be implemented in order to attain its objective of protecting the interest of the public,
the banking industry and the economy.
WHEREFORE, the petition for prohibition is DENIED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson
DIOSDADO M. PERALTA
Associate Justice

ROBERTO A. ABAD
Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice
ATT E S TATI O N
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice

EN BANC
G.R. No. 186613, August 27, 2013
ROSENDO R. CORALES, IN HIS OFFICIAL CAPACITY AS MUNICIPAL MAYOR OF NAGCARLAN,
LAGUNA, AND DR. RODOLFO R. ANGELES, IN HIS OFFICIAL CAPACITY AS MUNICIPAL
ADMINISTRATOR OF NAGCARLAN, LAGUNA Petitioners, v. REPUBLIC OF THE PHILIPPINES,
REPRESENTED BY THE COMMISSION ON AUDIT, AS REPRESENTED BY PROVINCIAL STATE
AUDITOR OF LAGUNA MAXIMO L. ANDAL, Respondent.
DECISION
PEREZ, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to nullify the Decision 1 and
Resolution2 dated 15 September 2008 and 20 February 2009, respectively, of the Court of Appeals in CAG.R. SP No. 101296 and, in effect, to reinstate the Petition for Prohibition and Mandamus 3 filed by herein
petitioners Rosendo R. Corales (Corales) and Dr. Rodolfo R. Angeles (Dr. Angeles) with the Regional Trial
Court (RTC) of San Pablo City, Laguna. The assailed Decision annulled and set aside the Order 4 dated 17 May
2007 of Branch 32, and the Order5 dated 5 September 2007 of Branch 29, both of the RTC of San Pablo City,
Laguna in Civil Case No. SP-6370 (07), which respectively denied herein respondent Republic of the
Philippines (Republic) Motion to Dismiss petitioners Petition for Prohibition and the subsequent Motion for
Reconsideration thereof. The Court of Appeals thereby ordered the dismissal of petitioners Petition for
Prohibition with the court a quo. The questioned Resolution, on the other hand, denied for lack of merit
petitioners Motion for Reconsideration of the assailed Decision.
The antecedents, as culled from the records, are as follows:

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Petitioner Corales was the duly elected Municipal Mayor of Nagcarlan, Laguna for three (3) consecutive
terms, i.e., the 1998, 2001 and 2004 elections. In his first term as local chief executive, petitioner Corales
appointed petitioner Dr. Angeles to the position of Municipal Administrator, whose appointment was
unanimously approved by the Sangguniang Bayan of Nagcarlan, Laguna (Sangguniang Bayan) per
Resolution No. 98-646 dated 22 July 1998. During his second and third terms as municipal mayor, petitioner
Corales renewed the appointment of petitioner Dr. Angeles. But, on these times, the Sangguniang Bayan per
Resolution No. 2001-0787 dated 12 July 2001 and 26 subsequent Resolutions, disapproved petitioner Dr.
Angeles appointment on the ground of nepotism, as well as the latters purported unfitness and
unsatisfactory performance. Even so, petitioner Dr. Angeles continued to discharge the functions and duties
of a Municipal Administrator for which he received an annual salary of P210,012.00. 8
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Following an audit on various local disbursements, Maximo Andal (Andal), the Provincial State Auditor of
Laguna, issued an Audit Observation Memorandum (AOM) No. 2006-007-100 9 dated 6 October 2006
addressed to petitioner Corales who was asked to comment/reply. The aforesaid AOM, in sum, states that:
1) petitioner Dr. Angeles appointment as Municipal Administrator (during the second and third terms of
petitioner Corales) was without legal basis for having been repeatedly denied confirmation by
the Sangguniang Bayan; 2) petitioner Dr. Angeles can be considered, however, as a de facto officer entitled
to the emoluments of the office for the actual services rendered; 3) nonetheless, it is not the Municipality of
Nagcarlan that should be made liable to pay for petitioner Dr. Angeles salary; instead, it is petitioner
Corales, being the appointing authority, as explicitly provided for in Article 169(I) of the Rules and
Regulations Implementing the Local Government Code of 1991, 10 as well as Section 5, Rule IV of the
Omnibus Rules of Appointments and Other Personnel Actions; 11 4) a post audit of payrolls pertaining to the
payment of salaries, allowances and other incentives of petitioner Dr. Angeles from 15 July 2001 up to 31
May 200612 partially amounted to P1,282,829.99; and 5) in view thereof, it is recommended that an
appropriate Notice of Disallowance be issued for the payment of salary expenses incurred without legal basis
by the Municipality of Nagcarlan in the aforestated amount. 13
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Instead of submitting his comment/reply thereon, petitioner Corales, together with petitioner Dr. Angeles,
opted to file a Petition for Prohibition and Mandamus against Andal and the then members of
the Sangguniang Bayan before the RTC of San Pablo City, Laguna, docketed as Civil Case No. SP-6370 (07)
and originally raffled to Branch 32. Petitioners sought, by way of prohibition, to require the Office of the
Provincial Auditor, through Andal, to recall its AOM and to eventually desist from collecting reimbursement
from petitioner Corales for the salaries paid to and received by petitioner Dr. Angeles for the latters services
as Municipal Administrator. Petitioners similarly sought, by way of mandamus, to compel the then members
of the Sangguniang Bayan, as a collegial body, to recall its Resolutions denying confirmation to petitioner Dr.
Angeles appointment as Municipal Administrator and in their stead to confirm the validity and legitimacy of
such appointment.14
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In its turn, the Office of the Solicitor General (OSG), on Andals behalf, who was impleaded in his official
capacity, filed a Motion to Dismiss petitioners Petition for Prohibition and Mandamus grounded on lack of
cause of action, prematurity and non-exhaustion of administrative remedies. It was specifically contended
therein that: (1) the issuance of the AOM was merely an initiatory step in the administrative investigation of
the Commission on Audit (COA) to allow petitioner Corales to controvert the findings and conclusions of
the Sangguniang Bayan in its Resolution No. 2001-078, as well as those of then Secretary Jose D. Lina, Jr. in
Department of Interior and Local Government (DILG) Opinion No. 124 s. 2002; (2) it was only after the
completion of the said investigation that a resolution will be issued as regards the propriety of the
disbursements made by the Municipality of Nagcarlan in the form of salaries paid to petitioner Dr. Angeles
during his tenure as Municipal Administrator; and (3) instead of resorting to judicial action, petitioner
Corales should have first responded to the AOM and, in the event of an adverse decision against him,
elevate the matter for review to a higher authorities in the COA. 15 With these, petitioners petition should be
dismissed, as petitioner Corales has no cause of action against Andal - his resort to judicial intervention is
premature and he even failed to avail himself of, much less exhaust, the administrative remedies available
to him.16
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In its Order dated 17 May 2007, the trial court denied the said Motion to Dismiss on the ground that Andal
was merely a nominal party.17 The subsequent motion for its reconsideration was also denied in another
Order dated 5 September 2007.18
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Respondent Republic, as represented by COA, as represented by Andal, consequently filed a Petition

for Certiorari with the Court of Appeals ascribing grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the trial court in rendering the Orders dated 17 May 2007 and 5 September 2007,
as it unjustly denied respondents right to actively prosecute the case through a mere declaration that it was
a nominal party despite a clear showing that the Petition for Prohibition referred to the respondent as a real
party in interest.19
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On 15 September 2008, the Court of Appeals rendered its now assailed Decision granting respondents
Petition for Certiorari, thereby annulling and setting aside the RTC Orders dated 17 May 2007 and 5
September 2007 and, accordingly, dismissing petitioners Petition for Prohibition with the court a quo.20 The
Court of Appeals justified its decision in the following manner:
x x x We agree with the OSGs contention that the [herein respondent Republic], herein represented by
the COA and specifically by Andal in the latters capacity as Provincial State Auditor of Laguna, is not
merely a nominal party to the petition for prohibition. x x x. That the [respondent] naturally has

an interest in the disposition/disbursement of said public funds as well as in the recovery thereof
should the ongoing investigative audit confirm the illegality thereof cannot be gainsaid. Rather
than a mere nominal party, therefore, the [respondent] is an indispensable party to the petition
for prohibition and may thus seek its dismissal, given that under the attendant facts there is a
yet no actual case or controversy calling for [therein] respondent courts exercise of its judicial
power.
Judicial review cannot be exercised in vacuo. Thus, as a condition precedent for the exercise of
judicial inquiry, there must be an actual case or controversy, which exists when there is a conflict of
legal rights or an assertion of opposite legal claims, which can be resolved on the basis of existing law and
jurisprudence. x x x. An actual case or controversy thus means an existing case or controversy that is
appropriate or ripe for judicial determination, not conjectural or anticipatory, lest the decision of the court
would amount to an advisory opinion.
[Herein petitioners] x x x have failed to show the existence of an actual case or controversy that
would necessitate judicial inquiry through a petition for prohibition. As the OSG aptly observed,
the issuance of the AOM is just an initiatory step in the investigative audit being then conducted by
Andal[,] as Provincial State Auditor of Laguna to determine the propriety of the disbursements made
by the Municipal Government of Nagcarlan. While Andal may have stated an opinion in the AOM
that [herein petitioner] Corales should reimburse the government treasury for the salaries paid
to [herein petitioner Dr. Angeles] in light of the repeated disapproval and/or rejection of the
latters appointment by the Sangguniang [Bayan] of Nagcarlan, there is no showing whatsoever
of any affirmative action taken by Andal to enforce such audit observation. What Andal did, as
the AOM unmistakably shows, was to merely request [petitioner] Corales to submit a
reply/comment to the audit observation and in the process afford the latter an opportunity to
controvert not only Andals opinion on salary reimbursement but the other statements therein expressed by
the other members of the audit team.
In the absence moreover of a showing that [petitioners], particularly [petitioner] Corales, sustained actual
or imminent injury by reason of the issuance of the AOM, there is no reason to allow the continuance of the
petition for prohibition which was, after all, manifestly conjectural or anticipatory, filed for a speculative
purpose and upon the hypothetical assumption that [petitioner] Corales would be eventually compelled to
reimburse the amounts paid as [petitioner Dr. Angeles] salaries should the audit investigation confirm the
irregularity of such disbursements. This Court will not engage in such speculative guesswork and neither
should respondent court x x x.21 (Emphasis and italics supplied).
Disgruntled, petitioners moved for its reconsideration but it was denied for lack of merit in a Resolution
dated 20 February 2009.
Hence, this petition.
In their Memorandum, petitioners raise the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A PALPABLY ERRONEOUS RESOLUTION
OF A SUBSTANTIAL QUESTION OF LAW WHEN IT ORDERED THE DISMISSAL OF PETITIONERS
SUIT FOR PROHIBITION.
II.
WHETHER OR NOT THE COURT OF APPEALS ACTED UNJUSTLY AND INJUDICIOUSLY WHEN IT
HELD THAT THE FACTS AND CIRCUMSTANCES SURROUNDING THE SUIT FOR PROHIBITION IS
NOT YET RIPE FOR JUDICIAL DETERMINATION.
III.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN THE
INTERPRETATION AND RESOLUTION OF A PIVOTAL LEGAL ISSUE WHEN IT CONCLUDED THAT
THERE IS NO ACTUAL DISPUTE OR CONCRETE CONTROVERSY WHICH MAY BE THE PROPER
SUBJECT MATTER OF A SUIT FOR PROHIBITION.
IV.

WHETHER OR NOT THE COURT OF APPEALS UNJUSTIFIABLY TRANSGRESSED AND TRAMPLED

UPON A CATEGORICAL JURISPRUDENTIAL DOCTRINE WHEN IT TOOK COGNIZANCE OF AND
FAVORABLY RESOLVED THE [HEREIN RESPONDENTS] PETITION FOR CERTIORARI, IN BLATANT
VIOLATION OF THE RULE LAID DOWN IN THE APROPOS CASE OF CHINA ROAD AND BRIDGE
CORPORATION [V.] COURT OF APPEALS (348 SCRA 401).
V.
WHETHER OR NOT THE COURT OF APPEALS OVERSTEPPED AND WENT BEYOND THE BOUNDARIES
OF ITS LEGITIMATE DISCRETION WHEN IT DEVIATED AND VEERED AWAY FROM THE PRINCIPAL
ISSUES OF THE CASE, INSTEAD OF PRONOUNCING THAT PETITIONERS HAVE A VALID, PERFECT
AND LEGITIMATE CAUSE OF ACTION FOR PROHIBITION. 22 (Italics supplied).
The Petition is bereft of merit.
The issues will be discussed in seriatim.
The first three issues concern the ripeness or prematurity of the Petition for Prohibition assailing the AOM
issued by Andal to petitioner Corales. Petitioners argue that from the tenor of the AOM it is clear that
petitioner Corales is being adjudged liable and personally accountable to pay or to reimburse, in his private
capacity, the salaries paid to and received by petitioner Dr. Angeles for the latters services as Municipal
Administrator, as his appointment thereto was considered invalid for lack of necessary confirmation from
the Sangguniang Bayan. It is further argued that contrary to the claim of respondent Republic that such
AOM is a mere initiatory step in the course of an investigative auditing process, the wordings thereof
unmistakably reveal that the same is a categorical disposition and enforcement measure requiring petitioner
Corales to reimburse the money disbursed by the Municipality of Nagcarlan to pay petitioner Dr. Angeles
salaries as Municipal Administrator. Such AOM is a firm, clear and affirmative official action on the part of the
Provincial State Auditor to hold petitioner Corales liable for reimbursement; thus, to require the latter to still
comment or controvert the findings thereon is a mere frivolous and useless formality. Since the requirement
for petitioner Corales to pay and reimburse the salaries of petitioner Dr. Angeles is actual, direct and
forthcoming, the same may be the proper subject of an action for prohibition. Otherwise stated, such
imposition of liability for reimbursement against petitioner Corales presents a concrete justiciable
controversy and an actual dispute of legal rights.
Petitioners contention is unavailing.
To begin with, this Court deems it proper to quote the significant portions of the questioned AOM, to wit:

FOR: Hon. ROSENDO R. CORALES

Municipal Mayor
Nagcarlan, Laguna
FROM:Mr. MAXIMO L. ANDAL
State Auditor IV
Audit Team Leader
May we have your comment/reply on the following audit observation. Please return the duplicate
within fifteen (15) days upon receipt by filling up the space provided for with your comments.

AUDIT OBSERVATION
The appointment of [herein
petitioner Dr. Angeles] as
Municipal Administrator was
repeatedly denied not
confirmed/ concurred
by Sangguniang

MANAGEMENT COMMENT

Bayanhence, the validity of

the appointment as per
opinion/rulings by the then
Secretary Jose D. Lina, Jr.
of the DILG in opinion No.
124 s.2002 was without
legal basis.
DILG Opinion No. 124
s[.]2002 states that the
continued discharge of
powers by [petitioner Dr.
Angeles] as Municipal
Administrator appears to
have no legal basis. A
person may assume public
office once his appointment
is already effective. The
Supreme Court in one case
(Atty. David B. Corpuz [v.]
Court of Appeals, et al[.],
G.R. No. 123989, 26
January 1998) held that
where the assent or
confirmation of some other
office or body is required,
the appointment may be
complete only when such
assent or confirmation is
obtained. Until the process
is completed, the appointee
can claim no vested right in
the office nor invoke
security of tenure. Since
the appointment of a
Municipal Administrator
requires sanggunian
concurrence (Section 443
(d), RA 7160) and
considering that the
appointment never became
effective. As such, his
assumption and continued
holding of the office of the

Municipal Administrator find

no legal basis.
However, [petitioner Dr.
Angeles] may claim salary
for the services he has
actually rendered. As held
in one case (Civil Liberties
Union [v.] Executive
Secretary, 194 SCRA 317),
a de factoofficer is entitled
to emoluments of the office
for the actual services
rendered. Here, [petitioner
Dr. Angeles] can be
considered as a de
facto officer. x x x, as held
in the Corpuz case cited
above, the Supreme Court
ruled that a public official
who assumed office under
an incomplete appointment
is merely a de facto officer
for the duration of his
occupancy of the office for
the reason that he assumed
office under color of a
known appointment which
is void by a reason of some
defect or irregularity in its
exercise.
It is worthy to emphasize
along that line that while
[petitioner Dr. Angeles]
may be entitled to the
salary as a de facto officer,
the municipality cannot be
made liable to pay his
salaries. Instructive on this
point is Article 169 (I) of
the Rules and Regulations
Implementing the Local
Government Code of 1991

which explicitly provides,

thus:
The appointing
authority shall be liable
for the payment of
salary of the appointee
for actual services
rendered if the
appointment is
disapproved because the
appointing authority
issued it in willful
violation of applicable
laws, rules and
regulations thereby
making the appointment
unlawful.
Corollary, Section 5 of Rule
IV of the Omnibus Rules of
Appointments and Other
Personnel Actions provides,
thus:
The services rendered
by any person who was
required to assume the
duties and
responsibilities of any
position without
appointment having
been issued by the
appointing authority
shall not be credited nor
recognized by the
Commission and shall be
the personal
accountability of the
person who made him
assume office.
Hence, [herein petitioner
Corales] shall pay the

salaries of [petitioner Dr.

Angeles] for the services
the latter has actually
rendered.
xxxxxxxxxxxx
Clearly, the appointment of
[petitioner Dr. Angeles] per
se was bereft of legal
basis in view of the
absence of the concurrence
of the legislative body thus
payment of his salaries
from the funds of the
Municipality for actual
services rendered remained
unlawful.
Further, in paragraph 4 of
the letter of Mr. Allan Poe
M. Carmona, Director II of
the CSC dated [1 December
2004] to Mr. Ruben C.
Pagaspas, OIC, Regional
Cluster Director, COA,
Cluster III, Sub-Cluster VI
stated that [petitioner Dr.
Angeles] cannot be
appointed to Municipal
Administrator without the
concurrence of
theSangguniang Bayan as
provided under RA 7160.
Post audit of payrolls
pertaining to the payment
of salaries, allowances and
other incentives of
[petitioner Dr. Angeles] as
Municipal Administrator for
the period from [15 July
2001] up to [31 May 2006]
excluding the period from

[1 November 2001] to [31

December 2001], [16
March 2002] to [15 May
2002], [1-31 August 2002],
[16-30 June 2003], [1-31
December 2003], [1-31
September 2004] and [1
June 2006] to [30
September 2006] were
partially amounted to
P1,282,829.99. x x x.
Issuance of Notice of
Disallowance was
suggested by Atty. Eden T.
Rafanan, Regional Cluster
Director for [L]egal and
Adjudication Office in her
2nd Indorsement dated [3
July 2006].
In view hereof, it is
recommended that
appropriate Notice of
Disallowance be
issued for the payment of
the salary expenses
incurred without legal basis
by the municipality in the
amount mentioned in the
above
paragraph.23 (Emphasis,
italics and underscoring
supplied).
As can be gleaned therefrom, petitioner Corales was simply required to submit his comment/reply on
the observations stated in the AOM. As so keenly observed by the Court of Appeals, any mention in the
AOM that petitioner Corales shall reimburse the salaries paid to petitioner Dr. Angeles in light of the repeated
disapproval or rejection by the Sangguniang Bayan of his appointment as Municipal Administrator was
merely an initial opinion, not conclusive, as there was no showing that Andal had taken any affirmative
action thereafter to compel petitioner Corales to make the necessary reimbursement. Otherwise stated, it
has not been shown that Andal carried out or enforced what was stated in the AOM. On the contrary,
petitioner Corales was given an opportunity to refute the findings and observations in the AOM by requesting
him to comment/reply thereto, but he never did. More so, even though the AOM already contained a
recommendation for the issuance of a Notice of Disallowance of the payment of salary expenses, the records
are bereft of any evidence to show that a Notice of Disallowance has, in fact, been issued. Concomitantly,
the AOM did not contain any recommendation to the effect that petitioner Corales would be held personally
liable for the amount that would be disallowed. It is, therefore, incongruous to conclude that the said AOM is
tantamount to a directive requiring petitioner Corales to reimburse the salaries paid to and received by

petitioner Dr. Angeles during the latters stint as Municipal Administrator after his appointment thereto was
held invalid for want of conformity from the Sangguniang Bayan.
In relation thereto, as aptly observed by the OSG, to which the Court of Appeals conformed, theissuance of
the AOM is just an initiatory step in the investigative audit being conducted by Andal as Provincial
State Auditor to determine the propriety of the disbursements made by the Municipal Government of
Laguna. That the issuance of an AOM can be regarded as just an initiatory step in the investigative audit is
evident from COA Memorandum No. 2002-053 dated 26 August 2002. 24 A perusal of COA Memorandum No.
2002-053, particularly Roman Numeral III, Letter A, paragraphs 1 to 5 and 9, reveals that any finding or
observation by the Auditor stated in the AOM is not yet conclusive, as the comment/justification 25 of the
head of office or his duly authorized representative is still necessary before the Auditor can make any
conclusion. The Auditor may give due course or find the comment/justification to be without merit but in
either case, the Auditor shall clearly state the reason for the conclusion reached and recommendation made.
Subsequent thereto, the Auditor shall transmit the AOM, together with the comment or justification of the
Auditee and the formers recommendation to the Director, Legal and Adjudication Office (DLAO), for the
sector concerned in Metro Manila and/or the Regional Legal and Adjudication Cluster Director (RLACD) in the
case of regions. The transmittal shall be coursed through the Cluster Director concerned and the Regional
Cluster Director, as the case may be, for their own comment and recommendation. The DLAO for the sector
concerned in the Central Office and the RLACD shall make the necessary evaluation of the records
transmitted with the AOM. When, on the basis thereof, he finds that the transaction should be suspended or
disallowed, he will then issue the corresponding Notice of Suspension (NS), Notice of Disallowance (ND) or
Notice of Charge (NC), as the case may be, furnishing a copy thereof to the Cluster Director. Otherwise, the
Director may dispatch a team to conduct further investigation work to justify the contemplated action. If
after in-depth investigation, the DLAO for each sector in Metro Manila and the RLACD for the regions find
that the issuance of the NS, ND, and NC is warranted, he shall issue the same and transmit such NS, ND or
NC, as the case may be, to the agency head and other persons found liable therefor.
From the foregoing, it is beyond doubt that the issuance of an AOM is, indeed, an initial step in the conduct
of an investigative audit considering that after its issuance there are still several steps to be conducted
before a final conclusion can be made or before the proper action can be had against the Auditee. There is,
therefore, no basis for petitioner Corales claim that his comment thereon would be a mere formality.
Further, even though the AOM issued to petitioner Corales already contained a recommendation for the
issuance of a Notice of Disallowance, still, it cannot be argued that his comment/reply to the AOM would be
a futile act since no Notice of Disallowance was yet issued. Again, the records are bereft of any evidence
showing that Andal has already taken any affirmative action against petitioner Corales after the issuance of
the AOM.
Viewed in this light, this Court can hardly see any actual case or controversy to warrant the exercise of its
power of judicial review. Settled is the rule that for the courts to exercise the power of judicial review, the
following must be extant: (1) there must be an actual case calling for the exercise of judicial power; (2) the
question must be ripe for adjudication; and (3) the person challenging must have the standing. An actual
case or controversy involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of
judicial resolution as distinguished from a mere hypothetical or abstract difference or dispute. There must be
a contrariety of legal rights that can be interpreted and enforced on the basis of existing law and
jurisprudence. Closely related thereto is that the question must be ripe for adjudication. A question is
considered ripe for adjudication when the act being challenged has had a direct adverse effect on
the individual challenging it. The third requisite is legal standing or locus standi, which has been defined
as a personal or substantial interest in the case such that the party has sustained or will sustain direct injury
as a result of the governmental act that is being challenged, alleging more than a generalized grievance. The
gist of the question of standing is whether a party alleges such personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which
the court depends for illumination of difficult constitutional questions. Unless a person is injuriously affected
in any of his constitutional rights by the operation of statute or ordinance, he has no standing. 26
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The requisites of actual case and ripeness are absent in the present case. To repeat, the AOM issued by
Andal merely requested petitioner Corales to comment/reply thereto. Truly, the AOM already contained a
recommendation to issue a Notice of Disallowance; however, no Notice of Disallowance was yet issued. More
so, there was no evidence to show that Andal had already enforced against petitioner Corales the contents
of the AOM. Similarly, there was no clear showing that petitioners, particularly petitioner Corales, would
sustain actual or imminent injury by reason of the issuance of the AOM. The action taken by the petitioners
to assail the AOM was, indeed, premature and based entirely on surmises, conjectures and speculations that
petitioner Corales would eventually be compelled to reimburse petitioner Dr. Angeles salaries, should the

audit investigation confirm the irregularity of such disbursements. Further, as correctly pointed out by
respondent Republic in its Memorandum, what petitioners actually assail is Andals authority to request them
to file the desired comment/reply to the AOM, which is beyond the scope of the action for prohibition, as
such request is neither an actionable wrong nor constitutive of an act perceived to be illegal. Andal, being
the Provincial State Auditor, is clothed with the authority to audit petitioners disbursements, conduct an
investigation thereon and render a final finding and recommendation thereafter. Hence, it is beyond question
that in relation to his audit investigation function, Andal can validly and legally require petitioners to submit
comment/reply to the AOM, which the latter cannot pre-empt by prematurely seeking judicial intervention,
like filing an action for prohibition.
Moreover, prohibition, being a preventive remedy to seek a judgment ordering the defendant to desist from
continuing with the commission of an act perceived to be illegal, may only be resorted to when there is no
appeal or any other plain, speedy, and adequate remedy in the ordinary course of law.27
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In this case, petitioners insist that it is no longer necessary to exhaust administrative remedies considering
that there is no appeal or any other plain, speedy and appropriate remedial measure to assail the imposition
under the AOM aside from an action for prohibition.
This Court finds the said contention plain self-deception.
As previously stated, petitioners action for prohibition was premature. The audit investigative process was
still in its initial phase. There was yet no Notice of Disallowance issued. And, even granting that the AOM
issued to petitioner Corales is already equivalent to an order, decision or resolution of the Auditor or that
such AOM is already tantamount to a directive for petitioner Corales to reimburse the salaries paid to
petitioner Dr. Angeles, still, the action for prohibition is premature since there are still many administrative
remedies available to petitioners to contest the said AOM. Section 1, Rule V of the 1997 Revised Rules of
Procedure of the COA, provides: [a]n aggrieved party may appeal from an order or decision or ruling
rendered by the Auditor embodied in a report, memorandum, letter, notice of disallowances and charges,
Certificate of Settlement and Balances, to the Director who has jurisdiction over the agency under audit.
From the final order or decision of the Director, an aggrieved party may appeal to the Commission
proper.28 It is the decision or resolution of the Commission proper which can be appealed to this Court. 29

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Clearly, petitioners have all the remedies available to them at the administrative level but they failed to
exhaust the same and instead, immediately sought judicial intervention. Otherwise stated, the auditing
process has just begun but the petitioners already thwarted the same by immediately filing a Petition for
Prohibition. In Fua, Jr. v. COA,30 citing Sison v. Tablang,31 this Court declared that the general rule is that
before a party may seek the intervention of the court, he should first avail himself of all the means
afforded him by administrative processes. The issues which administrative agencies are authorized to
decide should not be summarily taken from them and submitted to the court without first giving such
administrative agency the opportunity to dispose of the same after due deliberation. Also, in The Special
Audit Team, Commission on Audit v. Court of Appeals and Government Service Insurance System,32 this
Court has extensively pronounced that:
If resort to a remedy within the administrative machinery can still be made by giving the administrative
officer concerned every opportunity to decide on a matter that comes within his or her jurisdiction, then
such remedy should be exhausted first before the courts judicial power can be sought. The premature
invocation of the intervention of the court is fatal to ones cause of action. The doctrine of
exhaustion of administrative remedies is based on practical and legal reasons. The availment of
administrative remedy entails lesser expenses and provides for a speedier disposition of controversies.
Furthermore, the courts of justice, for reasons of comity and convenience, will shy away from a
dispute until the system of administrative redress has been completed and complied with, so as
to give the administrative agency concerned every opportunity to correct its error and dispose of
the case. x x x.
Moreover, courts have accorded respect for the specialized ability of other agencies of government
to deal with the issues within their respective specializations prior to any court intervention. The
Court has reasoned thus:
We have consistently declared that the doctrine of exhaustion of administrative remedies is a cornerstone of
our judicial system. The thrust of the rule is that courts must allow administrative agencies to carry out their
functions and discharge their responsibilities within the specialized areas of their respective competence. The
rationale for this doctrine is obvious. It entails lesser expenses and provides for the speedier resolution of
controversies. Comity and convenience also impel courts of justice to shy away from a dispute until the
system of administrative redress has been completed.

The 1987 Constitution created the constitutional commissions as independent constitutional bodies, tasked
with specific roles in the system of governance that require expertise in certain fields. For COA, this role
involves:
The power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and
receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions, agencies, instrumentalities, including government-owned and
controlled corporations with original charter. x x x.
As one of the three (3) independent constitutional commissions, COA has been empowered to define the
scope of its audit and examination and to establish the techniques and methods required
therefor; and to promulgate accounting and auditing rules and regulations, including those for
the prevention and disallowance of irregular, unnecessary, excessive, extravagant or
unconscionable expenditures or uses of government funds and properties.
Thus, in the light of this constitutionally delegated task, the courts must exercise caution when intervening
with disputes involving these independent bodies, for thegeneral rule is that before a party may seek
the intervention of the court, he should first avail of all the means afforded him by administrative
processes. The issues which administrative agencies are authorized to decide should not be
summarily taken from them and submitted to a court without first giving such administrative agency the
opportunity to dispose of the same after due deliberation. 33 (Emphasis supplied).
In their futile attempt to convince this Court to rule in their favor, petitioners aver that by filing a Motion to
Dismiss on the ground of lack of cause of action, respondent Republic, in essence, admitted all the material
averments and narration of facts stated in the Petition for Prohibition and Mandamus. As such, there is no
longer any question of fact to speak of and what remains is a pure question of law. The judgment, therefore,
of the trial court denying the Motion to Dismiss is no longer subject to any appeal or review by the Court of
Appeals. Instead, it is already appealable and reviewable by this Court under Rule 45 of the Rules of Court,
where only pure questions of law may be raised and dealt with. This is in line with the pronouncement
in China Road and Bridge Corporation v. Court of Appeals34 (China Road Case). The Court of Appeals should
have dismissed respondent Republics Petition for Certiorari under Rule 65 of the Rules of Court for being an
improper and inappropriate mode of review.
Petitioners above argument is misplaced.
China Road Case is not at all applicable in the case at bench. Therein, the Motion to Dismiss the Complaint
was granted. As the order granting the motion to dismiss was a final, as distinguished from an interlocutory
order, the proper remedy was an appeal in due course.35 Thus, this Court in China Road Case held that:
x x x Applying the test to the instant case, it is clear that private respondent raises pure questions of law
which are not proper in an ordinary appeal under Rule 41, but should be raised by way of a petition for
review on certiorari under Rule 45.
We agree with private respondent that in a motion to dismiss due to failure to state a cause of action, the
trial court can consider all the pleadings filed, including annexes, motions and the evidence on record.
However in so doing, the trial court does not rule on the truth or falsity of such documents. It merely
includes such documents in the hypothetical admission. Any review of a finding of lack of cause of action
based on these documents would not involve a calibration of the probative value of such pieces of evidence
but would only limit itself to the inquiry of whether the law was properly applied given the facts and these
supporting documents. Therefore, what would inevitably arise from such a review are pure
questions of law, and not questions of fact.36 (Emphasis supplied).
In the case at bench, however, the Motion to Dismiss was denied. It is well-entrenched that an order
denying a motion to dismiss is an interlocutory order which neither terminates nor finally disposes of a case
as it leaves something to be done by the court before the case is finally decided on the merits. 37 Therefore,
contrary to the claim of petitioners, the denial of a Motion to Dismiss is not appealable, not even via Rule 45
of the Rules of Court. The only remedy for the denial of the Motion to Dismiss is a special civil action
for certiorari showing that such denial was made with grave abuse of discretion. 38
cralaw virtualaw library

Taking into consideration all the foregoing, this Court finds no reversible error on the part of the Court of
Appeals in reversing the Orders of the court a quo and consequently dismissing petitioners Petition for
Prohibition filed thereat.
WHEREFORE, premises considered, the Decision and Resolution dated 15 September 2008 and 20 February
2009, respectively, of the Court of Appeals in CA-G.R. SP No. 101296 are herebyAFFIRMED. Costs against
petitioners.

SO ORDERED.
Sereno, C.J., Carpio, Velasco, Jr., Leonardo-De Castro, Peralta, Bersamin, Del Castillo, Abad, Mendoza,
Reyes, Perlas-Bernabe, and Leonen, JJ., concur.
Brion, J., On Official leave.
Villarama, Jr., On Official leave.

THIRD DIVISION
ROLANDO TAN, ELENA TAN G.R. No. 164966
and LAMBERTO TAN,
Petitioners, Present:
Ynares-Santiago, J. (Chairperson),
- versus - Austria-Martinez,
Chico-Nazario, and
Nachura, JJ.
THE HONORABLE COURT OF
APPEALS, HON. HERMES B.
MONTERO, in his capacity as Promulgated:
Assistant Provincial Prosecutor, and
the PEOPLE OF THE PHILIPPINES,
Respondents. June 8, 2007
x
x

----------------------------------------------------------------------------------------

DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari assailing the
November 24, 2003 Decision[1] of the Court of Appeals in CA-G.R.
SP No. 74450 dismissing the petition for prohibition and
injunction, which sought to enjoin the Presiding Judge of the
Regional Trial Court of Cebu City, Branch 5, from further
proceeding with Crim. Case Nos. 64381, 64383, 64385, 64386

and 64387; and the July 14, 2004 Resolution[2] denying petitioners
motion for reconsideration.
In a Letter-Complaint dated June 26, 2002, James L. King
(King) charged Roderick Lim-Go, Lucy Go, Nelson Go, John Doe
and Peter Doe with violation of Batas Pambansa Bilang 22 (B.P.
22) and Estafa involving two checks both dated June 21, 2002, to
wit: (1) United Overseas Bank Philippines (UOB) Check No.
00082597 in the amount of P20 Million; and (2) UOB Check No.
00082599 in the amount of P7.9 Million.
Subsequently or on July 10, 2002, King filed a Supplemental
Complaint-Affidavit involving five additional checks, to wit: (1)
UOB Check No. 0000082596 dated June 21, 2002 in the amount
of P7 Million; (2) UOB Check No. 0000082598 dated June 21, 2002
in the amount of P26.68 Million; (3) UOB Check No. 0000082434
dated June 23, 2002 in the amount of P2.6 Million; (4) UOB Check
No. 0000082495 dated June 24, 2002 in the amount of P7 Million;
and (5) UOB Check No. 0000082494 dated June 24, 2002 in the
amount of P18 Million. The complaints were docketed as I.S. Nos.
02-5997-5999-F, 02-0827-B, 02-0827-C, 02-0827-D, 02-0827-E
and 02-0827-F, respectively.
On August 1, 2002, King filed a Second Supplemental
Complaint-Affidavit for Estafa impleading Grace Tan-Go, and
herein petitioners Rolando Tan, Elena Tan, and Lamberto Tan, as
additional respondents.
King averred that in February 2002, the spouses Roderick
Lim Go and Grace Tan-Go (spouses Go) proposed to him a
business transaction wherein the spouses Go would borrow cash
from King in exchange for which Roderick Go would issue
postdated checks corresponding to the amount borrowed plus
interest. Roderick Gos parents, Go Tong Go and Lucy Go, and
brother, Nelson Go, assured King that whatever checks Roderick
Go would issue would be funded on their due dates and that the

checking account at the United Overseas Bank, Carbon

Branch, Cebu City is their joint account. King agreed to the
business proposal. Thereafter, Roderick Go started issuing checks,
inclusive of interest, in exchange for the cash given by King. The
checks when presented for encashment were initially honored by
the drawee bank; consequently, King reposed his trust and
confidence in spouses Go.
On March 22, 2002, the spouses Go, together with herein
petitioners Rolando Tan (father of Grace Tan-Go), Elena Tan
(mother of Grace Tan-Go), asked P100 Million from King allegedly
for the renovation of their movie houses in Butuan City. However,
King could only accommodate P40 Million, in exchange for which,
Roderick Go issued several checks to King in the amount
of P61.28 Million, inclusive of the interest for three months.
At first, the checks issued by Go were honored by the
drawee bank when presented. However, on June 24, 2002, when
several of the checks he issued were about to fall due, Roderick
Go requested King for a meeting. While at the agreed meeting
place, Roderick Go allegedly attacked King with a box cutter and
told him that all the checks that he issued would be dishonored
and for this reason he had to injure, kidnap and kill him. This
incident is the subject of a separate criminal case.Thereafter, all
the checks dated June 21, 23 and 24, 2002 issued by Roderick Go
were dishonored for having been drawn against insufficient
funds. Despite repeated demands, no payment was made; hence,
King filed a complaint for violation of BP Blg. 22 and Estafa.
All the accused, except Roderick Go, submitted their counteraffidavits. In their Joint Counter-Affidavit[3] dated August 8, 2002,
petitioners denied meeting King on March 22, 2002; that only
Roderick Go could be held liable for the bouncing checks
considering that he alone issued the same; that Kings first
supplemental complaint-affidavit contradicted his second
supplemental complaint-affidavit. In the first supplemental

complaint-affidavit, Roderick Go, Lucy Go, Nelson Go, John Doe

and Peter Doe were made respondents as co-conspirators relative
to the issuance of the bouncing checks, while in the second
supplemental complaint-affidavit, petitioners were made coconspirators over the same checks but under totally different
circumstances. Thus, petitioners claim that the criminal cases
filed against them were an afterthought and prayed that the same
be dismissed.
The preliminary investigation of the subject criminal cases
was initially assigned to 1st Assistant Provincial Prosecutor/Officerin-Charge Cesar Tajanlangit who voluntarily inhibited himself. On
October 10, 2002, then Secretary of Justice Hernando B. Perez
issued Department Order (D.O.) No. 369,[4] designating public
respondent 3rd Assistant Provincial Prosecutor Hermes Montero
(Montero) to continue with the preliminary investigation of these
cases, and, if the evidence warranted, to file the appropriate
informations in court.
In a Joint Resolution[5] dated November 8, 2002, public
respondent Montero found probable cause for the following
crimes:
WHEREFORE, in the light of the foregoing, the
following criminal Informations shall be filed against:
(1) Roderick L. Go, alias Edu Ting, for violation of B.P.
22 on seven (7) counts;
(2) Roderick L. Go, Grace Tan-Go, Go Tong Go, Lucy
Go and Nelson Go, for estafa on two (2) counts anent (a)
UOB Check No. 00082597 dated June 21, 2002 in the
amount ofP20,000,000.00; and (b) UOB Check No.
00082599 dated June 21, 2002 in the amount
of P7,800,000.00;

(3) Roderick L. Go, Grace Tan-Go, Go Tong Go, Lucy

Go, Nelson Go, [petitioners] Rolando Tan, Elena Tan and
Lamberto Tan, for estafa on five (5) counts anent (c) UOB
Check No. 0000082596 dated June 21, 2002, in the
amount
of P7,000,000.00,
(d)
UOB
Check
No.
0000082598 dated June 21, 2002, in the amount
of P26,680,000.00, (e) UOB Check No. 0000082434 dated
June 23, 2002, in the amount of P2,600,000.00, (f) UOB
Check No. 0000082495 dated June 24, 2002, in the
amount of P7,000,000.00, and (g) UOB Check No.
0000082494 dated June 24, 2002, in the amount
of P18,000,000.00.[6]

On November 11, 2002, five informations for estafa under

Article 315, 2(a) of the Revised Penal Code were filed against
Roderick L. Go, Grace Tan-Go, Go Tong Go, Lucy Go, Nelson Go,
and herein petitioners, docketed as Criminal Case Nos. CBU64381, 64383, 64385, 64386, and 64387 and raffled to the
Regional Trial Court, Branch 5 of Cebu City. From the abovequoted adverse Resolution of public respondent Montero, only
Roderick Go and Grace Tan-Go separately appealed to the
Secretary of Justice.
On November 18, 2002, before any warrant of arrest could
be issued, petitioners posted bail. The following day or
on November 19, 2002, they were arraigned and pleaded not
guilty.
On December 17, 2002, petitioners filed a Petition for
Prohibition and Injunction with Preliminary Injunction and Prayer
for Temporary Restraining Order [7]before the Court of
Appeals. They sought to restrain the trial court from proceeding
with the subject criminal cases against them and prayed that the
same be dismissed.
On November 24, 2003, the Court of Appeals issued the
assailed Decision dismissing the petition for lack of merit. It found

that (1) petitioners failed to avail themselves of other plain,

speedy and adequate remedies to challenge the public
prosecutors finding of probable cause; (2) the petition failed to
establish that it falls under any of the exceptions to the general
rule that the court will not issue writs of prohibition or injunction,
preliminary or final, to enjoin or restrain a criminal prosecution;
(3) public respondent Montero was duly authorized by the
Secretary of Justice to conduct the preliminary investigation and,
if the evidence so warranted, to file the corresponding
informations relative to the subject criminal cases; (4) petitioners
failed to prove that public respondents acted with grave abuse of
discretion; and (5) petitioners claims contesting the public
prosecutors finding of probable cause are matters of defense that
should be threshed out during the trial of the criminal cases and
not through the extraordinary remedy of prohibition.
After their motion for reconsideration was denied, petitioners
interposed the instant petition raising nine issues [8] revolving
around the factual and legal bases of the finding of probable
cause for estafa against them as well as the authority of public
respondent Montero to file the subject criminal cases with the trial
court.
At the outset, it must be stressed that petitioners are asking
us to review the Decision of the Court of Appeals which dismissed
their petition for prohibition.Therefore, the principal issue is
whether resort to the extraordinary remedy of prohibition was
proper.
We rule in the negative.
Basic is the rule that the writ of prohibition is an
extraordinary remedy to prevent the unlawful and oppressive
exercise of legal authority and to provide for a fair and orderly
administration of justice. [9] It is available only when there is no
appeal or any plain, speedy and adequate remedy in the ordinary

course of law, and when the proceedings are done without or in

excess of jurisdiction or with grave abuse of discretion. The
petitioner must allege in his petition and establish facts to show
that any other existing remedy is not speedy or adequate. [10] A
remedy is plain, speedy and adequate if it will promptly relieve
the petitioner from the injurious effects of that judgment and the
acts of the tribunal or inferior court. [11] Further, the writ will not lie
to correct errors of judgment but only errors of jurisdiction. As
long as the tribunal acts within its jurisdiction, any alleged errors
committed in the exercise of its discretion will amount to nothing
more than mere errors of judgment which are correctible by a
timely appeal.[12] In determining whether a tribunal acted in grave
abuse of discretion, mere abuse of discretion is not enough. There
must be grave abuse of discretion as where the tribunal exercised
its power in an arbitrary or despotic manner, by reason of passion
or personal hostility, and it must be so patent or gross as would
amount to an evasion, or virtual refusal to perform the duty
enjoined, or to act in contemplation of law. [13]
In the case at bar, petitioners contend that there was no
appeal or other plain, speedy or adequate remedy available in the
ordinary course of law because they were prevented by the trial
court from appealing public respondent Monteros Joint Resolution
dated November 8, 2002 which found, among others, probable
cause for estafa against them. They claim that the trial court
forced arraigned them on November 19, 2002. This was allegedly
done in order to prevent them from appealing the Joint Resolution
dated November 8, 2002 to the Secretary of Justice as a
consequence of paragraph 2, section 7 of DOJ Circular No.
70[14] (2000 National Prosecution Service Rule on Appeal) which
provides in part that [i]f an information has been filed in court
pursuant to the appealed resolution, the petition shall not be
given due course if the accused has already been arraigned x x x.
We are not persuaded.

Petitioners admit[15] that they received a copy of the Joint

Resolution dated November 8, 2002 as early as November 13,
2002. However, from the time they received the copy of the
aforesaid Resolution to the time they were arraigned
on November 19, 2002, petitioners did not take steps to move for
reconsideration, or appeal the aforesaid Resolution to the
Secretary of Justice. More importantly, the Court of Appeals
observed that there is no evidence on record to support
petitioners claim that they were forced arraigned. In fact, the
arraignment of petitioners proceeded without objections on the
part of petitioners or their counsel. [16] Absent proof of force or
intimidation, the trial judge enjoys the presumption of regularity
in the performance of his functions. [17] We also note that
petitioners other co-accused, Roderick Lim Go and Grace Tan-Go,
were able to timely appeal the Joint Resolution dated November 8,
2002 to the Secretary of Justice while petitioners failed to appeal
the same before their arraignment.
In fine, the arguments raised in their petition for prohibition
ineluctably shows that petitioners are principally questioning the
factual and legal bases of the finding of probable cause against
them. This is but a veiled attempt to litigate issues which should
have been timely appealed to the Secretary of Justice via a
petition for review. However, petitioners, through their own fault,
failed to avail themselves of this remedy. Countless times we
have ruled that the extraordinary remedy ofcertiorari or
prohibition is not a substitute for a lost appeal. [18] This case is no
different.
There is another equally important reason why the instant
petition should be denied outright. After the Court of Appeals
issued the assailed Decision datedNovember 24, 2003 which
dismissed petitioners petition for prohibition, several supervening
events took place.

As earlier noted, petitioners failed to appeal from the Joint

Resolution dated November 8, 2002 issued by public respondent
Montero which found, among others, probable cause against them
for estafa. Only co-accused Grace Tan-Go and Roderick Go
separately and timely appealed to the Secretary of Justice. Then
Secretary of Justice Simeon A. Datumanong subsequently issued a
Resolution[19] dated December 23, 2003 granting Grace Tan-Gos
petition for review. The aforesaid Resolution was, likewise,
favorable to petitioners cause and ordered, among others, the
withdrawal of the informations for estafa against them:
WHEREFORE, the assailed Joint Resolution is hereby
SET ASIDE and, conformably with Department Order No.
473, dated December 8, 2003, which recalls and
supersedes Department Order No. 369 previously
authorizing Provincial Prosecutor Cezar Tajanlangit to
conduct the preliminary investigation and prosecution of
the foregoing cases, the City Prosecutor of Cebu, is
hereby directed to
(1) To withdraw the informations filed in Court
against all the respondents for Estafa.
(2) To file the corresponding Informations in Court
against RODERICK LIM GO only, for violations of BP 22 on
eight (8) counts and proceed with the prosecution
thereof; and
(3) To submit to this Office, within ten (10) days from
receipt of this Resolution, the appropriate action or
actions taken.
SO ORDERED.[20]

When King moved for reconsideration of the above Resolution,

petitioners participated in the proceedings before the Secretary of
Justice by opposing the same together with Grace Tan-Go. [21] In a
Resolution[22] dated February 11, 2004, then Acting Secretary of

Justice Merceditas N. Guitierrez granted Kings motion for

reconsideration and reinstated public respondent Monteros Joint
Resolution dated November 8, 2002. Grace Tan-Go then filed a
motion for reconsideration which was joined by petitioners
through their motion for leave to join the motion for
reconsideration.[23] However, Acting Secretary Guiterrez denied
the same in a Resolution dated August 18, 2004. Thereafter,
Grace Tan-Go filed a motion to resolve the second ground raised
in
her
motion
for
reconsideration.
In
a
[24]
Resolution
datedDecember 17, 2004, Secretary of Justice Raul
M. Gonzalez reversed and set aside the February 11,
2004 and August 18, 2004 Resolutions of Acting Secretary
Gutierrez, and reinstated former Secretary Datumanongs
Resolution dated December 23, 2003. Consequently, a motion to
withdraw informations[25] was filed by the prosecution before the
trial court.
By participating in the proceedings before the Secretary of
Justice, petitioners have actively litigated the issues regarding
the factual and legal bases of the finding of probable cause
against them as well as the authority of public respondent
Montero to file the subject criminal informations. This is clearly
borne by the tenor of theResolution dated December 17,
2004 issued by the Secretary of Justice. Yet, these issues are
exactly the same issues being raised by petitioners before this
Court through the instant petition which is separate and distinct
from the proceedings before the Secretary of Justice whose
aforesaid Resolution is not the one before us for review. To
reiterate, what is before us for review is the Decision of the Court
of Appeals which dismissed the petition for prohibition filed by
petitioners to restrain the trial court from proceeding with the
criminal cases against them.
In effect, by taking these two distinct courses of actions,
petitioners have pursued the same or related causes, prayed for
the same or substantially the same reliefs, and, in the process,

have created the possibility of conflicting decisions being

rendered by the different fora upon the same issues which is
precisely the evil that the rule on forum-shopping seeks to
prevent.[26] Doubtless, they have engaged in a form of forumshopping. Their attempt to trifle with the courts and abuse their
processes must not be countenanced. As a consequence of
petitioners violation of the rule against forum-shopping and in
order to preserve the laudable objectives of the rule against
forum-shopping, the dismissal of the petition for prohibition
should be upheld.[27]
WHEREFORE, the petition is DENIED. The Decision of the
Court of Appeals dated November 24, 2003 in CA-G.R. SP No.
74450 dismissing petitioners petition for prohibition, and the
Resolution dated July 14, 2004 denying reconsideration thereof,
are AFFIRMED.
Costs against petitioners.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

MINITA V. CHICO-NAZARIO ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

ATTESTATION
I attest that the conclusions in the above decision were reached in
consultation before the case was assigned to the writer of the
opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the
Division Chairpersons Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the
Courts Division.

LEONARDO A. QUISUMBING
Acting Chief Justice

THIRD DIVISION
NILO
HIPOS,
SR.
REPRESENTING
DARRYL
HIPOS,
BENJAMIN
CORSIO
REPRESENTING
JAYCEE
CORSIO,
and
ERLINDA
VILLARUEL
REPRESENTING
ARTHUR VILLARUEL,
Petitioners,
- versus -

G.R. Nos. 174813-15

Present:
YNARES-SANTIAGO, J.,
Chairperson,
CARPIO,*
CHICO-NAZARIO,
NACHURA, and
PERALTA, JJ.

HONORABLE RTC JUDGETEODO

Promulgated:
RO A. BAY, Presiding Judge,
RTC, Hall of Justice,Quezon
City, Branch 86,
March 17, 2009
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:

This is a Petition for Mandamus under Rule 65 of the Rules of

Court seeking a reversal of the Order dated 2 October 2006 of
respondent Judge Teodoro A. Bay of Branch 86 of the Regional
Trial Court (RTC) of Quezon City, which denied the Motion to
Withdraw Informations of the Office of the City Prosecutor of
Quezon City.
The facts of the case are as follows.
On 15 December 2003, two Informations for the crime of
rape and one Information for the crime of acts of lasciviousness
were filed against petitioners Darryl Hipos, Jaycee Corsio, Arthur
Villaruel and two others before Branch 86 of the Regional Trial
Court of Quezon City, acting as a Family Court, presided by
respondentJudge Bay. The cases were docketed as Criminal Cases
No. Q-03-123284, No. Q-03-123285 and No. Q-03-123286. The
Informations were signed by Assistant City Prosecutor Ronald C.
Torralba.
On 23 February 2004, private complainants AAA [1] and BBB
filed a Motion for Reinvestigation asking Judge Bay to order the
City Prosecutor of Quezon City to study if the proper Informations
had
been
filed
against
petitioners
and
their
coaccused. Judge Bay granted
the
Motion
and
ordered
a
reinvestigation of the cases.
On 19 May 2004, petitioners filed their Joint Memorandum to
Dismiss the Case[s] before the City Prosecutor. They claimed that
there was no probable cause to hold them liable for the crimes
charged.
On 10 August 2004, the Office of the City Prosecutor issued a
Resolution on the reinvestigation affirming the Informations filed
against petitioners and their co-accused in Criminal Cases No. Q03-123284-86. The Resolution was signed by Assistant City
Prosecutor Raniel S. Cruz and approved by City Prosecutor Claro
A. Arellano.

On 3 March 2006, 2nd Assistant City Prosecutor Lamberto C.

de Vera, treating the Joint Memorandum to Dismiss the Case as an
appeal of the 10 August 2004Resolution, reversed the Resolution
dated 10 August 2004, holding that there was lack of probable
cause. On the same date, the City Prosecutor filed a Motion to
Withdraw Informations before Judge Bay.
On 2 October 2006, Judge Bay denied the
Withdraw Informations in an Order of even date.

Motion

to

Without moving for a reconsideration of the above assailed

Order, petitioners filed the present Petition for Mandamus,
bringing forth this lone issue for our consideration:
CAN THE HON. SUPREME COURT COMPEL RESPONDENT JUDGE BAY TO
DISMISS THE CASE THROUGH A WRIT OF MANDAMUS BY VIRTUE OF
THE RESOLUTION OF THE OFFICE OF THE CITY PROSECUTOR
OF QUEZON CITY FINDING NO PROBABLE CAUSE AGAINST THE
ACCUSED AND SUBSEQUENTLY FILING A MOTION TO WITHDRAW
INFORMATION?[2]

Mandamus is an extraordinary writ commanding a tribunal,

corporation, board, officer or person, immediately or at some
other specified time, to do the act required to be done, when the
respondent unlawfully neglects the performance of an act which
the law specifically enjoins as a duty resulting from an office,
trust, or station; or when the respondent excludes another from
the use and enjoyment of a right or office to which the latter is
entitled, and there is no other plain, speedy and adequate remedy
in the ordinary course of law.[3]
As an extraordinary writ, the remedy of mandamus lies only
to compel an officer to perform a ministerial duty, not a
discretionary one; mandamus will not issue to control the exercise
of discretion by a public officer where the law imposes upon him
the duty to exercise his judgment in reference to any manner in
which he is required to act, because it is his judgment that is to
be exercised and not that of the court. [4]

In the case at bar, the act which petitioners pray that we

compel the trial court to do is to grant the Office of the City
Prosecutors Motion for Withdrawal of Informations against
petitioners. In effect, petitioners seek to curb Judge Bays exercise
of judicial discretion.
There is indeed an exception to the rule that matters
involving judgment and discretion are beyond the reach of a writ
of mandamus, for such writ may be issued to compel action in
those matters, when refused. [5] However, mandamus is never
available to direct the exercise of judgment or discretion
in a particular way or the retraction or reversal of an
action already taken in the exercise of either.[6] In other
words, while a judge refusing to act on a Motion to Withdraw
Informations can be compelled by mandamus to act on the same,
he cannot be compelled to act in a certain way, i.e., to grant or
deny such Motion. In the case at bar, Judge Bay did not refuse to
act on the Motion to Withdraw Informations; he had already acted
on it by denying the same. Accordingly, mandamus is not
available
anymore. If
petitioners
believed
that Judge Bay committed grave abuse of discretion in the
issuance of such Order denying the Motion to Withdraw
Informations, the proper remedy of petitioners should have been
to file a Petition for Certiorari against the assailed Order of Judge
Bay.
Petitioners counter that the above conclusion, which has
been argued by the Solicitor General, is contrary to a ruling of this
Court, which allegedly states that the proper remedy in such
cases is a Petition for Mandamus and not Certiorari. Petitioners
cite the following excerpt from our ruling in Sanchez v.
Demetriou[7]:
The appreciation of the evidence involves the use of discretion on the
part of the prosecutor, and we do not find in the case at bar a clear
showing by the petitioner of a grave abuse of such discretion.
The decision of the
the Secretary of Justice
the Philippines. But even
of a person against

prosecutor may be reversed or modified by

or in special cases by the President of
this Court cannot order the prosecution
whom the prosecutor does not find

sufficient evidence to support at least a prima facie case. The

courts try and absolve or convict the accused but as a rule have no
part in the initial decision to prosecute him.
The possible exception is where there is an unmistakable
showing of grave abuse of discretion that will justify a judicial
intrusion into the precincts of the executive.But in such a case
the proper remedy to call for such exception is a petition
for mandamus, not certiorari or prohibition.[8] (Emphases supplied.)

Petitioners have taken the above passage way out of its

context. In the case of Sanchez, Calauan Mayor Antonio Sanchez
brought a Petition for Certioraribefore this Court, challenging the
order of the respondent Judge therein denying his motion to
quash the Information filed against him and six other persons for
alleged rape and homicide. One of the arguments of Mayor
Sanchez was that there was discrimination against him because
of the non-inclusion of two other persons in the Information. We
held that even this Court cannot order the prosecution of a
person against whom the prosecutor does not find sufficient
evidence to support at least aprima facie case. However, if there
was an unmistakable showing of grave abuse of discretion on the
part of the prosecutors in that case, Mayor Sanchez should
have filed a Petition for Mandamus to compel the filing of
charges against said two other persons.
In the case at bar, the Petition for Mandamus is directed not
against the prosecution, but against the trial court, seeking to
compel the trial court to grant the Motion to Withdraw
Informations by the City Prosecutors Office. The prosecution has
already filed a case against petitioners. Recently, in Santos v.
Orda, Jr.,[9] we reiterated the doctrine we established in the
leading case of Crespo v. Mogul,[10] that once a criminal complaint
or an information is filed in court, any disposition or dismissal of
the case or acquittal or conviction of the accused rests within the
jurisdiction, competence, and discretion of the trial court. Thus,
we held:
In Crespo v. Mogul, the Court held that once a criminal complaint
or information is filed in court, any disposition of the case or dismissal
or acquittal or conviction of the accused rests within the exclusive

jurisdiction, competence, and discretion of the trial court. The trial

court is the best and sole judge on what to do with the case before it. A
motion to dismiss the case filed by the public prosecutor should be
addressed to the court who has the option to grant or deny the
same. Contrary to the contention of the petitioner, the rule applies to a
motion to withdraw the Information or to dismiss the case even before
or after arraignment of the accused. The only qualification is that the
action of the court must not impair the substantial rights of the
accused or the right of the People or the private complainant to due
process of law. When the trial court grants a motion of the public
prosecutor to dismiss the case, or to quash the Information, or to
withdraw the Information in compliance with the directive of the
Secretary of Justice, or to deny the said motion, it does so not out of
subservience to or defiance of the directive of the Secretary of Justice
but in sound exercise of its judicial prerogative.

Petitioners also claim that since Judge Bay granted a Motion

for Reinvestigation, he should have deferred to the Resolution of
Asst. City Prosecutor De Vera withdrawing the case. [11] Petitioners
cite the following portion of our Decision in People v. Montesa, Jr.
[12]
:
In the instant case, the respondent Judge granted the motion for
reinvestigation and directed the Office of the Provincial Prosecutor of
Bulacan to conduct the reinvestigation. The former was, therefore,
deemed to have deferred to the authority of the prosecution arm of the
Government to consider the so-called new relevant and material
evidence and determine whether the information it had filed should
stand.[13]

Like what was done to our ruling in Sanchez, petitioners took

specific statements from our Decision, carefully cutting off the
portions which would expose the real import of our
pronouncements. The Petition for Certiorari in Montesa, Jr. was
directed against a judge who, after granting the Petition for
Reinvestigation filed by the accused, proceeded nonetheless to
arraign the accused; and, shortly thereafter, the judge decided to
dismiss the case on the basis of a Resolution of the Assistant
Provincial Prosecutor recommending the dismissal of the
case. The dismissal of the case in Montesa, Jr. was done despite
the disapproval of the Assistant Provincial Prosecutors Resolution
by the Provincial Prosecutor (annotated in the same Resolution),
and despite the fact that the reinvestigation the latter ordered

was still ongoing, since the Resolution of the Assistant Provincial

Prosecutor had not yet attained finality. We held that the judge
should have waited for the conclusion of the Petition for
Reinvestigation he ordered, before acting on whether or not the
case should be dismissed for lack of probable cause, and before
proceeding with the arraignment.Thus, the continuation of the
above paragraph of our Decision in Montesa, Jr. reads:
Having done so, it behooved the respondent Judge to wait for a final
resolution of the incident. In Marcelo vs. Court of Appeals, this Court
ruled:
Accordingly, we rule that the trial court in a criminal
case which takes cognizance of an accused's motion for
review of the resolution of the investigating prosecutor or
for reinvestigation and defers the arraignment until
resolution of the said motion must act on the resolution
reversing the investigating prosecutor's finding or on a
motion to dismiss based thereon only upon proof that
such resolution is already final in that no appeal was taken
thereon to the Department of Justice.
The resolution of Assistant Provincial Prosecutor Rutor
recommending the dismissal of the case never became final, for it was
not approved by the Provincial Prosecutor. On the contrary, the latter
disapproved it. As a consequence, the final resolution with respect to
the reinvestigation is that of the Provincial Prosecutor, for under
Section 4, Rule 112 of the Rules of Court, no complaint or information
may be filed or dismissed by an investigating fiscal without the prior
written authority or approval of the provincial or city fiscal or chief
state prosecutor. Also, under Section l(d) of R.A. No. 5180, as amended
by P.D. No. 77 and P.D. No. 911.[14]

As can be clearly seen, the statement quoted by petitioners

from Montesa, Jr. is not meant to establish a doctrine that the
judge should just follow the determination by the prosecutor of
whether or not there is probable cause. On the contrary, Montesa,
Jr. states:
The rule is settled that once a criminal complaint or information
is filed in court, any disposition thereof, such as its dismissal or the
conviction or acquittal of the accused, rests in the sound discretion of
the court. While the prosecutor retains the discretion and control of the
prosecution of the case, he cannot impose his opinion on the court.
The court is the best and sole judge on what to do with the

case. Accordingly, a motion to dismiss the case filed by the prosecutor

before or after the arraignment, or after a reinvestigation, or upon
instructions of the Secretary of Justice who reviewed the records upon
reinvestigation, should be addressed to the discretion of the court. The
action of the court must not, however, impair the substantial rights of
the accused or the right of the People to due process of law. [15]

In a seemingly desperate attempt on the part of petitioners

counsel, he tries to convince us that a judge is allowed to deny a
Motion to Withdraw Informations from the prosecution only when
there is grave abuse of discretion on the part of the prosecutors
moving for such withdrawal; and that, where there is no grave
abuse of discretion on the part of the prosecutors, the denial of
the Motion to Withdraw Informations is void. Petitioners counsel
states in the Memorandum:
6.10. Furthermore, the ORDER dated October 2, 2006 of
the Respondent Judge BAY consisting of 9 pages which was attached to
the URGENT PETITION did not point out any iota of grave abuse of
discretion committed by Asst. City Prosecutor De Vera in issuing his
Resolution in favor of the sons of the Petitioners. Hence, the ORDER
issued by RJBAY is NULL and VOID in view of the recent ruling of the
Hon. Supreme Court in Ledesma vs. Court of Appeals, G.R. No. 113216,
September 5, 1997, 86 SCAD 695, 278 SCRA 657 which states that:
In the absence of a finding of grave abuse of
discretion, the courts bare denial of a motion to withdraw
information pursuant to the Secretarys resolution is void.
(Underscoring ours).
6.11. It is therefore respectfully submitted that the Hon.
Supreme Court disregard the argument of the OSG because of its
falsity.[16]

This
statement
of
petitioners
counsel
is
utterly
misleading. There is no such statement in our Decision
in Ledesma.[17] The excerpt from Ledesma, which appears to have
a resemblance to the statement allegedly quoted from said case,
provides:
No Grave Abuse of Discretion in the
Resolution of the Secretary of Justice

In the light of recent holdings in Marcelo and Martinez; and

considering that the issue of the correctness of the justice secretary's
resolution has been amply threshed out in petitioner's letter, the
information, the resolution of the secretary of justice, the motion to
dismiss, and even the exhaustive discussion in the motion for
reconsideration - all of which were submitted to the court - the trial
judge committed grave abuse of discretion when it denied the
motion to withdraw the information, based solely on his bare
and ambiguous reliance on Crespo. The trial court's order is
inconsistent with our repetitive calls for an independent and
competent assessment of the issue(s) presented in the motion
to dismiss. The trial judge was tasked to evaluate the secretary's
recommendation finding the absence of probable cause to hold
petitioner criminally liable for libel. He failed to do so. He merely ruled
to proceed with the trial without stating his reasons for disregarding
the secretary's recommendation.[18] (Emphasis supplied.)

It very much appears that the counsel of petitioners is

purposely misleading this Court, in violation of Rule 10.02 of the
Code of Professional Responsibility, which provides:
Rule 10.02 A lawyer shall not knowingly misquote or
misrepresent the contents of a paper, the language or the argument of
opposing counsel, or the text of a decision or authority, or knowingly
cite as law a provision already rendered inoperative by repel or
amendment, or assert as a fact that which has not been proved.

Counsels use of block quotation and quotation marks signifies

that he intends to make it appear that the passages are the exact
words of the Court. Furthermore, putting the words Underscoring
ours after the text implies that, except for the underscoring, the
text is a faithful reproduction of the original. Accordingly, we are
ordering Atty. Procopio S. Beltran, Jr. to show cause why he should
not be disciplined as a member of the Bar.
To clarify, we never stated in Ledesma that a judge is
allowed to deny a Motion to Withdraw Information from the
prosecution only when there is grave abuse of discretion on the
part of the prosecutors moving for such withdrawal. Neither did
we rule therein that where there is no grave abuse of discretion
on the part of the prosecutors, the denial of the Motion to
Withdraw Information is void. What we held therein is that a trial
judge commits grave abuse of discretion if he denies a Motion to

Withdraw Information without an independent and complete

assessment of the issues presented in such Motion. Thus, the
opening paragraph of Ledesmastates:
When confronted with a motion to withdraw an information on
the ground of lack of probable cause based on a resolution of the
secretary of justice, the bounden duty of the trial court is to
make an independent assessment of the merits of such
motion. Having acquired jurisdiction over the case, the trial court is
not bound by such resolution but is required to evaluate it before
proceeding further with the trial. While the secretary's ruling is
persuasive, it is not binding on courts. A trial court, however,
commits reversible error or even grave abuse of discretion if it
refuses/neglects to evaluate such recommendation and simply
insists on proceeding with the trial on the mere pretext of
having already acquired jurisdiction over the criminal action.
[19]
(Emphases supplied.)

Petitioners also try to capitalize on the fact that the

dispositive portion of the assailed Order apparently states that
there was no probable cause against petitioners:
WHEREFORE, finding no probable cause against the herein
accused for the crimes of rapes and acts of lasciviousness, the motion
to withdraw informations is DENIED.
Let the case be set for arraignment and pre-trial on October 24,
2006 at 8:30 oclock in the morning.[20] (Underscoring ours.)

Thus, petitioners claim that since even the respondent judge

himself found no probable cause against them, the Motion to
Withdraw Informations by the Office of the City Prosecutor should
be granted.[21]
Even a cursory reading of the assailed Order, however,
clearly shows that the insertion of the word no in the above
dispositive portion was a mere clerical error.The assailed Order
states in full:
After a careful study of the sworn statements of the
complainants and the resolution dated March 3, 2006 of 2nd Assistant
City Prosecutor Lamberto C. de Vera, the Court finds that there was
probable cause against the herein accused. The actuations of the

complainants after the alleged rapes and acts of lasciviousness cannot

be the basis of dismissal or withdrawal of the herein cases. Failure to
shout or offer tenatious resistance did not make voluntary the
complainants submission to the criminal acts of the accused (People v.
Velasquez, 377 SCRA 214, 2002). The complainants affidavits indicate
that the accused helped one another in committing the acts
complained of. Considering that the attackers were not strangers but
their trusted classmates who enticed them to go to the house where
they were molested, the complainants cannot be expected to react
forcefully or violently in protecting themselves from the unexpected
turn of events. Considering also that both complainants were fifteen
(15) years of age and considered children under our laws, the ruling of
the Supreme Court in People v. Malones, G.R. Nos. 124388-90, March
11, 2004 becomes very relevant. The Supreme Court ruled as follows:
Rape victims, especially child victims, should not be
expected to act the way mature individuals would when
placed in such a situation. It is not proper to judge the
actions of children who have undergone traumatic
experience by the norms of behavior expected from adults
under similar circumstances. The range of emotions
shown by rape victim is yet to be captured even by
calculus. It is, thus, unrealistic to expect uniform reactions
from rape victims (People v. Malones, G.R. Nos. 12438890, March 11, 2004).
The Court finds no need to discuss in detail the alleged
actuations of the complainants after the alleged rapes and acts of
lasciviousness. The alleged actuations are evidentiary in nature and
should be evaluated after full blown trial on the merits. This is
necessary to avoid a suspicion of prejudgment against the accused. [22]

As can be seen, the body of the assailed Order not only

plainly stated that the court found probable cause against the
petitioners, but likewise provided an adequate discussion of the
reasons for such finding. Indeed, the general rule is that where
there is a conflict between the dispositive portion or the fallo and
the body of the decision, the fallo controls. However, where the
inevitable conclusion from the body of the decision is so clear as
to show that there was a mistake in the dispositive portion, the
body of the decision will prevail.[23]
In sum, petitioners resort to a Petition for Mandamus to
compel the trial judge to grant their Motion to Withdraw
Informations is improper. While mandamus is available to compel

action on matters involving judgment and discretion when

refused, it is never available to direct the exercise of judgment or
discretion in a particular way or the retraction or reversal of an
action already taken in the exercise of either. [24] The trial court,
when confronted with a Motion to Withdraw an Information on the
ground of lack of probable cause, is not bound by the resolution of
the prosecuting arm of the government, but is required to make
an independent assessment of the merits of such motion, a
requirement satisfied by the respondent judge in the case at bar.
[25]

Finally, if only to appease petitioners who came to this Court

seeking a review of the finding of probable cause by the trial
court, we nevertheless carefully reviewed the records of the
case. After going through the same, we find that we are in
agreement with the trial court that there is indeed probable cause
against the petitioners sufficient to hold them for trial. We
decided to omit a detailed discussion of the merits of the case, as
we are not unmindful of the undue influence that might result
should this Court do so, even if such discussion is only intended to
focus on the finding of probable cause.
WHEREFORE,
the
instant
Petition
for Mandamus is DISMISSED. Let the records of this case be
remanded to the Regional Trial Court of Quezon City for the
resumption of the proceedings therein. The Regional Trial Court is
directed to act on the case with dispatch.
Atty. Procopio S. Beltran, Jr. is ORDERED to SHOW
CAUSE why he should not be disciplined as a member of the Bar
for his disquieting conduct as herein discussed.
SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

ANTONIO T. CARPIO ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice
DIOSDADO M. PERALTA
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision were reached
in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice

Chairperson, Third Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the
Division Chairpersons Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the
Courts Division.

REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 161735

September 25, 2007

EX-C1C JIMMY B. SANCHEZ and EX-C2C SALVADOR A. METEORO, Petitioners,

vs.
ROBERTO T. LASTIMOSO, in his capacity as DIRECTOR GENERAL OF THE PHILIPPINE
NATIONAL POLICE,Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the June 18, 2003 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 68989 and the January
15, 2004 Resolution3denying the motion for reconsideration thereof.
In 1989, petitioner Sanchez, a constable in the Philippine Constabulary (PC), was discharged from
the service for allegedly losing his service firearm. Petitioner Meteoro, also a constable, was likewise
discharged from the service in 1990 for being absent without leave. On appeal, they were both
cleared of all charges. They then applied for reinstatement but their applications were not acted
upon even up to the integration of the PC into the Philippine National Police (PNP). 4

On January 27, 1998, the National Police Commission (NAPOLCOM) issued Resolution No. 98-037
considering as absorbed into the police force, among others, those who had been discharged by
virtue of pending administrative or criminal cases but who were later acquitted or had their cases
dismissed, and who subsequently filed petitions for reinstatement that were not acted upon by the
PNP.5 Then, on April 3, 1998, NAPOLCOM
issued Resolution No. 98-105 affirming and confirming the absorption into the PNP, effective on
January 27, 1998, of the 126 ex-PC constables named in the list submitted by Director Edgar C.
Galvante of the PNP Directorate for Personnel and Records Management (DPRM). 6 Petitioners
Sanchez and Meteoro are in numbers 90 and 122, respectively, of the Galvante list. 7
Subsequently, on May 28, 1998, NAPOLCOM Commissioner Rogelio A. Pureza issued a
Memorandum to then Chief of the PNP Santiago Alino for the issuance of absorption orders to the
45 PC constables included in the initial batch of those covered by the PNP Board
Resolutions.8 Petitioner Sanchez is in number 45 of that list.9
As no absorption order had yet been issued by the Chief of the PNP, the constables in the list
requested the assistance of the Secretary of the Department of Interior and Local Government
(DILG). On July 29, 1998, the Office of the Secretary of the DILG sent a memorandum to respondent
Roberto T. Lastimoso, then the Chief of the PNP, endorsing the constables entreaties and
requesting for a feedback thereon.10
Without any response from the Chief of the PNP, and their pleas for the issuance of the absorption
orders still unacted upon, petitioners instituted, on September 30, 1998, a petition for mandamus
docketed as Civil Case No. Q-98-35659 in the Regional Trial Court (RTC) of Quezon City.11
During the pendency of the said petition, NAPOLCOM issued Resolution No. 99-061 on April 19,
1999 recalling the earlier Resolution No. 98-105. 12 The recall was based on the Commissions finding
that the list submitted by Galvante was not actually of the constables whose applications for
absorption were indorsed for approval, but of those whose applications were still to be reviewed,
evaluated and disposed of. In other words, the 126 named in the list were still to be interviewed and
their applications to be deliberated upon by the PNP Special Committee. 13
On November 15, 2001, however, the RTC rendered its Decision 14 in the mandamus case declaring
as void ab initio NAPOLCOM Resolution No. 99-061 and ruling in favor of the petitioners. The
dispositive portion of the Decision reads:
Accordingly, therefore, the petition is hereby granted. The Director-General of the Philippine National
Police is hereby directed to immediately issue absorption orders to the petitioners.
Resolution No. 99-061 is declared void ab initio.
IT IS SO ORDERED.15
On appeal, the CA, in the assailed June 18, 2003 Decision, 16 reversed the ruling of the trial court and
ruled that a writ of mandamus could not be issued because petitioners had not established with
distinct clarity their right to be absorbed into the PNP. The CA disposed of the appeal as follows:
WHEREFORE, the appeal is GRANTED. The decision of the trial court dated November 15, 2001 is
hereby REVERSED and SET ASIDE.

SO ORDERED.17
The appellate court later denied petitioners motion for reconsideration in the likewise assailed
January 15, 2004 Resolution. 18
Aggrieved, petitioners brought the case before us via a petition for review on certiorari, raising for
our disposition the following issues:
I
WHETHER OR NOT PETITIONERS HAVE A CLEAR LEGAL RIGHT TO BE ABSORBED IN
THE PHILIPPINE NATIONAL POLICE.
II.
WHETHER OR NOT RESOLUTION NO. 99-061 IS VOID FOR BEING VIOLATIVE OF THE
PROVISIONS OF R.A. 7965 AND ITS IMPLEMENTING RESOLUTIONS NO. 98-037 AND
98-105.
III.
WHETHER OR NOT PETITIONERS HAVE A CAUSE OF ACTION FOR MANDAMUS TO
COMPEL THE RESPONDENT TO ABSORB THE PETITIONERS IN THE PHILIPPINE
NATIONAL POLICE.19
The petition has no merit.
We have repeatedly stressed in our prior decisions that the remedy of mandamus is employed only
to compel the performance, when refused, of a ministerial duty, but not to require anyone to fulfill a
discretionary one. The issuance of the writ is simply a command to exercise a power already
possessed and to perform a duty already imposed.20 In Manila International Airport Authority v.
Rivera Village Lessee Homeowners Association, Inc.,21 we emphasized, through the erudite and
eloquent ponencia of Justice Dante O. Tinga, that the writ can be issued only when the applicants
legal right to the performance of a particular act sought to be compelled is clear and complete, one
which is indubitably granted by law or is inferable as a matter of law, thus:
In order that a writ of mandamus may aptly issue, it is essential that, on the one hand, petitioner has
a clear legal right to the claim that is sought and that, on the other hand, respondent has an
imperative duty to perform that which is demanded of him. Mandamus will not issue to enforce a
right, or to compel compliance with a duty, which is questionable or over which a substantial doubt
exists. The principal function of the writ of mandamus is to command and to expedite, not to inquire
and to adjudicate. Thus, it is neither the office nor the aim of the writ to secure a legal right but to
implement that which is already established. Unless the right to relief sought is unclouded,
mandamus will not issue.22
Viewed in light of the said guideposts, the PNP Chiefs issuance of the orders for the absorption of
herein petitioners in the police force is not compellable by a writ of mandamus precisely because the
same does not involve a performance of a ministerial duty. Let it be noted that petitioners were
discharged from the PC service, subsequently cleared of the charges against them, applied for
reinstatement but their applications were not acted upon until the integration of the PC into the PNP
in 1990 when R.A. No. 697523 was enacted. Thus, we no longer speak of the reinstatement of the

petitioners to the service because the Philippine Constabulary no longer exists, but of their
employment in the PNP which is, as we held in Gloria v. De Guzman, 24 technically an issuance of a
new appointment. The power to appoint is essentially discretionary to be performed by the officer in
which it is vested according to his best lights, the only condition being that the appointee should
possess the qualifications required by law.25 Consequently, it cannot be the subject of an application
for a writ of mandamus.26
Furthermore, the petitioners do not have a clear legal right over the issuance of the absorption
orders. They cannot claim the right to be issued an appointment based on the NAPOLCOM
issuances, specifically Resolution Nos. 98-037 and 98-105. Suffice it to state that R.A. No. 6975
clearly provides that the power to appoint PNP personnel with the rank of "Police Officer I" to "Senior
Police Officer IV" to which petitioners may be appointed 27 is vested in the PNP regional director or in
the Chief of the PNP as the case may be, and not in the NAPOLCOM, thus:
1wphi1

Section 31. Appointment of PNP Officers and Members.The appointment of the officers and
members of the PNP shall be effected in the following manner:
(a) Police Officer I to Senior Police Officer IV.Appointed by the PNP regional director for regional
personnel or by the Chief of the PNP for the national headquarters personnel and attested by the
Civil Service Commission.
x x x28
Even if, for the sake of argument, petitioners can derive a right from NAPOLCOM Resolution Nos.
98-037 and 98-105, still their right collapses and their mandamus petition becomes moot with the
issuance by NAPOLCOM of Resolution No. 99-061 recalling the approval of their absorption. The
trial court should then have immediately dismissed the mandamus petition when the OSG submitted
a copy of Resolution No. 99-061 because well-settled is the rule that courts will not resolve a moot
question.29
Also improper is the trial courts declaration that NAPOLCOM Resolution No. 99-061 is void ab initio.
In the petition filed below, only the Chief of the PNP is impleaded as the partydefendant.30 NAPOLCOM was never impleaded. As it was the latter, a separate entity, which had
issued Resolution No. 99-061, NAPOLCOM was an indispensable party over which the trial court
should have acquired jurisdiction. Since it was not impleaded, NAPOLCOM remains a stranger to
the case, and strangers are not bound by the judgment rendered by the court. 31 The absence of an
indispensable party renders all subsequent actions of the court null and void for want of authority to
act, not only as to the absent parties but even as to those present. 32
WHEREFORE, premises considered, the petition is DENIED. The June 18, 2003 Decision and the
January 15, 2004 Resolution of the Court of Appeals in CA-G.R. SP No. 68989 are AFFIRMED.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice
WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

RUBEN T. REYES
Associate Justice
ATT E S TATI O N
I attest that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Second Division
C E R TI F I C ATI O N
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, I
certify that the conclusions in the above decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court.
REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 156052

March 7, 2007

SOCIAL JUSTICE SOCIETY (SJS), VLADIMIR ALARIQUE T. CABIGAO, and BONIFACIO S.

TUMBOKON,Petitioners,
vs.
HON. JOSE L. ATIENZA, JR., in his capacity as Mayor of the City of Manila, Respondent.
DECISION
CORONA, J.:

In this original petition for mandamus,1 petitioners Social Justice Society (SJS), Vladimir Alarique T.
Cabigao and Bonifacio S. Tumbokon seek to compel respondent Hon. Jose L. Atienza, Jr., mayor of
the City of Manila, to enforce Ordinance No. 8027.
The antecedents are as follows.
On November 20, 2001, the Sangguniang Panlungsod of Manila enacted Ordinance No.
8027.2 Respondent mayor approved the ordinance on November 28, 2001. 3 It became effective on
December 28, 2001, after its publication.4
Ordinance No. 8027 was enacted pursuant to the police power delegated to local government units,
a principle described as the power inherent in a government to enact laws, within constitutional
limits, to promote the order, safety, health, morals and general welfare of the society.5 This is evident
from Sections 1 and 3 thereof which state:
SECTION 1. For the purpose of promoting sound urban planning and ensuring health, public safety,
and general welfare of the residents of Pandacan and Sta. Ana as well as its adjoining areas, the
land use of [those] portions of land bounded by the Pasig River in the north, PNR Railroad Track in
the east, Beata St. in the south, Palumpong St. in the southwest, and Estero de Pancacan in the
west[,] PNR Railroad in the northwest area, Estero de Pandacan in the [n]ortheast, Pasig River in
the southeast and Dr. M.L. Carreon in the southwest. The area of Punta, Sta. Ana bounded by the
Pasig River, Marcelino Obrero St., Mayo 28 St., and F. Manalo Street, are hereby reclassified from
Industrial II to Commercial I.
xxx xxx xxx
SEC. 3. Owners or operators of industries and other businesses, the operation of which are no
longer permitted under Section 1 hereof, are hereby given a period of six (6) months from the date of
effectivity of this Ordinance within which to cease and desist from the operation of businesses which
are hereby in consequence, disallowed.
Ordinance No. 8027 reclassified the area described therein from industrial to commercial and
directed the owners and operators of businesses disallowed under Section 1 to cease and desist
from operating their businesses within six months from the date of effectivity of the ordinance.
Among the businesses situated in the area are the so-called "Pandacan Terminals" of the oil
companies Caltex (Philippines), Inc., Petron Corporation and Pilipinas Shell Petroleum Corporation.
However, on June 26, 2002, the City of Manila and the Department of Energy (DOE) entered into a
memorandum of understanding (MOU)6 with the oil companies in which they agreed that "the scaling
down of the Pandacan Terminals [was] the most viable and practicable option." Under the MOU, the
oil companies agreed to perform the following:
Section 1. - Consistent with the objectives stated above, the OIL COMPANIES shall, upon signing of
this MOU, undertake a program to scale down the Pandacan Terminals which shall include, among
others, the immediate removal/decommissioning process of TWENTY EIGHT (28) tanks starting with
the LPG spheres and the commencing of works for the creation of safety buffer and green zones
surrounding the Pandacan Terminals. xxx
Section 2. Consistent with the scale-down program mentioned above, the OIL COMPANIES shall
establish joint operations and management, including the operation of common, integrated and/or
shared facilities, consistent with international and domestic technical, safety, environmental and

economic considerations and standards. Consequently, the joint operations of the OIL COMPANIES
in the Pandacan Terminals shall be limited to the common and integrated areas/facilities. A separate
agreement covering the commercial and operational terms and conditions of the joint operations,
shall be entered into by the OIL COMPANIES.
Section 3. - The development and maintenance of the safety and green buffer zones mentioned
therein, which shall be taken from the properties of the OIL COMPANIES and not from the
surrounding communities, shall be the sole responsibility of the OIL COMPANIES.
The City of Manila and the DOE, on the other hand, committed to do the following:
Section 1. - The City Mayor shall endorse to the City Council this MOU for its appropriate action with
the view of implementing the spirit and intent thereof.
Section 2. - The City Mayor and the DOE shall, consistent with the spirit and intent of this MOU,
enable the OIL COMPANIES to continuously operate in compliance with legal requirements, within
the limited area resulting from the joint operations and the scale down program.
Section 3. - The DOE and the City Mayor shall monitor the OIL COMPANIES compliance with the
provisions of this MOU.
Section 4. - The CITY OF MANILA and the national government shall protect the safety buffer and
green zones and shall exert all efforts at preventing future occupation or encroachment into these
areas by illegal settlers and other unauthorized parties.
The Sangguniang Panlungsod ratified the MOU in Resolution No. 97.7 In the same resolution,
the Sangguniandeclared that the MOU was effective only for a period of six months starting July 25,
2002.8 Thereafter, on January 30, 2003, the Sanggunian adopted Resolution No. 139 extending the
validity of Resolution No. 97 to April 30, 2003 and authorizing Mayor Atienza to issue special
business permits to the oil companies. Resolution No. 13, s. 2003 also called for a reassessment of
the ordinance.10
Meanwhile, petitioners filed this original action for mandamus on December 4, 2002 praying that
Mayor Atienza be compelled to enforce Ordinance No. 8027 and order the immediate removal of the
terminals of the oil companies.11
The issues raised by petitioners are as follows:
1. whether respondent has the mandatory legal duty to enforce Ordinance No. 8027 and
order the removal of the Pandacan Terminals, and
2. whether the June 26, 2002 MOU and the resolutions ratifying it can amend or repeal
Ordinance No. 8027.12
Petitioners contend that respondent has the mandatory legal duty, under Section 455 (b) (2) of the
Local Government Code (RA 7160),13 to enforce Ordinance No. 8027 and order the removal of the
Pandacan Terminals of the oil companies. Instead, he has allowed them to stay.
Respondents defense is that Ordinance No. 8027 has been superseded by the MOU and the
resolutions.14However, he also confusingly argues that the ordinance and MOU are not inconsistent
with each other and that the latter has not amended the former. He insists that the ordinance

remains valid and in full force and effect and that the MOU did not in any way prevent him from
enforcing and implementing it. He maintains that the MOU should be considered as a mere guideline
for its full implementation.15
Under Rule 65, Section 316 of the Rules of Court, a petition for mandamus may be filed when any
tribunal, corporation, board, officer or person unlawfully neglects the performance of an act which
the law specifically enjoins as a duty resulting from an office, trust or station. Mandamus is an
extraordinary writ that is employed to compel the performance, when refused, of a ministerial duty
that is already imposed on the respondent and there is no other plain, speedy and adequate remedy
in the ordinary course of law. The petitioner should have a well-defined, clear and certain legal right
to the performance of the act and it must be the clear and imperative duty of respondent to do the
act required to be done.17
Mandamus will not issue to enforce a right, or to compel compliance with a duty, which is
questionable or over which a substantial doubt exists. The principal function of the writ
of mandamus is to command and to expedite, not to inquire and to adjudicate; thus, it is neither the
office nor the aim of the writ to secure a legal right but to implement that which is already
established. Unless the right to the relief sought is unclouded, mandamus will not issue.18
To support the assertion that petitioners have a clear legal right to the enforcement of the ordinance,
petitioner SJS states that it is a political party registered with the Commission on Elections and has
its offices in Manila. It claims to have many members who are residents of Manila. The other
petitioners, Cabigao and Tumbokon, are allegedly residents of Manila.
We need not belabor this point. We have ruled in previous cases that when a mandamus proceeding
concerns a public right and its object is to compel a public duty, the people who are interested in the
execution of the laws are regarded as the real parties in interest and they need not show any
specific interest.19 Besides, as residents of Manila, petitioners have a direct interest in the
enforcement of the citys ordinances. Respondent never questioned the right of petitioners to
institute this proceeding.
On the other hand, the Local Government Code imposes upon respondent the duty, as city mayor, to
"enforce all laws and ordinances relative to the governance of the city.">20 One of these is Ordinance
No. 8027. As the chief executive of the city, he has the duty to enforce Ordinance No. 8027 as long
as it has not been repealed by theSanggunian or annulled by the courts.21 He has no other choice. It is his ministerial
duty to do so. In Dimaporo v. Mitra, Jr.,22 we stated the reason for this:

These officers cannot refuse to perform their duty on the ground of an alleged invalidity of the statute imposing the duty. The reason for this is obvious. It might seriously hinder
the transaction of public business if these officers were to be permitted in all cases to question the constitutionality of statutes and ordinances imposing duties upon them and
which have not judicially been declared unconstitutional. Officers of the government from the highest to the lowest are creatures of the law and are bound to obey it. 23

The question now is whether the MOU entered into by respondent with the oil companies and the subsequent resolutions passed by the Sanggunian have made the
respondents duty to enforce Ordinance No. 8027 doubtful, unclear or uncertain. This is also connected to the second issue raised by petitioners, that is, whether the MOU and
Resolution Nos. 97, s. 2002 and 13, s. 2003 of the Sanggunian can amend or repeal Ordinance No. 8027.

We need not resolve this issue. Assuming that the terms of the MOU were inconsistent with Ordinance No. 8027, the resolutions which ratified it and made it binding on the
City of Manila expressly gave it full force and effect only until April 30, 2003. Thus, at present, there is nothing that legally hinders respondent from enforcing Ordinance No.
8027.24

Ordinance No. 8027 was enacted right after the Philippines, along with the rest of the world, witnessed the horror of the September 11, 2001 attack on the Twin Towers of the
World Trade Center in New York City. The objective of the ordinance is to protect the residents of Manila from the catastrophic devastation that will surely occur in case of a
terrorist attack25 on the Pandacan Terminals. No reason exists why such a protective measure should be delayed.

WHEREFORE, the petition is hereby GRANTED. Respondent Hon. Jose L. Atienza, Jr., as mayor of the City of Manila, is directed to immediately enforce Ordinance No. 8027.

SO ORDERED.

RENATO C. CORONA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

(On official leave)

ADOLFO S. AZCUNA
Asscociate Justice

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
CANCIO C. GARCIA
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

EN BANC
G.R. No. 193462, February 04, 2014
DENNIS A.B. FUNA, Petitioner, v. MANILA ECONOMIC AND CULTURAL OFFICE AND THE
COMMISSION ON AUDIT, Respondents.
DECISION
PEREZ, J.:
This is a petition for mandamus1 to compel:

1.) the Commission on Audit (COA) to audit and examine the funds of the
Manila Economic and Cultural Office (MECO), and
2.) the MECO to submit to such audit and examination.
The antecedents:
Prelude

The aftermath of the Chinese civil war 2 left the country of China with two (2) governments in a stalemate
espousing competing assertions of sovereignty.3 On one hand is the communist Peoples Republic of China
(PROC) which controls the mainland territories, and on the other hand is the nationalist Republic of China
(ROC) which controls the island of Taiwan. For a better part of the past century, both the PROC and ROC
adhered to a policy of One China i.e., the view that there is only one legitimate government in China, but
differed in their respective interpretation as to which that government is. 4
With the existence of two governments having conflicting claims of sovereignty over one country, came the
question as to which of the two is deserving of recognition as that countrys legitimate government. Even
after its relocation to Taiwan, the ROC used to enjoy diplomatic recognition from a majority of the worlds
states, partly due to being a founding member of the United Nations (UN). 5The number of states partial to
the PROCs version of the One China policy, however, gradually increased in the 1960s and 70s, most
notably after the UN General Assembly adopted the monumental Resolution 2758 in 1971.6 Since then,
almost all of the states that had erstwhile recognized the ROC as the legitimate government of China,
terminated their official relations with the said government, in favor of establishing diplomatic relations with
the PROC.7 The Philippines is one of such states.
The Philippines formally ended its official diplomatic relations with the government in Taiwan on 9 June
1975, when the country and the PROC expressed mutual recognition thru the Joint Communiqu of the
Government of the Republic of the Philippines and the Government of the Peoples Republic of China (Joint
Communiqu).8
Under the Joint Communiqu, the Philippines categorically stated its adherence to the One Chinapolicy of the
PROC. The pertinent portion of the Joint Communiqu reads: 9
The Philippine Government recognizes the Government of the Peoples Republic of China as the sole
legal government of China, fully understands and respects the position of the Chinese Government that
there is but one China and that Taiwan is an integral part of Chinese territory, and decides to
remove all its official representations from Taiwan within one month from the date of signature
of this communiqu. (Emphasis supplied)
The Philippines commitment to the One China policy of the PROC, however, did not preclude the country
from keeping unofficial relations with Taiwan on a peopletopeople basis.10 Maintaining ties with Taiwan
that is permissible by the terms of the Joint Communiqu, however, necessarily required the Philippines, and
Taiwan, to course any such relations thru offices outside of the official or governmental organs.
Hence, despite ending their diplomatic ties, the people of Taiwan and of the Philippines maintained an
unofficial relationship facilitated by the offices of the Taipei Economic and Cultural Office, for the former, and
the MECO, for the latter.11
The MECO12 was organized on 16 December 1997 as a nonstock, nonprofit corporation under Batas
Pambansa Blg. 68 or the Corporation Code.13 The purposes underlying the incorporation of MECO, as stated
in its articles of incorporation,14 are as follows:
1.

To establish and develop the commercial and industrial interests of Filipino nationals here
and abroad, and assist on all measures designed to promote and maintain the trade
relations of the country with the citizens of other foreign countries;

2.

To receive and accept grants and subsidies that are reasonably necessary in carrying out the
corporate purposes provided they are not subject to conditions defeatist for or incompatible with
said purpose;
To acquire by purchase, lease or by any gratuitous title real and personal properties as may be
necessary for the use and need of the corporation, and to dispose of the same in like manner when
they are no longer needed or useful; and
To do and perform any and all acts which are deemed reasonably necessary to carry out the
purposes. (Emphasis supplied)

3.
4.

From the moment it was incorporated, the MECO became the corporate entity entrusted by the Philippine
government with the responsibility of fostering friendly and unofficial relations with the people of Taiwan,

particularly in the areas of trade, economic cooperation, investment, cultural, scientific and educational
exchanges.15 To enable it to carry out such responsibility, the MECO was authorized by the government to
perform certain consular and other functions that relates to the promotion, protection and facilitation of
Philippine interests in Taiwan.16
At present, it is the MECO that oversees the rights and interests of Overseas Filipino Workers (OFWs) in
Taiwan; promotes the Philippines as a tourist and investment destination for the Taiwanese; and facilitates
the travel of Filipinos and Taiwanese from Taiwan to the Philippines, and vice versa.17
Facts Leading to the Mandamus Petition
On 23 August 2010, petitioner sent a letter18 to the COA requesting for a copy of the latest financial and
audit report of the MECO invoking, for that purpose, his constitutional right to information on matters of
public concern. The petitioner made the request on the belief that the MECO, being under the operational
supervision of the Department of Trade and Industry (DTI), is a government owned and controlled
corporation (GOCC) and thus subject to the audit jurisdiction of the COA. 19
Petitioners letter was received by COA Assistant Commissioner Jaime P. Naranjo, the following day.
On 25 August 2010, Assistant Commissioner Naranjo issued a memorandum20 referring the petitioners
request to COA Assistant Commissioner Emma M. Espina for further disposition. In thismemorandum,
however, Assistant Commissioner Naranjo revealed that the MECO was not among the agencies audited by
any of the three Clusters of the Corporate Government Sector.21
On 7 September 2010, petitioner learned about the 25 August 2010 memorandum and its contents.
Mandamus Petition
Taking the 25 August 2010 memorandum as an admission that the COA had never audited and examined
the accounts of the MECO, the petitioner filed the instant petition for mandamus on 8 September 2010.
Petitioner filed the suit in his capacities as taxpayer, concerned citizen, a member of the Philippine Bar and
law book author.22 He impleaded both the COA and the MECO.
Petitioner posits that by failing to audit the accounts of the MECO, the COA is neglecting its duty under
Section 2(1), Article IXD of the Constitution to audit the accounts of an otherwise bona fideGOCC or
government instrumentality. It is the adamant claim of the petitioner that the MECO is a GOCC without an
original charter or, at least, a government instrumentality, the funds of which partake the nature of public
funds.23
According to petitioner, the MECO possesses all the essential characteristics of a GOCC and an
instrumentality under the Executive Order No. (EO) 292, s. 1987 or the Administrative Code: it is a non
stock corporation vested with governmental functions relating to public needs; it is controlled by the
government thru a board of directors appointed by the President of the Philippines; and while not integrated
within the executive departmental framework, it is nonetheless under the operational and policy supervision
of the DTI.24 As petitioner substantiates:

1.

The MECO is vested with government functions. It performs functions that are equivalent to those of
an embassy or a consulate of the Philippine government. 25 A reading of the authorized functions of
the MECO as found in EO No. 15, s. 2001, reveals that they are substantially the same functions
performed by the Department of Foreign Affairs (DFA), through its diplomatic and consular missions,
per the Administrative Code.26]

2.

The MECO is controlled by the government. It is the President of the Philippines that actually
appoints the directors of the MECO, albeit indirectly, by way of desire letters addressed to the
MECOs board of directors.27 An illustration of this exercise is the assumption by Mr. Antonio Basilio
as chairman of the board of directors of the MECO in 2001, which was accomplished when former
President Gloria MacapagalArroyo, through a memorandum28dated 20 February 2001, expressed
her desire to the board of directors of the MECO for the election of Mr. Basilio as chairman. 29]

3.

The MECO is under the operational and policy supervision of the DTI. The MECO was placed under
the operational supervision of the DTI by EO No. 328, s. of 2004, and again under the policy
supervision of the same department by EO No. 426, s. 2005. 30

To further bolster his position that the accounts of the MECO ought to be audited by the COA, the petitioner
calls attention to the practice, allegedly prevailing in the United States of America, wherein the American
Institute in Taiwan (AIT)the counterpart entity of the MECO in the United Statesis supposedly audited by
that countrys Comptroller General.31 Petitioner claims that this practice had been confirmed in a decision of
the United States Court of Appeals for the District of Columbia Circuit, in the case of Wood, Jr., ex rel.
United States of America v. The American Institute in Taiwan, et al.32
The Position of the MECO
The MECO prays for the dismissal of the mandamus petition on procedural and substantial grounds.
On procedure, the MECO argues that the mandamus petition was prematurely filed.33
The MECO posits that a cause of action for mandamus to compel the performance of a ministerial duty
required by law only ripens once there has been a refusal by the tribunal, board or officer concerned to
perform such a duty.34 The MECO claims that there was, in this case, no such refusal either on its part or on
the COAs because the petitioner never made any demand for it to submit to an audit by the COA or for the
COA to perform such an audit, prior to filing the instant mandamuspetition.35 The MECO further points out
that the only demand that the petitioner made was his request to the COA for a copy of the MECOs latest
financial and audit reportwhich request was not even finally disposed of by the time the instant petition
was filed.36
On the petitions merits, the MECO denies the petitioners claim that it is a GOCC or a government
instrumentality.37 While performing public functions, the MECO maintains that it is not owned or controlled
by the government, and its funds are private funds. 38 The MECO explains:

1.

It is not owned or controlled by the government. Contrary to the allegations of the petitioner, the
President of the Philippines does not appoint its board of directors. 39 The desire letter that the
President transmits is merely recommendatory and not binding on the corporation. 40As a corporation
organized under the Corporation Code, matters relating to the election of its directors and officers,
as well as its membership, are governed by the appropriate provisions of the said code, its articles
of incorporation and its bylaws.41 Thus, it is the directors who elect the corporations officers; the
members who elect the directors; and the directors who admit the members by way of a unanimous
resolution. All of its officers, directors, and members are private individuals and are not government
officials.42]

2.

The government merely has policy supervision over it. Policy supervision is a lesser form of
supervision wherein the governments oversight is limited only to ensuring that the corporations
activities are in tune with the countrys commitments under the One China policy of the PROC.43 The
daytoday operations of the corporation, however, remain to be controlled by its duly elected
board of directors.44

The MECO emphasizes that categorizing it as a GOCC or a government instrumentality can potentially violate
the countrys commitment to the One China policy of the PROC.45 Thus, the MECO cautions against applying
to the present mandamus petition the pronouncement in the Wood decision regarding the alleged
auditability of the AIT in the United States.46
The Position of the COA
The COA, on the other hand, advances that the mandamus petition ought to be dismissed on procedural
grounds and on the ground of mootness.
The COA argues that the mandamus petition suffers from the following procedural defects:

1.

The petitioner lacks locus standi to bring the suit. The COA claims that the petitioner has not shown,
at least in a concrete manner, that he had been aggrieved or prejudiced by its failure to audit the
accounts of the MECO.47]

2.

The petition was filed in violation of the doctrine of hierarchy of courts. The COA faults the filing of
the instant mandamus petition directly with this Court, when such petition could have very well
been presented, at the first instance, before the Court of Appeals or any Regional Trial Court. 48 The
COA claims that the petitioner was not able to provide compelling reasons to justify a direct resort
to the Supreme Court.49

At any rate, the COA argues that the instant petition already became moot when COA Chairperson Maria
Gracia M. PulidoTan (PulidoTan) issued Office Order No. 201169850 on 6 October 2011.51The COA notes
that under Office Order No. 2011698, Chairperson PulidoTan already directed a team of auditors to
proceed to Taiwan, specifically for the purpose of auditing the accounts of, among other government
agencies based therein, the MECO.52
In conceding that it has audit jurisdiction over the accounts of the MECO, however, the COA clarifies that it
does not consider the former as a GOCC or a government instrumentality. On the contrary, the COA
maintains that the MECO is a nongovernmental entity.53
The COA argues that, despite being a nongovernmental entity, the MECO may still be audited with respect
to the verification fees for overseas employment documents that it collects from Taiwanese employers on
behalf of the DOLE.54 The COA claims that, under Joint Circular No. 399,55 the MECO is mandated to remit
to the Department of Labor and Employment (DOLE) a portion of such verification fees.56 The COA,
therefore, classifies the MECO as a nongovernmental entity required to pay xxx government share
subject to a partial audit of its accounts under Section 26 of the Presidential Decree No. 1445 or the State
Audit Code of the Philippines (Audit Code).57
OUR RULING
We grant the petition in part. We declare that the MECO is a nongovernmental entity. However, under
existing laws, the accounts of the MECO pertaining to the verification fees it collects on behalf of the
DOLE as well as the fees it was authorized to collect under Section 2(6) of EO No. 15, s. 2001, are subject
to the audit jurisdiction of the COA. Such fees pertain to the government and should be audited by the COA.
I
We begin with the preliminary issues.
Mootness of Petition
The first preliminary issue relates to the alleged mootness of the instant mandamus petition, occasioned by
the COAs issuance of Office Order No. 2011698. The COA claims that by issuingOffice Order No. 2011
698, it had already conceded its jurisdiction over the accounts of the MECO and so fulfilled the objective of
the instant petition.58 The COA thus urges that the instant petition be dismissed for being moot and
academic.59
We decline to dismiss the mandamus petition on the ground of mootness.
A case is deemed moot and academic when, by reason of the occurrence of a supervening event, it ceases
to present any justiciable controversy.60 Since they lack an actual controversy otherwise cognizable by
courts, moot cases are, as a rule, dismissible.61
The rule that requires dismissal of moot cases, however, is not absolute. It is subject to exceptions. In David
v. MacapagalArroyo,62 this Court comprehensively captured these exceptions scattered throughout our
jurisprudence:

The moot and academic principle is not a magical formula that can automatically dissuade the courts in
resolving a case. Courts will decide cases, otherwise moot and academic, if: first, there is a grave violation
of the Constitution;63second, the exceptional character of the situation and the paramount public interest is
involved;64third, when constitutional issue raised requires formulation of controlling principles to guide the
bench, the bar, and the public;65 and fourth, the case is capable of repetition yet evading review.66
In this case, We find that the issuance by the COA of Office Order No. 2011698 indeed qualifies as a
supervening event that effectively renders moot and academic the main prayer of the
instantmandamus petition. A writ of mandamus to compel the COA to audit the accounts of the MECO would
certainly be a mere superfluity, when the former had already obliged itself to do the same.
Be that as it may, this Court refrains from dismissing outright the petition. We believe that
themandamus petition was able to craft substantial issues presupposing the commission of a grave
violation of the Constitution and involving paramount public interest, which need to be resolved
nonetheless:
First. The petition makes a serious allegation that the COA had been remiss in its constitutional or legal duty
to audit and examine the accounts of an otherwise auditable entity in the MECO.
Second. There is paramount public interest in the resolution of the issue concerning the failure of the COA to
audit the accounts of the MECO. The propriety or impropriety of such a refusal is determinative of whether
the COA was able to faithfully fulfill its constitutional role as the guardian of the public treasury, in which any
citizen has an interest.
Third. There is also paramount public interest in the resolution of the issue regarding the legal status of the
MECO; a novelty insofar as our jurisprudence is concerned. We find that the status of the MECOwhether it
may be considered as a government agency or nothas a direct bearing on the countrys commitment to
the One China policy of the PROC.67
An allegation as serious as a violation of a constitutional or legal duty, coupled with the pressing public
interest in the resolution of all related issues, prompts this Court to pursue a definitive ruling thereon, if not
for the proper guidance of the government or agency concerned, then for the formulation of controlling
principles for the education of the bench, bar and the public in general.68 For this purpose, the Court
invokes its symbolic function.69
If the foregoing reasons are not enough to convince, We still add another:
Assuming that the allegations of neglect on the part of the COA were true, Office Order No. 2011698does
not offer the strongest certainty that they would not be replicated in the future. In the first place, Office
Order No. 2011698 did not state any legal justification as to why, after decades of not auditing the
accounts of the MECO, the COA suddenly decided to do so. Neither does it state any determination regarding
the true status of the MECO. The justifications provided by the COA, in fact, only appears in the
memorandum70 it submitted to this Court for purposes of this case.
Thus, the inclusion of the MECO in Office Order No. 2011698 appears to be entirely dependent upon the
judgment of the incumbent chairperson of the COA; susceptible of being undone, with or without reason, by
her or even her successor. Hence, the case now before this Court is dangerouslycapable of being
repeated yet evading review.
Verily, this Court should not dismiss the mandamus petition on the ground of mootness.
Standing of Petitioner
The second preliminary issue is concerned with the standing of the petitioner to file the
instantmandamus petition. The COA claims that petitioner has none, for the latter was not able to concretely
establish that he had been aggrieved or prejudiced by its failure to audit the accounts of the MECO. 71

Related to the issue of lack of standing is the MECOs contention that petitioner has no cause of action to file
the instant mandamus petition. The MECO faults petitioner for not making any demand for it to submit to an
audit by the COA or for the COA to perform such an audit, prior to filing the instant petition. 72
We sustain petitioners standing, as a concerned citizen, to file the instant petition.
The rules regarding legal standing in bringing public suits, or locus standi, are already welldefined in our
case law. Again, We cite David, which summarizes jurisprudence on this point: 73
By way of summary, the following rules may be culled from the cases decided by this Court. Taxpayers,
voters, concerned citizens, and legislators may be accorded standing to sue, provided that the following
requirements are met:
(1) the cases involve constitutional issues;
(2) for taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure is
unconstitutional;
(3) for voters, there must be a showing of obvious interest in the validity of the election law in question;
(4) for concerned citizens, there must be a showing that the issues raised are of transcendental
importance which must be settled early; and
(5) for legislators, there must be a claim that the official action complained of infringes upon their
prerogatives as legislators.
We rule that the instant petition raises issues of transcendental importance, involved as they are with the
performance of a constitutional duty, allegedly neglected, by the COA. Hence, We hold that the petitioner, as
a concerned citizen, has the requisite legal standing to file the instant mandamuspetition.
To be sure, petitioner does not need to make any prior demand on the MECO or the COA in order to
maintain the instant petition. The duty of the COA sought to be compelled by mandamus, emanates from
the Constitution and law, which explicitly require, or demand, that it perform the said duty. To the mind of
this Court, petitioner already established his cause of action against the COA when he alleged that the COA
had neglected its duty in violation of the Constitution and the law.
Principle of Hierarchy of Courts
The last preliminary issue is concerned with the petitions nonobservance of the principle of hierarchy of
courts. The COA assails the filing of the instant mandamus petition directly with this Court, when such
petition could have very well been presented, at the first instance, before the Court of Appeals or any
Regional Trial Court.74 The COA claims that the petitioner was not able to provide compelling reasons to
justify a direct resort to the Supreme Court.75
In view of the transcendental importance of the issues raised in the mandamus petition, as earlier
mentioned, this Court waives this last procedural issue in favor of a resolution on the merits. 76
II
To the merits of this petition, then.
The single most crucial question asked by this case is whether the COA is, under prevailing law, mandated to
audit the accounts of the MECO. Conversely, are the accounts of the MECO subject to the audit jurisdiction of
the COA?
Law, of course, identifies which accounts of what entities are subject to the audit jurisdiction of the COA.

Under Section 2(1) of Article IXD of the Constitution, 77 the COA was vested with the power, authority and
duty to examine, audit and settle the accounts of the following entities:
1.

The government, or any of its subdivisions, agencies and instrumentalities;

2.
3.
4.

GOCCs with original charters;

5.

GOCCs without original charters;

Constitutional bodies, commissions and offices that have been granted fiscal autonomy under the
Constitution; and
Nongovernmental entities receiving subsidy or equity, directly or indirectly, from or through the
government, which are required by law or the granting institution to submit to the COA for audit as
a condition of subsidy or equity.78

The term accounts mentioned in the subject constitutional provision pertains to the revenue, receipts,
expenditures and uses of funds and property of the foregoing entities.79
Complementing the constitutional power of the COA to audit accounts of nongovernmental entities
receiving subsidy or equity xxx from or through the government is Section 29(1)80 of the Audit Code, which
grants the COA visitorial authority over the following nongovernmental entities:
1.

Nongovernmental entities subsidized by the government;

2.
3.
4.

Nongovernmental entities required to pay levy or government share;

Nongovernmental entities that have received counterpart funds from the government; and
Nongovernmental entities partly funded by donations through the government.

Section 29(1) of the Audit Code, however, limits the audit of the foregoing nongovernmental entities only
to funds xxx coming from or through the government.81 This section of the Audit Code is, in turn,
substantially reproduced in Section 14(1), Book V of the Administrative Code. 82
In addition to the foregoing, the Administrative Code also empowers the COA to examine and audit the
books, records and accounts of public utilities in connection with the fixing of rates of every nature, or in
relation to the proceedings of the proper regulatory agencies, for purposes of determining franchise tax.83
Both petitioner and the COA claim that the accounts of the MECO are within the audit jurisdiction of the
COA, but vary on the extent of the audit and on what type of auditable entity the MECO is. The petitioner
posits that all accounts of the MECO are auditable as the latter is a bona fide GOCC or government
instrumentality.84 On the other hand, the COA argues that only the accounts of the MECO that pertain to the
verification fees it collects on behalf of the DOLE are auditable because the former is merely a non
governmental entity required to pay xxx government share per the Audit Code.85
We examine both contentions.
The MECO Is Not a GOCC or
Government Instrumentality
We start with the petitioners contention.
Petitioner claims that the accounts of the MECO ought to be audited by the COA because the former is a
GOCC or government instrumentality. Petitioner points out that the MECO is a nonstock corporation vested
with governmental functions relating to public needs; it is controlled by the government thru a board of
directors appointed by the President of the Philippines; and it operates outside of the departmental
framework, subject only to the operational and policy supervision of the DTI.86 The MECO thus possesses,
petitioner argues, the essential characteristics of a bona fideGOCC and government instrumentality.87
We take exception to petitioners characterization of the MECO as a GOCC or government instrumentality.
The MECO is not a GOCC or government instrumentality.

Government instrumentalities are agencies of the national government that, by reason of some special
function or jurisdiction they perform or exercise, are allotted operational autonomy and are not
integrated within the department framework.88 Subsumed under the rubric government instrumentality
are the following entities:89
1.
2.
3.
4.

regulatory agencies,
chartered institutions,
government corporate entities or government instrumentalities with corporate
powers(GCE/GICP),90 and
GOCCs

The Administrative Code defines a GOCC:91

(13) Governmentowned or controlled corporation refers to any agency organized as a stock or nonstock
corporation, vested with functions relating to public needs whether governmental or proprietary in nature,
and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as
in the case of stock corporations, to the extent of at least fiftyone (51) per cent of its capital stock: x x x.
The above definition is, in turn, replicated in the more recent Republic Act No. 10149 or the GOCC
Governance Act of 2011, to wit:92
(o) GovernmentOwned or Controlled Corporation (GOCC) refers to any agency organized as a stock or
nonstock corporation, vested with functions relating to public needs whether governmental or proprietary
in nature, and owned by the Government of the Republic of the Philippines directly or through its
instrumentalities either wholly or, where applicable as in the case of stock corporations, to the extent of at
least a majority of its outstanding capital stock: x x x.
GOCCs, therefore, are stock or nonstock corporations vested with functions relating to public needs that
are owned by the Government directly or through its instrumentalities.93 By definition, three attributes
thus make an entity a GOCC: first, its organization as stock or nonstock corporation;94second, the public
character of its function; and third, government ownership over the same.
Possession of all three attributes is necessary to deem an entity a GOCC.
In this case, there is not much dispute that the MECO possesses the first and second attributes. It is
the third attribute, which the MECO lacks.
The MECO Is Organized as a NonStock Corporation
The organization of the MECO as a nonstock corporation cannot at all be denied. Records disclose that the
MECO was incorporated as a nonstock corporation under the Corporation Code on 16 December
1977.95 The incorporators of the MECO were Simeon R. Roxas, Florencio C. Guzon, Manuel K. Dayrit, Pio K.
Luz and Eduardo B. Ledesma, who also served as the corporations original members and directors. 96
The purposes for which the MECO was organized also establishes its nonprofit character, to wit:97
1.

To establish and develop the commercial and industrial interests of Filipino nationals here
and abroad and assist on all measures designed to promote and maintain the trade
relations of the country with the citizens of other foreign countries;

2.

To receive and accept grants and subsidies that are reasonably necessary in carrying out the
corporate purposes provided they are not subject to conditions defeatist for or incompatible with
said purpose;
To acquire by purchase, lease or by any gratuitous title real and personal properties as may be
necessary for the use and need of the corporation, and in like manner when they are
To do and perform any and all acts which are deemed reasonably necessary to carry out the
purposes. (Emphasis supplied)

3.
4.

The purposes for which the MECO was organized are somewhat analogous to those of a trade, business or
industry chamber,98 but only on a much larger scale i.e., instead of furthering the interests of a particular
line of business or industry within a local sphere, the MECO seeks to promote the general interests of the
Filipino people in a foreign land.
Finally, it is not disputed that none of the income derived by the MECO is distributable as dividends to any of
its members, directors or officers.
Verily, the MECO is organized as a nonstock corporation.
The MECO Performs Functions with a Public Aspect.
The public character of the functions vested in the MECO cannot be doubted either. Indeed, to a certain
degree, the functions of the MECO can even be said to partake of the nature of governmentalfunctions. As
earlier intimated, it is the MECO that, on behalf of the people of the Philippines, currently facilitates unofficial
relations with the people in Taiwan.
Consistent with its corporate purposes, the MECO was authorized by the Philippine government to perform
certain consular and other functions relating to the promotion, protection and facilitation of Philippine
interests in Taiwan.99 The full extent of such authorized functions are presently detailed in Sections 1 and 2
of EO No. 15, s. 2001:
SECTION 1. Consistent with its corporate purposes and subject to the conditions stated in Section 3 hereof,
MECO is hereby authorized to assist in the performance of the following functions:
1. Formulation and implementation of a program to attract and promote investments from Taiwan to
Philippine industries and businesses, especially in manufacturing, tourism, construction and other preferred
areas of investments;
2. Promotion of the export of Philippine products and Filipino manpower services, including Philippine
management services, to Taiwan;
3. Negotiation and/or assistance in the negotiation and conclusion of agreements or other arrangements
concerning trade, investment, economic cooperation, technology transfer, banking and finance, scientific,
cultural, educational and other modes of cooperative endeavors between the Philippines and Taiwan, on a
peopletopeople basis, in accordance with established rules and regulations;
4. Reporting on, and identification of, employment and business opportunities in Taiwan for the promotion of
Philippine exports, manpower and management services, and tourism;
5. Dissemination in Taiwan of information on the Philippines, especially in the fields of trade, tourism, labor,
economic cooperation, and cultural, educational and scientific endeavors;
6. Conduct of periodic assessment of market conditions in Taiwan, including submission of trade statistics
and commercial reports for use of Philippine industries and businesses; and
7. Facilitation, fostering and cultivation of cultural, sports, social, and educational exchanges between the
peoples of the Philippines and Taiwan.
SECTION 2. In addition to the abovementioned authority and subject to the conditions stated in Section 3
hereof, MECO, through its branch offices in Taiwan, is hereby authorized to perform the following functions:
1. Issuance of temporary visitors visas and transit and crew list visas, and such other visa services as may
be authorized by the Department of Foreign Affairs;

2. Issuance, renewal, extension or amendment of passports of Filipino citizens in accordance with existing
regulations, and provision of such other passport services as may be required under the circumstances;
3. Certification or affirmation of the authenticity of documents submitted for authentication;
4. Providing translation services;
5. Assistance and protection to Filipino nationals and other legal/juridical persons working or residing in
Taiwan, including making representations to the extent allowed by local and international law on their behalf
before civil and juridical authorities of Taiwan; and
6. Collection of reasonable fees on the first four (4) functions enumerated above to defray the cost of its
operations.
A perusal of the above functions of the MECO reveals its uncanny similarity to some of the functions typically
performed by the DFA itself, through the latters diplomatic and consular missions. 100 The functions of the
MECO, in other words, are of the kind that would otherwise be performed by the Philippines own diplomatic
and consular organs, if not only for the governments acquiescence that they instead be exercised by the
MECO.
Evidently, the functions vested in the MECO are impressed with a public aspect.
The MECO Is Not Owned or Controlled by the Government
Organization as a nonstock corporation and the mere performance of functions with a public aspect,
however, are not by themselves sufficient to consider the MECO as a GOCC. In order to qualify as a GOCC, a
corporation must also, if not more importantly, be owned by the government.
The government owns a stock or nonstock corporation if it has controlling interest in the corporation. In a
stock corporation, the controlling interest of the government is assured by its ownership of at least fiftyone
percent (51%) of the corporate capital stock. 101 In a nonstock corporation, like the MECO, jurisprudence
teaches that the controlling interest of the government is affirmed when at least majority of the members
are government officials holding such membership by appointment or designation102 or there is otherwise
substantial participation of the government in the selection of the corporations governing board.103
In this case, the petitioner argues that the government has controlling interest in the MECO because it is the
President of the Philippines that indirectly appoints the directors of the corporation.104 The petitioner claims
that the President appoints directors of the MECO thru desire letters addressed to the corporations
board.105 As evidence, the petitioner cites the assumption of one Mr. Antonio Basilio as chairman of the
board of directors of the MECO in 2001, which was allegedly accomplished when former President
MacapagalArroyo, through a memorandum dated 20 February 2001, expressed her desire to the board of
directors of the MECO for the election of Mr. Basilio as chairman. 106
The MECO, however, counters that the desire letters that the President transmits are merely
recommendatory and not binding on it.107 The MECO maintains that, as a corporation organized under the
Corporation Code, matters relating to the election of its directors and officers, as well as its membership, are
ultimately governed by the appropriate provisions of the said code, its articles of incorporation and its by
laws.108
As between the contrasting arguments, We find the contention of the MECO to be the one more consistent
with the law.
The fact of the incorporation of the MECO under the Corporation Code is key. The MECO was correct in
postulating that, as a corporation organized under the Corporation Code, it is governed by the appropriate
provisions of the said code, its articles of incorporation and its bylaws. In this case, it is the bylaws109 of
the MECO that stipulates that its directors are elected by its members; its officers are elected by its
directors; and its members, other than the original incorporators, are admitted by way of a unanimous
board resolution, to wit:

SECTION II. MEMBERSHIP

Article 2. Members shall be classified as (a) Regular and (b) Honorary.
(a) Regular members shall consist of the original incorporators and such other members who, upon
application for membership, are unanimously admitted by the Board of Directors.
(b) Honorary member A person of distinction in business who as sympathizer of the objectives of the
corporation, is invited by the Board to be an honorary member.
SECTION III. BOARD OF DIRECTORS
Article 3. At the first meeting of the regular members, they shall organize and constitute themselves as a
Board composed of five (5) members, including its Chairman, each of whom as to serve until such time as
his own successor shall have been elected by the regular members in an election called for the purpose. The
number of members of the Board shall be increased to seven (7) when circumstances so warrant and by
means of a majority vote of the Board members and appropriate application to and approval by the
Securities and Exchange Commission. Unless otherwise provided herein or by law, a majority vote of all
Board members present shall be necessary to carry out all Board resolutions.
During the same meeting, the Board shall also elect its own officers, including the designation of the
principal officer who shall be the Chairman. In line with this, the Chairman shall also carry the title Chief
Executive Officer. The officer who shall head the branch or office for the agency that may be established
abroad shall have the title of Director and Resident Representative. He will also be the ViceChairman. All
other members of the Board shall have the title of Director.
xxxx
SECTION IV. EXECUTIVE COMMITTEE
Article 5. There shall be established an Executive Committee composed of at least three (3) members of the
Board. The members of the Executive Committee shall be elected by the members of the Board among
themselves.
xxxx
SECTION VI. OFFICERS: DUTIES, COMPENSATION
Article 8. The officers of the corporation shall consist of a Chairman of the Board, ViceChairman, Chief
Finance Officer, and a Secretary. Except for the Secretary, who is appointed by the Chairman of the Board,
other officers and employees of the corporation shall be appointed by the Board.
The Deputy Representative and other officials and employees of a branch office or agency abroad are
appointed solely by the Vice Chairman and Resident Representative concerned. All such appointments
however are subject to ratification by the Board.
It is significant to note that none of the original incorporators of the MECO were shown to be government
officials at the time of the corporations organization. Indeed, none of the members, officers or board of
directors of the MECO, from its incorporation up to the present day, were established as government
appointees or public officers designated by reason of their office. There is, in fact, no law or executive order
that authorizes such an appointment or designation. Hence, from a strictly legal perspective, it appears that
the presidential desire letters pointed out by petitionerif such letters even exist outside of the case of Mr.
Basilioare, no matter how strong its persuasive effect may be, merely recommendatory.
The MECO Is Not a Government Instrumentality; It Is a Sui Generis Entity.

The categorical exclusion of the MECO from a GOCC makes it easier to exclude the same from any other
class of government instrumentality. The other government instrumentalities i.e., the regulatory agencies,
chartered institutions and GCE/GICP are all, by explicit or implicit definition, creatures of the law.110 The
MECO cannot be any other instrumentality because it was, as mentioned earlier, merely incorporated under
the Corporation Code.
Hence, unless its legality is questioned, and in this case it was not, the fact that the MECO is operating
under the policy supervision of the DTI is no longer a relevant issue to be reckoned with for purposes of this
case.
For whatever it is worth, however, and without justifying anything, it is easy enough for this Court to
understand the rationale, or necessity even, of the executive branch placing the MECO under thepolicy
supervision of one of its agencies.
It is evident, from the peculiar circumstances surrounding its incorporation, that the MECO was not intended
to operate as any other ordinary corporation. And it is not. Despite its private origins, and perhaps
deliberately so, the MECO was entrusted111 by the government with the delicate and
precarious112 responsibility of pursuing unofficial113 relations with the people of a foreign land whose
government the Philippines is bound not to recognize. The intricacy involved in such undertaking is the
possibility that, at any given time in fulfilling the purposes for which it was incorporated, the MECO may find
itself engaged in dealings or activities that can directly contradict the Philippines commitment to the One
China policy of the PROC. Such a scenario can only truly be avoided if the executive department exercises
some form of oversight, no matter how limited, over the operations of this otherwise private entity.
Indeed, from hindsight, it is clear that the MECO is uniquely situated as compared with other private
corporations. From its overreaching corporate objectives, its special duty and authority to exercise certain
consular functions, up to the oversight by the executive department over its operationsall the while
maintaining its legal status as a nongovernmental entitythe MECO is, for all intents and
purposes, sui generis.
Certain Accounts of the MECO May
Be Audited By the COA.
We now come to the COAs contention.
The COA argues that, despite being a nongovernmental entity, the MECO may still be audited with respect
to the verification fees for overseas employment documents that the latter collects from Taiwanese
employers on behalf of the DOLE.114 The COA claims that, under Joint Circular No. 399, the MECO is
mandated to remit to the national government a portion of such verification fees.115The COA, therefore,
classifies the MECO as a nongovernmental entity required to pay xxx government share per the Audit
Code.116
We agree that the accounts of the MECO pertaining to its collection of verification fees is subject to the
audit jurisdiction of the COA. However, We digress from the view that such accounts are the only ones that
ought to be audited by the COA. Upon careful evaluation of the information made available by the
records visvis the spirit and the letter of the laws and executive issuances applicable, We find that the
accounts of the MECO pertaining to the fees it was authorized to collect under Section 2(6) of EO No.
15, s. 2001, are likewise subject to the audit jurisdiction of the COA.
Verification Fees Collected by the MECO
In its comment,117 the MECO admitted that roughly 9% of its income is derived from its share in the
verification fees for overseas employment documents it collects on behalf of the DOLE.
The verification fees mentioned here refers to the service fee for the verification of overseas employment
contracts, recruitment agreement or special powers of attorney that the DOLE was authorized to collect
under Section 7 of EO No. 1022,118 which was issued by President Ferdinand E. Marcos on 1 May 1985.
These fees are supposed to be collected by the DOLE from the foreign employers of OFWs and are intended

to be used for the promotion of overseas employment and for welfare services to Filipino workers within
the area of jurisdiction of [concerned] foreign missions under the administration of the [DOLE].119
Joint Circular 399 was issued by the DOLE, DFA, the Department of Budget Management, the Department
of Finance and the COA in an effort to implement Section 7 of Executive Order No. 1022. 120 Thus, under Joint
Circular 399, the following officials have been tasked to be the Verification Fee Collecting Officer on
behalf of the DOLE:121
1.

The labor attach or duly authorized overseas labor officer at a given foreign post, as duly
designated by the DOLE Secretary;

2.

n foreign posts where there is no labor attach or duly authorized overseas labor officer, the finance
officer or collecting officer of the DFA duly deputized by the DOLE Secretary as approved by the DFA
Secretary;
In the absence of such finance officer or collecting officer, the alternate duly designated by the head
of the foreign post.

3.

Since the Philippines does not maintain an official post in Taiwan, however, the DOLE entered into a series
of Memorandum of Agreements with the MECO, which made the latter the formers collecting agent with
respect to the verification fees that may be due from Taiwanese employers of OFWs. 122Under the 27
February 2004 Memorandum of Agreement between DOLE and the MECO, the verification fees to be
collected by the latter are to be allocated as follows: (a) US$ 10 to be retained by the MECO as
administrative fee, (b) US $10 to be remitted to the DOLE, and (c) US$ 10 to be constituted as a common
fund of the MECO and DOLE.123
Evidently, the entire verification fees being collected by the MECO are receivables of the DOLE.124 Such
receipts pertain to the DOLE by virtue of Section 7 of EO No. 1022.
Consular Fees Collected by the MECO
Aside from the DOLE verification fees, however, the MECO also collects consular fees, or fees it collects
from the exercise of its delegated consular functions.
The authority behind consular fees is Section 2(6) of EO No. 15, s. 2001. The said section authorizes the
MECO to collect reasonable fees for its performance of the following consular functions:
1.

Issuance of temporary visitors visas and transit and crew list visas, and such other visa services as
may be authorized by the DFA;

2.

Issuance, renewal, extension or amendment of passports of Filipino citizens in accordance with

existing regulations, and provision of such other passport services as may be required under the
circumstances;
Certification or affirmation of the authenticity of documents submitted for authentication; and
Providing translation services.

3.
4.

Evidently, and just like the peculiarity that attends the DOLE verification fees, there is no consular office
for the collection of the consular fees. Thus, the authority for the MECO to collect the reasonable fees,
vested unto it by the executive order.
The consular fees, although held and expended by the MECO by virtue of EO No. 15, s. 2001, are, without
question, derived from the exercise by the MECO of consular functionsfunctions it performs by and only
through special authority from the government. There was never any doubt that the visas, passports and
other documents that the MECO issues pursuant to its authorized functions still emanate from the Philippine
government itself.
Such fees, therefore, are received by the MECO to be used strictly for the purpose set out under EO No. 15,
s. 2001. They must be reasonable as the authorization requires. It is the government that has ultimate
control over the disposition of the consular fees, which control the government did exercise when it

provided in Section 2(6) of EO No. 15, s. 2001 that such funds may be kept by the MECO to defray the cost
of its operations.
The Accounts of the MECO Pertaining to the Verification Fees and Consular Fees May Be Audited by the COA.
Section 14(1), Book V of the Administrative Code authorizes the COA to audit accounts of nongovernmental
entities required to pay xxx or have government share but only with respect to funds xxx coming from or
through the government. This provision of law perfectly fits the MECO:
First. The MECO receives the verification fees by reason of being the collection agent of the DOLEa
government agency. Out of its collections, the MECO is required, by agreement, to remit a portion thereof to
the DOLE. Hence, the MECO is accountable to the government for its collections of such verification fees
and, for that purpose, may be audited by the COA.
Second. Like the verification fees, the consular fees are also received by the MECO through the
government, having been derived from the exercise of consular functions entrusted to the MECO by the
government. Hence, the MECO remains accountable to the government for its collections of consular fees
and, for that purpose, may be audited by the COA.
Tersely put, the 27 February 2008 Memorandum of Agreement between the DOLE and the MECO and Section
2(6) of EO No. 15, s. 2001, visvis, respectively, the verification fees and the consular fees, grant and
at the same time limit the authority of the MECO to collect such fees. That grant and limit require the audit
by the COA of the collections thereby generated.
Conclusion
The MECO is not a GOCC or government instrumentality. It is a sui generis private entity especially
entrusted by the government with the facilitation of unofficial relations with the people in Taiwan without
jeopardizing the countrys faithful commitment to the One China policy of the PROC. However, despite its
nongovernmental character, the MECO handles government funds in the form of the verification fees it
collects on behalf of the DOLE and the consular fees it collects under Section 2(6) of EO No. 15, s. 2001.
Hence, under existing laws, the accounts of the MECO pertaining to its collection of such verification fees
and consular fees should be audited by the COA.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Manila Economic and
Cultural Office is hereby declared a nongovernmental entity. However, the accounts of the Manila Economic
and Cultural Office pertaining to: the verification fees contemplated by Section 7 of Executive Order No.
1022 issued 1 May 1985, that the former collects on behalf of the Department of Labor and
Employment, and the fees it was authorized to collect under Section 2(6) of Executive Order No. 15 issued
16 May 2001, are subject to the audit jurisdiction of the COA.
No costs.
SO ORDERED.
Sereno, C.J., Carpio, Velasco, Jr., LeonardoDe Castro, Brion, Peralta, Bersamin, Del Castillo,
Abad, Villarama, Jr., Mendoza, Reyes, PerlasBernabe, and Leonen, JJ., concur.

SECOND DIVISION

[G.R. No. 131977. February 4, 1999]

PEDRO MENDOZA, petitioner, vs. RAY ALLAS and GODOFREDO

OLORES, respondents.
DECISION
PUNO, J.:

Before us, petitioner prays for the execution of the decision of the trial court [1] granting his
petition for quo warranto which ordered his reinstatement as Director III, Customs Intelligence and
Investigation Service, and the payment of his back salaries and benefits.
Petitioner Pedro Mendoza joined the Bureau of Customs in 1972. He held the positions of
Port Security Chief from March 1972 to August 1972, Deputy Commissioner of Customs from
August 1972 to September 1975, Acting Commissioner of Customs from September 1975 to
April 1977 and Customs Operations Chief I from October 1987 to February 1988. [2] On March 1,
1988, he was appointed Customs Service Chief of the Customs Intelligence and Investigation
Service (CIIS). In 1989, the position of Customs Service Chief was reclassified by the Civil
Service as "Director III" in accordance with Republic Act No. 6758 and National Compensation
Circular No. 50. Petitioner's position was thus categorized as "Director III, CIIS" and he
discharged the function and duties of said office.
On April 22, 1993, petitioner was temporarily designated as Acting District Collector,
Collection District X, Cagayan de Oro City. In his place, respondent Ray Allas was appointed as
"Acting Director III" of the CIIS. Despite petitioner's new assignment as Acting District
Collector, however, he continued to receive the salary and benefits of the position of Director III.
In September 1994, petitioner received a letter from Deputy Customs Commissioner Cesar
Z. Dario, informing him of his termination from the Bureau of Customs, in view of respondent
Allas' appointment as Director III by President Fidel V. Ramos. The pertinent portion of the letter
reads:

"Effective March 4, 1994, Mr. Ray Allas was appointed Director III by President Fidel
V. Ramos and as a consequence, [petitioner's] services were terminated without
prejudice to [his] claim for all government benefits due [him]."
Attached to the letter was the appointment of respondent Ray Allas as "Director III, CIIS, Bureau
of Customs, vice Pedro Mendoza."
Petitioner wrote the Customs Commissioner demanding his reinstatement with full back
wages and without loss of seniority rights. No reply was made.
On December 2, 1994, petitioner filed a petition for quo warranto against respondent Allas
before the Regional Trial Court, Paranaque, Branch 258.[3] The case was tried and on September
11, 1995, a decision was rendered granting the petition. The court found that petitioner was
illegally terminated from office without due process of law and in violation of his security of
tenure, and that as he was deemed not to have vacated his office, the appointment of respondent
Allas to the same office was void ab initio. The court ordered the ouster of respondent Allas from
the position of Director III, and at the same time directed the reinstatement of petitioner to the
same position with payment of full back salaries and other benefits appurtenant thereto.

Respondent Allas appealed to the Court of Appeals. On February 8, 1996, while the case
was pending before said court, respondent Allas was promoted by President Ramos to the
position of Deputy Commissioner of Customs for Assessment and Operations. As a consequence
of this promotion, petitioner moved to dismiss respondent's appeal as having been rendered moot
and academic. The Court of Appeals granted the motion and dismissed the case accordingly. The
order of dismissal became final and entry of judgment was made on March 19, 1996.[4]
On May 9, 1996, petitioner filed with the court a quo a Motion for Execution of its
decision. On July 24, 1996, the court denied the motion on the ground that the contested position
vacated by respondent Allas was now being occupied by respondent Godofredo Olores who was
not a party to the quo warranto petition.[5]
Petitioner filed a special civil action for certiorari and mandamus with the Court of Appeals
questioning the order of the trial court. [6] On November 27, 1997, the Court of Appeals dismissed
the petition.[7] Hence, this recourse.
Petitioner claims that:
"The Court of Appeals grossly erred in holding that a writ of execution may no longer be issued,
considering that respondent Olores who was not a party to the case now occupies the subject
position."[8]
The instant petition arose from a special civil action for quo warranto under Rule 66 of the
Revised Rules of Court. Quo warranto is a demand made by the state upon some individual or
corporation to show by what right they exercise some franchise or privilege appertaining to the
state which, according to the Constitution and laws of the land, they cannot legally exercise
except by virtue of a grant or authority from the state. [9] In other words, a petition for quo
warranto is a proceeding to determine the right of a person to the use or exercise of a franchise or
office and to oust the holder from its enjoyment, if his claim is not well-founded, or if he has
forfeited his right to enjoy the privilege. [10] The action may be commenced for the Government by
the Solicitor General or the fiscal[11] against individuals who usurp a public office, against a
public officer whose acts constitute a ground for the forfeiture of his office, and against an
association which acts as a corporation without being legally incorporated. [12] The action may
also be instituted by an individual in his own name who claims to be entitled to the public office
or position usurped or unlawfully held or exercised by another.[13]
Where the action is filed by a private person, he must prove that he is entitled to the
controverted position, otherwise respondent has a right to the undisturbed possession of the
office.[14] If the court finds for the respondent, the judgment should simply state that the
respondent is entitled to the office.[15] If, however, the court finds for the petitioner and declares
the respondent guilty of usurping, intruding into, or unlawfully holding or exercising the office,
judgment may be rendered as follows:

"Sec. 10. Judgment where usurpation found.-- When the defendant is found guilty of
usurping, intruding into, or unlawfully holding or exercising an office, position, right,
privilege, or franchise, judgment shall be rendered that such defendant be ousted and
altogether excluded therefrom, and that the plaintiff or relator, as the case may be,
recover his costs. Such further judgment may be rendered determining the respective

rights in and to the office, position, right, privilege, or franchise of all the parties to
the action as justice requires."
If it is found that the respondent or defendant is usurping or intruding into the office, or
unlawfully holding the same, the court may order:
(1) The ouster and exclusion of the defendant from office;
(2) The recovery of costs by plaintiff or relator;
(3) The determination of the respective rights in and to the office, position, right, privilege or
franchise of all the parties to the action as justice requires. [16]

The character of the judgment to be rendered in quo warranto rests to some extent in the
discretion of the court and on the relief sought.[17] In the case at bar, petitioner prayed for the
following relief:

"WHEREFORE, it is respectfully prayed that respondent be ousted and altogether

excluded from the position of Director III, Customs Intelligence and Investigation
Service of the Bureau of Customs, and petitioner be seated to the position as the one
legally appointed and entitled thereto.
Other reliefs, just or equitable in the premises, are likewise prayed for." [18]
In granting the petition, the trial court ordered that:

"WHEREFORE, viewed in the light of the foregoing, judgment is hereby rendered

granting this petition for quo warranto by:
1. Ousting and excluding respondent Ray Allas from the position of Director III,
Customs Intelligence and Investigation Service of the Bureau of Customs; and
2. Reinstating petitioner Pedro C. Mendoza, Jr. to the position of Director III, Customs
Intelligence and Investigation Service of the Bureau of Customs with full back wages
and other monetary benefits appurtenant thereto from the time they were withheld
until reinstated."[19]
The trial court found that respondent Allas usurped the position of "Director III, Chief of the
Customs Intelligence and Investigation Service." Consequently, the court ordered that respondent
Allas be ousted from the contested position and that petitioner be reinstated in his
stead. Although petitioner did not specifically pray for his back salaries, the court ordered that he
be paid his "full back wages and other monetary benefits" appurtenant to the contested position
"from the time they were withheld until reinstated."
The decision of the trial court had long become final and executory, and petitioner prays for
its execution. He alleges that he should have been reinstated despite respondent Olores'
appointment because the subject position was never vacant to begin with. Petitioner's removal

was illegal and he was deemed never to have vacated his office when respondent Allas was
appointed to the same. Respondent Allas' appointment was null and void and this nullity
allegedly extends to respondent Olores, his successor-in-interest.[20]
Ordinarily, a judgment against a public officer in regard to a public right binds his successor
in office. This rule, however, is not applicable in quo warranto cases.[21] A judgment in quo
warranto does not bind the respondent's successor in office, even though such successor may trace
his title to the same source. This follows from the nature of the writ of quo warranto itself. It is
never directed to an officer as such, but always against the person-- to determine whether he is
constitutionally and legally authorized to perform any act in, or exercise any function of the
office to which he lays claim.[22] In the case at bar, the petition for quo warranto was filed by
petitioner solely against respondent Allas. What was threshed out before the trial court was the
qualification and right of petitioner to the contested position as against respondent Ray Allas, not
against Godofredo Olores. The Court of Appeals did not err in denying execution of the trial
court's decision.
Petitioner has apprised this Court that he reached the compulsory retirement age of sixtyfive (65) years on November 13, 1997. Reinstatement not being possible, petitioner now prays
for the payment of his back salaries and other benefits from the time he was illegally dismissed
until finality of the trial court's decision.[23]
Respondent Allas cannot be held personally liable for petitioner's back salaries and
benefits. He was merely appointed to the subject position by the President of the Philippines in
the exercise of his constitutional power as Chief Executive. Neither can the Bureau of Customs
be compelled to pay the said back salaries and benefits of petitioner. The Bureau of Customs was
not a party to the petition forquo warranto.[24]
IN VIEW WHEREOF, the petition is denied and the decision of the Court of Appeals in
CA-G.R. SP No. 41801 is affirmed.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

FIRST DIVISION
MA. LUTGARDA P. CALLEJA,
JOAQUIN M. CALLEJA, JR.,
JADELSON PETER P.
CALLEJA, MA. JESSICA T.
FLORES,
MERCIE
C.
TIPONES
and PERFECTO NIXON C.

G.R. No. 168696

Present:
PANGANIBAN, CJ., Chairperson,

TABORA,
Petitioners,

YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR. and
CHICO-NAZARIO, JJ.

- versus JOSE PIERRE A. PANDAY,

AUGUSTO R. PANDAY and
Promulgated:
MA. THELNA P. MALLARI,
Respondents.
February 28, 2006
x-----------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:
This resolves the petition for review on certiorari assailing the
Order[1] of the Regional Trial Court of San Jose, Camarines Sur,
Branch 58 (RTC-Br. 58) issued onJuly 13, 2005.
The antecedent facts are as follows.
On May 16, 2005, respondents filed a petition with the Regional Trial Court of San
Jose, Camarines Sur for quo warranto with Damages and Prayer for Mandatory
and Prohibitory Injunction, Damages and Issuance of Temporary Restraining Order
against herein petitioners. Respondents alleged that from 1985 up to the filing of
the petition with the trial court, they had been members of the board of directors
and officers of St. John Hospital, Incorporated, but sometime in May 2005,
petitioners, who are also among the incorporators and stockholders of said
corporation, forcibly and with the aid of armed men usurped the powers which
supposedly belonged to respondents.
On May 24, 2005, RTC-Br. 58 issued an Order transferring the case to the
Regional Trial Court in Naga City. According to RTC-Br. 58, since the verified

petition showed petitioners therein (herein respondents) to be residents

of Naga City, then pursuant to Section 7, Rule 66 of the 1997 Rules of Civil
Procedure, the action forquo warranto should be brought in the Regional Trial
Court exercising jurisdiction over the territorial area where the respondents or any
of
the
respondents
resides.However,
the
Executive
Judge
of
RTC, Naga City refused to receive the case folder of the subject case
for quo warranto, stating that improper venue is not a ground for transferring
a quo warranto case to another administrative jurisdiction.
The RTC-Br. 58 then proceeded to issue and serve summons on herein petitioners
(respondents below). Petitioner Tabora filed his Answer dated June 8, 2005, raising
therein the affirmative defenses of (1) improper venue, (2) lack of jurisdiction, and
(3) wrong remedy of quo warranto. Thereafter, the other petitioners also filed their
Answer, also raising the same affirmative defenses. All the parties were then
required to submit their respective memoranda.
On July 13, 2005, RTC-Br. 58 issued the assailed Order, the pertinent portions of
which read as follows:
It is undisputed that the plaintiffs cause of action involves controversies
arising out of intra-corporate relations, between and among stockholders,
members or associates of the St. John Hospital Inc. which originally
under PD 902-A approved on March 11, 1976 is within the original and
exclusive jurisdiction of the Securities and Exchange Commission to try
and decide in addition to its regulatory and adjudicated functions
(Section 5, PD 902-A). Upon the advent of RA 8799 approved on July
19, 2000, otherwise known as the Securities and Regulation Code, the
Commissions jurisdiction over all cases enumerated in Section 5,
Presidential Decree 902-A were transferred []to the Court of general
jurisdiction or the appropriate Regional Trial Court with a proviso that
the Supreme Court in the exercise of its authority may designate the
Regional Trial Court branches that shall exercise jurisdiction over these
cases. Pursuant to this mandate of RA 8799, the Supreme Court in the
exercise of said mandated authority, promulgated on November 21,
2000, A.M. No. 00-11-03-SC which took effect 15 December 2000
designated certain branches of the Regional Trial Court to try and decide
Securities and Exchange Commission Cases arising within their
respective territorial jurisdiction with respect to the National Capital

Region and within the respective provinces in the First to Twelve

Judicial Region. Accordingly, in the Province of Camarines Sur,
(Naga City) RTC Branch 23 presided by the Hon. Pablo M. Paqueo, Jr.
was designated as special court (Section 1, A.M. No. 00-11-03-SC).
Subsequently, on January 23, 2001, supplemental Administrative
Circular No. 8-01 which took effect on March 1, 2001 was issued by the
Supreme Court which directed that all SEC cases originally assigned or
transmitted to the regular Regional Trial Court shall be transferred to
branches of the Regional Trial Court specially designated to hear such
cases in accordance with A.M. No. 00-11-03-SC.
On March 13, 2001, A.M. No. 01-2-04 SC was promulgated and took
effect on April 1, 2001.
From the foregoing discussion and historical background relative to the
venue and jurisdiction to try and decide cases originally enumerated in
Section 5 of PD 902-A and later under Section 5.2 of RA 8799, it is
evident that the clear intent of the circular is to bestow the juridiction to
try and decide these cases to the special courts created under A.M. No.
00-11-03-SC. . . .
Under Section 8, of the Interim Rules, [a] Motion to Dismiss is among
the prohibited pleadings. On the otherhand, the Supreme Court under
Administrative Order 8-01 has directed the transfer from the regular
courts to the branches of the Regional Trial Courts specially designated
to try and decide intra-corporate dispute.
In the light of the above-noted observations and discussion,
the Motion to Dismiss is DENIED pursuant to the Interim Rules of
Procedure for Intra-Corporate Controversies (A.M. No. 01-2-04-SC)
which mandates that motion to dismiss is a prohibited pleading (Section
8) and in consonance with Administrative Order 8-01 of the Supreme
Court dated March 1, 2001, this case is hereby ordered remanded to the
Regional Trial Court Branch 23, Naga City which under A.M. No. 0011-03-SC has been designated as special court to try and decide intracorporate controversies under R.A. 8799.
The scheduled hearing on the prayer for temporary restraining order and
preliminary injunction set on July 18, 2005 is hereby cancelled.

For reasons of comity the issue of whether Quo Warranto is the proper
remedy is better left to the court of competent jurisdiction to rule upon.
SO ORDERED. [2]

Petitioners no longer moved for reconsideration of the foregoing Order and,

instead, immediately elevated the case to this Court via a petition for review
on certiorariunder Rule 45 of the 1997 Rules of Civil Procedure.
The petition raises the following issues:
I
WHETHER A BRANCH OF THE REGIONAL TRIAL COURT
WHICH HAS NO JURISDICTION TO TRY AND DECIDE A CASE
HAS AUTHORITY TO REMAND THE SAME TO ANOTHER COEQUAL COURT IN ORDER TO CURE THE DEFECTS ON VENUE
AND JURISDICTION
II
WHETHER OR NOT ADMINISTRATIVE CIRCULAR NO. 8-01
DATED JANUARY 23, 2001 WHICH TOOK EFFECT ON MARCH 1,
2001 MAY BE APPLIED IN THE PRESENT CASE WHICH WAS
FILED ON MAY 16, 2005. [3]

In their Comment, respondents argue that the present petition should be

denied due course and dismissed on the grounds that (1) an appeal under Rule 45 is
inappropriate in this case because the Order dated July 13, 2005 is merely an
interlocutory order and not a final order as contemplated under Rule 45 of the 1997
Rules of Civil Procedure; (2) a petition for review on certiorari under Rule 45 is
the wrong remedy under A.M. No. 04-9-07-SC, which provides that all decisions
and final orders in cases falling under the Interim Rules of Corporate
Rehabilitation and the Interim Rules of Procedure Governing Intra-Corporate
Controversies under Republic Act No. 8799 shall be appealable to the Court of
Appeals through a petition for review under Rule 43 of the Rules of Court; and (3)
the petition was intended merely to delay the proceedings in the trial court because
when the case was transferred to Branch 21 of the Regional Trial Court, said court

granted petitioners motion to hold the proceedings in view of the present petition
pending before this Court.
Subsequently, petitioners also filed an Urgent Motion to Restore Status Quo
Ante, alleging that on January 12, 2006, respondent Jose Pierre Panday, with the
aid of 14 armed men, assaulted the premises of St. John Hospital in Naga City,
taking away the daily hospital collections estimated at P400,000.00.
The Court notes that, indeed, petitioners chose the wrong remedy to assail
the Order of July 13, 2005. It is hornbook principle that Rule 45 of the 1997 Rules
of Civil Procedure governs appeals from judgments or final orders. [4] The Order
dated July 13, 2005 is basically a denial of herein petitioners prayer in their
Answer for the dismissal of respondents case against them. As a consequence of
the trial courts refusal to dismiss the case, it then directed the transfer of the case to
another branch of the Regional Trial Court that had been designated as a special
court to hear cases formerly cognizable by the SEC. Verily, the order was merely
interlocutory as it does not dispose of the case completely, but leaves something
more to be done on its merits. Such being the case, the assailed Order cannot
ordinarily be reviewed through a petition under Rule 45. As we held
in Tolentino v. Natanauan, [5] to wit:
In the case of Bangko Silangan Development Bank vs. Court of Appeals, the Court
reiterated the well-settled rule that:
. . . an order denying a motion to dismiss is merely interlocutory and
therefore not appealable, nor can it be the subject of a petition for review on
certiorari. Such order may only be reviewed in the ordinary course of law by an
appeal from the judgment after trial. The ordinary procedure to be followed in that
event is to file an answer, go to trial, and if the decision is adverse, reiterate the
issue on appeal from the final judgment.[6]

It appears, however, that the longer this case remains unresolved, the greater
chance there is for more violence between the parties to erupt. In Philippine
Airlines v. Spouses Kurangking,[7] the Court proceeded to give due course to a case
despite the wrong remedy resorted to by the petitioner therein, stating thus:
While a petition for review on certiorari under Rule 45 would
ordinarily be inappropriate to assail an interlocutory order, in the interest,
however, of arresting the perpetuation of an apparent error committed

below that could only serve to unnecessarily burden the parties, the
Court has resolved to ignore the technical flaw and, also, to treat the
petition, there being no other plain, speedy and adequate remedy, as a
special civil action for certiorari. Not much, after all, can be gained if the
Court were to refrain from now making a pronouncement on an issue so
basic as that submitted by the parties. [8]

In this case, the basic issue of which court has jurisdiction over cases
previously cognizable by the SEC under Section 5, Presidential Decree No. 902-A
(P.D. No. 902-A), and the propensity of the parties to resort to violence behoove
the Court to look beyond petitioners technical lapse of filing a petition for review
oncertiorari instead of filing a petition for certiorari under Rule 65 with the proper
court. Thus, the Court shall proceed to resolve the case on its merits.
It should be noted that allegations in a complaint for quo warranto that
certain persons usurped the offices, powers and functions of duly elected members
of the board, trustees and/or officers make out a case for an intra-corporate
controversy.[9] Prior to the enactment of R.A. No. 8799, the Court, adopting Justice
Jose Y.Ferias view, declared in Unilongo v. Court of Appeals [10] that Section 1,
Rule 66 of the 1997 Rules of Civil Procedure is limited to actions
of quo warranto against persons who usurp a public office, position or franchise;
public officers who forfeit their office; and associations which act as corporations
without being legally incorporated, while [a]ctions of quo warranto against
corporations, or against persons who usurp an office in a corporation, fall under the
jurisdiction of the Securities and Exchange Commission and are governed by its
rules. (P.D. No. 902-A as amended).[11]
However, R.A. No. 8799 was passed and Section 5.2 thereof provides as
follows:
5.2. The Commissions jurisdiction over all cases enumerated
under Section 5 of Presidential Decree No. 902-A is hereby transferred
to the Courts of general jurisdiction or the appropriate Regional Trial
Court: Provided, That the Supreme Court in the exercise of its authority
may designate the Regional Trial Court branches that shall exercise
jurisdiction over these cases. xxx

Therefore, actions of quo warranto against persons who usurp an office in a

corporation, which were formerly cognizable by the Securities and Exchange
Commission under PD 902-A, have been transferred to the courts of general
jurisdiction. But, this does not change the fact that Rule 66 of the 1997 Rules of
Civil Procedure does not apply to quo warranto cases against persons who usurp
an office in a private corporation. Presently, Section 1(a) of Rule 66 reads thus:
Section 1. Action by Government against individuals. An action
for the usurpation of a public office, position or franchise may be
commenced by a verified petition brought in the name of the Republic of
the Philippines against
(a) A person who usurps, intrudes into, or unlawfully holds or
exercises a public office, position or franchise;
xxxx

As explained in the Unilongo[12] case, Section 1(a) of Rule 66 of the present Rules
no longer contains the phrase or an office in a corporation created by authority of
law which was found in the old Rules. Clearly, the present Rule 66 only applies to
actions of quo warranto against persons who usurp a public office, position or
franchise; public officers who forfeit their office; and associations which act as
corporations without being legally incorporated despite the passage of R.A. No.
8799.It is, therefore, The Interim Rules of Procedure Governing Intra-Corporate
Controversies Under R.A. No. 8799 (hereinafter the Interim Rules) which applies
to the petition for quo warranto filed by respondents before the trial court since
what is being questioned is the authority of herein petitioners to assume the office
and act as the board of directors and officers of St. John Hospital, Incorporated.
The Interim Rules provide thus:
Section 1. (a) Cases covered. These Rules shall govern the
procedure to be observed in civil cases involving the following:
xxxx
(2) Controversies arising out of intra-corporate, partnership,
or association relations, between and among stockholders, members,
or associates, and between, any or all of them and the corporation,

partnership, or association of which they are stockholders, members, or

associates, respectively;
(3) Controversies in the election or appointment of directors,
trustees, officers, or managers of corporations, partnerships, or
associations;
xxxx
SEC. 5. Venue. All actions covered by these Rules shall be commenced
and tried in the Regional Trial Court which has jurisdiction over the
principal office of the corporation, partnership, or association
concerned. xxx (Emphasis ours)

Pursuant to Section 5.2 of R.A. No. 8799, the Supreme Court promulgated
A.M. No. 00-11-03-SC (effective December 15, 2000) designating certain branches
of the Regional Trial Courts to try and decide cases formerly cognizable by the
Securities and Exchange Commission. For the Fifth Judicial Region, this Court
designated the following branches of the Regional Trial Court, to wit:
Camarines Sur (Naga City)
Albay (Legaspi City)
Sorsogon (Sorsogon)

Branch 23, Judge Pablo M. Paqueo, Jr.

Branch 4, Judge Gregorio A. Consulta
Branch 52, Judge Honesto A. Villamor

Subsequently, the Court promulgated A.M. No. 03-03-03-SC, effective July 1,

2003, which provides that:
1. The Regional Courts previously designated as SEC Courts through the: (a)
Resolutions of this Court dated 21 November 2000, 4 July 2001, 12
November 2002, and 9 July 2002, all issued in A.M. No. 00-11-03-SC, (b)
Resolution dated 27 August 2001 in A.M. No. 01-5-298-RTC; and (c)
Resolution dated 8 July 2002 in A.M. No. 01-12-656-RTC are
hereby DESIGNATED and shall be CALLED as Special Commercial
Courts to try and decide cases involving violations of Intellectual Property
Rights which fall within their jurisdiction and those cases formerly
cognizable by the Securities and Exchange Commission;
xxxx
4. The Special Commercial Courts shall have jurisdiction over cases arising
within their respective territorial jurisdiction with respect to the National
Capital Judicial Region and within the respective provinces with respect to the
First to Twelfth Judicial Regions. Thus, cases shall be filed in the Office of

the Clerk of Court in the official station of the designated Special

Commercial Court; (Emphasis ours)

The next question then is, which branch of the Regional Trial Court has
jurisdiction over the present action for quo warrato? Section 5 of the Interim Rules
provides that the petition should be commenced and tried in the Regional Trial
Court that has jurisdiction over the principal office of the corporation. It is
undisputed that the principal office of the corporation is situated
at Goa, Camarines Sur. Thus, pursuant to A.M. No. 00-11-03-SC and A.M. No.
03-03-03-SC, it is the Regional Trial Court designated as Special Commercial
Courts in Camarines Sur which shall have jurisdiction over the petition
for quo warranto filed by herein respondents.
Evidently, the RTC-Br. 58 in San Jose, Camarines Sur is bereft of
jurisdiction over respondents petition for quo warranto. Based on the allegations in
the petition, the case was clearly one involving an intra-corporate dispute. The trial
court should have been aware that under R.A. No. 8799 and the aforementioned
administrative issuances of this Court, RTC-Br. 58 was never designated as
a Special Commercial Court; hence, it was never vested with jurisdiction over
cases previously cognizable by the SEC.
Such being the case, RTC-Br. 58 did not have the requisite authority or
power to order the transfer of the case to another branch of the Regional Trial
Court.The only action that RTC-Br. 58 could take on the matter was to dismiss the
petition for lack of jurisdiction. In HLC Construction and Development Corp. v.
Emily Homes Subdivision Homeowners Association,[13] the Court held that the trial
court, having no jurisdiction over the subject matter of the complaint, should
dismiss the same so the issues therein could be expeditiously heard and resolved by
the tribunal which was clothed with jurisdiction.
Note, further, that respondents petition for quo warranto was filed as late as
2005. A.M. No. 03-03-03-SC took effect as early as July 1, 2003 and it was clearly
provided therein that such petitions shall be filed in the Office of the Clerk of
Court in the official station of the designated Special Commercial Court. Since
the
official
station
of
the
designated Special
Commercial
Court for Camarines Sur is the Regional Trial Court in Naga City, respondents
should have filed their petition with said court. A.M. No. 00-11-03-SC having been
in effect for four years and A.M. No. 03-03-03-SC having been in effect for almost
two years by the time respondents filed their petition, there is no cogent reason

why respondents were not aware of the appropriate court where their petition
should be filed.
The ratiocination of RTC-Br.58 that Administrative Circular No. 08-2001
authorized said trial court to order the transfer of respondents petition to the
Regional Trial Court of Naga City is specious because as of the time of filing of
the petition, A.M. No. 03-03-03-SC, which clearly stated that cases formerly
cognizable by the SEC should be filed with the Office of the Clerk of Court in
the official station of the designated Special Commercial Court, had been in
effect for almost two years. Thus, the filing of the petition with the Regional Trial
Court of San Jose, Camarines Sur, which had no jurisdiction over those kinds of
actions, was clearly erroneous.
WHEREFORE,
the
petition
is GIVEN
DUE
COURSE and GRANTED. The Order of the Regional Trial Court of San
Jose, Camarines Sur dated July 13, 2005 is SET ASIDE for being NULL and
VOID. The petition for quo warranto in Civil Case No. T-1007 (now re-docketed
as SEC Case No. RTC 2005-0001), entitled Jose Pierre A. Panday, et al. v. Sps.
Joaquin M. Calleja, Jr., et al. is ordered DISMISSED.
SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice
WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO
Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified
that the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. Nos. 179431-32

June 22, 2010

LUIS K. LOKIN, JR., as the second nominee of CITIZENS BATTLE AGAINST CORRUPTION
(CIBAC),Petitioner,
vs.
COMMISSION ON ELECTIONS and the HOUSE OF REPRESENTATIVES, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 180443

LUIS K. LOKIN, JR., Petitioner,

vs.
COMMISSION ON ELECTIONS (COMELEC), EMMANUEL JOEL J. VILLANUEVA, CINCHONA C.
GONZALES and ARMI JANE R. BORJE, Respondents.
DECISION
BERSAMIN, J.:
The principal question posed in these consolidated special civil actions for certiorari and mandamus
is whether the Commission on Elections (COMELEC) can issue implementing rules and regulations
(IRRs) that provide a ground for the substitution of a party-list nominee not written in Republic Act
(R.A.) No. 7941,1 otherwise known as the Party-List System Act, the law that the COMELEC thereby
implements.
Common Antecedents
The Citizens Battle Against Corruption (CIBAC) was one of the organized groups duly registered
under the party-list system of representation that manifested their intent to participate in the May 14,
2007 synchronized national and local elections. Together with its manifestation of intent to
participate,2 CIBAC, through its president, Emmanuel Joel J. Villanueva, submitted a list of five
nominees from which its representatives would be chosen should CIBAC obtain the required number
of qualifying votes. The nominees, in the order that their names appeared in the certificate of
nomination dated March 29, 2007,3 were: (1) Emmanuel Joel J. Villanueva; (2) herein petitioner Luis
K. Lokin, Jr.; (3) Cinchona C. Cruz-Gonzales; (4) Sherwin Tugna; and (5) Emil L. Galang. The
nominees certificates of acceptance were attached to the certificate of nomination filed by CIBAC.
The list of nominees was later published in two newspapers of general circulation, The Philippine
Star News4 (sic) and The Philippine Daily Inquirer.5
Prior to the elections, however, CIBAC, still through Villanueva, filed a certificate of nomination,
substitution and amendment of the list of nominees dated May 7, 2007, 6 whereby it withdrew the
nominations of Lokin, Tugna and Galang and substituted Armi Jane R. Borje as one of the
nominees. The amended list of nominees of CIBAC thus included: (1) Villanueva, (2) Cruz-Gonzales,
and (3) Borje.
Following the close of the polls, or on June 20, 2007, Villanueva sent a letter to COMELEC
Chairperson Benjamin Abalos,7 transmitting therewith the signed petitions of more than 81% of the
CIBAC members, in order to confirm the withdrawal of the nomination of Lokin, Tugna and Galang
and the substitution of Borje. In their petitions, the members of CIBAC averred that Lokin and Tugna
were not among the nominees presented and proclaimed by CIBAC in its proclamation rally held in
May 2007; and that Galang had signified his desire to focus on his family life.
On June 26, 2007, CIBAC, supposedly through its counsel, filed with the COMELEC en banc sitting
as the National Board of Canvassers a motion seeking the proclamation of Lokin as its second
nominee.8 The right of CIBAC to a second seat as well as the right of Lokin to be thus proclaimed
were purportedly based on Party-List Canvass Report No. 26, which showed CIBAC to have
garnered a grand total of 744,674 votes. Using all relevant formulas, the motion asserted that CIBAC
was clearly entitled to a second seat and Lokin to a proclamation.
The motion was opposed by Villanueva and Cruz-Gonzales.

Notwithstanding Villanuevas filing of the certificate of nomination, substitution and amendment of the
list of nominees and the petitions of more than 81% of CIBAC members, the COMELEC failed to act
on the matter, prompting Villanueva to file a petition to confirm the certificate of nomination,
substitution and amendment of the list of nominees of CIBAC on June 28, 2007. 9
On July 6, 2007, the COMELEC issued Resolution No. 8219, 10 whereby it resolved to set the matter
pertaining to the validity of the withdrawal of the nominations of Lokin, Tugna and Galang and the
substitution of Borje for proper disposition and hearing. The case was docketed as E.M. No. 07-054.
In the meantime, the COMELEC en banc, sitting as the National Board of Canvassers, issued
National Board of Canvassers (NBC) Resolution No. 07-60 dated July 9, 2007 11 to partially proclaim
the following parties, organizations and coalitions participating under the Party-List System as
having won in the May 14, 2007 elections, namely: Buhay Hayaan Yumabong, Bayan Muna, CIBAC,
Gabriela Women's Party, Association of Philippine Electric Cooperatives, Advocacy for Teacher
Empowerment Through Action, Cooperation and Harmony Towards Educational Reforms, Inc.,
Akbayan! Citizen's Action Party, Alagad, Luzon Farmers Party, Cooperative-Natco Network Party,
Anak Pawis, Alliance of Rural Concerns and Abono; and to defer the proclamation of the nominees
of the parties, organizations and coalitions with pending disputes until final resolution of their
respective cases.
The COMELEC en banc issued another resolution, NBC Resolution No. 07-72 dated July 18,
2007,12 proclaiming Buhay Hayaan Yumabong as entitled to 2 additional seats and Bayan Muna,
CIBAC, Gabriela Women's Party, and Association of Philippine Electric Cooperatives to an additional
seat each; and holding in abeyance the proclamation of the nominees of said parties, organizations
and coalitions with pending disputes until the final resolution of their respective cases.
With the formal declaration that CIBAC was entitled to an additional seat, Ricardo de los Santos,
purportedly as secretary general of CIBAC, informed Roberto P. Nazareno, Secretary General of the
House of Representatives, of the promulgation of NBC Resolution No. 07-72 and requested that
Lokin be formally sworn in by Speaker Jose de Venecia, Jr. to enable him to assume office.
Nazareno replied, however, that the request of Delos Santos could not be granted because
COMELEC Law Director Alioden D. Dalaig had notified him of the pendency of E.M. 07-054.
On September 14, 2007, the COMELEC en banc resolved E.M. No. 07-05413 thuswise:
WHEREFORE, considering the above discussion, the Commission hereby approves the withdrawal
of the nomination of Atty. Luis K. Lokin, Sherwin N. Tugna and Emil Galang as second, third and
fourth nominees respectively and the substitution thereby with Atty. Cinchona C. Cruz-Gonzales as
second nominee and Atty. Armi Jane R. Borje as third nominee for the party list CIBAC. The new
order of CIBAC's nominees therefore shall be:
1. Emmanuel Joel J. Villanueva
2. Cinchona C. Cruz-Gonzales
3. Armi Jane R. Borje
SO ORDERED.
The COMELEC en banc explained that the actions of Villanueva in his capacity as the president of
CIBAC were presumed to be within the scope of his authority as such; that the president was

charged by Section 1 of Article IV of the CIBAC By-Laws to oversee and direct the corporate
activities, which included the act of submitting the party's manifestation of intent to participate in the
May 14, 2007 elections as well as its certificate of nominees; that from all indications, Villanueva as
the president of CIBAC had always been provided the leeway to act as the party's representative
and that his actions had always been considered as valid; that the act of withdrawal, although done
without any written Board approval, was accomplished with the Boards acquiescence or at least
understanding; and that the intent of the party should be given paramount consideration in the
selection of the nominees.
As a result, the COMELEC en banc proclaimed Cruz-Gonzales as the official second nominee of
CIBAC.14 Cruz-Gonzales took her oath of office
as a Party-List Representative of CIBAC on September 17, 2007. 15
Precs of the Consolidated Cases
In G.R. No. 179431 and G.R. No. 179432, Lokin seeks through mandamus to compel respondent
COMELEC to proclaim him as the official second nominee of CIBAC.
In G.R. No. 180443, Lokin assails Section 13 of Resolution No. 7804 promulgated on January 12,
2007;16 and the resolution dated September 14, 2007 issued in E.M. No. 07-054 (approving CIBACs
withdrawal of the nominations of Lokin, Tugna and Galang as CIBACs second, third and fourth
nominees, respectively, and the substitution by Cruz-Gonzales and Borje in their stead, based on the
right of CIBAC to change its nominees under Section 13 of Resolution No. 7804). 17 He alleges that
Section 13 of Resolution No. 7804 expanded Section 8 of R.A. No. 7941. 18 the law that the
COMELEC seeks to thereby implement.
In its comment, the COMELEC asserts that a petition for certiorari is an inappropriate recourse in
law due to the proclamation of Cruz-Gonzales as Representative and her assumption of that office;
that Lokins proper recourse was an electoral protest filed in the House of Representatives Electoral
Tribunal (HRET); and that, therefore, the Court has no jurisdiction over the matter being raised by
Lokin.
For its part, CIBAC posits that Lokin is guilty of forum shopping for filing a petition for mandamus and
a petition for certiorari, considering that both petitions ultimately seek to have him proclaimed as the
second nominee of CIBAC.
Issues
The issues are the following:
(a) Whether or not the Court has jurisdiction over the controversy;
(b) Whether or not Lokin is guilty of forum shopping;
(c) Whether or not Section 13 of Resolution No. 7804 is unconstitutional and violates the
Party-List System Act; and
(d) Whether or not the COMELEC committed grave abuse of discretion amounting to lack or
excess of jurisdiction in approving the withdrawal of the nominees of CIBAC and allowing the

amendment of the list of nominees of CIBAC without any basis in fact or law and after the
close of the polls, and in ruling on matters that were intra-corporate in nature.
Ruling
The petitions are granted.
A
The Court has jurisdiction over the case
The COMELEC posits that once the proclamation of the winning party-list organization has been
done and its nominee has assumed office, any question relating to the election, returns and
qualifications of the candidates to the House of Representatives falls under the jurisdiction of the
HRET pursuant to Section 17, Article VI of the 1987 Constitution. Thus, Lokin should raise the
question he poses herein either in an election protest or in a special civil action for quo warranto in
the HRET, not in a special civil action for certiorari in this Court.
We do not agree.
An election protest proposes to oust the winning candidate from office. It is strictly a contest between
the defeated and the winning candidates, based on the grounds of electoral frauds and irregularities,
to determine who between them has actually obtained the majority of the legal votes cast and is
entitled to hold the office. It can only be filed by a candidate who has duly filed a certificate of
candidacy and has been voted for in the preceding elections.
A special civil action for quo warranto refers to questions of disloyalty to the State, or of ineligibility of
the winning candidate. The objective of the action is to unseat the ineligible person from the office,
but not to install the petitioner in his place. Any voter may initiate the action, which is, strictly
speaking, not a contest where the parties strive for supremacy because the petitioner will not be
seated even if the respondent may be unseated.
The controversy involving Lokin is neither an election protest nor an action for quo warranto, for it
concerns a very peculiar situation in which Lokin is seeking to be seated as the second nominee of
CIBAC. Although an election protest may properly be available to one party-list organization seeking
to unseat another party-list organization to determine which between the defeated and the winning
party-list organizations actually obtained the majority of the legal votes, Lokins case is not one in
which a nominee of a particular party-list organization thereby wants to unseat another nominee of
the same party-list organization. Neither does an action for quo warranto lie, considering that the
case does not involve the ineligibility and disloyalty of Cruz-Gonzales to the Republic of the
Philippines, or some other cause of disqualification for her.
Lokin has correctly brought this special civil action for certiorari against the COMELEC to seek the
review of the September 14, 2007 resolution of the COMELEC in accordance with Section 7 of
Article IX-A of the 1987 Constitution, notwithstanding the oath and assumption of office by CruzGonzales. The constitutional mandate is now implemented by Rule 64 of the 1997 Rules of Civil
Procedure, which provides for the review of the judgments, final orders or resolutions of the
COMELEC and the Commission on Audit. As Rule 64 states, the mode of review is by a petition for
certiorari in accordance with Rule 65 to be filed in the Supreme Court within a limited period of 30
days. Undoubtedly, the Court has original and exclusive jurisdiction over Lokins petitions for
certiorari and for mandamus against the COMELEC.

B
Petitioner is not guilty of forum shopping
Forum shopping consists of the filing of multiple suits involving the same parties for the same cause
of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment.
Thus, forum shopping may arise: (a) whenever as a result of an adverse decision in one forum, a
party seeks a favorable decision (other than by appeal or certiorari) in another; or (b) if, after having
filed a petition in the Supreme Court, a party files another petition in the Court of Appeals, because
he thereby deliberately splits appeals "in the hope that even as one case in which a particular
remedy is sought is dismissed, another case (offering a similar remedy) would still be open"; or (c)
where a party attempts to obtain a writ of preliminary injunction from a court after failing to obtain the
writ from another court.19
What is truly important to consider in determining whether forum shopping exists or not is the
vexation caused to the courts and the litigants by a party who accesses different courts and
administrative agencies to rule on the same or related causes or to grant the same or substantially
the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the
different fora upon the same issue.20
The filing of identical petitions in different courts is prohibited, because such act constitutes forum
shopping, a malpractice that is proscribed and condemned as trifling with the courts and as abusing
their processes. Forum shopping is an improper conduct that degrades the administration of
justice.21
Nonetheless, the mere filing of several cases based on the same incident does not necessarily
constitute forum shopping. The test is whether the several actions filed involve the same
transactions and the same essential facts and circumstances. 22 The actions must also raise identical
causes of action, subject matter, and issues.23Elsewise stated, forum shopping exists where the
elements of litis pendentia are present, or where a final judgment in one case will amount to res
judicata in the other.24
Lokin has filed the petition for mandamus to compel the COMELEC to proclaim him as the second
nominee of CIBAC upon the issuance of NBC Resolution No. 07-72 (announcing CIBACs
entitlement to an additional seat in the House of Representatives), and to strike down the provision
in NBC Resolution No. 07-60 and NBC Resolution No. 07-72 holding in abeyance "all proclamation
of the nominees of concerned parties, organizations and coalitions with pending disputes shall
likewise be held in abeyance until final resolution of their respective cases." He has insisted that the
COMELEC had the ministerial duty to proclaim him due to his being CIBACs second nominee; and
that the COMELEC had no authority to exercise discretion and to suspend or defer the proclamation
of winning party-list organizations with pending disputes.
On the other hand, Lokin has resorted to the petition for certiorari to assail the September 14, 2007
resolution of the COMELEC (approving the withdrawal of the nomination of Lokin, Tugna and Galang
and the substitution by Cruz-Gonzales as the second nominee and Borje as the third nominee); and
to challenge the validity of Section 13 of Resolution No. 7804, the COMELECs basis for allowing
CIBACs withdrawal of Lokins nomination.
Applying the test for forum shopping, the consecutive filing of the action for certiorari and the action
for mandamus did not violate the rule against forum shopping even if the actions involved the same
parties, because they were based on different causes of action and the reliefs they sought were
different.

C
Invalidity of Section 13 of Resolution No. 7804
The legislative power of the Government is vested exclusively in the Legislature in accordance with
the doctrine of separation of powers. As a general rule, the Legislature cannot surrender or abdicate
its legislative power, for doing so will be unconstitutional. Although the power to make laws cannot
be delegated by the Legislature to any other authority, a power that is not legislative in character
may be delegated.25
Under certain circumstances, the Legislature can delegate to executive officers and administrative
boards the authority to adopt and promulgate IRRs. To render such delegation lawful, the Legislature
must declare the policy of the law and fix the legal principles that are to control in given cases. The
Legislature should set a definite or primary standard to guide those empowered to execute the law.
For as long as the policy is laid down and a proper standard is established by statute, there can be
no unconstitutional delegation of legislative power when the Legislature leaves to selected
instrumentalities the duty of making subordinate rules within the prescribed limits, although there is
conferred upon the executive officer or administrative board a large measure of discretion. There is a
distinction between the delegation of power to make a law and the conferment of an authority or a
discretion to be exercised under and in pursuance of the law, for the power to make laws necessarily
involves a discretion as to what it shall be.26
The authority to make IRRs in order to carry out an express legislative purpose, or to effect the
operation and enforcement of a law is not a power exclusively legislative in character, but is rather
administrative in nature. The rules and regulations adopted and promulgated must not, however,
subvert or be contrary to existing statutes. The function of promulgating IRRs may be legitimately
exercised only for the purpose of carrying out the provisions of a law. The power of administrative
agencies is confined to implementing the law or putting it into effect. Corollary to this is that
administrative regulation cannot extend the law and amend a legislative enactment. It is axiomatic
that the clear letter of the law is controlling and cannot be amended by a mere administrative rule
issued for its implementation. Indeed, administrative or executive acts shall be valid only when they
are not contrary to the laws or the Constitution. 27
To be valid, therefore, the administrative IRRs must comply with the following requisites to be valid: 28
1. Its promulgation must be authorized by the Legislature;
2. It must be within the scope of the authority given by the Legislature;
3. It must be promulgated in accordance with the prescribed procedure; and
4. It must be reasonable.
The COMELEC is constitutionally mandated to enforce and administer all laws and regulations
relative to the conduct of an election, a plebiscite, an initiative, a referendum, and a recall. 29 In
addition to the powers and functions conferred upon it by the Constitution, the COMELEC is also
charged to promulgate IRRs implementing the provisions of the Omnibus Election Code or other
laws that the COMELEC enforces and administers.30
The COMELEC issued Resolution No. 7804 pursuant to its powers under the Constitution, Batas
Pambansa Blg. 881, and the Party-List System Act.31 Hence, the COMELEC met the first requisite.

The COMELEC also met the third requisite. There is no question that Resolution No. 7804
underwent the procedural necessities of publication and dissemination in accordance with the
procedure prescribed in the resolution itself.
Whether Section 13 of Resolution No. 7804 was valid or not is thus to be tested on the basis of
whether the second and fourth requisites were met. It is in this respect that the challenge of Lokin
against Section 13 succeeds.
As earlier said, the delegated authority must be properly exercised. This simply means that the
resulting IRRs must not be ultra vires as to be issued beyond the limits of the authority conferred. It
is basic that an administrative agency cannot amend an act of Congress, 32 for administrative IRRs
are solely intended to carry out, not to supplant or to modify, the law. The administrative agency
issuing the IRRs may not enlarge, alter, or restrict the provisions of the law it administers and
enforces, and cannot engraft additional non-contradictory requirements not contemplated by the
Legislature.33
Section 8 of R.A. No. 7941 reads:
Section 8. Nomination of Party-List Representatives.-Each registered party, organization or coalition
shall submit to the COMELEC not later that forty-five (45) days before the election a list of names,
not less than five (5), from which party-list representatives shall be chosen in case it obtains the
required number of votes.
A person may be nominated in one (1) list only. Only persons who have given their consent in writing
may be named in the list. The list shall not include any candidate of any elective office or a person
who has lost his bid for an elective office in the immediately preceding election. No change of names
or alteration of the order of nominees shall be allowed after the same shall have been submitted to
the COMELEC except in cases where the nominee dies, or withdraws in writing his nomination,
becomes incapacitated in which case the name of the substitute nominee shall be placed last in the
list. Incumbent sectoral representatives in the House of Representatives who are nominated in the
party-list system shall not be considered resigned.
The provision is daylight clear. The Legislature thereby deprived the party-list organization of the
right to change its nominees or to alter the order of nominees once the list is submitted to the
COMELEC, except when: (a) the nominee dies; (b) the nominee withdraws in writing his nomination;
or (c) the nominee becomes incapacitated. The provision must be read literally because its language
is plain and free from ambiguity, and expresses a single, definite, and sensible meaning. Such
meaning is conclusively presumed to be the meaning that the Legislature has intended to convey.
Even where the courts should be convinced that the Legislature really intended some other
meaning, and even where the literal interpretation should defeat the very purposes of the enactment,
the explicit declaration of the Legislature is still the law, from which the courts must not
depart.34 When the law speaks in clear and categorical language, there is no reason for interpretation
or construction, but only for application. 35Accordingly, an administrative agency tasked to implement
a statute may not construe it by expanding its meaning where its provisions are clear and
unambiguous.36
The legislative intent to deprive the party-list organization of the right to change the nominees or to
alter the order of the nominees was also expressed during the deliberations of the Congress, viz:
MR. LAGMAN: And again on Section 5, on the nomination of party list representatives, I do not see
any provision here which prohibits or for that matter allows the nominating party to change the

nominees or to alter the order of prioritization of names of nominees. Is the implication correct that at
any time after submission the names could still be changed or the listing altered?
MR. ABUEG: Mr. Speaker, that is a good issue brought out by the distinguished Gentleman from
Albay and perhaps a perfecting amendment may be introduced therein. The sponsoring committee
will gladly consider the same.
MR. LAGMAN: In other words, what I would like to see is that after the list is submitted to the
COMELEC officially, no more changes should be made in the names or in the order of listing.
MR. ABUEG: Mr. Speaker, there may be a situation wherein the name of a particular nominee has
been submitted to the Commission on Elections but before election day the nominee changed his
political party affiliation. The nominee is therefore no longer qualified to be included in the party list
and the political party has a perfect right to change the name of that nominee who changed his
political party affiliation.
MR. LAGMAN: Yes of course. In that particular case, the change can be effected but will be the
exception rather than the rule. Another exception most probably is the nominee dies, then there has
to be a change but any change for that matter should always be at the last part of the list so that the
prioritization made by the party will not be adversely affected. 37
The usage of "No" in Section 8 "No change of names or alteration of the order of nominees shall
be allowed after the same shall have been submitted to the COMELEC except in cases where the
nominee dies, or withdraws in writing his nomination, or becomes incapacitated, in which case the
name of the substitute nominee shall be placed last in the list" renders Section 8 a negative law,
and is indicative of the legislative intent to make the statute mandatory. Prohibitive or negative words
can rarely, if ever, be directory, for there is but one way to obey the command "thou shall not," and
that is to completely refrain from doing the forbidden act, 38 subject to certain exceptions stated in the
law itself, like in this case.
Section 8 does not unduly deprive the party-list organization of its right to choose its nominees, but
merely divests it of the right to change its nominees or to alter the order in the list of its nominees
names after submission of the list to the COMELEC.
The prohibition is not arbitrary or capricious; neither is it without reason on the part of lawmakers.
The COMELEC can rightly presume from the submission of the list that the list reflects the true will of
the party-list organization. The COMELEC will not concern itself with whether or not the list contains
the real intended nominees of the party-list organization, but will only determine whether the
nominees pass all the requirements prescribed by the law and whether or not the nominees possess
all the qualifications and none of the disqualifications. Thereafter, the names of the nominees will be
published in newspapers of general circulation. Although the people vote for the party-list
organization itself in a party-list system of election, not for the individual nominees, they still have the
right to know who the nominees of any particular party-list organization are. The publication of the
list of the party-list nominees in newspapers of general circulation serves that right of the people,
enabling the voters to make intelligent and informed choices. In contrast, allowing the party-list
organization to change its nominees through withdrawal of their nominations, or to alter the order of
the nominations after the submission of the list of nominees circumvents the voters demand for
transparency. The lawmakers exclusion of such arbitrary withdrawal has eliminated the possibility of
such circumvention.
D
Exceptions in Section 8 of R.A. 7941 are exclusive

Section 8 of R.A. No. 7941 enumerates only three instances in which the party-list organization can
substitute another person in place of the nominee whose name has been submitted to the
COMELEC, namely: (a) when the nominee dies; (b) when the nominee withdraws in writing his
nomination; and (c) when the nominee becomes incapacitated.
The enumeration is exclusive, for, necessarily, the general rule applies to all cases not falling under
any of the three exceptions.
When the statute itself enumerates the exceptions to the application of the general rule, the
exceptions are strictly but reasonably construed. The exceptions extend only as far as their language
fairly warrants, and all doubts should be resolved in favor of the general provision rather than the
exceptions. Where the general rule is established by a statute with exceptions, none but the
enacting authority can curtail the former. Not even the courts may add to the latter by implication,
and it is a rule that an express exception excludes all others, although it is always proper in
determining the applicability of the rule to inquire whether, in a particular case, it accords with reason
and justice.39
1avvphi1

The appropriate and natural office of the exception is to exempt something from the scope of the
general words of a statute, which is otherwise within the scope and meaning of such general words.
Consequently, the existence of an exception in a statute clarifies the intent that the statute shall
apply to all cases not excepted. Exceptions are subject to the rule of strict construction; hence, any
doubt will be resolved in favor of the general provision and against the exception. Indeed, the liberal
construction of a statute will seem to require in many circumstances that the exception, by which the
operation of the statute is limited or abridged, should receive a restricted construction.
E
Section 13 of Resolution No. 7804 expanded
the exceptions under Section 8 of R.A. No. 7941
Section 13 of Resolution No. 7804 states:
Section 13. Substitution of nominees. A party-list nominee may be substituted only when he
dies, or his nomination is withdrawn by the party, or he becomes incapacitated to continue as
such, or he withdraws his acceptance to a nomination. In any of these cases, the name of the
substitute nominee shall be placed last in the list of nominees.
No substitution shall be allowed by reason of withdrawal after the polls.
Unlike Section 8 of R.A. No. 7941, the foregoing regulation provides four instances, the fourth being
when the "nomination is withdrawn by the party."
Lokin insists that the COMELEC gravely abused its discretion in expanding to four the three
statutory grounds for substituting a nominee.
We agree with Lokin.
The COMELEC, despite its role as the implementing arm of the Government in the enforcement and
administration of all laws and regulations relative to the conduct of an election, 40 has neither the
authority nor the license to expand, extend, or add anything to the law it seeks to implement thereby.
The IRRs the COMELEC issues for that purpose should always accord with the law to be

implemented, and should not override, supplant, or modify the law. It is basic that the IRRs should
remain consistent with the law they intend to carry out. 41
Indeed, administrative IRRs adopted by a particular department of the Government under legislative
authority must be in harmony with the provisions of the law, and should be for the sole purpose of
carrying the laws general provisions into effect. The law itself cannot be expanded by such IRRs,
because an administrative agency cannot amend an act of Congress.42
The COMELEC explains that Section 13 of Resolution No. 7804 has added nothing to Section 8 of
R.A. No. 7941,43 because it has merely reworded and rephrased the statutory provisions
phraseology.
The explanation does not persuade.
To reword means to alter the wording of or to restate in other words; to rephrase is to phrase anew
or in a new form.44 Both terms signify that the meaning of the original word or phrase is not altered.
However, the COMELEC did not merely reword or rephrase the text of Section 8 of R.A. No. 7941,
because it established an entirely new ground not found in the text of the provision. The new ground
granted to the party-list organization the unilateral right to withdraw its nomination already submitted
to the COMELEC, which Section 8 of R.A. No. 7941 did not allow to be done. Neither was the grant
of the unilateral right contemplated by the drafters of the law, who precisely denied the right to
withdraw the nomination (as the quoted record of the deliberations of the House of Representatives
has indicated). The grant thus conflicted with the statutory intent to save the nominee from falling
under the whim of the party-list organization once his name has been submitted to the COMELEC,
and to spare the electorate from the capriciousness of the party-list organizations.
We further note that the new ground would not secure the object of R.A. No. 7941 of developing and
guaranteeing a full, free and open party-list electoral system. The success of the system could only
be ensured by avoiding any arbitrariness on the part of the party-list organizations, by seeing to the
transparency of the system, and by guaranteeing that the electorate would be afforded the chance of
making intelligent and informed choices of their party-list representatives.
The insertion of the new ground was invalid. An axiom in administrative law postulates that
administrative authorities should not act arbitrarily and capriciously in the issuance of their IRRs, but
must ensure that their IRRs are reasonable and fairly adapted to secure the end in view. If the IRRs
are shown to bear no reasonable relation to the purposes for which they were authorized to be
issued, they must be held to be invalid and should be struck down. 45
F
Effect of partial nullity of Section 13 of Resolution No. 7804
An IRR adopted pursuant to the law is itself law.46 In case of conflict between the law and the IRR,
the law prevails. There can be no question that an IRR or any of its parts not adopted pursuant to
the law is no law at all and has neither the force nor the effect of law.47 The invalid rule, regulation, or
part thereof cannot be a valid source of any right, obligation, or power.
Considering that Section 13 of Resolution No. 7804 to the extent that it allows the party-list
organization to withdraw its nomination already submitted to the COMELEC was invalid, CIBACs
withdrawal of its nomination of Lokin and the others and its substitution of them with new nominees
were also invalid and ineffectual. It is clear enough that any substitution of Lokin and the others

could only be for any of the grounds expressly stated in Section 8 of R.A. No. 7941. Resultantly, the
COMELECs approval of CIBACs petition of withdrawal of the nominations and its recognition of
CIBACs substitution, both through its assailed September 14, 2007 resolution, should be struck
down for lack of legal basis. Thereby, the COMELEC acted without jurisdiction, having relied on the
invalidly issued Section 13 of Resolution No. 7804 to support its action.
WHEREFORE, we grant the petitions for certiorari and mandamus.
We declare Section 13 of Resolution No. 7804 invalid and of no effect to the extent that it authorizes
a party-list organization to withdraw its nomination of a nominee once it has submitted the
nomination to the Commission on Elections.
Accordingly, we annul and set aside:
(a) The resolution dated September 14, 2007 issued in E. M. No. 07-054 approving Citizens
Battle Against Corruptions withdrawal of the nominations of Luis K. Lokin, Jr., Sherwin N.
Tugna, and Emil Galang as its second, third, and fourth nominees, respectively, and ordering
their substitution by Cinchona C. Cruz-Gonzales as second nominee and Armi Jane R. Borje
as third nominee; and
(b) The proclamation by the Commission on Elections of Cinchona C. Cruz-Gonzales as a
Party-List Representative representing Citizens Battle Against Corruption in the House of
Representatives.
We order the Commission on Elections to forthwith proclaim petitioner Luis K. Lokin, Jr. as a PartyList Representative representing Citizens Battle Against Corruption in the House of Representatives.
We make no pronouncements on costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
ANTONIO T. CARPIO
Associate Justice

CONCHITA CARPIO MORALES

Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

TERESITA J. LEONARDO DE CASTRO

Associate Justice

ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA

MARIANO C. DEL CASTILLO

Associate Justice

Associate Justice

ROBERTO A. ABAD
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

(On Leave)
JOSE CATRAL MENDOZA
Associate Justice

C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court.
RENATO C. CORONA
Chief Justice
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 195229

October 9, 2012

EFREN RACEL ARA TEA, Petitioner,

vs.
COMMISSiON ON ELECTIONS and ESTELA D. ANTlPOLO, Respondents.
DECISION
CARPIO, J.:
The Case
This is a special civil action for certiorari1 seeking to review and nullify the
Resolution2 dated 2 February 2011 and the Order3 dated 12 January 2011 of the Commission on
Elections (COMELEC) En Banc in Dra. Sigrid S. Rodolfo v. Romeo D. Lonzanida, docketed as SPA
No. 09-158 (DC). The petition asserts that the COMELEC issued the Resolution and Order with
grave abuse of discretion amounting to lack or excess of jurisdiction.
The Facts
Romeo D. Lonzanida (Lonzanida) and Estela D. Antipolo (Antipolo) were candidates for Mayor of
San Antonio, Zambales in the May 2010 National and Local Elections. Lonzanida filed his certificate
of candidacy on 1 December 2009.4 On 8 December 2009, Dra. Sigrid S. Rodolfo (Rodolfo) filed a
petition under Section 78 of the Omnibus Election Code to disqualify Lonzanida and to deny due
course or to cancel Lonzanidas certificate of candidacy on the ground that Lonzanida was elected,

and had served, as mayor of San Antonio, Zambales for four (4) consecutive terms immediately prior
to the term for the May 2010 elections. Rodolfo asserted that Lonzanida made a false material
representation in his certificate of candidacy when Lonzanida certified under oath that he was
eligible for the office he sought election. Section 8, Article X of the 1987 Constitution 5 and Section
43(b) of the Local Government Code6 both prohibit a local elective official from being elected and
serving for more than three consecutive terms for the same position.
The COMELEC Second Division rendered a Resolution 7 on 18 February 2010 cancelling
Lonzanidas certificate of candidacy. Pertinent portions of the 18 February 2010 Resolution read:
Respondent Lonzanida never denied having held the office of mayor of San Antonio, Zambales for
more than nine consecutive years. Instead he raised arguments to forestall or dismiss the petition on
the grounds other than the main issue itself. We find such arguments as wanting. Respondent
Lonzanida, for holding the office of mayor for more than three consecutive terms, went against the
three-term limit rule; therefore, he could not be allowed to run anew in the 2010 elections. It is time
to infuse new blood in the political arena of San Antonio.
WHEREFORE, premises considered, the instant petition is hereby GRANTED. The Certificate of
Candidacy of Respondent Romeo D. Lonzanida for the position of mayor in the municipality of San
Antonio, Zambales is hereby CANCELLED. His name is hereby ordered STRICKEN OFF the list of
Official Candidates for the position of Mayor of San Antonio, Zambales in May 10, 2010 elections.
SO ORDERED.8
Lonzanidas motion for reconsideration before the COMELEC En Banc remained pending during the
May 2010 elections. Lonzanida and Efren Racel Aratea (Aratea) garnered the highest number of
votes and were respectively proclaimed Mayor and Vice-Mayor.
Aratea took his oath of office as Acting Mayor before Regional Trial Court (RTC) Judge Raymond C.
Viray of Branch 75, Olongapo City on 5 July 2010. 9 On the same date, Aratea wrote the Department
of Interior and Local Government (DILG) and requested for an opinion on whether, as Vice-Mayor,
he was legally required to assume the Office of the Mayor in view of Lonzanidas disqualification.
DILG Legal Opinion No. 117, S. 201010 stated that Lonzanida was disqualified to hold office by
reason of his criminal conviction. As a consequence of Lonzanidas disqualification, the Office of the
Mayor was deemed permanently vacant. Thus, Aratea should assume the Office of the Mayor in an
acting capacity without prejudice to the COMELECs resolution of Lonzanidas motion for
reconsideration. In another letter dated 6 August 2010, Aratea requested the DILG to allow him to
take the oath of office as Mayor of San Antonio, Zambales. In his response dated 24 August 2010,
then Secretary Jesse M. Robredo allowed Aratea to take an oath of office as "the permanent
Municipal Mayor of San Antonio, Zambales without prejudice however to the outcome of the cases
pending before the [COMELEC]."11
On 11 August 2010, the COMELEC En Banc issued a Resolution 12 disqualifying Lonzanida from
running for Mayor in the May 2010 elections. The COMELEC En Bancs resolution was based on
two grounds: first, Lonzanida had been elected and had served as Mayor for more than three
consecutive terms without interruption; andsecond, Lonzanida had been convicted by final judgment
of ten (10) counts of falsification under the Revised Penal Code. Lonzanida was sentenced for each
count of falsification to imprisonment of four (4) years and one (1) day of prisin correccional as
minimum, to eight (8) years and one (1) day of prisin mayor as maximum. The judgment of
conviction became final on 23 October 2009 in the Decision of this Court in Lonzanida v.
People,13before Lonzanida filed his certificate of candidacy on 1 December 2009. Pertinent portions
of the 11 August 2010 Resolution read:

Prescinding from the foregoing premises, Lonzanida, for having served as Mayor of San Antonio,
Zambales for more than three (3) consecutive terms and for having been convicted by a final
judgment of a crime punishable by more than one (1) year of imprisonment, is clearly disqualified to
run for the same position in the May 2010 Elections.
WHEREFORE, in view of the foregoing, the Motion for Reconsideration is hereby DENIED.
SO ORDERED.14
On 25 August 2010, Antipolo filed a Motion for Leave to Intervene and to Admit Attached Petition-inIntervention.15She claimed her right to be proclaimed as Mayor of San Antonio, Zambales because
Lonzanida ceased to be a candidate when the COMELEC Second Division, through its 18 February
2010 Resolution, ordered the cancellation of his certificate of candidacy and the striking out of his
name from the list of official candidates for the position of Mayor of San Antonio, Zambales in the
May 2010 elections.
In his Comment filed on 26 January 2011, Aratea asserted that Antipolo, as the candidate who
received the second highest number of votes, could not be proclaimed as the winning candidate.
Since Lonzanidas disqualification was not yet final during election day, the votes cast in his favor
could not be declared stray. Lonzanidas subsequent disqualification resulted in a permanent
vacancy in the Office of Mayor, and Aratea, as the duly-elected Vice-Mayor, was mandated by
Section 4416 of the Local Government Code to succeed as Mayor.
The COMELECs Rulings
The COMELEC En Banc issued an Order dated 12 January 2011, stating:
Acting on the "Motion for Leave to Intervene and to Admit Attached Petition-in-Intervention" filed by
Estela D. Antipolo (Antipolo) and pursuant to the power of this Commission to suspend its Rules or
any portion thereof in the interest of justice, this Commission hereby RESOLVES to:
1. GRANT the aforesaid Motion;
2. ADMIT the Petition-in-Intervention filed by Antipolo;
3. REQUIRE the Respondent, ROMEO DUMLAO LONZANIDA, as well as EFREN RACEL ARATEA,
proclaimed Vice-Mayor of San Antonio, Zambales, to file their respective Comments on the Petitionin- Intervention within a non-extendible period of five (5) days from receipt thereof;
4. SET the above-mentioned Petition-in-Intervention for hearing on January 26, 2011 at 10:00 a.m.
COMELEC Session Hall, 8th Floor, Palacio del Gobernador, Intramuros, Manila.
WHEREFORE, furnish copies hereof the parties for their information and compliance.
SO ORDERED.17
In its Resolution dated 2 February 2011, the COMELEC En Banc no longer considered Lonzanidas
qualification as an issue: "It is beyond cavil that Lonzanida is not eligible to hold and discharge the
functions of the Office of the Mayor of San Antonio, Zambales. The sole issue to be resolved at this
juncture is how to fill the vacancy resulting from Lonzanidas disqualification." 18 The Resolution
further stated:

We cannot sustain the submission of Oppositor Aratea that Intervenor Antipolo could never be
proclaimed as the duly elected Mayor of Antipolo [sic] for being a second placer in the elections. The
teachings in the cases of Codilla vs. De Venecia and Nazareno and Domino vs. COMELEC, et al.,
while they remain sound jurisprudence find no application in the case at bar. What sets this case
apart from the cited jurisprudence is that the notoriety of Lonzanidas disqualification and ineligibility
to hold public office is established both in fact and in law on election day itself. Hence, Lonzanidas
name, as already ordered by the Commission on February 18, 2010 should have been stricken off
from the list of official candidates for Mayor of San Antonio, Zambales.
WHEREFORE, in view of the foregoing, the Commission hereby:
1. Declares NULL and VOID the proclamation of respondent ROMEO D. LONZANIDA;
2. GRANTS the Petition for Intervention of Estela D. Antipolo;
3. Orders the immediate CONSTITUTION of a Special Municipal Board of Canvassers to
PROCLAIM Intervenor Estela D. Antipolo as the duly elected Mayor of San Antonio, Zambales;
4. Orders Vice-Mayor Efren Racel Aratea to cease and desist from discharging the functions of the
Office of the Mayor, and to cause a peaceful turn-over of the said office to Antipolo upon her
proclamation; and
5. Orders the Office of the Executive Director as well as the Regional Election Director of Region III
to cause the implementation of this Resolution and disseminate it to the Department of Interior and
Local Government.
SO ORDERED.19
Aratea filed the present petition on 9 February 2011.
The Issues
The manner of filling up the permanent vacancy in the Office of the Mayor of San Antonio, Zambales
is dependent upon the determination of Lonzanidas removal. Whether Lonzanida was disqualified
under Section 68 of the Omnibus Election Code, or made a false material representation under
Section 78 of the same Code that resulted in his certificate of candidacy being void ab initio, is
determinative of whether Aratea or Antipolo is the rightful occupant to the Office of the Mayor of San
Antonio, Zambales.
The dissenting opinions reverse the COMELECs 2 February 2011 Resolution and 12 January 2011
Order. They hold that Aratea, the duly elected Vice-Mayor of San Antonio, Zambales, should be
declared Mayor pursuant to the Local Government Codes rule on succession.
The dissenting opinions make three grave errors: first, they ignore prevailing jurisprudence that a
false representation in the certificate of candidacy as to eligibility in the number of terms elected and
served is a material fact that is a ground for a petition to cancel a certificate of candidacy under
Section 78; second, they ignore that a false representation as to eligibility to run for public office due
to the fact that the candidate suffers from perpetual special disqualification is a material fact that is a
ground for a petition to cancel a certificate of candidacy under Section 78; and third, they resort to a
strained statutory construction to conclude that the violation of the three-term limit rule cannot be a
ground for cancellation of a certificate of candidacy under Section 78, even when it is clear and plain

that violation of the three-term limit rule is an ineligibility affecting the qualification of a candidate to
elective office.
The dissenting opinions tread on dangerous ground when they assert that a candidates eligibility to
the office he seeks election must be strictly construed to refer only to the details, i.e., age,
citizenship, or residency, among others, which the law requires him to state in his COC, and which
he must swear under oath to possess. The dissenting opinions choose to view a false certification of
a candidates eligibility on the three-term limit rule not as a ground for false material representation
under Section 78 but as a ground for disqualification under Section 68 of the same Code. This is
clearly contrary to well-established jurisprudence.
The Courts Ruling
We hold that Antipolo, the alleged "second placer," should be proclaimed Mayor because
Lonzanidas certificate of candidacy was void ab initio. In short, Lonzanida was never a candidate at
all. All votes for Lonzanida were stray votes. Thus, Antipolo, the only qualified candidate, actually
garnered the highest number of votes for the position of Mayor.
Qualifications and Disqualifications
Section 65 of the Omnibus Election Code points to the Local Government Code for the qualifications
of elective local officials. Paragraphs (a) and (c) of Section 39 and Section 40 of the Local
Government Code provide in pertinent part:
Sec. 39. Qualifications. (a) An elective local official must be a citizen of the Philippines; a
registered voter in the barangay, municipality, city or province x x x; a resident therein for at least one
(1) year immediately preceding the day of the election; and able to read and write Filipino or any
other local language or dialect.
xxxx
(c) Candidates for the position of mayor or vice-mayor of independent component cities, component
cities, or municipalities must be at least twenty-one (21) years of age on election day.
xxxx
Sec. 40. Disqualifications. - The following persons are disqualified from running for any elective local
position:
(a) Those sentenced by final judgment for an offense involving moral turpitude or for an
offense punishable by one (1) year or more of imprisonment, within two (2) years after
serving sentence;
(b) Those removed from office as a result of an administrative case;
(c) Those convicted by final judgment for violating the oath of allegiance to the Republic;
(d) Those with dual citizenship;
(e) Fugitives from justice in criminal or non-political cases here or abroad;

(f) Permanent residents in a foreign country or those who have acquired the right to reside abroad
and continue to avail of the same right after the effectivity of this Code; and
(g) The insane or feeble-minded. (Emphasis supplied)
Section 12 of the Omnibus Election Code provides:
Sec. 12. Disqualification. Any person who has been declared by competent authority insane or
incompetent, or has been sentenced by final judgment for subversion, insurrection, rebellion or for
any offense for which he was sentenced to a penalty of more than eighteen months or for a
crime involving moral turpitude, shall be disqualified to be a candidate and to hold any office,
unless he has been given plenary pardon or granted amnesty.
The disqualifications to be a candidate herein provided shall be deemed removed upon the
declaration by competent authority that said insanity or incompetence had been removed or after the
expiration of a period of five years from his service of sentence, unless within the same period he
again becomes disqualified. (Emphasis supplied)
The grounds for disqualification for a petition under Section 68 of the Omnibus Election Code are
specifically enumerated:
Sec. 68. Disqualifications. Any candidate who, in an action or protest in which he is a party is
declared by final decision by a competent court guilty of, or found by the Commission of having (a)
given money or other material consideration to influence, induce or corrupt the voters or
public officials performing electoral functions; (b) committed acts of terrorism to enhance his
candidacy; (c) spent in his election campaign an amount in excess of that allowed by this
Code; (d) solicited, received or made any contribution prohibited under Sections 89, 95, 96,
97 and 104; (e) violated any of Sections 80, 83, 85, 86 and 261, paragraphs d, e, k, v, and cc,
subparagraph 6, shall be disqualified from continuing as a candidate, or if he has been elected,
from holding the office. Any person who is a permanent resident of or an immigrant to a foreign
country shall not be qualified to run for any elective office under this Code, unless said person has
waived his status as permanent resident or immigrant of a foreign country in accordance with the
residence requirement provided for in the election laws. (Emphasis supplied)
A petition for disqualification under Section 68 clearly refers to "the commission of prohibited acts
and possession of a permanent resident status in a foreign country." 20 All the offenses mentioned
in Section 68 refer to election offenses under the Omnibus Election Code, not to violations of
other penal laws. There is absolutely nothing in the language of Section 68 that would justify
including violation of the three-term limit rule, or conviction by final judgment of the crime of
falsification under the Revised Penal Code, as one of the grounds or offenses covered under
Section 68. In Codilla, Sr. v. de Venecia,21 this Court ruled:
[T]he jurisdiction of the COMELEC to disqualify candidates is limited to those enumerated in Section
68 of the Omnibus Election Code. All other election offenses are beyond the ambit of COMELEC
jurisdiction. They are criminal and not administrative in nature. x x x
Clearly, the violation by Lonzanida of the three-term limit rule, or his conviction by final judgment of
the crime of falsification under the Revised Penal Code, does not constitute a ground for a petition
under Section 68.
False Material Representation

Section 78 of the Omnibus Election Code states that a certificate of candidacy may be denied or
cancelled when there is false material representation of the contents of the certificate of
candidacy:
Sec. 78. Petition to deny due course to or cancel a certificate of candidacy. A verified petition
seeking to deny due course or to cancel a certificate of candidacy may be filed by the
person exclusively on the ground that any material representation contained therein as
required under Section 74 hereof is false. The petition may be filed at any time not later than
twenty-five days from the time of the filing of the certificate of candidacy and shall be decided, after
due notice and hearing, not later than fifteen days before the election. (Emphasis supplied)
Section 74 of the Omnibus Election Code details the contents of the certificate of candidacy:
Sec. 74. Contents of certificate of candidacy. The certificate of candidacy shall state that the
person filing it is announcing his candidacy for the office stated therein and that he is eligible for
said office; if for Member of the Batasang Pambansa, the province, including its component cities,
highly urbanized city or district or sector which he seeks to represent; the political party to which he
belongs; civil status; his date of birth; residence; his post office address for all election purposes; his
profession or occupation; that he will support and defend the Constitution of the Philippines and will
maintain true faith and allegiance thereto; that he will obey the laws, legal orders, and decrees
promulgated by the duly constituted authorities; that he is not a permanent resident or immigrant to a
foreign country; that the obligation imposed by his oath is assumed voluntarily, without mental
reservation or purpose of evasion; and that the facts stated in the certificate of candidacy are true to
the best of his knowledge.
x x x x (Emphasis supplied)
A candidate for mayor in the 2010 local elections was thus required to provide 12 items of
information in the certificate of candidacy: 22 name; nickname or stage name; gender; age; place of
birth; political party that nominated the candidate; civil status; residence/address; profession or
occupation; post office address for election purposes; locality of which the candidate is a registered
voter; and period of residence in the Philippines before 10 May 2010. The candidate also certifies
four statements: a statement that the candidate is a natural born or naturalized Filipino citizen; a
statement that the candidate is not a permanent resident of, or immigrant to, a foreign country; a
statement that the candidate is eligible for the office he seeks election; and a statement of the
candidates allegiance to the Constitution of the Republic of the Philippines. 23 The certificate of
candidacy should also be under oath, and filed within the period prescribed by law.
The conviction of Lonzanida by final judgment, with the penalty of prisin mayor, disqualifies him
perpetually from holding any public office, or from being elected to any public office. This
perpetual disqualification took effect upon the finality of the judgment of conviction, before
Lonzanida filed his certificate of candidacy. The pertinent provisions of the Revised Penal Code
are as follows:
Art. 27. Reclusion perpetua. x x x
Prisin mayor and temporary disqualification. The duration of the penalties of prisin
mayor and temporary disqualification shall be from six years and one day to twelve years,
except when the penalty of disqualification is imposed as an accessory penalty, in which
case, it shall be that of the principal penalty.
xxxx

Art. 30. Effects of the penalties of perpetual or temporary absolute disqualification. The penalties
of perpetual or temporary absolute disqualification for public office shall produce the following
effects:
1. The deprivation of the public offices and employments which the offender may have held,
even if conferred by popular election.
2. The deprivation of the right to vote in any election for any popular elective office or to be
elected to such office.
3. The disqualification for the offices or public employments and for the exercise of any of the
rights mentioned.
In case of temporary disqualification, such disqualification as is comprised in paragraphs 2 and 3 of
this article shall last during the term of the sentence.
4. The loss of all rights to retirement pay or other pension for any office formerly held.
Art. 31. Effects of the penalties of perpetual or temporary special disqualification. The penalties
of perpetual or temporary special disqualification for public office, profession or calling shall
produce the following effects:
1. The deprivation of the office, employment, profession or calling affected.
2. The disqualification for holding similar offices or employments either perpetually or during the term
of the sentence, according to the extent of such disqualification.
Art. 32. Effects of the penalties of perpetual or temporary special disqualification for the exercise of
the right of suffrage. The perpetual or temporary special disqualification for the exercise of
the right of suffrage shall deprive the offender perpetually or during the term of the sentence,
according to the nature of said penalty, of the right to vote in any popular election for any public
office or to be elected to such office.Moreover, the offender shall not be permitted to hold any
public office during the period of his disqualification.
Art. 42. Prisin mayor Its accessory penalties. The penalty of prision mayor shall carry with it
that oftemporary absolute disqualification and that of perpetual special disqualification from
the right of suffrage which the offender shall suffer although pardoned as to the principal penalty,
unless the same shall have been expressly remitted in the pardon. (Emphasis supplied)
The penalty of prisin mayor automatically carries with it, by operation of law,24 the accessory
penalties of temporary absolute disqualification and perpetual special disqualification. Under
Article 30 of the Revised Penal Code, temporary absolute disqualification produces the effect of
"deprivation of the right to vote in any election for any popular elective office or to be elected to such
office. The duration of temporary absolute disqualification is the same as that of the principal
penalty of prisin mayor. On the other hand, under Article 32 of the Revised Penal Code, perpetual
special disqualification means that "the offender shall not be permitted to hold any public
office during the period of his disqualification, which is perpetually. Both temporary absolute
disqualification and perpetual special disqualification constitute ineligibilities to hold elective public
office. A person suffering from these ineligibilities is ineligible to run for elective public office,
and commits a false material representation if he states in his certificate of candidacy that he
is eligible to so run.

In Lacuna v. Abes (Lacuna),25 the Court, speaking through Justice J.B.L. Reyes, explained the import
of the accessory penalty of perpetual special disqualification:
On the first defense of respondent-appellee Abes, it must be remembered that appellees conviction
of a crime penalized with prision mayor which carried the accessory penalties of temporary absolute
disqualification and perpetual special disqualification from the right of suffrage (Article 42, Revised
Penal Code); and Section 99 of the Revised Election Code disqualifies a person from voting if he
had been sentenced by final judgment to suffer one year or more of imprisonment.
The accessory penalty of temporary absolute disqualification disqualifies the convict for public office
and for the right to vote, such disqualification to last only during the term of the sentence (Article 27,
paragraph 3, & Article 30, Revised Penal Code) that, in the case of Abes, would have expired on 13
October 1961.
But this does not hold true with respect to the other accessory penalty of perpetual special
disqualification for the exercise of the right of suffrage. This accessory penalty deprives the convict
of the right to vote or to be elected to or hold public office perpetually, as distinguished from
temporary special disqualification, which lasts during the term of the sentence. Article 32, Revised
Penal Code, provides:
Art. 32. Effects of the penalties of perpetual or temporary special disqualification for the exercise of
the right of suffrage. The perpetual or temporary special disqualification for the exercise of the
right of suffrage shall deprive the offender perpetually or during the term of the sentence, according
to the nature of said penalty, of the right to vote in any popular election for any public office or to be
elected to such office. Moreover, the offender shall not be permitted to hold any public office during
the period of disqualification.
The word "perpetually" and the phrase "during the term of the sentence" should be applied
distributively to their respective antecedents; thus, the word "perpetually" refers to the perpetual kind
of special disqualification, while the phrase "during the term of the sentence" refers to the temporary
special disqualification. The duration between the perpetual and the temporary (both special) are
necessarily different because the provision, instead of merging their durations into one period, states
that such duration is "according to the nature of said penalty" which means according to whether
the penalty is the perpetual or the temporary special disqualification. (Emphasis supplied)
Clearly, Lacuna instructs that the accessory penalty of perpetual special disqualification "deprives
the convict of the right to vote or to be elected to or hold public office perpetually.
The accessory penalty of perpetual special disqualification takes effect immediately once the
judgment of conviction becomes final. The effectivity of this accessory penalty does not depend
on the duration of the principal penalty, or on whether the convict serves his jail sentence or not. The
last sentence of Article 32 states that "the offender shall not be permitted to hold any public office
during the period of his [perpetual special] disqualification." Once the judgment of conviction
becomes final, it is immediately executory. Any public office that the convict may be holding at the
time of his conviction becomes vacant upon finality of the judgment, and the convict becomes
ineligible to run for any elective public office perpetually. In the case of Lonzanida, he
became ineligible perpetually to hold, or to run for, any elective public office from the time
the judgment of conviction against him became final. The judgment of conviction was
promulgated on 20 July 2009 and became final on 23 October 2009, before Lonzanida filed
his certificate of candidacy on 1 December 2009 . 26

Perpetual special disqualification is a ground for a petition under Section 78 of the Omnibus
Election Code because this accessory penalty is an ineligibility, which means that the convict is not
eligible to run for public office, contrary to the statement that Section 74 requires him to state under
oath in his certificate of candidacy. As this Court held in Fermin v. Commission on Elections,27 the
false material representation may refer to "qualifications or eligibility. One who suffers from
perpetual special disqualification is ineligible to run for public office. If a person suffering from
perpetual special disqualification files a certificate of candidacy stating under oath that "he is eligible
to run for (public) office," as expressly required under Section 74, then he clearly makes afalse
material representation that is a ground for a petition under Section 78. As this Court explained
inFermin:
Lest it be misunderstood, the denial of due course to or the cancellation of the CoC is not based on
the lack of qualifications but on a finding that the candidate made a material representation that is
false, which may relate to the qualifications required of the public office he/she is running
for. It is noted that the candidate states in his/her CoC that he/she is eligible for the office
he/she seeks. Section 78 of the OEC, therefore, is to be read in relation to the constitutional
and statutory provisions on qualifications or eligibility for public office. If the candidate
subsequently states a material representation in the CoC that is false, the COMELEC,
following the law, is empowered to deny due course to or cancel such certificate. Indeed, the
Court has already likened a proceeding under Section 78 to a quo warranto proceeding under
Section 253 of the OEC since they both deal with the eligibility or qualification of a candidate, with
the distinction mainly in the fact that a "Section 78" petition is filed before proclamation, while a
petition for quo warranto is filed after proclamation of the winning candidate. 28 (Emphasis supplied)
Latasa, Rivera and Ong:
The Three-Term Limit Rule as a Ground for Ineligibility
Section 74 requires the candidate to certify that he is eligible for the public office he seeks
election. Thus, Section 74 states that "the certificate of candidacy shall state that the person
filing x x x is eligible for said office. The three-term limit rule, enacted to prevent the
establishment of political dynasties and to enhance the electorates freedom of choice, 29 is found
both in the Constitution30 and the law.31 After being elected and serving for three consecutive terms,
an elective local official cannot seek immediate reelection for the same office in the next regular
election32 because he is ineligible. One who has an ineligibility to run for elective public office is not
"eligible for [the] office." As used in Section 74, the word "eligible" 33 means having the right to run for
elective public office, that is, having all the qualifications and none of the ineligibilities to run for the
public office.
In Latasa v. Commission on Elections, 34 petitioner Arsenio Latasa was elected mayor of the
Municipality of Digos, Davao del Sur in 1992, 1995, and 1998. The Municipality of Digos was
converted into the City of Digos during Latasas third term. Latasa filed his certificate of candidacy for
city mayor for the 2001 elections. Romeo Sunga, Latasas opponent, filed before the COMELEC a
"petition to deny due course, cancel certificate of candidacy and/or disqualification" under Section 78
on the ground that Latasa falsely represented in his certificate of candidacy that he is eligible to run
as mayor of Digos City. Latasa argued that he did not make any false representation. In his
certificate of candidacy, Latasa inserted a footnote after the phrase "I am eligible" and indicated
"*Having served three (3) term[s] as municipal mayor and now running for the first time as city
mayor." The COMELEC First Division cancelled Latasas certificate of candidacy for violation of the
three-term limit rule but not for false material representation. This Court affirmed the COMELEC En
Bancs denial of Latasas motion for reconsideration.

We cancelled Marino Morales certificate of candidacy in Rivera III v. Commission on

Elections (Rivera).35 We held that Morales exceeded the maximum three-term limit, having been
elected and served as Mayor of Mabalacat for four consecutive terms (1995 to 1998, 1998 to 2001,
2001 to 2004, and 2004 to 2007). We declared him ineligible as a candidate for the same position for
the 2007 to 2010 term. Although we did not explicitly rule that Morales violation of the three-term
limit rule constituted false material representation, we nonetheless granted the petition to cancel
Morales certificate of candidacy under Section 78. We also affirmed the cancellation of Francis
Ongs certificate of candidacy in Ong v. Alegre,36 where the "petition to disqualify, deny due course
and cancel" Ongs certificate of candidacy under Section 78 was predicated on the violation of the
three-term limit rule.
Loong, Fermin and Munder:
When Possession of a Disqualifying Condition
is Not a Ground for a Petition for Disqualification
It is obvious from a reading of the laws and jurisprudence that there is an overlap in the grounds for
eligibility and ineligibility vis--vis qualifications and disqualifications. For example, a candidate may
represent that he is a resident of a particular Philippine locality 37 when he is actually a permanent
resident of another country.38 In cases of such overlap, the petitioner should not be constrained in his
choice of remedy when the Omnibus Election Code explicitly makes available multiple
remedies.39 Section 78 allows the filing of a petition to deny due course or to cancel a certificate of
candidacy before the election, while Section 253 allows the filing of a petition for quo warranto after
the election. Despite the overlap of the grounds, one should not confuse a petition for disqualification
using grounds enumerated in Section 68 with a petition to deny due course or to cancel a certificate
of candidacy under Section 78.
The distinction between a petition under Section 68 and a petition under Section 78 was discussed
in Loong v. Commission on Elections40 with respect to the applicable prescriptive period. Respondent
Nur Hussein Ututalum filed a petition under Section 78 to disqualify petitioner Benjamin Loong for
the office of Regional Vice-Governor of the Autonomous Government of Muslim Mindanao for false
representation as to his age. The petition was filed 16 days after the election, and clearly beyond the
prescribed 25 day period from the last day of filing certificates of candidacy. This Court ruled that
Ututalums petition was one based on false representation under Section 78, and not for
disqualification under Section 68. Hence, the 25-day prescriptive period provided in Section 78
should be strictly applied. We recognized the possible gap in the law:
It is true that the discovery of false representation as to material facts required to be stated in a
certificate of candidacy, under Section 74 of the Code, may be made only after the lapse of the 25day period prescribed by Section 78 of the Code, through no fault of the person who discovers such
misrepresentations and who would want the disqualification of the candidate committing the
misrepresentations. It would seem, therefore, that there could indeed be a gap between the time of
the discovery of the misrepresentation, (when the discovery is made after the 25-day period under
Sec. 78 of the Code has lapsed) and the time when the proclamation of the results of the election is
made. During this so-called "gap" the would-be petitioner (who would seek the disqualification of the
candidate) is left with nothing to do except to wait for the proclamation of the results, so that he could
avail of a remedy against the misrepresenting candidate, that is, by filing a petition for quo warranto
against him. Respondent Commission sees this "gap" in what it calls a procedural gap which,
according to it, is unnecessary and should be remedied.
At the same time, it can not be denied that it is the purpose and intent of the legislative branch of the
government to fix a definite time within which petitions of protests related to eligibility of candidates

for elective offices must be filed, as seen in Sections 78 and 253 of the Code. Respondent
Commission may have seen the need to remedy this so-called procedural gap", but it is not for it to
prescribe what the law does not provide, its function not being legislative. The question of whether
the time to file these petitions or protests is too short or ineffective is one for the Legislature to
decide and remedy.41
In Fermin v. Commission on Elections,42 the issue of a candidates possession of the required oneyear residency requirement was raised in a petition for disqualification under Section 68 instead of a
petition to deny due course or to cancel a certificate of candidacy under Section 78. Despite the
question of the one-year residency being a proper ground under Section 78, Dilangalen, the
petitioner before the COMELEC in Fermin, relied on Section 5(C)(1) and 5(C)(3)(a)(4) of COMELEC
Resolution No. 780043 and filed the petition under Section 68. In Fermin, we ruled that "a COMELEC
rule or resolution cannot supplant or vary legislative enactments that distinguish the grounds for
disqualification from those of ineligibility, and the appropriate proceedings to raise the said
grounds."44 A petition for disqualification can only be premised on a ground specified in Section 12 or
68 of the Omnibus Election Code or Section 40 of the Local Government Code. Thus, a petition
questioning a candidates possession of the required one-year residency requirement, as
distinguished from permanent residency or immigrant status in a foreign country, should be filed
under Section 78, and a petition under Section 68 is the wrong remedy.
In Munder v. Commission on Elections,45 petitioner Alfais Munder filed a certificate of candidacy for
Mayor of Bubong, Lanao del Sur on 26 November 2009. Respondent Atty. Tago Sarip filed a petition
for Munders disqualification on 13 April 2010. Sarip claimed that Munder misrepresented that he
was a registered voter of Bubong, Lanao del Sur, and that he was eligible to register as a voter in
2003 even though he was not yet 18 years of age at the time of the voters registration. Moreover,
Munders certificate of candidacy was not accomplished in full as he failed to indicate his precinct
and did not affix his thumb-mark. The COMELEC Second Division dismissed Sarips petition and
declared that his grounds are not grounds for disqualification under Section 68 but for denial or
cancellation of Munders certificate of candidacy under Section 78. Sarips petition was filed out of
time as he had only 25 days after the filing of Munders certificate of candidacy, or until 21 December
2009, within which to file his petition.
The COMELEC En Banc, however, disqualified Munder. In reversing the COMELEC Second
Division, the COMELEC En Banc did not rule on the propriety of Sarips remedy but focused on the
question of whether Munder was a registered voter of Bubong, Lanao del Sur. This Court reinstated
the COMELEC Second Divisions resolution. This Court ruled that the ground raised in the petition,
lack of registration as voter in the locality where he was running as a candidate, is inappropriate for a
petition for disqualification. We further declared that with our ruling in Fermin, we had already
rejected the claim that lack of substantive qualifications of a candidate is a ground for a petition for
disqualification under Section 68. The only substantive qualification the absence of which is a
ground for a petition under Section 68 is the candidates permanent residency or immigrant status in
a foreign country.
The dissenting opinions place the violation of the three-term limit rule as a disqualification under
Section 68 as the violation allegedly is "a status, circumstance or condition which bars him from
running for public office despite the possession of all the qualifications under Section 39 of the [Local
Government Code]." In so holding the dissenting opinions write in the law what is not found in the
law. Section 68 is explicit as to the proper grounds for disqualification under said Section. The
grounds for filing a petition for disqualification under Section 68 are specifically enumerated in said
Section. However, contrary to the specific enumeration in Section 68 and contrary to prevailing
jurisprudence, the dissenting opinions add to the enumerated grounds the violation of the three-term

limit rule and falsification under the Revised Penal Code, which are obviously not found in the
enumeration in Section 68.
The dissenting opinions equate Lonzanidas possession of a disqualifying condition (violation of the
three-term limit rule) with the grounds for disqualification under Section 68. Section 68 is explicit as
to the proper grounds for disqualification: the commission of specific prohibited acts under the
Omnibus Election Code and possession of a permanent residency or immigrant status in a foreign
country. Any other false representation regarding a material fact should be filed under Section 78,
specifically under the candidates certification of his eligibility. In rejecting a violation of the three-term
limit as a condition for eligibility, the dissenting opinions resort to judicial legislation, ignoring
the verba legis doctrine and well-established jurisprudence on this very issue.
In a certificate of candidacy, the candidate is asked to certify under oath his eligibility, and thus
qualification, to the office he seeks election. Even though the certificate of candidacy does not
specifically ask the candidate for the number of terms elected and served in an elective position,
such fact is material in determining a candidates eligibility, and thus qualification for the office.
Election to and service of the same local elective position for three consecutive terms renders a
candidate ineligible from running for the same position in the succeeding elections. Lonzanida
misrepresented his eligibility because he knew full well that he had been elected, and had served, as
mayor of San Antonio, Zambales for more than three consecutive terms yet he still certified that he
was eligible to run for mayor for the next succeeding term. Thus, Lonzanidas representation that he
was eligible for the office that he sought election constitutes false material representation as to his
qualification or eligibility for the office.
Legal Duty of COMELEC
to Enforce Perpetual Special Disqualification
Even without a petition under Section 78 of the Omnibus Election Code, the COMELEC is under a
legal duty to cancel the certificate of candidacy of anyone suffering from perpetual special
disqualification to run for public office by virtue of a final judgment of conviction. The final judgment
of conviction is judicial notice to the COMELEC of the disqualification of the convict from running for
public office. The law itself bars the convict from running for public office, and the disqualification is
part of the final judgment of conviction. The final judgment of the court is addressed not only to the
Executive branch, but also to other government agencies tasked to implement the final judgment
under the law.
Whether or not the COMELEC is expressly mentioned in the judgment to implement the
disqualification, it is assumed that the portion of the final judgment on disqualification to run for
elective public office is addressed to the COMELEC because under the Constitution the COMELEC
is duty bound to "enforce and administer all laws and regulations relative to the conduct of an
election."46 The disqualification of a convict to run for elective public office under the Revised Penal
Code, as affirmed by final judgment of a competent court, is part of theenforcement and
administration of "all the laws" relating to the conduct of elections.
Effect of a Void Certificate of Candidacy
A cancelled certificate of candidacy void ab initio cannot give rise to a valid candidacy, and much
less to valid votes.47 We quote from the COMELECs 2 February 2011 Resolution with approval:
As early as February 18, 2010, the Commission speaking through the Second Division had already
ordered the cancellation of Lonzanidas certificate of candidacy, and had stricken off his name in the
list of official candidates for the mayoralty post of San Antonio, Zambales. Thereafter, the

Commission En Banc in its resolution dated August 11, 2010 unanimously affirmed the resolution
disqualifying Lonzanida. Our findings were likewise sustained by the Supreme Court no less. The
disqualification of Lonzanida is not simply anchored on one ground. On the contrary, it was
emphasized in our En Banc resolution that Lonzanidas disqualification is two-pronged: first, he
violated the constitutional fiat on the three-term limit; and second, as early as December 1, 2009, he
is known to have been convicted by final judgment for ten (10) counts of Falsification under Article
171 of the Revised Penal Code. In other words, on election day, respondent Lonzanidas
disqualification is notoriously known in fact and in law. Ergo, since respondent Lonzanida was never
a candidate for the position of Mayor [of] San Antonio, Zambales, the votes cast for him should be
considered stray votes. Consequently, Intervenor Antipolo, who remains as the sole qualified
candidate for the mayoralty post and obtained the highest number of votes, should now be
proclaimed as the duly elected Mayor of San Antonio, Zambales. 48 (Boldfacing and underscoring in
the original; italicization supplied)
Lonzanida's certificate of candidacy was cancelled because he was ineligible or not qualified to run
for Mayor. Whether his certificate of candidacy is cancelled before or after the elections is immaterial
because the cancellation on such ground means he was never a candidate from the very beginning,
his certificate of candidacy being void ab initio. There was only one qualified candidate for Mayor in
the May 201 0 elections - Anti polo, who therefore received the highest number of votes.
1wphi1

WHEREFORE, the petition is DISMISSED. The Resolution dated 2 February 2011 and the Order
dated 12 January 2011 of the COMELEC En Bane in SPA No. 09-158 (DC) are AFFIRMED. The
COMELEC En Bane isDIRECTED to constitute a Special Municipal Board of Canvassers to proclaim
Estela D. Antipolo as the duly elected Mayor of San Antonio, Zambales. Petitioner Efren Racel
Aratea is ORDERED to cease and desist from discharging the functions of the Office of the Mayor of
San Antonio, Zambales.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
(I join the dissent of J.B. Reyes)
PRESBITERO J. VELASCO, JR.
Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

(see my dissent)
ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ROBERTO A. ABAD
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

JOSE C. MENDOZA
Associate Justice

(with dissenting position)

BIENVENIDO L. REYES
Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court.
MARIA LOURDES P. A. SERENO
Chief Justice

Republic of the Philippines

SUPREME COURT
Baguio City
EN BANC
G.R. No. 194994

April 16, 2013

EMMANUEL A. DE CASTRO, Petitioner,

vs.
EMERSON S. CARLOS, Respondent.
DECISION
SERENO, CJ.:
Before us is a Petition for the issuance of a writ of quo warranto under Rule 66 filed by Emmanuel A.
de Castro (petitioner) seeking to oust respondent Emerson S. Carlos (respondent) from the position
of assistant general manager for operations (AGMO) of the Metropolitan Manila Development
Authority (MMDA).
On 29 July 2009, then President Gloria Macapagal Arroyo appointed petitioner as AGM0. 1 His
appointment was concurred in by the members of the Metro Manila Council in MMDA Resolution No.
09-10, Series of 2009.2 He took his oath on 17 August 2009 before then Chairperson Bayani F.
Fernando.3
Meanwhile, on 29 July 2010, Executive Secretary Paquito Ochoa issued Office of the President (OP)
Memorandum Circular No. 2, Series of 2010, amending OP Memorandum Circular No. 1, Series of
2010.

OP Memorandum Circular No. 2 states:

2. All non-Career Executive Service Officials (non-CESO) occupying Career Executive Service
(CES) positions in all agencies of the executive branch shall remain in office and continue to perform
their duties and discharge their responsibility until October 31, 2010 or until their resignations have
been accepted and/or until their respective replacements have been appointed or designated,
whichever comes first, unless they are reappointed in the meantime. 4
On 30 July 2010, Atty. Francis N. Tolentino, chairperson of the MMDA, issued Office Order No.
106,5 designating Corazon B. Cruz as officer-in-charge (OIC) of the Office of the AGMO. Petitioner
was then reassigned to the Legal and Legislative Affairs Office, Office of the General Manager. The
service vehicle and the office space previously assigned to him were withdrawn and assigned to
other employees.
Subsequently, on 2 November 2010, Chairperson Tolentino designated respondent as OIC of the
Office of the AGMO by virtue of Memorandum Order No. 24,6 which in turn cited OP Memorandum
Circular No. 2 as basis. Thereafter, the name of petitioner was stricken off the MMDA payroll, and he
was no longer paid his salary beginning November 2010.
Petitioner sought a clarification7 from the Career Executive Service Board (CESB) as to the proper
classification of the position of AGMO. In her reply,8 Executive Director Maria Anthonette Allones
(Executive Director Allones), CESO I, stated that the position of AGMO had not yet been classified
and could not be considered as belonging to the Career Executive Service (CES). She further stated
that a perusal of the appointment papers of petitioner showed that he was not holding a coterminous
position. In sum, she said, he was not covered by OP Memorandum Circular Nos. 1 and 2.
Petitioner was later offered the position of Director IV of MMDA Public Health and Safety Services
and/or MMDA consultant. He turned down the offer, claiming that it was a demotion in rank.
Demanding payment of his salary and reinstatement in the monthly payroll, 9 petitioner sent a letter
on 5 December 2010 to Edenison Faisan, assistant general manager (AGM) for Finance and
Administration; and Lydia Domingo, Director III, Administrative Services. For his failure to obtain an
action or a response from MMDA, he then made a formal demand for his reinstatement as AGMO
through a letter addressed to the Office of the President on 17 December 2010. 10
However, on 4 January 2011, President Benigno S. Aquino III (President Aquino) appointed
respondent as the new AGMO of the MMDA.11 On 10 January 2011, the latter took his oath of office.
Hence, the instant Petition.
The Office of the Solicitor General (OSG), representing respondent, filed its Comment on 19 August
2011.12However, upon motion of petitioner, it was disqualified from representing respondent. Thus, a
private law firm13entered an appearance as counsel for respondent and adopted the Comment filed
by the OSG.14
Petitioner filed his Reply on 17 November 2011.
ISSUES
Petitioner raises the following issues15 for the consideration of this Court:

(1) Whether respondent Emerson S. Carlos was validly appointed by President Aquino to the
position of AGMO of the MMDA;
(2) Whether petitioner Emmanuel A. de Castro is entitled to the position of AGMO; and
(3) Whether or not respondent should pay petitioner the salaries and financial benefits he received
during his illegal tenure as AGMO of the MMDA.
THE COURTS RULING
Petitioner contends that Section 2(3), Article IX(B) of the 1987 Constitution guarantees the security
of tenure of employees in the civil service. He further argues that his appointment as AGMO is not
covered by OP Memorandum Circular No. 2, since it is not a CES position as determined by the
CESB.
On the other hand, respondent posits that the AGMO position belongs to the CES; thus, in order to
have security of tenure, petitioner, must be a Career Executive Service official (CESO). Respondent
maintains that the function of an AGM is executive and managerial in nature. Thus, considering that
petitioner is a non-CESO occupying a CES position, he is covered by OP Memorandum Circular
Nos. 1 and 2. Respondent likewise raises the issue of procedural infirmity in the direct recourse to
the Supreme Court by petitioner, who thereby failed to adhere to the doctrine of hierarchy of courts.
Hierarchy of Courts
As to the procedural issue, petitioner submits that a direct recourse to this Court is warranted by the
urgent demands of public interest, particularly the veritable need for stability in the civil service and
the protection of the rights of civil servants. Moreover, considering that no other than the President of
the Philippines is the appointing authority, petitioner doubts if a trial court judge or an appellate court
justice, with a prospect of promotion in the judiciary would be willing to go against a presidential
appointment.
Although Section 5(1) of Article VIII of the 1987 Constitution explicitly provides that the Supreme
Court has original jurisdiction over petitions for certiorari, prohibition, mandamus, quo warranto, and
habeas corpus, the jurisdiction of this Court is not exclusive but is concurrent with that of the Court of
Appeals and regional trial court and does not give petitioner unrestricted freedom of choice of court
forum.16 The hierarchy of courts must be strictly observed.
Settled is the rule that "the Supreme Court is a court of last resort and must so remain if it is to
satisfactorily perform the functions assigned to it by the fundamental charter and immemorial
tradition."17 A disregard of the doctrine of hierarchy of courts warrants, as a rule, the outright
dismissal of a petition.18
A direct invocation of this Courts jurisdiction is allowed only when there are special and important
reasons that are clearly and specifically set forth in a petition. 19 The rationale behind this policy
arises from the necessity of preventing (1) inordinate demands upon the time and attention of the
Court, which is better devoted to those matters within its exclusive jurisdiction; and (2) further
overcrowding of the Courts docket.20
In this case, petitioner justified his act of directly filing with this Court only when he filed his Reply
and after respondent had already raised the procedural infirmity that may cause the outright

dismissal of the present Petition. Petitioner likewise cites stability in the civil service and protection of
the rights of civil servants as rationale for disregarding the hierarchy of courts.
Petitioners excuses are not special and important circumstances that would allow a direct recourse
to this Court. More so, mere speculation and doubt to the exercise of judicial discretion of the lower
courts are not and cannot be valid justifications to hurdle the hierarchy of courts. Thus, the Petition
must be dismissed.
Nature of the AGMO Position
Even assuming that petitioners direct resort to this Court is permissible, the Petition must still be
dismissed for lack of merit.
"A petition for quo warranto is a proceeding to determine the right of a person to use or exercise a
franchise or an office and to oust the holder from the enjoyment, thereof, if the claim is not wellfounded, or if his right to enjoy the privilege has been forfeited." 21 Where the action is filed by a
private person, in his own name, he must prove that he is entitled to the controverted position,
otherwise, respondent has a right to the undisturbed possession of the office. 22
The controversy arose from the issuance of OP Memorandum Circular Nos. 1 and 2, which applies
to all non-CESOs occupying CES positions in all agencies of the executive branch. Petitioner, being
a non-CESO, avers that he is not covered by these OP memoranda considering that the AGMO of
the MMDA is a non-CES position.
In order to settle the controversy, there is a need to determine the nature of the contentious position
of AGMO of the MMDA.
Career vs. non-career
Section 4 of Republic Act No. (R.A.) 7924, 23 otherwise known as the MMDA Charter, specifically
created the position of AGMO. It reads as follows:
Sec. 4 Metro Manila Council. x x x.
xxxx
The Council shall be headed by a Chairman, who shall be appointed by the President and who shall
continue to hold office at the discretion of the appointing authority. He shall be vested with the rank,
rights, privileges, disqualifications, and prohibitions of a Cabinet member.
The Chairman shall be assisted by a General Manager, an Assistant General Manager for Finance
and Administration, an Assistant General Manager for Planning and an Assistant General Manager
for Operations, all of whom shall be appointed by the President with the consent and concurrence of
the majority of the Council, subject to civil service laws and regulations. They shall enjoy security of
tenure and may be removed for cause in accordance with law. (Emphasis supplied)
Executive Order No. (E.O.) 292, otherwise known as The Revised Administrative Code of 1987,
provides for two classifications of positions in the civil service: career and non-career.24
Career service is characterized by the existence of security of tenure, 25 as contradistinguished from
non-career service whose tenure is coterminous with that of the appointing authority; or subject to

the latters pleasure; or limited to a period specified by law or to the duration of a particular project
for which purpose the appointment was made. 26
Applying the foregoing distinction to the instant case, this Court finds that an AGMO holds a career
position, considering that the MMDA Charter specifically provides that AGMs enjoy security of tenure
the core characteristic of a career service, as distinguished from a non-career service position.
CES vs. non-CES
Career service includes the following:
(1) Open Career positions for appointment to which prior qualification in an appropriate examination
is required;
(2) Closed Career positions which are scientific, or highly technical in nature; these include the
faculty and academic staff of state colleges and universities, and scientific and technical positions in
scientific or research institutions which shall establish and maintain their own merit systems;
(3) Positions in the Career Executive Service; namely, Undersecretary, Assistant Secretary, Bureau
Director, Assistant Bureau Director, Regional Director, Assistant Regional Director, Chief of
Department Service and other officers of equivalent rank as may be identified by the Career
Executive Service Board, all of whom are appointed by the President;
(4) Career officers, other than those in the Career Executive Service, who are appointed by the
President, such as the Foreign Service Officers in the Department of Foreign Affairs;
(5) Commissioned officers and enlisted men of the Armed Forces which shall maintain a separate
merit system;
(6) Personnel of government-owned or controlled corporations, whether performing governmental or
proprietary functions, who do not fall under the non-career service; and
(7) Permanent laborers, whether skilled, semi-skilled, or unskilled. 27 (Emphasis supplied)
In Civil Service Commission v. Court of Appeals and PCSO,28 the Court clarified the positions
covered by the CES:
Thus, from the long line of cases cited above, in order for a position to be covered by the CES, two
elements must concur. First, the position must either be (1) a position enumerated under Book V,
Title I, Subsection A, Chapter 2, Section 7(3) of the Administrative Code of 1987, i.e.,
Undersecretary, Assistant Secretary, Bureau Director, Assistant Bureau Director, Regional Director,
Assistant Regional Director, Chief of Department Service, or (2) a position of equal rank as those
enumerated, and identified by the Career Executive Service Board to be such position of equal rank.
Second, the holder of the position must be a presidential appointee. Failing in any of these
requirements, a position cannot be considered as one covered by the third-level or CES. (Emphasis
supplied)
In sum, there are two elements required for a position to be considered as CES:

1) The position is among those enumerated under Book V, Title I, Subtitle A, Chapter 2, Section 7(3)
of the Administrative Code of 1987 OR a position of equal rank as those enumerated and identified
by the CESB to be such position of equal rank; AND
2) The holder of the position is a presidential appointee. Records show that in reply 29 to Chairperson
Tolentinos query on whether the positions of general manager and AGM of the MMDA are covered
by the CES,30 the CESB thru Executive Director Allones categorically stated that these positions
are not among those covered by the CES.
Upon petitioners separate inquiry on the matter,31 the CESB similarly responded that the AGMOs
position could not be considered as belonging to the CES. 32 Additionally, Executive Director Allones
said that petitioner was not covered by OP Memorandum Circular Nos. 1 and 2, to wit:
A cursory perusal of your appointment papers would show that it does not bear any indication that
you are holding a coterminous appointment. Neither your position as AGMO can be considered as
created in excess of the authorized staffing pattern since RA 7924, the law that created the MMDA
clearly provided for such position. As further stated above, your position will not fall under paragraph
No. 2 of OP MC 1 because it is not yet considered as belonging to the CES. Hence, we posit that
you are not covered by OP MC 1 and 2.33
However, contrary to Executive Director Allones statement, the CESB, through Resolution No. 799
already declared certain positions meeting the criteria set therein as embraced within the CES.
It is worthy of note that CESB Resolution No. 799 was issued on 19 May 2009, even prior to
petitioners appointment on 29 July 2009. Moreover, as early as 31 May 1994, the above
classification was already embodied in CSC Resolution No. 34-2925, circularized in CSC
Memorandum Circular 21, Series of 1994.
Resolution No. 799 classified the following positions as falling within the coverage of the CES:
a. The Career Executive Service includes the positions of Undersecretary, Assistant Secretary,
Bureau director, Assistant Bureau Director, regional Director (department-wide and bureau-wide),
Assistant Regional Director (department-wide and bureau-wide), and Chief of Department Service;
b. Unless provided otherwise, all other managerial or executive positions in the government,
including government-owned or controlled corporations with original charters are embraced within
the CES provided that they meet the following criteria:
i.) The position is a career position;
ii.) The position is above division chief level; and,
iii.) The duties and responsibilities of the position require performance of executive and managerial
functions.
Without a doubt, the AGMO position is not one of those enumerated in the above-cited paragraph(a)
but it clearly falls under paragraph(b) considering that it belongs to a government-owned and
controlled corporation with an original charter. The nature of AGMO is clear from the provisions of
the MMDA Charter.

First, we have already determined that an AGMO is a career position that enjoys security of tenure
by virtue of the MMDA Charter.
Second, it is undisputed that the position of AGMO is above the division chief level, which is
equivalent to the rank of assistant secretary with Salary Grade 29. 34
Third, a perusal of the MMDA Charter readily reveals that the duties and responsibilities of the
position require the performance of executive and managerial functions.
Section 12.4, Rule IV of the Rules and Regulations Implementing R.A. 7924 provides the powers,
functions, duties and responsibilities of an AGMO, as follows:
12.4 Assistant General Manager for Operations
The Assistant General Manager for Operations shall perform the following functions:
a. Establish a mechanism for coordinating and operationalizing the delivery of metro-wide basic
services;
b. Maintain a monitoring system for the effective evaluation of the implementation of approved
policies, plans and programs for the development of Metropolitan Manila;
c. Mobilize the participation of local government units, executive departments or agencies of the
national government, and the private sector in the delivery of metro-wide services; and
d. Operate a central radio communication system.
He shall perform such other duties as are incidental or related to the above functions or as may be
assigned from time to time.
An AGMO performs functions that are managerial in character; exercises management over people,
resource, and/or policy; and assumes functions like planning, organizing, directing, coordinating,
controlling, and overseeing the activities of MMDA. The position requires the application of
managerial or supervisory skills necessary to carry out duties and responsibilities involving functional
guidance, leadership, and supervision.
For the foregoing reasons, the position of AGMO is within the coverage of the CES.
In relation thereto, positions in the career service, for which appointments require examinations, are
grouped into three major levels:35
Sec. 8. Classes of positions in the Career Service. (1) Classes of positions in the career service
appointment to which requires examinations shall be grouped into three major levels as follows:
(a) The first level shall include clerical, trades, crafts and custodial service positions which involve
non-professional or sub-professional work in a non-supervisory or supervisory capacity requiring
less than four years of collegiate studies;
(b) The second level shall include professional, technical, and scientific positions which involve
professional, technical or scientific work in a non-supervisory or supervisory capacity requiring at
least four years of college work up to Division Chief levels; and

(c) The third level shall cover positions in the Career Executive Service. (Emphasis supplied)
Entrance to different levels requires corresponding civil service eligibilities. 36 Those at the third level
(CES positions) require career service executive eligibility (CSEE) as a requirement for permanent
appointment.37
Evidently, an AGMO should possess all the qualifications required by third-level career service within
the CES. In this case, petitioner does not have the required eligibility. Therefore, we find that his
appointment to the position of AGMO was merely temporary.
Amores v. Civil Service Commission38 is instructive as to the nature of temporary appointments in the
CES. The Court held therein that an appointee cannot hold a position in a permanent capacity
without the required CES eligibility:
We begin with the precept, firmly established by law and jurisprudence that a permanent
appointment in the civil service is issued to a person who has met the requirements of the position to
which the appointment is made in accordance with law and the rules issued pursuant thereto. An
appointment is permanent where the appointee meets all the requirements for the position to which
he is being appointed, including the appropriate eligibility prescribed, and it is temporary where the
appointee meets all the requirements for the position except only the appropriate civil service
eligibility.
xxxx
With particular reference to positions in the career executive service (CES), the requisite civil service
eligibility is acquired upon passing the CES examinations administered by the CES Board and the
subsequent conferment of such eligibility upon passing the examinations. Once a person acquires
eligibility, he either earns the status of a permanent appointee to the CES position to which he has
previously been appointed, or he becomes qualified for a permanent appointment to that position
provided only that he also possesses all the other qualifications for the position. Verily, it is clear that
the possession of the required CES eligibility is that which will make an appointment in the career
executive service a permanent one. Petitioner does not possess such eligibility, however, it cannot
be said that his appointment to the position was permanent.
Indeed, the law permits, on many occasions, the appointment of non-CES eligibles to CES positions
in the government in the absence of appropriate eligibles and when there is necessity in the interest
of public service to fill vacancies in the government. But in all such cases, the appointment is at best
merely temporary as it is said to be conditioned on the subsequent obtention of the required CES
eligibility. This rule, according to De Leon v. Court of Appeals, Dimayuga v. Benedicto, Caringal v.
Philippine Charity Sweepstakes Office, and Achacoso v. Macaraig, is invariable even though the
given appointment may have been designated as permanent by the appointing authority.
xxxx
Security of tenure in the career executive service, which presupposes a permanent appointment,
takes place upon passing the CES examinations administered by the CES Board x x x.
Petitioner undisputedly lacked CES eligibility. Thus, he did not hold the position of AGMO in a
permanent capacity or acquire security of tenure in that position. Otherwise stated, his appointment
was temporary and "co-terminus with the appointing authority." 39 In Carillo v. CA,40 this Court ruled
that "one who holds a temporary appointment has no fixed tenure of office; his employment can be

terminated at the pleasure of the appointing power, there being no need to show that the termination
is for cause." Therefore, we find no violation of security of tenure when petitioner was replaced by
respondent upon the latters appointment to the position of AGMO by President Aquino.
Even granting for the sake of argument that the position of AGMO is yet to be classified by the
CESB, petitioners appointment is still deemed coterminous pursuant to CESB Resolution No. 945
issued on 14 June 2011, which reads:
WHEREAS, on November 23, 2010, the Supreme Court in the case of PCSO v. CSC, G.R. NO.
185766 and G.R. No. 185767 limited the coverage of positions belonging to the CES to positions
requiring Presidential appointments.
WHEREAS, in the same vein, CES positions have now become synonymous to third level positions
by virtue of the said ruling.
WHEREFORE, foregoing premises considered, the Board RESOLVES, as it is hereby RESOLVED,
to issue the following guidelines to clarify the policy on the coverage of CES and its classification:
1. For career service positions requiring Presidential appointments expressly enumerated under
Section 7(3), Chapter 2, Subtitle A, Title 1, Book V of the Administrative Code of 1987 namely:
Undersecretary, Assistant Secretary, Bureau Director, Assistant Bureau Director, Regional Director,
Assistant Regional Director, and Chief of Department Service, no classification of position is
necessary to place them under the coverage of the CES, except if they belong to Project Offices, in
which case a position classification is required, in consultation with the Department of Budget and
Management (DBM).
2. For positions requiring Presidential appointments other than those enumerated above, a
classification of positions is necessary which shall be conducted by the Board, upon request of the
head of office of the government department/agency concerned, to place them under the coverage
of the CES provided they comply with the following criteria:
i.) The position is a career position;
ii.) The position is above division chief level; and,
iii.)The duties and responsibilities of the position require the performance of executive and
managerial functions.
All appointments to positions which have not been previously classified as part of the CES would be
deemed co-terminus with the appointing authority. (Emphasis supplied)
Therefore, considering that petitioner is an appointee of then President Arroyo whose term ended on
30 June 2010, petitioners term of office was also deemed terminated upon the assumption of
President Aquino.
Likewise, it is inconsequential that petitioner was allegedly replaced by another non-CESO eligible.
In a quo warranto proceeding, the person suing must show that he has a clear right to the office
allegedly held unlawfully by another. Absent a showing of that right, the lack of qualification or
eligibility of the supposed usurper is immaterial.41

All the foregoing considered, the petition merits an outright dismissal for disregarding the hierarchy
of courts and petitioners lack of cause of action against respondent for failure to sufficiently show
that he has undisturbed rights to the position of AGMO of the MMDA.
WHEREFORE, premises considered, the Petition is DENIED.
SO ORDERED.
MARIA LOURDES P. A. SERENO
Chief Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ROBERTO A. ABAD
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

BIENVENIDO L. REYES
Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

MARIO VICTOR F. LEONEN

Associate Justice
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court.
MARIA LOURDES P. A. SERENO
Chief Justice

SECOND DIVISION

[G.R. No. 142304. June 20, 2001]

CITY OF MANILA, petitioner, vs. OSCAR, FELICITAS, JOSE, BENJAMIN,

ESTELITA,
LEONORA,
and
ADELAIDA,
all
surnamed
SERRANO,respondents.
DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the decision, dated November 16, 1999, and
resolution, dated February 23, 2000, of the Court of Appeals reversing the order, dated December
15, 1998, of the Regional Trial Court, Branch 16, Manila and perpetually enjoining it from
proceeding with petitioners complaint for eminent domain in Civil Case No. 94-72282.
The facts are as follows:
On December 21, 1993, the City Council of Manila enacted Ordinance No. 7833,
authorizing the expropriation of certain properties in Manilas First District in Tondo, covered by
TCT Nos. 70869, 105201, 105202, and 138273 of the Register of Deeds of Manila, which are to
be sold and distributed to qualified occupants pursuant to the Land Use Development Program of
the City of Manila.
One of the properties sought to be expropriated, denominated as Lot 1-C, consists of 343.10
square meters. It is covered by TCT No. 138272 which was derived from TCT No. 70869 issued
in the name of Feliza De Guia.[1] After her death, the estate of Feliza De Guia was settled among
her heirs by virtue of a compromise agreement, which was duly approved by the Regional Trial
Court, Branch 53, Manila in its decision, dated May 8, 1986.[2] In 1989, Alberto De Guia, one of
the heirs of Feliza De Guia, died, as a result of which his estate, consisting of his share in the
properties left by his mother, was partitioned among his heirs. Lot 1-C was assigned to Edgardo
De Guia, one of the heirs of Alberto De Guia. [3] On April 15, 1994, Edgardo De Guia was issued
TCT No. 215593, covering Lot 1-C.[4] On July 29, 1994, the said property was transferred to Lee
Kuan Hui, in whose name TCT No. 217018 was issued.[5]
The property was subsequently sold on January 24, 1996 to Demetria De Guia to whom
TCT No. 226048 was issued.[6]
On September 26, 1997, petitioner City of Manila filed an amended complaint for
expropriation, docketed as Civil Case No. 94-72282, with the Regional Trial Court, Branch 16,
Manila, against the supposed owners of the lots covered by TCT Nos. 70869 (including Lot 1-C),
105201, 105202, and 138273, which included herein respondents Oscar, Felicitas, Jose,
Benjamin, Estelita, Leonora, Adelaida, all surnamed Serrano.[7] On November 12, 1997,
respondents filed a consolidated answer, in which they alleged that their mother, the late

Demetria De Guia, had acquired Lot 1-C from Lee Kian Hui; that they had been the bona fide
occupants of the said parcel of land for more than 40 years; that the expropriation of Lot 1-C
would result in their dislocation, it being the only residential land left to them by their deceased
mother; and that the said lot was exempt from expropriation because dividing the said parcel of
land among them would entitle each of them to only about 50 square meters of
land.Respondents, therefore, prayed that judgment be rendered declaring Lot 1-C exempt from
expropriation and ordering the cancellation of the notice annotated on the back of TCT No.
226048,[8] regarding the pendency of Civil Case No. 94-72282 for eminent domain filed by
petitioner.[9]
Upon motion by petitioner, the trial court issued an order, dated October 9, 1998, directing
petitioner to deposit the amount of P1,825,241.00 equivalent to the assessed value of the
properties.[10] After petitioner had made the deposit, the trial court issued another order, dated
December 15, 1998, directing the issuance of a writ of possession in favor of petitioner.[11]
Respondents filed a petition for certiorari with the Court of Appeals, alleging that the
expropriation of Lot 1-C would render respondents, who are actual occupants thereof, landless;
that Lot 1-C is exempt from expropriation because R.A. No. 7279 provides that properties
consisting of residential lands not exceeding 300 square meters in highly urbanized cities are
exempt from expropriation; that respondents would only receive around 49 square meters each
after the partition of Lot 1-C which consists of only 343.10 square meters; and that R.A. No.
7279 was not meant to deprive an owner of the entire residential land but only that in excess of
300 square meters.[12]
On November 16, 1999, the Court of Appeals rendered a decision holding that Lot 1-C is not
exempt from expropriation because it undeniably exceeds 300 square meters which is no longer
considered a small property within the framework of R.A. No. 7279. However, it held that in
accordance with the ruling in Filstream International Inc. v. Court of Appeals,[13] the other modes
of acquisition of lands enumerated in 9-10 of the law must first be tried by the city government
before it can resort to expropriation. As petitioner failed to show that it had done so, the Court of
Appeals gave judgment for respondents and enjoined petitioner from expropriating Lot 1-C. The
dispositive portion of its decision reads:

WHEREFORE, in view of all the foregoing, the instant petition is hereby GIVEN
DUE COURSE and accordingly GRANTED. The Order, dated December 15, 1998,
denying petitioners motion for reconsideration issued by respondent Regional Trial
Court of Manila, Branch 16, in Civil Case No. 94-72282 is hereby REVERSED and
SET ASIDE. Let a writ of injunction issue perpetually enjoining the same respondent
court from proceeding with the complaint for eminent domain in Civil Case No. 9472282.[14]
In its resolution, dated February 23, 2000, the Court of Appeals likewise denied two motions
for reconsideration filed by petitioner.[15] Hence this petition. Petitioner contends that the Court of
Appeals erred in

1) Giving due course to the Petition of the Serranos under Rule 65 notwithstanding its
own declaration of the impropriety of the resort to the writ and filing thereof with the
wrong appellate court;
2) Concluding that the Order of October 9, 1998 which authorizes the immediate entry
of the City as the expropriating agency into the property sought to be expropriated
upon the deposit of the provisionally fixed fair market value thereof as tantamount to
condemnation of the property without prior showing of compliance with the
acquisition of other lands enumerated in Sec. 9 of R.A. 7279 ergo a violation of due
process to the Serranos by the doctrinaire application of FILSTREAM ruling and
corrollarily,
3) In prohibiting permanently, by writ of injunction, the trial court from proceeding
with a complaint for expropriation of the City in Civil Case No. 94-72282. [16]
We will deal with these contentions in the order they are presented.
First. Petitioner contends that respondents remedy against the order of the trial court
granting a writ of possession was not to file a petition for certiorari under Rule 65 but a petition
for review under Rule 45 which should have been filed in the Supreme Court.[17]
This contention has no merit. A petition for review under Rule 45 is a mode of
appeal. Accordingly, it could not have been resorted to by respondents inasmuch as the order of
the trial court granting a writ of possession was merely interlocutory from which no appeal could
be taken. Rule 45, 1 of the 1997 Rules of Civil Procedure applies only to final judgments or
orders of the Court of Appeals, the Sandiganbayan, and the Regional Trial Court. On the other
hand, a petition for certiorari is the suitable remedy in view of Rule 65, 1 which provides:

When any tribunal, board or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is no appeal, nor any plain,
speedy, and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental reliefs as
law and justice may require.
Respondents petition before the Court of Appeals alleged that the trial court had acted
without or in excess of its jurisdiction or with grave abuse of discretion amounting to lack of
jurisdiction in issuing the order, dated December 15, 1998, resolving that Lot 1-C is not exempt
from expropriation and ordering the issuance of the writ of possession in favor of petitioner.[18]
Second. Petitioner faults the Court of Appeals for deciding issues not raised in the trial court,
specifically the question of whether or not there was compliance with 9 and 10 of R.A. No.
7279. It argues that the sole defense set up by respondents in their petition before the Court of

Appeals was that their property was exempted from expropriation because it comes within the
purview of a small property as defined by R.A. No. 7279. Accordingly, the Court of Appeals
should not have applied the doctrine laid down by this Court in the Filstream[19] case as such
issue was not raised by respondents in their petition before the Court of Appeals.
This contention likewise has no merit. In their petition before the Court of Appeals,
respondents raised the following issues:
1. Whether or not the subject Lot 1-C with an area of 343.10 square meters covered by T.C.T.
No. 226048 in the name of petitioners mother, the late Demetria [De Guia] Serrano, may be
lawfully expropriated for the public purpose of providing landless occupants thereof
homelots of their own under the land-for-the-landless program of respondent City of Manila.
2. Whether or not the expropriation of the said Lot 1-C by respondent City of Manila violates
the equal protection clause of the Constitution, since petitioners, with the exception of
petitioner Oscar G. Serrano, who are likewise landless are actual occupants hereof.
3. Whether or not Lot 1-C is or may be exempted from expropriation pursuant to R.A. 7279,
otherwise known as the Urban Development and Housing Act of 1992. [20]

It is clear that respondents raised in issue the propriety of the expropriation of their property
in connection with R.A. No. 7279. Although what was discussed at length in their petition before
the Court of Appeals was whether or not the said property could be considered a small property
within the purview of the exemption under the said law, the other provisions of the said law
concerning expropriation proceedings need also be looked into to address the first issue raised by
respondents and to determine whether or not expropriation of Lot 1-C was proper under the
circumstances. The Court of Appeals properly considered relevant provisions of R.A. No. 7279
to determine the issues raised by respondents. Whether or not it correctly applied the doctrine
laid down in Filstream in resolving the issues raised by respondents, however, is a different
matter altogether, and this brings us to the next point.
Third. Petitioner contends that the Court of Appeals erroneously presumed that Lot 1-C has
been ordered condemned in its favor when the fact is that the order of the trial court, dated
December 15, 1998, merely authorized the issuance of a writ of possession and petitioners entry
into the property pursuant to Rule 67, 2. At that stage, it was premature to determine whether the
requirements of R.A. No. 7279, 9-10 have been complied with since no evidentiary hearing had
yet been conducted by the trial court.[21]
This contention is well taken. Rule 67, 2 provides:

Upon the filing of the complaint or at any time thereafter and after due notice to the
defendant, the plaintiff shall have the right to take or enter upon the possession of the
real property involved if he deposits with the authorized government depositary an
amount equivalent to the assessed value of the property for purposes of taxation to be
held by such bank subject to the orders of the court. Such deposit shall be in money,
unless in lieu thereof the court authorizes the deposit of a certificate of deposit of a
government bank of the Republic of the Philippines payable on demand to the
authorized government depositary.

If personal property is involved, its value shall be provisionally ascertained and the
amount to be deposited shall be fixed by the court.
After such deposit is made the court shall order the sheriff or other proper officer to
forthwith place the plaintiff in possession of the property involved and promptly
submit a report thereof to the court with service of copies to the parties.
Thus, a writ of execution may be issued by a court upon the filing by the government of a
complaint for expropriation sufficient in form and substance and upon deposit made by the
government of the amount equivalent to the assessed value of the property subject to
expropriation. Upon compliance with these requirements, the issuance of the writ of possession
becomes ministerial.[22] In this case, these requirements were satisfied and, therefore, it became
the ministerial duty of the trial court to issue the writ of possession.
The Court of Appeals, however, ruled that petitioner failed to comply with the requirements
laid down in 9-10 of R.A. No. 7279 and reiterated in the Filstream ruling. This is error. The
ruling inFilstream was necessitated because an order of condemnation had already been issued
by the trial court in that case. Thus, the judgment in that case had already become final. In this
case, the trial court has not gone beyond the issuance of a writ of possession. Hearing is still to
be held to determine whether or not petitioner indeed complied with the requirements provided
in R.A. No. 7279. It is, therefore, premature at this stage of the proceedings to find that petitioner
resorted to expropriation without first trying the other modes of acquisition enumerated in 10 of
the law.
R.A. No. 7279 in pertinent parts provide:

SEC. 9. Priorities in the Acquisition of Land.--- Lands for socialized housing shall be
acquired in the following order:
(a) Those owned by the Government or any of its subdivisions, instrumentalities, or
agencies, including government-owned and controlled corporations and their
subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle lands;
(d) Those within the declared Areas or Priority Development, Zonal Improvement
Program sites, and Slum Improvement and Resettlement Program sites which have not
yet been acquired;
(e) Bagong Lipunan Improvement of Sites and Services or BLISS sites which have
not yet been acquired; and
(f) Privately-owned lands.

Where on-site development is found more practicable and advantageous to the

beneficiaries, the priorities mentioned in this section shall not apply. the local
government units shall give budgetary priority to on-site development of government
lands.
SEC. 10. Modes for Land Acquisition.--- The modes of acquiring lands for purposes
of this Act shall include, amount others, community mortgage, land swapping, land
assembly or consolidation, land banking, donation to the Government, joint-venture
agreement, negotiated purchase, and expropriation: Provided, however, That
expropriation shall be resorted to only when other modes of acquisition have been
exhausted: Provided, further, That where expropriation is resorted to, parcels of land
owned by small property owners shall be exempted for purposes of this
Act: Provided, finally, That abandoned property, as herein defined, shall be reverted
and escheated to the State in a proceeding analogous to the procedure laid down in
Rule 91 of the Rules of Court.
For the purpose of socialized housing, government-owned and foreclosed properties
shall be acquired by the local government units, or by the National Housing Authority
primarily through negotiated purchase: Provided, That qualified beneficiaries who are
actual occupants of the land shall be given the right of first refusal.
Whether petitioner has complied with these provisions requires the presentation of evidence,
although in its amended complaint petitioner did allege that it had complied with the
requirements.[23] The determination of this question must await the hearing on the complaint for
expropriation, particularly the hearing for the condemnation of the properties sought to be
expropriated. Expropriation proceedings consists of two stages: first, condemnation of the
property after it is determined that its acquisition will be for a public purpose or public use and,
second, the determination of just compensation to be paid for the taking of private property to be
made by the court with the assistance of not more than three commissioners.[24]
WHEREFORE, the decision, dated November 16, 1999, and resolution, dated February 23,
2000, of the Court of Appeals are REVERSED and the order of the trial court, dated December
15, 1998, is REINSTATED. This case is REMANDED to the trial court for further proceedings.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.

FIRST DIVISION

[G.R. No. 106804. August 12, 2004]

NATIONAL POWER CORPORATION, petitioner, vs.

APPEALS and ANTONINO POBRE, respondents.

COURT

OF

DECISION
CARPIO, J.:

The Case
Before us is a petition for review of the 30 March 1992 Decision and 14
August 1992 Resolution of the Court of Appeals in CA-G.R. CV No. 16930.
The Court of Appeals affirmed the Decision of the Regional Trial Court,
Branch 17, Tabaco, Albay in Civil Case No. T-552.
[1]

[2]

[3]

The Antecedents
Petitioner National Power Corporation (NPC) is a public corporation
created to generate geothermal, hydroelectric, nuclear and other power and to
transmit electric power nationwide. NPC is authorized by law to acquire
property and exercise the right of eminent domain.
[4]

Private respondent Antonino Pobre (Pobre) is the owner of a 68,969

square-meter land (Property) located in Barangay Bano, Municipality of Tiwi,
Albay. The Property is covered by TCT No. 4067 and Subdivision Plan 119709.
In 1963, Pobre began developing the Property as a resort-subdivision,
which he named as Tiwi Hot Springs Resort Subdivision. On 12 January 1966,
the then Court of First Instance of Albay approved the subdivision plan of the
Property. The Register of Deeds thus cancelled TCT No. 4067 and issued
independent titles for the approved lots. In 1969, Pobre started advertising
and selling the lots.
On 4 August 1965, the Commission on Volcanology certified that thermal
mineral water and steam were present beneath the Property. The Commission
on Volcanology found the thermal mineral water and steam suitable for
domestic use and potentially for commercial or industrial use.
NPC then became involved with Pobres Property in three instances.
First was on 18 February 1972 when Pobre leased to NPC for one year
eleven lots from the approved subdivision plan.

Second was sometime in 1977, the first time that NPC filed its
expropriation case against Pobre to acquire an 8,311.60 square-meter portion
of the Property. On 23 October 1979, the trial court ordered the expropriation
of the lots upon NPCs payment of P25 per square meter or a total amount
of P207,790. NPC began drilling operations and construction of steam wells.
While this first expropriation case was pending, NPC dumped waste materials
beyond the site agreed upon by NPC with Pobre. The dumping of waste
materials altered the topography of some portions of the Property. NPC did
not act on Pobres complaints and NPC continued with its dumping.
[5]

Third was on 1 September 1979, when NPC filed its second expropriation
case against Pobre to acquire an additional 5,554 square meters of the
Property. This is the subject of this petition. NPC needed the lot for the
construction and maintenance of Naglagbong Well Site F-20, pursuant to
Proclamation No. 739 and Republic Act No. 5092. NPC immediately
deposited P5,546.36 with the Philippine National Bank. The deposit
represented 10% of the total market value of the lots covered by the second
expropriation. On 6 September 1979, NPC entered the 5,554 square-meter lot
upon the trial courts issuance of a writ of possession to NPC.
[6]

[7]

On 10 December 1984, Pobre filed a motion to dismiss the second

complaint for expropriation. Pobre claimed that NPC damaged his Property.
Pobre prayed for just compensation of all the lots affected by NPCs actions
and for the payment of damages.
On 2 January 1985, NPC filed a motion to dismiss the second
expropriation case on the ground that NPC had found an alternative site and
that NPC had already abandoned in 1981 the project within the Property due
to Pobres opposition.
On 8 January 1985, the trial court granted NPCs motion to dismiss but the
trial court allowed Pobre to adduce evidence on his claim for damages. The
trial court admitted Pobres exhibits on the damages because NPC failed to
object.
On 30 August 1985, the trial court ordered the case submitted for decision
since NPC failed to appear to present its evidence. The trial court denied
NPCs motion to reconsider the submission of the case for decision.
NPC filed a petition for certiorari with the then Intermediate Appellate
Court, questioning the 30 August 1985 Order of the trial court. On 12 February
1987, the Intermediate Appellate Court dismissed NPCs petition but directed
the lower court to rule on NPCs objections to Pobres documentary exhibits.
[8]

On 27 March 1987, the trial court admitted all of Pobres exhibits and
upheld its Order dated 30 August 1985. The trial court considered the case
submitted for decision.
On 29 April 1987, the trial court issued its Decision in favor of Pobre. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
defendant and against the plaintiff, ordering the plaintiff to pay unto the defendant:
(1) The sum of THREE MILLION FOUR HUNDRED FORTY EIGHT THOUSAND
FOUR HUNDRED FIFTY (P3,448,450.00) PESOS which is the fair market value
of the subdivision of defendant with an area of sixty eight thousand nine hundred
sixty nine (68,969) square meters, plus legal rate of interest per annum from
September 6, 1979 until the whole amount is paid, and upon payment thereof by
the plaintiff the defendant is hereby ordered to execute the necessary Deed of
Conveyance or Absolute Sale of the property in favor of the plaintiff;
(2) The sum of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS for and as
attorneys fees.

Costs against the plaintiff.

SO ORDERED.

[9]

On 13 July 1987, NPC filed its motion for reconsideration of the decision.
On 30 October 1987, the trial court issued its Order denying NPCs motion for
reconsideration.
NPC appealed to the Court of Appeals. On 30 March 1992, the Court of
Appeals upheld the decision of the trial court but deleted the award of
attorneys fees. The dispositive portion of the decision reads:
WHEREFORE, by reason of the foregoing, the Decision appealed from is
AFFIRMED with the modification that the award of attorneys fees is deleted. No
pronouncement as to costs.
SO ORDERED.

[10]

The Court of Appeals denied NPCs motion for reconsideration in a

Resolution dated 14 August 1992.
The Ruling of the Trial Court

In its 69-page decision, the trial court recounted in great detail the scale
and scope of the damage NPC inflicted on the Property that Pobre had
developed into a resort-subdivision. Pobres Property suffered permanent
injury because of the noise, water, air and land pollution generated by NPCs
geothermal plants. The construction and operation of the geothermal plants
drastically changed the topography of the Property making it no longer viable
as a resort-subdivision. The chemicals emitted by the geothermal plants
damaged the natural resources in the Property and endangered the lives of
the residents.
NPC did not only take the 8,311.60 square-meter portion of the Property,
but also the remaining area of the 68,969 square-meter Property. NPC had
rendered Pobres entire Property useless as a resort-subdivision. The Property
has become useful only to NPC. NPC must therefore take Pobres entire
Property and pay for it.
The trial court found the following badges of NPCs bad faith: (1) NPC
allowed five years to pass before it moved for the dismissal of the second
expropriation case; (2) NPC did not act on Pobres plea for NPC to eliminate or
at least reduce the damage to the Property; and (3) NPC singled out Pobres
Property for piecemeal expropriation when NPC could have expropriated
other properties which were not affected in their entirety by NPCs operation.
The trial court found the just compensation to be P50 per square meter or
a total of P3,448,450 for Pobres 68,969 square-meter Property. NPC failed to
contest this valuation. Since NPC was in bad faith and it employed dilatory
tactics to prolong this case, the trial court imposed legal interest on
the P3,448,450 from 6 September 1979 until full payment. The trial court
awarded Pobre attorneys fees of P150,000.
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. However, the
appellate court deleted the award of attorneys fees because Pobre did not
properly plead for it.
The Issues
NPC claims that the Court of Appeals committed the following errors that
warrant reversal of the appellate courts decision:

1. In not annulling the appealed Decision for having been rendered by the trial court
with grave abuse of discretion and without jurisdiction;
2. In holding that NPC had taken the entire Property of Pobre;
3. Assuming arguendo that there was taking of the entire Property, in not excluding
from the Property the 8,311.60 square-meter portion NPC had previously
expropriated and paid for;
4. In holding that the amount of just compensation fixed by the trial court
at P3,448,450.00 with interest from September 6, 1979 until fully paid, is just and
fair;
5. In not holding that the just compensation should be fixed at P25.00 per square meter
only as what NPC and Pobre had previously mutually agreed upon; and
6. In not totally setting aside the appealed Decision of the trial court.[11]

Procedural Issues
NPC, represented by the Office of the Solicitor General, insists that at the
time that it moved for the dismissal of its complaint, Pobre had yet to serve an
answer or a motion for summary judgment on NPC. Thus, NPC as plaintiff had
the right to move for the automatic dismissal of its complaint. NPC relies on
Section 1, Rule 17 of the 1964 Rules of Court, the Rules then in effect. NPC
argues that the dismissal of the complaint should have carried with it the
dismissal of the entire case including Pobres counterclaim.
NPCs belated attack on Pobres claim for damages must fail. The trial
courts reservation of Pobres right to recover damages in the same case is
already beyond review. The 8 January 1985 Order of the trial court attained
finality when NPC failed to move for its reconsideration within the 15-day
reglementary period. NPC opposed the order only on 27 May 1985 or more
than four months from the issuance of the order.
We cannot fault the Court of Appeals for not considering NPCs objections
against the subsistence of Pobres claim for damages. NPC neither included
this issue in its assignment of errors nor discussed it in its appellants brief.
NPC also failed to question the trial courts 8 January 1985 Order in the
petition for certiorari it had earlier filed with the Court of Appeals. It is only
before this Court that NPC now vigorously assails the preservation of Pobres
claim for damages. Clearly, NPCs opposition to the existence of Pobres claim
for damages is a mere afterthought. Rules of fair play, justice and due process
dictate that parties cannot raise an issue for the first time on appeal.
[12]

[13]

We must correct NPCs claim that it filed the notice of dismissal just shortly
after it had filed the complaint for expropriation. While NPC had intimated
several times to the trial court its desire to dismiss the expropriation case it
filed on 5 September 1979, it was only on 2 January 1985 that NPC filed its
notice of dismissal. It took NPC more than five years to actually file the
notice of dismissal. Five years is definitely not a short period of time. NPC
obviously dilly-dallied in filing its notice of dismissal while NPC meanwhile
burdened Pobres property rights.
[14]

[15]

Even a timely opposition against Pobres claim for damages would not
yield a favorable ruling for NPC. It is not Section 1, Rule 17 of the 1964 Rules
of Court that is applicable to this case but Rule 67 of the same Rules, as well
as jurisprudence on expropriation cases. Rule 17 referred to dismissal of civil
actions in general while Rule 67 specifically governed eminent domain cases.
Eminent domain is the authority and right of the state, as sovereign, to
take private property for public use upon observance of due process of law
and payment of just compensation. The power of eminent domain may be
validly delegated to the local governments, other public entities and public
utilities such as NPC. Expropriation is the procedure for enforcing the right of
eminent domain. Eminent Domain was the former title of Rule 67 of the 1964
Rules of Court. In the 1997 Rules of Civil Procedure, which took effect on 1
July 1997, the prescribed method of expropriation is still found in Rule 67, but
its title is now Expropriation.
[16]

[17]

[18]

Section 1, Rule 17 of the 1964 Rules of Court provided the exception to

the general rule that the dismissal of the complaint is addressed to the sound
discretion of the court. For as long as all of the elements of Section 1, Rule
17 were present the dismissal of the complaint rested exclusively on the
plaintiffs will. The defending party and even the courts were powerless to
prevent the dismissal. The courts could only accept and record the dismissal.
[19]

[20]

[21]

[22]

A plain reading of Section 1, Rule 17 of the 1964 Rules of Court makes it

obvious that this rule was not intended to supplement Rule 67 of the same
Rules. Section 1, Rule 17 of the 1964 Rules of Court, provided that:
SECTION 1. Dismissal by the plaintiff. An action may be dismissed by the plaintiff
without order of court by filing a notice of dismissal at any time before service of the
answer or of a motion for summary judgment. Unless otherwise stated in the notice,
the dismissal is without prejudice, except that a notice operates as an adjudication
upon the merits when filed by a plaintiff who has once dismissed in a competent court
an action based on or including the same claim. A class suit shall not be dismissed or
compromised without approval of the court.

While Section 1, Rule 17 spoke of the service of answer or summary

judgment, the Rules then did not require the filing of an answer or summary
judgment in eminent domain cases. In lieu of an answer, Section 3 of Rule
67 required the defendant to file a single motion to dismiss where he should
present all of his objections and defenses to the taking of his property for the
purpose specified in the complaint. In short, in expropriation cases under
Section 3 of Rule 67, the motion to dismiss took the place of the answer.
[23]

[24]

The records show that Pobre had already filed and served on NPC his
motion to dismiss/answer even before NPC filed its own motion to dismiss.
NPC filed its notice of dismissal of the complaint on 2 January 1985. However,
as early as 10 December 1984, Pobre had already filed with the trial court
and served on NPC his motion to dismiss/answer. A certain Divina Cerela
received Pobres pleading on behalf of NPC. Unfortunately for NPC, even
Section 1, Rule 17 of the 1964 Rules of Court could not save its cause.
[25]

[26]

NPC is in no position to invoke Section 1, Rule 17 of the 1964 Rules of

Court. A plaintiff loses his right under this rule to move for the immediate
dismissal of the complaint once the defendant had served on the plaintiff the
answer or a motion for summary judgment before the plaintiff could file his
notice of dismissal of the complaint. Pobres motion to dismiss/answer, filed
and served way ahead of NPCs motion to dismiss, takes the case out of
Section 1, Rule 17 assuming the same applies.
[27]

In expropriation cases, there is no such thing as the plaintiffs matter of

right to dismiss the complaint precisely because the landowner may have
already suffered damages at the start of the taking. The plaintiffs right in
expropriation cases to dismiss the complaint has always been subject to court
approval and to certain conditions. The exceptional right that Section 1, Rule
17 of the 1964 Rules of Court conferred on the plaintiff must be understood to
have applied only to other civil actions. The 1997 Rules of Civil Procedure
abrogated this exceptional right.
[28]

[29]

The power of eminent domain is subject to limitations. A landowner cannot

be deprived of his right over his land until expropriation proceedings are
instituted in court. The court must then see to it that the taking is for public
use, there is payment of just compensation and there is due process of law.
[30]

[31]

If the propriety of the taking of private property through eminent domain is

subject to judicial scrutiny, the dismissal of the complaint must also pass
judicial inquiry because private rights may have suffered in the meantime. The
dismissal, withdrawal or abandonment of the expropriation case cannot be
made arbitrarily. If it appears to the court that the expropriation is not for some
public use, then it becomes the duty of the court to dismiss the action.
[32]

However, when the defendant claims that his land suffered damage
because of the expropriation, the dismissal of the action should not foreclose
the defendants right to have his damages ascertained either in the same case
or in a separate action.
[33]

[34]

Thus, NPCs theory that the dismissal of its complaint carried with it the
dismissal of Pobres claim for damages is baseless. There is nothing in Rule
67 of the 1964 Rules of Court that provided for the dismissal of the defendants
claim for damages, upon the dismissal of the expropriation case. Case law
holds that in the event of dismissal of the expropriation case, the claim for
damages may be made either in a separate or in the same action, for all
damages occasioned by the institution of the expropriation case. The
dismissal of the complaint can be made under certain conditions, such as the
reservation of the defendants right to recover damages either in the same or
in another action. The trial court in this case reserved Pobres right to prove
his claim in the same case, a reservation that has become final due to NPCs
own fault.
[35]

[36]

Factual Findings of the Trial and Appellate Courts Bind the Court
The trial and appellate courts held that even before the first expropriation
case, Pobre had already established his Property as a resort-subdivision.
NPC had wrought so much damage to the Property that NPC had made the
Property uninhabitable as a resort-subdivision. NPCs facilities such as steam
wells, nag wells, power plants, power lines, and canals had hemmed in
Pobres Property. NPCs operations of its geothermal project also posed a risk
to lives and properties.
We uphold the factual findings of the trial and appellate courts. Questions
of facts are beyond the pale of Rule 45 of the Rules of Court as a petition for
review may only raise questions of law. Moreover, factual findings of the trial
court, particularly when affirmed by the Court of Appeals, are generally binding
on this Court. We thus find no reason to set aside the two courts factual
findings.
[37]

[38]

NPC points out that it did not take Pobres 68,969 square-meter Property.
NPC argues that assuming that it is liable for damages, the 8,311.60 squaremeter portion that it had successfully expropriated and fully paid for should
have been excluded from the 68,969 square-meter Property that Pobre claims
NPC had damaged.
We are not persuaded.

In its 30 October 1987 Order denying NPCs motion for reconsideration,

the trial court pointed out that the Property originally had a total area of
141,300 square meters. Pobre converted the Property into a resortsubdivision and sold lots to the public. What remained of the lots are the
68,969 square meters of land. Pobre no longer claimed damages for the
other lots that he had before the expropriation.
[39]

[40]

Pobre identified in court the lots forming the 68,969 square-meter

Property. NPC had the opportunity to object to the identification of the lots.
NPC, however, failed to do so. Thus, we do not disturb the trial and
appellate courts finding on the total land area NPC had damaged.
[41]

NPC must Pay Just Compensation for the Entire Property

Ordinarily, the dismissal of the expropriation case restores possession of
the expropriated land to the landowner. However, when possession of the
land cannot be turned over to the landowner because it is neither convenient
nor feasible anymore to do so, the only remedy available to the aggrieved
landowner is to demand payment of just compensation.
[42]

[43]

In this case, we agree with the trial and appellate courts that it is no longer
possible and practical to restore possession of the Property to Pobre. The
Property is no longer habitable as a resort-subdivision. The Property is
worthless to Pobre and is now useful only to NPC. Pobre has completely lost
the Property as if NPC had physically taken over the entire 68,969 squaremeter Property.
In United States v. Causby, the U.S. Supreme Court ruled that when
private property is rendered uninhabitable by an entity with the power to
exercise eminent domain, the taking is deemed complete. Such taking is thus
compensable.
[44]

In this jurisdiction, the Court has ruled that if the government takes
property without expropriation and devotes the property to public use, after
many years the property owner may demand payment of just compensation.
This principle is in accord with the constitutional mandate that private
property shall not be taken for public use without just compensation.
[45]

[46]

In the recent case of National Housing Authority v. Heirs of Isidro

Guivelondo, the Court compelled the National Housing Authority (NHA) to
pay just compensation to the landowners even after the NHA had already
abandoned the expropriation case. The Court pointed out that a government
agency could not initiate expropriation proceedings, seize a persons property,
[47]

and then just decide not to proceed with the expropriation. Such a complete
turn-around is arbitrary and capricious and was condemned by the Court in
the strongest possible terms. NHA was held liable to the landowners for the
prejudice that they had suffered.
In this case, NPC appropriated Pobres Property without resort to
expropriation proceedings. NPC dismissed its own complaint for the second
expropriation. At no point did NPC institute expropriation proceedings for the
lots outside the 5,554 square-meter portion subject of the second
expropriation. The only issues that the trial court had to settle were the
amount of just compensation and damages that NPC had to pay Pobre.
This case ceased to be an action for expropriation when NPC dismissed
its complaint for expropriation. Since this case has been reduced to a simple
case of recovery of damages, the provisions of the Rules of Court on the
ascertainment of the just compensation to be paid were no longer applicable.
A trial before commissioners, for instance, was dispensable.
We have held that the usual procedure in the determination of just
compensation is waived when the government itself initially violates
procedural requirements. NPCs taking of Pobres property without filing the
appropriate expropriation proceedings and paying him just compensation is a
transgression of procedural due process.
[48]

From the beginning, NPC should have initiated expropriation proceedings

for Pobres entire 68,969 square-meter Property. NPC did not. Instead, NPC
embarked on a piecemeal expropriation of the Property. Even as the second
expropriation case was still pending, NPC was well aware of the damage that
it had unleashed on the entire Property. NPC, however, remained impervious
to Pobres repeated demands for NPC to abate the damage that it had
wrought on his Property.
NPC moved for the dismissal of the complaint for the second expropriation
on the ground that it had found an alternative site and there was stiff
opposition from Pobre. NPC abandoned the second expropriation case five
years after it had already deprived the Property virtually of all its value. NPC
has demonstrated its utter disregard for Pobres property rights.
[49]

Thus, it would now be futile to compel NPC to institute expropriation

proceedings to determine the just compensation for Pobres 68,969 squaremeter Property. Pobre must be spared any further delay in his pursuit to
receive just compensation from NPC.
Just compensation is the fair and full equivalent of the loss. The trial and
appellate courts endeavored to meet this standard. The P50 per square meter
[50]

valuation of the 68,969 square-meter Property is reasonable considering that

the Property was already an established resort-subdivision. NPC has itself to
blame for not contesting the valuation before the trial court. Based on the P50
per square meter valuation, the total amount of just compensation that NPC
must pay Pobre is P3,448,450.
The landowner is entitled to legal interest on the price of the land from the
time of the taking up to the time of full payment by the government. In accord
with jurisprudence, we fix the legal interest at six per cent (6%) per annum.
The legal interest should accrue from 6 September 1979, the date when the
trial court issued the writ of possession to NPC, up to the time that NPC fully
pays Pobre.
[51]

[52]

[53]

NPCs abuse of its eminent domain authority is appalling. However, we

cannot award moral damages because Pobre did not assert his right to it.
We also cannot award attorneys fees in Pobres favor since he did not
appeal from the decision of the Court of Appeals denying recovery of
attorneys fees.
[54]

[55]

Nonetheless, we find it proper to award P50,000 in temperate damages to

Pobre. The court may award temperate or moderate damages, which are
more than nominal but less than compensatory damages, if the court finds
that a party has suffered some pecuniary loss but its amount cannot be
proved with certainty from the nature of the case. As the trial and appellate
courts noted, Pobres resort-subdivision was no longer just a dream because
Pobre had already established the resort-subdivision and the prospect for it
was initially encouraging. That is, until NPC permanently damaged Pobres
Property. NPC did not just destroy the property. NPC dashed Pobres hope of
seeing his Property achieve its full potential as a resort-subdivision.
[56]

The lesson in this case must not be lost on entities with eminent domain
authority. Such entities cannot trifle with a citizens property rights. The power
of eminent domain is an extraordinary power they must wield with
circumspection and utmost regard for procedural requirements. Thus, we hold
NPC liable for exemplary damages of P100,000. Exemplary damages or
corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory
damages.
[57]

WHEREFORE, we DENY the petition for lack of merit. The appealed

Decision of the Court of Appeals dated 30 March 1992 in CA-G.R. CV No.
16930 is AFFIRMED with MODIFICATION. National Power Corporation is
ordered to pay Antonino Pobre P3,448,450 as just compensation for the
68,969 square-meter Property at P50 per square meter. National Power

Corporation is directed to pay legal interest at 6% per annum on the amount

adjudged from 6 September 1979 until fully paid. Upon National Power
Corporations payment of the full amount, Antonino Pobre is ordered to
execute a Deed of Conveyance of the Property in National Power
Corporations favor. National Power Corporation is further ordered to pay
temperate and exemplary damages of P50,000 and P100,000, respectively.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna,
JJ., concur.

SECOND DIVISION
REPUBLIC
OF
THEPHILIPPINES (Departme
nt of Public Works and
Highways),
Petitioner,

- versus ISMAEL ANDAYA,

Respondent.

G.R. No. 160656

Present:

QUISUMBING, J., Chairperson,

CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
Promulgated:

June 15, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.:
This is a petition for review of the Decision [1] dated October
30, 2003 of the Court of Appeals in CA-G.R. CV No. 65066

affirming
with
modification
the
Decision [2] of
the Regional Trial Court of Butuan City, Branch 33 in Civil Case No.
4378, for enforcement of easement of right-of-way (or eminent
domain).
Respondent Ismael Andaya is the registered owner of two parcels
of land in Bading, Butuan City. His ownership is evidenced by
Transfer Certificates of Title Nos. RT-10225 and RT-10646. These
properties are subject to a 60-meter wide perpetual easement for
public highways, irrigation ditches, aqueducts, and other similar
works of the government or public enterprise, at no cost to the
government, except only the value of the improvements existing
thereon that may be affected.
Petitioner Republic of the Philippines (Republic) negotiated
with Andaya to enforce the 60-meter easement of right-ofway. The easement was for concrete levees and floodwalls for
Phase 1, Stage 1 of the Lower Agusan Development Project. The
parties, however, failed to reach an agreement.
On December 13, 1995, the Republic instituted an action
before
the Regional Trial Court of Butuan City to
enforce
the
easement of right-of-way or eminent domain.The trial court issued
a writ of possession on April 26, 1996.[3] It also constituted a Board
of
Commissioners
(Board)
to
determine
the
just
compensation. Eventually, the trial court issued an Order of
Expropriation upon payment of just compensation.[4] Later, the
Board reported that there was a discrepancy in the description of
the property sought to be expropriated. The Republic thus
amended its complaint, reducing the 60-meter easement to 10
meters, or an equivalent of 701 square meters.
On December 10, 1998, the Board reported that the project would
affect a total of 10,380 square meters of Andayas properties,
4,443 square meters of which will be for the 60-meter easement.
The Board also reported that the easement would diminish
the value of the remaining 5,937 square meters. As a result, it
recommended the payment of consequential damages amounting
to P2,820,430 for the remaining area.[5]

Andaya objected to the report because although the

Republic reduced the easement to 10 meters or an equivalent of
701 square meters, the Board still granted it 4,443 square
meters. He contended that the consequential damages should be
based on the remaining area of 9,679 square meters. Thus, the
just compensation should be P11,373,405. The Republic did not
file any comment, opposition, nor objection.
After considering the Boards report, the trial court decreed
on April 29, 1999, as follows:
WHEREFORE, in the light of the foregoing, the Court decides as
follows:
a) That the plaintiff is legally entitled to its inherent right of
expropriation to, viz.: 1) the lot now known as lot 3291-B-1-A,
portion of lot 3291-B-1, (LRC) Psd-255693, covered by TCT
No. RT-10225, with an area of 288 sq. m.; and 2) the lot now
known as lot 3293-F-5-B-1, portion of lot 3293-F-5-B (LRC)
Psd-230236, covered by TCT No. RT-10646, with an area
of 413 sq. m., both of the Butuan City Registry of Deeds, it
being shown that it is for public use and purpose --- free of
charge by reason of the statutory lien of easement of rightof-way imposed on defendants titles;
b) That however, the plaintiff is obligated to pay defendant the
sum of TWO MILLION EIGHT HUNDRED TWENTY THOUSAND
FOUR HUNDRED THIRTY (P2,820,430.00) PESOS as fair and
reasonable severance damages;
c) To pay members of the Board of Commissioners, thus: for the
chairman --- TWENTY THOUSAND (P20,000.00) PESOS and
the two (2) members at FIFTEEN THOUSAND (P15,000.00)
PESOS each;
d) To pay defendants counsel FIFTY THOUSAND (P50,000.00)
PESOS as Attorneys fees; and finally,
e) That the Registry of Deeds of Butuan City is also directed to
effect the issuance of Transfer Certificate of Titles for the
aforementioned two (2) lots in the name of the Republic of
the Philippines, following the technical description as
appearing in pages 6, 7, and 8 of the Commissioners Report.
NO COSTS.
IT IS SO ORDERED.[6]

Both parties appealed to the Court of Appeals. The Republic

contested the awards of severance damages and attorneys fees
while Andaya demanded just compensation for his entire property
minus the easement. Andaya alleged that the easement would
prevent ingress and egress to his property and turn it into a catch
basin for the floodwaters coming from the Agusan River. As a
result, his entire property would be rendered unusable and
uninhabitable.
He
thus
demandedP11,373,405
as
just
compensation based on the total compensable area of 9,679
square meters.
The Court of Appeals modified the trial courts decision by
imposing a 6% interest on the consequential damages from the
date of the writ of possession or the actual taking, and by deleting
the attorneys fees.
Hence, the instant petition. Simply put, the sole issue for
resolution may be stated thus: Is the Republic liable for just
compensation if in enforcing the legal easement of right-of-way
on a property, the remaining area would be rendered unusable
and uninhabitable?
It is undisputed that there is a legal easement of right-of-way
in favor of the Republic. Andayas transfer certificates of
title[7] contained the reservation that the lands covered thereby
are subject to the provisions of the Land Registration Act [8] and
the Public Land Act.[9] Section 112[10] of the Public Land Act
provides that lands granted by patent shall be subject to a rightof-way not exceeding 60 meters in width for public highways,
irrigation ditches, aqueducts, and other similar works of the
government or any public enterprise, free of charge, except only
for the value of the improvements existing thereon that may be
affected. In view of this, the Court of Appeals declared that all the
Republic needs to do is to enforce such right without having to
initiate expropriation proceedings and without having to pay any
just compensation.[11] Hence, the Republic may appropriate the
701 square meters necessary for the construction of the
floodwalls without paying for it.

We are, however, unable to sustain the Republics argument

that it is not liable to pay consequential damages if in enforcing
the legal easement on Andayas property, the remaining area
would be rendered unusable and uninhabitable. Taking, in the
exercise of the power of eminent domain, occurs not only when
the government actually deprives or dispossesses the property
owner of his property or of its ordinary use, but also when there is
a practical destruction or material impairment of the value of his
property.[12] Using this standard, there was undoubtedly a taking
of the remaining area of Andayas property. True, no burden was
imposed thereon and Andaya still retained title and possession of
the property. But, as correctly observed by the Board and affirmed
by the courts a quo, the nature and the effect of the floodwalls
would deprive Andaya of the normal use of the remaining
areas. It would prevent ingress and egress to the property and
turn it into a catch basin for the floodwaters coming from
the Agusan River.
For this reason, in our view, Andaya is entitled to payment of
just compensation, which must be neither more nor less than the
monetary equivalent of the land. [13] One of the basic principles
enshrined in our Constitution is that no person shall be deprived
of his private property without due process of law; and in
expropriation cases, an essential element of due process is that
there must be just compensation whenever private property is
taken for public use. Noteworthy, Section 9, Article III of our
Constitution mandates that private property shall not be taken for
public use without just compensation. [14]
Finally, we affirm the findings of the Court of Appeals and the
trial court that just compensation should be paid only for 5,937
square meters of the total area of 10,380 square
meters. Admittedly, the Republic needs only a 10-meter
easement or an equivalent of 701 square meters. Yet, it is also
settled that it is legally entitled to a 60-meter wide easement or
an equivalent of 4,443 square meters. Clearly, although the
Republic will use only 701 square meters, it should not be liable
for the 3,742 square meters, which constitute the difference
between this area of 701 square meters and the 4,443 square

meters to which it is fully entitled to use as easement, free of

charge except for damages to affected existing improvements, if
any, under Section 112 of the Public Land Act.
In effect, without such damages alleged and proved, the
Republic is liable for just compensation of only the remaining areas
consisting of 5,937 square meters, with interest thereon at the legal
rate of 6% per annum from the date of the writ of possession or the
actual taking until full payment is made. For the purpose of
determining the final just compensation, the case is remanded to
the trial court. Said court is ordered to make the determination of
just compensation payable to respondent Andaya with deliberate
dispatch.
WHEREFORE, the Decision of the Court of Appeals dated October
30, 2003 in CA-G.R. CV No. 65066, modifying the Decision of
the Regional Trial Court ofButuan City, Branch 33 in Civil Case No.
4378, is AFFIRMED with MODIFICATION as herein set forth.
The
case
is
hereby REMANDED to
the Regional Trial Court of Butuan City,
Branch
33
for
the
determination of the final just compensation of the compensable
area consisting of 5,937 square meters, with interest thereon at
the legal rate of 6% per annum from the date of the writ of
possession or actual taking until fully paid.
No pronouncement as to costs.
SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

(On official leave)

CONCHITA CARPIO
MORALES
Associate Justice

DANTE O. TINGA
Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairpersons Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts
Division.

REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 169914

April 18, 2008

ASIA'S EMERGING DRAGON CORPORATION, petitioner,

vs.
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETARY LEANDRO R.
MENDOZA and MANILA INTERNATIONAL AIRPORT AUTHORITY, respondents.
x ----------------------------------------- x
G.R. No. 174166

April 18, 2008

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF TRANSPORTATION

AND COMMUNICATIONS and MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,
vs.
HON. COURT OF APPEALS and SALACNIB BATERINA, respondents.
DECISION
CHICO-NAZARIO, J.:
This Court is still continuously besieged by Petitions arising from the awarding of the Ninoy Aquino
International Airport International Passenger Terminal III (NAIA IPT III) Project to the Philippine
International Air Terminals Co., Inc. (PIATCO), despite the promulgation by this Court of Decisions
and Resolutions in two cases, Agan, Jr. v. Philippine International Air Terminals Co.,
Inc.1 and Republic v. Gingoyon,2 which already resolved the more basic and immediate issues arising

from the said award. The sheer magnitude of the project, the substantial cost of its building, the
expected high profits from its operations, and its remarkable impact on the Philippine economy,
consequently raised significant interest in the project from various quarters.
Once more, two new Petitions concerning the NAIA IPT III Project are before this Court. It is only
appropriate, however, that the Court first recounts its factual and legal findings
in Agan and Gingoyon to ascertain that its ruling in the Petitions at bar shall be consistent and in
accordance therewith.
Agan, Jr. v. Philippine International Air Terminals Co., Inc. (G.R. Nos. 155001, 155547, and
155661)
Already established and incontrovertible are the following facts in Agan:
In August 1989, the [Department of Trade and Communications (DOTC)] engaged the
services of Aeroport de Paris (ADP) to conduct a comprehensive study of the Ninoy Aquino
International Airport (NAIA) and determine whether the present airport can cope with the
traffic development up to the year 2010. The study consisted of two parts: first, traffic
forecasts, capacity of existing facilities, NAIA future requirements, proposed master plans
and development plans; and second, presentation of the preliminary design of the passenger
terminal building. The ADP submitted a Draft Final Report to the DOTC in December 1989.
Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun,
Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then President Fidel V.
Ramos to explore the possibility of investing in the construction and operation of a new
international airport terminal. To signify their commitment to pursue the project, they formed
the Asia's Emerging Dragon Corp. (AEDC) which was registered with the Securities and
Exchange Commission (SEC) on September 15, 1993.
On October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the
DOTC/[Manila International Airport Authority (MIAA)] for the development of NAIA
International Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer
arrangement pursuant to RA 6957 as amended by RA 7718 (BOT Law).
On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the
Prequalification Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT
III project.
On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to
the National Economic and Development Authority (NEDA). A revised proposal, however,
was forwarded by the DOTC to NEDA on December 13, 1995. On January 5, 1996, the
NEDA Investment Coordinating Council (NEDA ICC) - Technical Board favorably endorsed
the project to the ICC - Cabinet Committee which approved the same, subject to certain
conditions, on January 19, 1996. On February 13, 1996, the NEDA passed Board Resolution
No. 2 which approved the NAIA IPT III project.
On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of
an invitation for competitive or comparative proposals on AEDC's unsolicited proposal, in
accordance with Sec. 4-A of RA 6957, as amended. The alternative bidders were required to
submit three (3) sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first
envelope should contain the Prequalification Documents, the second envelope the Technical
Proposal, and the third envelope the Financial Proposal of the proponent.

On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid
Documents and the submission of the comparative bid proposals. Interested firms were
permitted to obtain the Request for Proposal Documents beginning June 28, 1996, upon
submission of a written application and payment of a non-refundable fee of P50,000.00
(US$2,000).
The Bid Documents issued by the PBAC provided among others that the proponent must
have adequate capability to sustain the financing requirement for the detailed engineering,
design, construction, operation, and maintenance phases of the project. The proponent
would be evaluated based on its ability to provide a minimum amount of equity to the project,
and its capacity to secure external financing for the project.
On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid
conference on July 29, 1996.
On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents.
The following amendments were made on the Bid Documents:
a. Aside from the fixed Annual Guaranteed Payment, the proponent shall include in
its financial proposal an additional percentage of gross revenue share of the
Government, as follows:
i.

First 5 years

5.0%

ii.

Next 10 years

7.5%

iii.

Next 10 years

10.0%

b. The amount of the fixed Annual Guaranteed Payment shall be subject of the price
challenge. Proponent may offer an Annual Guaranteed Payment which need not be
of equal amount, but payment of which shall start upon site possession.
c. The project proponent must have adequate capability to sustain the financing
requirement for the detailed engineering, design, construction, and/or operation and
maintenance phases of the project as the case may be. For purposes of prequalification, this capability shall be measured in terms of:
i. Proof of the availability of the project proponent and/or the consortium to
provide the minimum amount of equity for the project; and
ii. a letter testimonial from reputable banks attesting that the project
proponent and/or the members of the consortium are banking with them, that
the project proponent and/or the members are of good financial standing, and
have adequate resources.
d. The basis for the prequalification shall be the proponent's compliance with the
minimum technical and financial requirements provided in the Bid Documents and
the [Implementing Rules and Regulations (IRR)] of the BOT Law. The minimum
amount of equity shall be 30% of the Project Cost.

e. Amendments to the draft Concession Agreement shall be issued from time to time.
Said amendments shall only cover items that would not materially affect the
preparation of the proponent's proposal.
On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications
were made. Upon the request of prospective bidder People's Air Cargo & Warehousing Co.,
Inc (Paircargo), the PBAC warranted that based on Sec. 11.6, Rule 11 of the Implementing
Rules and Regulations of the BOT Law, only the proposed Annual Guaranteed Payment
submitted by the challengers would be revealed to AEDC, and that the challengers' technical
and financial proposals would remain confidential. The PBAC also clarified that the list of
revenue sources contained in Annex 4.2a of the Bid Documents was merely indicative and
that other revenue sources may be included by the proponent, subject to approval by
DOTC/MIAA. Furthermore, the PBAC clarified that only those fees and charges denominated
as Public Utility Fees would be subject to regulation, and those charges which would be
actually deemed Public Utility Fees could still be revised, depending on the outcome of
PBAC's query on the matter with the Department of Justice.
In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of
PAIRCARGO as Per Letter Dated September 3 and 10, 1996." Paircargo's queries and the
PBAC's responses were as follows:
1. It is difficult for Paircargo and Associates to meet the required minimum equity
requirement as prescribed in Section 8.3.4 of the Bid Documents considering that
the capitalization of each member company is so structured to meet the
requirements and needs of their current respective business undertaking/activities. In
order to comply with this equity requirement, Paircargo is requesting PBAC to just
allow each member of (sic) corporation of the Joint Venture to just execute an
agreement that embodies a commitment to infuse the required capital in case the
project is awarded to the Joint Venture instead of increasing each corporation's
current authorized capital stock just for prequalification purposes.
In prequalification, the agency is interested in one's financial capability at the time of
prequalification, not future or potential capability.
A commitment to put up equity once awarded the project is not enough to establish
that "present" financial capability. However, total financial capability of all member
companies of the Consortium, to be established by submitting the respective
companies' audited financial statements, shall be acceptable.
2. At present, Paircargo is negotiating with banks and other institutions for the
extension of a Performance Security to the joint venture in the event that the
Concessions Agreement (sic) is awarded to them. However, Paircargo is being
required to submit a copy of the draft concession as one of the documentary
requirements. Therefore, Paircargo is requesting that they'd (sic) be furnished copy
of the approved negotiated agreement between the PBAC and the AEDC at the
soonest possible time.
A copy of the draft Concession Agreement is included in the Bid Documents. Any
material changes would be made known to prospective challengers through bid
bulletins. However, a final version will be issued before the award of contract.

The PBAC also stated that it would require AEDC to sign Supplement C of the Bid
Documents (Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the
same with the required Bid Security.
On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing
Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp.
(Security Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to
the PBAC. On September 23, 1996, the PBAC opened the first envelope containing the
prequalification documents of the Paircargo Consortium. On the following day, September
24, 1996, the PBAC prequalified the Paircargo Consortium.
On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards
the Paircargo Consortium, which include:
a. The lack of corporate approvals and financial capability of PAIRCARGO;
b. The lack of corporate approvals and financial capability of PAGS;
c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the
amount that Security Bank could legally invest in the project;
d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for
prequalification purposes; and
e. The appointment of Lufthansa as the facility operator, in view of the Philippine
requirement in the operation of a public utility.
The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the
issues raised by the latter, and that based on the documents submitted by Paircargo and the
established prequalification criteria, the PBAC had found that the challenger, Paircargo, had
prequalified to undertake the project. The Secretary of the DOTC approved the finding of the
PBAC.
The PBAC then proceeded with the opening of the second envelope of the Paircargo
Consortium which contained its Technical Proposal.
On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's
financial capability, in view of the restrictions imposed by Section 21-B of the General
Banking Act and Sections 1380 and 1381 of the Manual Regulations for Banks and Other
Financial Intermediaries. On October 7, 1996, AEDC again manifested its objections and
requested that it be furnished with excerpts of the PBAC meeting and the accompanying
technical evaluation report where each of the issues they raised were addressed.
On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the
Paircargo Consortium containing their respective financial proposals. Both proponents
offered to build the NAIA Passenger Terminal III for at least $350 million at no cost to the
government and to pay the government: 5% share in gross revenues for the first five years of
operation, 7.5% share in gross revenues for the next ten years of operation, and 10% share
in gross revenues for the last ten years of operation, in accordance with the Bid Documents.
However, in addition to the foregoing, AEDC offered to pay the government a total ofP135

million as guaranteed payment for 27 years while Paircargo Consortium offered to pay the
government a total of P17.75 billion for the same period.
Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted
by the Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996
within which to match the said bid, otherwise, the project would be awarded to Paircargo.
As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary
Amado Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium
regarding AEDC's failure to match the proposal.
On February 27, 1997, Paircargo Consortium incorporated into Philippine International
Airport Terminals Co., Inc. (PIATCO).
AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated
its objections as regards the prequalification of PIATCO.
On April 11, 1997, the DOTC submitted the concession agreement for the second-pass
approval of the NEDA-ICC.
On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration
of Nullity of the Proceedings, Mandamus and Injunction against the Secretary of the DOTC,
the Chairman of the PBAC, the voting members of the PBAC and Pantaleon D. Alvarez, in
his capacity as Chairman of the PBAC Technical Committee.
xxxx
On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO.
On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and
PIATCO, through its President, Henry T. Go, signed the "Concession Agreement for the
Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport
Passenger Terminal III" (1997 Concession Agreement). x x x.
On November 26, 1998, the Government and PIATCO signed an Amended and Restated
Concession Agreement (ARCA). x x x.
Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The
First Supplement was signed on August 27, 1999; the Second Supplement on September 4,
2000; and the Third Supplement on June 22, 2001 (collectively, Supplements).
xxxx
Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA
Terminals I and II, had existing concession contracts with various service providers to offer
international airline airport services, such as in-flight catering, passenger handling, ramp and
ground support, aircraft maintenance and provisions, cargo handling and warehousing, and
other services, to several international airlines at the NAIA. x x x.
On September 17, 2002, the workers of the international airline service providers, claiming
that they stand to lose their employment upon the implementation of the questioned

agreements, filed before this Court a petition for prohibition to enjoin the enforcement of said
agreements.
On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed
a motion for intervention and a petition-in-intervention.
On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino
Jaraula filed a similar petition with this Court.
On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the
legality of the various agreements.
On December 11, 2002, another group of Congressmen, Hon. Jacinto V. Paras, Rafael P.
Nantes, Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles, Prospero A. Pichay,
Jr., Harlin Cast Abayon and Benasing O. Macaranbon, moved to intervene in the case as
Respondents-Intervenors. They filed their Comment-In-Intervention defending the validity of
the assailed agreements and praying for the dismissal of the petitions.
During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on
November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacaang
Palace, stated that she will not "honor (PIATCO) contracts which the Executive Branch's
legal offices have concluded (as) null and void."3
The Court first dispensed with the procedural issues raised in Agan, ruling that (a) the MIAA service
providers and its employees, petitioners in G.R. Nos. 155001 and 155661, had the requisite standing
since they had a direct and substantial interest to protect by reason of the implementation of the
PIATCO Contracts which would affect their source of livelihood; 4 and (b) the members of the House
of Representatives, petitioners in G.R. No. 155547, were granted standing in view of the serious
legal questions involved and their impact on public interest. 5
As to the merits of the Petitions in Agan, the Court concluded that:
In sum, this Court rules that in view of the absence of the requisite financial capacity of the
Paircargo Consortium, predecessor of respondent PIATCO, the award by the PBAC of the
contract for the construction, operation and maintenance of the NAIA IPT III is null and void.
Further, considering that the 1997 Concession Agreement contains material and substantial
amendments, which amendments had the effect of converting the 1997 Concession
Agreement into an entirely different agreement from the contract bidded upon, the 1997
Concession Agreement is similarly null and void for being contrary to public policy. The
provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession
Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute a
direct government guarantee expressly prohibited by, among others, the BOT Law and its
Implementing Rules and Regulations are also null and void. The Supplements, being
accessory contracts to the ARCA, are likewise null and void.6
Hence, the fallo of the Court's Decision in Agan reads:
WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession
Agreement and the Supplements thereto are set aside for being null and void. 7

In a Resolution8 dated 21 January 2004, the Court denied with finality the Motions for
Reconsideration of its 5 May 2003 Decision in Agan filed by therein respondents PIATCO and
Congressmen Paras, et al., and respondents-intervenors.9 Significantly, the Court declared in the
same Resolution that:
This Court, however, is not unmindful of the reality that the structures comprising the NAIA
IPT III facility are almost complete and that funds have been spent by PIATCO in their
construction. For the government to take over the said facility, it has to compensate
respondent PIATCO as builder of the said structures. The compensation must be just
and in accordance with law and equity for the government can not unjustly enrich itself at
the expense of PIATCO and its investors.10 (Emphasis ours.)
It is these afore-quoted pronouncements that gave rise to the Petition in Gingoyon.
Republic v. Gingoyon (G.R. No. 166429)
According to the statement of facts in Gingoyon:
After the promulgation of the rulings in Agan, the NAIA 3 facilities have remained in the
possession of PIATCO, despite the avowed intent of the Government to put the airport
terminal into immediate operation. The Government and PIATCO conducted several rounds
of negotiation regarding the NAIA 3 facilities. It also appears that arbitral proceedings were
commenced before the International Chamber of Commerce International Court of Arbitration
and the International Centre for the Settlement of Investment Disputes, although the
Government has raised jurisdictional questions before those two bodies.
Then, on 21 December 2004, the Government filed a Complaint for expropriation with the
Pasay City Regional Trial Court (RTC), together with an Application for Special
Raffle seeking the immediate holding of a special raffle. The Government sought upon the
filing of the complaint the issuance of a writ of possession authorizing it to take immediate
possession and control over the NAIA 3 facilities. The Government also declared that it had
deposited the amount of P3,002,125,000.00 (3 Billion) in Cash with the Land Bank of the
Philippines, representing the NAIA 3 terminal's assessed value for taxation purposes.
The case was raffled to Branch 117 of the Pasay City RTC, presided by respondent judge
Hon. Henrick F. Gingoyon (Hon. Gingoyon). On the same day that the Complaint was filed,
the RTC issued an Orderdirecting the issuance of a writ of possession to the Government,
authorizing it to "take or enter upon the possession" of the NAIA 3 facilities. Citing the case
of City of Manila v. Serrano, the RTC noted that it had the ministerial duty to issue the writ of
possession upon the filing of a complaint for expropriation sufficient in form and substance,
and upon deposit made by the government of the amount equivalent to the assessed value
of the property subject to expropriation. The RTC found these requisites present, particularly
noting that "[t]he case record shows that [the Government has] deposited the assessed
value of the [NAIA 3 facilities] in the Land Bank of the Philippines, an authorized depositary,
as shown by the certification attached to their complaint." Also on the same day, the RTC
issued a Writ of Possession. According to PIATCO, the Government was able to take
possession over the NAIA 3 facilities immediately after the Writ of Possession was issued.
However, on 4 January 2005, the RTC issued another Order designed to supplement its 21
December 2004Order and the Writ of Possession. In the 4 January 2005 Order, now
assailed in the present petition, the RTC noted that its earlier issuance of its writ of
possession was pursuant to Section 2, Rule 67 of the 1997 Rules of Civil Procedure.

However, it was observed that Republic Act No. 8974 (Rep. Act No. 8974), otherwise known
as "An Act to Facilitate the Acquisition of Right-of-Way, Site or Location for National
Government Infrastructure Projects and For Other Purposes" and its Implementing Rules
and Regulations (Implementing Rules) had amended Rule 67 in many respects.
There are at least two crucial differences between the respective procedures under Rep. Act
No. 8974 and Rule 67. Under the statute, the Government is required to make immediate
payment to the property owner upon the filing of the complaint to be entitled to a writ of
possession, whereas in Rule 67, the Government is required only to make an initial deposit
with an authorized government depositary. Moreover, Rule 67 prescribes that the initial
deposit be equivalent to the assessed value of the property for purposes of taxation, unlike
Rep. Act No. 8974 which provides, as the relevant standard for initial compensation, the
market value of the property as stated in the tax declaration or the current relevant zonal
valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and the value of the
improvements and/or structures using the replacement cost method.
Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974 and Section 10 of the
Implementing Rules, the RTC made key qualifications to its earlier issuances. First, it
directed the Land Bank of the Philippines, Baclaran Branch (LBP-Baclaran), to immediately
release the amount of US$62,343,175.77 to PIATCO, an amount which the RTC
characterized as that which the Government "specifically made available for the purpose of
this expropriation;" and such amount to be deducted from the amount of just compensation
due PIATCO as eventually determined by the RTC. Second, the Government was directed to
submit to the RTC a Certificate of Availability of Funds signed by authorized officials to cover
the payment of just compensation. Third, the Government was directed "to maintain,
preserve and safeguard" the NAIA 3 facilities or "perform such as acts or activities in
preparation for their direct operation" of the airport terminal, pending expropriation
proceedings and full payment of just compensation. However, the Government was
prohibited "from performing acts of ownership like awarding concessions or leasing any part
of [NAIA 3] to other parties."
The very next day after the issuance of the assailed 4 January 2005 Order, the Government
filed an Urgent Motion for Reconsideration, which was set for hearing on 10 January 2005.
On 7 January 2005, the RTC issued another Order, the second now assailed before this
Court, which appointed three (3) Commissioners to ascertain the amount of just
compensation for the NAIA 3 Complex. That same day, the Government filed a Motion for
Inhibition of Hon. Gingoyon.
The RTC heard the Urgent Motion for Reconsideration and Motion for Inhibition on 10
January 2005. On the same day, it denied these motions in an Omnibus Order dated 10
January 2005. This is the third Ordernow assailed before this Court. Nonetheless, while
the Omnibus Order affirmed the earlier dispositions in the 4 January 2005 Order, it excepted
from affirmance "the superfluous part of the Order prohibiting the plaintiffs from awarding
concessions or leasing any part of [NAIA 3] to other parties."
Thus, the present Petition for Certiorari and Prohibition under Rule 65 was filed on 13
January 2005. The petition prayed for the nullification of the RTC orders dated 4 January
2005, 7 January 2005, and 10 January 2005, and for the inhibition of Hon. Gingoyon from
taking further action on the expropriation case. A concurrent prayer for the issuance of a
temporary restraining order and preliminary injunction was granted by this Court in
a Resolution dated 14 January 2005.11

The Court resolved the Petition of the Republic of the Philippines and Manila International Airport
Authority inGingoyon in this wise:
In conclusion, the Court summarizes its rulings as follows:
(1) The 2004 Resolution in Agan sets the base requirement that has to be observed before
the Government may take over the NAIA 3, that there must be payment to PIATCO of just
compensation in accordance with law and equity. Any ruling in the present expropriation case
must be conformable to the dictates of the Court as pronounced in the Agan cases.
(2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate
payment by the Government of at least the proffered value of the NAIA 3 facilities to PIATCO
and provides certain valuation standards or methods for the determination of just
compensation.
(3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the
Government over NAIA 3 is held in abeyance until PIATCO is directly paid the amount of P3
Billion, representing the proffered value of NAIA 3 under Section 4(c) of the law.
(4) Applying Rep. Act No. 8974, the Government is authorized to start the implementation of
the NAIA 3 Airport terminal project by performing the acts that are essential to the operation
of the NAIA 3 as an international airport terminal upon the effectivity of the Writ of
Possession, subject to the conditions above-stated. As prescribed by the Court, such
authority encompasses "the repair, reconditioning and improvement of the complex,
maintenance of the existing facilities and equipment, installation of new facilities and
equipment, provision of services and facilities pertaining to the facilitation of air traffic and
transport, and other services that are integral to a modern-day international airport."
5) The RTC is mandated to complete its determination of the just compensation within sixty
(60) days from finality of this Decision. In doing so, the RTC is obliged to comply with the
standards set under Rep. Act No. 8974 and its Implementing Rules. Considering that the
NAIA 3 consists of structures and improvements, the valuation thereof shall be determined
using the replacements cost method, as prescribed under Section 10 of the Implementing
Rules.
(6) There was no grave abuse of discretion attending the RTC Order appointing the
commissioners for the purpose of determining just compensation. The provisions on
commissioners under Rule 67 shall apply insofar as they are not inconsistent with Rep. Act
No. 8974, its Implementing Rules, or the rulings of the Court in Agan.
(7) The Government shall pay the just compensation fixed in the decision of the trial court to
PIATCO immediately upon the finality of the said decision.
(8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon.
All told, the Court finds no grave abuse of discretion on the part of the RTC to warrant the
nullification of the questioned orders. Nonetheless, portions of these orders should be
modified to conform with law and the pronouncements made by the Court herein. 12
The decretal portion of the Court's Decision in Gingoyon thus reads:

WHEREFORE, the Petition is GRANTED in PART with respect to the orders dated 4 January
2005 and 10 January 2005 of the lower court. Said orders are AFFIRMED with the following
MODIFICATIONS:
1) The implementation of the Writ of Possession dated 21 December 2004 is HELD IN
ABEYANCE, pending payment by petitioners to PIATCO of the amount of Three Billion Two
Million One Hundred Twenty Five Thousand Pesos (P3,002,125,000.00), representing the
proffered value of the NAIA 3 facilities;
2) Petitioners, upon the effectivity of the Writ of Possession, are authorized [to] start the
implementation of the Ninoy Aquino International Airport Pasenger Terminal III project by
performing the acts that are essential to the operation of the said International Airport
Passenger Terminal project;
3) RTC Branch 117 is hereby directed, within sixty (60) days from finality of this Decision, to
determine the just compensation to be paid to PIATCO by the Government.
The Order dated 7 January 2005 is AFFIRMED in all respects subject to the qualification that
the parties are given ten (10) days from finality of this Decision to file, if they so choose,
objections to the appointment of the commissioners decreed therein.
The Temporary Restraining Order dated 14 January 2005 is hereby LIFTED.
No pronouncement as to costs.13
Motions for Partial Reconsideration of the foregoing Decision were filed by therein petitioners
Republic and MIAA, as well as the three other parties who sought to intervene, namely, Asakihosan
Corporation, Takenaka Corporation, and Congressman Baterina.
In a Resolution dated 1 February 2006, this Court denied with finality the Motion for Partial
Reconsideration of therein petitioners and remained faithful to its assailed Decision based on the
following ratiocination:
Admittedly, the 2004 Resolution in Agan could be construed as mandating the full payment
of the final amount of just compensation before the Government may be permitted to take
over the NAIA 3. However, the Decision ultimately rejected such a construction,
acknowledging the public good that would result from the immediate operation of the NAIA 3.
Instead, the Decision adopted an interpretation which is in consonance with Rep. Act No.
8974 and with equitable standards as well, that allowed the Government to take possession
of the NAIA 3 after payment of the proffered value of the facilities to PIATCO. Such a reading
is substantially compliant with the pronouncement in the 2004 Agan Resolution, and is in
accord with law and equity. In contrast, the Government's position, hewing to the strict
application of Rule 67, would permit the Government to acquire possession over the NAIA 3
and implement its operation without having to pay PIATCO a single centavo, a situation that
is obviously unfair. Whatever animosity the Government may have towards PIATCO does not
acquit it from settling its obligations to the latter, particularly those which had already been
previously affirmed by this Court.14
The Court, in the same Resolution, denied all the three motions for intervention of Asakihosan
Corporation, Takenaka Corporation, and Congressman Baterina, and ruled as follows:

We now turn to the three (3) motions for intervention all of which were filed after the
promulgation of the Court's Decision. All three (3) motions must be denied. Under Section 2,
Rule 19 of the 1997 Rules of Civil Procedure the motion to intervene may be filed at any time
before rendition of judgment by the court. Since this case originated from an original action
filed before this Court, the appropriate time to file the motions-in-intervention in this case if
ever was before and not after resolution of this case. To allow intervention at this juncture
would be highly irregular. It is extremely improbable that the movants were unaware of the
pendency of the present case before the Court, and indeed none of them allege such lack of
knowledge.
Takenaka and Asahikosan rely on Mago v. Court of Appeals wherein the Court took the
extraordinary step of allowing the motion for intervention even after the challenged order of
the trial court had already become final. Yet it was apparent in Mago that the movants therein
were not impleaded despite being indispensable parties, and had not even known of the
existence of the case before the trial court, and the effect of the final order was to deprive the
movants of their land. In this case, neither Takenaka nor Asahikosan stand to be
dispossessed by reason of the Court's Decision. There is no palpable due process violation
that would militate the suspension of the procedural rule.
Moreover, the requisite legal interest required of a party-in-intervention has not been
established so as to warrant the extra-ordinary step of allowing intervention at this late stage.
As earlier noted, the claims of Takenaka and Asahikosan have not been judicially proved or
conclusively established as fact by any trier of facts in this jurisdiction. Certainly, they could
not be considered as indispensable parties to the petition for certiorari. In the case of
Representative Baterina, he invokes his prerogative as legislator to curtail the disbursement
without appropriation of public funds to compensate PIATCO, as well as that as a taxpayer,
as the basis of his legal standing to intervene. However, it should be noted that the amount
which the Court directed to be paid by the Government to PIATCO was derived from the
money deposited by the Manila International Airport Authority, an agency which enjoys
corporate autonomy and possesses a legal personality separate and distinct from those of
the National Government and agencies thereof whose budgets have to be approved by
Congress.
It is also observed that the interests of the movants-in-intervention may be duly litigated in
proceedings which are extant before lower courts. There is no compelling reason to
disregard the established rules and permit the interventions belatedly filed after the
promulgation of the Court's Decision.15
Asia's Emerging Dragon Corporation v. Department of Transportation and Communications
and Manila International Airport Authority (G.R. No. 169914)
Banking on this Court's declaration in Agan that the award of the NAIA IPT III Project to PIATCO is
null and void, Asia's Emerging Dragon Corporation (AEDC) filed before this Court the present
Petition for Mandamus and Prohibition (with Application for Temporary Restraining Order), praying of
this Court that:
(1) After due hearing, judgment be rendered commanding the Respondents, their officers,
agents, successors, representatives or persons or entities acting on their behalf, to formally
award the NAIA-APT [sic] III PROJECT to Petitioner AEDC and to execute and formalize
with Petitioner AEDC the approved Draft Concession Agreement embodying the agreed
terms and conditions for the operation of the NAIA-IPT III Project and directing Respondents

to cease and desist from awarding the NAIA-IPT Project to third parties or negotiating into
any concession contract with third parties.
(2) Pending resolution on the merits, a Temporary Restraining Order be issued enjoining
Respondents, their officers, agents, successors or representatives or persons or entities
acting on their behalf from negotiating, re-bidding, awarding or otherwise entering into any
concession contract with PIATCO and other third parties for the operation of the NAIA-IPT III
Project.
Other relief and remedies, just and equitable under the premises, are likewise prayed for.16
AEDC bases its Petition on the following grounds:
I. PETITIONER AEDC, BEING THE RECOGNIZED AND UNCHALLENGED ORIGINAL
PROPONENT, HAS THE EXCLUSIVE, CLEAR AND VESTED STATUTORY RIGHT TO THE
AWARD OF THE NAIA-IPT III PROJECT;
II. RESPONDENTS HAVE A STATUTORY DUTY TO PROTECT PETITIONER AEDC AS
THE UNCHALLENGED ORIGINAL PROPONENT AS A RESULT OF THE SUPREME
COURT'S NULLIFICATION OF THE AWARD OF THE NAIA-IPT III PROJECT TO PIATCO[;
and]
III. RESPONDENTS HAVE NO LEGAL BASIS OR AUTHORITY TO TAKE OVER THE NAIAIPT III PROJECT, TO THE EXCLUSION OF PETITIONER AEDC, OR TO AWARD THE
PROJECT TO THIRD PARTIES.17
At the crux of the Petition of AEDC is its claim that, being the recognized and unchallenged original
proponent of the NAIA IPT III Project, it has the exclusive, clear, and vested statutory right to the
award thereof. However, the Petition of AEDC should be dismissed for lack of merit, being as it is,
substantially and procedurally flawed.
SUBSTANTIVE INFIRMITY
A petition for mandamus is governed by Section 3 of Rule 65 of the Rules of Civil Procedure, which
reads
SEC. 3. Petition for mandamus. When any tribunal, corporation, board, officer or person
unlawfully neglects the performance of an act which the law specifically enjoins as a duty
resulting from an office, trust, or station, or unlawfully excludes another from the use and
enjoyment of a right or office to which such other is entitled, and there is no other plain,
speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with certainty and praying
that judgment be rendered commanding the respondent, immediately or some other time to
be specified by the court, to do the act required to be done to protect the rights of the
petitioner, and to pay the damages sustained by the petitioner by reason of the wrongful acts
of the respondent.
It is well-established in our jurisprudence that only specific legal rights are enforceable
by mandamus, that the right sought to be enforced must be certain and clear, and that the writ will
not issue in cases where the right is doubtful. Just as fundamental is the principle governing the

issuance of mandamus that the duties to be performed must be such as are clearly and peremptorily
enjoined by law or by reason of official station. 18
A rule long familiar is that mandamus never issues in doubtful cases. It requires a showing of a
complete and clear legal right in the petitioner to the performance of ministerial acts. In varying
language, the principle echoed and reechoed is that legal rights may be enforced by mandamus only
if those rights are well-defined, clear and certain. Otherwise, the mandamus petition must be
dismissed.19
The right that AEDC is seeking to enforce is supposedly enjoined by Section 4-A of Republic Act No.
6957,20 as amended by Republic Act No. 7718, on unsolicited proposals, which provides
SEC. 4-A. Unsolicited proposals. Unsolicited proposals for projects may be accepted by
any government agency or local government unit on a negotiated basis: Provided, That, all
the following conditions are met: (1) such projects involve a new concept or technology
and/or are not part of the list of priority projects, (2) no direct government guarantee, subsidy
or equity is required, and (3) the government agency or local government unit has invited by
publication, for three (3) consecutive weeks, in a newspaper of general circulation,
comparative or competitive proposals and no other proposal is received for a period of sixty
(60) working days: Provided, further, That in the event another proponent submits a lower
price proposal, the original proponent shall have the right to match the price within thirty (30)
working days.
In furtherance of the afore-quoted provision, the Implementing Rules and Regulations (IRR) of
Republic Act No. 6957, as amended by Republic Act No. 7718, devoted the entire Rule 10 to
Unsolicited Proposals, pertinent portions of which are reproduced below
Sec. 10.1. Requisites for Unsolicited Proposals. Any Agency/LGU may accept unsolicited
proposals on a negotiated basis provided that all the following conditions are met:
a. the project involves a new concept or technology and/or is not part of the list of priority
projects;
b. no direct government guarantee, subsidy or equity is required; and
c. the Agency/LGU concerned has invited by publication, for three (3) consecutive weeks, in
a newspaper of general circulation, comparative or competitive proposals and no other
proposal is received for a period of sixty (60) working days. In the event that another project
proponent submits a price proposal lower than that submitted by the original proponent, the
latter shall have the right to match said price proposal within thirty (30) working days. Should
the original proponent fail to match the lower price proposal submitted within the specified
period, the contract shall be awarded to the tenderer of the lowest price. On the other hand,
if the original project proponent matches the submitted lowest price within the specified
period, he shall be immediately be awarded the project.
xxxx
Sec. 10.6. Evaluation of Unsolicited Proposals. The Agency/LGU is tasked with the initial
evaluation of the proposal. The Agency/LGU shall: 1) appraise the merits of the project; 2)
evaluate the qualification of the proponent; and 3) assess the appropriateness of the
contractual arrangement and reasonableness of the risk allocation. The Agency/LGU is given

sixty (60) days to evaluate the proposal from the date of submission of the complete
proposal. Within this 60-day period, the Agency/LGU, shall advise the proponent in writing
whether it accepts or rejects the proposal. Acceptance means commitment of the
Agency/LGU to pursue the project and recognition of the proponent as the "original
proponent." At this point, the Agency/LGU will no longer entertain other similar
proposals until the solicitation of comparative proposals. The implementation of the
project, however, is still contingent primarily on the approval of the appropriate approving
authorities consistent with Section 2.7 of these IRR, the agreement between the original
proponent and the Agency/LGU of the contract terms, and the approval of the contract by the
[Investment Coordination Committee (ICC)] or Local Sanggunian.
xxxx
Sec. 10.9. Negotiation With the Original Proponent. Immediately after ICC/Local
Sanggunian's clearance of the project, the Agency/LGU shall proceed with the indepth negotiation of the project scope, implementation arrangements and concession
agreement, all of which will be used in the Terms of Reference for the solicitation of
comparative proposals. The Agency/LGU and the proponent are given ninety (90) days
upon receipt of ICC's approval of the project to conclude negotiations. The Agency/LGU and
the original proponent shall negotiate in good faith. However, should there be
unresolvable differences during the negotiations, the Agency/LGU shall have the
option to reject the proposal and bid out the project. On the other hand, if the
negotiation is successfully concluded, the original proponent shall then be required to
reformat and resubmit its proposal in accordance with the requirements of the Terms
of Reference to facilitate comparison with the comparative proposals. The
Agency/LGU shall validate the reformatted proposal if it meets the requirements of the
TOR prior to the issuance of the invitation for comparative proposals.
xxxx
Sec. 10.11. Invitation for Comparative Proposals. The Agency/LGU shall publish the
invitation for comparative or competitive proposals only after ICC/Local Sanggunian issues a
no objection clearance of the draft contract. The invitation for comparative or competitive
proposals should be published at least once every week for three (3) weeks in at least one
(1) newspaper of general circulation. It shall indicate the time, which should not be earlier
than the last date of publication, and place where tender/bidding documents could be
obtained. It shall likewise explicitly specify a time of sixty (60) working days reckoned from
the date of issuance of the tender/bidding documents upon which proposals shall be
received. Beyond said deadline, no proposals shall be accepted. A pre-bid conference shall
be conducted ten (10) working days after the issuance of the tender/bidding documents.
Sec. 10.12. Posting of Bid Bond by Original Proponent. The original proponent shall be
required at the date of the first date of the publication of the invitation for comparative
proposals to submit a bid bond equal to the amount and in the form required of the
challengers.
Sec. 10.13. Simultaneous Qualification of the Original Proponent. The Agency/LGU shall
qualify the original proponent based on the provisions of Rule 5 hereof, within thirty (30) days
from start of negotiation. For consistency, the evaluation criteria used for qualifying the
original proponent should be the same criteria used for qualifying the original proponent
should be the criteria used in the Terms of Reference for the challengers.

xxxx
Sec. 10.16. Disclosure of the Price Proposal. The disclosure of the price proposal of the
original proponent in the Tender Documents will be left to the discretion of the Agency/LGU.
However, if it was not disclosed in the Tender Documents, the original proponent's price
proposal should be revealed upon the opening of the financial proposals of the
challengers. The right of the original proponent to match the best proposal within thirty
(30) working days starts upon official notification by the Agency/LGU of the most
advantageous financial proposal. (Emphasis ours.)
In her sponsorship speech on Senate Bill No. 1586 (the precursor of Republic Act No. 7718), then
Senator (now President of the Republic of the Philippines) Gloria Macapagal-Arroyo explained the
reason behind the proposed amendment that would later become Section 4-A of Republic Act No.
6957, as amended by Republic Act No. 7718:
The object of the amendment is to protect proponents which have already incurred costs in
the conceptual design and in the preparation of the proposal, and which may have adopted
an imaginative method of construction or innovative concept for the proposal. The
amendment also aims to harness the ingenuity of the private sector to come up with
solutions to the country's infrastructure problems.21
It is irrefragable that Section 4-A of Republic Act No. 6957, as amended by Republic Act No. 7718,
and Section 10 of its IRR, accord certain rights or privileges to the original proponent of an
unsolicited proposal for an infrastructure project. They are meant to encourage private sector
initiative in conceptualizing infrastructure projects that would benefit the public. Nevertheless, none
of these rights or privileges would justify the automatic award of the NAIA IPT III Project to AEDC
after its previous award to PIATCO was declared null and void by this Court in Agan.
The rights or privileges of an original proponent of an unsolicited proposal for an infrastructure
project are never meant to be absolute. Otherwise, the original proponent can hold the Government
hostage and secure the award of the infrastructure project based solely on the fact that it was the
first to submit a proposal. The absurdity of such a situation becomes even more apparent when
considering that the proposal is unsolicited by the Government. The rights or privileges of an original
proponent depends on compliance with the procedure and conditions explicitly provided by the
statutes and their IRR.
An unsolicited proposal is subject to evaluation, after which, the government agency or local
government unit (LGU) concerned may accept or reject the proposal outright.
Under Section 10.6 of the IRR, the "acceptance" of the unsolicited proposal by the agency/LGU is
limited to the "commitment of the [a]gency/LGU to pursue the project and recognition of the
proponent as the 'original proponent.'" Upon acceptance then of the unsolicited proposal, the original
proponent is recognized as such but no award is yet made to it. The commitment of the
agency/LGU upon acceptance of the unsolicited proposal is to the pursuit of the project,
regardless of to whom it shall subsequently award the same. The acceptance of the unsolicited
proposal only precludes the agency/LGU from entertaining other similar proposals until the
solicitation of comparative proposals.
Consistent in both the statutes and the IRR is the requirement that invitations be published for
comparative or competitive proposals. Therefore, it is mandatory that a public bidding be held before
the awarding of the project. The negotiations between the agency/LGU and the original proponent,
as provided in Section 10.9 of the IRR, is for the sole purpose of coming up with draft agreements,

which shall be used in the Terms of Reference (TOR) for the solicitation of comparative proposals.
Even at this point, there is no definite commitment made to the original proponent as to the awarding
of the project. In fact, the same IRR provision even gives the concerned agency/LGU, in case of
unresolvable differences during the negotiations, the option to reject the original proponent's
proposal and just bid out the project.
Generally, in the course of processing an unsolicited proposal, the original proponent is treated in
much the same way as all other prospective bidders for the proposed infrastructure project. It is
required to reformat and resubmit its proposal in accordance with the requirements of the TOR. 22 It
must submit a bid bond equal to the amount and in the form required of the challengers. 23 Its
qualification shall be evaluated by the concerned agency/LGU, using evaluation criteria in
accordance with Rule 524 of the IRR, and which shall be the same criteria to be used in the TOR for
the challengers.25 These requirements ensure that the public bidding under Rule 10 of IRR on
Unsolicited Proposals still remain in accord with the three principles in public bidding, which are: the
offer to the public, an opportunity for competition, and a basis for exact comparison of bids. 26
The special rights or privileges of an original proponent thus come into play only when there are
other proposals submitted during the public bidding of the infrastructure project. As can be gleaned
from the plain language of the statutes and the IRR, the original proponent has: (1) the right to match
the lowest or most advantageous proposal within 30 working days from notice thereof, and (2) in the
event that the original proponent is able to match the lowest or most advantageous proposal
submitted, then it has the right to be awarded the project. The second right or privilege is contingent
upon the actual exercise by the original proponent of the first right or privilege. Before the project
could be awarded to the original proponent, he must have been able to match the lowest or most
advantageous proposal within the prescribed period. Hence, when the original proponent is able to
timely match the lowest or most advantageous proposal, with all things being equal, it shall enjoy
preference in the awarding of the infrastructure project.
This is the extent of the protection that Legislature intended to afford the original proponent, as
supported by the exchange between Senators Neptali Gonzales and Sergio Osmea during the
Second Reading of Senate Bill No. 1586:
Senator Gonzales:
xxxx
The concept being that in case of an unsolicited proposal and nonetheless public bidding
has been held, then [the original proponent] shall, in effect, be granted what is the
equivalent of the right of first refusal by offering a bid which shall equal or better the
bid of the winning bidder within a periodof, let us say, 30 days from the date of bidding.
Senator Osmea:
xxxx
To capture the tenor of the proposal of the distinguished Gentleman, a subsequent
paragraph has to be added which says, "IF THERE IS A COMPETITIVE PROPOSAL, THE
ORIGINAL PROPONENT SHALL HAVE THE RIGHT TO EQUAL THE TERMS AND
CONDITIONS OF THE COMPETITIVE PROPOSAL."

In other words, if there is nobody who will submit a competitive proposal, then nothing is lost.
Everybody knows it, and it is open and transparent. But if somebody comes in with another
proposal and because it was the idea of the original proponent that proponent now has
the right to equal the terms of the original proposal.
SENATOR GONZALES:
That is the idea, Mr. President. Because it seems to me that it is utterly unfair for one who
has conceived an idea or a concept, spent and invested in feasibility studies, in the drawing
of plans and specifications, and the project is submitted to a public bidding, then somebody
will win on the basis of plans and specifications and concepts conceived by the original
proponent. He should at least be given the right to submit an equalizing bid. x x
x.27 (Emphasis ours.)
As already found by this Court in the narration of facts in Agan, AEDC failed to match the more
advantageous proposal submitted by PIATCO by the time the 30-day working period expired on 28
November 1996;28 and, without exercising its right to match the most advantageous proposal, it
cannot now lay claim to the award of the project.
The bidding process as to the NAIA IPT III Project was already over after the award thereof to
PIATCO, even if eventually, the said award was nullified and voided. The nullification of the award to
PIATCO did not revive the proposal nor re-open the bidding. AEDC cannot insist that this Court turn
back the hands of time and award the NAIA IPT III Project to it, as if the bid of PIATCO never existed
and the award of the project to PIATCO did not take place. Such is a simplistic approach to a very
complex problem that is the NAIA IPT III Project.
In his separate opinion in Agan, former Chief Justice Artemio V. Panganiban noted that "[T]here was
effectively no public bidding to speak of, the entire bidding process having been flawed and
tainted from the very outset, therefore, the award of the concession to Paircargo's successor
Piatco was void, and the Concession Agreement executed with the latter was likewise void ab
initio. x x x.29" (Emphasis ours.) In consideration of such a declaration that the entire bidding process
was flawed and tainted from the very beginning, then, it would be senseless to re-open the same to
determine to whom the project should have been properly awarded to. The process and all
proposals and bids submitted in participation thereof, and not just PIATCO's, were placed in doubt,
and it would be foolhardy for the Government to rely on them again. At the very least, it may be
declared that there was a failure of public bidding. 30
In addition, PIATCO is already close to finishing the building of the structures comprising NAIA IPT
III,31 a fact that this Court cannot simply ignore. The NAIA IPT III Project was proposed, subjected to
bidding, and awarded as a build-operate-transfer (BOT) project. A BOT project is defined as
A contractual arrangement whereby the project proponent undertakes the construction,
including financing, of a given infrastructure facility, and the operation and
maintenance thereof. The project proponent operates the facility over a fixed term during
which it is allowed to charge facility users appropriate tolls, fees, rentals, and charges not
exceeding those proposed in its bid or as negotiated and incorporated in the contract to
enable the project proponent to recover its investment, and operating and maintenance
expenses in the project. The project proponent transfers the facility to the government
agency or local government unit concerned at the end of the fixed term that shall not exceed
fifty (50) years. This shall include a supply-and-operate situation which is a contractual
arrangement whereby the supplier of equipment and machinery for a given infrastructure

facility, if the interest of the Government so requires, operates the facility providing in the
process technology transfer and training to Filipino nationals. 32(Emphasis ours.)
The original proposal of AEDC is for a BOT project, in which it undertook to build, operate,
and transfer to the Government the NAIA IPT III facilities. This is clearly no longer applicable or
practicable under the existing circumstances. It is undeniable that the physical structures comprising
the NAIA IPT III Project are already substantially built, and there is almost nothing left for AEDC to
construct. Hence, the project could no longer be awarded to AEDC based on the theory of legal
impossibility of performance.
Neither can this Court revert to the original proposal of AEDC and award to it only the unexecuted
components of the NAIA IPT III Project. Whoever shall assume the obligation to operate and
maintain NAIA IPT III and to subsequently transfer the same to the Government (in case the
operation is not assumed by the Government itself) shall have to do so on terms and conditions that
would necessarily be different from the original proposal of AEDC. It will no longer include any
undertaking to build or construct the structures. An amendment of the proposal of AEDC to address
the present circumstances is out of the question since such an amendment would be substantive
and tantamount to an entirely new proposal, which must again be subjected to competitive bidding.
AEDC's offer to reimburse the Government the amount it shall pay to PIATCO for the NAIA IPT III
Project facilities, as shall be determined in the ongoing expropriation proceedings before the RTC of
Pasay City, cannot restore AEDC to its status and rights as the project proponent. It must be
stressed that the law requires the project proponent to undertake the construction of the
project, including financing; financing, thus, is but a component of the construction of the structures
and not the entirety thereof.
Moreover, this "reimbursement arrangement" may even result in the unjust enrichment of AEDC. In
its original proposal, AEDC offered to construct the NAIA IPT III facilities for $350 million or P9 billion
at that time. In exchange, AEDC would share a certain percentage of the gross revenues with, and
pay a guaranteed annual income to the Government upon operation of the NAIA IPT III.
In Gingoyon, the proferred value of the NAIA IPT III facilities was already determined to be P3 billion.
It seems improbable at this point that the balance of the value of said facilities for which the
Government is still obligated to pay PIATCO shall reach or exceed P6 billion. There is thus the
possibility that the Government shall be required to pay PIATCO an amount less than P9 billion. If
AEDC is to reimburse the Government only for the said amount, then it shall acquire the NAIA IPT III
facilities for a price less than its original proposal of P9 billion. Yet, per the other terms of its original
proposal, it may still recoup a capital investment of P9 billion plus a reasonable rate of return of
investment. A change in the agreed value of the NAIA IPT III facilities already built cannot be done
without a corresponding amendment in the other terms of the original proposal as regards profit
sharing and length of operation; otherwise, AEDC will be unjustly enriched at the expense of the
Government.
Again, as aptly stated by former Chief Justice Panganiban, in his separate opinion in Agan:
If the PIATCO contracts are junked altogether as I think they should be, should not AEDC
automatically be considered the winning bidder and therefore allowed to operate the facility?
My answer is a stone-cold 'No.' AEDC never won the bidding, never signed any contract, and
never built any facility. Why should it be allowed to automatically step in and benefit from the
greed of another?33
The claim of AEDC to the award of the NAIA IPT III Project, after the award thereof to PIATCO was
set aside for being null and void, grounded solely on its being the original proponent of the project, is

specious and an apparent stretch in the interpretation of Section 4-A of Republic Act No. 6957, as
amended by Republic Act No. 7718, and Rule 10 of the IRR.
In all, just as AEDC has no legal right to the NAIA IPT III Project, corollarily, it has no legal right over
the NAIA IPT III facility. AEDC does not own the NAIA IPT III facility, which this Court already
recognized in Gingoyon as owned by PIATCO; nor does AEDC own the land on which NAIA IPT III
stands, which is undisputedly owned by the Republic through the Bases Conversion Development
Authority (BCDA). AEDC did not fund any portion of the construction of NAIA IPT III, which was
entirely funded by PIATCO. AEDC also does not have any kind of lien over NAIA IPT III or any kind
of legal entitlement to occupy the facility or the land on which it stands. Therefore, nothing that the
Government has done or will do in relation to the project could possibly prejudice or injure AEDC.
AEDC then does not possess any legal personality to interfere with or restrain the activities of the
Government as regards NAIA IPT III. Neither does it have the legal personality to demand that the
Government deliver or sell to it the NAIA IPT III facility despite the express willingness of AEDC to
reimburse the Government the proferred amount it had paid PIATCO and complete NAIA IPT III
facility at its own cost.
AEDC invokes the Memorandum of Agreement, purportedly executed between the DOTC and AEDC
on 26 February 1996, following the approval of the NAIA IPT III Project by the National Economic
Development Authority Board in a Resolution dated 13 February 1996, which provided for the
following commitments by the parties:
a. commitment of Respondent DOTC to target mid 1996 as the time frame for the formal
award of the project and commencement of site preparation and construction activities with
the view of a partial opening of the Terminal by the first quarter of 1998;
b. commitment of Respondent DOTC to pursue the project envisioned in the unsolicited
proposal and commence and conclude as soon as possible negotiations with Petitioner
AEDC on the BOT contract;
c. commitment of Respondent DOTC to make appropriate arrangements through which the
formal award of the project can be affected[;]
d. commitment of Petitioner AEDC to a fast track approach to project implementation and to
commence negotiations with its financial partners, investors and creditors;
e. commitment of Respondent DOTC and Petitioner AEDC to fast track evaluation of
competitive proposals, screening and eliminating nuisance comparative bids; 34
It is important to note, however, that the document attached as Annex "E" to the Petition of AEDC is
a "certified photocopy of records on file." This Court cannot give much weight to said document
considering that its existence and due execution have not been established. It is not notarized, so it
does not enjoy the presumption of regularity of a public document. It is not even witnessed by
anyone. It is not certified true by its supposed signatories, Secretary Jesus B. Garcia, Jr. for DOTC
and Chairman Henry Sy, Sr. for AEDC, or by any government agency having its custody. It is
certified as a photocopy of records on file by an Atty. Cecilia L. Pesayco, the Corporate Secretary, of
an unidentified corporation.
Even assuming for the sake of argument, that the said Memorandum of Agreement, is in existence
and duly executed, it does little to support the claim of AEDC to the award of the NAIA IPT III Project.
The commitments undertaken by the DOTC and AEDC in the Memorandum of Agreement may be
simply summarized as a commitment to comply with the procedure and requirements provided in

Rules 10 and 11 of the IRR. It bears no commitment on the part of the DOTC to award the NAIA IPT
III Project to AEDC. On the contrary, the document includes express stipulations that negate any
such government obligation. Thus, in the first clause, 35 the DOTC affirmed its commitment to pursue,
implement and complete the NAIA IPT III Project on or before 1998, noticeably without mentioning
that such commitment was to pursue the project specifically with AEDC. Likewise, in the second
clause,36 it was emphasized that the DOTC shall pursue the project under Rules 10 and 11 of the
IRR of Republic Act No. 6957, as amended by Republic Act No. 7718. And most significantly, the
tenth clause of the same document provided:
10. Nothing in this Memorandum of Understanding shall be understood, interpreted or
construed as permitting, allowing or authorizing the circumvention of, or non-compliance
with, or as waiving, the provisions of, and requirements and procedures under, existing laws,
rules and regulations.37
AEDC further decries that:
24. In carrying out its commitments under the DOTC-AEDC MOU, Petitioner AEDC
undertook the following activities, incurring in the process tremendous costs and expenses.
a. pre-qualified 46 design and contractor firms to assist in the NAIA-IPT III Project;
b. appointed a consortium of six (6) local banks as its financial advisor in June 1996;
c. hired the services of GAIA South, Inc. to prepare the Project Description Report and to
obtain the Environmental Clearance Certificate (ECC) for the NAIA-IPT III Project;
d. coordinated with the Airline Operators Association, Bases Conversion Development
Authority, Philippine Air Force, Bureau of Customs, Bureau of Immigration, relative to their
particular requirements regarding the NAIA-IPT III [P]roject; and
e. negotiated and entered into firm commitments with Ital Thai, Marubeni Corporation and
Mitsui Corporation as equity partners.38
While the Court may concede that AEDC, as the original proponent, already expended resources in
its preparation and negotiation of its unsolicited proposal, the mere fact thereof does not entitle it to
the instant award of the NAIA IPT III Project. AEDC was aware that the said project would have to
undergo public bidding, and there existed the possibility that another proponent may submit a more
advantageous bid which it cannot match; in which case, the project shall be awarded to the other
proponent and AEDC would then have no means to recover the costs and expenses it already
incurred on its unsolicited proposal. It was a given business risk that AEDC knowingly undertook.
Additionally, the very defect upon which this Court nullified the award of the NAIA IPT III Project to
PIATCO similarly taints the unsolicited proposal of AEDC. This Court found Paircargo Consortium
financially disqualified after striking down as incorrect the PBAC's assessment of the consortium's
financial capability. According to the Court'sratio in Agan:
As the minimum project cost was estimated to be US$350,000,000.00 or
roughly P9,183,650,000.00, the Paircargo Consortium had to show to the satisfaction of the
PBAC that it had the ability to provide the minimum equity for the project in the amount of at
least P2,755,095,000.00.

xxxx
Thus, the maximum amount that Security Bank could validly invest in the Paircargo
Consortium is onlyP528,525,656.55, representing 15% of its entire net worth. The total net
worth therefore of the Paircargo Consortium, after considering the maximum amounts that
may be validly invested by each of its members is P558,384,871.55 or only 6.08% of the
project cost, an amount substantially less than the prescribed minimum equity investment
required for the project in the amount of P2,755,095,000.00 or 30% of the project cost.
The purpose of pre-qualification in any public bidding is to determine, at the earliest
opportunity, the ability of the bidder to undertake the project. Thus, with respect to the
bidder's financial capacity at the pre-qualification stage, the law requires the government
agency to examine and determine the ability of the bidder to fund the entire cost of the
project by considering the maximum amounts that each bidder may invest in the
project at the time of pre-qualification.
xxxx
Thus, if the maximum amount of equity that a bidder may invest in the project at the time
the bids are submitted falls short of the minimum amounts required to be put up by the
bidder, said bidder should be properly disqualified. Considering that at the pre-qualification
stage, the maximum amounts which the Paircargo Consortium may invest in the project fell
short of the minimum amounts prescribed by the PBAC, we hold that Paircargo Consortium
was not a qualified bidder. Thus the award of the contract by the PBAC to the Paircargo
Consortium, a disqualified bidder, is null and void.39
Pursuant to the above-quoted ruling, AEDC, like the Paircargo Consortium, would not be financially
qualified to undertake the NAIA IPT III Project. Based on AEDC's own submissions to the
Government, it had then a paid-in capital of only P150,000,000.00,40 which was less than
the P558,384,871.55 that Paircargo Consortium was capable of investing in the NAIA IPT III Project,
and even far less that what this Court prescribed as the minimum equity investment required for the
project in the amount of P2,755,095,000.00 or 30% of the project cost. AEDC had not sufficiently
demonstrated that it would have been financially qualified to undertake the project at the time of
submission of the bids.
Instead, AEDC took pains to present to this Court that allowing it to take over and operate NAIA IPT
III at present would be beneficial to the Government. This Court must point out, however, that AEDC
is precisely making a new proposal befitting the current status of the NAIA IPT III Project, contrary to
its own argument that it is merely invoking its original BOT proposal. And it is not for this Court to
evaluate AEDC's new proposal and assess whether it would truly be most beneficial for the
Government, for the same is an executive function rather than judicial, for which the statutes and
regulations have sufficiently provided standards and procedures for evaluation.
It can even be said that if the award of the NAIA IPT III Project was merely a matter of choosing
between PIATCO and AEDC (which it is not), there could be no doubt that PIATCO is more qualified
to operate the structure that PIATCO itself built and PIATCO's offer of P17.75 Billion in annual
guaranteed payments to the Government is far better that AEDC's offer of P135 Million.
Hence, AEDC is not entitled to a writ of mandamus, there being no specific, certain, and clear legal
right to be enforced, nor duty to be performed that is clearly and peremptorily enjoined by law or by
reason of official station.

PROCEDURAL LAPSES
In addition to the substantive weaknesses of the Petition of AEDC, the said Petition also suffers from
procedural defects.
AEDC revived its hope to acquire the NAIA IPT III Project when this Court promulgated its Decision
in Agan on 5 May 2003. The said Decision became final and executory on 17 February 2004 upon
the denial by this Court of the Motion for Leave to File Second Motion for Reconsideration submitted
by PIATCO. It is this Decision that declared the award of the NAIA IPT III Project to PIATCO as null
and void; without the same, then the award of the NAIA IPT III Project to PIATCO would still subsist
and other persons would remain precluded from acquiring rights thereto, including AEDC. Irrefutably,
the present claim of AEDC is rooted in the Decision of this Court in Agan. However, AEDC filed the
Petition at bar only 20 months after the promulgation of the Decision in Agan on 5 May 2003.
It must be emphasized that under Sections 2 and 3, Rule 65 of the revised Rules of Civil Procedure,
petitions for prohibition and mandamus, such as in the instant case, can only be resorted to when
there is no other plain, speedy and adequate remedy for the party in the ordinary course of law.
In Cruz v. Court of Appeals,41 this Court elucidates that
Although Rule 65 does not specify any period for the filing of a petition for certiorari
and mandamus, it must, nevertheless, be filed within a reasonable time. In certiorari cases,
the definitive rule now is that such reasonable time is within three months from the
commission of the complained act. The same rule should apply to mandamus cases.
The unreasonable delay in the filing of the petitioner's mandamus suit unerringly negates any
claim that the application for the said extraordinary remedy was the most expeditious and
speedy available to the petitioner. (Emphasis ours.)
As the revised Rules now stand, a petition for certiorari may be filed within 60 days from notice of the
judgment, order or resolution sought to be assailed. 42 Reasonable time for filing a petition
for mandamus should likewise be for the same period. The filing by the AEDC of its petition
for mandamus 20 months after its supposed right to the project arose is evidently beyond
reasonable time and negates any claim that the said petition for the extraordinary writ was the most
expeditious and speedy remedy available to AEDC.
AEDC contends that the "reasonable time" within which it should have filed its petition should be
reckoned only from 21 September 2005, the date when AEDC received the letter from the Office of
the Solicitor General refusing to recognize the rights of AEDC to provide the available funds for the
completion of the NAIA IPT III Project and to reimburse the costs of the structures already built by
PIATCO. It has been unmistakable that even long before said letter especially when the
Government instituted with the RTC of Pasay City expropriation proceedings for the NAIA IPT III on
21 December 2004 that the Government would not recognize any right that AEDC purportedly had
over the NAIA IPT III Project and that the Government is intent on taking over and operating the
NAIA IPT III itself.
Another strong argument against the AEDC's Petition is that it is already barred by res judicata.
In Agan,43 it was noted that on 16 April 1997, the AEDC instituted before the RTC of Pasig City Civil
Case No. 66213, a Petition for the Declaration of Nullity of the Proceedings, Mandamus and
Injunction, against the DOTC Secretary and the PBAC Chairman and members.

In Civil Case No. 66213, AEDC prayed for:

i) the nullification of the proceedings before the DOTC-PBAC, including its decision to qualify
Paircargo Consortium and to deny Petitioner AEDC's access to Paircargo Consortium's
technical and financial bid documents;
ii) the protection of Petitioner AEDC's right to match considering the void challenge bid of the
Paircargo Consortium and the denial by DOTC-PBAC of access to information vital to the
effective exercise of its right to match;
iii) the declaration of the absence of any other qualified proponent submitting a competitive
bid in an unsolicited proposal.44
Despite the pendency of Civil Case No. 66213, the DOTC issued the notice of award for the NAIA
IPT III Project to PIATCO on 9 July 1997. The DOTC and PIATCO also executed on 12 July 1997 the
1997 Concession Agreement. AEDC then alleges that:
k) On September 3, 1998, then Pres. Joseph Ejercito Estrada convened a meeting with the
members of the Board of Petitioner AEDC to convey his "desire" for the dismissal of the
mandamus case filed by Petition AEDC and in fact urged AEDC to immediately withdraw
said case.
l) The President's direct intervention in the disposition of this mandamus case was a clear
imposition that Petitioner AEDC had not choice but to accept. To do otherwise was to take a
confrontational stance against the most powerful man in the country then under the risk of
catching his ire, which could have led to untold consequences upon the business interests of
the stakeholders in AEDC. Thus, Petitioner AEDC was constrained to agree to the signing of
a Joint Motion to Dismiss and to the filing of the same in court.
m) Unbeknownst to AEDC at that time was that simultaneous with the signing of the July 12,
1997 Concession Agreement, the DOTC and PIATCO executed a secret side agreement
grossly prejudicial and detrimental to the interest of Government. It stipulated that in the
event that the Civil Case filed by AEDC on April 16, 1997 is not resolved in a manner
favorable to the Government, PIATCO shall be entitled to full reimbursement for all costs and
expenses it incurred in order to obtain the NAIA IPT III BOT project in an amount not less
than One Hundred Eighty Million Pesos (Php 180,000,000.00). This was apparently the
reason why the President was determined to have AEDC's case dismissed immediately.
n) On February 9, 1999, after the Amended and Restated Concession Agreement
(hereinafter referred to as "ARCA") was signed without Petitioner AEDC's knowledge,
Petitioner AEDC signed a Joint Motion to Dismiss upon the representation of the DOTC that
it would provide AEDC with a copy of the 1997 Concession Agreement. x x x. 45
On 30 April 1999, the RTC of Pasig City issued an Order dismissing with prejudice Civil Case No.
66213 upon the execution by the parties of a Joint Motion to Dismiss. According to the Joint Motion
to Dismiss
The parties, assisted by their respective counsel, respectfully state:
1. Philippine International Air Terminals Company, Inc. ("PIATCO") and the respondents have
submitted to petitioner, through the Office of the Executive Secretary, Malacaang, a copy of

the Concession Agreement which they executed for the construction and operation of the
Ninoy Aquino International Airport International Passenger Terminal III Project ("NAIA IPT III
Project), which petitioner requested.
2. Consequently, the parties have decided to amicably settle the instant case and jointly
move for the dismissal thereof without any of the parties admitting liability or conceding to
the position taken by the other in the instant case.
3. Petitioner, on the other hand, and the respondents, on the other hand, hereby release
and forever discharge each other from any and all liabilities, direct or indirect, whether
criminal or civil, which arose in connection with the instant case.
4. The parties agree to bear the costs, attorney's fees and other expenses they respectively
incurred in connection with the instant case. (Emphasis ours.)
AEDC, however, invokes the purported pressure exerted upon it by then President Joseph E.
Estrada, the alleged fraud committed by the DOTC, and paragraph 2 in the afore-quoted Joint
Motion to Dismiss to justify the non-application of the doctrine of res judicata to its present Petition.
The elements of res judicata, in its concept as a bar by former judgment, are as follows: (1) the
former judgment or order must be final; (2) it must be a judgment or order on the merits, that is, it
was rendered after a consideration of the evidence or stipulations submitted by the parties at the trial
of the case; (3) it must have been rendered by a court having jurisdiction over the subject matter and
the parties; and (4) there must be, between the first and second actions, identity of parties, of subject
matter and of cause of action.46 All of the elements are present herein so as to bar the present
Petition.
First, the Order of the RTC of Pasig City, dismissing Civil Case No. 66213, was issued on 30 April
1999. The Joint Motion to Dismiss, deemed a compromise agreement, once approved by the court is
immediately executory and not appealable.47
Second, the Order of the RTC of Pasig City dismissing Civil Case No. 66213 pursuant to the Joint
Motion to Dismiss filed by the parties constitutes a judgment on the merits.
The Joint Motion to Dismiss stated that the parties were willing to settle the case amicably and,
consequently, moved for the dismissal thereof. It also contained a provision in which the parties
the AEDC, on one hand, and the DOTC Secretary and PBAC, on the other released and forever
discharged each other from any and all liabilities, whether criminal or civil, arising in connection with
the case. It is undisputable that the parties entered into a compromise agreement, defined as "a
contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to
one already commenced.48" Essentially, it is a contract perfected by mere consent, the latter being
manifested by the meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract. Once an agreement is stamped with judicial approval, it becomes more
than a mere contract binding upon the parties; having the sanction of the court and entered as its
determination of the controversy, it has the force and effect of any other judgment. 49 Article 2037 of
the Civil Code explicitly provides that a compromise has upon the parties the effect and authority
of res judicata.
Because of the compromise agreement among the parties, there was accordingly a judicial
settlement of the controversy, and the Order, dated 30 April 1999, of the RTC of Pasig City was no
less a judgment on the merits which may be annulled only upon the ground of extrinsic fraud. 50 Thus,

the RTC of Pasig City, in the same Order, correctly granted the dismissal of Civil Case No.
66213 with prejudice.
A scrutiny of the Joint Motion to Dismiss submitted to the RTC of Pasig City would reveal that the
parties agreed to discharge one another from any and all liabilities, whether criminal or civil, arising
from the case, after AEDC was furnished with a copy of the 1997 Concession Agreement between
the DOTC and PIATCO. This complete waiver was the reciprocal concession of the parties that puts
to an end the present litigation, without any residual right in the parties to litigate the same in the
future. Logically also, there was no more need for the parties to admit to any liability considering that
they already agreed to absolutely discharge each other therefrom, without necessarily conceding to
the other's position. For AEDC, it was a declaration that even if it was not conceding to the
Government's position, it was nonetheless waiving any legal entitlement it might have to sue the
Government on account of the NAIA IPT III Project. Conversely, for the Government, it was an
avowal that even if it was not accepting AEDC's stance, it was all the same relinquishing its right to
file any suit against AEDC in connection with the same project. That none of the parties admitted
liability or conceded its position is without bearing on the validity or binding effect of the compromise
agreement, considering that these were not essential to the said compromise.
Third, there is no question as to the jurisdiction of the RTC of Pasig City over the subject matter and
parties in Civil Case No. 66213. The RTC can exercise original jurisdiction over cases involving the
issuance of writs ofcertiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction.51 To recall, the Petition of AEDC before the RTC of Pasig City was for the declaration of
nullity of proceedings, mandamus and injunction. The RTC of Pasig City likewise had jurisdiction
over the parties, with the voluntary submission by AEDC and proper service of summons on the
DOTC Secretary and the PBAC Chairman and members.
Lastly, there is, between Civil Case No. 66213 before the RTC of Pasig City and the Petition now
pending before this Court, an identity of parties, of subject matter, and of causes of action.
There is an identity of parties. In both petitions, the AEDC is the petitioner. The respondents in Civil
Case No. 66213 are the DOTC Secretary and the PBAC Chairman and members. The respondents
in the instant Petition are the DOTC, the DOTC Secretary, and the Manila International Airport
Authority (MIAA). While it may be conceded that MIAA was not a respondent and did not participate
in Civil Case No. 66213, it may be considered a successor-in-interest of the PBAC. When Civil Case
No. 66213 was initiated, PBAC was then in charge of the NAIA IPT III Project, and had the authority
to evaluate the bids and award the project to the one offering the lowest or most advantageous bid.
Since the bidding is already over, and the structures comprising NAIA IPT III are now built, then
MIAA has taken charge thereof. Furthermore, it is clear that it has been the intention of the AEDC to
name as respondents in their two Petitions the government agency/ies and official/s who, at the
moment each Petition was filed, had authority over the NAIA IPT III Project.
There is an identity of subject matter because the two Petitions involve none other than the award
and implementation of the NAIA IPT III Project.
There is an identity of cause of action because, in both Petitions, AEDC is asserting the violation of
its right to the award of the NAIA IPT III Project as the original proponent in the absence of any other
qualified bidders. As early as in Civil Case No. 66213, AEDC already sought a declaration by the
court of the absence of any other qualified proponent submitting a competitive bid for the NAIA IPT
III Project, which, ultimately, would result in the award of the said project to it.
AEDC attempts to evade the effects of its compromise agreement by alleging that it was compelled
to enter into such an agreement when former President Joseph E. Estrada asserted his influence

and intervened in Civil Case No. 66213. This allegation deserves scant consideration. Without any
proof that such events did take place, such statements remain mere allegations that cannot be given
weight. One who alleges any defect or the lack of a valid consent to a contract must establish the
same by full, clear and convincing evidence, not merely by preponderance thereof. 52 And, even
assuming arguendo, that the consent of AEDC to the compromise agreement was indeed vitiated,
then President Estrada was removed from office in January 2001. AEDC filed the present Petition
only on 20 October 2005. The four-year prescriptive period, within which an action to annul a
voidable contract may be brought, had already expired. 53
The AEDC further claims that the DOTC committed fraud when, without AEDC's knowledge, the
DOTC entered into an Amended and Restated Concession Agreement (ARCA) with PIATCO. The
fraud on the part of the DOTC purportedly also vitiated AEDC's consent to the compromise
agreement. It is true that a judicial compromise may be set aside if fraud vitiated the consent of a
party thereof; and that the extrinsic fraud, which nullifies a compromise, likewise invalidates the
decision approving it.54 However, once again, AEDC's allegations of fraud are unsubstantiated. There
is no proof that the DOTC and PIATCO willfully and deliberately suppressed and kept the information
on the execution of the ARCA from AEDC. The burden of proving that there indeed was fraud lies
with the party making such allegation. Each party must prove his own affirmative allegations. The
burden of proof lies on the party who would be defeated if no evidence were given on either side. In
this jurisdiction, fraud is never presumed.55
Moreover, a judicial compromise may be rescinded or set aside on the ground of fraud in
accordance with Rule 38 of the Rules on Civil Procedure on petition for relief from judgment. Section
3 thereof prescribes the periods within which the petition for relief must be filed:
SEC. 3. Time for filing petition; contents and verification. A petition provided for in either of
the preceding sections of this Rule must be verified, filed within sixty (60) days after the
petitioner learns of the judgment, final order or other proceeding to be set aside, and not
more than six (6) months after such judgment or final order was entered, or such proceeding
was taken, and must be accompanied with affidavits showing the fraud, accident, mistake or
excusable negligence relied upon, and the facts constituting the petitioner's good and
substantial cause of action or defense, as the case may be.
According to this Court's ruling in Argana v. Republic,56 as applied to a judgment based on
compromise, both the 60-day and six-month reglementary periods within which to file a petition for
relief should be reckoned from the date when the decision approving the compromise agreement
was rendered because such judgment is considered immediately executory and entered on the date
that it was approved by the court. In the present case, the Order of the RTC of Pasig City granting
the Joint Motion to Dismiss filed by the parties in Civil Case No. 66213 was issued on 30 April 1999,
yet AEDC only spoke of the alleged fraud which vitiated its consent thereto in its Petition before this
Court filed on 20 October 2005, more than six years later.
It is obvious that the assertion by AEDC of its vitiated consent to the Joint Motion to Dismiss Civil
Case No. 66213 is nothing more than an after-thought and a desperate attempt to escape the legal
implications thereof, including the barring of its present Petition on the ground of res judicata.
It is also irrelevant to the legal position of AEDC that the Government asserted in Agan that the
award of the NAIA IPT III Project to PIATCO was void. That the Government eventually took such a
position, which this Court subsequently upheld, does not affect AEDC's commitments and
obligations under its judicially-approved compromise agreement in Civil Case No. 66213, which
AEDC signed willingly, knowingly, and ably assisted by legal counsel.

In addition, it cannot be said that there has been a fundamental change in the Government's position
since Civil Case No. 66213, contrary to the allegation of AEDC. The Government then espoused that
AEDC is not entitled to the award of the NAIA IPT III Project. The Government still maintains the
exact same position presently. That the Government eventually reversed its position on the validity of
its award of the project to PIATCO is not inconsistent with its position that neither should AEDC be
awarded the project.
For the foregoing substantive and procedural reasons, the instant Petition of AEDC should be
dismissed.
Republic of the Philippines v. Court of Appeals and Baterina (G.R. No. 174166)
As mentioned in Gingoyon, expropriation proceedings for the NAIA IPT III was instituted by the
Government with the RTC of Pasay City, docketed as Case No. 04-0876CFM. Congressman
Baterina, together with other members of the House of Representatives, sought intervention in Case
No. 04-0876CFM by filing a Petition for Prohibition in Intervention (with Application for Temporary
Restraining Order and Writ of Preliminary Injunction). Baterina, et al. believe that the Government
need not file expropriation proceedings to gain possession of NAIA IPT III and that PIATCO is not
entitled to payment of just compensation, arguing thus
A) Respondent PIATCO does not own Terminal III because BOT Contracts do not vest
ownership in PIATCO. As such, neither PIATCO nor FRAPORT are entitled to compensation.
B) Articles 448, ET SEQ., of the New Civil Code, as regards builders in good faith/bad faith,
do not apply to PIATCO's Construction of Terminal III.
C) Article 1412(2) of the New Civil Code allows the Government to demand the return of
what it has given without any obligation to comply with its promise.
D) The payment of compensation to PIATCO is unconstitutional, violative of the BuildOperate-Transfer Law, and violates the Civil Code and other laws. 57
On 27 October 2005, the RTC of Pasay City issued an Order admitting the Petition in Intervention of
Baterina, et al., as well as the Complaint in Intervention of Manuel L. Fortes, Jr. and the Answer in
Intervention of Gina B. Alnas, et al. The Republic sought reconsideration of the 27 October 2005
Order of the RTC of Pasay City, which, in an Omnibus Order dated 13 December 2005, was denied
by the RTC of Pasay City as regards the intervention of Baterina, et al. and Fortes, but granted as to
the intervention of Alnas, et al. On 22 March 2006, Baterina, et al. filed with the RTC of Pasay City a
Motion to Declare in Default and/or Motion for Summary Judgment considering that the Republic and
PIATCO failed to file an answer or any responsive pleading to their Petition for Prohibition in
Intervention.
In the meantime, on 19 December 2005, the Court's Decision in Gingoyon was promulgated.
Baterina also filed a Motion for Intervention in said case and sought reconsideration of the Decision
therein. However, his Motion for Intervention was denied by this Court in a Resolution dated 1
February 2006.
On 27 March 2006, the RTC of Pasay City issued an Order and Writ of Execution, the dispositive
portion of which reads

WHEREFORE, let a writ of execution be issued in this case directing the Sheriff of this court
to immediately implement the Order dated January 4, 2005 and January 10, 2005, as
affirmed by the Decision of the Supreme Court in G.R. No. 166429 in the above-entitled case
dated December 19, 2005, in the following manner:
1. Ordering the General Manager, the Senior Assistant General Manager and the Vice
President of Finance of the Manila International Airport Authority (MIAA) to immediately
withdraw the amount ofP3,002,125,000.00 from the above-mentioned Certificates of US
Dollar Time Deposits with the Land Bank of the Philippines, Baclaran Branch;
2. Ordering the Branch Manager, Land Bank of the Philippines, Baclaran Branch to
immediately release the sum of P3,002,125,000.00 to PIATCO;
Return of Service of the Writs shall be made by the Sheriff of this court immediately
thereafter;58
The RTC of Pasay City, in an Order, dated 15 June 2006, denied the Motions for Reconsideration of
its Order and Writ of Execution filed by the Government and Fortes. Baterina, meanwhile, went
before the Court of Appeals via a Petition for Certiorari and Prohibition (With Urgent Prayer for the
Issuance of a Temporary Restraining Order and Writ of Preliminary Injunction), docketed as CA-G.R.
No. 95539, assailing the issuance, in grave abuse of discretion, by the RTC of Pasay City of its
Orders dated 27 March 2006 and 15 June 2006 and Writ of Execution dated 27 March 2006.
During the pendency of CA-G.R. No. 95539 with the Court of Appeals, the RTC of Pasay City issued
an Order, dated 7 August 2006, denying the Urgent Manifestation and Motion filed by the Republic in
which it relayed willingness to comply with the Order and Writ of Execution dated 27 March 2006,
provided that the trial court shall issue an Order expressly authorizing the Republic to award
concessions and lease portions of the NAIA IPT III to potential users. The following day, on 8 August
2006, the RTC of Pasay City issued an Order denying the intervention of Baterina, et al. and Fortes
in Case No. 04-0876CFM. In a third Order, dated 9 August 2006, the RTC of Pasay City directed
PIATCO to receive the amount of P3,002,125,000.00 from the Land Bank of the Philippines,
Baclaran Branch.
By 24 August 2006, the Republic was all set to comply with the 9 August 2006 Order of the RTC of
Pasay City. Hence, the representatives of the Republic and PIATCO met before the RTC of Pasay
City for the supposed payment by the former to the latter of the proferred amount. However, on the
same day, the Court of Appeals, in CA G.R. No. 95539, issued a Temporary Restraining Order (TRO)
enjoining, among other things, the RTC of Pasay City from implementing the questioned Orders,
dated 27 March 2006 and 15 June 2006, or "from otherwise causing payment and from further
proceeding with the determination of just compensation in the expropriation case involved herein,
until such time that petitioner's motion to declare in default and motion for partial summary judgment
shall have been resolved by the trial court; or it is clarified that PIATCO categorically disputes the
proferred value for NAIA Terminal 3." The TRO was to be effective for 30 days. Two days later, on 26
August 2006, the Republic filed with the Court of Appeals an Urgent Motion to Lift Temporary
Restraining Order, which the appellate court scheduled for hearing on 5 September 2006.
While the Urgent Motion to lift the TRO was still pending with the Court of Appeals, the Republic
already filed the present Petition for Certiorari and Prohibition With Urgent Application for a
Temporary Restraining Order and/or Writ of Preliminary Injunction, attributing to the Court of Appeals
grave abuse of discretion in granting the TRO and seeking a writ of prohibition against the Court of
Appeals to enjoin it from giving due course to Baterina's Petition in CA-G.R. No. 95539. The
Republic thus raises before this Court the following arguments:

I
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO AN EXCESS OR LACK OF JURISDICTION WHEN IT GRANTED THE TEMPORARY
RESTRAINING ORDER.
A. THIS HONORABLE COURT'S DECISION IN GINGOYON CONSTITUTES THE
"LAW OF THE CASE".
B. THE TRO IS IN DIRECT CONTRAVENTION OF THIS COURT'S DECISION
WICH HAD ATTAINED FINALITY.
II
THE REPUBLIC IS SUFFERING IRREPARABLE DAMAGE.
III
THE COURT OF APPEALS MUST BE PROHIBITED FROM GIVING DUE COURSE TO A
PETITION THAT IS DEFECTIVE IN FORM AND SUBSTANCE.
A. PRIVATE RESPONDENT HAS NO LEGAL STANDING.
1. THIS HONORABLE COURT HAS RULED THAT PRIVATE RESPONDENT
HAS NO LEGAL STANDING.
2. PRIVATE RESPONDENT HAS LOST HIS STANDING AS AN
INTERVENOR.
B. PRIVATE RESPONDENT FAILED TO DEMONSTRATE THAT HE IS ENTITLED
TO THE INJUNCTIVE RELIEFS PRAYED FOR.
C. THE BOND POSTED IS INSUFFICIENT.
IV
GRANTING ARGUENDO THAT PRIVATE RESPONDENT'S PETITION IS SUFFICIENT IN
FORM AND SUBSTANCE, THE SAME HAS BECOME MOOT AND ACADEMIC.
A. THE MOTION TO DECLARE IN DEFAULT AND/OR MOTION FOR PARTIAL
SUMMARY JUDGMENT HAS ALREADY BEEN RESOLVED.
B. PIATCO HAS CATEGORICALLY DISPUTED THE PROFFERED VALUE FOR
NAIA TERMINAL III.59
The Republic prays of this Court that:
(a) Pending the determination of the merits of this petition, a temporary restraining order
and/or a writ of preliminary injunction be ISSUED restraining the Court of Appeals from
implementing the writ of preliminary injunction in CA-G.R. SP No. 95539 and proceeding in

said case such as hearing it on September 5, 2006. After both parties have been heard, the
preliminary injunction be MADE PERMANENT;
(b) The Resolution date 24 August 2006 of the Court of Appeals be SET ASIDE; and
(c) CA-G.R. SP No. 95539 be ORDERED DISMISSED.
Other just and equitable reliefs are likewise prayed for.60
On 4 September 2006, the Republic filed a Manifestation and Motion to Withdraw Urgent Motion to
Lift Temporary Restraining Order with the Court of Appeals stating, among other things, that it had
decided to withdraw the said Motion as it had opted to avail of other options and remedies. Despite
the Motion to Withdraw filed by the Government, the Court of Appeals issued a Resolution, dated 8
September 2006, lifting the TRO it issued, on the basis of the following
In view of the pronouncement of the Supreme Court in the Gingoyon case upholding the
right of PIATCO to be paid the proferred value in the amount of P3,002,125,000.00 prior to
the implementation of the writ of possession issued by the trial court on December 21, 2004
over the NAIA Passenger Terminal III, and directing the determination of just compensation,
there is no practical and logical reason to maintain the effects of the Temporary Restraining
Order contained in our Resolution dated August 24, 2006. Thus, We cannot continue
restraining what has been mandated in a final and executory decision of the Supreme Court.
WHEREFORE, Our Resolution dated 24 August 2006 be SET ASIDE. Consequently, the
Motion to Withdraw the Motion to Lift the Temporary Restraining Order is rendered moot and
academic.61
There being no more legal impediment, the Republic tendered on 11 September 2006 Land Bank
check in the amount of P3,002,125,000.00 representing the proferred value of NAIA IPT III, which
was received by a duly authorized representative of PIATCO.
On 27 December 2006, the Court of Appeals rendered a Decision in CA G.R. No. 95539 dismissing
Baterina's Petition.
The latest developments before the Court of Appeals and the RTC of Pasay City render the present
Petition of the Republic moot.
Nonetheless, Baterina, as the private respondent in the instant Petition, presented his own prayer
that a judgment be rendered as follows:
A. For this Honorable Court, in the exercise of its judicial discretion to relax procedural rules
consistent withMetropolitan Traffic Command v. Gonong and deem that justice would be
better served if all legal issuesinvolved in the expropriation case and in Baterina are
resolved in this case once and for all, to DECLAREthat:
i. TERMINAL 3, as a matter of law, is public property and thus not a proper object of
eminent domain proceedings; and
ii. PIATCO, as a matter of law, is merely the builder of TERMINAL 3 and, as such, it
may file a claim for recovery on quantum meruit with the Commission on Audi[t] for
determination of the amount thereof, if any.

B. To DIRECT the Regional Trial Court of Pasay City, Branch 117 to dismiss the
expropriation case;
C. To DISMISS the instant Petition and DENY The Republic's application for TRO and/or writ
of preliminary injunction for lack of merit;
D. To DECLARE that the P3 Billion (representing the proferred value of TERMINAL 3) paid
to PIATCO on 11 September 2006 as funds held in trust by PIATCO for the benefit of the
Republic and subject to the outcome of the proceedings for the determination of recovery
on quantum meruit due to PIATCO, if any.
E. To DIRECT the Solicitor General to disclose the evidence it has gathered on corruption,
bribery, fraud, bad faith, etc., to this Honorable Court and the Commission on Audit, and
to DECLARE such evidence to be admissible in any proceeding for the determination of any
compensation due to PIATCO, if any.
[F]. In the alternative, to:
i. SET ASIDE the trial court's Order dated 08 August 2006 denying Private
Respondent's motion for intervention in the expropriation case, and
ii. Should this Honorable Court lend credence to the argument of the Solicitor
General in its Commentdated 20 April 2006 that "there are issues as to material fact
that require presentation of evidence", to REMAND the resolution of the legal issues
raised by Private Respondent to the trial court consistent with this Honorable Court's
holding in the Gingoyon Resolution that "the interests of the movants-inintervention [meaning Takenaka, Asahikosan, and herein Private Respondent]
may be duly litigated in proceedings which are extant before the lower
courts."62
In essence, Baterina is opposing the expropriation proceedings on the ground that NAIA IPT III is
already public property. Hence, PIATCO is not entitled to just compensation for NAIA IPT III. He is
asking the Court to make a definitive ruling on this matter considering that it was not settled in
either Agan or Gingoyon.
We disagree. Contrary to Baterina's stance, PIATCO's entitlement to just and equitable consideration
for its construction of NAIA IPT III and the propriety of the Republic's resort to expropriation
proceedings were already recognized and upheld by this Court in Agan and Gingoyon.
The Court's Decisions in both Agan and Gingoyon had attained finality, the former on 17 February
2004 and the latter on 17 March 2006.
This Court already made an unequivocal pronouncement in its Resolution dated 21 January 2004
in Agan that for the Government of the Republic to take over the NAIA IPT III facility, it has to
compensate PIATCO as a builder of the structures; and that "[t]he compensation must be just and in
accordance with law and equity for the government cannot unjustly enrich itself at the expense of
PIATCO and its investors."63 As between the Republic and PIATCO, the judgment on the need to
compensate PIATCO before the Government may take over NAIA IPT III is already conclusive and
beyond question.
Hence, in Gingoyon, this Court declared that:

This pronouncement contains the fundamental premises which permeate this decision of the
Court. Indeed,Agan, final and executory as it is, stands as governing law in this case, and
any disposition of the present petition must conform to the conditions laid down by the Court
in its 2004 Resolution.
xxxx
The pronouncement in the 2004 Resolution is especially significant to this case in two
aspects, namely: (i) that PIATCO must receive payment of just compensation
determined in accordance with law and equity; and (ii) that the government is barred
from taking over NAIA 3 until such just compensation is paid. The parties cannot be
allowed to evade the directives laid down by this Court through any mode of judicial action,
such as the complaint for eminent domain.
It cannot be denied though that the Court in the 2004 Resolution prescribed mandatory
guidelines which the Government must observe before it could acquire the NAIA 3 facilities.
Thus, the actions of respondent judge under review, as well as the arguments of the parties
must, to merit affirmation, pass the threshold test of whether such propositions are in accord
with the 2004 Resolution.64
The Court then, in Gingoyon, directly addressed the issue on the appropriateness of the Republic's
resort to expropriation proceedings:
The Government has chosen to resort to expropriation, a remedy available under the
law, which has the added benefit of an integrated process for the determination of just
compensation and the payment thereof to PIATCO. We appreciate that the case at bar is
a highly unusual case, whereby the Government seeks to expropriate a building complex
constructed on land which the State already owns. There is an inherent illogic in the resort to
eminent domain on property already owned by the State. At first blush, since the State
already owns the property on which NAIA 3 stands, the proper remedy should be akin to an
action for ejectment.
However, the reason for the resort by the Government to expropriation proceedings is
understandable in this case. The 2004 Resolution, in requiring the payment of just
compensation prior to the takeover by the Government of NAIA 3, effectively precluded it
from acquiring possession or ownership of the NAIA 3 through the unilateral exercise of its
rights as the owner of the ground on which the facilities stood. Thus, as things stood after the
2004 Resolution, the right of the Government to take over the NAIA 3 terminal was
preconditioned by lawful order on the payment of just compensation to PIATCO as builder of
the structures.
xxxx
The right of eminent domain extends to personal and real property, and the NAIA 3
structures, adhered as they are to the soil, are considered as real property. The public
purpose for the expropriation is also beyond dispute. It should also be noted that Section 1
of Rule 67 (on Expropriation) recognizes the possibility that the property sought to be
expropriated may be titled in the name of the Republic of the Philippines, although
occupied by private individuals, and in such case an averment to that effect should be
made in the complaint. The instant expropriation complaint did aver that the NAIA 3 complex
"stands on a parcel of land owned by the Bases Conversion Development Authority, another
agency of [the Republic of the Philippines]."

Admittedly, eminent domain is not the sole judicial recourse by which the Government
may have acquired the NAIA 3 facilities while satisfying the requisites in the 2004
Resolution. Eminent domain though may be the most effective, as well as the speediest
means by which such goals may be accomplished. Not only does it enable immediate
possession after satisfaction of the requisites under the law, it also has a built-in procedure
through which just compensation may be ascertained. Thus, there should be no question as
to the propriety of eminent domain proceedings in this case.
Still, in applying the laws and rules on expropriation in the case at bar, we are impelled to
apply or construe these rules in accordance with the Court's prescriptions in the 2004
Resolution to achieve the end effect that the Government may validly take over the NAIA 3
facilities. Insofar as this case is concerned, the 2004 Resolution is effective not only as a
legal precedent, but as the source of rights and prescriptions that must be guaranteed, if not
enforced, in the resolution of this petition. Otherwise, the integrity and efficacy of the rulings
of this Court will be severely diminished.65 (Emphasis ours.)
The Court, also in Gingoyon, categorically recognized PIATCO's ownership over the structures it had
built in NAIA IPT III, to wit:
There can be no doubt that PIATCO has ownership rights over the facilities which it
had financed and constructed. The 2004 Resolution squarely recognized that right when it
mandated the payment of just compensation to PIATCO prior to the takeover by the
Government of NAIA 3. The fact that the Government resorted to eminent domain
proceedings in the first place is a concession on its part of PIATCO's ownership. Indeed, if
no such right is recognized, then there should be no impediment for the Government to seize
control of NAIA 3 through ordinary ejectment proceedings.
xxxx
Thus, the property subject of expropriation, the NAIA 3 facilities, are real property
owned by PIATCO. x x x (Emphasis ours.)66
It was further settled in Gingoyon that the expropriation proceedings shall be held in accordance with
Republic Act No. 8974,67 thus:
Unlike in the case of Rule 67, the application of Rep. Act No. 8974 will not contravene the
2004 Resolution, which requires the payment of just compensation before any takeover of
the NAIA 3 facilities by the Government. The 2004 Resolution does not particularize the
extent such payment must be effected before the takeover, but it unquestionably requires at
least some degree of payment to the private property owner before a writ of possession may
issue. The utilization of Rep. Act No. 8974 guarantees compliance with this bare minimum
requirement, as it assures the private property owner the payment of, at the very least, the
proffered value of the property to be seized. Such payment of the proffered value to the
owner, followed by the issuance of the writ of possession in favor of the Government, is
precisely the schematic under Rep. Act No. 8974, one which facially complies with the
prescription laid down in the 2004 Resolution.
And finally, as to the determination of the amount due PIATCO, this Court ruled in Gingoyon that:
Under Rep. Act No. 8974, the Government is required to "immediately pay" the owner of the
property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of
the property based on the current relevant zonal valuation of the [BIR]; and (2) the value of

the improvements and/or structures as determined under Section 7. As stated above, the
BIR zonal valuation cannot apply in this case, thus the amount subject to immediate
payment should be limited to "the value of the improvements and/or structures as
determined under Section 7," with Section 7 referring to the "implementing rules and
regulations for the equitable valuation of the improvements and/or structures on the land."
Under the present implementing rules in place, the valuation of the improvements/structures
are to be based using "the replacement cost method." However, the replacement cost is
only one of the factors to be considered in determining the just compensation.
In addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated that the
payment of just compensation should be in accordance with equity as well. Thus, in
ascertaining the ultimate amount of just compensation, the duty of the trial court is to ensure
that such amount conforms not only to the law, such as Rep. Act No. 8974, but to principles
of equity as well.
Admittedly, there is no way, at least for the present, to immediately ascertain the value of the
improvements and structures since such valuation is a matter for factual determination. Yet
Rep. Act No. 8974 permits an expedited means by which the Government can immediately
take possession of the property without having to await precise determination of the
valuation. Section 4(c) of Rep. Act No. 8974 states that "in case the completion of a
government infrastructure project is of utmost urgency and importance, and there is no
existing valuation of the area concerned, the implementing agency shall immediately pay
the owner of the property its proferred value, taking into consideration the standards
prescribed in Section 5 [of the law]." The "proffered value" may strike as a highly subjective
standard based solely on the intuition of the government, but Rep. Act No. 8974 does
provide relevant standards by which "proffered value" should be based, as well as the
certainty of judicial determination of the propriety of the proffered value.
In filing the complaint for expropriation, the Government alleged to have deposited the
amount of P3 Billion earmarked for expropriation, representing the assessed value of the
property. The making of the deposit, including the determination of the amount of the deposit,
was undertaken under the erroneous notion that Rule 67, and not Rep. Act No. 8974, is the
applicable law. Still, as regards the amount, the Court sees no impediment to recognize this
sum of P3 Billion as the proffered value under Section 4(b) of Rep. Act No. 8974. After all, in
the initial determination of the proffered value, the Government is not strictly required to
adhere to any predetermined standards, although its proffered value may later be subjected
to judicial review using the standards enumerated under Section 5 of Rep. Act No. 8974. 68
Gingoyon constitutes as the law of the case for the expropriation proceedings, docketed as Case
No. 04-0876CFM, before the RTC of Pasay City. Law of the case has been defined in the following
manner
By "law of the case" is meant that "whatever is once irrevocably established as the
controlling legal rule or decision between the same parties in the same case continues to be
the law of the case" so long as the "facts on which such decision was predicated continue to
be the facts of the case before the court" (21 C.J.S. 330). And once the decision becomes
final, it is binding on all inferior courts and hence beyond their power and authority to alter or
modify (Kabigting vs. Acting Director of Prisons, G.R. L-15548, October 30, 1962). 69
A ruling rendered on the first appeal, constitutes the law of the case, and, even if erroneous, it may
no longer be disturbed or modified since it has become final long ago. 70

The extensive excerpts from Gingoyon demonstrate and emphasize that the Court had already
adjudged the issues raised by Baterina, which he either conveniently overlooked or stubbornly
refused to accept.
The general rule precluding the relitigation of material facts or questions which were in issue and
adjudicated in former action are commonly applied to all matters essentially connected with the
subject matter of the litigation. Thus, it extends to questions necessarily involved in an issue,
and necessarily adjudicated, or necessarily implied in the final judgment, although no specific
finding may have been made in reference thereto, and although such matters were directly referred
to in the pleadings and were not actually or formally presented. Under this rule, if the record of the
former trial shows that the judgment could not have been rendered without deciding the particular
matter, it will be considered as having settled that matter as to all future actions between the parties
and if a judgment necessarily presupposes certain premises, they are as conclusive as the
judgment itself. Reasons for the rule are that a judgment is an adjudication on all the matters which
are essential to support it, and that every proposition assumed or decided by the court leading up to
the final conclusion and upon which such conclusion is based is as effectually passed upon as the
ultimate question which is finally solved.71
Since the issues Baterina wishes to raise as an intervenor in Case No. 04-0876CFM were already
settled with finality in both Agan and Gingoyon, then there is no point in still allowing his intervention.
His Petition-in-Intervention would only be a relitigation of matters that had been previously
adjudicated by no less than the Highest Court of the land. And, in no manner can the RTC of Pasay
City in Case No. 04-0876CFM grant the reliefs he prayed for without departing from or running afoul
of the final and executory Decisions of this Court in Aganand Gingoyon.
While it is true that when this Court, in a Resolution dated 1 February 2006, dismissed the Motions
for Intervention in Gingoyon, including that of Baterina, it also observed that the interests of the
movants-in-intervention may be duly litigated in proceedings which are extant before the lower
courts. This does not mean, however, that the said movants-in-interest were assured of being
allowed as intervenors or that the reliefs they sought as such shall be granted by the trial courts. The
fate of their intervention still rests on their interest or legal standing in the case and the merits of their
arguments.
WHEREFORE, in view of the foregoing:
a. The Petition in G.R. No. 169914 is hereby DISMISSED for lack of merit; and
b. The Petition in G.R. No. 174166 is hereby likewise DISMISSED for being moot and academic.
No costs.
SO ORDERED.
Puno, C.J., Quisumbing, Ynares-Santiago, Austria-Martinez, Corona, Carpio-Morales, Tinga,
Velasco, Jr., Leonardo-de Castro, Brion, JJ., concur.
Carpio, Azcuna, Nachura, Reyes, no part.

THIRD DIVISION

SPOUSES LETICIA & JOSE ERVIN G.R. No. 189239

ABAD, SPS. ROSARIO AND ERWIN
COLLANTES, SPS. RICARDO AND Present:
FELITA ANN, SPS. ELSIE AND
ROGER LAS PIAS, LINDA LAYDA, CARPIO MORALES, Chairperson, J.,
RESTITUTO
MARIANO,
SPS. BRION,
ARNOLD
AND
MIRIAM BERSAMIN
MERCINES, SPS. LUCITA AND VILLARAMA, JR., and
WENCESLAO A. RAPACON, SPS. SERENO, JJ.
ROMEO AND EMILYN HULLEZA,
LUZ MIPANTAO, SPS. HELEN AND
ANTHONY TEVES, MARLENE
TUAZON, SPS. ZALDO AND MIA
SALES, SPS. JOSEFINA AND JOEL
YBERA, SPS. LINDA AND JESSIE
CABATUAN, SPS. WILMA AND
MARIO
ANDRADA,
SPS.
RAYMUNDO
AND
ARSENIA
LELIS, FREDY AND SUSANA
PILONEO,
Petitioners,
- versus -

FIL-HOMES
REALTY
and
DEVELOPMENT CORPORATION Promulgated:
and
MAGDIWANG
REALTY
CORPORATION,
Respondents.
November 24, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - x

DECISION

CARPIO MORALES, J.:

Fil-Homes Realty and Development Corporation and Magdiwang Realty
Corporation (respondents), co-owners of two lots situated in Sucat, Paraaque City
and covered by Transfer Certificates of Title Nos. 21712 and 21713, filed a
complaint for unlawful detainer on May 7, 2003 against above-named petitioners
before the Paraaque Metropolitan Trial Court (MeTC).
Respondents alleged that petitioners, through tolerance, had occupied the subject
lots since 1980 but ignored their repeated demands to vacate them.
Petitioners countered that there is no possession by tolerance for they have been in
adverse, continuous and uninterrupted possession of the lots for more than 30
years; and that respondents predecessor-in-interest, Pilipinas Development
Corporation, had no title to the lots. In any event, they contend that the question of
ownership must first be settled before the issue of possession may be resolved.
During the pendency of the case or on June 30, 2004, the City of Paraaque filed
expropriation proceedings covering the lots before the Regional Trial Court of
Paraaque with the intention of establishing a socialized housing project therein for
distribution to the occupants including petitioners. A writ of possession was
consequently issued and a Certificate of Turn-over given to the City.
Branch 77 of the MeTC, by Decision of March 3, 2008, rendered judgment
in the unlawful detainer case against petitioners, disposing as follows:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendants Leticia and Ervin Abad et. als.
ordering the latter and all persons claiming rights under them
to VACATE and SURRENDER possession of the premises (Lots
covered by TCT NOS. (71065) 21712 and (71066) 21713 otherwise
known as Purok I Silverio Compound, Barangay San Isidro, Paraaque
City to plaintiff and to PAY the said plaintiff as follows:
1. The reasonable compensation in the amount of P20,000.00 a
month commencing November 20, 2002 and every month

thereafter until the defendants shall have finally vacated the

premises and surrender peaceful possession thereof to the
plaintiff;
2. P20,000.00 as and for attorneys fees, and finally
3. Costs of suit.
SO ORDERED.[1] (emphasis in the original)

The MeTC held that as no payment had been made to respondents for the lots, they
still maintain ownership thereon. It added that petitioners cannot claim a better
right by virtue of the issuance of a Writ of Possession for the project beneficiaries
have yet to be named.
On appeal, the Regional Trial Court (RTC), by Decision of September 4, 2008,
[2]
reversed the MeTC decision and dismissed respondents complaint in this wise:
x x x The court a quo ruled that the case filed by plaintiffs (respondents
herein) is unlawful detainer as shown by the allegations of the
Complaint. The ruling of the court a quo is not accurate.It is not the
allegations of the Complaint that finally determine whether a case is
unlawful detainer, rather it is the evidence in the case.

Unlawful detainer requires the significant element of tolerance.

Tolerance of the occupation of the property must be present right from
the start of the defendants possession. The phrase from the start of
defendants possession is significant. When there is no tolerance right
from the start of the possession sought to be recovered, the case
of unlawful detainer will not prosper.[3] (emphasis in the original;
underscoring supplied)

The RTC went on to rule that the issuance of a writ of possession in favor of the
City bars the continuation of the unlawful detainer proceedings, and since the
judgment had already been rendered in the expropriation proceedings which
effectively turned over the lots to the City, the MeTC has no jurisdiction to
disregard the . . . final judgment and writ of possession due to non-payment of just
compensation:
The Writ of Possession shows that possession over the properties
subject of this case had already been given to the City of Paraaque since
January 19, 2006 after they were expropriated. It is serious error for
the court a quo to rule in the unlawful detainer case that Magdiwang
Realty Corporation and Fil-Homes Realty and Development
Corporation could still be given possession of the properties which
were already expropriated in favor of the City of Paraaque.
There is also another serious lapse in the ruling of the court a quo
that the case for expropriation in the Regional Trial Court would not bar,
suspend or abate the ejectment proceedings. The court a quo had failed
to consider the fact that the case for expropriation was already decided
by the Regional Trial Court, Branch 196 way back in the year 2006 or 2
years before the court a quo rendered its judgment in the unlawful
detainer case in the year 2008. In fact, there was already a Writ of
Possession way back in the year 1996 (sic) issued in the expropriation
case by the Regional Trial Court, Branch 196. The court a quo has no
valid reason to disregard the said final judgment and the writ of
possession already issued by the Regional Trial Court in favor of the
City of Paraaque and against Magdiwang Realty Corporation and
Fil-Homes Realty Development Corporation and make another
judgment concerning possession of the subject properties contrary
to the final judgment of the Regional Trial Court, Branch 196.
[4]
(emphasis in the original)

Before the Court of Appeals where respondents filed a petition for review,
they maintained that respondents act of allowing several years to pass without
requiring [them] to vacate nor filing an ejectment case against them amounts to
acquiescence or tolerance of their possession.[5]

By Decision of May 27, 2009,[6] the appellate court, noting that petitioners did not
present evidence to rebut respondents allegation of possession by tolerance, and
considering petitioners admission that they commenced occupation of the property
without the permission of the previous owner Pilipinas Development
Corporation as indicium of tolerance by respondents predecessor-in-interest,
ruled in favor of respondents. Held the appellate court:
Where the defendants entry upon the land was with plaintiffs
tolerance from the date and fact of entry, unlawful detainer proceedings
may be instituted within one year from the demand on him to vacate
upon demand. The status of such defendant is analogous to that of a
tenant or lessee, the term of whose lease, has expired but whose
occupancy is continued by the tolerance of the lessor. The same rule
applies where the defendant purchased the house of the former lessee,
who was already in arrears in the payment of rentals, and thereafter
occupied the premises without a new lease contract with the landowner.[7]

Respecting the issuance of a writ of possession in the expropriation proceedings,

the appellate court, citing Republic v. Gingoyon,[8] held the same does not signify
the completion of the expropriation proceedings. Thus it disposed:
WHEREFORE, premises considered, the instant Petition is
GRANTED. The assailed Decision of the Court a quo is REVOKED and
SET ASIDE. The Decision of the Metropolitan Trial Court dated March
3, 2008 is hereby REINSTATED with MODIFICATION [by] deleting
the award for attorneys fees.
SO ORDERED. (underscoring supplied)

Petitioners motion for reconsideration was denied by Resolution dated August 26,
2009, hence, the filing of the present petition for review.
The petition fails.
In the exercise of the power of eminent domain, the State expropriates
private property for public use upon payment of just compensation. A socialized
housing project falls within the ambit of public use as it is in furtherance of the
constitutional provisions on social justice.[9]

As a general rule, ejectment proceedings, due to its summary nature, are not
suspended or their resolution held in abeyance despite the pendency of a civil
action regarding ownership.
Section 1 of Commonwealth Act No. 538[10] enlightens, however:
Section 1. When the Government seeks to acquire, through
purchase or expropriation proceedings, lands belonging to any estate or
chaplaincy (cappellania), any action for ejectment against the tenants
occupying said lands shall be automatically suspended, for such time
as may be required by the expropriation proceedings or the necessary
negotiations for the purchase of the lands, in which latter case, the period
of suspension shall not exceed one year.
To avail himself of the benefits of the suspension, the tenants
shall pay to the landowner the current rents as they become due
or deposit the same with the court where the action for ejectment has
been instituted. (emphasis and underscoring supplied)

Petitioners did not comply with any of the acts mentioned in the law to avail of the
benefits of the suspension. They nevertheless posit that since the lots are the
subject of expropriation proceedings, respondents can no longer assert a better
right of possession; and that the City Ordinance authorizing the initiation of
expropriation proceedings designated them as beneficiaries of the lots, hence, they
are entitled to continue staying there.
Petitioners position does not lie.
The exercise of expropriation by a local government unit is covered by
Section 19 of the Local Government Code (LGC):
SEC. 19. Eminent Domain. A local government unit may, through
its chief executive and acting pursuant to an ordinance, exercise the
power of eminent domain for public use, or purpose, or welfare for the
benefit of the poor and the landless, upon payment of just compensation,
pursuant to the provisions of the Constitution and pertinent laws:
Provided, however, That the power of eminent domain may not be
exercised unless a valid and definite offer has been previously made to

the owner, and such offer was not accepted: Provided, further, That the
local government unit may immediately take possession of the property
upon the filing of the expropriation proceedings and upon making a
deposit with the proper court of at least fifteen percent (15%) of the fair
market value of the property based on the current tax declaration of the
property to be expropriated: Provided, finally, That the amount to be paid
for the expropriated property shall be determined by the proper court,
based on the fair market value of the property.
Lintag v. National Power Corporation [11] clearly outlines the stages of
expropriation, viz:
Expropriation of lands consists of two stages:
The first is concerned with the determination of the authority of the
plaintiff to exercise the power of eminent domain and the propriety of its
exercise in the context of the facts involved in the suit. It ends with an
order, if not of dismissal of the action, "of condemnation declaring that
the plaintiff has a lawful right to take the property sought to be
condemned, for the public use or purpose described in the complaint,
upon the payment of just compensation to be determined as of the date
of the filing of the complaint x x x.
The second phase of the eminent domain action is concerned with the
determination by the court of "the just compensation for the property
sought to be taken." This is done by the court with the assistance of not
more than three (3) commissioners x x x .
It is only upon the completion of these two stages that expropriation is
said to have been completed. The process is not complete until payment
of just compensation. Accordingly, the issuance of the writ of possession
in this case does not write finis to the expropriation proceedings. To
effectuate the transfer of ownership, it is necessary for the NPC to pay
the property owners thefinal just compensation.[12] (emphasis and
underscoring supplied)

In the present case, the mere issuance of a writ of possession in the expropriation
proceedings did not transfer ownership of the lots in favor of the City. Such
issuance was only the first stage in expropriation. There is even no evidence that
judicial deposit had been made in favor of respondents prior to the Citys
possession of the lots, contrary to Section 19 of the LGC.

Respecting petitioners claim that they have been named beneficiaries of the
lots, the city ordinance authorizing the initiation of expropriation proceedings does
not state so.[13] Petitioners cannot thus claim any right over the lots on the basis of
the ordinance.
Even if the lots are eventually transferred to the City, it is non sequitur for
petitioners to claim that they are automatically entitled to be beneficiaries
thereof. Forcertain requirements must be met and complied with before they can be
considered to be beneficiaries.
In another vein, petitioners posit that respondents failed to prove that their
possession is by mere tolerance. This too fails. Apropos is the ruling in Calubayan
v. Pascual:[14]
In allowing several years to pass without requiring the occupant to
vacate the premises nor filing an action to eject him, plaintiffs
have acquiesced to defendants possession and use of the
premises. It has been held that a person who occupies the land
of another at the latters tolerance or permission, without any
contract between them, is necessarily bound by an implied
promise that he will vacate upon demand, failing which a
summary action for ejectment is the proper remedy against
them. The status of the defendant is analogous to that of a lessee or
tenant whose term of lease has expired but whose occupancy
continued by tolerance of the owner. In such a case, the unlawful
deprivation or withholding of possession is to be counted from the
date of the demand to vacate. (emphasis and underscoring supplied)

Respondents bought the lots from Pilipinas Development Corporation in

1983. They stepped into the shoes of the seller with respect to its relationship with
petitioners.Even if early on respondents made no demand or filed no action against
petitioners to eject them from the lots, they thereby merely maintained the status
quo allowed petitioners possession by tolerance.

WHEREFORE, the petition for review is DENIED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

ARTURO D. BRION
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
CONCHITA CARPIO MORALES
Associate Justice
Chairperson

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, I certify that the conclusions in the above decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA
Chief Justice