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A.

Interpleader [Rule 62]

MESINA V. IAC 145 SCRA 497 Holder in due course


MESINA V. IAC
145 SCRA 497
FACTS:
Jose Go purchased from Associate Bank a Cashiers Check, which he left on top of the managers
desk when left the bank.
employees.

The bank manager then had it kept for safekeeping by one of its

The employee was then in conference with one Alexander Lim. He left the check in

his desk
and upon his return, Lim and the check were gone.

When Go inquired about his check, the

same couldn't be found and Go was advised to request for the stoppage of payment which he did.
He executed also an affidavit of loss as well as reported it to the police.
The bank then received the check twice for clearing. For these two times, they dishonored the
payment by saying that payment has been stopped. After the second time, a lawyer
contacted it demanding payment.

He refused to disclose the name of his client and threatened to

sue. Later, the


name of Mesina was revealed.

When asked by the police on how he possessed the check,

he said it was paid to him Lim. An information for theft was then filed against Lim.
A case of interpleader was filed by the bank and Go moved to participate as intervenor in the
complaint for damages.

Mesina moved for the dismissal of the case but was denied.

The

trial court ruled in the interpleader case ordering the bank to replace the cashiers check in favor of

Go.

HELD:
Petitioner cannot raise as arguments that a cashiers check cannot be countermanded from
the hands of a holder in due course and that a cashiers check is a check drawn by the
bank against itself.

Petitioner failed to substantiate that he was a holder in due course.

Upon
questioning, he admitted that he got the check from Lim who stole the check. He refused to
disclose how and why it has passed to him. It simply means that he has notice of the defect of his
title over the check from the start.

The holder of a cashiers check who is not a holder in

due course
cannot enforce payment against the issuing bank which dishonors the same. If a payee of a
cashiers check obtained it from the issuing bank by fraud, or if there is some other reason why
the payee is not entitled to collect the check, the bank would of course have the right to
refuse
payment of the check when presented by payee, since the bank was aware of the facts surrounding
the loss of the check in question.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 70145 November 13, 1986
MARCELO A. MESINA, petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT, HON. ARSENIO M. GONONG, in his
capacity as Judge of Regional Trial Court Manila (Branch VIII), JOSE GO, and ALBERT UY,
respondents.

PARAS, J.:
This is an appeal by certiorari from the decision of the then Intermediate Appellate Court (IAC for
short), now the Court of Appeals (CA) in AC-G.R. S.P. 04710, dated Jan. 22, 1985, which dismissed
the petition for certiorari and prohibition filed by Marcelo A. Mesina against the trial court in Civil
Case No. 84-22515. Said case (an Interpleader) was filed by Associated Bank against Jose Go and

Marcelo A. Mesina regarding their conflicting claims over Associated Bank Cashier's Check No.
011302 for P800,000.00, dated December 29, 1983.
Briefly, the facts and statement of the case are as follows:
Respondent Jose Go, on December 29, 1983, purchased from Associated Bank Cashier's Check
No. 011302 for P800,000.00. Unfortunately, Jose Go left said check on the top of the desk of the
bank manager when he left the bank. The bank manager entrusted the check for safekeeping to a
bank official, a certain Albert Uy, who had then a visitor in the person of Alexander Lim. Uy had to
answer a phone call on a nearby telephone after which he proceeded to the men's room. When he
returned to his desk, his visitor Lim was already gone. When Jose Go inquired for his cashier's
check from Albert Uy, the check was not in his folder and nowhere to be found. The latter advised
Jose Go to go to the bank to accomplish a "STOP PAYMENT" order, which suggestion Jose Go
immediately followed. He also executed an affidavit of loss. Albert Uy went to the police to report the
loss of the check, pointing to the person of Alexander Lim as the one who could shed light on it.
The records of the police show that Associated Bank received the lost check for clearing on
December 31, 1983, coming from Prudential Bank, Escolta Branch. The check was immediately
dishonored by Associated Bank by sending it back to Prudential Bank, with the words "Payment
Stopped" stamped on it. However, the same was again returned to Associated Bank on January 4,
1984 and for the second time it was dishonored. Several days later, respondent Associated Bank
received a letter, dated January 9, 1984, from a certain Atty. Lorenzo Navarro demanding payment
on the cashier's check in question, which was being held by his client. He however refused to reveal
the name of his client and threatened to sue, if payment is not made. Respondent bank, in its letter,
dated January 20, 1984, replied saying the check belonged to Jose Go who lost it in the bank and is
laying claim to it.
On February 1, 1984, police sent a letter to the Manager of the Prudential Bank, Escolta Branch,
requesting assistance in Identifying the person who tried to encash the check but said bank refused
saying that it had to protect its client's interest and the Identity could only be revealed with the
client's conformity. Unsure of what to do on the matter, respondent Associated Bank on February 2,
1984 filed an action for Interpleader naming as respondent, Jose Go and one John Doe, Atty.
Navarro's then unnamed client. On even date, respondent bank received summons and copy of the
complaint for damages of a certain Marcelo A. Mesina from the Regional Trial Court (RTC) of
Caloocan City filed on January 23, 1984 bearing the number C-11139. Respondent bank moved to
amend its complaint, having been notified for the first time of the name of Atty. Navarro's client and
substituted Marcelo A. Mesina for John Doe. Simultaneously, respondent bank, thru representative
Albert Uy, informed Cpl. Gimao of the Western Police District that the lost check of Jose Go is in the
possession of Marcelo Mesina, herein petitioner. When Cpl. Gimao went to Marcelo Mesina to ask
how he came to possess the check, he said it was paid to him by Alexander Lim in a "certain
transaction" but refused to elucidate further. An information for theft (Annex J) was instituted against
Alexander Lim and the corresponding warrant for his arrest was issued (Annex 6-A) which up to the
date of the filing of this instant petition remains unserved because of Alexander Lim's successful
evation thereof.
Meanwhile, Jose Go filed his answer on February 24, 1984 in the Interpleader Case and moved to
participate as intervenor in the complain for damages. Albert Uy filed a motion of intervention and
answer in the complaint for Interpleader. On the Scheduled date of pretrial conference inthe
interpleader case, it was disclosed that the "John Doe" impleaded as one of the defendants is
actually petitioner Marcelo A. Mesina. Petitioner instead of filing his answer to the complaint in the
interpleader filed on May 17, 1984 an Omnibus Motion to Dismiss Ex Abudante Cautela alleging lack
of jurisdiction in view of the absence of an order to litigate, failure to state a cause of action and lack

of personality to sue. Respondent bank in the other civil case (CC-11139) for damages moved to
dismiss suit in view of the existence already of the Interpleader case.
The trial court in the interpleader case issued an order dated July 13, 1984, denying the motion to
dismiss of petitioner Mesina and ruling that respondent bank's complaint sufficiently pleaded a cause
of action for itnerpleader. Petitioner filed his motion for reconsideration which was denied by the trial
court on September 26, 1984. Upon motion for respondent Jose Go dated October 31, 1984,
respondent judge issued an order on November 6, 1984, declaring petitioner in default since his
period to answer has already expirecd and set the ex-parte presentation of respondent bank's
evidence on November 7, 1984.
Petitioner Mesina filed a petition for certioari with preliminary injunction with IAC to set aside 1) order
of respondent court denying his omnibus Motion to Dismiss 2) order of 3) the order of default against
him.
On January 22, 1985, IAC rendered its decision dimissing the petition for certiorari. Petitioner
Mesina filed his Motion for Reconsideration which was also denied by the same court in its
resolution dated February 18, 1985.
Meanwhile, on same date (February 18, 1985), the trial court in Civil Case #84-22515 (Interpleader)
rendered a decisio, the dispositive portion reading as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered
ordering plaintiff Associate Bank to replace Cashier's Check No. 011302 in
favor of Jose Go or its cas equivalent with legal rate of itnerest from date of
complaint, and with costs of suit against the latter.
SO ORDERED.
On March 29, 1985, the trial court in Civil Case No. C-11139, for damages,
issued an order, the pertinent portion of which states:
The records of this case show that on August 20, 1984 proceedings in this
case was (were) ordered suspended because the main issue in Civil Case
No. 84-22515 and in this instant case are the same which is: who between
Marcelo Mesina and Jose Go is entitled to payment of Associated Bank's
Cashier's Check No. CC-011302? Said issue having been resolved already in
Civil casde No. 84-22515, really this instant case has become moot and
academic.
WHEREFORE, in view of the foregoing, the motion sholud be as it is hereby
granted and this case is ordered dismissed.
In view of the foregoing ruling no more action should be taken on the "Motion
For Reconsideration (of the order admitting the Intervention)" dated June 21,
1984 as well as the Motion For Reconsideration dated September 10, 1984.
SO ORDERED.
Petitioner now comes to Us, alleging that:

1. IAC erred in ruling that a cashier's check can be countermanded even in the hands of a holder in
due course.
2. IAC erred in countenancing the filing and maintenance of an interpleader suit by a party who had
earlier been sued on the same claim.
3. IAC erred in upholding the trial court's order declaring petitioner as in default when there was no
proper order for him to plead in the interpleader complaint.
4. IAC went beyond the scope of its certiorari jurisdiction by making findings of facts in advance of
trial.
Petitioner now interposes the following prayer:
1. Reverse the decision of the IAC, dated January 22, 1985 and set aside the February 18, 1985
resolution denying the Motion for Reconsideration.
2. Annul the orders of respondent Judge of RTC Manila giving due course to the interpleader suit
and declaring petitioner in default.
Petitioner's allegations hold no water. Theories and examples advanced by petitioner on causes and
effects of a cashier's check such as 1) it cannot be countermanded in the hands of a holder in due
course and 2) a cashier's check is a bill of exchange drawn by the bank against itself-are general
principles which cannot be aptly applied to the case at bar, without considering other things.
Petitioner failed to substantiate his claim that he is a holder in due course and for consideration or
value as shown by the established facts of the case. Admittedly, petitioner became the holder of the
cashier's check as endorsed by Alexander Lim who stole the check. He refused to say how and why
it was passed to him. He had therefore notice of the defect of his title over the check from the start.
The holder of a cashier's check who is not a holder in due course cannot enforce such check against
the issuing bank which dishonors the same. If a payee of a cashier's check obtained it from the
issuing bank by fraud, or if there is some other reason why the payee is not entitled to collect the
check, the respondent bank would, of course, have the right to refuse payment of the check when
presented by the payee, since respondent bank was aware of the facts surrounding the loss of the
check in question. Moreover, there is no similarity in the cases cited by petitioner since respondent
bank did not issue the cashier's check in payment of its obligation. Jose Go bought it from
respondent bank for purposes of transferring his funds from respondent bank to another bank near
his establishment realizing that carrying money in this form is safer than if it were in cash. The check
was Jose Go's property when it was misplaced or stolen, hence he stopped its payment. At the
outset, respondent bank knew it was Jose Go's check and no one else since Go had not paid or
indorsed it to anyone. The bank was therefore liable to nobody on the check but Jose Go. The bank
had no intention to issue it to petitioner but only to buyer Jose Go. When payment on it was
therefore stopped, respondent bank was not the one who did it but Jose Go, the owner of the check.
Respondent bank could not be drawer and drawee for clearly, Jose Go owns the money it
represents and he is therefore the drawer and the drawee in the same manner as if he has a current
account and he issued a check against it; and from the moment said cashier's check was lost and/or
stolen no one outside of Jose Go can be termed a holder in due course because Jose Go had not
indorsed it in due course. The check in question suffers from the infirmity of not having been properly
negotiated and for value by respondent Jose Go who as already been said is the real owner of said
instrument.
In his second assignment of error, petitioner stubbornly insists that there is no showing of conflicting
claims and interpleader is out of the question. There is enough evidence to establish the contrary.

Considering the aforementioned facts and circumstances, respondent bank merely took the
necessary precaution not to make a mistake as to whom to pay and therefore interpleader was its
proper remedy. It has been shown that the interpleader suit was filed by respondent bank because
petitioner and Jose Go were both laying their claims on the check, petitioner asking payment thereon
and Jose Go as the purchaser or owner. The allegation of petitioner that respondent bank had
effectively relieved itself of its primary liability under the check by simply filing a complaint for
interpleader is belied by the willingness of respondent bank to issue a certificate of time deposit in
the amount of P800,000 representing the cashier's check in question in the name of the Clerk of
Court of Manila to be awarded to whoever wig be found by the court as validly entitled to it. Said
validity will depend on the strength of the parties' respective rights and titles thereto. Bank filed the
interpleader suit not because petitioner sued it but because petitioner is laying claim to the same
check that Go is claiming. On the very day that the bank instituted the case in interpleader, it was not
aware of any suit for damages filed by petitioner against it as supported by the fact that the
interpleader case was first entitled Associated Bank vs. Jose Go and John Doe, but later on
changed to Marcelo A. Mesina for John Doe when his name became known to respondent bank.
In his third assignment of error, petitioner assails the then respondent IAC in upholding the trial
court's order declaring petitioner in default when there was no proper order for him to plead in the
interpleader case. Again, such contention is untenable. The trial court issued an order, compelling
petitioner and respondent Jose Go to file their Answers setting forth their respective claims.
Subsequently, a Pre-Trial Conference was set with notice to parties to submit position papers.
Petitioner argues in his memorandum that this order requiring petitioner to file his answer was issued
without jurisdiction alleging that since he is presumably a holder in due course and for value, how
can he be compelled to litigate against Jose Go who is not even a party to the check? Such
argument is trite and ridiculous if we have to consider that neither his name or Jose Go's name
appears on the check. Following such line of argument, petitioner is not a party to the check either
and therefore has no valid claim to the Check. Furthermore, the Order of the trial court requiring the
parties to file their answers is to all intents and purposes an order to interplead, substantially and
essentially and therefore in compliance with the provisions of Rule 63 of the Rules of Court. What
else is the purpose of a law suit but to litigate?
The records of the case show that respondent bank had to resort to details in support of its action for
Interpleader. Before it resorted to Interpleader, respondent bank took an precautionary and
necessary measures to bring out the truth. On the other hand, petitioner concealed the
circumstances known to him and now that private respondent bank brought these circumstances out
in court (which eventually rendered its decision in the light of these facts), petitioner charges it with
"gratuitous excursions into these non-issues." Respondent IAC cannot rule on whether respondent
RTC committed an abuse of discretion or not, without being apprised of the facts and reasons why
respondent Associated Bank instituted the Interpleader case. Both parties were given an opportunity
to present their sides. Petitioner chose to withhold substantial facts. Respondents were not forbidden
to present their side-this is the purpose of the Comment of respondent to the petition. IAC decided
the question by considering both the facts submitted by petitioner and those given by respondents.
IAC did not act therefore beyond the scope of the remedy sought in the petition.
WHEREFORE, finding that the instant petition is merely dilatory, the same is hereby denied and the
assailed orders of the respondent court are hereby AFFIRMED in toto.
SO ORDERED.
Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.

Arreza vs. Diaz, Jr, GR 133113, 30 August 2001 [interpleading parties may file counterclaim, cross-claims or third party complaint for complete adjudication of the case]

Facts: Bliss Development Corporation is the owner of a housing unit located at Lot 27. Block 30
New Capitol Estates I, Barangay Matandang Balara, Quezon City. In the course of a case
involving a conflict of ownership between petitioner Edgar H. Arreza and respondent Montano
M. Diaz. Bliss Development Corporation filed a complaint for interpleader. Petitioner Arreza
filed a Motion to Dismiss the case, citing as grounds res adjudicata or conclusiveness of the
judgment in the interpleader case as well as lack of cause of action. The petition was dismissed
for lack of merit. The Court of Appeals said:
The decision invoked by the petitioner as res adjudicata resolved only the issue of who between
Edgar H. Arreza and Montano Diaz has the better right over the property under litigation. It did
not resolve the rights and obligations of the parties
ISSUE:
where petitioner raises the following grounds for review:
I
THE CAUSE OF ACTION EMBODIED IN THE PRESENT RTC CASE PERTAINING
TO MR. DIAZ'S CLAIMS FOR REIMBURSEMENT OF AMOUNTS WHICH HE
ALLEGEDLY PAID TO BLISS BY WAY OF PREMIUM OR INSTALLMENT
PAYMENTS FOR THE ACQUISITION OF THE PROPERTY WAS ERRONEOUSLY
BROUGHT AGAINST MR. ARREZA. ALSO, SAID CLAIMS ARE BARRED BY RES
ADJUDICATA OR CONCLUSIVENESS OF A PRIOR JUDGMENT IN THE PRIOR
RTC CASE WHICH WAS ULTIMATELY AFFIRMED BY THIS HONORABLE
COURT IN G.R. NO. 128726.
II
THE CAUSE OF ACTION EMBODIED IN THE PRESENT RTC CASE PERTAINING
TO MR. DIAZ'S CLAIMS FOR REIMBURSEMENT OF THE COST OF
IMPROVEMENTS HE ALLEGEDLY INTRODUCED TO THE PROPERTY IS
LIKEWISE BARRED BY RES ADJUDICATA OR CONCLUSIVENESS OF A PRIOR
JUDGMENT IN THE PRIOR RTC CASE WHICH WAS ULTIMATELY AFFIRMED
BY THIS HONORABLE COURT IN G.R NO. 128726.
III.

THE RULING IN THE PRIOR CA PETITION (CA-G.R. SP. NO. 41974) WHICH WAS
ULTIMATELY AFFIRMED BY THIS HONORABLE COURT IN G.R. NO. 128726
THAT THE DECISION IN THE PRIOR RTC CASE SETTLED ALL CLAIMS WHICH
MESSRS. DIAZ AND ARREZA HAD AGAINST EACH OTHER CONSTITUTES THE
LAW OF THE CASE BETWEEN THEM AND SERVES AS BAR TO THE FILING OF
THE PRESENT RTC CASE INVOLVING THE SAME CLAIMS.
IV.
IN ITS ENTIRETY, THE AMENDED COMPLAINT IN THE PRESENT RTC CASE IS
DISMISSIBLE ON THE GROUND OF LACK OF CAUSE OF ACTION.7
HELD:

The issue for our resolution now is whether respondent Diaz's claims for reimbursement against
petitioner Arreza are barred by res adjudicata.
The elements of res adjudicata are: (a) that the former judgment must be final; (b) the court
which rendered judgment had jurisdiction over the parties and the subject matter; (c) it must be a
judgment on the merits; and (d) there must be between the first and second causes of action
identity of the parties, subject matter, and cause of action.8
Worthy of note, the prior case for interpleader filed with Branch 146 of the Regional Trial Court
of Makati, Civil Case No. 94-2086, was settled with finality with this Court's resolution in G.R.
No. 128726. 9 The judgment therein is now final.
When the Regional Trial Court of Makati (Branch 146) rendered judgment, it had priorly
acquired jurisdiction over the parties and the subject matter. Respondent, however, contends that
the trial court did not acquire jurisdiction over the property subject of the action, as the action
was instituted in Makati City while the subject unit is situated in Quezon City.
As stated by the Court of Appeals, the court in a complaint for interpleader shall determine the
rights and obligations of the parties and adjudicate their respective claims. Such rights,
obligations, and claims could only be adjudicated if put forward by the aggrieved party in
assertion of his rights. That party in this case referred to respondent Diaz. The second paragraph
of Section 5 of Rule 62 of the 1997 Rules of Civil Procedure provides that the parties in an
interpleader action may file counterclaims, cross-claims, third party complaints and responsive
pleadings thereto, "as provided by these Rules." The second paragraph was added to Section 5 to
expressly authorize the additional pleadings and claims enumerated therein, in the interest of a
complete adjudication of the controversy and its incidents.15
Pursuant to said Rules, respondent should have filed his claims against petitioner
Arreza in the interpleader action. Having asserted his rights as a buyer in good faith
in his answer, and praying relief therefor, respondent Diaz should have crystallized

his demand into specific claims for reimbursement by petitioner Arreza. This he
failed to do.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 133113

August 30, 2001

EDGAR H. ARREZA, petitioner, (conflicting claims of the ownership of house in Balara


quezon city)
vs.
MONTANO M. DIAZ, JR., respondent.
QUISUMBING, J.:
This petition assails the decision 1 promulgated on December 24, 1997, and the resolution 2
dated March 6, 1998, by the Court of Appeals in CA-G.R SP No. 43895. That decision dismissed
the petition for certiorari questioning the order 3 dated February 4, 1997 of the Regional Trial
Court of Makati City, Branch 59, in Civil Case No. 96-1372, which had denied petitioner's
motion to dismiss the complaint filed against him on grounds of res adjudicata.
The factual antecedents of the present petition are culled from the findings of the Court of
Appeals.
Bliss Development Corporation is the owner of a housing unit located at Lot 27. Block 30 New
Capitol Estates I, Barangay Matandang Balara, Quezon City. In the course of a case involving a
conflict of ownership between petitioner Edgar H. Arreza and respondent Montano M. Diaz, Jr.,
4 docketed as Civil Case No. 94-2086 before the Regional Trial Court of Makati, Branch 146,
Bliss Development Corporation filed a complaint for interpleader.
In a decision dated March 27, 1996, the trial court resolved the conflict by decreeing as follows:
WHEREFORE, premises considered, the herein interpleader is resolved in favor of
defendant Edgar H. Arreza, and plaintiff Bliss Development is granted cognizance of the

May 6, 1991 transfer of rights by Emiliano and Leonila Melgazo thru Manuel Melgazo,
to said defendant Edgar Arreza. The case is dismissed as against defendant Montano M.
Diaz, Jr.
The third-party complaint is likewise dismissed.
SO ORDERED.
The decision became final and was duly executed with Bliss executing a Contract to Sell the
aforementioned property to petitioner Arreza. Respondent Diaz was constrained to deliver the
property with all its improvements to petitioner.
Thereafter respondent Diaz filed a complaint against Bliss Development Corporation, Edgar H.
Arreza, and Domingo Tapay in the Regional Trial Court of Makati, Branch 59, docketed as Civil
Case No. 96-1372. He sought to hold Bliss Development Corporation and petitioner Arreza
liable for reimbursement to him of P1,706,915;58 representing the cost of his acquisition and
improvements on the subject property with interest at 8% per annum.
Petitioner Arreza filed a Motion to Dismiss the case, citing as grounds res adjudicata or
conclusiveness of the judgment in the interpleader case as well as lack of cause of action.
In an Order dated February 4, 1997, the motion was denied for lack of merit.
A Motion for Reconsideration filed by Arreza was likewise denied on March 20, 1997.
On April 16, 1997, Arreza filed a petition for certiorari before the Court of Appeals alleging that
the Orders dated February 4 and March 20, 1997, were issued against clear provisions of
pertinent laws, the Rules of Court, and established jurisprudence such that respondent court acted
without or in excess of jurisdiction, or grave abuse of discretion amounting to lack or excess of
jurisdiction.
The petition was dismissed for lack of merit. The Court of Appeals said:
The decision invoked by the petitioner as res adjudicata resolved only the issue of who
between Edgar H. Arreza and Montano Diaz has the better right over the property under
litigation. It did not resolve the rights and obligations of the parties.
The action filed by Montano M. Diaz against Bliss Development Corporation, et al. seeks
principally the collection of damages in the form of the payments Diaz made to the
defendant and the value of the improvements he introduced on the property matters
that were not adjudicated upon in the previous case for interpleader.
xxx

xxx

xxx

WHEREFORE, this petition is hereby DISMISSED with costs against the petitioner.

SO ORDERED.5
Petitioner's motion to reconsider the decision of the Court of Appeals was denied.6 Hence, the
present petition, where petitioner raises the following grounds for review:
I
THE CAUSE OF ACTION EMBODIED IN THE PRESENT RTC CASE PERTAINING
TO MR. DIAZ'S CLAIMS FOR REIMBURSEMENT OF AMOUNTS WHICH HE
ALLEGEDLY PAID TO BLISS BY WAY OF PREMIUM OR INSTALLMENT
PAYMENTS FOR THE ACQUISITION OF THE PROPERTY WAS ERRONEOUSLY
BROUGHT AGAINST MR. ARREZA. ALSO, SAID CLAIMS ARE BARRED BY RES
ADJUDICATA OR CONCLUSIVENESS OF A PRIOR JUDGMENT IN THE PRIOR
RTC CASE WHICH WAS ULTIMATELY AFFIRMED BY THIS HONORABLE
COURT IN G.R. NO. 128726.
II
THE CAUSE OF ACTION EMBODIED IN THE PRESENT RTC CASE PERTAINING
TO MR. DIAZ'S CLAIMS FOR REIMBURSEMENT OF THE COST OF
IMPROVEMENTS HE ALLEGEDLY INTRODUCED TO THE PROPERTY IS
LIKEWISE BARRED BY RES ADJUDICATA OR CONCLUSIVENESS OF A PRIOR
JUDGMENT IN THE PRIOR RTC CASE WHICH WAS ULTIMATELY AFFIRMED
BY THIS HONORABLE COURT IN G.R NO. 128726.
III.
THE RULING IN THE PRIOR CA PETITION (CA-G.R. SP. NO. 41974) WHICH WAS
ULTIMATELY AFFIRMED BY THIS HONORABLE COURT IN G.R. NO. 128726
THAT THE DECISION IN THE PRIOR RTC CASE SETTLED ALL CLAIMS WHICH
MESSRS. DIAZ AND ARREZA HAD AGAINST EACH OTHER CONSTITUTES THE
LAW OF THE CASE BETWEEN THEM AND SERVES AS BAR TO THE FILING OF
THE PRESENT RTC CASE INVOLVING THE SAME CLAIMS.
IV.
IN ITS ENTIRETY, THE AMENDED COMPLAINT IN THE PRESENT RTC CASE IS
DISMISSIBLE ON THE GROUND OF LACK OF CAUSE OF ACTION.7
MEANING OF RES ADJUDICATA:
The issue for our resolution now is whether respondent Diaz's claims for reimbursement against
petitioner Arreza are barred by res adjudicata.
The elements of res adjudicata are: (a) that the former judgment must be final; (b) the court
which rendered judgment had jurisdiction over the parties and the subject matter; (c) it must be a

judgment on the merits; and (d) there must be between the first and second causes of action
identity of the parties, subject matter, and cause of action.8
Worthy of note, the prior case for interpleader filed with Branch 146 of the Regional Trial Court
of Makati, Civil Case No. 94-2086, was settled with finality with this Court's resolution in G.R.
No. 128726. 9 The judgment therein is now final.
When the Regional Trial Court of Makati (Branch 146) rendered judgment, it had priorly
acquired jurisdiction over the parties and the subject matter. Respondent, however, contends that
the trial court did not acquire jurisdiction over the property subject of the action, as the action
was instituted in Makati City while the subject unit is situated in Quezon City.
We find, however, that in his answer to the complaint dated October 3, 1994, respondent alleged:
20. That should the said additional provision be declared valid and in the remote
possibility that the alleged conflicting claimant is adjudged to possess better right herein
answering defendant is asserting his right as a buyer for value and in good faith against
all persons/parties concerned.10 (Italics supplied)
Respondent in his answer also prayed that:
D. Should the said additional provision be found valid and in the event his co-defendant
is found to possess better rights, to adjudge him (Diaz) entitled to rights as a buyer in
good faith and for value.11
By asserting his right as a buyer for value and in good faith of the subject property, and asking
for relief arising therefrom, respondent invoked the jurisdiction of the trial court. Having invoked
the jurisdiction of the Regional Trial Court of Makati (Branch 146) by filing his answer to secure
affirmative relief against petitioner, respondent is now estopped from challenging the jurisdiction
of said court after it had decided the case against him. Surely we cannot condone here the
undesirable practice of a party submitting his case for decision and then accepting the judgment
only if favorable, but attacking it on grounds of jurisdiction when adverse.12
Respondent also claims that there is no identity of causes of action between Civil Case No. 942086, the prior case, and Civil Case No. 96-1372, the present case subject of this petition, as the
former involved a complaint for interpleader while the latter now involves an action for a sum of
money and damages. He avers that a complaint for interpleader is nothing more than the
determination of rights over the subject matter involved.
In its assailed decision, respondent Court of Appeals pointed out that the 1997 Rules of Civil
Procedure provide that in a case for interpleader, the court shall determine the respective rights
and obligations of the parties and adjudicate their respective claims.13 The appellate court noted,
however, that the defendants in that interpleader case, namely Diaz and Arreza, did not pursue
the issue of damages and reimbursement although the answer of respondent Diaz did pray for
affirmative relief arising out of the rights of a buyer in good faith.14

Following the same tack, respondent Diaz now alleges that the issues in the prior case, Civil
Case No. 94-2086, were delimited by the pre-trial order which did not include matters of
damages and reimbursement as an issue. He faults petitioner for not raising such issues in the
prior case, with the result that the trial court did not resolve the rights and obligations of the
parties. There being no such resolution, no similar cause of action exists between the prior case
and the present case, according to respondent Diaz.
Respondent in effect argues that it was incumbent upon petitioner as a party in Civil Case No.
94-2086 to put in issue respondent's demands for reimbursement. However, it was not
petitioner's duty to do the lawyering for respondent. As stated by the Court of Appeals, the court
in a complaint for interpleader shall determine the rights and obligations of the parties and
adjudicate their respective claims. Such rights, obligations, and claims could only be adjudicated
if put forward by the aggrieved party in assertion of his rights. That party in this case referred to
respondent Diaz. The second paragraph of Section 5 of Rule 62 of the 1997 Rules of Civil
Procedure provides that the parties in an interpleader action may file counterclaims, cross-claims,
third party complaints and responsive pleadings thereto, "as provided by these Rules." The
second paragraph was added to Section 5 to expressly authorize the additional pleadings and
claims enumerated therein, in the interest of a complete adjudication of the controversy and its
incidents.15
Pursuant to said Rules, respondent should have filed his claims against petitioner Arreza in the
interpleader action. Having asserted his rights as a buyer in good faith in his answer, and praying
relief therefor, respondent Diaz should have crystallized his demand into specific claims for
reimbursement by petitioner Arreza. This he failed to do. Such failure gains significance in light
of our ruling in Baclayon vs. Court of Appeals, 182 SCRA 761, 771-772 (1990), where this Court
said:
A corollary question that We might as well resolve now (although not raised as an issue
in the present petition, but conformably with Gayos, et al. v. Gayos, et al., G.R. No. L27812, September 26, 197S, 67 SCRA 146, that it is a cherished rule of procedure that a
court should always strive to settle the entire controversy in a single proceeding leaving
no root or branch to bear the seeds in future litigation) is whether or not the private
respondents can still file a separate complaint against the petitioners on the ground that
they are builders in good faith and consequently, recover the value of the improvements
introduced by them on the subject lot. The case of Heirs of Laureano Marquez v.
Valencia, 99 Phil. 740, provides the answer:
If, aside from relying solely on the deed of sale with a right to repurchase and
failure on the part of the vendors to purchase it within the period stipulated
therein, the defendant had set up an alternative though inconsistent defense that he
had inherited the parcel of land from his late maternal grandfather and presented
evidence in support of both defenses, the overruling of the first would not bar the
determination by the court of the second. The defendant having failed to set up
such alternative defenses and chosen or elected to rely on one only, the overruling
thereof was a complete determination of the controversy between the parties
which bars a subsequent action based upon an unpleaded defense, or any other

cause of action, except that of Failure of the complaint to state a cause of action
and of lack of jurisdiction of the Court. The determination of the issue joined by
the parties constitutes res judicata. (Italics supplied)
Although the alternative defense of being builders in good faith is only permissive, the
counterclaim for reimbursement of the value of the improvements is in the nature of a
compulsory counterclaim. Thus, the failure by the private respondents to set it up bars
their right to raise it in a subsequent litigation (Rule 9, Section 4 of the Rules of Court).
While We realize the plight of the private respondents, the rule on compulsory
counterclaim is designed to enable the disposition of the whole controversy at one time
and in one action. The philosophy of the rule is to discourage multiplicity of suits. (Italics
supplied)
Having failed to set up his claim for reimbursement, said claim of respondent Diaz being in the
nature of a compulsory counterclaim is now barred.16
In cases involving res adjudicata, the parties and the causes of action are identical or
substantially the same in the prior as well as the subsequent action. The judgment in the first
action is conclusive as to every matter offered and received therein and as to any other matter
admissible therein and which might have been offered for that purpose, hence said judgment is
an absolute bar to a subsequent action for the same cause.17 The bar 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"18 Said prior judgment is conclusive in a subsequent suit between the same parties on
the same subject matter, and on the same cause of action, not only as to matters which were
decided in the first action, but also as to every other matter which the parties could have properly
set up in the prior suit.19
In the present case, we find there is an identity of causes of action between Civil Case No. 942086 and Civil Case No. 96-1372. Respondent Diaz's cause of action in the prior case, now the
crux of his present complaint against petitioner, was in the nature of an unpleaded compulsory
counterclaim, which is now barred. There being a former final judgment on the merits in the
prior case, rendered in Civil Case No. 94-2086 by Branch 146 of the Regional Trial Court of
Makati, which acquired jurisdiction over the same parties, the same subject property, and the
same cause of action, the present complaint of respondent herein (Diaz) against petitioner Arreza
docketed as Civil Case No. 96-1372 before the Regional Trial of Makati, Branch 59 should be
dismissed on the ground of res adjudicata.
WHEREFORE, the instant petition is GRANTED. The decision dated December 24, 1997 and
the resolution dated March 6, 1998 of the Court of Appeals in CA-G.R. SP No. 43895 are
REVERSED and SET ASIDE. Civil Case No. 96-1372 before the Regional Trial Court of Makati
City, Branch 59, is hereby ordered DISMISSED as against herein petitioner Edgar H. Arreza.
Costs against respondent.
SO ORDERED.

B. Declaratory Relief [Rule 63]


1. Eufemia Almeda vs. Bathala marketing Industries, GR 150806, 28 January
2008 [Defintion; Requisites]

FACTS:

Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee, represented by
its president Ramon H. Garcia, renewed its Contract of Lease4 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 letter7 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
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.

ISSUE

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.

HELD:
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.

A.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 150806

January 28, 2008

EUFEMIA ALMEDA and ROMEL ALMEDA, petitioners,


vs.
BATHALA MARKETING INDUSTRIES, INC., respondent.
DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, of the Decision1
of the Court of Appeals (CA), dated September 3, 2001, in CA-G.R. CV No. 67784, and its
Resolution2 dated November 19, 2001. The assailed Decision affirmed with modification the
Decision3 of the Regional Trial Court (RTC), Makati City, Branch 136, dated May 9, 2000 in
respondent Bathala Marketing Industries, Inc., as lessee, represented by its president Ramon H.
Garcia, renewed its Contract of Lease4
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;

During the effectivity of the contract, Ponciano died. Thereafter, respondent dealt with
petitioners. In a letter7 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.
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.
DECLARATORY RELIEF:
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.
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 plaintiff's 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 PLAINTIFFAPPELLEE 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 DEFINITION:
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 Corporation17 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. Mirasol18 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. Limited20 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 1250's "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' letter22 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.

Malana vs. Tappa, GR 181303, 17 September 2009 [Proper party, three remedies similar to
declaratory relief, reformation, quieting of title and consolidation; jurisdiction]
FACTS:

Petitioners filed before the RTC their Complaint for Reivindicacion, Quieting of Title, and
Damages2 against respondents. Petitioners alleged in their Complaint that they are the owners of
a parcel of land covered by Transfer Certificate of Title (TCT) No. T-1279373 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
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

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.

ISSUE:
WHETHER OR NOT THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF
DISCRETION IN DISMISSING THE COMPLAINT OF THE PETITIONERS MOTU
PROPRIO.20

HELD:

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

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 181303

September 17, 2009

CARMEN DANAO MALANA, MARIA DANAO ACORDA, EVELYN DANAO,


FERMINA DANAO, LETICIA DANAO and LEONORA DANAO, the last two are
represented herein by their Attorney-in-Fact, MARIA DANAO ACORDA, Petitioners,
vs.
BENIGNO TAPPA, JERRY REYNA, SATURNINO CAMBRI and SPOUSES
FRANCISCO AND MARIA LIGUTAN, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Certiorari under Rule 65 of the Rules of Court, assailing the Orders1 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
Damages2 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-1279373 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
Court13 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 2007 Order 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 exercise exclusive 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 before the 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 an accion 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.271avvphi1
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. Abellana28 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 of certiorari.
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 Regional Trial 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.

Ombudsman vs. Ibay, GR 137538, 3 September 2001 [relief incapable of pecuniary


estimation; jurisdiction
PRIVATE RESPONDENT ( Branch Manager) MAY FILE DECLARATORY RELIEF
FACTS:

Sometime in 1998, petitioner conducted an investigation on the alleged "scam" on the Public
Estates Authority-Amari Coastal Bay Development Corporation. The case, entitled Fact-Finding
and Intelligence Bureau vs. Amadeo Lagdameo, et al., was docketed as OMB-0-97-0411. Initial
result of the investigation revealed that the alleged anomaly was committed through the issuance
of checks which were subsequently deposited in several financial institutions. On April 29, 1998,
petitioner issued an Order directing private respondent Lourdes Marquez, branch manager of
Union Bank of the Philippines to produce several bank documents for inspection relative to
Account Nos. 011-37270-5, 240-020718, 245-30317-3 and 245-303318-1, The inspection would
be done "in camera" wherein the bank records would be examined without bringing the
documents outside the bank premises. Its purpose was to identify the specific bank records prior
to the issuance of the required information not in any manner needed in or relevant to the
investigation.1
Petitioner reminded private respondent that her acts constitute disobedience or resistance to a
lawful order and is punishable as indirect contempt under Section 3 (b), Rule 71 of the Revised
Rules of Court, In the event of her failure to comply as directed, private respondent was ordered
to show cause why she should not be cited for contempt and why she should not be charged for
obstruction.3

ISSUE: The only question raised by petitioner for resolution is whether or not public respondent
acted without jurisdiction and/or with grave abuse of discretion in entertaining the cited petition
for declaratory relief.
HELD: Similarly, the Rules of Court is explicit that such action shall be brought before the
appropriate Regional Trial Court. Section 1, Rule 63 of the Rules of Court provides:
Section 1. Who may file petition. Any person interested under a deed, will, contract or
other written instrument, 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.
xxx

xxx

xxx

REQUISITES OF DECLARATORY RELIEF:

The requisites of an action for declaratory relief are:


(1) there must be a justiciable 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.7 In this case, the controversy concerns the extent of the power of
petitioner to examine bank accounts under Section 15 (8) of R.A. 6770 vis--vis the duty of
banks under Republic Act 1405 not to divulge any information relative to deposits of whatever
nature. The interests of the parties are adverse considering the antagonistic assertion of a legal
right on one hand, that is the power of Ombudsman to examine bank deposits, and on the other,
the denial thereof apparently by private respondent who refused to allow petitioner to inspect in
camera certain bank accounts. The party seeking relief, private respondent herein, asserts a legal
interest in the controversy. The issue invoked is ripe for judicial determination as litigation is
inevitable. Note that petitioner has threatened private respondent with "indirect contempt" and
"obstruction" charges should the latter not comply with its order.
Circumstances considered, we hold that public respondent has jurisdiction to take cognizance of
the petition for declaratory relief. Nor can it be said that public respondent gravely abused its
discretion in doing so. We are thus constrained to dismiss the instant petition for lack of merit.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 137538 September 3, 2001
OFFICE OF THE OMBUDSMAN, petitioner,
vs.
HON. FRANCISCO B. IBAY, in his capacity as Presiding Judge of the Regional Trial
Court, Makati City, Branch 135, UNION BANK OF THE PHILIPPINES, and LOURDES
T. MARQUEZ, in her capacity as Branch Manager of UBP Julia Vargas Branch,
respondents.1wphi1.nt

RE S O LUTI ON
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the Orders of public respondent dated
August 19, 1998 and December 22, 1998, and to dismiss the proceedings in Civil Case No. 981585.
The factual antecedents of this case are as follows: lawphil.net
Sometime in 1998, petitioner conducted an investigation on the alleged "scam" on the Public
Estates Authority-Amari Coastal Bay Development Corporation. The case, entitled Fact-Finding
and Intelligence Bureau vs. Amadeo Lagdameo, et al., was docketed as OMB-0-97-0411. Initial
result of the investigation revealed that the alleged anomaly was committed through the issuance
of checks which were subsequently deposited in several financial institutions. On April 29, 1998,
petitioner issued an Order directing private respondent Lourdes Marquez, branch manager of
Union Bank of the Philippines branch at Julia Vargas Avenue, Pasig City, to produce several
bank documents for inspection relative to Account Nos. 011-37270-5, 240-020718, 245-30317-3
and 245-303318-1, reportedly maintained in the said branch. The documents referred to include
bank account application forms, signature cards, transactions history, bank statements, bank
ledgers, debit and credit memos, deposit and withdrawal slips, application for purchase of
manager's checks, used manager's checks and check microfilms. The inspection would be done
"in camera" wherein the bank records would be examined without bringing the documents
outside the bank premises. Its purpose was to identify the specific bank records prior to the
issuance of the required information not in any manner needed in or relevant to the
investigation.1
Private respondent failed to comply with petitioner's order. She explained that the subject
accounts pertain to International Corporate Bank (Interbank) which merged with Union Bank in
1994. She added that despite diligent efforts, the bank could not identify these accounts since the
checks were issued in cash or bearer forms. She informed petitioner that she had to first verify
from the Interbank records in its archives the whereabouts of said accounts.2
Petitioner found private respondent's explanation unacceptable. Petitioner reminded private
respondent that her acts constitute disobedience or resistance to a lawful order and is punishable
as indirect contempt under Section 3 (b), Rule 71 of the Revised Rules of Court, in relation to
Section 15 (9) of R.A. 6770 (Ombudsman Act of 1989). The same might also constitute willful
obstruction of the lawful exercise of the functions of the Ombudsman, which is punishable under
Section 36 of R.A. 6770. On June 16, 1998, petitioner issued an order to private respondent to
produce the requested bank documents for "in camera" inspection. In the event of her failure to
comply as directed, private respondent was ordered to show cause why she should not be cited
for contempt and why she should not be charged for obstruction.3
Instead of complying with the order of petitioner, private respondent filed a petition for
declaratory relief with an application for temporary restraining order and/or preliminary
injunction before the Regional Trial Court of Makati City, Branch 135, presided by respondent

Judge Francisco Ibay. The petition was docketed as Civil Case No. 98-1585. In her petition,
private respondent averred that under Sections 2 and 3 of R.A. 1405 (Law on Secrecy of Bank
Deposits), she had the legal obligation not to divulge any information relative to all deposits of
whatever nature with banks in the Philippines. But petitioner's Order cited Section 15 (8) of R.A.
6770 stating that the Ombudsman had the power to examine and have access to bank accounts
and records. Private respondents, therefore, sought a definite ruling and/or guidelines as regards
her rights as well as petitioner's power to inspect bank deposits under the cited provisions of law.
Meanwhile, private respondent filed with this Court a petition for certiorari and prohibition,
assailing petitioner's order to institute indirect contempt proceedings against her.4
Petitioner moved to dismiss the aforesaid petition for declaratory relief on the ground that the
RTC has no jurisdiction over the subject matter thereof. In an order dated August 19, 1998, now
being assailed, public respondent denied petitioner's motion to dismiss. Petitioner then filed an
ex-parte motion for extended ruling. On December 22, 1998, public respondent issued an order
declaring that it has jurisdiction over the case since it is an action for declaratory relief under
Rule 63 of the Rules of Court.
Seasonably, petitioner filed before this Court the instant petition assailing the Orders dated
August 19, 1998 and December 22, 1998 of public respondent on the ground that public
respondent assumed jurisdiction over the case and issued orders with grave abuse of discretion
and clear lack of jurisdiction. Petitioner sought the nullification of the impugned orders, the
immediate dismissal of Civil Case No. 98-1585, and the prohibition of public respondent from
exercising jurisdiction on the investigation being conducted by petitioner in the alleged PEAAMARI land "scam".
The only question raised by petitioner for resolution is whether or not public respondent acted
without jurisdiction and/or with grave abuse of discretion in entertaining the cited petition for
declaratory relief.
Petitioner contends that the RTC of Makati City lacks jurisdiction over the petition for
declaratory relief. It asserts that respondent judge should have dismissed the petition outright in
view of Section 14 of R.A. 6770.lawphil.net
Section 14 of R.A. 6770 provides:lawphil.net
Restrictions. No writ of injunction shall be issued by any court to delay an investigation
being conducted by the Ombudsman under this Act, unless there is a prima facie
evidence that the subject matter of the investigation is outside the jurisdiction of the
Office of the Ombudsman.
No court shall hear any appeal or application for remedy against the decision or findings
of the Ombudsman, except the Supreme Court, on pure question of law.
Petitioner's invocation of the aforequoted statutory provision is misplaced. The special civil
action of declaratory relief falls under the exclusive jurisdiction of the Regional Trial Court.5 It is
not among the actions within the original jurisdiction of the Supreme Court even if only

questions of law are involved.6 Similarly, the Rules of Court is explicit that such action shall be
brought before the appropriate Regional Trial Court. Section 1, Rule 63 of the Rules of Court
provides:
Section 1. Who may file petition. Any person interested under a deed, will, contract or
other written instrument, 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.
xxx

xxx

xxx

The requisites of an action for declaratory relief are: (1) there must be a justiciable 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.7 In this
case, the controversy concerns the extent of the power of petitioner to examine bank accounts
under Section 15 (8) of R.A. 6770 vis--vis the duty of banks under Republic Act 1405 not to
divulge any information relative to deposits of whatever nature. The interests of the parties are
adverse considering the antagonistic assertion of a legal right on one hand, that is the power of
Ombudsman to examine bank deposits, and on the other, the denial thereof apparently by private
respondent who refused to allow petitioner to inspect in camera certain bank accounts. The party
seeking relief, private respondent herein, asserts a legal interest in the controversy. The issue
invoked is ripe for judicial determination as litigation is inevitable. Note that petitioner has
threatened private respondent with "indirect contempt" and "obstruction" charges should the
latter not comply with its order.
Circumstances considered, we hold that public respondent has jurisdiction to take cognizance of
the petition for declaratory relief. Nor can it be said that public respondent gravely abused its
discretion in doing so. We are thus constrained to dismiss the instant petition for lack of merit.
In any event, the relief being sought by private respondent in her action for declaratory relief
before the RTC of Makati City has been squarely addressed by our decision in Marquez vs.
Desierto.8 In that case, we ruled that before an in camera inspection of bank accounts may be
allowed, there must be a pending case before a court of competent jurisdiction. Further, the
account must be clearly identified, and the inspection limited to the subject matter of the pending
case before the court of competent jurisdiction. The bank personnel and the account holder must
be notified to be present during the inspection, and such inspection may cover only the account
identified in the pending case. In the present case, since there is no pending litigation yet before a
court of competent authority, but only an investigation by the Ombudsman on the so-called
"scam", any order for the opening of the bank account for inspection is clearly premature and
legally unjustified.1wphi1.nt
WHEREFORE, the instant petition is DISMISSED.
SO ORDERED.

Commisioner of Customs vs. Hyper Mix Feeds Corp., GR 179579, 1 February 2012
[necessary facts for an action for declaratory relief]

FACTS:

Under the Memorandum, for tariff purposes, wheat was classified according to the following: (1)
importer or consignee; (2) country of origin; and (3) port of discharge.5 The regulation provided
an exclusive list of corporations, ports of discharge, commodity descriptions and countries of
origin. Depending on these factors, wheat would be classified either as food grade or feed grade.
The corresponding tariff for food grade wheat was 3%, for feed grade, 7%.
The RTC held that it had jurisdiction over the subject matter, given that the issue raised by
respondent concerned the quasi-legislative powers of petitioners. It likewise stated that a petition
for declaratory relief was the proper remedy, and that respondent was the proper party to file it.
The court considered that respondent was a regular importer, and that the latter would be
subjected to the application of the regulation in future transactions.
With regard to the validity of the regulation, the trial court found that petitioners had not
followed the basic requirements of hearing and publication in the issuance of CMO 27-2003. It
likewise held that petitioners had "substituted the quasi-judicial determination of the commodity
by a quasi-legislative predetermination."13 The lower court pointed out that a classification based
on importers and ports of discharge were violative of the due process rights of respondent.

ISSUE: . THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE


WHICH IS NOT IN ACCORD WITH THE LAW AND PREVAILING
JURISPRUDENCE.
HELD:

The Petition has no merit.


We shall first discuss the propriety of an action for declaratory relief.
Rule 63, Section 1 provides:
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.

The requirements of an action for declaratory relief are as follows: (1) there must be a justiciable
controversy; (2) the controversy must be between persons whose interests are adverse; (3) the
party seeking declaratory relief must have a legal interest in the controversy; and (4) the issue
involved must be ripe for judicial determination.15 We find that the Petition filed by respondent
before the lower court meets these requirements.
First, the subject of the controversy is the constitutionality of CMO 27-2003 issued by petitioner
Commissioner of Customs. In Smart Communications v. NTC,16 we held:
The determination of whether a specific rule or set of rules issued by an administrative agency
contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the
Constitution vests the power of judicial review or the power to declare a law, treaty, international
or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the
courts, including the regional trial courts.
This is within the scope of judicial power, which includes the authority of the courts to determine
in an appropriate action the validity of the acts of the political departments.
Judicial power includes the duty of the courts of justice to settle actual controversies involving
rights which are legally demandable and enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 179579

February 1, 2012

COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE PORT OF


SUBIC, Petitioners,
vs.
HYPERMIX FEEDS CORPORATION, Respondent.
DECISION
SERENO, J.:

Before us is a Petition for Review under Rule 45,1 assailing the Decision2 and the Resolution3 of
the Court of Appeals (CA), which nullified the Customs Memorandum Order (CMO) No. 2720034 on the tariff classification of wheat issued by petitioner Commissioner of Customs.
The antecedent facts are as follows:
On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-2003. Under the
Memorandum, for tariff purposes, wheat was classified according to the following: (1) importer
or consignee; (2) country of origin; and (3) port of discharge.5 The regulation provided an
exclusive list of corporations, ports of discharge, commodity descriptions and countries of origin.
Depending on these factors, wheat would be classified either as food grade or feed grade. The
corresponding tariff for food grade wheat was 3%, for feed grade, 7%.
CMO 27-2003 further provided for the proper procedure for protest or Valuation and
Classification Review Committee (VCRC) cases. Under this procedure, the release of the articles
that were the subject of protest required the importer to post a cash bond to cover the tariff
differential.6
A month after the issuance of CMO 27-2003, on 19 December 2003, respondent filed a Petition
for Declaratory Relief7 with the Regional Trial Court (RTC) of Las Pias City. It anticipated the
implementation of the regulation on its imported and perishable Chinese milling wheat in transit
from China.8 Respondent contended that CMO 27-2003 was issued without following the
mandate of the Revised Administrative Code on public participation, prior notice, and
publication or registration with the University of the Philippines Law Center.
Respondent also alleged that the regulation summarily adjudged it to be a feed grade supplier
without the benefit of prior assessment and examination; thus, despite having imported food
grade wheat, it would be subjected to the 7% tariff upon the arrival of the shipment, forcing them
to pay 133% more than was proper.
Furthermore, respondent claimed that the equal protection clause of the Constitution was
violated when the regulation treated non-flour millers differently from flour millers for no reason
at all.
Lastly, respondent asserted that the retroactive application of the regulation was confiscatory in
nature.
On 19 January 2004, the RTC issued a Temporary Restraining Order (TRO) effective for twenty
(20) days from notice.9
Petitioners thereafter filed a Motion to Dismiss.10 They alleged that: (1) the RTC did not have
jurisdiction over the subject matter of the case, because respondent was asking for a judicial
determination of the classification of wheat; (2) an action for declaratory relief was improper; (3)
CMO 27-2003 was an internal administrative rule and not legislative in nature; and (4) the
claims of respondent were speculative and premature, because the Bureau of Customs (BOC)
had yet to examine respondents products. They likewise opposed the application for a writ of

preliminary injunction on the ground that they had not inflicted any injury through the issuance
of the regulation; and that the action would be contrary to the rule that administrative issuances
are assumed valid until declared otherwise.
On 28 February 2005, the parties agreed that the matters raised in the application for preliminary
injunction and the Motion to Dismiss would just be resolved together in the main case. Thus, on
10 March 2005, the RTC rendered its Decision11 without having to resolve the application for
preliminary injunction and the Motion to Dismiss.
The trial court ruled in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, the Petition is GRANTED and the subject Customs
Memorandum Order 27-2003 is declared INVALID and OF NO FORCE AND EFFECT.
Respondents Commissioner of Customs, the District Collector of Subic or anyone acting in their
behalf are to immediately cease and desist from enforcing the said Customs Memorandum Order
27-2003.
SO ORDERED.12
The RTC held that it had jurisdiction over the subject matter, given that the issue raised by
respondent concerned the quasi-legislative powers of petitioners. It likewise stated that a petition
for declaratory relief was the proper remedy, and that respondent was the proper party to file it.
The court considered that respondent was a regular importer, and that the latter would be
subjected to the application of the regulation in future transactions.
With regard to the validity of the regulation, the trial court found that petitioners had not
followed the basic requirements of hearing and publication in the issuance of CMO 27-2003. It
likewise held that petitioners had "substituted the quasi-judicial determination of the commodity
by a quasi-legislative predetermination."13 The lower court pointed out that a classification based
on importers and ports of discharge were violative of the due process rights of respondent.
Dissatisfied with the Decision of the lower court, petitioners appealed to the CA, raising the
same allegations in defense of CMO 27-2003.14 The appellate court, however, dismissed the
appeal. It held that, since the regulation affected substantial rights of petitioners and other
importers, petitioners should have observed the requirements of notice, hearing and publication.
Hence, this Petition.
Petitioners raise the following issues for the consideration of this Court:
I. THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE WHICH IS
NOT IN ACCORD WITH THE LAW AND PREVAILING JURISPRUDENCE.
II. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT THE
TRIAL COURT HAS JURISDICTION OVER THE CASE.

The Petition has no merit.


We shall first discuss the propriety of an action for declaratory relief.
Rule 63, Section 1 provides:
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.
The requirements of an action for declaratory relief are as follows: (1) there must be a justiciable
controversy; (2) the controversy must be between persons whose interests are adverse; (3) the
party seeking declaratory relief must have a legal interest in the controversy; and (4) the issue
involved must be ripe for judicial determination.15 We find that the Petition filed by respondent
before the lower court meets these requirements.
First, the subject of the controversy is the constitutionality of CMO 27-2003 issued by petitioner
Commissioner of Customs. In Smart Communications v. NTC,16 we held:
The determination of whether a specific rule or set of rules issued by an administrative agency
contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the
Constitution vests the power of judicial review or the power to declare a law, treaty, international
or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the
courts, including the regional trial courts. This is within the scope of judicial power, which
includes the authority of the courts to determine in an appropriate action the validity of the acts
of the political departments. Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the Government. (Emphasis
supplied)
Meanwhile, in Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance
Secretary,17 we said:
xxx [A] legislative rule is in the nature of subordinate legislation, designed to implement a
primary legislation by providing the details thereof. xxx
In addition such rule must be published. On the other hand, interpretative rules are designed to
provide guidelines to the law which the administrative agency is in charge of enforcing.
Accordingly, in considering a legislative rule a court is free to make three inquiries: (i) whether
the rule is within the delegated authority of the administrative agency; (ii) whether it is
reasonable; and (iii) whether it was issued pursuant to proper procedure. But the court is not free
to substitute its judgment as to the desirability or wisdom of the rule for the legislative body, by

its delegation of administrative judgment, has committed those questions to administrative


judgments and not to judicial judgments. In the case of an interpretative rule, the inquiry is not
into the validity but into the correctness or propriety of the rule. As a matter of power a court,
when confronted with an interpretative rule, is free to (i) give the force of law to the rule; (ii) go
to the opposite extreme and substitute its judgment; or (iii) give some intermediate degree of
authoritative weight to the interpretative rule. (Emphasis supplied)
Second, the controversy is between two parties that have adverse interests. Petitioners are
summarily imposing a tariff rate that respondent is refusing to pay.
Third, it is clear that respondent has a legal and substantive interest in the implementation of
CMO 27-2003. Respondent has adequately shown that, as a regular importer of wheat, on 14
August 2003, it has actually made shipments of wheat from China to Subic. The shipment was
set to arrive in December 2003. Upon its arrival, it would be subjected to the conditions of CMO
27-2003. The regulation calls for the imposition of different tariff rates, depending on the factors
enumerated therein. Thus, respondent alleged that it would be made to pay the 7% tariff applied
to feed grade wheat, instead of the 3% tariff on food grade wheat. In addition, respondent would
have to go through the procedure under CMO 27-2003, which would undoubtedly toll its time
and resources. The lower court correctly pointed out as follows:
xxx As noted above, the fact that petitioner is precisely into the business of importing wheat,
each and every importation will be subjected to constant disputes which will result into (sic)
delays in the delivery, setting aside of funds as cash bond required in the CMO as well as the
resulting expenses thereof. It is easy to see that business uncertainty will be a constant
occurrence for petitioner. That the sums involved are not minimal is shown by the discussions
during the hearings conducted as well as in the pleadings filed. It may be that the petitioner can
later on get a refund but such has been foreclosed because the Collector of Customs and the
Commissioner of Customs are bound by their own CMO. Petitioner cannot get its refund with
the said agency. We believe and so find that Petitioner has presented such a stake in the outcome
of this controversy as to vest it with standing to file this petition.18 (Emphasis supplied)
Finally, the issue raised by respondent is ripe for judicial determination, because litigation is
inevitable19 for the simple and uncontroverted reason that respondent is not included in the
enumeration of flour millers classified as food grade wheat importers. Thus, as the trial court
stated, it would have to file a protest case each time it imports food grade wheat and be subjected
to the 7% tariff.
It is therefore clear that a petition for declaratory relief is the right remedy given the
circumstances of the case.
Considering that the questioned regulation would affect the substantive rights of respondent as
explained above, it therefore follows that petitioners should have applied the pertinent provisions
of Book VII, Chapter 2 of the Revised Administrative Code, to wit:
Section 3. Filing. (1) Every agency shall file with the University of the Philippines Law Center
three (3) certified copies of every rule adopted by it. Rules in force on the date of effectivity of

this Code which are not filed within three (3) months from that date shall not thereafter be the
bases of any sanction against any party of persons.
xxx

xxx

xxx

Section 9. Public Participation. - (1) If not otherwise required by law, an agency shall, as far as
practicable, publish or circulate notices of proposed rules and afford interested parties the
opportunity to submit their views prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates
shall have been published in a newspaper of general circulation at least two (2) weeks
before the first hearing thereon.
(3) In case of opposition, the rules on contested cases shall be observed.
When an administrative rule is merely interpretative in nature, its applicability needs nothing
further than its bare issuance, for it gives no real consequence more than what the law itself has
already prescribed. When, on the other hand, the administrative rule goes beyond merely
providing for the means that can facilitate or render least cumbersome the implementation of the
law but substantially increases the burden of those governed, it behooves the agency to accord at
least to those directly affected a chance to be heard, and thereafter to be duly informed, before
that new issuance is given the force and effect of law.20
Likewise, in Taada v. Tuvera,21 we held:
The clear object of the above-quoted provision is to give the general public adequate notice of
the various laws which are to regulate their actions and conduct as citizens. Without such notice
and publication, there would be no basis for the application of the maxim "ignorantia legis non
excusat." It would be the height of injustice to punish or otherwise burden a citizen for the
transgression of a law of which he had no notice whatsoever, not even a constructive one.
Perhaps at no time since the establishment of the Philippine Republic has the publication of laws
taken so vital significance that at this time when the people have bestowed upon the President a
power heretofore enjoyed solely by the legislature. While the people are kept abreast by the mass
media of the debates and deliberations in the Batasan Pambansa and for the diligent ones,
ready access to the legislative records no such publicity accompanies the law-making process
of the President. Thus, without publication, the people have no means of knowing what
presidential decrees have actually been promulgated, much less a definite way of informing
themselves of the specific contents and texts of such decrees. (Emphasis supplied)
Because petitioners failed to follow the requirements enumerated by the Revised Administrative
Code, the assailed regulation must be struck down.
Going now to the content of CMO 27-3003, we likewise hold that it is unconstitutional for being
violative of the equal protection clause of the Constitution.

The equal protection clause means that no person or class of persons shall be deprived of the
same protection of laws enjoyed by other persons or other classes in the same place in like
circumstances. Thus, the guarantee of the equal protection of laws is not violated if there is a
reasonable classification. For a classification to be reasonable, it must be shown that (1) it rests
on substantial distinctions; (2) it is germane to the purpose of the law; (3) it is not limited to
existing conditions only; and (4) it applies equally to all members of the same class.22
Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how the quality
of wheat is affected by who imports it, where it is discharged, or which country it came from.
Thus, on the one hand, even if other millers excluded from CMO 27-2003 have imported food
grade wheat, the product would still be declared as feed grade wheat, a classification subjecting
them to 7% tariff. On the other hand, even if the importers listed under CMO 27-2003 have
imported feed grade wheat, they would only be made to pay 3% tariff, thus depriving the state of
the taxes due. The regulation, therefore, does not become disadvantageous to respondent only,
but even to the state.
It is also not clear how the regulation intends to "monitor more closely wheat importations and
thus prevent their misclassification." A careful study of CMO 27-2003 shows that it not only fails
to achieve this end, but results in the opposite. The application of the regulation forecloses the
possibility that other corporations that are excluded from the list import food grade wheat; at the
same time, it creates an assumption that those who meet the criteria do not import feed grade
wheat. In the first case, importers are unnecessarily burdened to prove the classification of their
wheat imports; while in the second, the state carries that burden.
Petitioner Commissioner of Customs also went beyond his powers when the regulation limited
the customs officers duties mandated by Section 1403 of the Tariff and Customs Law, as
amended. The law provides:
Section 1403. Duties of Customs Officer Tasked to Examine, Classify, and Appraise Imported
Articles. The customs officer tasked to examine, classify, and appraise imported articles shall
determine whether the packages designated for examination and their contents are in accordance
with the declaration in the entry, invoice and other pertinent documents and shall make return in
such a manner as to indicate whether the articles have been truly and correctly declared in the
entry as regard their quantity, measurement, weight, and tariff classification and not imported
contrary to law. He shall submit samples to the laboratory for analysis when feasible to do so and
when such analysis is necessary for the proper classification, appraisal, and/or admission into the
Philippines of imported articles.
Likewise, the customs officer shall determine the unit of quantity in which they are usually
bought and sold, and appraise the imported articles in accordance with Section 201 of this Code.
Failure on the part of the customs officer to comply with his duties shall subject him to the
penalties prescribed under Section 3604 of this Code.1wphi1

The provision mandates that the customs officer must first assess and determine the classification
of the imported article before tariff may be imposed. Unfortunately, CMO 23-2007 has already
classified the article even before the customs officer had the chance to examine it. In effect,
petitioner Commissioner of Customs diminished the powers granted by the Tariff and Customs
Code with regard to wheat importation when it no longer required the customs officers prior
examination and assessment of the proper classification of the wheat.
It is well-settled that rules and regulations, which are the product of a delegated power to create
new and additional legal provisions that have the effect of law, should be within the scope of the
statutory authority granted by the legislature to the administrative agency. It is required that the
regulation be germane to the objects and purposes of the law; and that it be not in contradiction
to, but in conformity with, the standards prescribed by law.23
In summary, petitioners violated respondents right to due process in the issuance of CMO 272003 when they failed to observe the requirements under the Revised Administrative Code.
Petitioners likewise violated respondents right to equal protection of laws when they provided
for an unreasonable classification in the application of the regulation. Finally, petitioner
Commissioner of Customs went beyond his powers of delegated authority when the regulation
limited the powers of the customs officer to examine and assess imported articles.
WHEREFORE, in view of the foregoing, the Petition is DENIED.
SO ORDERED.

Macasiano vs. NHA, GR 107921, 1 July 1993 [treating declaratory relief as one for
prohibition]

FACTS:
Petitioner seeks to have this Court declare as unconstitutional Sections 28 and 44 of Republic Act No. 7279,
otherwise known as the Urban Development and Housing Act of 1992. He predicates his locust standi on his being a
consultant of the Department of Public Works and Highways (DPWH) pursuant to a Contract of Consultancy on
Operation for Removal of Obstructions and Encroachments on Properties of Public Domain (executed immediately
after his retirement on 2 January 1992 from the Philippine National Police) and his being a taxpayer

In its Comment 5 filed on 15 January 1993, respondent National Mapping and Resource Information
Authority alleges that the implementation of the assailed sections of the Act does not belong to or fall
within its jurisdiction. It disagrees with the petitioner's stand that the said sections are unconstitutional and
avers that Section 28 merely provides for the "humanitarian approach" towards less privileged, citizens
and does not in fact prohibit but merely discourages eviction or demolition, while Section 44 only covers
program beneficiaries.

ISSUE:
WON It is a rule firmly entrenched in our jurisprudence that the constitutionality of an act of the
legislature will not be determined by the courts unless that, question is properly raised and presented in
appropriate cases and is necessary to a determination of the case, i.e., the issue of constitutionality must
be very lis mota presented.
LIS MOTA. The cause of the suit or action. By this term is understood the commencement of the controve
rsy, and thebeginning of the suit

HELD:
8

To reiterate, the essential requisites for a successful judicial inquiry into the constitutionality of a law are:
(a) the existence of an actual case or controversy involving a conflict of legal rights susceptible of judicial
determination, (b) the constitutional question must be raised by a proper property, (c) the constitutional
question must be raised at the opportunity, and (d) the resolution of the constitutional question must be
necessary to the decision of the case. 9 A proper party is one who has sustained or is in danger of
sustaining an immediate injury as a result of the acts or measures complained of. 10
It is easily discernible in the instant case that the first two (2) fundamental requisites are absent. There is
no actual controversy. Moreover, petitioner does not claim that, in either or both of the capacities in which
he is filing the petition, he has been actually prevented from performing his duties as a consultant and
exercising his rights as a property owner because of the assertion by other parties of any benefit under
the challenged sections of the said Act. Judicial review cannot be exercised in vacuo.
Judicial power is the "right to determine actual controversies arising between adverse litigants."

11

In reality, his petition is one for declaratory relief as he prays therein that, "his rights as well as those of
private landowners be clearly defined and his duties under the Constitution and the pertinent laws be
dearly stated with respect to the demolition of illegal structures on public and private lands." 12 Even so, it
is still not viable since among the essential requisites of a petition for declaratory relief are controversy,

(a) there must be a justiciable controversy,(b)the controversy must be between persons whose interests
are adverse and (c) the party seeking declaratory relief must have a legal interest in the controversy. 13
Furthermore, an action for declaratory relief does not fall within the original jurisdiction of the Supreme
Court even if only questions of law are involved. 14 True, we have said that such a petition may be treated
as one for prohibition 15 or mandamus 16 if it has far reaching implications and raises questions that need
to be resolved; but the exercise of such discretion presupposes, at the outset, that the petition is
otherwise viable or meritorious.
The petitioner is not likewise a "proper party." As a consultant of the DPWH under the "Contract for
Consultancy . . .," he is not vested with any authority to demolish obstructions and encroachments on
properties of the public domain, much less on private lands

Republic of the Philippines


SUPREME COURT
Manila
EN BANC

G.R. No. 107921 July 1, 1993


POLICE GENERAL LEVY MACASIANO (Ret.), in his capacity as the consultant of the Department of Public Works and Highways
(DPWH) Task Force on Demolition and/or in his personal capacity as taxpayer, petitioner,
vs.
NATIONAL HOUSING AUTHORITY, HOUSING AND LAND USE REGULATORY BOARD and NATIONAL MAPPING RESOURCES
INFORMATION AUTHORITY, respondents.
RESOLUTION

DAVIDE, JR., J.:

Petitioner seeks to have this Court declare as unconstitutional Sections 28 and 44 of Republic Act No. 7279,
otherwise known as the Urban Development and Housing Act of 1992. He predicates his locust standi on his being a
consultant of the Department of Public Works and Highways (DPWH) pursuant to a Contract of Consultancy on
Operation for Removal of Obstructions and Encroachments on Properties of Public Domain (executed immediately
after his retirement on 2 January 1992 from the Philippine National Police) and his being a taxpayer. As to the first, he
alleges that said Sections 28 and 44 "contain the seeds of a ripening controversy that serve as drawback" to his
"tasks and duties regarding demolition of illegal structures"; because of the said sections, he "is unable to continue
the demolition of illegal structures which he assiduously and faithfully carried out in the past." 1 As a taxpayer, he
alleges that "he has a direct interest in seeing to it that public funds are properly and lawfully disbursed." 2

Republic Act No. 7279 was approved on 24 March 1992 and published in the 4 May 1992 issue of the
Official Gazette. 3 The challenged provisions therein read as follows:
SEC. 28. Eviction and Demolition. Eviction or demolition as a practice shall be
discouraged. Eviction or demolition, however, may be allowed under the following
situations:

(a) When persons or entities occupy danger areas such as esteros, railroad tracks,
garbage dumps, riverbanks, shorlines, waterways, and other public places such as
sidewalks, roads, parks and playgrounds;
(b) When government infrastructure projects with available funding are about to be
implemented; or
(c) When there is a court order for eviction and demolition.
In the execution of eviction or demolition orders involving underprivileged and homeless
citizens, the following shall be mandatory:
(1) Notice upon the affected persons or entities at least thirty (30) days prior to the date of
eviction or demolition;
(2) Adequate consultations on the matter of resettlement with the duly designated
representatives of the families to be resettled and the affected communities in the areas
where they are to be relocated;
(3) Presence of local government officials or their representatives during eviction or
demolition;
(4) Proper identification of all persons taking part in the demolition;
(5) Execution of eviction or demolition only during regular office hours from Mondays to
Fridays and during good weather, unless the affected families consent otherwise;
(6) no use of heavy equipment for demolition except for structures that are permanent
and of concrete materials;
(7) Proper uniforms for members of the Philippine National Police who shall occupy the
first line of law enforcement and observe proper disturbance control procedures; and
(8) Adequate relocation, whether temporary or permanent: Provided, however, That in
cases of eviction and demolition pursuant to a court order involving underprivileged and
homeless citizens, relocations shall be undertaken by the local government unit
concerned and the National Housing Authority with the assistance of other government
agencies within forty-five(45) days from service of notice of final judgment by the court,
after which period the said order shall be executed: Provided, further, That should
relocation not be possible within the said period financial assistance in the amount
equivalent to the prevailing minimum daily wage multiplied by sixty (60) days shall be
extended to the affected families by the local government concerned.
The Department of the Interior and Local Government and the Housing and Urban
Development Coordinating Council shall jointly promulgate the necessary rules and
regulations to carry out the above provision.
xxx xxx xxx
Sec. 44. Moratorium on Eviction and Demolition. There shall be a moratorium on the
eviction of all program beneficiaries and on the demolition of their houses or dwelling
units for a period of three (3) years from the effectivity of this Act: Provided, That the

moratorium shall not apply to those persons who have constructed their structures after
the effectivity of this Act and for cases enumerated in Section 28 hereof.
Petitioner maintains that the said provisions are unconstitutional because:
(a) They deprive the government, and more so, private property owners of their property
without due process of law and without compensation;
(b) They reward, instead of punish, what this Honorable Court has categorically declared
as unlawful acts;
(c) They violate the prohibition against legislation that" takes away one's property to be
given to plain interlopers;
(d) They sweep overbroadly over legitimate concerns of the police power of the State;
and
(e) They encroach upon the judicial power to its valid judgments and orders. 4
On 10 December 1992, we required the respondents to comment on the petition.
In its Comment 5 filed on 15 January 1993, respondent National Mapping and Resource Information
Authority alleges that the implementation of the assailed sections of the Act does not belong to or fall
within its jurisdiction. It disagrees with the petitioner's stand that the said sections are unconstitutional and
avers that Section 28 merely provides for the "humanitarian approach" towards less privileged, citizens
and does not in fact prohibit but merely discourages eviction or demolition, while Section 44 only covers
program beneficiaries.
On 15 January 1993, the Realty Owners Association of the Philippines, Inc. filed a motion to intervene 6
alleging that it has a legal interest in the success of the petition and is in full accord with it. This Court
required the parties to comment thereon.
On 16 February 1993, the Office of the Government Corporate (OGCC) filed a comment 7 for the
respondent National Housing Authority (NHA) informing this Court that "in a letter of respondent NHA
addressed to the office of the undersigned counsel, dated 29 January 1993, . . ., the former categorically
expressed as its official stand on the instant petition that Sections 28 and 44 of Republic Act No. 7279 are
indeed unconstitutional," and that "after a circumspect evaluation of petition. We find no cogent reason
not to support the position heretofore taken by respondent NHA." Said office then prays that the instant
petition be given due course.
On 14 May 1993, the Solicitor General filed his Comment to the petition. He maintains that, the instant
petition is devoid of merit for non-compliance with the essential requisites for the exercise of judicial
review in cases involving the constitutionality of a law. He contends that there is no actual case or
controversy with litigants asserting adverse legal rights or interests, that the petitioner merely asks for an
advisory opinion, that the petitioner is not the proper party to question the Act as he does not state that he
has property "being squatted upon" and that there is no showing that the question of constitutionality is
the very lis mota presented. He argues that Sections 28 and 44 of the Act are not constitutionality infirm.
Up to this time, no comment has been submitted by the parties on the motion to intervene. Considering,
however, that the issues are clear and simple enough, this Court dispenses with the need for a comment
on the said motion, denies the same and, after deliberating on the issues said and the arguments
adduced by the parties in the petition and comments, declares this petition to be without merit.

It is a rule firmly entrenched in our jurisprudence that the constitutionality of an act of the legislature will
not be determined by the courts unless that, question is properly raised and presented in appropriate
cases and is necessary to a determination of the case, i.e., the issue of constitutionality must be very lis
mota presented. 8 To reiterate, the essential requisites for a successful judicial inquiry into the
constitutionality of a law are: (a) the existence of an actual case or controversy involving a conflict of legal
rights susceptible of judicial determination, (b) the constitutional question must be raised by a proper
property, (c) the constitutional question must be raised at the opportunity, and (d) the resolution of the
constitutional question must be necessary to the decision of the case. 9 A proper party is one who has
sustained or is in danger of sustaining an immediate injury as a result of the acts or measures complained
of. 10
It is easily discernible in the instant case that the first two (2) fundamental requisites are absent. There is
no actual controversy. Moreover, petitioner does not claim that, in either or both of the capacities in which
he is filing the petition, he has been actually prevented from performing his duties as a consultant and
exercising his rights as a property owner because of the assertion by other parties of any benefit under
the challenged sections of the said Act. Judicial review cannot be exercised in vacuo. Judicial power is
the "right to determine actual controversies arising between adverse litigants." 11
In reality, his petition is one for declaratory relief as he prays therein that, "his rights as well as those of
private landowners be clearly defined and his duties under the Constitution and the pertinent laws be
dearly stated with respect to the demolition of illegal structures on public and private lands." 12 Even so, it
is still not viable since among the essential requisites of a petition for declaratory relief are controversy,
(a) there must be a justiciable controversy,(b)the controversy must be between persons whose interests
are adverse and (c) the party seeking declaratory relief must have a legal interest in the controversy. 13
Furthermore, an action for declaratory relief does not fall within the original jurisdiction of the Supreme
Court even if only questions of law are involved. 14 True, we have said that such a petition may be treated
as one for prohibition 15 or mandamus 16 if it has far reaching implications and raises questions that need
to be resolved; but the exercise of such discretion presupposes, at the outset, that the petition is
otherwise viable or meritorious.
The petitioner is not likewise a "proper party." As a consultant of the DPWH under the "Contract for
Consultancy . . .," he is not vested with any authority to demolish obstructions and encroachments on
properties of the public domain, much less on private lands. The consultancy contract limits his duties to
the following: "(a) to organize and train selected DPWH personnel for the different Engineering Districts in
the NCR in the techniques and methods of removing/demolishing illegal structures/stalls, etc. as well as in
crowd control, self-defense and security procedures . . .; (b) to provide advice to the Secretary and other
DPWH officials regarding prioritization of areas to be cleared of obstructions and encroachments; (c) to
conduct field inspection from time to time of areas recommend for clearing; (d) to provide advice in
developing appropriate standards and techniques in cost effective implementation of the removal and
demolition of obstructions and encroachments . . .; and (e) to develop operational procedures that will
institutionalize demolition
processes." 17 Moreover, the consultancy contract expired on 31 December 1992 and the petitioner has
not manifested that he obtained a renewal or extension thereof.
Nor does the petitioner claim that he is an owner of an urban property whose enjoyment and use would
be affected by the challenged provisions of R.A. No. 7279.
Although the petitioner likewise anchors his locus standi on the fact that he is a taxpayer, it does not
mean, however, that in each and every instance where such a ground is invoked, this Court is left with no
alternative except to hear the parties. In Tan vs. Macapagal, 18 we clarified that "as far as a taxpayer's suit
s concerned, this Court is not devoid of the discretion as to whether or not it should be entertained."
We do not, as well, find an indubitable ground for the constitutional challenge. As this Court said through
Mr. Justice Isagani A. Cruz in Garcia vs. Executive Secretary. 19

On the merits, We find that the constitutional challenge must be rejected for failure to
show that there is an indubitable ground for it, not to say even a necessity to resolve it.
The policy of the courts is to avoid ruling on constitutional questions and to presume that
the acts of the political departments are valid in the absence of a clear and unmistakable
showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine
of separation of powers which enjoins upon each department a becoming respect for the
acts of the other departments. The theory is that as the joint act of Congress and the
President of the Philippines, a law has been carefully studied and determined to be in
accordance with the fundamental law before it was finally enacted.
We cannot end this resolution without a few words on the comment of the OGCC for public respondent
National Housing Authority wherein the OGCC merely adopted the stand of the officer-in-charge of the
Legal Department of the said Authority that the challenged sections of R.A. No. 7279 are unconstitutional.
On its own, the OGCC did not even attempt to reason out why this petition should be granted or denied. It
has obviously treated this case without the circumspection and seriousness expected of it especially in
the light of the functions, duties and responsibilities of the NHA under the challenged Act. The OGCC
should not have cursorily adopted the opinion of the officer-in-charge who acted on his own and who,
apparently, did not even refer his opinion to the Board of Directors of the NHA.
Wherefore, for lack of merit, the instant petition is DISMISSED with costs against the petitioner.
SO ORDERED.

Wilson Gamboa vs. Finance Secretary, GR 176579, 28 June 2011 [treating declaratory
relief as one for mandamus if it has far reaching implications]

FACTS:

The Office of the Solicitor General (OSG) initially filed a motion for reconsideration on
behalfofthe SEC,5 assailing the 28 June 2011 Decision. However, it subsequently filed a
Consolidated Comment on behalf of the State,6 declaring expressly that it agrees with the Court's
definition of the term "capital" in Section 11, Article XII of the Constitution. During the Oral
Arguments on 26 June 2012, the OSG reiterated its position consistent with the Court's 28 June
2011 Decision.
ISSUE: WON the Constitution expressly reserves the ownership and operation of public utilities
to Filipino citizens, or corporations or associations at least 60 percent of whose capital belongs to
Filipinos. Following Dr. Villegass claim, the Philippines appears to be more liberal in allowing
foreign investors to own 40 percent of public utilities, unlike in other Asian countries whose
governments own and operate such industries.

HELD:
Movants interpretation of the term "capital" would bring us back to the same evils spawned by
the Parity Amendment, effectively giving foreigners parity rights with Filipinos, but this time
even without any amendment to the present Constitution. Worse, movants interpretation opens
up our national economy to effective control not only by Americans but also by all foreigners,
be they Indonesians, Malaysians or Chinese, even in the absence of reciprocal treaty
arrangements. At least the Parity Amendment, as implemented by the Laurel-Langley
Agreement, gave the capital-starved Filipinos theoretical parity the same rights as Americans to
exploit natural resources, and to own and control public utilities, in the United States of America.
Here, movants interpretation would effectively mean a unilateral opening up of our national
economy to all foreigners, without any reciprocal arrangements. That would mean that
Indonesians, Malaysians and Chinese nationals could effectively control our mining companies
and public utilities while Filipinos, even if they have the capital, could not control similar
corporations in these countries.
The 1935, 1973 and 1987 Constitutions have the same 60 percent Filipino ownership and control
requirement for public utilities like PLOT. Any deviation from this requirement necessitates an
amendment to the Constitution as exemplified by the Parity Amendment. This Court has no
power to amend the Constitution for its power and duty is only to faithfully apply and interpret
the Constitution

G.R. No. 176579

October 9, 2012

HEIRS OF WILSON P. GAMBOA,* Petitioners,


vs.
FINANCE SECRETARYMARGARITO B. TEVES, FINANCE
UNDERSECRETARYJOHN P. SEVILLA, AND COMMISSIONER RICARDO ABCEDE
OF THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT(PCGG) IN
THEIR CAPACITIES AS CHAIR AND MEMBERS, RESPECTIVELY, OF THE
PRIVATIZATION COUNCIL, CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO.,
LTD. IN HIS CAPACITY AS DIRECTOR OF METRO PACIFIC ASSET HOLDINGS
INC., CHAIRMAN MANUEL V. PANGILINAN OF PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY (PLDT) IN HIS CAPACITY AS MANAGING DIRECTOR OF
FIRST PACIFIC CO., LTD., PRESIDENT NAPOLEON L. NAZARENO OF PHILIPPINE
LONG DISTANCE TELEPHONE COMPANY, CHAIR FE BARIN OF THE
SECURITIES AND EXCHANGE COMMISSION, and PRESIDENT FRANCIS LIM OF
THE PHILIPPINE STOCK EXCHANGE, Respondents.
PABLITO V. SANIDAD and ARNO V. SANIDAD, Petitioner-in-Intervention.
RESOLUTION
CARPIO, J.:
This resolves the motions for reconsideration of the 28 June 2011 Decision filed by (1) the
Philippine Stock Exchange's (PSE) President, 1 (2) Manuel V. Pangilinan (Pangilinan),2 (3)
Napoleon L. Nazareno (Nazareno ),3 and ( 4) the Securities and Exchange Commission (SEC)4
(collectively, movants ).
The Office of the Solicitor General (OSG) initially filed a motion for reconsideration on
behalfofthe SEC,5 assailing the 28 June 2011 Decision. However, it subsequently filed a
Consolidated Comment on behalf of the State,6 declaring expressly that it agrees with the Court's
definition of the term "capital" in Section 11, Article XII of the Constitution. During the Oral
Arguments on 26 June 2012, the OSG reiterated its position consistent with the Court's 28 June
2011 Decision.
We deny the motions for reconsideration.
I.
Far-reaching implications of the legal issue justify
treatment of petition for declaratory relief as one for mandamus.
As we emphatically stated in the 28 June 2011 Decision, the interpretation of the term "capital"
in Section 11, Article XII of the Constitution has far-reaching implications to the national
economy. In fact, a resolution of this issue will determine whether Filipinos are masters, or

second-class citizens, in their own country. What is at stake here is whether Filipinos or
foreigners will have effective control of the Philippine national economy. Indeed, if ever there is
a legal issue that has far-reaching implications to the entire nation, and to future generations of
Filipinos, it is the threshold legal issue presented in this case.
Contrary to Pangilinans narrow view, the serious economic consequences resulting in the
interpretation of the term "capital" in Section 11, Article XII of the Constitution undoubtedly
demand an immediate adjudication of this issue. Simply put, the far-reaching implications of
this issue justify the treatment of the petition as one for mandamus.7
In Luzon Stevedoring Corp. v. Anti-Dummy Board,8 the Court deemed it wise and expedient to
resolve the case although the petition for declaratory relief could be outrightly dismissed for
being procedurally defective. There, appellant admittedly had already committed a breach of the
Public Service Act in relation to the Anti-Dummy Law since it had been employing nonAmerican aliens long before the decision in a prior similar case. However, the main issue in
Luzon Stevedoring was of transcendental importance, involving the exercise or enjoyment of
rights, franchises, privileges, properties and businesses which only Filipinos and qualified
corporations could exercise or enjoy under the Constitution and the statutes. Moreover, the same
issue could be raised by appellant in an appropriate action. Thus, in Luzon Stevedoring the Court
deemed it necessary to finally dispose of the case for the guidance of all concerned, despite the
apparent procedural flaw in the petition.
The circumstances surrounding the present case, such as the supposed procedural defect of the
petition and the pivotal legal issue involved, resemble those in Luzon Stevedoring. Consequently,
in the interest of substantial justice and faithful adherence to the Constitution, we opted to
resolve this case for the guidance of the public and all concerned parties.
II.
No change of any long-standing rule;
thus, no redefinition of the term "capital."
Movants contend that the term "capital" in Section 11, Article XII of the Constitution has long
been settled and defined to refer to the total outstanding shares of stock, whether voting or nonvoting. In fact, movants claim that the SEC, which is the administrative agency tasked to enforce
the 60-40 ownership requirement in favor of Filipino citizens in the Constitution and various
statutes, has consistently adopted this particular definition in its numerous opinions. Movants
point out that with the 28 June 2011 Decision, the Court in effect introduced a "new" definition
or "midstream redefinition"9 of the term "capital" in Section 11, Article XII of the Constitution.
This is egregious error.
For more than 75 years since the 1935 Constitution, the Court has not interpreted or defined the
term "capital" found in various economic provisions of the 1935, 1973 and 1987 Constitutions.
There has never been a judicial precedent interpreting the term "capital" in the 1935, 1973 and
1987 Constitutions, until now. Hence, it is patently wrong and utterly baseless to claim that the
Court in defining the term "capital" in its 28 June 2011 Decision modified, reversed, or set aside

the purported long-standing definition of the term "capital," which supposedly refers to the total
outstanding shares of stock, whether voting or non-voting. To repeat, until the present case there
has never been a Court ruling categorically defining the term "capital" found in the various
economic provisions of the 1935, 1973 and 1987 Philippine Constitutions.
The opinions of the SEC, as well as of the Department of Justice (DOJ), on the definition of the
term "capital" as referring to both voting and non-voting shares (combined total of common and
preferred shares) are, in the first place, conflicting and inconsistent. There is no basis whatsoever
to the claim that the SEC and the DOJ have consistently and uniformly adopted a definition of
the term "capital" contrary to the definition that this Court adopted in its 28 June 2011 Decision.
In DOJ Opinion No. 130, s. 1985,10 dated 7 October 1985, the scope of the term "capital" in
Section 9, Article XIV of the 1973 Constitution was raised, that is, whether the term "capital"
includes "both preferred and common stocks." The issue was raised in relation to a stock-swap
transaction between a Filipino and a Japanese corporation, both stockholders of a domestic
corporation that owned lands in the Philippines. Then Minister of Justice Estelito P. Mendoza
ruled that the resulting ownership structure of the corporation would be unconstitutional
because 60% of the voting stock would be owned by Japanese while Filipinos would own only
40% of the voting stock, although when the non-voting stock is added, Filipinos would own 60%
of the combined voting and non-voting stock. This ownership structure is remarkably similar
to the current ownership structure of PLDT. Minister Mendoza ruled:
xxxx
Thus, the Filipino group still owns sixty (60%) of the entire subscribed capital stock (common
and preferred) while the Japanese investors control sixty percent (60%) of the common (voting)
shares.
It is your position that x x x since Section 9, Article XIV of the Constitution uses the word
"capital," which is construed "to include both preferred and common shares" and "that
where the law does not distinguish, the courts shall not distinguish."
xxxx
In light of the foregoing jurisprudence, it is my opinion that the stock-swap transaction in
question may not be constitutionally upheld. While it may be ordinary corporate practice to
classify corporate shares into common voting shares and preferred non-voting shares, any
arrangement which attempts to defeat the constitutional purpose should be eschewed. Thus, the
resultant equity arrangement which would place ownership of 60%11 of the common
(voting) shares in the Japanese group, while retaining 60% of the total percentage of
common and preferred shares in Filipino hands would amount to circumvention of the
principle of control by Philippine stockholders that is implicit in the 60% Philippine
nationality requirement in the Constitution. (Emphasis supplied)
In short, Minister Mendoza categorically rejected the theory that the term "capital" in Section 9,
Article XIV of the 1973 Constitution includes "both preferred and common stocks" treated as the

same class of shares regardless of differences in voting rights and privileges. Minister Mendoza
stressed that the 60-40 ownership requirement in favor of Filipino citizens in the Constitution is
not complied with unless the corporation "satisfies the criterion of beneficial ownership" and
that in applying the same "the primordial consideration is situs of control."
On the other hand, in Opinion No. 23-10 dated 18 August 2010, addressed to Castillo Laman Tan
Pantaleon & San Jose, then SEC General Counsel Vernette G. Umali-Paco applied the Voting
Control Test, that is, using only the voting stock to determine whether a corporation is a
Philippine national. The Opinion states:
Applying the foregoing, particularly the Control Test, MLRC is deemed as a Philippine
national because: (1) sixty percent (60%) of its outstanding capital stock entitled to vote is
owned by a Philippine national, the Trustee; and (2) at least sixty percent (60%) of the ERF will
accrue to the benefit of Philippine nationals. Still pursuant to the Control Test, MLRCs
investment in 60% of BFDCs outstanding capital stock entitled to vote shall be deemed as
of Philippine nationality, thereby qualifying BFDC to own private land.
Further, under, and for purposes of, the FIA, MLRC and BFDC are both Philippine nationals,
considering that: (1) sixty percent (60%) of their respective outstanding capital stock entitled
to vote is owned by a Philippine national (i.e., by the Trustee, in the case of MLRC; and by
MLRC, in the case of BFDC); and (2) at least 60% of their respective board of directors are
Filipino citizens. (Boldfacing and italicization supplied)
Clearly, these DOJ and SEC opinions are compatible with the Courts interpretation of the 60-40
ownership requirement in favor of Filipino citizens mandated by the Constitution for certain
economic activities. At the same time, these opinions highlight the conflicting, contradictory, and
inconsistent positions taken by the DOJ and the SEC on the definition of the term "capital" found
in the economic provisions of the Constitution.
The opinions issued by SEC legal officers do not have the force and effect of SEC rules and
regulations because only the SEC en banc can adopt rules and regulations. As expressly provided
in Section 4.6 of the Securities Regulation Code,12 the SEC cannot delegate to any of its
individual Commissioner or staff the power to adopt any rule or regulation. Further, under
Section 5.1 of the same Code, it is the SEC as a collegial body, and not any of its legal
officers, that is empowered to issue opinions and approve rules and regulations. Thus:
4.6. The Commission may, for purposes of efficiency, delegate any of its functions to any
department or office of the Commission, an individual Commissioner or staff member of the
Commission except its review or appellate authority and its power to adopt, alter and
supplement any rule or regulation.
The Commission may review upon its own initiative or upon the petition of any interested party
any action of any department or office, individual Commissioner, or staff member of the
Commission.

SEC. 5. Powers and Functions of the Commission.- 5.1. The Commission shall act with
transparency and shall have the powers and functions provided by this Code, Presidential Decree
No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company Act and
other existing laws. Pursuant thereto the Commission shall have, among others, the following
powers and functions:
xxxx
(g) Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and
provide guidance on and supervise compliance with such rules, regulations and orders;
x x x x (Emphasis supplied)
Thus, the act of the individual Commissioners or legal officers of the SEC in issuing opinions
that have the effect of SEC rules or regulations is ultra vires. Under Sections 4.6 and 5.1(g) of
the Code, only the SEC en banc can "issue opinions" that have the force and effect of rules or
regulations. Section 4.6 of the Code bars the SEC en banc from delegating to any individual
Commissioner or staff the power to adopt rules or regulations. In short, any opinion of
individual Commissioners or SEC legal officers does not constitute a rule or regulation of
the SEC.
The SEC admits during the Oral Arguments that only the SEC en banc, and not any of its
individual commissioners or legal staff, is empowered to issue opinions which have the same
binding effect as SEC rules and regulations, thus:
JUSTICE CARPIO:
So, under the law, it is the Commission En Banc that can issue an
SEC Opinion, correct?
COMMISSIONER GAITE:13
Thats correct, Your Honor.
JUSTICE CARPIO:
Can the Commission En Banc delegate this function to an SEC officer?
COMMISSIONER GAITE:
Yes, Your Honor, we have delegated it to the General Counsel.
JUSTICE CARPIO:

It can be delegated. What cannot be delegated by the Commission En Banc to a


commissioner or an individual employee of the Commission?
COMMISSIONER GAITE:
Novel opinions that [have] to be decided by the En Banc...
JUSTICE CARPIO:
What cannot be delegated, among others, is the power to adopt or amend rules
and regulations, correct?
COMMISSIONER GAITE:
Thats correct, Your Honor.
JUSTICE CARPIO:
So, you combine the two (2), the SEC officer, if delegated that power, can
issue an opinion but that opinion does not constitute a rule or regulation,
correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
So, all of these opinions that you mentioned they are not rules and
regulations, correct?
COMMISSIONER GAITE:
They are not rules and regulations.
JUSTICE CARPIO:
If they are not rules and regulations, they apply only to that particular situation
and will not constitute a precedent, correct?
COMMISSIONER GAITE:
Yes, Your Honor.14 (Emphasis supplied)
Significantly, the SEC en banc, which is the collegial body statutorily empowered to issue rules
and opinions on behalf of the SEC, has adopted even the Grandfather Rule in determining

compliance with the 60-40 ownership requirement in favor of Filipino citizens mandated by the
Constitution for certain economic activities. This prevailing SEC ruling, which the SEC correctly
adopted to thwart any circumvention of the required Filipino "ownership and control," is laid
down in the 25 March 2010 SEC en banc ruling in Redmont Consolidated Mines, Corp. v.
McArthur Mining, Inc., et al.,15 to wit:
The avowed purpose of the Constitution is to place in the hands of Filipinos the exploitation of
our natural resources. Necessarily, therefore, the Rule interpreting the constitutional
provision should not diminish that right through the legal fiction of corporate ownership
and control. But the constitutional provision, as interpreted and practiced via the 1967 SEC
Rules, has favored foreigners contrary to the command of the Constitution. Hence, the
Grandfather Rule must be applied to accurately determine the actual participation, both direct
and indirect, of foreigners in a corporation engaged in a nationalized activity or business.
Compliance with the constitutional limitation(s) on engaging in nationalized activities must be
determined by ascertaining if 60% of the investing corporations outstanding capital stock is
owned by "Filipino citizens", or as interpreted, by natural or individual Filipino citizens. If such
investing corporation is in turn owned to some extent by another investing corporation, the same
process must be observed. One must not stop until the citizenships of the individual or natural
stockholders of layer after layer of investing corporations have been established, the very essence
of the Grandfather Rule.
Lastly, it was the intent of the framers of the 1987 Constitution to adopt the Grandfather
Rule. In one of the discussions on what is now Article XII of the present Constitution, the
framers made the following exchange:
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and
foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9, and 2/3-1/3 in Section 15.
MR. VILLEGAS. That is right.
MR. NOLLEDO. In teaching law, we are always faced with the question: Where do we base the
equity requirement, is it on the authorized capital stock, on the subscribed capital stock, or on the
paid-up capital stock of a corporation? Will the Committee please enlighten me on this?
MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP
Law Center who provided us a draft. The phrase that is contained here which we adopted from
the UP draft is 60 percent of voting stock.
MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared
delinquent, unpaid capital stock shall be entitled to vote.
MR. VILLEGAS. That is right.

MR. NOLLEDO. Thank you. With respect to an investment by one corporation in another
corporation, say, a corporation with 60-40 percent equity invests in another corporation which is
permitted by the Corporation Code, does the Committee adopt the grandfather rule?
MR. VILLEGAS. Yes, that is the understanding of the Committee.
MR. NOLLEDO. Therefore, we need additional Filipino capital?
MR. VILLEGAS. Yes. (Boldfacing and underscoring supplied; italicization in the original)
This SEC en banc ruling conforms to our 28 June 2011 Decision that the 60-40 ownership
requirement in favor of Filipino citizens in the Constitution to engage in certain economic
activities applies not only to voting control of the corporation, but also to the beneficial
ownership of the corporation. Thus, in our 28 June 2011 Decision we stated:
Mere legal title is insufficient to meet the 60 percent Filipinoowned "capital" required in the
Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock,
coupled with 60 percent of the voting rights, is required. The legal and beneficial ownership
of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in
accordance with the constitutional mandate. Otherwise, the corporation is "considered as nonPhilippine national[s]." (Emphasis supplied)
Both the Voting Control Test and the Beneficial Ownership Test must be applied to determine
whether a corporation is a "Philippine national."
The interpretation by legal officers of the SEC of the term "capital," embodied in various
opinions which respondents relied upon, is merely preliminary and an opinion only of such
officers. To repeat, any such opinion does not constitute an SEC rule or regulation. In fact, many
of these opinions contain a disclaimer which expressly states: "x x x the foregoing opinion is
based solely on facts disclosed in your query and relevant only to the particular issue raised
therein and shall not be used in the nature of a standing rule binding upon the Commission
in other cases whether of similar or dissimilar circumstances."16 Thus, the opinions clearly
make a caveat that they do not constitute binding precedents on any one, not even on the SEC
itself.
Likewise, the opinions of the SEC en banc, as well as of the DOJ, interpreting the law are neither
conclusive nor controlling and thus, do not bind the Court. It is hornbook doctrine that any
interpretation of the law that administrative or quasi-judicial agencies make is only preliminary,
never conclusive on the Court. The power to make a final interpretation of the law, in this case
the term "capital" in Section 11, Article XII of the 1987 Constitution, lies with this Court, not
with any other government entity.
In his motion for reconsideration, the PSE President cites the cases of National
Telecommunications Commission v. Court of Appeals17 and Philippine Long Distance Telephone
Company v. National Telecommunications Commission18 in arguing that the Court has already
defined the term "capital" in Section 11, Article XII of the 1987 Constitution.19

The PSE President is grossly mistaken. In both cases of National Telecommunications v. Court of
Appeals20 and Philippine Long Distance Telephone Company v. National Telecommunications
Commission,21 the Court did not define the term "capital" as found in Section 11, Article XII of
the 1987 Constitution. In fact, these two cases never mentioned, discussed or cited Section
11, Article XII of the Constitution or any of its economic provisions, and thus cannot serve
as precedent in the interpretation of Section 11, Article XII of the Constitution. These two
cases dealt solely with the determination of the correct regulatory fees under Section 40(e) and
(f) of the Public Service Act, to wit:
(e) For annual reimbursement of the expenses incurred by the Commission in the supervision of
other public services and/or in the regulation or fixing of their rates, twenty centavos for each
one hundred pesos or fraction thereof, of the capital stock subscribed or paid, or if no shares
have been issued, of the capital invested, or of the property and equipment whichever is higher.
(f) For the issue or increase of capital stock, twenty centavos for each one hundred pesos or
fraction thereof, of the increased capital. (Emphasis supplied)
The Courts interpretation in these two cases of the terms "capital stock subscribed or paid,"
"capital stock" and "capital" does not pertain to, and cannot control, the definition of the term
"capital" as used in Section 11, Article XII of the Constitution, or any of the economic provisions
of the Constitution where the term "capital" is found. The definition of the term "capital" found
in the Constitution must not be taken out of context. A careful reading of these two cases reveals
that the terms "capital stock subscribed or paid," "capital stock" and "capital" were defined solely
to determine the basis for computing the supervision and regulation fees under Section 40(e) and
(f) of the Public Service Act.
III.
Filipinization of Public Utilities
The Preamble of the 1987 Constitution, as the prologue of the supreme law of the land, embodies
the ideals that the Constitution intends to achieve.22 The Preamble reads:
We, the sovereign Filipino people, imploring the aid of Almighty God, in order to build a just
and humane society, and establish a Government that shall embody our ideals and aspirations,
promote the common good, conserve and develop our patrimony, and secure to ourselves and
our posterity, the blessings of independence and democracy under the rule of law and a regime of
truth, justice, freedom, love, equality, and peace, do ordain and promulgate this Constitution.
(Emphasis supplied)
Consistent with these ideals, Section 19, Article II of the 1987 Constitution declares as State
policy the development of a national economy "effectively controlled" by Filipinos:
Section 19. The State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos.
Fortifying the State policy of a Filipino-controlled economy, the Constitution decrees:

Section 10. The Congress shall, upon recommendation of the economic and planning agency,
when the national interest dictates, reserve to citizens of the Philippines or to corporations or
associations at least sixty per centum of whose capital is owned by such citizens, or such higher
percentage as Congress may prescribe, certain areas of investments. The Congress shall enact
measures that will encourage the formation and operation of enterprises whose capital is wholly
owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and patrimony,
the State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments within its national
jurisdiction and in accordance with its national goals and priorities.23
Under Section 10, Article XII of the 1987 Constitution, Congress may "reserve to citizens of the
Philippines or to corporations or associations at least sixty per centum of whose capital is owned
by such citizens, or such higher percentage as Congress may prescribe, certain areas of
investments." Thus, in numerous laws Congress has reserved certain areas of investments to
Filipino citizens or to corporations at least sixty percent of the "capital" of which is owned by
Filipino citizens. Some of these laws are: (1) Regulation of Award of Government Contracts or
R.A. No. 5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna Carta for
Micro, Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping
Development Act or R.A. No. 7471; (5) Domestic Shipping Development Act of 2004 or R.A.
No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No. 10055; and (7) Ship
Mortgage Decree or P.D. No. 1521.
With respect to public utilities, the 1987 Constitution specifically ordains:
Section 11. No franchise, certificate, or any other form of authorization for the operation of
a public utility shall be granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines, at least sixty per centum of whose
capital is owned by such citizens; nor shall such franchise, certificate, or authorization be
exclusive in character or for a longer period than fifty years. Neither shall any such franchise or
right be granted except under the condition that it shall be subject to amendment, alteration, or
repeal by the Congress when the common good so requires. The State shall encourage equity
participation in public utilities by the general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be limited to their proportionate share in its
capital, and all the executive and managing officers of such corporation or association must be
citizens of the Philippines. (Emphasis supplied)
This provision, which mandates the Filipinization of public utilities, requires that any form of
authorization for the operation of public utilities shall be granted only to "citizens of the
Philippines or to corporations or associations organized under the laws of the Philippines at least
sixty per centum of whose capital is owned by such citizens." "The provision is [an express]
recognition of the sensitive and vital position of public utilities both in the national
economy and for national security."24

The 1987 Constitution reserves the ownership and operation of public utilities exclusively to (1)
Filipino citizens, or (2) corporations or associations at least 60 percent of whose "capital" is
owned by Filipino citizens. Hence, in the case of individuals, only Filipino citizens can validly
own and operate a public utility. In the case of corporations or associations, at least 60 percent of
their "capital" must be owned by Filipino citizens. In other words, under Section 11, Article
XII of the 1987 Constitution, to own and operate a public utility a corporations capital
must at least be 60 percent owned by Philippine nationals.
IV.
Definition of "Philippine National"
Pursuant to the express mandate of Section 11, Article XII of the 1987 Constitution, Congress
enacted Republic Act No. 7042 or the Foreign Investments Act of 1991 (FIA), as amended, which
defined a "Philippine national" as follows:
SEC. 3. Definitions. - As used in this Act:
a. The term "Philippine national" shall mean a citizen of the Philippines; or a domestic
partnership or association wholly owned by citizens of the Philippines; or a corporation
organized under the laws of the Philippines of which at least sixty percent (60%) of the
capital stock outstanding and entitled to vote is owned and held by citizens of the
Philippines; or a corporation organized abroad and registered as doing business in the
Philippines under the Corporation Code of which one hundred percent (100%) of the capital
stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for
pension or other employee retirement or separation benefits, where the trustee is a Philippine
national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine
nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a
Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of
the capital stock outstanding and entitled to vote of each of both corporations must be owned and
held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board
of Directors of each of both corporations must be citizens of the Philippines, in order that the
corporation, shall be considered a "Philippine national." (Boldfacing, italicization and
underscoring supplied)
Thus, the FIA clearly and unequivocally defines a "Philippine national" as a Philippine citizen,
or a domestic corporation at least "60% of the capital stock outstanding and entitled to vote" is
owned by Philippine citizens.
The definition of a "Philippine national" in the FIA reiterated the meaning of such term as
provided in its predecessor statute, Executive Order No. 226 or the Omnibus Investments Code
of 1987,25 which was issued by then President Corazon C. Aquino. Article 15 of this Code states:
Article 15. "Philippine national" shall mean a citizen of the Philippines or a diplomatic
partnership or association wholly-owned by citizens of the Philippines; or a corporation
organized under the laws of the Philippines of which at least sixty per cent (60%) of the
capital stock outstanding and entitled to vote is owned and held by citizens of the

Philippines; or a trustee of funds for pension or other employee retirement or separation


benefits, where the trustee is a Philippine national and at least sixty per cent (60%) of the fund
will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its nonFilipino stockholders own stock in a registered enterprise, at least sixty per cent (60%) of the
capital stock outstanding and entitled to vote of both corporations must be owned and held by the
citizens of the Philippines and at least sixty per cent (60%) of the members of the Board of
Directors of both corporations must be citizens of the Philippines in order that the corporation
shall be considered a Philippine national. (Boldfacing, italicization and underscoring supplied)
Under Article 48(3)26 of the Omnibus Investments Code of 1987, "no corporation x x x which is
not a Philippine national x x x shall do business
x x x in the Philippines x x x without first securing from the Board of Investments a written
certificate to the effect that such business or economic activity x x x would not conflict with the
Constitution or laws of the Philippines."27 Thus, a "non-Philippine national" cannot own and
operate a reserved economic activity like a public utility. This means, of course, that only a
"Philippine national" can own and operate a public utility.
In turn, the definition of a "Philippine national" under Article 15 of the Omnibus Investments
Code of 1987 was a reiteration of the meaning of such term as provided in Article 14 of the
Omnibus Investments Code of 1981,28 to wit:
Article 14. "Philippine national" shall mean a citizen of the Philippines; or a domestic
partnership or association wholly owned by citizens of the Philippines; or a corporation
organized under the laws of the Philippines of which at least sixty per cent (60%) of the
capital stock outstanding and entitled to vote is owned and held by citizens of the
Philippines; or a trustee of funds for pension or other employee retirement or separation
benefits, where the trustee is a Philippine national and at least sixty per cent (60%) of the fund
will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its nonFilipino stockholders own stock in a registered enterprise, at least sixty per cent (60%) of the
capital stock outstanding and entitled to vote of both corporations must be owned and held by the
citizens of the Philippines and at least sixty per cent (60%) of the members of the Board of
Directors of both corporations must be citizens of the Philippines in order that the corporation
shall be considered a Philippine national. (Boldfacing, italicization and underscoring supplied)
Under Article 69(3) of the Omnibus Investments Code of 1981, "no corporation x x x which is
not a Philippine national x x x shall do business x x x in the Philippines x x x without first
securing a written certificate from the Board of Investments to the effect that such business or
economic activity x x x would not conflict with the Constitution or laws of the Philippines."29
Thus, a "non-Philippine national" cannot own and operate a reserved economic activity like a
public utility. Again, this means that only a "Philippine national" can own and operate a public
utility.
Prior to the Omnibus Investments Code of 1981, Republic Act No. 518630 or the Investment
Incentives Act, which took effect on 16 September 1967, contained a similar definition of a
"Philippine national," to wit:

(f) "Philippine National" shall mean a citizen of the Philippines; or a partnership or association
wholly owned by citizens of the Philippines; or a corporation organized under the laws of the
Philippines of which at least sixty per cent of the capital stock outstanding and entitled to
vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a Philippine National and at least
sixty per cent of the fund will accrue to the benefit of Philippine Nationals: Provided, That where
a corporation and its non-Filipino stockholders own stock in a registered enterprise, at least sixty
per cent of the capital stock outstanding and entitled to vote of both corporations must be owned
and held by the citizens of the Philippines and at least sixty per cent of the members of the Board
of Directors of both corporations must be citizens of the Philippines in order that the corporation
shall be considered a Philippine National. (Boldfacing, italicization and underscoring supplied)
Under Section 3 of Republic Act No. 5455 or the Foreign Business Regulations Act, which took
effect on 30 September 1968, if the investment in a domestic enterprise by non-Philippine
nationals exceeds 30% of its outstanding capital stock, such enterprise must obtain prior approval
from the Board of Investments before accepting such investment. Such approval shall not be
granted if the investment "would conflict with existing constitutional provisions and laws
regulating the degree of required ownership by Philippine nationals in the enterprise."31 A "nonPhilippine national" cannot own and operate a reserved economic activity like a public utility.
Again, this means that only a "Philippine national" can own and operate a public utility.
The FIA, like all its predecessor statutes, clearly defines a "Philippine national" as a Filipino
citizen, or a domestic corporation "at least sixty percent (60%) of the capital stock
outstanding and entitled to vote" is owned by Filipino citizens. A domestic corporation is a
"Philippine national" only if at least 60% of its voting stock is owned by Filipino citizens. This
definition of a "Philippine national" is crucial in the present case because the FIA reiterates and
clarifies Section 11, Article XII of the 1987 Constitution, which limits the ownership and
operation of public utilities to Filipino citizens or to corporations or associations at least 60%
Filipino-owned.
The FIA is the basic law governing foreign investments in the Philippines, irrespective of the
nature of business and area of investment. The FIA spells out the procedures by which nonPhilippine nationals can invest in the Philippines. Among the key features of this law is the
concept of a negative list or the Foreign Investments Negative List.32 Section 8 of the law states:
SEC. 8. List of Investment Areas Reserved to Philippine Nationals [Foreign Investment
Negative List]. - The Foreign Investment Negative List shall have two 2 component lists: A and
B:
a. List A shall enumerate the areas of activities reserved to Philippine nationals by mandate of
the Constitution and specific laws.
b. List B shall contain the areas of activities and enterprises regulated pursuant to law:
1. which are defense-related activities, requiring prior clearance and authorization from the
Department of National Defense [DND] to engage in such activity, such as the manufacture,

repair, storage and/or distribution of firearms, ammunition, lethal weapons, military ordinance,
explosives, pyrotechnics and similar materials; unless such manufacturing or repair activity is
specifically authorized, with a substantial export component, to a non-Philippine national by the
Secretary of National Defense; or
2. which have implications on public health and morals, such as the manufacture and distribution
of dangerous drugs; all forms of gambling; nightclubs, bars, beer houses, dance halls, sauna and
steam bathhouses and massage clinics. (Boldfacing, underscoring and italicization supplied)
Section 8 of the FIA enumerates the investment areas "reserved to Philippine nationals." Foreign
Investment Negative List A consists of "areas of activities reserved to Philippine nationals by
mandate of the Constitution and specific laws," where foreign equity participation in any
enterprise shall be limited to the maximum percentage expressly prescribed by the
Constitution and other specific laws. In short, to own and operate a public utility in the
Philippines one must be a "Philippine national" as defined in the FIA. The FIA is abundant
notice to foreign investors to what extent they can invest in public utilities in the
Philippines.
To repeat, among the areas of investment covered by the Foreign Investment Negative List A is
the ownership and operation of public utilities, which the Constitution expressly reserves to
Filipino citizens and to corporations at least 60% owned by Filipino citizens. In other words,
Negative List A of the FIA reserves the ownership and operation of public utilities only to
"Philippine nationals," defined in Section 3(a) of the FIA as "(1) a citizen of the Philippines;
x x x or (3) a corporation organized under the laws of the Philippines of which at least sixty
percent (60%) of the capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or (4) a corporation organized abroad and registered as doing
business in the Philippines under the Corporation Code of which one hundred percent (100%) of
the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of
funds for pension or other employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of
Philippine nationals."
Clearly, from the effectivity of the Investment Incentives Act of 1967 to the adoption of the
Omnibus Investments Code of 1981, to the enactment of the Omnibus Investments Code of
1987, and to the passage of the present Foreign Investments Act of 1991, or for more than four
decades, the statutory definition of the term "Philippine national" has been uniform and
consistent: it means a Filipino citizen, or a domestic corporation at least 60% of the voting
stock is owned by Filipinos. Likewise, these same statutes have uniformly and consistently
required that only "Philippine nationals" could own and operate public utilities in the
Philippines. The following exchange during the Oral Arguments is revealing:
JUSTICE CARPIO:
Counsel, I have some questions. You are aware of the Foreign Investments Act of
1991, x x x? And the FIA of 1991 took effect in 1991, correct? Thats over twenty
(20) years ago, correct?

COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
And Section 8 of the Foreign Investments Act of 1991 states that []only Philippine
nationals can own and operate public utilities[], correct?
COMMISSIONER GAITE:
Yes, Your Honor.
JUSTICE CARPIO:
And the same Foreign Investments Act of 1991 defines a "Philippine national"
either as a citizen of the Philippines, or if it is a corporation at least sixty percent
(60%) of the voting stock is owned by citizens of the Philippines, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
And, you are also aware that under the predecessor law of the Foreign
Investments Act of 1991, the Omnibus Investments Act of 1987, the same
provisions apply: x x x only Philippine nationals can own and operate a public
utility and the Philippine national, if it is a corporation, x x x sixty percent (60%)
of the capital stock of that corporation must be owned by citizens of the
Philippines, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
And even prior to the Omnibus Investments Act of 1987, under the Omnibus
Investments Act of 1981, the same rules apply: x x x only a Philippine national
can own and operate a public utility and a Philippine national, if it is a
corporation, sixty percent (60%) of its x x x voting stock, must be owned by
citizens of the Philippines, correct?
COMMISSIONER GAITE:

Correct, Your Honor.


JUSTICE CARPIO:
And even prior to that, under [the]1967 Investments Incentives Act and the
Foreign Company Act of 1968, the same rules applied, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
So, for the last four (4) decades, x x x, the law has been very consistent only
a Philippine national can own and operate a public utility, and a Philippine
national, if it is a corporation, x x x at least sixty percent (60%) of the voting
stock must be owned by citizens of the Philippines, correct?
COMMISSIONER GAITE:
Correct, Your Honor.33 (Emphasis supplied)
Government agencies like the SEC cannot simply ignore Sections 3(a) and 8 of the FIA which
categorically prescribe that certain economic activities, like the ownership and operation of
public utilities, are reserved to corporations "at least sixty percent (60%) of the capital stock
outstanding and entitled to vote is owned and held by citizens of the Philippines." Foreign
Investment Negative List A refers to "activities reserved to Philippine nationals by mandate of
the Constitution and specific laws." The FIA is the basic statute regulating foreign
investments in the Philippines. Government agencies tasked with regulating or monitoring
foreign investments, as well as counsels of foreign investors, should start with the FIA in
determining to what extent a particular foreign investment is allowed in the Philippines. Foreign
investors and their counsels who ignore the FIA do so at their own peril. Foreign investors and
their counsels who rely on opinions of SEC legal officers that obviously contradict the FIA do so
also at their own peril.
Occasional opinions of SEC legal officers that obviously contradict the FIA should immediately
raise a red flag. There are already numerous opinions of SEC legal officers that cite the definition
of a "Philippine national" in Section 3(a) of the FIA in determining whether a particular
corporation is qualified to own and operate a nationalized or partially nationalized business in the
Philippines. This shows that SEC legal officers are not only aware of, but also rely on and
invoke, the provisions of the FIA in ascertaining the eligibility of a corporation to engage in
partially nationalized industries. The following are some of such opinions:
1. Opinion of 23 March 1993, addressed to Mr. Francis F. How;

2. Opinion of 14 April 1993, addressed to Director Angeles T. Wong of the Philippine


Overseas Employment Administration;
3. Opinion of 23 November 1993, addressed to Messrs. Dominador Almeda and Renato
S. Calma;
4. Opinion of 7 December 1993, addressed to Roco Bunag Kapunan Migallos &
Jardeleza;
5. SEC Opinion No. 49-04, addressed to Romulo Mabanta Buenaventura Sayoc & De
Los Angeles;
6. SEC-OGC Opinion No. 17-07, addressed to Mr. Reynaldo G. David; and
7. SEC-OGC Opinion No. 03-08, addressed to Attys. Ruby Rose J. Yusi and Rudyard S.
Arbolado.
The SEC legal officers occasional but blatant disregard of the definition of the term "Philippine
national" in the FIA signifies their lack of integrity and competence in resolving issues on the 6040 ownership requirement in favor of Filipino citizens in Section 11, Article XII of the
Constitution.
The PSE President argues that the term "Philippine national" defined in the FIA should be
limited and interpreted to refer to corporations seeking to avail of tax and fiscal incentives under
investment incentives laws and cannot be equated with the term "capital" in Section 11, Article
XII of the 1987 Constitution. Pangilinan similarly contends that the FIA and its predecessor
statutes do not apply to "companies which have not registered and obtained special incentives
under the schemes established by those laws."
Both are desperately grasping at straws. The FIA does not grant tax or fiscal incentives to any
enterprise. Tax and fiscal incentives to investments are granted separately under the Omnibus
Investments Code of 1987, not under the FIA. In fact, the FIA expressly repealed Articles 44 to
56 of Book II of the Omnibus Investments Code of 1987, which articles previously regulated
foreign investments in nationalized or partially nationalized industries.
The FIA is the applicable law regulating foreign investments in nationalized or partially
nationalized industries. There is nothing in the FIA, or even in the Omnibus Investments Code of
1987 or its predecessor statutes, that states, expressly or impliedly, that the FIA or its predecessor
statutes do not apply to enterprises not availing of tax and fiscal incentives under the Code. The
FIA and its predecessor statutes apply to investments in all domestic enterprises, whether or not
such enterprises enjoy tax and fiscal incentives under the Omnibus Investments Code of 1987 or
its predecessor statutes. The reason is quite obvious mere non-availment of tax and fiscal
incentives by a non-Philippine national cannot exempt it from Section 11, Article XII of the
Constitution regulating foreign investments in public utilities. In fact, the Board of
Investments Primer on Investment Policies in the Philippines,34 which is given out to foreign
investors, provides:

PART III. FOREIGN INVESTMENTS WITHOUT INCENTIVES


Investors who do not seek incentives and/or whose chosen activities do not qualify for
incentives, (i.e., the activity is not listed in the IPP, and they are not exporting at least 70% of
their production) may go ahead and make the investments without seeking incentives. They only
have to be guided by the Foreign Investments Negative List (FINL).
The FINL clearly defines investment areas requiring at least 60% Filipino ownership. All other
areas outside of this list are fully open to foreign investors. (Emphasis supplied)
V.
Right to elect directors, coupled with beneficial ownership,
translates to effective control.
The 28 June 2011 Decision declares that the 60 percent Filipino ownership required by the
Constitution to engage in certain economic activities applies not only to voting control of the
corporation, but also to the beneficial ownership of the corporation. To repeat, we held:
Mere legal title is insufficient to meet the 60 percent Filipino-owned "capital" required in the
Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock,
coupled with 60 percent of the voting rights, is required. The legal and beneficial ownership
of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in
accordance with the constitutional mandate. Otherwise, the corporation is "considered as nonPhilippine national[s]." (Emphasis supplied)
This is consistent with Section 3 of the FIA which provides that where 100% of the capital stock
is held by "a trustee of funds for pension or other employee retirement or separation benefits,"
the trustee is a Philippine national if "at least sixty percent (60%) of the fund will accrue to the
benefit of Philippine nationals." Likewise, Section 1(b) of the Implementing Rules of the FIA
provides that "for stocks to be deemed owned and held by Philippine citizens or Philippine
nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial
ownership of the stocks, coupled with appropriate voting rights, is essential."
Since the constitutional requirement of at least 60 percent Filipino ownership applies not only to
voting control of the corporation but also to the beneficial ownership of the corporation, it is
therefore imperative that such requirement apply uniformly and across the board to all classes of
shares, regardless of nomenclature and category, comprising the capital of a corporation. Under
the Corporation Code, capital stock35 consists of all classes of shares issued to stockholders, that
is, common shares as well as preferred shares, which may have different rights, privileges or
restrictions as stated in the articles of incorporation.36
The Corporation Code allows denial of the right to vote to preferred and redeemable shares, but
disallows denial of the right to vote in specific corporate matters. Thus, common shares have the
right to vote in the election of directors, while preferred shares may be denied such right.
Nonetheless, preferred shares, even if denied the right to vote in the election of directors, are
entitled to vote on the following corporate matters: (1) amendment of articles of incorporation;

(2) increase and decrease of capital stock; (3) incurring, creating or increasing bonded
indebtedness; (4) sale, lease, mortgage or other disposition of substantially all corporate assets;
(5) investment of funds in another business or corporation or for a purpose other than the primary
purpose for which the corporation was organized; (6) adoption, amendment and repeal of bylaws; (7) merger and consolidation; and (8) dissolution of corporation.37
Since a specific class of shares may have rights and privileges or restrictions different from the
rest of the shares in a corporation, the 60-40 ownership requirement in favor of Filipino citizens
in Section 11, Article XII of the Constitution must apply not only to shares with voting rights but
also to shares without voting rights. Preferred shares, denied the right to vote in the election of
directors, are anyway still entitled to vote on the eight specific corporate matters mentioned
above. Thus, if a corporation, engaged in a partially nationalized industry, issues a mixture
of common and preferred non-voting shares, at least 60 percent of the common shares and
at least 60 percent of the preferred non-voting shares must be owned by Filipinos. Of
course, if a corporation issues only a single class of shares, at least 60 percent of such shares
must necessarily be owned by Filipinos. In short, the 60-40 ownership requirement in favor
of Filipino citizens must apply separately to each class of shares, whether common,
preferred non-voting, preferred voting or any other class of shares. This uniform application
of the 60-40 ownership requirement in favor of Filipino citizens clearly breathes life to the
constitutional command that the ownership and operation of public utilities shall be reserved
exclusively to corporations at least 60 percent of whose capital is Filipino-owned. Applying
uniformly the 60-40 ownership requirement in favor of Filipino citizens to each class of shares,
regardless of differences in voting rights, privileges and restrictions, guarantees effective Filipino
control of public utilities, as mandated by the Constitution.
Moreover, such uniform application to each class of shares insures that the "controlling interest"
in public utilities always lies in the hands of Filipino citizens. This addresses and extinguishes
Pangilinans worry that foreigners, owning most of the non-voting shares, will exercise greater
control over fundamental corporate matters requiring two-thirds or majority vote of all
shareholders.
VI.
Intent of the framers of the Constitution
While Justice Velasco quoted in his Dissenting Opinion38 a portion of the deliberations of the
Constitutional Commission to support his claim that the term "capital" refers to the total
outstanding shares of stock, whether voting or non-voting, the following excerpts of the
deliberations reveal otherwise. It is clear from the following exchange that the term "capital"
refers to controlling interest of a corporation, thus:
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and
foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9 and 2/3-1/3 in Section 15.
MR. VILLEGAS. That is right.

MR. NOLLEDO. In teaching law, we are always faced with this question: "Where do we base
the equity requirement, is it on the authorized capital stock, on the subscribed capital stock, or on
the paid-up capital stock of a corporation"? Will the Committee please enlighten me on this?
MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP
Law Center who provided us a draft. The phrase that is contained here which we adopted
from the UP draft is "60 percent of voting stock."
MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared
delinquent, unpaid capital stock shall be entitled to vote.
MR. VILLEGAS. That is right.
MR. NOLLEDO. Thank you.
With respect to an investment by one corporation in another corporation, say, a corporation with
60-40 percent equity invests in another corporation which is permitted by the Corporation Code,
does the Committee adopt the grandfather rule?
MR. VILLEGAS. Yes, that is the understanding of the Committee.
MR. NOLLEDO. Therefore, we need additional Filipino capital?
MR. VILLEGAS. Yes.39
xxxx
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting
stock or controlling interest."
MR. AZCUNA. Hence, without the Davide amendment, the committee report would read:
"corporations or associations at least sixty percent of whose CAPITAL is owned by such
citizens."
MR. VILLEGAS. Yes.
MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital
to be owned by citizens.
MR. VILLEGAS. That is right.
MR. AZCUNA. But the control can be with the foreigners even if they are the minority. Let
us say 40 percent of the capital is owned by them, but it is the voting capital, whereas, the
Filipinos own the nonvoting shares. So we can have a situation where the corporation is

controlled by foreigners despite being the minority because they have the voting capital.
That is the anomaly that would result here.
MR. BENGZON. No, the reason we eliminated the word "stock" as stated in the 1973 and
1935 Constitutions is that according to Commissioner Rodrigo, there are associations that
do not have stocks. That is why we say "CAPITAL."
MR. AZCUNA. We should not eliminate the phrase "controlling interest."
MR. BENGZON. In the case of stock corporations, it is assumed.40 (Boldfacing and
underscoring supplied)
Thus, 60 percent of the "capital" assumes, or should result in, a "controlling interest" in the
corporation.
The use of the term "capital" was intended to replace the word "stock" because associations
without stocks can operate public utilities as long as they meet the 60-40 ownership requirement
in favor of Filipino citizens prescribed in Section 11, Article XII of the Constitution. However,
this did not change the intent of the framers of the Constitution to reserve exclusively to
Philippine nationals the "controlling interest" in public utilities.
During the drafting of the 1935 Constitution, economic protectionism was "the battle-cry of the
nationalists in the Convention."41 The same battle-cry resulted in the nationalization of the public
utilities.42 This is also the same intent of the framers of the 1987 Constitution who adopted the
exact formulation embodied in the 1935 and 1973 Constitutions on foreign equity limitations in
partially nationalized industries.
The OSG, in its own behalf and as counsel for the State,43 agrees fully with the Courts
interpretation of the term "capital." In its Consolidated Comment, the OSG explains that the
deletion of the phrase "controlling interest" and replacement of the word "stock" with the term
"capital" were intended specifically to extend the scope of the entities qualified to operate public
utilities to include associations without stocks. The framers omission of the phrase "controlling
interest" did not mean the inclusion of all shares of stock, whether voting or non-voting. The
OSG reiterated essentially the Courts declaration that the Constitution reserved exclusively to
Philippine nationals the ownership and operation of public utilities consistent with the States
policy to "develop a self-reliant and independent national economy effectively controlled by
Filipinos."
As we held in our 28 June 2011 Decision, to construe broadly the term "capital" as the total
outstanding capital stock, treated as a single class regardless of the actual classification of shares,
grossly contravenes the intent and letter of the Constitution that the "State shall develop a selfreliant and independent national economy effectively controlled by Filipinos." We illustrated the
glaring anomaly which would result in defining the term "capital" as the total outstanding capital
stock of a corporation, treated as a single class of shares regardless of the actual classification of
shares, to wit:

Let us assume that a corporation has 100 common shares owned by foreigners and 1,000,000
non-voting preferred shares owned by Filipinos, with both classes of share having a par value of
one peso (P 1.00) per share. Under the broad definition of the term "capital," such corporation
would be considered compliant with the 40 percent constitutional limit on foreign equity of
public utilities since the overwhelming majority, or more than 99.999 percent, of the total
outstanding capital stock is Filipino owned. This is obviously absurd.
In the example given, only the foreigners holding the common shares have voting rights in the
election of directors, even if they hold only 100 shares. The foreigners, with a minuscule equity
of less than 0.001 percent, exercise control over the public utility. On the other hand, the
Filipinos, holding more than 99.999 percent of the equity, cannot vote in the election of directors
and hence, have no control over the public utility. This starkly circumvents the intent of the
framers of the Constitution, as well as the clear language of the Constitution, to place the control
of public utilities in the hands of Filipinos. x x x
Further, even if foreigners who own more than forty percent of the voting shares elect an allFilipino board of directors, this situation does not guarantee Filipino control and does not in any
way cure the violation of the Constitution. The independence of the Filipino board members so
elected by such foreign shareholders is highly doubtful. As the OSG pointed out, quoting Justice
George Sutherlands words in Humphreys Executor v. US,44 "x x x it is quite evident that one
who holds his office only during the pleasure of another cannot be depended upon to maintain an
attitude of independence against the latters will." Allowing foreign shareholders to elect a
controlling majority of the board, even if all the directors are Filipinos, grossly circumvents the
letter and intent of the Constitution and defeats the very purpose of our nationalization laws.
VII.
Last sentence of Section 11, Article XII of the Constitution
The last sentence of Section 11, Article XII of the 1987 Constitution reads:
The participation of foreign investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the executive and managing officers
of such corporation or association must be citizens of the Philippines.
During the Oral Arguments, the OSG emphasized that there was never a question on the intent of
the framers of the Constitution to limit foreign ownership, and assure majority Filipino
ownership and control of public utilities. The OSG argued, "while the delegates disagreed as to
the percentage threshold to adopt, x x x the records show they clearly understood that Filipino
control of the public utility corporation can only be and is obtained only through the election of a
majority of the members of the board."
Indeed, the only point of contention during the deliberations of the Constitutional Commission
on 23 August 1986 was the extent of majority Filipino control of public utilities. This is evident
from the following exchange:
THE PRESIDENT. Commissioner Jamir is recognized.

MR. JAMIR. Madam President, my proposed amendment on lines 20 and 21 is to delete the
phrase "two thirds of whose voting stock or controlling interest," and instead substitute the words
"SIXTY PERCENT OF WHOSE CAPITAL" so that the sentence will read: "No franchise,
certificate, or any other form of authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or associations organized under the laws
of the Philippines at least SIXTY PERCENT OF WHOSE CAPITAL is owned by such citizens."
xxxx
THE PRESIDENT: Will Commissioner Jamir first explain?
MR. JAMIR. Yes, in this Article on National Economy and Patrimony, there were two previous
sections in which we fixed the Filipino equity to 60 percent as against 40 percent for foreigners.
It is only in this Section 15 with respect to public utilities that the committee proposal was
increased to two-thirds. I think it would be better to harmonize this provision by providing that
even in the case of public utilities, the minimum equity for Filipino citizens should be 60 percent.
MR. ROMULO. Madam President.
THE PRESIDENT. Commissioner Romulo is recognized.
MR. ROMULO. My reason for supporting the amendment is based on the discussions I have had
with representatives of the Filipino majority owners of the international record carriers, and the
subsequent memoranda they submitted to me. x x x
Their second point is that under the Corporation Code, the management and control of a
corporation is vested in the board of directors, not in the officers but in the board of directors.
The officers are only agents of the board. And they believe that with 60 percent of the equity, the
Filipino majority stockholders undeniably control the board. Only on important corporate acts
can the 40-percent foreign equity exercise a veto, x x x.
x x x x45
MS. ROSARIO BRAID. Madam President.
THE PRESIDENT. Commissioner Rosario Braid is recognized.
MS. ROSARIO BRAID. Yes, in the interest of equal time, may I also read from a memorandum
by the spokesman of the Philippine Chamber of Communications on why they would like to
maintain the present equity, I am referring to the 66 2/3. They would prefer to have a 75-25 ratio
but would settle for 66 2/3. x x x
xxxx
THE PRESIDENT. Just to clarify, would Commissioner Rosario Braid support the proposal of
two-thirds rather than the 60 percent?

MS. ROSARIO BRAID. I have added a clause that will put management in the hands of Filipino
citizens.
x x x x46
While they had differing views on the percentage of Filipino ownership of capital, it is clear that
the framers of the Constitution intended public utilities to be majority Filipino-owned and
controlled. To ensure that Filipinos control public utilities, the framers of the Constitution
approved, as additional safeguard, the inclusion of the last sentence of Section 11, Article XII of
the Constitution commanding that "[t]he participation of foreign investors in the governing body
of any public utility enterprise shall be limited to their proportionate share in its capital, and all
the executive and managing officers of such corporation or association must be citizens of the
Philippines." In other words, the last sentence of Section 11, Article XII of the Constitution
mandates that (1) the participation of foreign investors in the governing body of the corporation
or association shall be limited to their proportionate share in the capital of such entity; and (2) all
officers of the corporation or association must be Filipino citizens.
Commissioner Rosario Braid proposed the inclusion of the phrase requiring the managing
officers of the corporation or association to be Filipino citizens specifically to prevent
management contracts, which were designed primarily to circumvent the Filipinization of public
utilities, and to assure Filipino control of public utilities, thus:
MS. ROSARIO BRAID. x x x They also like to suggest that we amend this provision by adding
a phrase which states: "THE MANAGEMENT BODY OF EVERY CORPORATION OR
ASSOCIATION SHALL IN ALL CASES BE CONTROLLED BY CITIZENS OF THE
PHILIPPINES." I have with me their position paper.
THE PRESIDENT. The Commissioner may proceed.
MS. ROSARIO BRAID. The three major international record carriers in the Philippines, which
Commissioner Romulo mentioned Philippine Global Communications, Eastern
Telecommunications, Globe Mackay Cable are 40-percent owned by foreign multinational
companies and 60-percent owned by their respective Filipino partners. All three, however, also
have management contracts with these foreign companies Philcom with RCA, ETPI with Cable
and Wireless PLC, and GMCR with ITT. Up to the present time, the general managers of these
carriers are foreigners. While the foreigners in these common carriers are only minority owners,
the foreign multinationals are the ones managing and controlling their operations by virtue of
their management contracts and by virtue of their strength in the governing bodies of these
carriers.47
xxxx
MR. OPLE. I think a number of us have agreed to ask Commissioner Rosario Braid to propose
an amendment with respect to the operating management of public utilities, and in this
amendment, we are associated with Fr. Bernas, Commissioners Nieva and Rodrigo.
Commissioner Rosario Braid will state this amendment now.

Thank you.
MS. ROSARIO BRAID. Madam President.
THE PRESIDENT. This is still on Section 15.
MS. ROSARIO BRAID. Yes.
MR. VILLEGAS. Yes, Madam President.
xxxx
MS. ROSARIO BRAID. Madam President, I propose a new section to read: THE
MANAGEMENT BODY OF EVERY CORPORATION OR ASSOCIATION SHALL IN ALL
CASES BE CONTROLLED BY CITIZENS OF THE PHILIPPINES."
This will prevent management contracts and assure control by Filipino citizens. Will the
committee assure us that this amendment will insure that past activities such as management
contracts will no longer be possible under this amendment?
xxxx
FR. BERNAS. Madam President.
THE PRESIDENT. Commissioner Bernas is recognized.
FR. BERNAS. Will the committee accept a reformulation of the first part?
MR. BENGZON. Let us hear it.
FR. BERNAS. The reformulation will be essentially the formula of the 1973 Constitution which
reads: "THE PARTICIPATION OF FOREIGN INVESTORS IN THE GOVERNING BODY OF
ANY PUBLIC UTILITY ENTERPRISE SHALL BE LIMITED TO THEIR PROPORTIONATE
SHARE IN THE CAPITAL THEREOF AND..."
MR. VILLEGAS. "ALL THE EXECUTIVE AND MANAGING OFFICERS OF SUCH
CORPORATIONS AND ASSOCIATIONS MUST BE CITIZENS OF THE PHILIPPINES."
MR. BENGZON. Will Commissioner Bernas read the whole thing again?
FR. BERNAS. "THE PARTICIPATION OF FOREIGN INVESTORS IN THE GOVERNING
BODY OF ANY PUBLIC UTILITY ENTERPRISE SHALL BE LIMITED TO THEIR
PROPORTIONATE SHARE IN THE CAPITAL THEREOF..." I do not have the rest of the copy.

MR. BENGZON. "AND ALL THE EXECUTIVE AND MANAGING OFFICERS OF SUCH
CORPORATIONS OR ASSOCIATIONS MUST BE CITIZENS OF THE PHILIPPINES." Is that
correct?
MR. VILLEGAS. Yes.
MR. BENGZON. Madam President, I think that was said in a more elegant language. We accept
the amendment. Is that all right with Commissioner Rosario Braid?
MS. ROSARIO BRAID. Yes.
xxxx
MR. DE LOS REYES. The governing body refers to the board of directors and trustees.
MR. VILLEGAS. That is right.
MR. BENGZON. Yes, the governing body refers to the board of directors.
MR. REGALADO. It is accepted.
MR. RAMA. The body is now ready to vote, Madam President.
VOTING
xxxx
The results show 29 votes in favor and none against; so the proposed amendment is approved.
xxxx
THE PRESIDENT. All right. Can we proceed now to vote on Section 15?
MR. RAMA. Yes, Madam President.
THE PRESIDENT. Will the chairman of the committee please read Section 15?
MR. VILLEGAS. The entire Section 15, as amended, reads: "No franchise, certificate, or any
other form of authorization for the operation of a public utility shall be granted except to citizens
of the Philippines or to corporations or associations organized under the laws of the Philippines
at least 60 PERCENT OF WHOSE CAPITAL is owned by such citizens." May I request
Commissioner Bengzon to please continue reading.
MR. BENGZON. "THE PARTICIPATION OF FOREIGN INVESTORS IN THE GOVERNING
BODY OF ANY PUBLIC UTILITY ENTERPRISE SHALL BE LIMITED TO THEIR
PROPORTIONATE SHARE IN THE CAPITAL THEREOF AND ALL THE EXECUTIVE

AND MANAGING OFFICERS OF SUCH CORPORATIONS OR ASSOCIATIONS MUST BE


CITIZENS OF THE PHILIPPINES."
MR. VILLEGAS. "NOR SHALL SUCH FRANCHISE, CERTIFICATE OR AUTHORIZATION
BE EXCLUSIVE IN CHARACTER OR FOR A PERIOD LONGER THAN TWENTY-FIVE
YEARS RENEWABLE FOR NOT MORE THAN TWENTY-FIVE YEARS. Neither shall any
such franchise or right be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by Congress when the common good so requires. The State
shall encourage equity participation in public utilities by the general public."
VOTING
xxxx
The results show 29 votes in favor and 4 against; Section 15, as amended, is approved.48
(Emphasis supplied)
The last sentence of Section 11, Article XII of the 1987 Constitution, particularly the provision
on the limited participation of foreign investors in the governing body of public utilities, is a
reiteration of the last sentence of Section 5, Article XIV of the 1973 Constitution,49 signifying its
importance in reserving ownership and control of public utilities to Filipino citizens.
VIII.
The undisputed facts
There is no dispute, and respondents do not claim the contrary, that (1) foreigners own 64.27% of
the common shares of PLDT, which class of shares exercises the sole right to vote in the election
of directors, and thus foreigners control PLDT; (2) Filipinos own only 35.73% of PLDTs
common shares, constituting a minority of the voting stock, and thus Filipinos do not control
PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights; (4) preferred
shares earn only 1/70 of the dividends that common shares earn;50 (5) preferred shares have twice
the par value of common shares; and (6) preferred shares constitute 77.85% of the authorized
capital stock of PLDT and common shares only 22.15%.
Despite the foregoing facts, the Court did not decide, and in fact refrained from ruling on the
question of whether PLDT violated the 60-40 ownership requirement in favor of Filipino citizens
in Section 11, Article XII of the 1987 Constitution. Such question indisputably calls for a
presentation and determination of evidence through a hearing, which is generally outside the
province of the Courts jurisdiction, but well within the SECs statutory powers. Thus, for
obvious reasons, the Court limited its decision on the purely legal and threshold issue on the
definition of the term "capital" in Section 11, Article XII of the Constitution and directed the
SEC to apply such definition in determining the exact percentage of foreign ownership in PLDT.
IX.
PLDT is not an indispensable party;
SEC is impleaded in this case.

In his petition, Gamboa prays, among others:


xxxx
5. For the Honorable Court to issue a declaratory relief that ownership of common or voting
shares is the sole basis in determining foreign equity in a public utility and that any other
government rulings, opinions, and regulations inconsistent with this declaratory relief be
declared unconstitutional and a violation of the intent and spirit of the 1987 Constitution;
6. For the Honorable Court to declare null and void all sales of common stocks to foreigners in
excess of 40 percent of the total subscribed common shareholdings; and
7. For the Honorable Court to direct the Securities and Exchange Commission and Philippine
Stock Exchange to require PLDT to make a public disclosure of all of its foreign
shareholdings and their actual and real beneficial owners.
Other relief(s) just and equitable are likewise prayed for. (Emphasis supplied)
As can be gleaned from his prayer, Gamboa clearly asks this Court to compel the SEC to
perform its statutory duty to investigate whether "the required percentage of ownership of the
capital stock to be owned by citizens of the Philippines has been complied with [by PLDT] as
required by x x x the Constitution."51 Such plea clearly negates SECs argument that it was not
impleaded.
Granting that only the SEC Chairman was impleaded in this case, the Court has ample powers to
order the SECs compliance with its directive contained in the 28 June 2011 Decision in view of
the far-reaching implications of this case. In Domingo v. Scheer,52 the Court dispensed with the
amendment of the pleadings to implead the Bureau of Customs considering (1) the unique
backdrop of the case; (2) the utmost need to avoid further delays; and (3) the issue of public
interest involved. The Court held:
The Court may be curing the defect in this case by adding the BOC as party-petitioner. The
petition should not be dismissed because the second action would only be a repetition of the first.
In Salvador, et al., v. Court of Appeals, et al., we held that this Court has full powers, apart from
that power and authority which is inherent, to amend the processes, pleadings, proceedings and
decisions by substituting as party-plaintiff the real party-in-interest. The Court has the power to
avoid delay in the disposition of this case, to order its amendment as to implead the BOC as
party-respondent. Indeed, it may no longer be necessary to do so taking into account the
unique backdrop in this case, involving as it does an issue of public interest. After all, the
Office of the Solicitor General has represented the petitioner in the instant proceedings, as well
as in the appellate court, and maintained the validity of the deportation order and of the BOCs
Omnibus Resolution. It cannot, thus, be claimed by the State that the BOC was not afforded its
day in court, simply because only the petitioner, the Chairperson of the BOC, was the respondent
in the CA, and the petitioner in the instant recourse. In Alonso v. Villamor, we had the occasion to
state:

There is nothing sacred about processes or pleadings, their forms or contents. Their sole
purpose is to facilitate the application of justice to the rival claims of contending parties.
They were created, not to hinder and delay, but to facilitate and promote, the administration of
justice. They do not constitute the thing itself, which courts are always striving to secure to
litigants. They are designed as the means best adapted to obtain that thing. In other words, they
are a means to an end. When they lose the character of the one and become the other, the
administration of justice is at fault and courts are correspondingly remiss in the performance of
their obvious duty.53 (Emphasis supplied)
In any event, the SEC has expressly manifested54 that it will abide by the Courts decision
and defer to the Courts definition of the term "capital" in Section 11, Article XII of the
Constitution. Further, the SEC entered its special appearance in this case and argued
during the Oral Arguments, indicating its submission to the Courts jurisdiction. It is clear,
therefore, that there exists no legal impediment against the proper and immediate
implementation of the Courts directive to the SEC.
PLDT is an indispensable party only insofar as the other issues, particularly the factual questions,
are concerned. In other words, PLDT must be impleaded in order to fully resolve the issues on
(1) whether the sale of 111,415 PTIC shares to First Pacific violates the constitutional limit on
foreign ownership of PLDT; (2) whether the sale of common shares to foreigners exceeded the
40 percent limit on foreign equity in PLDT; and (3) whether the total percentage of the PLDT
common shares with voting rights complies with the 60-40 ownership requirement in favor of
Filipino citizens under the Constitution for the ownership and operation of PLDT. These issues
indisputably call for an examination of the parties respective evidence, and thus are clearly
within the jurisdiction of the SEC. In short, PLDT must be impleaded, and must necessarily be
heard, in the proceedings before the SEC where the factual issues will be thoroughly threshed out
and resolved.
Notably, the foregoing issues were left untouched by the Court. The Court did not rule on the
factual issues raised by Gamboa, except the single and purely legal issue on the definition of the
term "capital" in Section 11, Article XII of the Constitution. The Court confined the resolution of
the instant case to this threshold legal issue in deference to the fact-finding power of the SEC.
Needless to state, the Court can validly, properly, and fully dispose of the fundamental legal issue
in this case even without the participation of PLDT since defining the term "capital" in Section
11, Article XII of the Constitution does not, in any way, depend on whether PLDT was
impleaded. Simply put, PLDT is not indispensable for a complete resolution of the purely legal
question in this case.55 In fact, the Court, by treating the petition as one for mandamus,56 merely
directed the SEC to apply the Courts definition of the term "capital" in Section 11, Article XII of
the Constitution in determining whether PLDT committed any violation of the said constitutional
provision. The dispositive portion of the Courts ruling is addressed not to PLDT but solely
to the SEC, which is the administrative agency tasked to enforce the 60-40 ownership
requirement in favor of Filipino citizens in Section 11, Article XII of the Constitution.
Since the Court limited its resolution on the purely legal issue on the definition of the term
"capital" in Section 11, Article XII of the 1987 Constitution, and directed the SEC to investigate

any violation by PLDT of the 60-40 ownership requirement in favor of Filipino citizens under
the Constitution,57 there is no deprivation of PLDTs property or denial of PLDTs right to due
process, contrary to Pangilinan and Nazarenos misimpression. Due process will be afforded to
PLDT when it presents proof to the SEC that it complies, as it claims here, with Section 11,
Article XII of the Constitution.
X.
Foreign Investments in the Philippines
Movants fear that the 28 June 2011 Decision would spell disaster to our economy, as it may
result in a sudden flight of existing foreign investors to "friendlier" countries and simultaneously
deterring new foreign investors to our country. In particular, the PSE claims that the 28 June
2011 Decision may result in the following: (1) loss of more than P 630 billion in foreign
investments in PSE-listed shares; (2) massive decrease in foreign trading transactions; (3) lower
PSE Composite Index; and (4) local investors not investing in PSE-listed shares.58
Dr. Bernardo M. Villegas, one of the amici curiae in the Oral Arguments, shared movants
apprehension. Without providing specific details, he pointed out the depressing state of the
Philippine economy compared to our neighboring countries which boast of growing economies.
Further, Dr. Villegas explained that the solution to our economic woes is for the government to
"take-over" strategic industries, such as the public utilities sector, thus:
JUSTICE CARPIO:
I would like also to get from you Dr. Villegas if you have additional information on whether this
high FDI59 countries in East Asia have allowed foreigners x x x control [of] their public utilities,
so that we can compare apples with apples.
DR. VILLEGAS:
Correct, but let me just make a comment. When these neighbors of ours find an industry
strategic, their solution is not to "Filipinize" or "Vietnamize" or "Singaporize." Their solution is
to make sure that those industries are in the hands of state enterprises. So, in these
countries, nationalization means the government takes over. And because their
governments are competent and honest enough to the public, that is the solution. x x x 60
(Emphasis supplied)
If government ownership of public utilities is the solution, then foreign investments in our public
utilities serve no purpose. Obviously, there can never be foreign investments in public utilities if,
as Dr. Villegas claims, the "solution is to make sure that those industries are in the hands of state
enterprises." Dr. Villegass argument that foreign investments in telecommunication companies
like PLDT are badly needed to save our ailing economy contradicts his own theory that the
solution is for government to take over these companies. Dr. Villegas is barking up the wrong
tree since State ownership of public utilities and foreign investments in such industries are
diametrically opposed concepts, which cannot possibly be reconciled.

In any event, the experience of our neighboring countries cannot be used as argument to decide
the present case differently for two reasons. First, the governments of our neighboring countries
have, as claimed by Dr. Villegas, taken over ownership and control of their strategic public
utilities like the telecommunications industry. Second, our Constitution has specific provisions
limiting foreign ownership in public utilities which the Court is sworn to uphold regardless of the
experience of our neighboring countries.
In our jurisdiction, the Constitution expressly reserves the ownership and operation of public
utilities to Filipino citizens, or corporations or associations at least 60 percent of whose capital
belongs to Filipinos. Following Dr. Villegass claim, the Philippines appears to be more liberal in
allowing foreign investors to own 40 percent of public utilities, unlike in other Asian countries
whose governments own and operate such industries.
XI.
Prospective Application of Sanctions
In its Motion for Partial Reconsideration, the SEC sought to clarify the reckoning period of the
application and imposition of appropriate sanctions against PLDT if found violating Section 11,
Article XII of the Constitution.1avvphi1
As discussed, the Court has directed the SEC to investigate and determine whether PLDT
violated Section 11, Article XII of the Constitution. Thus, there is no dispute that it is only after
the SEC has determined PLDTs violation, if any exists at the time of the commencement of the
administrative case or investigation, that the SEC may impose the statutory sanctions against
PLDT. In other words, once the 28 June 2011 Decision becomes final, the SEC shall impose the
appropriate sanctions only if it finds after due hearing that, at the start of the administrative case
or investigation, there is an existing violation of Section 11, Article XII of the Constitution.
Under prevailing jurisprudence, public utilities that fail to comply with the nationality
requirement under Section 11, Article XII and the FIA can cure their deficiencies prior to the
start of the administrative case or investigation.61
XII.
Final Word
The Constitution expressly declares as State policy the development of an economy "effectively
controlled" by Filipinos. Consistent with such State policy, the Constitution explicitly reserves
the ownership and operation of public utilities to Philippine nationals, who are defined in the
Foreign Investments Act of 1991 as Filipino citizens, or corporations or associations at least 60
percent of whose capital with voting rights belongs to Filipinos. The FIAs implementing rules
explain that "[f]or stocks to be deemed owned and held by Philippine citizens or Philippine
nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial
ownership of the stocks, coupled with appropriate voting rights is essential." In effect, the
FIA clarifies, reiterates and confirms the interpretation that the term "capital" in Section 11,
Article XII of the 1987 Constitution refers to shares with voting rights, as well as with full
beneficial ownership. This is precisely because the right to vote in the election of directors,
coupled with full beneficial ownership of stocks, translates to effective control of a corporation.

Any other construction of the term "capital" in Section 11, Article XII of the Constitution
contravenes the letter and intent of the Constitution. Any other meaning of the term "capital"
openly invites alien domination of economic activities reserved exclusively to Philippine
nationals. Therefore, respondents interpretation will ultimately result in handing over effective
control of our national economy to foreigners in patent violation of the Constitution, making
Filipinos second-class citizens in their own country.
Filipinos have only to remind themselves of how this country was exploited under the Parity
Amendment, which gave Americans the same rights as Filipinos in the exploitation of natural
resources, and in the ownership and control of public utilities, in the Philippines. To do this the
1935 Constitution, which contained the same 60 percent Filipino ownership and control
requirement as the present 1987 Constitution, had to be amended to give Americans parity rights
with Filipinos. There was bitter opposition to the Parity Amendment62 and many Filipinos
eagerly awaited its expiration. In late 1968, PLDT was one of the American-controlled public
utilities that became Filipino-controlled when the controlling American stockholders divested in
anticipation of the expiration of the Parity Amendment on 3 July 1974.63 No economic suicide
happened when control of public utilities and mining corporations passed to Filipinos hands
upon expiration of the Parity Amendment.
Movants interpretation of the term "capital" would bring us back to the same evils spawned by
the Parity Amendment, effectively giving foreigners parity rights with Filipinos, but this time
even without any amendment to the present Constitution. Worse, movants interpretation opens
up our national economy to effective control not only by Americans but also by all foreigners,
be they Indonesians, Malaysians or Chinese, even in the absence of reciprocal treaty
arrangements. At least the Parity Amendment, as implemented by the Laurel-Langley
Agreement, gave the capital-starved Filipinos theoretical parity the same rights as Americans to
exploit natural resources, and to own and control public utilities, in the United States of America.
Here, movants interpretation would effectively mean a unilateral opening up of our national
economy to all foreigners, without any reciprocal arrangements. That would mean that
Indonesians, Malaysians and Chinese nationals could effectively control our mining companies
and public utilities while Filipinos, even if they have the capital, could not control similar
corporations in these countries.
The 1935, 1973 and 1987 Constitutions have the same 60 percent Filipino ownership and control
requirement for public utilities like PLOT. Any deviation from this requirement necessitates an
amendment to the Constitution as exemplified by the Parity Amendment. This Court has no
power to amend the Constitution for its power and duty is only to faithfully apply and interpret
the Constitution.
WHEREFORE, we DENY the motions for reconsideration WITH FINALITY. No further
pleadings shall be entertained.
SO ORDERED.

Customs vs. Cloribel, GR L-21036, 30 June 1977 [third party complaint is not proper when
the main case is declaratory relief]

G.R. No. L-21036 June 30, 1977


COMMISSIONER OF CUSTOMS and COLLECTOR OF CUSTOMS FOR MANILA and
CONRADO SOLEDAD, EDMUNDO POSTRERO, MAXIMINO ABRUGENA,
GERONIMO DERILO, SANTOS GUINTO and EUSTAQUIO MARANAN, as
employees and duly authorized representatives of the House of Representatives,
Congress of the Philippines, petitioners,
vs.
HON. JUDGE GAUDENCIO CLORIBEL, as Presiding Judge of Branch VI, Court of
First Instance of Manila, and JOSE and SUSANA COCHINGYAN, respondents.
BARREDO, J.:
Petition for certiorari and prohibition to annul and set aside several orders of respondent
court all of which together in effect: (1) permitted ex-parte private respondents Jose and
Susana Conchingyan to file a third-party complaint for mandamus against petitioners in
a special civil. action for declaratory relief in which said Cochingyans were defendants
and which was already tried and almost ready for decision; on the same day, (2)
admitted said third-party complaint and (8) further issued immediately a writ of
preliminary mandatory injunction likewise ex-parte; and which (4) were intended to
enforce said writ of injunction.
There was pending before respondent court as Civil Case No. 52318, entitled Macario
M. Ofilada vs. Reparations Commission, Jose Cochingyan and Susana Cochingyan, a
special civil action for declaratory relief, wherein Ofilada, as the Second Receiver of the
World War II Veterans Enterprises, Inc. (Warvets) in Civil Case No. 34998, likewise
pending in another Branch of the Court of First Instance of Manila, sought a judicial
declaration as to whether, under the allocation granted to said Warvets to purchase
reparations goods, the conversion into pesos of the dollar prices of said goods should
be at the rate of two pesos to one dollar or at the prevailing market rate at the time for
payment, which would be much higher. Civil Case No. 34998 was a minority suit filed by
certain stockholders of Warvets alleging irregularities in the management and
disposition of the goods being purchased by the corporation by virtue of the

aforementioned allocation, hence the need for receivers, of which there were two, the
first being one Ramon E. Saura and the second, Ofilada. In the same Civil Case No.
34998, an order had been issued on October 9, 1962 ordering Ofilada to deliver to the
Cochingyans the second shipment of goods under Warvets' allocation. (The
Cochingyans had a contract with Warvets regarding said goods.) It appears, however,
that a motion for the reconsideration of the just mentioned order of October 9, 1962 had
been filed and was still unresolved when on February 9, 1963, the Honorable Judge
Francisco Arca (now deceased) issued the following order:
Considering all the foregoing, the Court is of the opinion that the petition of
Atty. Magno to defer action on the motion for contempt against the
intervenors should be granted until after it can be definitely known whether
or not the parties can settle this case amicably. Resolutions on all pending
incidents, such as the motion for reconsideration of the order authorizing
the release of the second shipment, and the motions for the release of the
third, fourth and fifth shipments, are also held in abeyance until such time
that the Court knows the result of the pending settlement being negotiated
among the parties.
In view of all the above, the Court hereby orders that all incidents pending
resolution be held in abeyance until after the parties have definitely
decided whether they are going to settle this case or not. (Emphasis
supplied.)
It was shortly after the issuance of this order which in effect freezed the order of release
of October 9, 1962, that the incidents subject of the instant petition took place. On
February 13, 1963, the Cochingyans filed in Civil Case No. 52318 then already tried
although not yet decided by Judge Gaudencio Cloribel (now also deceased) who on
February 9, 1963 had written the Secretary of Justice asking for permission to go on
leave for a week starting February 12, 1973 but who later changed the starting date to
February 13, 1973- an ex-parte motion asking permission to file a third party complaint
which was forthwith granted. On the same day, another motion was filed asking for
immediate admission of the third party complaint, which likewise, was forthwith granted.
The third-party complaint included in the prayer, among other reliefs, the following:
1. Immediately upon the filing of the herein third-party complaint this
Honorable Court issue a writ of preliminary mandatory injunction ex-parte,
without notice to the other parties, ordering the third-party defendants
Commissioner of Customs and Collector of Customs and Reparations
Commission to release immediately to the third-party plaintiffs the balance
of the 202 packages of rayon clothing forming part of the shipment of
consumer goods originally consigned to the Reparations Commission
which arrived in Manila aboard the SS GUILLERMO on September 10,
1962, and which to the present are still under the custody and possession
of the Collector of Customs and Commissioner of Customs, upon the filing
of a bond by the third-party plaintiffs in such amount as may be fixed by

this Honorable Court to pay for any damages that the third-party
defendants may suffer should this Honorable Court find that issuance of
the preliminary mandatory injunction is not proper. (Page 87, Record.)
Without loss of time and without hearing the third-party defendants, the following order,
was issued on the same day, February 12, 1963:
In a verified third-party complaint for mandamus against the
Commissioner of Customs, the Collector of Customs and others, third
party plaintiffs Jose and Susana Cochingyan, doing business under the
name and style "The Catholic Church Mart", alleged that a shipment of
402 packages of rayon cloth which was procured by the Reparations
Commission to cover an allocation granted by the Commission to the
World War II Veterans Enterprises (WARVETS for reparation consumer
goods from Japan arrived in Manila on September 10, 1962, consigned to
the Reparations Commission; that this Court in Civil Case No. 34998
entitled "Pilar Normandy et al., vs. Calixto Duque, et al." authorized in its
order of October 9, 1962, the Second Receiver of WARVETS, Mr. Macario
M. Ofilada, to release said goods to Jose and Susana Cochingyan; that
pursuant to said order of October 9, 1962, Mr. Ofilada, in his capacity as
second receiver of WARVETS, signed a contract of absolute sale with the
Reparations Commission covering the described reparation consumer
goods and paid in full the purchase price of said goods; that after receiving
full payment of the purchase price of said goods the Commission instead
of releasing the goods from customs and delivering them requested the
Collector of Customs to verify and make an appraisal of the value of the
goods and complying with said request, the Collector of Customs opened
and inspected each and all of the bales and packages compromising said
shipment; that after completing said inspection and verification the
Collector of Customs advised the third-party plaintiffs herein that the
shipment cannot be released unless the advance sales' tax due on the
goods be first paid; that said Collector of Customs also advised the
Reparations Commission that the goods, being reparations goods and as
such owned by the Philippine Government, cannot be subject to seizure or
forfeiture proceedings; that of the 402 packages the Commissioner and
Collector of Customs have released to the said third-party plaintiffs only
200 packages but have retained 202 packages supposedly to secure the
payment of advance sales tax assessed on the shipment as recomputed
on the basis of an opinion of the Collector of Internal Revenue; that
notwithstanding the fact that there are no unpaid liens fines, surcharges
taxes (except the advance sales tax the payment of which was tendered
by third-party plaintiffs and refused and the amount deposited with the
Clerk of this Court) customs duties, and consular fees (of which the goods
are exempt under Section 14 of the Reparations Law) and notwithstanding
the fact that there are no pending proceedings for the seizure and
forfeiture of the goods for the same have been imported by the

Reparations Commission which made the proper declaration of entry


therefor, third-party defendants Commissioner of Customs and Collector of
Customs have refused without any legal reason or justification whatsoever
to release and deliver the balance of the shipment to the third-party
plaintiffs; that the duty of the Collector of Customs and Commissioner of
Customs to deliver or release said goods to third- party plaintiffs is clear
as under the circumstances above recited said officials have no discretion
to decide whether or not to release said goods.
Third-party plaintiffs further alleged that the delay in the release of the
goods to them has caused and will cause them grave and irreparable
damage and injury; and unless a writ of preliminary injunction were to be
issued ex-parte they will suffer greater and grave damages.
WHEREFORE, finding the petition for the issuance of a writ of preliminary
injunction to be meritorious, the same is hereby granted, and upon the
filing by the third-party plaintiffs of a bond in the sum of P5,000.00 to
answer for all damages that the third-party defendants may sustain by
reason of this injunction if it be finally decided that the third-party plaintiffs
are not entitled thereto, let a writ of preliminary mandatory injunction be
issued ordering the third-party defendants Commissioner of Customs,
Collector of Customs, and the Reparations Commission, their
representatives, agents, subordinates and other persons acting in their
behalf to release and deliver immediately the third-party plaintiffs Jose and
Susana Cochingyan, doing business under the name and style 'The
Catholic, Church Mart the 202 packages of rayon cloth presently in their
possession, custody and/or control, which goods are part of the shipment
of reparation consumer goods which arrived in Manila aboard the SS
Guillermo from Japan consigned to the Reparations Commission.
SO ORDERED.
The writ issued pursuant to this order was served on the Law Division of the Bureau of
Customs at 4:55 o'clock in the afternoon of the same day, February 12, 1963. But
compliance therewith did not materialize. A motion to lift the writ was filed, and in the
meanwhile, the Chairman of the Committee on Reparations of the House of
Representatives, which was then investigating the implementation of the Warvets
allocation, asserted jurisdiction over the goods by ordering the Collector of Customs to
deliver the same to the Sergeant-at-Arms of the House. Respondent court denied the
motion to lift and threatened the agents of the Committee on Reparations, herein copetitioners, with contempt. Still, there was no release. The goods were, therefore, still
unreleased to the Cochingyans when the petition now at bar was filed.
We deem it unnecessary to dwell on the many interesting issues extensively and
brilliantly discussed by distinguished counsel of both petitioners and respondents. In
Our view of this case, the only question We have to resolve in order to dispose of it is

whether or not respondent court gravely abused its discretion in allowing the filing of
and in admitting the third-party complaint of the Cochingyans. In the affirmative, it
should follow that the writ of preliminary mandatory injunction in question would have no
legal basis, as also all subsequent orders of respondent court tending to enforce the
same. And it is Our considered opinion and so We hold that it was highly irregular and
totally unwarranted for respondent court to have allowed said third-party complaint. The
circumstances surrounding the allowance and admission thereof indicate that
respondent court's action was hasty, baseless and arbitrary.
As already stated, Civil Case No. 52318 was a special civil action for declaratory relief
under Rule 66 of the Rules of 1940 which were in force when it was filed. The only
purpose thereof was to secure from the court the proper interpretation or construction of
the reparations contract between the Reparations Commission and Warvets in regard to
the rate of conversion of the dollar to the peso of the purchase price Warvets had to pay
No positive or affirmative, much less any material relief, was 'using sought therein.
Indeed, it is in the very nature of a 'declaratory relief special civil action that "the Relief
is confined to a case of actual controversy within the Court's jurisdiction, without the
need of injunction, execution or other relief beyond the adjudication of the legal rights
which are the subject of controversy between the parties." ( 3 Moran, Comments on the
Rules of Court, p. 146, 1970 ed.) In other words, the plaintiff Ofilada in said case did
not, as he could not pray for anything to be award or granted to him. Now, as regards
the nature and purpose of a third-party complaint, Section 1 of Rule 12 of the Rules of
1940 provided:
SECTION 1. Claim against one not a party to an action. When a
defendant claims to be entitled against a person not a party to the action,
hereinafter called the third-party defendant, to contribution, indemnity,
subrogation or any other relief, in respect of the plaintiff' claim, he may file,
with leave of court, against such person a pleading which shall state the
nature of his claim and shall be called the third-party complaint.
It is obvious from this definition that a third-party complaint is inconceivable when the
main case is one for nothing more' than a declaratory relief. In a third-party complaint,
the defendant or third-party plaintiff is supposed to seek contribution, indemnity,
subrogation or any other relief from the third-party defendant is respect to the claim of
the plaintiff against him. In the case at bar, what possible relief could the Cochingyans,
as defendants in Civil Case No. 52318, for declaratory relief, have asked for by way of
contribution, indemnity, subrogation or any other relief from those they have named
third-party defendants, the Collector of Customs, Commissioner of Customs,
Reparations Commission, their co-defendant and Macario Ofilada, the very plaintiff, in
respect to the construction or interpretation that Ofilada was asking the court to make?
At the risk of quoting again part thereof, the complete prayer in the third-party complaint
in question reads thus:
1. Immediately upon the filing of the herein third-party complaint this
Honorable Court issue a writ of preliminary mandatory injunction ex-parte,

without notice to the other parties, ordering the third-party defendants


Commissioner of Customs and Collector of Customs and Reparations
Commission to release immediately the third-party plaintiffs the balance of
the 202 packages of rayon clothing forming part of the shipment of
consumer goods originally consigned to the Reparations Commission
which arrived in Manila aboard the SS GUILLERMO on September 10,
1962, and which to the present are still under the custody and possession
of the collector of Customs and Commissioner of Customs upon the filing
of a bond by the third-party plaintiffs in such amount as may be fixed by
this Honorable Court to pay for any damages that the third-party
defendants may suffer should this Honorable Court find that issuance of
the preliminary mandatory injunction is not proper.
2. That after hearing on the merits this Honorable Court confirm and make
final its order of mandatory preliminary injunction.
The third-party plaintiffs further pray for such other relief as may be just
and equitable under the premises. (Pp. 87-88, Record.)
According to Moran:
Tests of Propriety.The test to determine whether the claim for indemnity
in a third-party complaint in respect to plaintiff's claim is proper, are (a)
whether it arises out of the same transaction on which plaintiff's claim is
based; or whether the third-party's claim, although arising out of another or
different contract or transaction, is connected with plaintiff's claim; (U.S.
Commercial Co. v. Guevara, et al., 48 O.G. 612.) (b) whether the thirdparty defendant would be liable to the plaintiff or to the defendant for all or
part of the plaintiffs claim against the original defendant, although the
third- party defendant's liability arises out of another transaction; or (e)
whether the third-party defendant may assert any defense which the thirdparty plaintiff has, or may have, against plaintiff's claim. (Capayas v. Court
of First Instance, 77 Phil. 181.) Failing these tests, the complaint is
improper. ... (1 Moran, Comments on the Rules of Court, p. 281, 1970 ed.)
It is thus too evident to call for more elaborate discussion that respondent court s action
in allowing the filing of Cochingyans' third-party complaint completely disregarded, due
presumably to ignorance thereof, the basic concepts of the remedies of declaratory
relief and third-party complaint.
Moreover, respondent court also paid no heed to the requirement of Section 2 of Rule
12 of the 1940 Rules to the effect that: "Before the service of his answer a defendant
may move ex parte or, after the service of his answer, on notice to the plaintiff, for leave
as third- party plaintiff to file a complaint against a third-party defendant." In the present
case, it is a fact that the motions of the Cochingyans for leave to file their third-party

complaint and for the admission thereof were granted ex parte notwithstanding that the
trial of the case had already been terminated.
IN CONSEQUENCE OF THE FOREGOING, We have no other alternative than to
declare as We do declare null and void all the orders herein complained of. 1 They are all
hereby set aside and respondent court is enjoined to desist from carrying any of them into effect, Costs
against respondents Jose and Susana Cochingyan.
Antonio, Muoz-Palma, Concepcion, Jr., and Martin, JJ., concur. Fernando and Aquino, JJ., took no part.
Munoz Palma and Martin, JJ., were designated to sit in the Second Division.

Baguio Citizens Action Inc., et.al. vs. City Council of Baguio, GR L-27247, 20 April 1983
[non-joinder of parties of interest who may be affected by declaratory judgment is not a
jurisdictional defect]

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-27247 April 20, 1983
IN THE MATTER OF THE PETITION FOR DECLARATORY JUDGMENT REGARDING
THE VALIDITY OF ORDINANCE NO. 386 OF THE CITY OF BAGUIO, BAGUIO
CITIZENS ACTION INC., and JUNIOR CHAMBER OF BAGUIO CITY, INC.,
petitioners-appellants,
vs.
THE CITY COUNCIL AND CITY MAYOR OF THE CITY OF BAGUIO, respondentsappellees.

DE CASTRO, J:
In this petition for declaratory relief originally filed in the Court of First Instance of
Baguio, Branch II, what is involved is the validity of Ordinance 386 passed by the City
Council of Baguio City which took effect on February 23, 1967, quoted together with the
explanatory note, as follows:

ORDINANCE 386
AN ORDINANCE CONSIDERING ALL SQUATTERS OF PUBLIC LAND,
OTHER THAN THOSE EARMARKED FOR PUBLIC USE IN THE CITY
OF BAGUIO WHO ARE DULY REGISTERED AS SUCH AT THE TIME OF
THE PROMULGATION OF THIS ORDINANCE AS BONAFIDE
OCCUPANTS OF THEIR RESPECTIVE LOTS AND WHICH SHALL
HEREAFTER BE EMBRACED AS A CITY GOVERNMENT HOUSING
PROJECT AND PROVIDING FOR OTHER PURPOSES.
Upon strong recommendation of the Vice-Mayor and Presiding Officer, on
Motion of all the Councilors, seconded by the same, be it ordained by the
City Council assembled:
Section l.All public lands within Baguio townsite which are occupied by
squatters who are duly registered as such at the time of the promulgation
of this Ordinance such public lands not designated by city and national
authorities for public use, shall be considered as embraced and
comprising a City Government Housing Project; PROVIDED, HOWEVER,
That areas covered by Executive Orders or Presidential Proclamations but
the city had made official representation for the lifting of such orders or
proclamation shall be deemed to be part of the Baguio Townsite for the
purposes of this ordinance;
Section 2.Building permits shall have been deemed issued to all
squatters as contemplated by this Ordinance, giving such squatters five
years from the approval of this Ordinance to satisfactorily comply with city
building specifications and payment of the corresponding city building
permit fees;
Section 3.All cases pending in court against squatters be dropped
without prejudice to the full prosecution of all subsequent violations in
relation to the provisions of existing city ordinances and/or resolutions;
Section 4.All squatters be given all the necessary and needed
protection of the City Government against the stringent provisions of the
Public Land Act, particularly on public bidding, in that the lots occupied by
said squatters be awarded to them by direct sale through Presidential
Proclamation;
Section 5.The City Government shall not be interested in making
financial profit out of the project and that the appraisal and evaluation of
the said lots shall be made at minimum cost per square meters, the total
cost of the lots made payable within the period of ten years;

Section 6.The minimum lot area requirements shall be disregarded in


cases where it could not be implemented due to existing congestion of
houses, and that, if necessary, areas applied for under this ordinance shall
be reduced to that which is practical under the circumstances;
PROVIDED, HOWEVER, That squatters in congested areas shall be given
preference in the transfer to resettlement areas or government housing
projects earmarked as such under the provisions of this ordinance, if and
when it becomes necessary to ease congestion or when their lots shall be
traversed by the laying of roads or are needed for public use;
Section 7.The amount of P20,000.00 or so much as is necessary, for
the lot survey of each squatter's lot be appropriated, such survey of which
shall be conducted by licensed private surveyors through public biddings;
PROVIDED, That, said expenses for survey shall be included in the
overall cost of each lot;
Section 8.The three-man control committed for the Quirino-Magsaysay
housing project which was previously created under City Ordinance No.
344, shall exercise administration and supervision of the city government
housing projects created under this Ordinance shall, furthermore, be
entrusted with the duty of: (1) Consolidating a list of all city squatters who
shall be benefitted in contemplation and under the provisions of this
Ordinance; (2) To assist and help the squatters in the preparation of all the
necessary and required paper work and relative items in connection with
their application over their respective lots; (3) To seek and locate other
areas within the Baguio Townsite conveniently situated and which will be
earmarked as subsequently housing projects of the city for landless
bonafide city residents; and (4) To carry out and implement the provisions
of this Ordinance without the least possible delay.
EXPLANATORY NOTE
This ordinance is primarily designed to extend a helping hand to the
numerous landless city residents and the called 'Squatters' within the
Baguio Townsite in their desire to acquire residential lots which they may
rightly call their own.
The reported people who have violated the City's building ordinances were
not so guarded by any criminal perversity, but where given to it more by
circumstances of necessity and that they are, therefore, entitled to a more
human treatment, more of understanding and more of pity rather than be
herded before the courts, likened to hardened criminals and deliberate
violators of our laws and ordinances.
The petition for declaratory relief filed with the Court of First Instance of Baguio, Branch
II, prays for a judgment declaring the Ordinance as invalid and illegal ab initio. The

respondents-appellees, the City Council and the City Mayor, filed motions to dismiss the
petition which were denied. Nonetheless, in the decision thereafter rendered, the
petition was dismissed on the grounds that: 1) another court, the Court of First Instance
of Baguio, Branch I, had declared the Ordinance valid in a criminal case filed against
the squatters for illegal construction, and the Branch II of the same court cannot, in a
declaratory proceeding, review and determine the validity of said judgment pursuant to
the policy of judicial respect and stability; 2) those who come within the protection of the
ordinance have not been made parties to the suit in accordance with Section 2 of Rule
64 and it has been held that the non-joinder of such parties is a jurisdictional defect; and
3) the court is clothed with discretion to refuse to make any declaration where the
declaration is not necessary and proper at the time under all circumstances, e.g. where
the declaration would be of no practical help in ending the controversy or would not
stabilize the disputed legal relation, citing Section 5 of Rule 64; ICJS 1033-1034; 16 AM.
JUR 287-289; Hoskyns vs. National City Bank of New York, 85 Phil. 201.
Hence, the instant appeal which was perfected in accordance with the provisions of
Rule 42, before the approval of Republic Act No. 5440 on September 9, 1968.
1. The case before the Court of First Instance of Baguio, Branch 1, dealt with the
criminal liability of the accused for constructing their houses without obtaining building
permits, contrary to Section 47 in relation to Section 52 of the Revised Ordinances of
Baguio, which act the said court considered as pardoned by Section 2 of Ordinance
386. The court in said case upheld the power of the Municipal Council to legalize the
acts punished by the aforesaid provisions of the Revised Ordinances of Baguio, stating
that the Municipal Council is the policy determining body of Baguio City and therefore it
can amend, repeal, alter or modify its own laws as it did when it enacted Ordinance 386.
In deciding the case, the first branch of the court a quo did not declare the whole
Ordinance valid. This is clear when it stated that "had the issue been the legalization of
illegal occupation of public land, covered by Republic Act No. 947, ... the Ordinance in
question should have been ultra vires and unconstitutional." 1 Said court merely confined itself
to Sections 2 and 3 of Ordinance 386. It did not make any definite pronouncement whether or not the City
Council has the power to legalize the illegal occupation of public land which is the issue in the instant
case. It is noteworthy that the court, in passing upon the validity of the aforesaid sections, was apparently
guided by the rule that where part of a statute is void as repugnant to the organic law, while another part
is valid, the valid portion, if separable from the invalid may stand and be enforced. Contrary to what was
said in the decision under review, the second branch of the court a quo was not called upon to determine
the validity of the judgment of the first branch.
2. The non-inclusion of the squatters mentioned in the Ordinance in question as party defendants in this
case cannot defeat the jurisdiction of the Court of First Instance of Baguio. There is nothing in Section 2
of Rule 64 of the Rules of Court which says that the non-joinder of persons who have or claim any interest
which would be affected by the declaration is a jurisdictional defect. Said section merely states that "All
persons shall be made parties who have or claim any interest which would be affected by the declaration;
and no declaration shall, except or otherwise provided in these rules, prejudice the rights of persons not
parties to the action." This section contemplates a situation where there are other persons who would be
affected by the declaration, but were not impleaded as necessary parties, in which case the declaration
shall not prejudice them. If at all, the case may be dismissed not on the ground of lack of jurisdiction but
for the reason stated in Section 5 of the same Rule stating that "the Court may refuse to exercise the
power to declare rights and to construe instruments in any case where a decision would not terminate the

uncertainty or controversy which gave rise to the action, or any case where the declaration or construction
is not necessary and proper at the time under all circumstances."
It must be noted that the reason for the law requiring the joinder of all necessary parties is that failure to
do so would deprive the declaration of the final and pacifying function the action for declaratory relief is
calculated to subserve, as they would not be bound by the declaration and may raise the Identical issue. 2
In the case at bar, although it is true that any declaration by the court would affect the squatters, the latter
are not necessary parties because the question involved is the power of the Municipal Council to enact
the Ordinances in question. Whether or not they are impleaded, any determination of the controversy
would be binding upon the squatters.
A different situation obtains in the case of Degala v. Reyes 3 cited in the decision under review. The
Degala case involves the validity of the trust created in the will of the testator. In the said case, the Roman
Catholic Church which was a necessary party, being the one which would be most vitally affected by the
declaration of the nullity of the will was not brought in as party. The Court therefore, refused to make any
declaratory judgment on ground of jurisdictional defect, for there can be no final judgment that could be
rendered and the Roman Catholic not being bound by such judgment might raise the Identical issue,
making therefore the declaration a mere exercise in futility.
This is not true in the instant case. A declaration on the nullity of the ordinance, would give the squatters
no right which they are entitled to protect. The party most interested to sustain and defend the legality of
the Ordinance is the body that passed it, the City Council, and together with the City Mayor, is already a
party in these proceedings.
3. The Ordinance in question is a patent nullity. It considered all squatters of public land in the City of
Baguio as bona-fide occupants of their respective lots. As we have stated in City of Manila v. Garcia, 4 et
al.:
Squatting is unlawful and no amount of acquiescence on the part of the city officials will
elevate it into a lawful act. In principle, a compound of illegal entry and official permit to
stay is obnoxious to our concept of proper official norm of conduct. Because, such permit
does not serve social justice; it fosters moral decadence. It does not promote public
welfare; it abets disrespect for the law. It has its roots in vice; so it is an infected bargain.
Official approval of squatting should not, therefore, be permitted to obtain in this country
where there is an orderly form of government.
In the same case, squatting was characterized as a widespread vice and a blight Thus:
Since the last global war, squatting on another's property in this country has become a
widespread vice. It was and is a blight Squatter's areas pose problems of health,
sanitation. They are breeding places for crime. They constitute proof that respect for the
law and the rights of others, even those of the government are being flouted. Knowingly,
squatters have embarked on the pernicious act of occupying property whenever and
wherever convenient to their interests without as much as leave, and even against the
will, of the owner. They are emboldened seemingly because of their belief that they could
violate the law with impunity. The pugnaciousness of some of them has tied up the hands
of legitimate owners. The latter are thus prevented from recovering possession by
peaceful means. Government lands have not been spared by them. They know, of
course, that instrusion into property, government or private, is wrong. But, then the
wheels of justice grind slow, mainly because of lawyers who, by means, fair or foul, are
quite often successful in procuring delay of the day of reckoning. Rampancy of forcible
entry into government lands particularly, is abetted by the apathy of some public officials
to enforce the government's rights. Obstinacy of these squatters is difficult to explain
unless it is spawned by official tolerance, if not outright encouragement or protection.

Said squatters have become insensible to the difference between right and wrong. To
them, violation of law means nothing. With the result that squatters still exists, much to
the detriment of public interest. It is high time that, in this aspect, sanity and the rule of
law be restored. It is in this environment that we look into the validity of the permits
granted defendants herein.
In the above cited case, the land occupied by the squatters belongs to the City of Manila. In the instant
case, the land occupied by the squatters are portions of water sheds, reservations, scattered portions of
the public domain within the Baguio townsite. Certainly, there is more reason then to void the actions
taken by the City of Baguio through the questioned ordinance.
Being unquestionably a public land, no disposition thereof could be made by the City of Baguio without
prior legislative authority. It is the fundamental principle that the state possesses plenary power in law to
determine who shall be favored recipients of public domain, as well as under what terms such privilege
may be granted not excluding the placing of obstacles in the way of exercising what otherwise would be
ordinary acts of ownership. And the law has laid in the Director of Lands the power of exclusive control,
administrations, disposition and alienation of public land that includes the survey, classification, lease,
sale or any other form of concessions or disposition and management of the lands of public domains. 5
Nor could the enactment of Ordinance 386 be justified by stating that "this Ordinance is primarily
designed to extend a helping hand to the numerous landless city residents and the so called squatters
within the Baguio townsite in their desire to acquire residential lots which they may rightly call their own
and that the reported people who have violated the City's building ordinances were not so guided by any
criminal perversity, but were given to it more by circumstances of necessity and that they are, therefore,
entitled to a more human treatment, more understanding and more of pity rather than be herded before
the courts, likened to hardened criminals and deliberate violators of our laws and ordinances." 6
Our pronouncement in Astudillo vs. Board of Directors of PHHC 7 is relevant to this case. Thus
In carrying out its social re-adjustment policies, the government could not simply lay
aside moral standards, and aim to favor usurpers, squatters, and intruders, unmindful of
the lawful and unlawful origin and character of their occupancy. Such a policy would
perpetuate conflicts instead of attaining their just solution. (Bernardo vs. Bernardo, 96
Phil. 202, 206.)
Indeed, the government has enunciated a militant policy against squatters. Thus, Letter of
Instruction No. 19 dated October 2, 1972 orders city and district engineers 'to remove all
illegal constructions including buildings ... and those built without permits on public or
private property' and providing for the relocation of squatters (68 O.G. 7962. See Letter of
Instruction No. 19-A). As noted by Justice Sanchez, since the last global war, squatting
on another's property in this country has become a widespread vice. (City of Manila vs..
Garcia, L-26053, Feb. 21, 1967, 19 SCRA 413, 418).
WHEREFORE, in view of the foregoing, Ordinance 386 is hereby rendered nullified and without force and
effect.
SO ORDERED.

C. Review of Judgments and Final Orders or Resolution of the COMELEC and COA [Rule
64]

Brenda Nazareth vs. Hon. Villar, GR 188635, 29 January 2013 [Certiorari under
rule 64; requirement for petition; ground]

BRENDA L. NAZARETH, REGIONAL DIRECTOR, DEPARTMENT OF SCIENCE AND


TECHNOLOGY, REGIONAL OFFICE NO. IX, ZAMBOANGA CITY, Petitioner,
vs.
THE HON. REYNALDO A. VILLAR, HON. JUANITO G. ESPINO, JR.,
(COMMISSIONERS OF THE COMMISSION ON AUDIT), and DIR. KHEM M. INOK,
Respondents.
DECISION
BERSAMIN, J.:
No money shall be paid out of the Treasury except in pursuance of an appropriation made by
law.1 A violation of this constitutional edict warrants the disallowance of the payment. However,
the refund of the disallowed payment of a benefit granted by law to a covered person, agency or
office of the Government may be barred by the good faith of the approving official and of the
recipient.
Being assailed by petition for certiorari on the ground of its being issued with grave abuse of
discretion amounting to lack or excess of jurisdiction is the decision rendered on June 4, 2009 by
the Commission on Audit (COA) in COA Case No. 2009-045 entitled Petition of Ms. Brenda L.
Nazareth, Regional Director, Department of Science and Technology, Regional Office No. IX,
Zamboanga City, for review of Legal and Adjudication Office (LAO)-National Decision No.
2005-308 dated September 15, 2005 and LAO-National Resolution No. 2006-308A dated May
12, 2006 on disallowances of subsistence, laundry, hazard and other benefits in the total amount
of P3,591,130.36,2 affirming the issuance of notices of disallowance (NDs) by the Audit Team
Leader of COA Regional Office No. IX in Zamboanga City against the payment of benefits to
covered officials and employees of the Department of Science and Technology (DOST) for
calendar year (CY) 2001 out of the savings of the DOST.
The petitioner DOST Regional Director hereby seeks to declare the decision dated June 4, 2009
"null and void," and prays for the lifting of the disallowance of the payment of the benefits for
CY2001 for being within the ambit of Republic Act No. 8439 (R.A. No. 8439), otherwise known
as the Magna Carta for Scientists, Engineers, Researchers, and other Science and Technology
Personnel in the Government (Magna Carta, for short), and on the strength of the Memorandum
of Executive Secretary Ronaldo B. Zamora dated April 12, 2000 authorizing the use of the
savings for the purpose.

Antecedents
On December 22, 1997, Congress enacted R.A. No. 8439 to address the policy of the State to
provide a program for human resources development in science and technology in order to
achieve and maintain the necessary reservoir of talent and manpower that would sustain the drive
for total science and technology mastery.3 Section 7 of R.A. No. 8439 grants the following
additional allowances and benefits (Magna Carta benefits) to the covered officials and employees
of the DOST, to wit:
(a) Honorarium. - S & T personnel who rendered services beyond the established
irregular workload of scientists, technologists, researchers and technicians whose broad
and superior knowledge, expertise or professional standing in a specific field contributes
to productivity and innovativeness shall be entitled to receive honorarium subject to rules
to be set by the Department;
(b) Share in royalties. - S & T scientists, engineers, researchers and other S & T personnel
shall be entitled to receive share in royalties subject to guidelines of the Department. The
share in royalties shall be on a sixty percent-forty percent (60%-40%) basis in favor of
the Government and the personnel involved in the technology/ activity which has been
produced or undertaken during the regular performance of their functions. For the
purpose of this Act, share in royalties shall be defined as a share in the proceeds of
royalty payments arising from patents, copyrights and other intellectual property rights;
If the researcher works with a private company and the program of activities to be
undertaken has been mutually agreed upon by the parties concerned, any royalty arising
therefrom shall be divided according to the equity share in the research project;
(c) Hazard allowance. - S & T personnel involved in hazardous undertakings or assigned
in hazardous workplaces, shall be paid hazard allowances ranging from ten (10%) to
thirty (30%) percent of their monthly basic salary depending on the nature and extent of
the hazard involved. The following shall be considered hazardous workplaces:
(1) Radiation-exposed laboratories and service workshops;
(2) Remote/depressed areas;
(3) Areas declared under a state of calamity or emergency;
(4) Strife-torn or embattled areas;
(5) Laboratories and other disease-infested areas.
(d) Subsistence allowance. - S & T personnel shall be entitled to full subsistence
allowance equivalent to three (3) meals a day, which may be computed and implemented
in accordance with the criteria to be provided in the implementing rules and regulations.

Those assigned out of their regular work stations shall be entitled to per diem in place of
the allowance;
(e) Laundry allowance. - S & T personnel who are required to wear a prescribed uniform
during office hours shall be entitled to a laundry allowance of not less than One hundred
fifty pesos (P150.00) a month;
(f) Housing and quarter allowance. - S & T personnel who are on duty in laboratories,
research and development centers and other government facilities shall be entitled to free
living quarters within the government facility where they are stationed: Provided, That
the personnel have their residence outside of the fifty (50)-kilometer radius from such
government facility;
(g) Longevity pay. - A monthly longevity pay equivalent to five percent (5%) of the
monthly basic salary shall be paid to S & T personnel for every five (5) years of
continuous and meritorious service as determined by the Secretary of the Department;
and
(h) Medical examination. - During the tenure of their employment, S & T personnel shall
be given a compulsory free medical examination once a year and immunization as the
case may warrant. The medical examination shall include:
(1) Complete physical examination;
(2) Routine laboratory, Chest X-ray and ECG;
(3) Psychometric examination;
(4) Dental examination;
(5) Other indicated examination.
Under R.A. No. 8439, the funds for the payment of the Magna Carta benefits are to be
appropriated by the General Appropriations Act (GAA) of the year following the enactment of
R.A. No. 8439.4
The DOST Regional Office No. IX in Zamboanga City released the Magna Carta benefits to the
covered officials and employees commencing in CY 1998 despite the absence of specific
appropriation for the purpose in the GAA. Subsequently, following the post-audit conducted by
COA State Auditor Ramon E. Vargas on April 23, 1999, October 28, 1999, June 20, 2000,
February 27, 2001, June 27, 2001, October 10, 2001 and October 17, 2001, several NDs were
issued disapproving the payment of the Magna Carta benefits. The justifications for the
disallowance were stated in the post-audit report, as follows:
a) ND Nos. 99-001-101 (98) to 99-105-101 (98) Payment of Subsistence and Laundry
Allowances and Hazard Pay for the months of February-November 1998 The State

Auditor claims that no funds were appropriated in the 1998 General Appropriations Act
for the said purpose notwithstanding the effectivity of the Magna Carta, providing for
payment of allowances and benefits, among others, to Science and Technology Personnel
in the Government;
b) ND Nos. 2000-101-101 (99) to 2000-010-101 (99) Payment of Subsistence and
Laundry Allowances and Hazard Pay for the months of January-June 1999 The State
Auditor claims that no Department of Budget and Management (DBM) and Civil Service
Commission (CSC) guidelines were issued by the said Departments on the payment
thereof;
c) ND Nos. 2001-001-101 (00) to 2001-013-101 (00) Payment of Subsistence and
Laundry Allowances, Hazard Pay and Health Care Program for the month of October
1999 and January-September 2000 The State Auditor claims that there was no basis for
the payment of the said allowances because the President vetoed provisions of the
General Appropriations Act (GAA) regarding the use of savings for the payment of
benefits;
d) ND Nos. 2001-014-101(00) to 2001-025-101 (00) Payment of Subsistence and
Laundry Allowances, Hazard Pay and Medical Benefits for the months of JanuaryOctober 2001 The provision for the use of savings in the General Appropriations Act
(GAA) was vetoed by the
President; hence, there was no basis for the payment of the aforesaid allowances or benefits
according to the State Auditor.5
The disallowance by the COA prompted then DOST Secretary Dr. Filemon Uriarte, Jr. to request
the Office of the President (OP) through his
Memorandum dated April 3, 2000 (Request for Authority to Use Savings for the Payment of
Magna Carta Benefits as provided for in R.A. 8439) for the authority to utilize the DOSTs
savings to pay the Magna Carta benefits.6 The salient portions of the Memorandum of Secretary
Uriarte, Jr. explained the request in the following manner:
x x x. However, the amount necessary for its full implementation had not been provided in the
General Appropriations Act (GAA). Since the Acts effectivity, the Department had paid the 1998
MC benefits out of its current years savings as provided for in the Budget Issuances of the
Department of Budget and Management while the 1999 MC benefits were likewise sourced from
the years savings as authorized in the 1999 GAA.
The 2000 GAA has no provision for the use of savings. The Department, therefore, cannot
continue the payment of the Magna Carta benefits from its 2000 savings. x x x. The DOST
personnel are looking forward to His Excellencys favorable consideration for the payment of
said MC benefits, being part of the administrations 10-point action program to quote "I will
order immediate implementation of RA 8439 (the Magna Carta for Science and Technology
Personnel in Government)" as published in the Manila Bulletin dated May 20, 1998.

Through the Memorandum dated April 12, 2000, then Executive Secretary Ronaldo Zamora,
acting by authority of the President, approved the request of Secretary Uriarte, Jr.,7 viz:
With reference to your Memorandum dated April 03, 2000 requesting authority to use savings
from the appropriations of that Department and its agencies for the payment of Magna Carta
Benefits as provided for in R.A. 8439, please be informed that the said request is hereby
approved.
On July 28, 2003, the petitioner, in her capacity as the DOST Regional Director in Region IX,
lodged an appeal with COA Regional Cluster Director Ellen Sescon, urging the lifting of the
disallowance of the Magna Carta benefits for the period covering CY 1998 to CY 2001
amounting to P4,363,997.47. She anchored her appeal on the April 12, 2000 Memorandum of
Executive Secretary Zamora, and cited the provision in the GAA of 1998,8 to wit:
Section 56. Priority in the Use of Savings. In the use of savings, priority shall be given to the
augmentation of the amounts set aside for compensation, bonus, retirement gratuity, terminal
leave, old age pension of veterans and other personnel benefits authorized by law and those
expenditure items authorized in agency Special Provisions and in Sec. 16 and in other sections of
the General Provisions of this Act.9
In support of her appeal, the petitioner contended that the DOST Regional Office had
"considered the subsistence and laundry allowance as falling into the category other personnel
benefits authorized by law, hence the payment of such allowances were charged to account 100900 for Other Benefits (Honoraria), which was declared to be the savings of our Office."10 She
argued that the April 12, 2000 Memorandum of Executive Secretary Zamora not only ratified the
payment of the Magna Carta benefits out of the savings for CY 1998 and CY 1999 and allowed
the use of the savings for CY 2000, but also operated as a continuing endorsement of the use of
savings to cover the Magna Carta benefits in succeeding calendar years.
The appeal was referred to the Regional Legal and Adjudication Director (RLAD), COA
Regional Office IX in Zamboanga City, which denied the appeal and affirmed the grounds stated
in the NDs.
Not satisfied with the result, the petitioner elevated the matter to the COA Legal and
Adjudication Office in Quezon City
On September 15, 2005, respondent Director Khem N. Inok of the COA Legal and Adjudication
Office rendered a decision in LAO-N-2005-308,11 denying the petitioners appeal with the
modification that only the NDs covering the Magna Carta benefits for CY 2000 were to be set
aside in view of the authorization under the Memorandum of April 12, 2000 issued by Executive
Secretary Zamora as the alter ego of the President. The decision explained itself as follows:
In resolving the case, the following issues should first be resolved:
1. Whether or not the "approval" made by the Executive Secretary on April 12, 2000 on
the request for authority to use savings of the agency to pay the benefits, was valid; and

2. Whether or not the payments of the benefits made by the agency using its savings for
the years 1998 and 1999 based on Section 56 of RA 8522 (General Appropriations Act of
1998 [GAA]) were legal and valid.
Anent the first issue, the law in point is Article VI, Section 25(5) of the 1987 Constitution, which
aptly provides that:
"(5) No law shall be passed authorizing any transfer of appropriations, however, the
PRESIDENT, x x x may by law, be authorized to augment any item in the general appropriations
law for their respective offices from savings in other items of their respective appropriations."
Simply put, it means that only the President has the power to augment savings from one item to
another in the budget of administrative agencies under his control and supervision. This is the
very reason why the President vetoed the Special Provisions in the 1998 GAA that would
authorize the department heads to use savings to augment other items of appropriations within
the Executive Branch. Such power could well be extended to his Cabinet Secretaries as alter egos
under the "doctrine of qualified political agency" enunciated by the Supreme Court in the case of
Binamira v. Garrucho, 188 SCRA 154, where it was pronounced that the official acts of a
Department Secretary are deemed acts of the President unless disapproved or reprobated by the
latter. Thus, in the instant case, the authority granted to the DOST by the Executive Secretary,
being one of the alter egos of the President, was legal and valid but in so far as the use of
agencys savings for the year 2000 only. Although 2000 budget was reenacted in 2001, the
authority granted on the use of savings did not necessarily extend to the succeeding year.
On the second issue, the payments of benefits made by the agency in 1998 and 1999 were
admittedly premised on the provisions of the General Appropriations Acts (GAA) for CY 1998
and 1999 regarding the use of savings which states that:
"In the use of savings, priority shall be given to the augmentation of the amount set aside for
compensation, bonus, retirement gratuity, terminal leave, old age pensions of veterans and other
personal benefits x x x." (Underscoring ours.)
It can be noted, however, that augmentation was likewise a requisite to make payments for such
benefits which means that Presidential approval was necessary in accordance with the abovecited provision of the 1987 Constitution. Therefore, the acts of the agency in using its savings to
pay the said benefits without the said presidential approval were illegal considering that during
those years there was no appropriations provided in the GAA to pay such benefits.
Further, COA Decision Nos. 2003-060 dated March 18, 2003 and 2002-022 dated January 11,
2002, where this Commission lifted the DOST disallowance on the payments of similar benefits
in 1992 to 1995, can not be applied in the instant case. The disallowances therein dealt more on
the classification of the agency as health related or not while the instant case deals mainly on the
availability of appropriated funds for the benefits under RA 8439 and the guidelines for their
payments.

Likewise, the certification of the DOST Secretary declaring work areas of S and T personnel as
hazardous for purposes of entitlement to hazard allowance is not valid and may be considered as
self-serving. Under RA 7305 and its Implementing Rules and Regulation[s] (Magna Carta of
Public Health Workers), the determination which agencies are considered health-related
establishments is within the competence of the Secretary of Health which was used by this
Commission in COA Decision No. 2003-060, supra, to wit:
xxxx
"It bears emphasis to state herein that it is within the competence of the Secretary of Health as
mandated by RA 7305 and its IRR to determine which agencies are health-related
establishments. Corollary thereto, the certifications dated October 10, 1994 issued by then DOH
Secretary Juan M. Flavier that certain DOST personnel identified by DOST Secretary Padolina
in his letter dated September 29, 1994 to be engaged in health and health-related work and that of
Secretary Hilarion J. Ramiro dated December 12, 1996 confirming the staff and personnel of the
DOST and its attached agencies to be engaged in health-related work and further certified to be a
health-related establishment were sufficient basis for reconsideration of the disallowance on
subsistence and laundry allowances paid for 1992, 1993 and 1995."
xxxx
Assuming that the situation in the DOST and its attached agencies did not change as to consider
it health-related establishment for its entitlement to magna carta benefits, still the payments of
the benefits cannot be sustained in audit not only for lack of said certification from the Secretary
of Department of Health for the years 1998 and 1999 but more importantly, for lack of funding.
WHEREFORE, premises considered, the herein Appeal is DENIED with modification. NDs
Nos. 2001-001-101 (00) to 2001-013-101 (00) issued for the payments of benefits for CY 2000
are hereby SET ASIDE while NDs pertaining to benefits paid for CY 1998, 1999 and 2001 shall
STAY.
On December 1, 2005, the petitioner filed her motion for reconsideration in the COA Legal and
Adjudication Office-National in Quezon City.
By resolution dated May 12, 2006,12 the COA Legal and Adjudication Office-National denied the
motion for reconsideration.
Thence, the petitioner filed a petition for review in the COA Head Office, insisting that the
payment of Magna Carta benefits to qualified DOST Regional Office No. IX officials and
employees had been allowed under R.A. No. 8349.
On June 4, 2009, the COA rendered the assailed decision, further modifying the decision of
respondent Director Inok by also lifting and setting aside the NDs covering the Magna Carta
benefits for CY 1998 and CY 1999 for the same reason applicable to the lifting of the NDs for
CY 2000, but maintaining the disallowance of the benefits for CY 2001 on the ground that they

were not covered by the authorization granted by the Memorandum of April 12, 2000 of
Executive Secretary Zamora.
The pertinent portions of the decision are quoted below, to wit:
Hence, the appellant filed the instant petition for review with the main argument that the
payment of Magna Carta benefits to qualified DOST Regional Office No. IX employees is
allowed pursuant to RA No. 8439.
ISSUE
The sole issue to be resolved is whether or not the payment of Magna Carta benefits for CYs
1998, 1999 and 2001 is valid and legal.
DISCUSSION
It is clear that the funds utilized for the payment of the Magna Carta benefits came from the
savings of the agency. The approval by the Executive Secretary of the request for authority to use
the said savings for payments of the benefits was an affirmation that the payments were
authorized. The Memorandum dated April 3, 2000 of the DOST Secretary requested for the
approval of the payment out of savings of the CY 2000 benefits. Likewise, the same
Memorandum mentioned the 1998 Magna Carta benefits which were paid out of its current
years savings as provided for in the budget issuances of the DBM and the 1999 Magna Carta
benefits which were sourced from the years savings as authorized in the 1999 GAA. When such
memorandum request was approved by the Executive Secretary in a Memorandum dated April
12, 2000, it was clear that the approval covered the periods stated in the request, which were the
1998, 1999 and 2000 Magna Carta benefits.
Thus, this Commission hereby affirms LAO-National Decision No. 2005-308 dated September
15, 2005 which lifted ND Nos. 2001-001-101 (00) to 2001-013-101 (00) for the payments of
Magna Carta benefits for CY 2000 and which sustained the NDs for payments in 2001. However,
for the disallowances covering payments in 1998 and 1999, this Commission is inclined to lift
the same. This is in view of the approval made by the Executive Secretary for the agency to use
its savings to pay the benefits for the years covered. Thus, when the Executive Secretary granted
the request of the DOST Secretary for the payment of the Magna Carta benefits to its qualified
personnel, the said payments became lawful for the periods covered in the request, that is, CYs
1998, 1999 and 2000. Since the Magna Carta benefits paid in 2001 were not covered by the
approval, the same were correctly disallowed in audit.
In a previous COA Decision-No. 2006-015 dated January 31, 2006, the payment of hazard,
subsistence and laundry allowances given to personnel of the DOST, Regional Office No. VI,
Iloilo City, was granted. The same decision also stated that in (sic) no doubt the DOST
personnel, who are qualified, are entitled to receive the Magna Carta benefits. The 1999 GAA
did not prohibit the grant of these benefits but merely emphasized the discretion of the agency
head, upon authority of the President, to use savings from the Departments appropriation, to
implement the payment of benefits pursuant to the DOST Charter.

RULING
WHEREFORE, premises considered, the instant appeal on the payment of Magna Carta benefits
for CYs 1998 and 1999 which were disallowed in ND Nos. 99-001-101 (98) to 99-015-101 (98)
and 2000-001-101 (99) to 2000-010-101 (99), is hereby GRANTED. Likewise, the lifting of ND
Nos. 2001-001-101 (00) to 2001-013-101 (00) as embodied in LAO-National Decision No.
2005-308 dated September 15, 2005 is hereby CONFIRMED. While the disallowances on the
payment of said benefits for 2001 as covered by ND Nos. 2001-014-101 (01) to 2001-032-101
(01) are hereby AFFIRMED.
Issues on CERTOIORARI
Hence, this special civil action for certiorari, with the petitioner insisting that the COA gravely
abused its discretion amounting to lack or excess of jurisdiction in affirming the disallowance of
the Magna Carta benefits for CY 2001 despite the provisions of R.A. No. 8439, and in ruling that
the Memorandum of April 12, 2000 did not cover the payment of the Magna Carta benefits for
CY 2001.
Did the COA commit grave abuse of discretion in issuing ND No. 2001-014-101(01) to ND No.
2001-032-101(01)?
Ruling
The petition for certiorari lacks merit.
R. A. No. 8439 was enacted as a manifestation of the States recognition of science and
technology as an essential component for the attainment of national development and progress.
The law offers a program of human resources development in science and technology to help
realize and maintain a sufficient pool of talent and manpower that will sustain the initiative for
total science and technology mastery. In furtherance of this objective, the law not only ensures
scholarship programs and improved science and engineering education, but also affords
incentives for those pursuing careers in science and technology. Moreover, the salary scale of
science and technology personnel is differentiated by R. A. No. 8439 from the salary scales of
government employees under the existing law.
As earlier mentioned, Section 7 of R. A. No. 8439 confers the Magna Carta benefits consisting of
additional allowances and benefits to DOST officers and employees, such as honorarium, share
in royalties, hazard, subsistence, laundry, and housing and quarter allowances, longevity pay, and
medical examination. But the Magna Carta benefits will remain merely paper benefits without
the corresponding allocation of funds in the GAA.
The petitioner urges the Court to treat the authority granted in the April 12, 2000 Memorandum
of Executive Secretary Zamora as a continuing authorization to use the DOSTs savings to pay
the Magna Carta benefits.
We cannot agree with the petitioner.

The April 12, 2000 Memorandum was not a blanket authority from the OP to pay the benefits out
of the DOSTs savings. Although the Memorandum was silent as to the period covered by the
request for authority to use the DOSTs savings, it was clear just the same that the Memorandum
encompassed only CY 1998, CY 1999 and CY 2000. The limitation of its applicability to those
calendar years was based on the tenor of the request of Secretary Uriarte, Jr. to the effect that the
DOST had previously used its savings to pay the Magna Carta benefits in CY 1998 and CY
1999; that the 2000 GAA did not provide for the use of savings; and that the DOST personnel
were looking forward to the Presidents favorable consideration. The Memorandum could only
be read as an authority covering the limited period until and inclusive of CY 2000. The text of
the Memorandum was also bereft of any indication that the authorization was to be indefinitely
extended to any calendar year beyond CY 2000.
As we see it, the COA correctly ruled on the matter at hand. Article VI Section 29 (1) of the 1987
Constitution firmly declares that: "No money shall be paid out of the Treasury except in
pursuance of an appropriation made by law." This constitutional edict requires that the GAA be
purposeful, deliberate, and precise in its provisions and stipulations. As such, the requirement
under Section 2013 of R.A. No. 8439 that the amounts needed to fund the Magna Carta benefits
were to be appropriated by the GAA only meant that such funding must be purposefully,
deliberately, and precisely included in the GAA. The funding for the Magna Carta benefits would
not materialize as a matter of course simply by fiat of R.A. No. 8439, but must initially be
proposed by the officials of the DOST as the concerned agency for submission to and
consideration by Congress. That process is what complies with the constitutional edict. R.A. No.
8439 alone could not fund the payment of the benefits because the GAA did not mirror every
provision of law that referred to it as the source of funding. It is worthy to note that the DOST
itself acknowledged the absolute need for the appropriation in the GAA. Otherwise, Secretary
Uriarte, Jr. would not have needed to request the OP for the express authority to use the savings
to pay the Magna Carta benefits.
In the funding of current activities, projects, and programs, the general rule should still be that
the budgetary amount contained in the appropriations bill is the extent Congress will determine
as sufficient for the budgetary allocation for the proponent agency. The only exception is found
in Section 25 (5),14 Article VI of the Constitution, by which the President, the President of the
Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and
the heads of Constitutional Commissions are authorized to transfer appropriations to augment
any item in the GAA for their respective offices from the savings in other items of their
respective appropriations. The plain language of the constitutional restriction leaves no room for
the petitioners posture, which we should now dispose of as untenable.
It bears emphasizing that the exception in favor of the high officials named in Section 25(5),
Article VI of the Constitution limiting the authority to transfer savings only to augment another
item in the GAA is strictly but reasonably construed as exclusive. As the Court has expounded in
Lokin, Jr. v. Commission on Elections:15
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.
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.
The claim of the petitioner that the payment of the 2001 Magna Carta benefits was upon the
authorization extended by the OP through the 12 April 2000 Memorandum of Executive
Secretary Zamora was outrightly bereft of legal basis. In so saying, she inexplicably, but selfservingly, ignored the important provisions in the 2000 GAA on the use of savings, to wit:
Sec. 54. Use of Savings. The President of the Philippines, the President of the Senate, the
Speaker of the House of Representatives, the Chief Justice of the Supreme Court, the Heads of
Constitutional Commissions under Article IX of the Constitution, the Ombudsman and the
Chairman of the Commission on Human Rights are hereby authorized to augment any item in
this Act for their respective offices from savings in other items of their respective appropriations.
Sec. 55. Meaning of Savings and Augmentation. Savings refer to portions or balances of any
programmed appropriation in this Act free of any obligation or encumbrance still available after
the completion or final discontinuance or abandonment of the work, activity or purpose for
which the appropriation is authorized, or arising from unpaid compensation and related costs
pertaining to vacant positions and leaves of absence without pay.
Augmentation implies the existence in this Act of an item, project, activity or purpose with an
appropriation which upon implementation or subsequent evaluation of needed resources is
determined to be deficient. In no case, therefore, shall a non-existent item, project, activity,
purpose or object of expenditure be funded by augmentation from savings or by the use of
appropriations authorized otherwise in this Act. (Bold emphases added)
Under these provisions, the authority granted to the President was subject to two essential
requisites in order that a transfer of appropriation from the agencys savings would be validly
effected. The first required that there must be savings from the authorized appropriation of the
agency. The second demanded that there must be an existing item, project, activity, purpose or
object of expenditure with an appropriation to which the savings would be transferred for
augmentation purposes only.

At any rate, the proposition of the petitioner that savings could and should be presumed from the
mere transfer of funds is plainly incompatible with the doctrine laid down in Demetria v. Alba,16
in which the petition challenged the constitutionality of paragraph 1 of Section 4417 of
Presidential Decree No. 1177 (Budget Reform Decree of 1977) in view of the express prohibition
contained in Section 16(5)18 of Article VIII of the 1973 Constitution against the transfer of
appropriations except to augment out of savings,19 with the Court declaring the questioned
provision of Presidential Decree No. 1177 "null and void for being unconstitutional" upon the
following reasoning, to wit:
The prohibition to transfer an appropriation for one item to another was explicit and categorical
under the 1973 Constitution. However, to afford the heads of the different branches of the
government and those of the constitutional commissions considerable flexibility in the use of
public funds and resources, the constitution allowed the enactment of a law authorizing the
transfer of funds for the purpose of augmenting an item from savings in another item in the
appropriation of the government branch or constitutional body concerned. The leeway granted
was thus limited. The purpose and conditions for which funds may be transferred were specified,
i.e., transfer may be allowed for the purpose of augmenting an item and such transfer may be
made only if there are savings from another item in the appropriation of the government branch
or constitutional body.
Paragraph 1 of Section 44 of P.D. No. 1177 unduly overextends the privilege granted under said
Section 16(5). It empowers the President to indiscriminately transfer funds from one department,
bureau, office or agency of the Executive Department to any program, project, or activity of any
department, bureau or office included in the General Appropriations Act or approved after its
enactment, without regard as to whether or not the funds to be transferred are actually savings in
the item from which the same are to be taken, or whether or not the transfer is for the purpose of
augmenting the item to which said transfer is to be made. It does not only completely disregard
the standards set in the fundamental law, thereby amounting to an undue delegation of legislative
powers, but likewise goes beyond the tenor thereof. Indeed, such constitutional infirmities render
the provision in question null and void.
Clearly and indubitably, the prohibition against the transfer of appropriations is the general rule.
Consequently, the payment of the Magna Carta benefits for CY 2001 without a specific item or
provision in the GAA and without due authority from the President to utilize the DOSTs savings
in other items for the purpose was repugnant to R.A. No. 8439, the Constitution, and the reenacted GAA for 2001.
The COA is endowed with sufficient latitude to determine, prevent, and disallow the irregular,
unnecessary, excessive, extravagant, or unconscionable expenditures of government funds. It has
the power to ascertain whether public funds were utilized for the purposes for which they had
been intended by law. The "Constitution has made the COA the guardian of public funds, vesting
it with broad powers over all accounts pertaining to government revenue and expenditures and
the uses of public funds and property, including the exclusive authority to define the scope of its
audit and examination, to establish the techniques and methods for such review, and to
promulgate accounting and auditing rules and regulations".20

Thus, the COA is generally accorded complete discretion in the exercise of its constitutional duty
and responsibility to examine and audit expenditures of public funds, particularly those which
are perceptibly beyond what is sanctioned by law. Verily, the Court has sustained the decisions of
administrative authorities like the COA as a matter of general policy, not only on the basis of the
doctrine of separation of powers but also upon the recognition that such administrative
authorities held the expertise as to the laws they are entrusted to enforce.21 The Court has
accorded not only respect but also finality to their findings especially when their decisions are
not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion.22
Only when the COA has acted without or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, may the Court entertain and grant a
petition for certiorari brought to assail its actions.23 Section 1 of Rule 65,24 Rules of Court,
demands that the petitioner must show that, one, the tribunal, board or officer exercising judicial
or quasi-judicial functions acted without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and, two, there is neither an appeal nor any
plain, speedy and adequate remedy in the ordinary course of law for the purpose of amending or
nullifying the proceeding. Inasmuch as the sole office of the writ of certiorari is the correction of
errors of jurisdiction, which includes the commission of grave abuse of discretion amounting to
lack of jurisdiction, the petitioner should establish that the COA gravely abused its discretion.
The abuse of discretion must be grave, which means either that the judicial or quasi-judicial
power was exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, or that the respondent judge, tribunal or board evaded a positive duty, or virtually
refused to perform the duty enjoined or to act in contemplation of law, such as when such judge,
tribunal or board exercising judicial or quasi-judicial powers acted in a capricious or whimsical
manner as to be equivalent to lack of jurisdiction.25 Mere abuse of discretion is not enough to
warrant the issuance of the writ.26
The petitioner dismally failed to discharge her burden.1wphi1 We conclude and declare,
therefore, that the COAs assailed decision was issued in steadfast compliance of its duty under
the Constitution and in the judicious exercise of its general audit power conferred to it by the
Constitution.
Nonetheless, the Court opines that the DOST officials who caused the payment of the Magna
Carta benefits to the covered officials and employees acted in good faith in the honest belief that
there was a firm legal basis for the payment of the benefits. Evincing their good faith even after
receiving the NDs from the COA was their taking the initiative of earnestly requesting the OP for
the authorization to use the DOSTs savings to pay the Magna Carta benefits. On their part, the
DOST covered officials and employees received the benefits because they considered themselves
rightfully deserving of the benefits under the long-awaited law.
The Court declares and holds that the disallowed benefits received in good faith need not be
reimbursed to the Government. This accords with consistent pronouncements of the Court, like
that issued in De Jesus v. Commission on Audit,27 to wit:
Nevertheless, our pronouncement in Blaquera v. Alcala28 supports petitioners position on the
refund of the benefits they received. In Blaquera, the officials and employees of several

government departments and agencies were paid incentive benefits which the COA disallowed
on the ground that Administrative Order No. 29 dated 19 January 1993 prohibited payment of
these benefits. While the Court sustained the COA on the disallowance, it nevertheless declared
that:
Considering, however, that all the parties here acted in good faith, we cannot countenance the
refund of subject incentive benefits for the year 1992, which amounts the petitioners have
already received. Indeed, no indicia of bad faith can be detected under the attendant facts and
circumstances. The officials and chiefs of offices concerned disbursed such incentive benefits in
the honest belief that the amounts given were due to the recipients and the latter accepted the
same with gratitude, confident that they richly deserve such benefits.
This ruling in Blaquera applies to the instant case. Petitioners here received the additional
allowances and bonuses in good faith under the honest belief that LWUA Board Resolution No.
313 authorized such payment. At the time pet1t10ners received the additional allowances and
bonuses, the Court had not yet decided Baybay Water District v. Commission on Audit.29
Petitioners had no knowledge that such payment was without legal basis. Thus, being in good
faith, petitioners need not refund the allowances and bonuses they received but disallowed by the
COA.
Also, in Veloso v. Commission on Audit30 the Court, relying on a slew of jurisprudence31 ruled
that the recipients of the disallowed retirement and gratuity pay remuneration need not refund
whatever they had received:
x x x because all the parties acted in good faith. In this case, the questioned disbursement was
made pursuant to an ordinance enacted as early as December 7, 2000 although deemed approved
only on August 22, 2002. The city officials disbursed the retirement and gratuity pay
remuneration in the honest belief that the amounts given were due to the recipients and the latter
accepted the same with gratitude, confident that they richly deserve such reward.
WHEREFORE, the Court DISMISSES the petition for certiorari for lack of merit; AFFIRMS the
decision issued on June 4, 2009 by the Commission Proper of the Commission on Audit in COA
Case No. 2009-045; and DECLARES that the covered officials and employees of the
Department of Science and Technology who received the Magna Carta benefits for calendar year
2001 are not required to refund the disallowed benefits received.
No pronouncement on costs of suit.
SO ORDERED.

Sanchez vs. COA, Gr 127545, 23 April 2008, 552 SCRA 471, 489 [Findings accorded
respect and finality if supported]

SUPREME COURT
Manila
EN BANC
G.R. No. 127545

April 23, 2008

ANDRES SANCHEZ, LEONARDO D. REGALA, RAFAEL D. BARATA, NORMA AGBAYANI, and


CESAR N. SARINO, petitioners,
vs.
COMMISSION ON AUDIT, respondent.
DECISION
TINGA, J.:
The 1987 Constitution has made the Commission on Audit (COA) the guardian of public funds, vesting it with
broad powers over all accounts pertaining to government revenue and expenditures and the uses of public funds
and property, including the exclusive authority to define the scope of its audit and examination, establish the
techniques and methods for such review, and promulgate accounting and auditing rules and regulations.1 Its
exercise of its general audit power is among the constitutional mechanisms that give life to the check and
balance system inherent in our form of government.2
The exercise of this power by the Department Auditor of the Department of the Interior and Local Government
(DILG) is the subject of the instant Petition for Review3 dated 10 February 1997.
A chronicle of the operative incidents is needed.
In 1991, Congress passed Republic Act No. 7180 (R.A. 7180) otherwise known as the General Appropriations
Act of 1992. This law provided an appropriation for the DILG under Title XIII and set aside the amount of
P75,000,000.00 for the DILGs Capability Building Program.
The usage of the Capability Building Program Fund (Fund) is provided under the Special Provisions of the law
as follows:
Special Provisions
1. Capability Building Program for Local Personnel. The amount herein appropriated for the Capability
Building Program for local personnel shall be used for local government and community capability
building programs, such as training and technical assistance, with the necessary support for training
materials, supplies and facilities: PROVIDED, That savings from the appropriation may be used to

acquire equipment, except motor vehicles, in further support of the programs.


The Capability Building Program shall be implemented nationwide by the Department of the Interior
and Local Government through the Local Government Academy and shall involve local officials and
employees, including barangay officials, elected and appointed.
The appropriations authorized herein shall be administered by the Department of the Interior and Local
Government and shall be released upon submission of a work and financial plan supported by a detailed
breakdown of the projects, activities and objects of expenditures proposed to be funded.
Savings generated over and above the requirements prescribed in Section 18 of the General Provisions
of this Act shall be made available for the Capability Building Program of the Department of the Interior
and Local Government for local officials and employees, subject to Section 40 of P.D. 1177 (Sec. 35,
Book VI of E.O. No. 292).
On 11 November 1991, Atty. Hiram C. Mendoza (Atty. Mendoza), Project Director of the Ad Hoc Task Force
for Inter-Agency Coordination to Implement Local Autonomy, informed then Deputy Executive Secretary
Dionisio de la Serna of the proposal to constitute and implement a "shamrock" type task force to implement
local autonomy institutionalized under the Local Government Code of 1991.
The stated purpose for the creation of the task force was to design programs, strategize and prepare modules for
an effective program for local autonomy. The estimated expenses for its operation was P2,388,000.00 for a
period of six months beginning on 1 December 1991 up to 31 May 1992 unless the above ceiling is sooner
expended and/or the project is earlier pre-terminated.
The proposal was accepted by the Deputy Executive Secretary and attested by then DILG Secretary Cesar N.
Sarino, one of the petitioners herein, who consequently issued a memorandum for the transfer and remittance to
the Office of the President of the sum of P300,000.00 for the operational expenses of the task force. An
additional cash advance of P300,000.00 was requested. These amounts were taken from the Fund.
Two (2) cash advances both in the amount of P300,000.00 were withdrawn from the Fund by the DILG and
transferred to the Cashier of the Office of the President. The "Particulars of Payment" column of the
disbursement voucher states that the transfer of funds was made "to the Office of the President for Ad-Hoc Task
Force for Inter-Agency Coordination to Implement Local Autonomy." 4
The first cash advance in the amount of P300,000.00 was liquidated in the following manner although no
receipts were presented to support the expenditures:

Payroll
Office rentals
Office furnitures

P 226,000.00
60,000.00
7,500.00

Office supplies

3,682.50

Xerox

300.30

Transportation expense

406.00

Bank charges

75.00

Miscellaneous

60.00
P298,023.80
===========

Balance 31 March 1992

P 1,976.005

There is no record of the liquidation of the second cash advance in the amount of P300,000.00.
Upon post-audit conducted by Department auditor Iluminada M.V. Fabroa, however, the amounts were
disallowed for the following reasons stated in the 3rd Endorsement dated 25 May 1992:
1. No legal basis for the created Task Force to claim payment thru DILG by way of cash advance.
2. Previous cash advance granted to accountable officer has not yet been liquidated.
3. Expenditures funded from capability building are subject to restrictions/conditions embodied in the
Special Provisions of the DILG Appropriations of R.A. 7180 which should be met.
4. Estimate of expenses covered by the cash advance not specified.6
The disallowance was reiterated in the Notice of Disallowance dated 29 March 1993, which states:
The transfer of fund from DILG to the Office of the President to defray salaries of personnel, office
supplies, office rentals, foods and meals, etc. of an Ad Hoc Task Force for Inter-Agency Coordination to
Implement Local Autonomy taken from the Capability Building Program Fund is violative of the
Special Provisions of R.A. 7180.7
A Notice of Disallowance dated 29 March 1993 was then sent to Mr. Sarino, et al. holding the latter jointly and
severally liable for the amount and directing them to immediately settle the disallowance.
Aggrieved by such action, Mr. Sarino, et al. requested reconsideration of the disallowance on the following
grounds:
1. That the transfer was for the operational expenses of an ad hoc task force for inter-agency

coordination to implement local autonomy; hence, for a public purpose;


2. Legally, the question of whether or not the transfer of funds by the DILG taken from the
capability building program of the Office of the President is violative of R.A. 7180 is exclusively
within the competence and jurisdiction of the courts and not of any other office. As it is, the matter
involves a prejudicial issue that necessitates prior authoritative determination by the courts. Unless there
is a pronouncement to the contrary, the transfer of funds for a public purpose effected by the executive
branch of government thru the department head is presumed legal and regular. Likewise, the DILG
Auditors conclusion of violation of the law cannot overcome the presumption of legality and regularity
of acts done by public officers in the performance of public duty. At best, such conclusion is gratuitous
and devoid of legal force and effect;
3. That the alleged violation is not specific and stated with particularity so as to apprise the respondents
of the nature and cause of the alleged violation. Legally, therefore, the disallowance is completely void
for being violative of the constitutional guarantee of due process; and
4. In the case of Binamira v. Garrucho, 188 SCRA 155, the Supreme Court held that the acts of
department heads, unless reprobated or disapproved by the Chief Executive, performed and promulgated
in the regular course of business are presumed valid and presumptively considered acts of the President
of the Philippines.8
Countering the foregoing points raised in the request for reconsideration, the Department Auditor denied the
request, thus:
1. That the expenses was for a public purpose.
Yes, it may be granted that the expenses was for a public purpose, but it was different from the
purpose for which the fund was created. Expenditures, as earlier pointed out, funded from the
Capability Building Program are subject to compliance to the restrictions/conditions embodied
in the Special Provisions of the General Appropriations Act of 1992.
Section 37, P.D. 1177 provides that "All money appropriated for functions, activities, projects
and programs shall be available solely for the specific purpose for which these are appropriated."
(Underscoring supplied)
2. We believe that there is no prejudicial issue involved in this particular case that needs the
pronouncement by the Courts. It is clearly stated in the Special Provisions of the DILG Appropriations
of R.A. No. 7180 that the Capability Building Program Fund shall be used for local government and
community capability building programs. Therefore the transfer and expenditures of the funds in the
Office of the Deputy Executive Secretary has completely abandoned the raison d etre for which the
fund was established.
Every expenditure or obligation authorized or incurred in violation of law shall be the personal
liability of the persons who authorized the expenditure. There is no need for the officer or
employee to misappropriate public funds but merely appropriating public funds for a purpose

other than that authorized by law. (Underscoring supplied)


3. We beg to disagree to the Counsels claim that the alleged violation was not specific and stated with
particularity so as to apprise the clients of the nature and cause of the alleged violation.
The grounds for our disallowance were specifically enumerated in our 3rd Indorsement dated
May 25, 1992, to the FMS Director, this Department.
4. The mere transfer of the fund from DILG to the Office of the Deputy Executive Secretary to defray
the salaries of the personnel, office supplies, office rentals, foods and meals, etc. is already in violation
of law. Section 84 (2) of P.D. 1445 provides that "Trust funds shall not be paid out of any public
treasury or depository except in fulfillment of the purpose for which the trust was created or funds
received, and upon authorization of the legislative body or head of any other agency of the government
having control thereof, and subject to pertinent budget law, rules and regulations. (Underscoring
supplied)9
Finding no reason to deviate from the findings of the Department Auditor, the COA affirmed the disallowance
in its assailed COA Decision No. 96-65410 dated 21 November 1996.
It is worth noting at this juncture that while Commissioner Sofronio B. Ursal (Commissioner Ursal) signed the
assailed Decision, he nonetheless submitted a dissenting opinion stating that the transfer of funds from the Fund
to the Office of the Executive Secretary falls within the authority of the President to augment any item in the
general appropriations law as provided in Sec. 25(5), Art. VI of the 1987 Constitution. Thus, he concludes that
the transfer is deemed an act of the President. Further, the use of the Fund by the task force to implement local
autonomy falls within the purpose for which the Fund was created. However, he adds that the individual
disbursements made by the task force for such expenses as salaries, allowances, rentals, food and the like
should be audited by the Auditor for the Office of the President in accordance with existing accounting and
auditing rules.11
Petitioners argue that the transfer of the questioned amount from the Fund of the DILG to the Office of the
President was legal and that the Notice of Disallowance dated 29 May 1993 was without basis. They explain
that the Capability Building Program which was financed by the Fund was administered by the DILG and was
intended as a complementary resource to aid the DILG in its task of pursuing an intensified program of
enhancing local government autonomy capabilities. It was pursuant to this goal that a task force was created to
design programs, strategize and prepare modules for an effective program for local autonomy with the expenses
therefor to be charged against the Fund. Thus, petitioners argue that the purpose of the task force was actually
within the framework of the Special Provisions of R.A. No. 7180, and the transfer of funds to effectuate this
purpose was not violative of the said law contrary to the Department Auditors conclusion.
Further, petitioners aver that the law did not prohibit the DILG from directly coordinating with the Office of the
President in attaining the objectives of local autonomy.
The Office of the Solicitor General (OSG) filed a Manifestation and Motion in Lieu of Comment12 dated 19
January 1998, which it later disavowed, however, stating that the petition is meritorious. According to the OSG
then, far from being categorically different from the purpose for which the Fund was created, the transfer of the

amount in question complemented, if not enhanced, the DILGs program to promote local autonomy. The
transfer of a portion of the Fund for the operational expenses of the task force to implement local autonomy did
not therefore violate the Special Provisions of R.A. No. 7180.
Because of the position initially taken by the OSG, the COA filed its own Comment13 dated 16 March 1998,
maintaining that it acted according to its constitutional mandate when it disallowed the disbursement
considering that the transfer of funds from the DILG to the Office of the President was violative of the Special
Provisions of R.A. No. 7180. The COA considers the Fund a trust fund which may not be paid out except in
fulfillment of the purpose for which it was created and upon authorization of the head of agency and subject to
budget law, rules and regulations.
Petitioners filed their Reply14 dated 9 March 2001. Thereafter, the parties were required to submit their
respective memoranda in the Resolution15 dated 12 February 2002. In compliance with this directive, the parties
filed their memoranda16 in reiteration of their respective positions.
For further elucidation of the issues, the Court set the case for oral argument, crystallizing the decisive issues in
this case as follows:
(1) Whether there is legal basis for the transfer of funds of the Capability Building Program Fund
appropriated in the 1992 General Appropriation Act from the Department of Interior and Local
Government to the Office of the President;
(2) Whether the conditions or requisites for the transfer of funds under the applicable law were present
in this case;
(3) Whether the Capability Building Program Fund is a trust fund, a special fund, a trust receipt or a
regular appropriation; and finally
(4) Whether the questioned disallowance by the Commission on Audit is valid.17
The parties were required to simultaneously submit their memoranda in amplification of their arguments on the
foregoing issues.
Retracting its previous stance, the OSG avers in its Memorandum18 dated 6 July 2005 that the transfer of funds
from the DILG to the Office of the President has no legal basis and that COAs disallowance of the transfer is
valid. According to the OSG, the creation of a task force to implement local autonomy, if one was necessary,
should have been done through the Local Government Academy with the approval of its board of trustees in
accordance with R.A. No. 7180.
Moreover, Sec. 25(5), Art. VI of the Constitution authorizes the transfer of funds within the OP if made by the
President for purposes
of augmenting an item in the Office of the President. In this case, it was not the President but the Deputy
Executive Secretary who caused the transfers and the latter was not shown to have been authorized by the

President to do so.
The OSGs Memorandum also brings to the surface several facts which had theretofore remained hidden. For
instance, it was disclosed that the disallowed transfers were released without the submission of a work and
financial plan supported by a detailed breakdown of the projects, activities and objects of expenditures
proposed to be funded.19 There was also no proper liquidation of the P600,000.00 cash advance made to Atty.
Mendoza who, in addition, was not even an employee either of the DILG or the Office of the President.20
In the absence of evidence of bad faith, malice or gross negligence, however, the OSG submits that petitioners
may not be held civilly and personally liable for the disallowed expenditure.
The COA, in its Memorandum21 dated 18 July 2005, reiterates its position that there is no legal basis for the
transfers in question because the Fund was meant to be implemented by the Local Government Academy.
Further, transfer of funds under Sec. 25(5), Art. VI of the Constitution may be made only by the persons
mentioned in the section and may not be re-delegated being already a delegated authority. Additionally, the
funds transferred must come only from savings of the office in other items of its appropriation and must be used
for other items in the appropriation of the same office. In this case, there were no savings from which
augmentation can be taken because the releases of funds to the Office of the President were made at the
beginning of the budget year 1992.
The COA also posits that while the Fund is a regular appropriation, it partakes the nature of a trust fund because
it was allocated for a specific purpose. Thus, it may be used only for the specific purpose for which it was
created or the fund received. The COA concludes that petitioners should be held civilly and criminally liable for
the disallowed expenditures.
For their part, petitioners maintain in their Memorandum22 that the transfer of funds was never repudiated by the
President and that operational control over the amount transferred remained with the DILG as evidenced by the
fact that liquidation was done by the latter and not by the Office of the President. Petitioners also insist that the
Fund is a regular item of appropriation and not a trust fund because after the end of the calendar year, any
unexpended amount will be reverted to the General Fund.
We affirm the ruling of the COA.
The COA is endowed with enough latitude to determine, prevent and disallow irregular, unnecessary, excessive,
extravagant or unconscionable expenditures of government funds.23 It has the power to ascertain whether public
funds were utilized for the purpose for which they had been intended.
The Court had therefore previously upheld the authority of the COA to disapprove payments which it finds
excessive and disadvantageous to the Government; to determine the meaning of "public bidding" and when
there is "failure" in the bidding; to disallow expenditures which it finds unnecessary according to its rules even
if disallowance will mean discontinuance of foreign aid; to
disallow a contract even after it has been executed and goods have been delivered.24 Likewise, we sustained the
findings of the COA disallowing the disbursements of the National Home Mortgage Finance Corporation for

failure to submit certain documentary requirements and for being irregular and excessive. 25
We have also ruled that the final determination of the Department of Finance and the BIR as to a persons
entitlement to an informers reward is conclusive only upon the executive agencies concerned and not on the
COA, the latter being an independent constitutional commission.26 The COA is traditionally given free rein in
the exercise of its constitutional duty to examine and audit expenditures of public funds especially those which
are palpably beyond what is allowed by law.
Verily, it is the general policy of the Court to sustain the decisions of administrative authorities, especially one
which is constitutionally-created, not only on the basis of the doctrine of separation of powers but also for their
presumed expertise in the laws they are entrusted to enforce.27 It is, in fact, an oft-repeated rule that findings of
administrative agencies are accorded not only respect but also finality when the decision and order are not
tainted with unfairness or arbitrariness that would amount to grave abuse of discretion.28
It is only when the COA has acted without or in excess of jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, that this Court entertains a petition questioning its rulings.29
We find no grave abuse of discretion on the part of the COA in issuing the assailed Decision as will be
discussed hereafter.
Petitioners have flip-flopped on whether an actual transfer of the disallowed amount had taken place. In
response a pointed question during oral argument, counsel for petitioners stated that there was no transfer of
even a centavo of the P600,000.00 to the Office of the President.30 On the other hand, in their Memorandum31
dated 28 August 2005, petitioners aver that "the transfer of funds was made by the DILG to the Office of the
President, through the request of then Deputy Executive Secretary Dionisio de la Serna. The transfer of funds
was never repudiated nor questioned by the President."32
The OSG, on the other hand, unmistakably confirms the actual transfer in its Memorandum attaching the
disbursement voucher and receipts covering the transfer of funds from the DILG to the Office of the President.
The resolution of these divergent theories is critical. If, on one hand, there was no actual transfer of funds, the
propriety of the disallowance would be evaluated on the basis of whether the purpose for which the fund was
used was indeed violative of R.A. No. 7180. On the other hand, if there was an actual transfer of funds, the
Court would have to ascertain whether the criteria laid out in Sec. 25(5), Art. VI of the 1987 Constitution had
been met.
In the following exchange between then Justice (now Chief Justice) Puno and COA Assistant Commissioner
Raquel Habitan, the latter reiterated that petitioners have always stood pat on their argument that there was a
transfer of funds but that the transfer was valid as it was for a public purpose:
The theory that there was an actual transfer of funds but the same was for a public purpose has been at the core
of petitioners arguments since they requested reconsideration of the Notice of Disallowance dated 29 March
1993. Even their pleadings before the Court reveal an unwavering adherence to their theory that the transferred
funds should not have been disallowed because they were used for a public purpose.

Commissioner Ursals dissent, which first brought to fore the opinion that the disallowed transfer was a valid
exercise of the Presidents power to augment under Sec. 25(5), Art. VI of the 1987 Constitution, is therefore
clearly just a gratuitous argument because petitioners themselves never justified the transfer as an exercise of
the Presidents constitutional prerogative.
At any rate, in order to finally lay this case to rest, we shall discuss whether the disallowed transfer satisfies the
standard laid down for the augmentation from savings under Sec. 25(5), Art. VI of the 1987 Constitution.
The General Provisions of R.A. No. 7180 provides that "[E]xcept by act of the Congress of the Philippines, no
change or modification shall be made in the expenditure items authorized in this Act and other appropriations
laws unless in cases of augmentations from savings in appropriations as authorized under Section 25(5) of
Article VI of the Constitution."34
Sec. 25(5), Art. VI of the 1987 Constitution, in turn, provides:
Sec. 25(5) No law shall be passed authorizing any transfer of appropriations; However, the President,
the President of the Senate, The Speaker of the House of Representatives, the Chief Justice of the
Supreme Court, and the heads of Constitutional Commissions may, by law, be authorized to augment
any item in the general appropriations law for their respective offices from savings in other items of
their respective appropriations.
It is important to underscore the fact that the power to transfer savings under Sec. 25(5), Art. VI of the 1987
Constitution pertains exclusively to the President, the President of the Senate, the Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, and the heads of Constitutional Commissions and no
other.
In Philippine Constitution Association v. Enriquez,35 the Court declared that individual members of Congress
may only determine the necessity of the realignment of savings in the allotments for their operating expenses
because they are in the best position to know whether there are savings available in some items and whether
there are deficiencies in other items of their operating expenses that need augmentation. However, it is the
Senate President and the Speaker of the House of Representatives who shall approve the realignment.36
In the same case, the Court also ruled that the Chief of Staff of the Armed Forces of the Philippines may not be
given authority to transfer funds under this article because the realignment of savings to augment items in the
general appropriations law for the executive branch must and can be exercised only by the President pursuant to
a specific law.37
Parenthetically, petitioners fail to point out to the Court the specific law and provision thereof which authorizes
the transfer of funds in this case.
Thus, the submission that there was a valid transfer of funds within the Executive Department should be
rejected as it overlooks the fact that the power and authority to transfer in this case was exercised not by the
President but only at the instance of the Deputy Executive Secretary, not the Executive Secretary himself. Even
if the DILG Secretary had corroborated the initiative of the Deputy Executive Secretary, it does not even appear
that the matter was authorized by the President. More fundamentally, as will be shown later, even the President

himself could not have validly authorized the transfer under the Constitution.
The deliberations of the Constitutional Commission are instructive as regards the extent of the Presidents
power to augment:
MR. SARMENTO: I have one last question. Section 25, paragraph (5) authorizes the Chief Justice of
the Supreme Court, the Speaker of the House of Representatives, the President, the President of the
Senate to augment any item in the General Appropriations Law. Do we have a limit in terms of
percentage as to how much they should augment any item in the General Appropriations Law?
MR. AZCUNA: The limit is not in percentage but "from savings." So it is only to the extent of their
savings.38
The 1973 Constitution contained an identical provision:
Sec. 16(5). No law shall be passed authorizing any transfer of appropriations, however, the President,
the Prime Minister, the Speaker, the Chief Justice of the Supreme Court, and the heads of constitutional
commissions may by law be authorized to augment any item in the general appropriations law for their
respective offices from savings in other items of their respective appropriations.
Construing this provision, the Court ruled in the pre-eminent case of Demetria v. Alba: 39
The prohibition to transfer an appropriation for one item to another was explicit and categorical under
the 1973 Constitution. However, to afford the heads of the different branches of the government and
those of the constitutional commissions considerable flexibility in the use of public funds and resources,
the constitution allowed the enactment of a law authorizing the transfer of funds for the purpose of
augmenting an item from savings in another item in the appropriation concerned. The leeway granted
was thus limited. The purpose and conditions for which funds may be transferred were specified,
i.e. transfer may be allowed for the purpose of augmenting an item and such transfer may be
made only if there are savings from another item in the appropriation of the government branch
or constitutional body. [Emphasis supplied]
Thus, we declared unconstitutional par. 1, Sec. 44 of Presidential Decree No. 1177 which authorized the
President "to transfer any fund, appropriated for the different departments, bureaus, offices and agencies of the
Executive Department, which are included in the General Appropriations Act, to any program, project or
activity of any department, bureau or office included in the General Appropriations Act or approved after its
enactment" because it unduly overextends the privilege granted under Sec. 16(5) of the 1973 Constitution.
We ruled that the President cannot indiscriminately transfer funds from one department, bureau, office or
agency of the Executive Department to any program, project or activity of any department, bureau or office
included in the General Appropriations Act or approved after its enactment, without regard to whether the funds
to be transferred are actually savings in the item from which the same are to be taken, or whether or not the
transfer is for the purpose of augmenting the item to which the transfer is to be made.40
R.A. 7180 contains a similar provision on the Presidents power to augment and provides the meaning of

"savings" and "augmentation," thus:


Sec. 17. Use of Savings. The President of the Philippines, the President of the Senate, the Speaker of the
House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions under Article IX of the Constitution, the Ombudsman and the Commission on Human
Rights are hereby authorized to augment any item in this Act for their respective offices from savings in
other items of their respective appropriations.
xxx
Sec. 19. Meaning of Savings and Augmentation. Savings refer to portions or balances of any
programmed appropriation free of any obligation or encumbrance still available after the satisfactory
completion or unavoidable discontinuance or abandonment of the work, activity or purpose for which
the appropriation is authorized, or arising from unpaid compensation and related costs pertaining to
vacant positions and leaves of absence without pay. Augmentation implies the existence in this Act of an
item, project, activity or purpose with an appropriation which upon implementation or subsequent
evaluation of needed resources is determined to be deficient. In no case, therefore, shall a non-existent
item, project, activity, purpose or object of expenditure be funded by augmentation from savings or by
the use of appropriations authorized otherwise in this act.41
Clearly, there are two essential requisites in order that a transfer of appropriation with the corresponding funds
may legally be effected. First, there must be savings in the programmed appropriation of the transferring
agency. Second, there must be an existing item, project or activity with an appropriation in the receiving agency
to which the savings will be transferred.
Actual savings is a sine qua non to a valid transfer of funds from one government agency to another. The word
"actual" denotes that something is real or substantial, or exists presently in fact as opposed to something which
is merely theoretical, possible, potential or hypothetical.42
As a case in point, the Chief Justice himself transfers funds only when there are actual savings, e.g., from
unfilled positions in the Judiciary.43
The thesis that savings may and should be presumed from the mere transfer of funds is plainly anathema to the
doctrine laid down in Demetria v. Alba as it makes the prohibition against transfer of appropriations the general
rule rather than the stringent exception the constitutional framers clearly intended it to be. It makes a mockery
of Demetria v. Alba as it would have the Court allow the mere expectancy of savings to be transferred.
Contrary to another submission in this case, the President, Chief Justice, Senate President, and the heads of
constitutional commissions need not first prove and declare the existence of savings before transferring funds,
the Court in Philconsa v. Enriquez, supra, categorically declared that the Senate President and the Speaker of
the House of Representatives, as the case may be, shall approve the realignment (of savings). However,
"[B]efore giving their stamp of approval, these two officials will have to see to it that: (1) The funds to be
realigned or transferred are actually savings in the items of expenditures from which the same are to be
taken; and (2) The transfer or realignment is for the purpose of augmenting the items of expenditure to

which said transfer or realignment is to be made."44


As it is, the fact that the permissible transfers contemplated by Section 25(5), Article VI of the 1987
Constitution would occur entirely within the framework of the executive, legislative, judiciary, or the
constitutional commissions, already makes wanton and unmitigated malversation of public funds all too easy,
without the Court abetting it by ruling that transfer of funds ipso facto denotes the existence of savings.
Precisely, the restriction on the transfer of funds, and similar constitutional limitations such as the specification
of purpose for special appropriations bill,45 the restriction on disbursement of discretionary funds,46 the
conditions on the release of money from the Treasury,47 among others, "were all safeguards designed to forestall
abuses in the expenditure of public funds."48
The following exchange between Mdme. Justice Sandoval-Gutierrez and counsel for petitioners inexorably
reveals that petitioners had known that there were no savings in the DILG at the time of the questioned It is
worthy of note, therefore, that the 1992 GAA only provided an appropriation for maintenance and other
operating expenses in the appropriation for the Capability Building Program, and not a single centavo for
capital outlay or for personal services.
Maintenance and other operating expenses cover traveling expense; communication services; repair and
maintenance of government facilities; use, repairs and maintenance of government vehicles; transportation
services; supplies and materials; rents; interests; grants, subsidies and contributions; awards and indemnities;
loan repayments and sinking fund contributions; losses/depreciation/depletion; water, illumination and power
service; social security benefits, rewards and other claims; auditing services; training and seminars;
extraordinary and miscellaneous expenses; confidential and intelligence expenses; antiinsurgency/contingency/emergency expenses; taxes and other duties; trading/production; advertising and
publication expenses; fidelity bond and insurance premiums; loss on foreign exchange; commitment
fees/charges; and other services such as repairs and maintenance; printing and binding; subscription to
periodicals and magazines; radiocast, telecast and documentary films; legal expenses; security and janitorial
services and meal and transportation allowance.56
Personal services, on the other hand, include the payment of salaries and wages; per diem compensation; social
security insurance premium; overtime pay; and commutable allowances,57 while capital outlays refer to
appropriations for the purchase of goods and services, the benefits of which extend beyond the fiscal year and
which add to the assets of government, including investments in the capital of government-owned or controlled
corporations and their subsidiaries as well as investments in public utilities such as public markets and
slaughterhouses.58
Maintenance and operating expenses and personal services are classified as current operating expenditures or
appropriations for the purchase of goods and services for current consumption or for benefits expected to
terminate within the fiscal year.59
By the nature of maintenance and operating expenses, savings may generally be determined at the end of the
year, or earlier in case of completion, discontinuance or abandonment of the work for which the appropriation
was authorized. In contrast, savings from personal services may generally be determined even at the opening of

the fiscal year in case of unpaid compensation pertaining to vacant positions and leaves of absence without pay.
It should be emphasized that the 1992 GAA did not provide an appropriation for personal services for the
Capability Building Program. Savings from vacant positions which pertain to personal services, therefore, may
not be considered savings from the Fund which may be transferred.
It is odd that during oral argument, petitioners did not bother to assert to the Court that there was actual savings
from the Fund which could have been transferred, prompting Justice (later Chief Justice) Panganiban to point
out that petitioners should have ascertained the existence of actual savings lest the petition be dismissed as it is
based on speculation.
From the foregoing, there is no question that there were no savings from the Fund at the time of the transfer.
The Court cannot hold on to the disputable presumptions that official duty had been regularly performed and
that the law had been obeyed.
Furthermore, the 1992 GAA itself forecloses the use of savings from the Fund for purposes other than those for
which it was established as specified under the law. The Special Provisions plainly state:
Special Provisions
2. Capability Building Program for Local Personnel. The amount herein appropriated for the Capability
Building Program for local personnel shall be used for local government and community capability
building programs, such as training and technical assistance, with the necessary support for training
materials, supplies and facilities: PROVIDED, That savings from the appropriation may be used to
acquire equipment, except motor vehicles, in further support of the programs.
The Capability Building Program shall be implemented nationwide by the Department of the Interior
and Local Government through the Local Government Academy and shall involve local officials and
employees, including barangay officials, elected and appointed.
The appropriations authorized herein shall be administered by the Department of the Interior and Local
Government and shall be released upon submission of a work and financial plan supported by a detailed
breakdown of the projects, activities and objects of expenditures proposed to be funded.
Savings generated over and above the requirements prescribed in Section 18 of the General
Provisions of this Act shall be made available for the Capability Building Program of the
Department of the Interior and Local Government for local officials and employees, subject to
Section 40 of P.D. 1177 (Sec. 35, Book VI of E.O. No. 292).
Thus, assuming that there were savings from the appropriation for the Executive Department, the Capability
Building Program should have been the recipient of any transfer thereof subject only to Section 1861 of the 1992
GAA. The Fund should have been the beneficiary and not the benefactor. Moreover, such savings should have
first been used to acquire equipment in furtherance of the Capability Building Program as was the clear intent
of the law.

As regards the requirement that there be an item to be augmented, which is also a sine qua non like the first
requirement on the existence of savings, there was no item for augmentation in the appropriation for the Office
of the President at the time of the transfers in question. Augmentation denotes that an appropriation was
determined to be deficient after the implementation of the project or activity for which an appropriation was
made, or after an evaluation of the needed resources. To say that the existing items in the appropriation for the
Office of the President already needed augmentation as early as 31 January 1992 is putting the cart before the
horse.
The task force spent the disallowed amount on behalf of the DILG allegedly to implement an item of
appropriation of the DILG. This evinces the fact that there was no item in the appropriation for the Office of the
President which the disallowed amount could have augmented.
The ad hoc62 nature of the task force whose operations the illegally transferred funds were supposed to finance
precisely underscores the impermanence and transitoriness of the group and its activities. Hence, the ad hoc
body itself is inconsistent with the notion that there was an existing item of appropriation which needed to be
augmented.
The absence of any item to be augmented starkly projects the illegality of the diversion of the funds and the
profligate spending thereof.
With the foregoing considerations, it is clear that no valid transfer of the Fund to the Office of the President
could have occurred in this case as there was neither allegation nor proof that the amount transferred was
savings or that the transfer was for the purpose of augmenting the item to which the transfer was made.
Further, we find that the use of the transferred funds was not in accordance with the purposes laid down by the
Special Provisions of R.A. 7180.
The Capability Building Program was established pursuant to the mandate of local autonomy under the 1987
Constitution carried out by the Local Government Code of 1991. It was supposed to guide local communities to
become self-reliant and capable of self-governance. In order to finance the program, R.A. No. 7180 set up the
Fund explicitly declaring that it shall be used for local government and community capability building
programs, such as training and technical assistance, with the necessary support for training materials, supplies
and facilities. The Fund was to be administered by the DILG.
Construed flexibly in the context of the general objective of attaining local autonomy, the stated purpose for the
creation of the task force, which was to design programs, strategize and prepare modules for an effective
program for local autonomy, would have fallen within the general intendment of the Fund. It is not enough,
however, for petitioners to loosely claim that the amount was used for a public purpose or that it was used to
advance local autonomy. It is imperative for them to show that the questioned amount was used directly in
fulfillment of the purpose for which the Fund was created.
In this case, there is no evidence on record as to how the task force was created, what its functions were and
who composed it. Atty. Mendoza, the project director of the task force, does not even appear to have been an
officer or employee of or connected in any capacity to either the DILG or the Office of the President, or at least
to have been acting under the authority of either office. The proposal to create the task force was initiated by

Atty. Mendoza in his personal capacity and on his own authority.63


There is also no evidence to the effect that the amount taken from the Fund was actually spent for the task
forces avowed objectives or that the purpose of the task force came to fruition. There is no indication at all
whether the task force was actually able to design programs, strategize and prepare modules in furtherance of
local autonomy using the Fund.
What is apparent from the records is that the amount in question was spent to "defray salaries of personnel,
office supplies, office rentals, foods and meals, etc."64 The audit conducted by the DILG Auditor covered both
the invalidity of the transfer of funds and the illegality of the use thereof. The Department Auditor concluded
that the questioned amount was not used for the purposes enumerated in the Special Provisions of R.A. 7180.
This evaluation was upheld by the COA itself also on both points. It said:
Reviewing the grounds of this motion for reconsideration, this Commission finds no legal justification
to deviate from the stand taken by the DILG Auditor. Appellants postulate that the transfer of funds was
for a public purpose. However, it was categorically different from the purpose for which the fund was
created. Expenditures funded from the capability building program are subject to compliance of the
restrictions/conditions embodied in the special provisions of R.A. No. 7180 and Section 37 of P.D. 1177
also provides:
All money appropriated for functions, activities, projects and programs shall be available solely
for the specific purpose for which these were appropriated. (Underscoring supplied)
It cannot also be validly argued that this case involves a prejudicial issue that necessitates prior
determination by the courts. Thus, it is clearly stated in the special provisions of the DILG
Appropriations of R.A. 7180 that the capability building program fund shall be used for local
government and community capability building programs. Therefore, the transfer and expenditure of
subject fund to the Office of the Executive Secretary has completely abandoned the reason or purpose
for which the fund was established. It bears stressing that the mere appropriation of public funds for a
purpose other than that authorized by law such as the subject transfer of funds from DILG to the Office
of the Executive Secretary to defray the salaries of office personnel, supplies, rentals, foods and meals,
etc. is already a violation of law. Section 84, par. 2, of P.D. 1445 provides, viz:
Trust funds shall not be paid out of any public treasury or depository except in fulfillment of the
purpose for which the trust was created or funds received, and upon authorization of the
legislative body or head of any other agency of the government having control thereof and
subject to pertinent budget law, rules and regulations. (Underscoring supplied)
Appellants cannot dispute the fact that they were duly informed of the nature and cause of the alleged
infraction. The constitutional guarantee of due process of law was strictly observed as the grounds for
the disallowance were specifically enumerated in the 3rd Indorsement dated May 25, 1992 to the FMS
Director, DILG.
Lastly, the case of Binamira vs. Garrucho cited by the appellants refers to a petition for quo warranto

filed by Mr. Ramon P. Binamira against then Secretary of Tourism Peter D. Garrucho for reinstatement
to the Office of the General Manager of the Philippine Tourism Authority from which he claims to have
been removed without cause in violation of his security of tenure. Appellants contend that pursuant to
the aforementioned case, the transfer of funds from the DILG to the Office of the Executive Secretary
was performed and promulgated in the regular course of business and is presumptively the act of the
Chief Executive, unless disapproved or reprobated. This argument cannot prevail because what is
disputed in the instant case is the expenditure of public funds which is subject to audit by this
Commission as constitutionally mandated. Necessarily, for audit purposes, this Commission has the sole
jurisdiction to determine whether or not the disbursement is in the first place legal and proper.65
The fact that the audit was conducted by the DILG Auditor and not by the Auditor of the Office of the President
is inconsequential because the findings and conclusion of the DILG Auditor were passed upon and upheld by
the COA itself.
In Olaguer v. Domingo,66 the COA affirmed the ruling of the Resident Auditor for the National Home Mortgage
Finance Corporation disallowing in audit the latters disbursements for the purchase of a parcel of land under
the Community Mortgage Program. We sustained the COA reiterating that in this jurisdiction, findings which
have been affirmed and reaffirmed along the administrative hierarchy are generally conclusive on the courts.
We held:
With these substantial findings, we affirm the ruling of respondent Commission on Audit. As to the other claims
raised by petitioners, suffice it to state that in this jurisdiction, courts will not interfere in matters which are
addressed to the sound discretion of government agencies which are entrusted with the regulation of activities
coming under the special technical knowledge and training of such agencies. With all the more reason should
this rule hold when, as in the instant case, the findings of respondent Razon have been affirmed and reaffirmed
along the administrative hierarchy.67
The ineluctable conclusion is that petitioners should be held personally liable for the disallowed disbursement
by virtue of their position as public officials held accountable for public funds.68 Sec. 103 of P.D. No. 1445
provides:
Sec. 103. General liability for unlawful expenditures.Expenditures of government funds or uses of
government property in violation of law or regulations shall be a personal liability of the official or
employee found to be directly responsible therefor.
Section 19 of the Manual of Certificate of Settlement and Balances states:
19.1 The liability of public officers and other persons for audit disallowances shall be determined on the
basis of: (a) the nature of the disallowance; (b) the duties, responsibilities or obligations of the
officers/persons concerned; (c) the extent of their participation or involvement in the disallowed
transaction; and (d) the amount of losses or damages suffered by the government thereby. The following
are illustrative examples:
xxxxxxxxx

19.1.3 Public officers who approve or authorize transactions involving the expenditure of government
funds and uses of government properties shall be liable for all losses arising out of their negligence or
failure to exercise the diligence of a good father of a family.
xxxxxxxxx
19.2 The liability for audit charges shall be measured by the individual participation or involvement of
persons in the charged transaction; i.e. public officers whose duties require the
appraisal/assessment/collection of government revenues and receipts shall be liable for under-appraisal,
under-assessment, and under-collection thereof."
Petitioners Sarino, Sanchez, Regala, Barata and Agbayani, at the time of the disallowed transfers, were all
responsible officers of the DILG being then the Departments Secretary, Undersecretary, Chief Accountant,
Director, and Chief of the Management Division, respectively. Their participation, assent and approval were
indispensable to the consummation of the illegal transfer of funds and render them accountable therefor.
In view of the foregoing, we find no grave abuse of discretion on the part of the COA in rendering the assailed
Decision. The constitutional body should even be lauded for its commitment in ensuring that public funds are
not spent in a manner not strictly within the intendment of the law.
WHEREFORE, the instant petition is DISMISSED and the assailed Decision of the Commission on Audit is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
DANTE O. TINGA
Associate Justice

Candelario Versoza vs. Guillermo Carague, GR 157838, 7 February 2012 [absent grave
abuse of discretion findings of quasi-judicial agencies area accorded respect and finality]

G.R. No. 157838

February 7, 2012

CANDELARIO L. VERZOSA, JR. (in his former capacity as Executive Director of the
Cooperative Development Authority), Petitioner,
vs.
GUILLERMO N. CARAGUE (in his official capacity as Chairman of the COMMISSION
ON AUDIT), RAUL C. FLORES, CELSO D. GANGAN, SOFRONIO B. URSAL and
COMMISSION ON AUDIT, Respondents.
RESOLUTION
VILLARAMA, JR., J.:
This resolves the motion for reconsideration of our Decision1 dated March 8, 2011 affirming
COA Decision Nos. 98-424 and 2003-061 dated October 21, 1998 and March 18, 2003,
respectively. We upheld the COAs ruling that petitioner is personally and solidarily liable for the
amount of P881,819.00 under Notice of Disallowance No. 93-0016-101.
In compliance with our Resolution dated February 8, 2011, counsel for petitioner filed a Notice,
Manifestation and Apology confirming the demise of petitioner on June 24, 2010 and explaining
the reason for the delay in informing this Court.
The motion for reconsideration filed by petitioners counsel, son of petitioner, is anchored on the
following grounds:
1) There is no finding of fact in this Courts decision which supports the serious finding
that petitioner acted in bad faith when he prevailed upon the DAP-TEC to modify the
initial result of the technical evaluation of the computers by imposing an irrelevant
grading system intended to favor one of the bidders;
2) Assuming without admitting there was an attempt to alter the results of the bidding,
petitioner was not directly responsible for it since it was a certain Rey Evangelista whose
act in itself did not constitute bad faith as to be interpreted as deliberately favoring
TETRA;
3) The mere fact that petitioner was the signatory in the vouchers and other documents
for the processing of the purchase after the winning bidder had been chosen does not by
itself constitute bad faith, malice or negligence. His participation as final
recommending/approving authority in the said purchase was merely ministerial;
4) Records of this case show that the COA decisions did not hold petitioner solely liable
for the disallowed amount of P881,819.00; there were others adjudged solidarily liable
with petitioner for the reimbursement of said amount;
5) The decision in Arriola v. Commission on Audit2 should have been applied in this case.
The TSO canvass coupled with confirmatory telephone canvass should be re-examined
given the admission made by the COA Auditor in her 1st Indorsement dated June 6, 1994
and as held in the Dissenting Opinion of Justice Ma. Lourdes P.A. Sereno; and

6) The Court should consider the bases of comparison which is made against a clone
generic brand (and its reference price values), in light of compliance with intellectual
property laws on software piracy and hardware imitations.3
On September 15, 2011, the Office of the Solicitor General (OSG) filed its Comment reiterating
its position that petitioner should not have been made liable for the disallowed amount since
there was no substantial evidence of his direct responsibility. It contends that the decision should
not have ordered petitioner to reimburse the disallowed amount on account of "overpricing of
purchased equipment" because he did not have any participation in the bidding that was
conducted by the PBAC, nor did he have any participation in influencing Mr. A. Quintos, Jr., the
DAP-TEC evaluator, to change the evaluation results. As to the acts cited by the COA in holding
petitioner liable for the disallowed amount, these cannot be the "clear showing of bad faith,
malice or gross negligence" required by law to hold public officers liable for acts done in the
performance of his official duties. There was no contrary evidence presented by the COA to
overcome the presumption of regularity in the performance of official duty. The OSG also cites
the discussion in the dissenting opinion of Justice Sereno that the standards set in Arriola should
have been observed by the COA, i.e., it should have compared the same brand of equipment
(with the same features and specifications) with the items CDA purchased to determine if there
was indeed overpricing.
Respondents filed their Comment asserting that the arguments raised by the petitioner in his
motion for reconsideration do not warrant reversal of the decision rendered by this Court. They
point out that the bad faith of petitioner was satisfactorily established when he prevailed upon
DAP-TEC to modify the initial result of the technical evaluation of the bidders computer units.
As to the contention that petitioners act of signing the documents for the processing of the
purchase was merely a ministerial function, respondents noted that the Certification in the
Disbursement Voucher for the payment of the computer states that "Expenses necessary, lawful
and incurred under my direct supervision." Such certification definitely involves the exercise of
discretion and is not a ministerial act. Petitioner recommended to the Chairman of the Board of
Administrators of CDA the award of the contract to TETRA upon evaluation by the PBAC which
he reconstituted. He cannot therefore escape liability for the disallowed amount together with the
other liable parties, namely: Mr. Edwin Canonizado, PBAC Chairman, Ms. Ma. Luz Aggabao,
PBAC Vice-Chairman, and PBAC Members Ms. Sylvia Posadas, Ma. Erlinda Dailisan, Mr.
Leonilo Cedicol, Ms. Amelia Torrente (IT Consultant) and CDA Board Chairman Ms. Edna E.
Aberilla. As to the argument that the COA-TSO canvass was not accurate as it compared generic
computers with the computers offered by TETRA, respondent pointed out that aside from having
already been passed upon in the decision sought to be reconsidered, the report submitted by said
office disclosed that certain specifications of the reference computers were either similar or
better than those of the Trigem brand offered by TETRA at a much lower price. COA Auditor
Rubico had allowed a 15% mark up on the prices of the items canvassed by COA-TSO, but still
the actual purchase prices were way above the maximum allowable COA reference prices, hence,
the disallowance was proper.
We find that the arguments raised in the motion have been adequately discussed and passed upon
in our Decision dated March 8, 2011. There are, however, two significant issues that need to be
clarified: first, whether the COA violated its own rules and jurisprudence in the determination of

overpricing; second, whether petitioner may be ordered to reimburse the disallowed amount in
the purchase of the subject computers.
There was no violation of COA rules
In Arriola v. COA,4 this Court ruled that the disallowance made by the COA was not sufficiently
supported by evidence, as it was based on undocumented claims. The documents that were used
as basis of the COA Decision were not shown to petitioners therein despite their repeated
demands to see them; they were denied access to the actual canvass sheets or price quotations
from accredited suppliers. Absent due process and evidence to support COAs disallowance,
COAs ruling on petitioners liability has no basis.
Reiterating the above declaration, National Center for Mental Health Management v. COA,5
likewise ruled that price findings reflected in a report are not, in the absence of the actual canvass
sheets and/or price quotations from identified suppliers, valid bases for outright disallowance of
agency disbursements for government projects.
The aforesaid jurisprudence became the basis of COA Memorandum No. 97-012 dated March
31, 1997 which contained guidelines on evidence to support audit findings of over-pricing. In the
interest of fairness, transparency and due process, it was provided that copies of the documents
establishing the audit findings of over-pricing are to be made available to the management of the
audited agency.
The memorandum laid down the following specific guidelines:
3.1 When the price/prices of a transaction under audit is found beyond the allowable ten
percent (10%) above the prices indicated in reference price lists referred to in pa[r]. 2.1 as
market price indicators, the auditor shall secure additional evidence to firm-up the initial
audit finding to a reliable degree of certainty.
3.2 To firm-up the findings to a reliable degree of certainty, initial findings of overpricing based on market price indicators mentioned in pa[r]. 2.1 above have to be
supported with canvass sheets and/or price quotations indicating:
a) the identities/names of the suppliers or sellers;
b) the availability of stock sufficient in quantity to meet the requirements of the
procuring agency;
c) the specifications of the items which should match those involved in the
finding of over-pricing; and
d) the purchase/contract terms and conditions which should be the same as those
of the questioned transaction.
x x x x (Italics supplied.)

Contrary to the thrust of Justice Serenos dissent, the lack of compliance with the above
guidelines did not invalidate the audit report for violation of the CDAs right to due process. We
categorically ruled in Nava v. Palattao6 that neither Arriola nor the COA Memorandum No. 97012 can be given any retroactive effect. Thus, although Arriola was already promulgated at the
time, it is not correct to say that the COA in this case violated the afore-quoted guidelines which
have not yet been issued at the time the audit was conducted in 1993.
As to COA Resolution No. 90-43 dated September 10, 1990, while indeed it authorized the
disclosure or identification of the sources of data gathered by the Price Evaluation Division-TSO
in the conduct of its data gathering and price monitoring activities, perusal of this resolution
failed to indicate that the disclosure of the names and identities of suppliers who provided the
data during price monitoring activities of the TSO formed part of the evidentiary process in audit
findings of overpricing and not merely to guide the agencies on where to procure their supplies.
COA Resolution No. 90-43 reads as follows:
WHEREAS, it inheres in its constitutional mandate for this Commission to assist in the
development efforts of government by providing audit services with a view to avoiding loss and
wastage of public funds and property;
WHEREAS, in pursuance of such mandate, the determination of the reasonableness of price is an
essential aspect of the audit of procurement in goods and services;
WHEREAS, towards that end, the Price Evaluation Division (PED) of the Technical Services
Office (TSO), this commission, provides the Auditors with reference values which are obtained
thru a valid canvass in the open market;
WHEREAS, the price findings of the TSO that result from such audit determination of price
reasonableness at times adversely affect auditees who would request TSO to disclose or identify
the sources of these price quotations set by PED so that they can procure their supply needs from
said sources;
WHEREAS, this Commission is cognizant of the national policy of transparency in government
operations;
WHEREAS, this Commission perceives no legal impediment to the disclosure or identification
of the sources of price data which will ensure economy, efficiency and effectiveness in
government procurement;
NOW, THEREFORE, in keeping with the national policy of transparency, the commission
Proper has resolved, as it does hereby resolve, to authorize the disclosure or identification of the
sources of data gathered by the Price Evaluation Division, TSO in the conduct of its data
gathering and monitoring activities;
Be it further resolved that in order to carry out such policy of disclosure, the Price Monitor
Bulletin, a COA publication, contain not only specific items and prices of goods and services but

also the names and identities of responsive suppliers who provided the data during the canvass
conducted by the PED, TSO. (Emphasis and underscoring supplied.)
Accordingly, COA Memorandum No. 97-012 was issued on March 31, 1997 in view of the
Commissions recognition that "[t]here is a need to clarify the role and status of a price reference
data, such as those produced by the Technical Services Office, in the audit evidence process with
respect to findings of overpricing." It is therefore improper to apply this regulation to the postaudit conducted in the year 1993 on the subject transaction.
Further, it must be noted that petitioner in requesting reconsideration of the audit disallowance,
did not make a demand for the production of actual canvass sheets. Neither did he question the
correctness of the reference values used by the TSO. Petitioner only pointed out that the date of
canvass conducted by the TSO does not coincide with the date of purchase. To this the COATSO countered that "there was no showing that the foreign exchange rate changed during the
latter part of 1992 that would have significantly increased the prices of computers." Petitioner
nonetheless assailed the price comparison of the branded computers purchased by the CDA with
non-branded computers, which the dissent now deems as a right of preference or an exercise of
discretion on the part of CDA.
COA Upheld the Auditors
Position that Brand is
Irrelevant on the Basis
of Findings of its
Technical Personnel
The COA, under the Constitution, is empowered to examine and audit the use of funds by an
agency of the national government on a post-audit basis.7 For this purpose, the Constitution has
provided that the COA "shall have exclusive authority, subject to the limitations in this Article, to
define the scope of its audit and examination, establish the techniques and methods required
therefor, and 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."8 As such, CDAs decisions regarding
procurement of equipment for its own use, including computers and its accessories, is subject to
the COAs auditing rules and regulations for the prevention and disallowance of irregular,
unnecessary, excessive and extravagant expenditures. Necessarily, CDAs preferences regarding
brand of its equipment have to conform to the criteria set by the COA rules on what is reasonable
price for the items purchased.
The dissent points out that COA Circular No. 85-55-A itself provides that in determining whether
the price is excessive, the brand of products may be considered, thus:
D Brand of Products
Products of recognized brands coming from countries known for producing such quality products
are relatively expensive.

Ex. - Solingen scissors and the like which are made in Germany are more expensive than scissors
which do not carry such brand and are not made in Germany.
In this case, however, brand information was found by the COAs TSO Director, and also the
Information Technology Center (ITC) Director Marieta SF. Acorda as irrelevant to the
determination of the reasonableness of the price of the computers purchased by CDA from Tetra.
Director Jorge H.L. Perez of the TSO in his Memorandum dated April 24, 1995 addressed to the
Legal Office Director of the COA explained their position as follows:
xxxx
1. On the allegation that Trigem and Genesis computers are not comparable since it is like
comparing apples with oranges As a general rule/procedure, verification by TSO of the price of
an item requires comparison with the same/similar classification/group of items. The items
would then have the same specifications unless stated otherwise in the price findings of the
Office. In this case, the reference values are in accordance with the specifications but exclusive
of the "branded" information, since this was not stated in the P.O./Invoice, which was used as
basis of canvass. Since Trigem and Genesis are both computers of the same general
characteristics/attributes, the branded and non-branded labels propounded by the supplier is of
scant consideration.
As regards the UPS, the enumerated advantages of the delivered items are the same advantages
that can be generated from a UPS of the same specifications and standard features. In this case,
the reference value pertains to a UPS with the same capacity, input, output, battery packed and
back-up time, except for the brand.
x x x x9 (Underscoring supplied.)
On her part, COA Auditor Luzviminda V. Rubico maintained that what is important is that the
specifications and functions of Genesis and Trigem computers are similar. She pointed out that
"if the comparison of the prices for the disallowances issued was erroneous because what was
compared was Genesis brand [versus] Trigem, then the bidding conducted by CDA would not be
acceptable since in the Abstract of Bids, prices were not based on similar brands."
Director Acorda of the COA ITC likewise expressed a similar view when asked for comment
regarding the penalty points imposed by the CDA after the result of the DAP technical evaluation
initially showed that Tetra was ranked lowest. Thus, she explained in her December 9, 1996
memorandum addressed to COA Legal Counsel Director Habitan:
1. On the first issue - we observed that no additional computer features were introduced
in CDAs grading system, rather the bidders were penalized for non-compliance with
technical specifications fixed by CDA.
On CDAs representation with the Development Academy of the Philippines Technical
Evaluation Committee (DAP Committee) and based on the grading system devised by the

former, the DAP Committee agreed to impose penalties for non-compliance of the bids
with the technical specifications. Hereunder are their reasons for the penalties and our
comments thereto:
1.1 Columbia Computer Center (Columbia) and MicroCircuits Corporation
(MCC) were penalized because the microprocessor of the computer hardware they
delivered for evaluation were AMD and not Intel as required in the technical
specification.
AMD and Intel are both microprocessor brands. It rarely malfunctions. Hence, the
difference in brands, as in this case, will not affect the efficiency of the
computers performance. However, Intel microprocessors are more expensive and
are manufactured by Intel Corporation which pioneered the production of
microprocessors for personal computers.
1.2 Columbia was penalized because the ROM BIOSes of the computer hardware
they delivered were AcerBios, a deviation from the technical specifications which
required ROM BIOSes licensed by IBM. AMI, Phoenix or Awards.
This will not affect the efficiency of the computers performance. What is
important is that these ROM BIOSes are legal or licensed.
1.3 Columbia was again penalized because the casing of the computer they
delivered for evaluation in the Tower 386DX category has a desktop casing and
not tower casing as provided in the technical specifications.
Casings do not affect the efficiency of the computers performance but may affect
office furniture requirements such as the design of the computer tables.
1.4 Tetra Corporation (Tetra) was penalized because the RAM of the Notebook it
delivered for evaluation was only 640K instead of 2M (expandable).
We agree that RAM capacity will affect the efficiency of the computers performance.
2. On the second issue - the Benchmark testing conducted by the DAP Committee in
which Tetra got the lowest score in terms of Technical Evaluation is not a sufficient basis
for us to determine whether or not Trigem computers are inferior to the computer brands
offered by the other bidders.
In Benchmark Testing, weights are allocated to the different technical features of a computer.
The computers are then evaluated/appraised using diagnostic software and ranked in accordance
with the results of such evaluation/appraisal. The resulting ranking merely suggests which
computer best the appraisals. (Underscoring supplied.)
In the light of the foregoing consistent stand of its own technical personnel having expertise in
computer technology, the COA upheld the auditors finding that brand was irrelevant to

determining the reasonableness of the price at which CDA purchased the subject computers. It is
not for this Court, as the dissent attempts, to make assertions to the contrary, i.e., that the brand
preferred by CDA was superior to another brand or generic computer having similar
specifications/functions and to which the price of the branded computer was compared by
respondents. Whether a particular brand of computer or microprocessor is of superior quality is
not subject to judicial notice. Judicial notice is the cognizance of certain facts which judges may
properly take and act on without proof because they already know them.10
The dissent also asserted that it is "unfair to compare Tetras proposed Trigem computers to a
computer clone that was not even qualified to be bidded on or was not subjected to the same
hardware benchmark testing." But as COA ITC Director Acorda had explained in her December
9, 1996 memorandum, such Benchmark Testing conducted by the DAP-TEC is not a sufficient
basis for them to determine whether or not Trigem computers are inferior to the computer brands
offered by the other bidders.
COAs observation that
CDA should have been
entitled to volume discount
was valid
Under COA Circular No. 85-55-A, the price is deemed excessive if the discounts allowed in bulk
purchases is not reflected in the price offered or in the award or in the purchase/payment
documents. This implies that bulk purchases are expected to be accompanied by discounts that
should have resulted in lowering the price of items, which is contrary to the dissents stance that
the supplier TETRA was not legally obligated to give such discount to CDA. COA noted that
CDA should have been entitled to volume discount from the supplying dealer considering the
number of units it procured from them. Instead of explaining why there was no volume discount
at all reflected in the bid or purchase/payment documents, petitioner claimed that other buyers
even bought the same computers at higher prices from Tetra. However, when the sales invoices
issued to other companies were examined by the COA, it was found that only one unit was
procured by each. Hence, it was not pure conjecture on the part of COA to take into
consideration the absence of volume discount. Whether or not the other bidders actually
committed to give volume discount is beside the point, as the subject of post-audit was the
reasonableness of the price already paid to Tetra by CDA.
No grave abuse of discretion
committed by COA in holding
petitioner personally and
solidarily liable for the
overpricing of the
computers procured by CDA
Pursuant to Section 103 of P.D. No. 1445 and Section 19 of the Manual on the Certificates of
Settlement of Balances, petitioner was found liable for the audit disallowances totaling
P881,819.00 representing the overprice of the computers purchased by CDA. Petitioners

participation in the transaction was not limited to his signature/approval of the purchase as
recommended by the PBAC.
As pointed out in our Decision, records showed it was petitioner who ordered the reconstitution
of the PBAC which nullified the previous bidding conducted in December 1991. He further
secured the services of the DAP-TEC for technical evaluation and signed the agreement for the
said technical assistance when it is already the duty of the PBAC Chairman. Notwithstanding
petitioners claim that it was part of his duties as Executive Director to "[sign] outgoing
communications/letters except letters addressed to Heads of [Office], Congressmen, Senators and
to the Office of the President,"11 the fact remains that the services of DAP-TEC for P15,000.00
fee were availed of at his instance. As it turned out, the DAP-TEC came out with two different
technical evaluation reports, the second having been antedated but also signed by DAP-TEC
Director Minerva Mecina who admitted it was her signature in both documents but claimed she
was unaware that she had signed two different documents. The discrepancies in the two reports
(in the first impartial result, Tetra got the lowest ranking but in the second result made after CDA
ordered certain changes in the grading system, Tetra eventually won) was found by Auditor
Rubico to be irregular and indicative of bad faith.
The dissent assails such "alleged" instances of manipulation mentioned by Auditor Rubico as
belatedly raised and contends that the November 23, 1995 letter of the DAP-TEC technician
failed to show that Mr. Rey Evangelista (staff of the PBAC Chairman) went to DAP-TEC on
instructions by the petitioner. These circumstances surrounding the issuance of the DAP-TEC
technical evaluation results were additionally mentioned by Auditor Rubico to the respondents so
that the latter may be apprised that the members of the PBAC, including petitioner, could not
have been unaware of efforts to influence the outcome of the technical evaluation, and not as
ground per se of the disallowance. Hence, there was nothing anomalous in the fact that Auditor
Rubico only disclosed these additional findings in the course of her audit to the Commissions
Legal Counsel and other COA officials when she was asked to comment on the appeal/request
for reconsideration made by CDA from the notice of disallowance.
It is to be noted that petitioner never denied there were two different results of DAP-TEC
technical evaluation. To refute the imputation of irregularity, petitioner submitted a certification
from the incumbent CDA Executive Director that as per inventory, only fourteen out of the
subject forty-four Trigem computers have become unserviceable, which he said vindicated their
choice of branded computers. Thus, the supposedly "fraudulent" imposition of penalties in the
DAP-TEC second report during the physical testing of the computer hardware, construed as
manipulative endeavor by the COA Auditor, is now moot and academic. But as already explained
in our Decision, the continued serviceability of the purchased items did not justify the
overpricing nor render moot the disallowances based on post-audit examination of the pertinent
bid and purchase documents.
Finally, we find no merit in the assertion that in ordering the petitioner to reimburse the
disallowed amount, this Court misapplied the solidary nature of the liability determined by the
COA for petitioner and the other members of the PBAC. We have categorically stated that the
Court upholds the COAs ruling that petitioner is personally and solidarily liable for the
overpricing in the computers purchased by CDA. The directive for the payment of the amount of

disallowance finally determined by the COA did not change the nature of the obligation as
solidary because the demand thus made upon petitioner did not foreclose his right as solidary
debtor to proceed against his co-debtors/obligors, in this case the members of the PBAC charged
under Notice of Disallowance No. 93-0016-101, for their share in the total amount of
disallowance.12
Petitioner is therefore liable to restitute the P881,819.00 to the Government without prejudice,
however, to his right to recover it from persons who were solidarily liable with him.13
We stress anew that it is the general policy of the Court to sustain the decisions of administrative
authorities, especially one which is constitutionally-created, not only on the basis of the doctrine
of separation of powers but also for their presumed expertise in the laws they are entrusted to
enforce.14 Findings of quasi-judicial agencies, such as the COA, which have acquired expertise
because their jurisdiction is confined to specific matters are generally accorded not only respect
but at times even finality if such findings are supported by substantial evidence,15 and the
decision and order are not tainted with unfairness or arbitrariness that would amount to grave
abuse of discretion.16
There being no grave abuse of discretion in the findings and conclusions of the COA in this case,
the Court finds no cogent reason to deviate from these long-settled rules.
WHEREFORE, the motion for reconsideration is DENIED WITH FINALITY.
No further pleadings shall be entertained.
Let entry of judgment be made in due course.
SO ORDERED.

Candelario Versoza vs. Guillermo Carague, GR 157838, 7 February 2012 [absent grave
abuse of discretion findings of quasi-judicial agencies area accorded respect and finality]

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 193677

September 6, 2011

LUCIANO VELOSO, ABRAHAM CABOCHAN, JOCELYN DAWIS-ASUNCION and


MARLON M. LACSON, Petitioners,
vs.
COMMISSION ON AUDIT, Respondent.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 65 of the Rules of Court assailing
Decision No. 2008-0881 dated September 26, 2008 and Decision No. 2010-0772 dated August 23,
2010 of the Commission on Audit (COA) sustaining Notice of Disallowance (ND) No. 06-010100-053 dated May 24, 2006 disallowing the payment of monetary reward as part of the
Exemplary Public Service Award (EPSA) to former three-term councilors of the City of Manila
authorized by City Ordinance No. 8040.
The facts of the case are as follows:
On December 7, 2000, the City Council of Manila enacted Ordinance No. 8040 entitled An
Ordinance Authorizing the Conferment of Exemplary Public Service Award to Elective Local
Officials of Manila Who Have Been Elected for Three (3) Consecutive Terms in the Same
Position. Section 2 thereof provides:
SEC. 2. The EPSA shall consist of a Plaque of Appreciation, retirement and gratuity pay
remuneration equivalent to the actual time served in the position for three (3) consecutive
terms, subject to the availability of funds as certified by the City Treasurer. PROVIDED, That
[it] shall be accorded to qualified elected City Officials on or before the first day of service in an
appropriated public ceremony to be conducted for the purpose. PROVIDED FURTHER, That
this Ordinance shall only cover the Position of Mayor, Vice-Mayor and Councilor: PROVIDED
FURTHERMORE, That those who were elected for this term and run for higher elective position
thereafter, after being elected shall still be eligible for this award for the actual time served:
PROVIDED FINALLY That the necessary and incidental expenses needed to implement the

provisions of this Ordinance shall be appropriated and be included in the executive budget for
the year when any city official will qualify for the Award.4
The ordinance was deemed approved on August 23, 2002.
Pursuant to the ordinance, the City made partial payments in favor of the following former
councilors:
Councilor/Recipients

Check

Date

Amount

Abraham C. Cabochan

353010 06/07/05 P1,658,989.09

Julio E. Logarta, Jr.

353156 06/14/05 P1,658,989.08

Luciano M. Veloso

353778 06/30/05 P1,658,989.08

Jocelyn Dawis-Asuncion 353155 06/14/05 P1,658,989.08


Marlon M. Lacson

353157 06/14/05 P1,658,989.08

Heirs of Hilarion C. Silva 353093 06/09/05 P1,628,311.59


TOTAL

P9,923,257.00

On August 8, 2005, Atty. Gabriel J. Espina (Atty. Espina), Supervising Auditor of the City of
Manila, issued Audit Observation Memorandum (AOM) No. 2005-100(05)07(05)6 with the
following observations:
1. The initial payment of monetary reward as part of Exemplary Public Service Award
(EPSA) amounting to P9,923,257.00 to former councilors of the City Government of
Manila who have been elected for three (3) consecutive terms to the same position as
authorized by City Ordinance No. 8040 is without legal basis.
2. The amount granted as monetary reward is excessive and tantamount to double
compensation in contravention to Article 170 (c) of the IRR of RA 7160 which provides
that no elective or appointive local official shall receive additional, double or indirect
compensation unless specifically authorized by law.
3. The appropriations for retirement gratuity to implement EPSA ordinance was classified
as Maintenance and Other Operating Expenses instead of Personal Services contrary to
Section 7, Volume III of the Manual on the New Government Accounting System
(NGAS) for local government units and COA Circular No. 2004-008 dated September 20,
2004 which provide the updated description of accounts under the NGAS.7

After evaluation of the AOM, the Director, Legal and Adjudication Office (LAO)-Local of the
COA issued ND No. 06-010-100-058 dated May 24, 2006.
On November 9, 2006, former councilors Jocelyn Dawis-Asuncion (Dawis-Asuncion), Luciano
M. Veloso (Veloso), Abraham C. Cabochan (Cabochan), Marlon M. Lacson (Lacson), Julio E.
Logarta, Jr., and Monina U. Silva, City Accountant Gloria C. Quilantang, City Budget Officer
Alicia Moscaya and then Vice Mayor and Presiding Officer Danilo B. Lacuna filed a Motion to
Lift the Notice of Disallowance.9 In its Decision No. 2007-17110 dated November 29, 2007, the
LAO-Local decided in favor of the movants, the pertinent portion of which reads:
WHEREFORE, premises considered, the motion of former Vice- Mayor Danilo B. Lacuna, et al.,
is GRANTED and ND No. 06-010-100-05 dated May 24, 2006 is hereby ordered lifted as the
reasons for the disallowance have been sufficiently explained. This decision, however, should not
be taken as precedence (sic) to other or similar personal benefits that a local government unit
may extend which should be appreciated based on their separate and peculiar circumstances.11
Citing Article 170 of the Implementing Rules and Regulations (IRR) of Republic Act (RA) No.
7160, the LAO-Local held that the monetary reward given to the former councilors can be one of
gratuity and, therefore, cannot be considered as additional, double or indirect compensation.
Giving importance to the principle of local autonomy, the LAO-local upheld the power of local
government units (LGUs) to grant allowances. More importantly, it emphasized that the
Department of Budget and Management (DBM) did not disapprove the appropriation for the
EPSA of the City which indicate that the same is valid.12
Upon review, the COA rendered the assailed Decision No. 2008-088 sustaining ND No. 06-010100-05.13 The motion for reconsideration was likewise denied in Decision No. 2010-077.14 The
COA opined that the monetary reward under the EPSA is covered by the term "compensation."
Though it recognizes the local autonomy of LGUs, it emphasized the limitations thereof set forth
in the Salary Standardization Law (SSL). It explained that the SSL does not authorize the grant
of such monetary reward or gratuity. It also stressed the absence of a specific law passed by
Congress which ordains the conferment of such monetary reward or gratuity to the former
councilors.15 In Decision No. 2010-077, in response to the question on its jurisdiction to rule on
the legality of the disbursement, the COA held that it is vested by the Constitution the power to
determine whether government entities comply with laws and regulations in disbursing
government funds and to disallow irregular disbursements.16
Aggrieved, petitioners Veloso, Cabochan, Dawis-Asuncion and Lacson come before the Court in
this special civil action for certiorari alleging grave abuse of discretion on the part of the COA.
Specifically, petitioners claim that:
The respondent Commission on Audit did not only commit a reversible error but was, in fact,
guilty of grave abuse of discretion amounting to lack or excess of jurisdiction when it ruled that
the monetary award given under the EPSA partakes of the nature of an additional compensation
prohibited under the Salary Standardization Law, and other existing laws, rules and regulations,
and not a GRATUITY "voluntarily given in return for a favor or services rendered purely out of
generosity of the giver or grantor." (Plastic Tower Corporation vs. NLRC, 172 SCRA 580-581).

Apart from being totally oblivious of the fact that the monetary award given under the EPSA was
intended or given in return for the exemplary service rendered by its recipient(s), the respondent
COA further committed grave abuse of discretion when it effectively nullified a duly-enacted
ordinance which is essentially a judicial function. In other words, in the guise of disallowing the
disbursement in question, the respondent Commission arrogated unto itself an authority it did not
possess, and a prerogative it did not have.17
On November 30, 2010, the Court issued a Status Quo Ante Order18 requiring the parties to
maintain the status quo prevailing before the implementation of the assailed COA decisions.
There are two issues for resolution: (1) whether the COA has the authority to disallow the
disbursement of local government funds; and (2) whether the COA committed grave abuse of
discretion in affirming the disallowance of P9,923,257.00 covering the EPSA of former threeterm councilors of the City of Manila authorized by Ordinance No. 8040.
In their Reply,19 petitioners insist that the power and authority of the COA to audit government
funds and accounts does not carry with it in all instances the power to disallow a particular
disbursement.20 Citing Guevara v. Gimenez,21 petitioners claim that the COA has no discretion or
authority to disapprove payments on the ground that the same was unwise or that the amount is
unreasonable. The COA's remedy, according to petitioners, is to bring to the attention of the
proper administrative officer such expenditures that, in its opinion, are irregular, unnecessary,
excessive or extravagant.22 While admitting that the cited case was decided by the Court under
the 1935 Constitution, petitioners submit that the same principle applies in the present case.
We do not agree.
As held in National Electrification Administration v. Commission on Audit,23 the ruling in
Guevara cited by petitioners has already been overturned by the Court in Caltex Philippines, Inc.
v. Commission on Audit.24 The Court explained25 that under the 1935 Constitution, the Auditor
General could not correct irregular, unnecessary, excessive or extravagant expenditures of public
funds, but could only bring the matter to the attention of the proper administrative officer. Under
the 1987 Constitution, however, the COA is vested with the authority to determine whether
government entities, including LGUs, comply with laws and regulations in disbursing
government funds, and to disallow illegal or irregular disbursements of these funds.
Section 2, Article IX-D of the Constitution gives a broad outline of the powers and functions of
the COA, to wit:
Section 2. (1) The Commission on Audit shall have 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, or instrumentalities, including government-owned or controlled
corporations with original charters, and on a post-audit basis: (a) constitutional bodies,
commissions and offices that have been granted fiscal autonomy under this Constitution; (b)
autonomous state colleges and universities; (c) other government-owned or controlled
corporations and their subsidiaries; and (d) such non-governmental 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 such audit as a condition of subsidy or equity. However, where
the internal control system of the audited agencies is inadequate, the Commission may adopt
such measures, including temporary or special pre-audit, as are necessary and appropriate to
correct the deficiencies. It shall keep the general accounts of the Government and, for such
period as may be provided by law, preserve the vouchers and other supporting papers pertaining
thereto.
(2) The Commission shall have exclusive authority, subject to the limitations in this Article, to
define the scope of its audit and examination, establish the techniques and methods required
therefor, and 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.26
Section 11, Chapter 4, Subtitle B, Title I, Book V of the Administrative Code of 1987 echoes this
constitutional mandate to COA.
Under the first paragraph of the above provision, the COA's audit jurisdiction extends to the
government, or any of its subdivisions, agencies, or instrumentalities, including governmentowned or controlled corporations with original charters. Its jurisdiction likewise covers, albeit on
a post-audit basis, the constitutional bodies, commissions and offices that have been granted
fiscal autonomy, autonomous state colleges and universities, other government-owned or
controlled corporations and their subsidiaries, and such non-governmental entities receiving
subsidy or equity from or through the government. The power of the COA to examine and audit
government agencies cannot be taken away from it as Section 3, Article IX-D of the Constitution
mandates that "no law shall be passed exempting any entity of the Government or its subsidiary
in any guise whatever, or any investment of public funds, from the jurisdiction of the [COA]."
Pursuant to its mandate as the guardian of public funds, the COA is vested with broad powers
over all accounts pertaining to government revenue and expenditures and the uses of public
funds and property.27 This includes the exclusive authority to define the scope of its audit and
examination, establish the techniques and methods for such review, and promulgate accounting
and auditing rules and regulations.28 The COA is endowed with enough latitude to determine,
prevent and disallow irregular, unnecessary, excessive, extravagant or unconscionable
expenditures of government funds.29 It is tasked to be vigilant and conscientious in safeguarding
the proper use of the government's, and ultimately the people's, property.30 The exercise of its
general audit power is among the constitutional mechanisms that gives life to the check and
balance system inherent in our form of government.31
The Court had therefore previously upheld the authority of the COA to disapprove payments
which it finds excessive and disadvantageous to the Government; to determine the meaning of
"public bidding" and when there is failure in the bidding; to disallow expenditures which it finds
unnecessary according to its rules even if disallowance will mean discontinuance of foreign aid;
to disallow a contract even after it has been executed and goods have been delivered.32

Thus, LGUs, though granted local fiscal autonomy, are still within the audit jurisdiction of the
COA.
Now on the more important issue of whether the COA properly exercised its jurisdiction in
disallowing the disbursement of the City of Manila's funds for the EPSA of its former three-term
councilors.
It is the general policy of the Court to sustain the decisions of administrative authorities,
especially one which is constitutionally-created not only on the basis of the doctrine of
separation of powers but also for their presumed expertise in the laws they are entrusted to
enforce. Findings of administrative agencies are accorded not only respect but also finality when
the decision and order are not tainted with unfairness or arbitrariness that would amount to grave
abuse of discretion.33 It is only when the COA has acted without or in excess of jurisdiction, or
with grave abuse of discretion amounting to lack or excess of jurisdiction, that this Court
entertains a petition questioning its rulings.34 There is grave abuse of discretion when there is an
evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in
contemplation of law as when the judgment rendered is not based on law and evidence but on
caprice, whim and despotism.35
In this case, we find no grave abuse of discretion on the part of the COA in issuing the assailed
decisions as will be discussed below.
Petitioners claim that the grant of the retirement and gratuity pay remuneration is a valid exercise
of the powers of the Sangguniang Panlungsod set forth in RA 7160.
We disagree.
Indeed, Section 458 of RA 7160 defines the power, duties, functions and compensation of the
Sangguniang Panlungsod, to wit:
SEC. 458. Powers, Duties, Functions and Compensation. - (a) The Sangguniang Panlungsod, as
the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds
for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in
the proper exercise of the corporate powers of the city as provided for under Section 22 of this
Code, and shall:
xxxx
(viii) Determine the positions and salaries, wages, allowances and other emoluments and benefits
of officials and employees paid wholly or mainly from city funds and provide for expenditures
necessary for the proper conduct of programs, projects, services, and activities of the city
government.
In the exercise of the above power, the City Council of Manila enacted on December 7, 2000
Ordinance No. 8040, but the same was deemed approved on August 23, 2002. The ordinance
authorized the conferment of the EPSA to the former three-term councilors and, as part of the

award, the qualified city officials were to be given "retirement and gratuity pay remuneration."
We believe that the award is a "gratuity" which is a free gift, a present, or benefit of pecuniary
value bestowed without claim or demand, or without consideration.36
However, as correctly held by the COA, the above power is not without limitations. These
limitations are embodied in Section 81 of RA 7160, to wit:
SEC. 81. Compensation of Local Officials and Employees. The compensation of local officials
and personnel shall be determined by the sanggunian concerned: Provided, That the increase in
compensation of elective local officials shall take effect only after the terms of office of those
approving such increase shall have expired: Provided, further, That the increase in compensation
of the appointive officials and employees shall take effect as provided in the ordinance
authorizing such increase; Provided however, That said increases shall not exceed the limitations
on budgetary allocations for personal services provided under Title Five, Book II of this Code:
Provided finally, That such compensation may be based upon the pertinent provisions of
Republic Act Numbered Sixty-seven fifty-eight (R.A. No. 6758), otherwise known as the
"Compensation and Position Classification Act of 1989.
Moreover, the IRR of RA 7160 reproduced the Constitutional provision that "no elective or
appointive local official or employee shall receive additional, double, or indirect compensation,
unless specifically authorized by law, nor accept without the consent of the Congress, any
present, emoluments, office, or title of any kind from any foreign government." Section 325 of
the law limit the total appropriations for personal services37 of a local government unit to not
more than 45% of its total annual income from regular sources realized in the next preceding
fiscal year.
While it may be true that the above appropriation did not exceed the budgetary limitation set by
RA 7160, we find that the COA is correct in sustaining ND No. 06-010-100-05.
Section 2 of Ordinance No. 8040 provides for the payment of "retirement and gratuity pay
remuneration equivalent to the actual time served in the position for three (3) consecutive
terms" as part of the EPSA. The recomputation of the award disclosed that it is equivalent to the
total compensation received by each awardee for nine years that includes basic salary, additional
compensation, Personnel Economic Relief Allowance, representation and transportation
allowance, rice allowance, financial assistance, clothing allowance, 13th month pay and cash
gift.38 This is not disputed by petitioners. There is nothing wrong with the local government
granting additional benefits to the officials and employees. The laws even encourage the granting
of incentive benefits aimed at improving the services of these employees. Considering, however,
that the payment of these benefits constitute disbursement of public funds, it must not contravene
the law on disbursement of public funds.39 lawphi1
As clearly explained by the Court in Yap v. Commission on Audit,40 the disbursement of public
funds, salaries and benefits of government officers and employees should be granted to
compensate them for valuable public services rendered, and the salaries or benefits paid to such
officers or employees must be commensurate with services rendered. In the same vein, additional
allowances and benefits must be shown to be necessary or relevant to the fulfillment of the

official duties and functions of the government officers and employees. Without this limitation,
government officers and employees may be paid enormous sums without limit or without
justification necessary other than that such sums are being paid to someone employed by the
government. Public funds are the property of the people and must be used prudently at all times
with a view to prevent dissipation and waste.41
Undoubtedly, the above computation of the awardees' reward is excessive and tantamount to
double and additional compensation. This cannot be justified by the mere fact that the awardees
have been elected for three (3) consecutive terms in the same position. Neither can it be justified
that the reward is given as a gratuity at the end of the last term of the qualified elective official.
The fact remains that the remuneration is equivalent to everything that the awardees received
during the entire period that he served as such official. Indirectly, their salaries and benefits are
doubled, only that they receive half of them at the end of their last term.
The purpose of the prohibition against additional or double compensation is best expressed in
Peralta v. Auditor General,42 to wit:
This is to manifest a commitment to the fundamental principle that a public office is a public
trust. It is expected of a government official or employee that he keeps uppermost in mind the
demands of public welfare. He is there to render public service. He is of course entitled to be
rewarded for the performance of the functions entrusted to him, but that should not be the
overriding consideration. The intrusion of the thought of private gain should be unwelcome. The
temptation to further personal ends, public employment as a means for the acquisition of wealth,
is to be resisted. That at least is the idea. There is then to be an awareness on the part of the
officer or employee of the government that he is to receive only such compensation as may be
fixed by law. With such a realization, he is expected not to avail himself of devious or
circuitous means to increase the remuneration attached to his position.43
Verily, the COA's assailed decisions were made in faithful compliance with its mandate and in
judicious exercise of its general audit power as conferred on it by the Constitution.44 The COA
adheres to the policy that government funds and property should be fully protected and
conserved and that irregular, unnecessary, excessive or extravagant expenditures or uses of such
funds and property should be prevented.45
However, in line with existing jurisprudence,46 we need not require the refund of the disallowed
amount because all the parties acted in good faith. In this case, the questioned disbursement was
made pursuant to an ordinance enacted as early as December 7, 2000 although deemed approved
only on August 22, 2002. The city officials disbursed the retirement and gratuity pay
remuneration in the honest belief that the amounts given were due to the recipients and the latter
accepted the same with gratitude, confident that they richly deserve such reward.
WHEREFORE, the petition is DISMISSED. Decision No. 2008-088 dated September 26, 2008
and Decision No. 2010-077 dated August 23, 2010 of the Commission on Audit, are
AFFIRMED WITH MODIFICATION. The recipients need not refund the retirement and
gratuity pay remuneration that they already received.

Accordingly, the Status Quo Ante Order issued by the Court on November 30, 2010 is hereby
RECALLED. In view, however, of this Court's decision not to require the refund of the amounts
already received, the Commission on Audit is ORDERED to cease and desist from enforcing the
Notice of Finality of Decision47 dated October 5, 2010.
SO ORDERED.

Esteves vs. Sarmiento, GR 182374, 11 November 2008 [MR to COMELEC en Banc is


necessary before invoking review by the SC]

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 182374

November 11, 2008

JEREMIAS V. ESTEVES, petitioner


vs.
RENE V. SARMIENTO, NICODEMO T. FERRER, in their respective and Member of the
Second Division COMELEC, Manila and REYNALDO TEH BITONG, respondents.
DECISION
TINGA, J.:
This is a special civil action for certiorari and prohibition1 under Rule 65 of the 1997 Rules of
Civil Procedure, assailing the Resolution2 of the Second Division of the Commission on
Elections (COMELEC) in SPR No. 46-2007. Said resolution set aside the Order3 dated 8
September 2007 issued by the Regional Trial Court (RTC), Branch 96, Baler, Aurora and
consequently dismissed the election protest filed by herein petitioner Jeremias V. Esteves against
private respondent Mayor Reynaldo Teh Bitong.
As culled from the records of the case, the following antecedent facts appear:
In the national and local elections conducted last 14 May 2007, petitioner and private respondent
both ran for the position of municipal mayor of the Municipality of Casiguran, Aurora. On 15
May 2007, the Municipal Board of Canvassers proclaimed private respondent as the duly-elected
Mayor of Casiguran on the basis of the results of the canvassing, which showed him having
garnered 3,342 votes or with a margin of 48 votes over petitioner, who obtained 3,294 votes.4
On 25 May 2007, petitioner filed an election protest before the Regional Trial Court of Baler,
Aurora. The protest was docketed as Election Protest Case (EPC) No. 99 and raffled to Branch
96 presided by Judge Corazon D. Soluren.5
The RTC then issued a precautionary protection order directing the Municipal Treasurer and
Election Officer of Casiguran to take immediate steps to safeguard the integrity of all the ballot
boxes, lists of voters and other paraphernalia used in the elections and thereafter directed that all
the election paraphernalia, including the ballot boxes and lists of voters, subject of the protest be
brought before the court.6

Private respondent then filed an answer, which the RTC admitted in an Order dated 2 August
2007. In the same order, the RTC denied the motion for reconsideration of the dismissal of
private respondent's counter-protest on the ground of non-payment of filing fee. Thereafter, the
RTC ordered the creation of the revision committees.7
On 6 September 2007, private respondent filed a motion to dismiss the election protest, arguing
that it was defective in form and substance as it did not specify the precincts where fraud and
irregularities were committed. On 8 September 2007, the RTC issued the order denying private
respondent's motion to dismiss for lack of merit.8
Thus, private respondent filed before the COMELEC a petition for certiorari and prohibition
with application for temporary restraining order (TRO) and/or writ of preliminary injunction.9
The petition sought to nullify the RTC Order dated 8 September 2007 denying private
respondent's motion to dismiss. It also prayed that the election protest filed by petitioner be
dismissed and the proceedings thereon enjoined on the ground that the election protest failed to
comply with the requirements of Section 11(f), Rule 210 of A.M. No. 07-4-15-SC. Petitioner filed
an answer on 5 December 2007.
After hearing private respondent's application, the COMELEC (Second Division) issued a
temporary restraining order (TRO) on 06 December 2007, which directed Judge Soluren to desist
from further proceeding with Election Protest Case No. 96 until further orders from the
COMELEC.11
Thereafter, petitioner filed before this Court a special civil action for certiorari and prohibition
with application for issuance of a temporary restraining order and/or writ of preliminary
injunction. The petition, docketed as G.R. No. 180792, prayed that a temporary restraining order
be issued enjoining the COMELEC (Second Division) from taking cognizance of SPR Case No.
46-2007 and that the TRO issued by the COMELEC be ordered lifted.
On 15 January 2008, the Court resolved to dismiss G.R. No. 180792 for failure of the petition to
state the material dates showing that the petition was filed on time, failure to submit the required
competent proof of identity in the verification/certification, failure to give an explanation why
service was not personally made and failure to show that any grave abuse of discretion was
committed by the COMELEC in rendering the challenged order.
On 29 February 2008, the COMELEC (Second Division) issued the assailed resolution penned
by Commissioner Nicodemo T. Ferrer. The assailed resolution nullified the 8 September 2007
Order of the RTC and, accordingly, dismissed EPC No. 99.12 The other member of the Second
Division, Commissioner Rene V. Sarmiento, wrote a dissenting opinion.13 It appears that before
the issuance of the assailed resolution, the third member of the Second Division, Presiding
Commissioner Florentino A. Tuazon, Jr. had retired from the service.
Hence, the instant petition, raising the following arguments: (1) the COMELEC (Second
Division) has no jurisdiction to entertain special relief cases like petitions for certiorari,
prohibition or mandamus; (2) the challenged resolution did not comply with the constitutional

requirement that it must be decided by a majority vote of all the members; and (3) the challenged
resolution negated the spirit and very purpose of A.M. No. 07-4-15-SC.
The Office of the Solicitor General (OSG) manifested that under Section 5, Rule 65 of the Rules
of Court, only the private respondent is required to appear and defend the case, both on his own
behalf and on behalf of the public respondent COMELEC, and prayed that the COMELEC be
excused from filing the required comment.14 In a Resolution dated 12 August 2008, the Court
granted the motion of the OSG.15
The petition deserves dismissal.
Section 3, Article IX-C of the Constitution expressly states:
Section 3. The Commission on Elections may sit en banc or in two divisions, and shall
promulgate its rules of procedure in order to expedite disposition of election cases,
including pre-proclamation controversies. All such election cases shall be heard and
decided in division, provided that motions for reconsideration of decisions shall be
decided by the Commission en banc.
Also, Section 7, Article IX-A of the Constitution provides:
Section 7. Each Commission shall decide by a majority vote of all its Members any case
or matter brought before it within sixty days from the date of its submission for decision
or resolution. A case or matter is deemed submitted for decision or resolution upon the
filing of the last pleading, brief, or memorandum required by the rules of the Commission
or by the Commission itself. Unless otherwise provided by this Constitution or by law,
any decision, order, or ruling of each Commission may be brought to the Supreme Court
on certiorari by the aggrieved party within thirty days from receipt of a copy thereof.
Under the aforequoted constitutional provisions, the requirement that an aggrieved party must
first file a motion for reconsideration of a resolution of the Division to the COMELEC en banc is
mandatory and jurisdictional in invoking the power of review of the Supreme Court. Failure to
abide by this procedural requirement constitutes a ground for dismissal of the petition.16
All election cases, including pre-proclamation controversies, shall be decided by the COMELEC
in division, and the motion for reconsideration shall be decided by the COMELEC en banc.17 As
held in Ambil v. Commission on Elections,18 the power of review of the Supreme Court of the
rulings of the COMELEC is limited only to the final decision or resolution of the COMELEC en
banc and not the final resolution of its Division. The Supreme Court has no power to review, via
certiorari, an interlocutory order or even a final resolution of a Division of the Commission on
Elections.
Moreover, pursuant to Section 5 (c), Rule 319 of the COMELEC Rules of Procedure, a resolution
issued by a Division of the COMELEC must first be elevated to the COMELEC en banc by
filing a motion for reconsideration.

The filing of a motion for reconsideration is mandatory because the mode by which a decision,
order or ruling of the COMELEC en banc may be elevated to the Supreme Court is by the
special civil action of certiorari under Rule 64 of the Rules of Civil Procedure. It is settled that
the filing of a motion for reconsideration of the order, resolution or decision of the tribunal,
board or office is, subject to well-recognized exceptions, a condition sine qua non to the
institution of a special civil action for certiorari. The rationale therefore is that the law intends to
afford the tribunal, board or office an opportunity to rectify the errors and mistakes it may have
lapsed into before resort to the courts of justice can be had.20
Since the COMELEC Rules of Procedure allows the review of a resolution of the Division by the
COMELEC en banc, the filing of the instant petition for certiorari and prohibition is premature.
The petition does not allege that petitioner indeed filed a motion for reconsideration before the
COMELEC en banc. The unquestioned rule in this jurisdiction is that certiorari will lie only if
there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law
against the acts of public respondent.21 Certiorari cannot be resorted to as a shield from the
adverse consequences of petitioner's own omission to file the required motion for
reconsideration.22 A litigant should first exhaust the administrative remedies provided by law
before seeking judicial intervention in order to give the administrative agency an opportunity to
decide correctly the matter and prevent unnecessary and premature resort to the court.23 The
premature invocation of judicial intervention is fatal to one's cause of action.24
WHEREFORE, the instant petition for certiorari and prohibition is DENIED. Costs against
petitioner.
SO ORDERED.

D. Certiorari, Prohibition, and Mandamus [Rule 65]


Certiorari

Marino B. Icdang vs. Sandiganbayan, GR 185960, 25 January 2012

Marino B. Icdang vs. Sandiganbayan, GR 185960, 25 January 2012 [nature and definition
of grave abuse of discretion]

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 185960

January 25, 2012

MARINO B. ICDANG, Petitioner,


vs.
SANDIGANBAYAN (Second Division) and PEOPLE OF THE PHILIPPINES, Respondents.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for certiorari under Rule 65 seeking to reverse and set aside the Decision1 dated May 26,
2008 and Resolution2 dated November 18, 2008 of the Sandiganbayan (SB) (Second Division) which convicted
petitioner of the crime of malversation of public funds.
The factual antecedents:
Petitioner Marino B. Icdang, at the time of the transactions subject of this controversy, was the Regional Director
of the Office for Southern Cultural Communities (OSCC) Region XII in Cotabato City.
On January 19, 1998, a Special Audit Team was formed by the Commission on Audit (COA) Regional Office XII,
Cotabato City pursuant to COA Regional Office Order No. 98-103 to conduct comprehensive audit on the 1996
funds for livelihood projects of the OSCC-Region XII. Hadji Rashid A. Mudag was designated as team leader,
with Jose Mercado, Myrla Fermin and Evelyn Macala as members.
In its report submitted to the COA Regional Director, the audit team noted that petitioner was granted cash
advances which remained unliquidated. In the cash examination conducted by the team on March 10, 1998, it was
discovered that petitioner had a shortage of P219,392.75. Out of the total amount of P920,933.00 released in
September 1996 to their office under sub-allotment advice No. COT-043, to cover the implementation of various
socio-economic projects for the cultural communities of the region, cash advances amounting to P407,000.00 were
granted from October 1, 1996 to February 5, 1997 to officials and employees including petitioner. Per records, it
was noted that P297,392.75 of these cash advances remained unliquidated as of December 31, 1997.4
Petitioner never denied that he received a total of P196,000.00 evidenced by disbursement vouchers and checks
payable to him, as follows:
In the Audit Observation Memorandum No. 97-001 (March 18, 1998) sent by the COA Region XII to the OSCC-

Region XII reflecting the findings of the Special Audit Team, it was also disclosed that: (1) Funds intended for
programs for Ancestral Domain Claim Development and to support tribal cooperatives, were cash advanced, but
the proposed projects were not implemented by the OSCC-Region XII; (2) No official cashbooks are maintained
to record cash advances and disbursements from the 1996 funds allocated for livelihood projects; and (3) Out of
the total P920,933.00 allocated for 1996 livelihood projects, the amount of P445,892.80 was disbursed leaving a
balance of P475,040.20; however, final trial balance as of December 31, 1996 showed that the office has
exhausted the allocated funds for the whole year; the utilization of the P475,040.20 could not be explained by the
Accountant so that it may be concluded that such was misappropriated. Petitioner indicated his comments on the
said memorandum by requesting for extension to restitute the amount of P306,412.75 (which included the
P67,000.00 cash shortage of another OSCC-Region XII official, Ma. Teresa A. Somorostro), and explaining that
the P475,040.20 was not misappropriated as evidenced by their own financial report and re-statement of allotment
and obligation for the month ending December 31, 1996.7
From the field interviews conducted by the audit team, it was also gathered that the intended projects covered by
the cash advances were never implemented, such as the proposed Children Development Project in Bgy. Matila;
adult literacy program in Cotabato; operationalization of tribal cooperative in Bgy. Bantagan, Sultan Kudarat; and
establishment of ICC-IAD in Magpet, Cotabato where a complaint was made to the effect that the OSCC-Region
XII office allegedly upon receipt of funds prepares a project for implementation which is different from that
project proposal submitted by the project officer. Supposedly, there was likewise no support or assistance given by
the OSCC-Region XII to the activities of the Provincial Special Task Force on Ancestral Domain for the
indigenous people of Columbio, Sultan Kudarat, and to Bgys. Salumping, Municipality of Esperanza, President
Roxas, and Matrilala.8 And as already mentioned, the audit team discovered that the accountable officers of
OSCC-Region XII failed to maintain the official cashbook so that there were no recording of transactions
whenever a cash advance was granted; only subsidiary ledgers were used by the accounting section.
From the P232,000.00 accountabilities of petitioner, the COA deducted the following: P10,000.00 covered by
acknowledgment receipt by A. Anas; various cash invoices in the amount of P2,197.25; and Reimbursement
Expense Receipts (RERs) in the amount of P410.00. After the cash examination, petitioner was still found short of
P219,392.75.9 Consequently, a demand letter was sent by the COA for petitioner to immediately produce the
missing funds. In his letter-reply dated March 19, 1998, petitioner requested for one-week extension to comply
with the directive.10
However, the one-week period lapsed without compliance having been made by petitioner. Hence, the audit team
recommended the initiation of administrative and criminal charges against him, as well as Ms. Somorostro, Chief
of the Socio-Cultural Development Concerns Division of OSCC-Region XII.
On September 21, 2000, the Office of the Ombudsman found probable cause against petitioner and Ms.
Somorostro for violation of Art. 217 of the Revised Penal Code, as amended, and Section 3(e) of Republic Act No.
3019 (Anti-Graft and Corrupt Practices Act).
The Amended Information charging petitioner with the crime of Malversation of Public Funds (Criminal Case No.
26327) reads:
That during the period from October 1996 to February 1997 in Cotabato City, Philippines and within the
jurisdiction of this Honorable Court, accused Marino B. Icdang, a public officer being then the Regional Director

of the Office for Southern Communities (OSCC), Region XII, Cotabato City and as such is accountable officer for
the public fund received by him that were intended for the socio-economic and cultural development projects of
the OSCC Region XII, did then and there willfully, unlawfully and feloniously take[,] misappropriate, embezzle
and convert for his own personal use and benefit from the said fund the aggregate amount of TWO HUNDRED
NINETEEN THOUSAND THREE HUNDRED NINETY-TWO PESOS AND 75/100 (P219,392.75) to the
damage and prejudice of the government in the aforesaid sum.
CONTRARY TO LAW.11
Petitioner was likewise charged with violation of Section 3(e) of R.A. No. 3019 (Criminal Case No. 26328).
The lone witness for the prosecution was Hadji Rashid A. Mudag, State Auditor IV of COA Region XII. He
presented vouchers which they were able to gather during the cash examination conducted on March 10, 1998,
which showed cash advances granted to petitioner, and in addition other cash advances also received by petitioner
for which he remained accountable, duly certified by the Accountant of OSCC-Region XII. Petitioner was notified
of the cash shortage through the Audit Observation Memorandum No. 97-001 dated March 18, 1998 and was sent
a demand letter after failing to account for the missing funds totalling P219,392.75.12
On cross-examination, witness Mudag admitted that while they secured written and signed certifications from
project officers and other individuals during the field interviews, these were not made under oath. The reports
from Sultan Kudarat were just submitted to him by his team members as he was not present during the actual
interviews; he had gone only to Kidapawan, Cotabato and only prepared the audit report. He also admitted that
they no longer visited the project sites after being told by the project officers that there was nothing to be inspected
because no project was implemented.13
On May 26, 2008, the SBs Second Division rendered its decision convicting petitioner of malversation and
acquitting him from violation of Section 3(e) of R.A. No. 3019. The dispositive portion reads:
WHEREFORE, premises considered judgment is hereby rendered finding accused MARINO B. ICDANG Guilty
beyond reasonable doubt of Malversation of Public Funds or Property in Criminal Case No. 26327 and finding in
his favor the mitigating circumstance of voluntary surrender, is hereby sentenced to an indeterminate penalty of,
considering the amount involved, TEN (10) YEARS and ONE (1) DAY of PRISION MAYOR as minimum to
EIGHTEEN (18) YEARS, EIGHT (8) MONTHS and ONE (1) DAY of Reclusion Temporal as maximum, to
suffer the penalty of perpetual special disqualification, and to pay a fine of P196,000.00 without subsidiary
imprisonment in case of insolvency.
He is also ordered to reimburse the government of the said amount.
In Criminal Case No. 26328, he is hereby ACQUITTED on the basis of reasonable doubt.
With cost against accused.
SO ORDERED.14
The SB ruled that the prosecution has established the guilt of petitioner beyond reasonable doubt for the crime of

malversation of public funds, the presumption from his failure to account for the cash shortage in the amount of
P232,000.00 remains unrebutted. As to the reasons given by petitioner for non-compliance with the COA demand,
the SB held:
A careful perusal of Mr. Icdangs Letter-Answer dated 19 March 1998 (Exh. "J") to the demand letter and directive
issued by the COA clearly shows he was just asking for extension of time to comply with the demand letter. There
was virtually no denial on his part that he received the P232,000.00 amount earmarked for the various government
projects. His reasons were first, the committee tasked to prepare the liquidation of the cash advances are still in the
process of collecting all the documents pertinent to the disbursement of the project funds; and second, the payees
to the disbursements were still to be notified so that they will have to come to the office to affix their signatures as
payees to the liquidation vouchers.
This response is queer because as he gave the money to the supposed payees, he should have kept a ledger to keep
track of the same, considering that these are public funds. More importantly, Mr. Icdang was given ample
opportunity to dispute the COA findings that there was indeed a shortage. Instead of doing so, Mr. Icdang never
presented the promised proof of his innocence before this Court during the trial of this case. Thus, the prima facie
presumption under Article 217 of the Revised Penal Code, that the failure of a public officer to have duly
forthcoming the public funds with which he is chargeable, upon demand, shall be evidence that he put the missing
funds for personal uses, arises because first, there was no issue as to the accuracy, correctness and regularity of the
audit findings and second, the funds are missing.151avvphi1
Petitioner filed a motion for reconsideration requesting that he be given another chance to present his evidence,
stating that his inability to attend the trial were due to financial constraints such that even when some of the
scheduled hearings were sometimes held in Davao City and Cebu City, he still failed to attend the same. However,
the SB denied the motion noting that the decision has become final and executory on June 10, 2008 for failure of
petitioner to file a motion for reconsideration, or new trial, or appeal before that date.
Hence, this petition anchored on the following grounds:
I. THE HONORABLE SANDIGANBAYAN COMMITTED GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION WHEN IT RENDERED ITS JUDGMENT
OF CONVICTION AGAINST PETITIONER DESPITE ITS KNOWLEDGE THAT PETITIONER WAS
NOT ABLE TO ADDUCE HIS EVIDENCE DUE TO VARIOUS CIRCUMSTANCES, THAT HE WAS
NOT ASSISTED BY COUNSEL DURING THE PROMULGATION OF JUDGMENT; THE GROSS
AND RECKLESS NEGLIGENCE OF HIS FORMER COUNSEL IN FAILING TO ASSIST HIM
DURING THE PROMULGATION; HIS FINANCIAL AND ECONOMIC DISLOCATION WHICH
MADE HIM UNABLE TO ATTEND THE SCHEDULED TRIALS IN MANILA, DAVAO CITY AND
CEBU CITY, HIS RESIDENCE BEING IN COTABATO, WHICH ALL CONSTITUTE A DENIAL OF
HIS RIGHT TO BE HEARD AND TO DUE PROCESS.
II. PETITIONER WAS LIKEWISE CLEARLY DENIED OF HIS RIGHT TO DUE PROCESS WHEN
DUE TO THE RECKLESS AND GROSS NEGLIGENCE OF HIS FORMER COUNSEL, THE LATTER
FAILED TO FILE A MOTION FOR NEW TRIAL TO REVERSE THE JUDGMENT OF CONVICTION
BEFORE THE SANDIGANBAYAN OR TO FILE AN APPEAL TO THE SUPREME COURT FROM

THE ADVERSE JUDGMENT OF CONVICTION.


III. IT IS HIGHLY UNJUST, INEQUITABLE AND UNCONSCIONABLE FOR PETITIONER TO BE
PRESENTLY LANGUISHING IN JAIL WITHOUT HIS DEFENSE AGAINST THE CRIME CHARGED
HAVING BEEN PRESENTED BEFORE THE HONORABLE SANDIGANBAYAN AND
APPRECIATED BY THE SAID COURT, AND BY THIS HONORABLE SUPREME COURT IN CASE
OF APPEAL FROM AN ADVERSE DECISION.
IV. REMAND OF THE INSTANT CASE TO THE COURT OF ORIGIN, OR TO THE HONORABLE
SANDIGANBAYAN SO THAT PETITIONER CAN PRESENT HIS EVIDENCE BEFORE SAID
COURT, ASSISTED BY NEW COUNSEL, IS PROPER AND JUSTIFIED, ESPECIALLY
CONSIDERING THAT THE INSTANT CASE INVOLVES A CRIME OF ALLEGED MALVERSATION
OF PUBLIC FUNDS WHICH HE NEVER COMMITTED, AND INVOLVES A HIGHER PENALTY OR
TERM OF IMPRISONMENT.16
The petition must fail.
At the outset it must be emphasized that the special civil action of certiorari is not the proper remedy to challenge
a judgment conviction rendered by the SB. Petitioner should have filed a petition for review on certiorari under
Rule 45.
Pursuant to Section 7 of Presidential Decree No. 1606,17 as amended by Republic Act No. 8249, decisions and final
orders of the Sandiganbayan shall be appealable to the Supreme Court by petition for review on certiorari raising
pure questions of law in accordance with Rule 45 of the Rules of Court. Section 1 of Rule 45 of the Rules of Court
provides that "[a] party desiring to appeal by certiorari from a judgment, final order or resolution of the x x x
Sandiganbayan x x x whenever authorized by law, may file with the Supreme Court a verified petition for review
on certiorari. The petition x x x shall raise only questions of law, which must be distinctly set forth." Section 2 of
Rule 45 likewise provides that the petition should be filed within the fifteen-day period from notice of the
judgment or final order or resolution, or of the denial of petitioners motion for reconsideration filed in due time
after notice of judgment.
As observed by the SB, the 15-day period of appeal, counted from the date of the promulgation of its decision on
May 26, 2008, lapsed on June 10, 2008, which rendered the same final and executory. Petitioners motion for
reconsideration was thus filed 6 days late. Petitioners resort to the present special civil action after failing to
appeal within the fifteen-day reglementary period, cannot be done. The special civil action of certiorari cannot be
used as a substitute for an appeal which the petitioner already lost.18
This Court has often enough reminded members of the bench and bar that a special civil action for certiorari under
Rule 65 lies only when there is no appeal nor plain, speedy and adequate remedy in the ordinary course of law.
Certiorari is not allowed when a party to a case fails to appeal a judgment or final order despite the availability of
that remedy. The remedies of appeal and certiorari are mutually exclusive and not alternative or successive.19
Appeals though filed late were allowed in some rare cases, but there must be exceptional circumstances to justify
the relaxation of the rules.
Petitioner claims that his right to due process was violated when his counsel failed to assist him during the

promulgation of the judgment. He faults the Sandiganbayan for proceeding with the promulgation despite the
petitioner not then being assisted by his counsel, and being a layman he is not familiar with court processes and
procedure.
Section 6, Rule 120 of the Revised Rules of Criminal Procedure, as amended, provides:
SEC. 6. Promulgation of judgment. -- The judgment is promulgated by reading it in the presence of the accused
and any judge of the court in which it was rendered. However, if the conviction is for a light offense, the
judgment may be pronounced in the presence of his counsel or representative. When the judge is absent or outside
the province or city, the judgment may be promulgated by the clerk of court.
If the accused is confined or detained in another province or city, the judgment may be promulgated by the
executive judge of the Regional Trial Court having jurisdiction over the place of confinement or detention upon
request of the court which rendered the judgment. The court promulgating the judgment shall have authority to
accept the notice of appeal and to approve the bail bond pending appeal; provided, that if the decision of the trial
court convicting the accused changed the nature of the offense from non-bailable to bailable, the application for
bail can only be filed and resolved by the appellate court.
The proper clerk of court shall give notice to the accused personally or through his bondsman or warden and
counsel, requiring him to be present at the promulgation of the decision. If the accused was tried in absentia
because he jumped bail or escaped from prison, the notice to him shall be served at his last known address.
In case the accused fails to appear at the scheduled date of promulgation of judgment despite notice, the
promulgation shall be made by recording the judgment in the criminal docket and serving him a copy thereof at
his last known address or thru his counsel.
If the judgment is for conviction and the failure of the accused to appear was without justifiable cause, he shall
lose the remedies available in these Rules against the judgment and the court shall order his arrest. Within fifteen
(15) days from promulgation of judgment, however, the accused may surrender and file a motion for leave of court
to avail of these remedies. He shall state the reasons for his absence at the scheduled promulgation and if he
proves that his absence was for a justifiable cause, he shall be allowed to avail of said remedies within fifteen (15)
days from notice. (Emphasis supplied.)
There is nothing in the rules that requires the presence of counsel for the promulgation of the judgment of
conviction to be valid. While notice must be served on both accused and his counsel, the latters absence during
the promulgation of judgment would not affect the validity of the promulgation. Indeed, no substantial right of the
accused on the merits was prejudiced by such absence of his counsel when the sentence was pronounced.20
It is worth mentioning that petitioner never raised issue on the fact that his counsel was not around during the
promulgation of the judgment in his motion for reconsideration which merely prayed for reopening of the case to
enable him to present liquidation documents and receipts, citing financial constraints as the reason for his failure
to attend the scheduled hearings. Before this Court he now submits that the gross negligence of his counsel
deprived him of the opportunity to present defense evidence.
Perusing the records, we find that the prosecution made a formal offer of evidence on August 30, 2002. At the

scheduled presentation of defense evidence on September 4, 2002, petitioners counsel, Atty. Manuel E. Iral,
called the attention of the SB to the fact that he had just received a copy of said formal offer, and requested for 15
days to submit his comment thereon. The SB granted his request and set the case for hearing on December 2 and 3,
2002.21 No such comment had been filed by Atty. Iral. On November 18, 2002, due to difficulty in securing a
quorum with five existing vacancies in the court, the SB thus reset the hearing to April 21 and 22, 2003.22 On
January 14, 2003, the SBs Second Division issued a resolution admitting Exhibits "A" to "N" after the defense
failed to submit any comment to the formal offer of the prosecution, and stating that the previously scheduled
hearings on April 21 and 22, 2003 shall proceed.23 On April 11, 2003, the SB for the same reason again reset the
hearing dates to August 11 and 12, 2003.24
At the scheduled initial presentation of defense evidence on August 11, 2003, only petitioner appeared informing
that when he passed by that morning to his counsels residence, the latter was ill and thus requested for
postponement. Without objection from the prosecution and on condition that Atty. Iral will present a medical
certificate within five days, the SB reset the hearing to October 16 and 17, 2003. The SB also said that if by the
next hearing petitioner is not yet represented by his counsel, said court shall appoint a counsel de oficio in the
person of Atty. Wilfredo C. Andres of the Public Attorneys Office.25 However, on October 16, 2003, the SB
received a letter from petitioner requesting for postponement citing the untimely death of his nephew and swelling
of his feet due to arthritis. He assured the court of his attendance in the next hearing it will set at a later date.26
Accordingly, the SB reset the hearings to February 12 and 13, 2004.27 On February 4, 2004, the SB again received
a letter from petitioner requesting another postponement for medical (arthritis) and financial (lack of funds for
attorneys/appearance fee) reasons. He assured the court of his availability after the May 10, 2004 elections.28 This
time, the SB did not grant the request and declared the case submitted for decision on the basis of the evidence on
record.29
On March 30, 2004, Atty. Iral filed an Urgent Motion for Reconsideration of the February 12, 2004 order
submitting the case for decision, citing circumstances beyond his control the fact that he had no means to come
to Manila from Kidapawan, North Cotabato, he being jobless for the past four years. He thus prayed to be allowed
to present his evidence on May 17 and 18, 2004.30 The prosecution opposed said motion, citing two postponements
in which petitioners counsel have not submitted the required medical certificate and explanation and failure to be
present on October 16, 2003.31
In the interest of justice, the SB reconsidered its earlier order submitting the case for decision and gave the
petitioner a last chance to present his evidence on August 17 to 18, 2004.32 On August 17, 2004, Atty. Iral appeared
but requested that presentation of evidence be postponed to the following day, which request was granted by the
SB.33 The next day, however, only petitioner appeared saying that his lawyer is indisposed. Over the objection of
the prosecution and in the supreme interest of justice, the SB cancelled the hearing and rescheduled it to
November 15 and 16, 2004. Atty. Iral was directed to submit a verified medical certificate within 10 days under
pain of contempt, and the SB likewise appointed a counsel de oficio in the person of Atty. Roberto C. Omandam
who was directed to be ready at the scheduled hearing in case petitioners counsel is not ready, stressing that the
court will no longer grant any postponement. Still, petitioner was directed to secure the services of another counsel
if Atty. Iral is not available.34 With the declaration by Malacaang that November 15, 2004 is a special nonworking holiday, the hearing was reset to November 16, 2004 as previously scheduled.35
On November 16, 2004, Atty. Iral appeared but manifested that he has no witness available. Over the objection of
the prosecution, hearing was reset to March 14 and 15, 2005. Atty. Iral agreed to submit the case for decision on

the basis of prosecution evidence in the event that he is unable to present any witness on the aforesaid dates.36 On
March 14, 2005, the SB again reset the hearing dates to May 26 and 27, 2005 for lack of material time.37 However,
at the scheduled hearing on May 26, 2005, petitioner manifested to the court that Atty. Iral was rushed to the
hospital having suffered a stroke, thereupon the hearing was rescheduled for September 21 and 22, 2005 with a
directive for Atty. Iral to submit a verified medical certificate.38 On September 22, 2005, Atty. Iral appeared but
again manifested that he has no witness present in court. On the commitment of Atty. Iral that if by the next
hearing he still fails to present their evidence the court shall consider them to have waived such right, the hearing
was reset to February 8 and 9, 2006.39 However, on February 9, 2006, the defense counsel manifested that he has
some other commitment in another division of the SB and hence he is constrained to seek cancellation of the
hearing. Without objection from the prosecution and considering that the intended witness was petitioner himself,
the SB reset the hearing to April 17 and 18, 2006, which dates were later moved to August 7 and 8, 2006.40 On
August 7, 2006, over the objection of the prosecution, the SB granted the motion for postponement by the defense
on the ground of lack of financial capacity. The hearing was for the last time reset to October 17 and 18, 2006,
which date was later changed to October 11 and 12, 2006.41
On October 11, 2006, on motion of the prosecution, the SB resolved that the cases be submitted for decision for
failure of the defense to appear and present their evidence, and directed the parties to present their respective
memoranda within 30 days.42 As only the prosecution submitted a memorandum, the SB declared the cases
submitted for decision on August 24, 2007.43 Petitioner and his counsel were duly notified of the promulgation of
decision, originally scheduled on February 28, 2008 but was moved to March 27, 2008 in view of the absence of
petitioner and the Handling Prosecutor.44 On that date, however, on motion of Atty. Iral, the promulgation was
postponed to April 14, 2008.45 On April 14, 2008, both petitioner and his counsel failed to appear, but since the
notice to petitioner was sent only on April 3, 2008, the SB finally reset the promulgation of judgment to May 26,
2008.46 While supposedly absent during the promulgation, records showed that Atty. Iral personally received on the
same date a copy of the decision.47
The foregoing shows that the defense was granted ample opportunity to present their evidence as in fact several
postponements were made on account of Atty. Irals health condition and petitioners lack of financial resources to
cover transportation costs. The SB exercised utmost leniency and compassion and even appointed a counsel de
oficio when petitioner cited lack of money to pay for attorneys fee. In those instances when either petitioner or his
counsel was present in court, the following documentary evidence listed during the pre-trial, allegedly in the
possession of petitioner, and which he undertook to present at the trial, were never produced in court at any time:
(1) Liquidation Report by petitioner; (2) Certification of Accountant Zamba Lajaratu of the National Commission
on Indigenous People, Region XII, Cotabato City; and (3) Different Certifications by project officers and barangay
captains.48 If indeed these documents existed, petitioner could have readily submitted them to the court considering
the length of time he was given to do so. The fact that not a single document was produced and no witness was
produced by the defense in a span of 4 years afforded them by the SB, it can be reasonably inferred that petitioner
did not have those evidence in the first place.
The elements of malversation of public funds are:
1. that the offender is a public officer;
2. that he had the custody or control of funds or property by reason of the duties of his office;

3. that those funds or property were public funds or property for which he was accountable; and
4. that he appropriated, took, misappropriated or consented or, through abandonment or negligence, permitted
another person to take them.49
There is no dispute on the existence of the first three elements; petitioner admitted having received the cash
advances for which he is accountable. As to the element of misappropriation, indeed petitioner failed to rebut the
legal presumption that he had misappropriated the said public funds to his personal use, notwithstanding his
unsubstantiated claim that he has in his possession liquidation documents. The SB therefore committed neither
reversible error nor grave abuse of discretion in convicting the petitioner of malversation for failure to explain or
account for his cash shortage by any liquidation or supporting documents. As this Court similarly ruled in one
case50 :
In the crime of malversation, all that is necessary for conviction is sufficient proof that the accountable officer had
received public funds, that he did not have them in his possession when demand therefor was made, and that he
could not satisfactorily explain his failure to do so. Direct evidence of personal misappropriation by the accused is
hardly necessary as long as the accused cannot explain satisfactorily the shortage in his accounts.
In convicting petitioner, the Sandiganbayan cites the presumption in Article 217, supra, of the Revised Penal
Code, i.e., the failure of a public officer to have duly forthcoming any public funds or property with which he is
chargeable, upon demand by any duly authorized officer, is prima facie evidence that he has put such missing fund
or property to personal uses. The presumption is, of course, rebuttable. Accordingly, if the accused is able to
present adequate evidence that can nullify any likelihood that he had put the funds or property to personal use,
then that presumption would be at an end and the prima facie case is effectively negated. This Court has
repeatedly said that when the absence of funds is not due to the personal use thereof by the accused, the
presumption is completely destroyed; in fact, the presumption is never deemed to have existed at all. In this case,
however, petitioner failed to overcome this prima facie evidence of guilt.
There is grave abuse of discretion where the public respondent acts in a capricious, whimsical, arbitrary or
despotic manner in the exercise of its judgment as to be 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 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 hostility.51 Under the facts on record, we find no grave abuse of discretion
on the part of the SB when it submitted the case for decision and rendered the judgment of conviction on the basis
of the prosecution evidence after the defense failed to present its evidence despite ample opportunity to do so.
WHEREFORE, the petition is DISMISSED. The Decision promulgated on May 26, 2008 and Resolution issued
on November 18, 2008 by the Sandiganbayan in Criminal Case No. 26327 are AFFIRMED.
With costs against the petitioner.
SO ORDERED.
MARTIN S. VILLARAMA, JR.
Associate Justice

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 183575

April 11, 2011

SPOUSES ROGELIO MARCELO and MILAGROS MARCELO, Petitioners,


vs.
LBC BANK, Respondent.
CARPIO, J.:
The Case
This petition for review1 assails the 26 March 2008 Amended Decision2 and 27 June 2008
Resolution3 of the Court of Appeals in CA-G.R. SP No. 90166. In the 26 March 2008 Amended
Decision, the Court of Appeals modified its original decision of 16 June 2006 and affirmed the
trial courts decision of 1 December 2004 directing the issuance of a writ of possession in favor
of respondent LBC Bank (LBC Bank). In the 27 June 2008 Resolution, the Court of Appeals
denied reconsideration.
The Facts
On 16 April 1997, petitioners Spouses Rogelio and Milagros Marcelo (Spouses Marcelo)
obtained a P3 million loan from LBC Bank. On 27 May 1998, Spouses Marcelo obtained another
loan from LBC Bank in the amount of P2.3 million. The two loans were secured by a real estate
mortgage over a parcel of land located in Baliuag, Bulacan and covered by Transfer Certificate
of Title (TCT) No. N-64135 in the name of Spouses Marcelo.
Spouses Marcelo defaulted in the payment of their loans. Consequently, LBC Bank sought the
extra-judicial foreclosure of the real estate mortgage on 15 October 1998.

On 21 October 1998, the Office of the Clerk of Court and the Ex-Officio Sheriff of Malolos,
Bulacan, issued a Notice of Sheriffs Sale. After the posting and publication of the Notice of
Sale, the mortgaged property was sold at a public auction on 25 November 1998. LBC Bank,
being the highest bidder, was issued a Certificate of Sale, which was eventually registered with
the Bulacan Registry of Deeds.
Spouses Marcelo failed to redeem the property within the prescribed period. As a result, on 5
December 2000, LBC Banks Mecauayan Branch Manager, Ricardo B. Milan, Jr. (Milan),
executed an Affidavit of Consolidation of Title, which was filed with the Bulacan Registry of
Deeds. On 1 February 2001, Spouses Marcelos title to the subject property was cancelled and
TCT No. T-145323 was issued in LBC Banks name.
On 12 October 2004, LBC Bank filed with the Regional trial Court of Bulacan, Branch 11, a
petition4 for the issuance of a writ of possession over the foreclosed property.
The Trial Courts Ruling
On 1 December 2004, the trial court rendered a decision, granting the petition and directing the
issuance of a writ of possession in favor of LBC Bank, to wit:
WHEREFORE, finding the petition to be sufficient in form and substance and the allegations
therein to be meritorious, the same is hereby GRANTED.
Let writ of possession in favor of LBC Bank be issued accordingly.
SO ORDERED.5
Spouses Marcelo moved for reconsideration, contending that LBC Banks consolidation of title
was invalid since the affidavit of consolidation was executed by Milan who was allegedly
unauthorized to do so. Spouses Marcelo further argued that the petition for the issuance of a writ
of possession was insufficient in form for being verified by one Rosario B. Aotriz who lacked
authority to perform such act.
The trial court denied the motion for reconsideration in an Order dated 17 May 2005.6
Spouses Marcelo filed a petition for certiorari with the Court of Appeals. Spouses Marcelo
claimed that the trial court gravely abused its discretion in directing the issuance of a writ of
possession in favor of LBC Bank. Spouses Marcelo alleged that there was no evidence that
Milan was the authorized representative of LBC Bank to consolidate ownership over the
foreclosed property. Absent such evidence, Milan was allegedly unauthorized, and thus, there
was no proper consolidation of title in favor of LBC Bank. Therefore, LBC Bank was not
entitled to a writ of possession.
The Court of Appeals Ruling

On 16 June 2006, the Court of Appeals rendered a decision,7 initially granting Spouses Marcelo
certiorari petition and disposing of the case as follows:
WHEREFORE, this petition for certiorari is GRANTED. Accordingly, the Decision dated
December 1, 2004 and the Order dated May 17, 2005 of the Regional Trial Court of Bulacan,
Branch 11 in P-525-2004 are hereby ANNULLED and SET ASIDE.
SO ORDERED.8
LBC Bank filed a motion for reconsideration,9 attaching thereto the (1) Affidavit of Ma. Tara O.
Aznar,10 Chief Finance Officer of LBC Bank, attesting to the practice and policy of LBC Bank
that Branch Managers are responsible for all accounts within their branchs jurisdiction with full
authority to foreclose secured accounts and consolidate ownership as may be warranted; (2)
Secretarys Certificate,11 dated 27 June 2006, expressly confirming and ratifying the "implied and
apparent authority" of Milan to consolidate ownership over the subject property; and (3)
Secretarys Certificate,12 dated 1 July 2005, authorizing Ma. Tara O. Aznar, among others, to "act
as authorized signatory in x x x Affidavit/s of Witness/es and other pleadings relevant to the
cases of the Bank."
On 26 March 2008, the Court of Appeals rendered an Amended Decision granting the motion for
reconsideration "in the interest of substantial justice." The Court of Appeals considered the
documents submitted by LBC Bank, namely, the Affidavit of its Chief Finance Officer and the
Secretarys Certificate, "showing that LBC Bank ratified the questioned consolidation of the
subject property." The dispositive portion of the Amended Decision reads:
WHEREFORE, the June 16, 2006 Decision is hereby AMENDED. Accordingly, the petition for
certiorari is DENIED. The assailed Decision dated December 1, 2004 and the Order dated May
17, 2005 of the Regional Trial Court of Bulacan, Branch 11 in P-525-2004 are AFFIRMED.
SO ORDERED.13
The Court of Appeals denied the motion for reconsideration in a Resolution dated 27 June 2008.
The Issue
The sole issue in this case is whether the Court of Appeals can admit new evidence in a special
civil action for certiorari.
The Ruling of the Court
The petition lacks merit.
In their petition for certiorari before the Court of Appeals, Spouses Marcelo insisted that Milan
had no authority to consolidate the title over the foreclosed property on behalf of LBC Bank.

On the other hand, LBC Bank claimed that Milan had such authority as indicated in the
Secretarys Certificate dated 9 March 2000, which pertinently states that "the Board hereby
confirms and ratifies the authority of [Milan] x x x to file and prosecute to its conclusion,
criminal and civil cases for and in behalf of LBC Development Bank and to enter into
compromise agreement or execute an affidavit of desistance upon final settlement of
criminal/civil complaints/cases, as fully to all intents and purposes as might or could be lawfully
done by this Bank;" x x x.
As stated, the Court of Appeals initially ruled in favor of Spouses Marcelo. However, upon
submission by LBC Bank of documents expressly and unequivocally confirming and ratifying
Milans authority to consolidate the title over the foreclosed property, the Court of Appeals
amended its original decision.
Spouses Marcelo fault the Court of Appeals for admitting and considering the Affidavit of Ma.
Tara O. Aznar, dated 10 July 2006, and the Secretarys Certificates dated 27 June 2006 and 1 July
2005 in resolving LBC Banks motion for reconsideration of the Court of Appeals 16 June 2006
Decision. Spouses Marcelo contend that in a special civil action for certiorari, the Court of
Appeals cannot admit new evidence. Spouses Marcelo further submit that the sole office of the
writ of certiorari is the correction of errors of jurisdiction, and thus, the Court of Appeals erred in
admitting the "additional evidence."
The Court is not convinced.
In Maralit v. Philippine National Bank,14 where petitioner Maralit questioned the appellate
courts admission and appreciation of a belatedly submitted documentary evidence, the Court
held that "[i]n a special civil action for certiorari, the Court of Appeals has ample authority to
receive new evidence and perform any act necessary to resolve factual issues." The Court
explained further:
Section 9 of Batas Pambansa Blg. 129, as amended, states that, "The Court of Appeals shall have
the power to try cases and conduct hearings, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling within its original and appellate
jurisdiction, including the power to grant and conduct new trials or further
proceedings."151avvphi1
Likewise, in VMC Rural Electric Service Cooperative, Inc. v. Court of Appeals,16 the Court held:
[I]t is already settled that under Section 9 of Batas Pambansa Blg. 129, as amended by Republic
Act No. 7902 (An Act Expanding the Jurisdiction of the Court of Appeals, amending for the
purpose of Section Nine of Batas Pambansa Blg. 129 as amended, known as the Judiciary
Reorganization Act of 1980), the Court of Appeals pursuant to the exercise of its original
jurisdiction over Petitions for Certiorari is specifically given the power to pass upon the
evidence, if and when necessary, to resolve factual issues. As clearly stated in Section 9 of Batas
Pambansa Blg. 129, as amended by Republic Act 7902:

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence
and perform any and all acts necessary to resolve factual issues raised in cases falling within its
original and appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings. x x x.
Clearly, the Court of Appeals did not err in admitting the evidence showing LBC Banks express
ratification of Milans consolidation of the title over the subject property. Further, the Court of
Appeals did not err in admitting such evidence in resolving LBC Banks motion for
reconsideration in a special civil action for certiorari. To rule otherwise will certainly defeat the
ends of substantial justice.
WHEREFORE, the Court DENIES the petition and AFFIRMS the 26 March 2008 Amended
Decision and 27 June 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 90166.
SO ORDERED.

Churchille Mari and People vs. Hon. Gonzales, GR 187728, 12 September 2011

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 187728

September 12, 2011

CHURCHILLE V. MARI and the PEOPLE OF THE PHILIPPINES, Petitioners,


vs.
HON. ROLANDO L. GONZALES, Presiding Judge, Regional Trial Court, Branch 39,
Sogod, Southern Leyte, and PO1 RUDYARD PALOMA y TORRES, Respondents.
DECISION
PERALTA, J.:
This resolves the Petition for Certiorari under Rule 65 of the Rules of Court, praying that the
Order1 of the Regional Trial Court of Sogod, Southern Leyte (RTC), dated January 16, 2009,
dismissing the criminal case for rape against PO1 Rudyard Paloma y Torres (private respondent),
and the Resolution2 dated March 16, 2009, denying petitioners' motion for reconsideration, be
annulled and set aside.
The records reveal the following antecedent facts.
On October 25, 2004, petitioner AAA, private complainant below, executed a sworn statement
before an Investigator of the 8th Regional Office, Philippine National Police-Criminal
Investigation and Detection Group (PNP-CIDG) in Tacloban City, where she stated that she was
raped by herein private respondent on October 10, 2004 at her boarding house at Sogod,
Southern Leyte. A preliminary investigation of the case was commenced on November 4, 2004
before the Presiding Judge of the Municipal Circuit Trial Court (MCTC) of Sogod. A warrant of
arrest was issued against private respondent, so he voluntarily surrendered to the Chief of Police
of Sogod on November 18, 2004 and was then incarcerated at the Sogod Municipal Jail.
On November 20, 2004, private respondent filed a Motion for Bail. Hearings on the motion
commenced on December 7, 2004, but petitioner failed to appear. Only private respondent
presented evidence. Thus, on March 16, 2005, the MCTC of Sogod issued an Order allowing
private respondent to post bail set at P200,000.00. After posting a surety bond, private
respondent was released from confinement.
Pursuant to the issuance of A.M. No. 05-8-26, divesting first-level courts of authority to conduct
preliminary investigation of criminal complaints cognizable by Regional Trial Courts, records of
the subject case were transmitted to the Provincial Prosecutor's Office of Southern Leyte. 3 The
Prosecutor's Office issued a Resolution dated May 26, 2008, finding probable cause against
private respondent and, accordingly, an Information for Rape was filed on June 11, 2008. A
warrant of arrest was immediately issued against private respondent.

On June 27, 2008, private respondent was committed to detention4 and, on June 30, 2008, the
RTC issued an Order5 stating that accused had voluntarily surrendered to the Office of the Clerk
of Court and arraignment was set for July 31, 2008. In the meantime, on July 3, 2008, private
respondent filed a Motion to Admit Cash Bond in Lieu of Surety Bond; thus, in an Order dated
July 10, 2008, the RTC cancelled the July 31, 2008 schedule for arraignment and reset the
arraignment and hearing on said motion for August 20, 2008. At said scheduled date for
arraignment and hearing on the motion, nobody appeared for the prosecution. Hence, the RTC
issued the Order6 dated August 20, 2008 resetting the arraignment for October 31, 2008 and
stating that:
x x x this Court hereby orders the public prosecutor x x x and/or his assistant prosecutor x x x to
appear and prosecute this case on the next scheduled hearing from arraignment up to the
termination of the trial of this case otherwise this Court will order the dismissal of this case for
failure to prosecute or nolle prosequi.7
On October 28, 2008, petitioner AAA, private complainant below, filed through her private
counsel, a Motion for Cancellation of Hearing,8 manifesting that Atty. Pedro Felicen, Jr. had been
granted the authority to prosecute by the Provincial Prosecutor and praying that the scheduled
arraignment on October 31, 2008 be cancelled due to the pendency of private complainant's
petition for transfer of venue before this Court. The authorized private prosecutor did not appear
on said hearing date. The hearing on October 31, 2008 proceeded as the RTC ruled, in its Order9
issued on the same day, that unless restrained by a higher court, the mere pendency of a petition
for transfer of venue is not sufficient reason to suspend the proceedings. Moreover, counsel for
accused invoked the accused's right to a speedy trial and, thus, private respondent was arraigned
in the presence of the Provincial Prosecutor who was designated by the RTC to represent the
prosecution for the purpose of arraignment. Pre-trial was set for November 13, 2008.
Nevertheless, said schedule for pre-trial was cancelled (per Order10 dated November 4, 2008) as
the Presiding Judge of the RTC had to attend a PHILJA Seminar, and pre-trial was reset to
November 24, 2008. On November 24, 2008, the day of the pre-trial itself, the private prosecutor
again filed a Motion for Cancellation of Hearing, again using as justification the pendency of the
petition for transfer of venue. The RTC issued an Order on even date, reading as follows:
During the scheduled pre-trial conference of this case, the public prosecutors of Leyte, the
private prosecutor and the private complainant failed to appear despite proper notices sent [to]
them. A motion for cancellation of hearing was filed by the authorized private prosecutor, Pedro
Felicen, Jr. for reasons stated therein to which this Court finds to be not meritorious, hence, the
same is denied. x x x the public prosecutor as well as the counsel for the accused were directed to
make their oral comments on the first endorsement of the Hon. Deputy Court Administrator,
regarding the motion to transfer venue of this case to any of the RTC, at Tacloban City, x x x.
x x x Thereafter, the pre trial proceeded by discussing matters concerning the amicable
settlement, plea bargaining agreement, stipulation of facts, pre-marking of documentary exhibits,
number of witnesses, trial dates and nature of the defense. There being no other matters to
discuss on pre-trial in order to expedite the early disposition of this case, the pre-trial proper is
now deemed terminated.11

The said Order also scheduled the initial hearing for trial on the merits for December 12, 2008.
On December 12, 2008, no one appeared for the prosecution, prompting counsel for accused
private respondent to move for dismissal of the case on the ground of failure to prosecute.
Private respondent's motion to dismiss was denied per Order12 dated December 12, 2008, and
hearing was reset to January 16, 2009.
Again, on the very day of the January 16, 2009 hearing, the private prosecutor filed an Urgent
Motion for Cancellation of Hearing, stating that it
was only on January 14, 2009 that he was furnished a copy of the notice of the January 16, 2009
hearing and he had to attend a previously scheduled hearing for another case he was handling, set
for the very same date. Thus, in the Order dated January 16, 2009, the RTC disposed, thus:
x x x Again notably absent are the private prosecutor, the two public prosecutors designated by
the Department of Justice to prosecute this case as well as the private complainant herself.
A last minute urgent motion to reset was filed by the private prosecutor, but the same is denied
being in violation of the three (3) day rule in filing written postponements. After hearing the
arguments coming from both the public prosecutor assigned to this Court and counsel for the
defense, the Court deems it proper to act on the urgency of the matter prayed for by the said
counsel. Considering that the accused has been languishing in jail since June, 2008 up to the
present and to allow him to stay in jail for a single minute, it is quite unreasonable and would
violate his right to speedy trial.
WHEREFORE, finding the motion of the counsel for the accused to be based on grounds that are
meritorious, this Court pursuant to x x x the rule on speedy trial (RA 8433) [should be "8493"]
hereby orders this case dismissed for failure of the prosecution to prosecute or nolle prosequi.13
Petitioners filed a motion for reconsideration, but the RTC denied the same per Resolution dated
March 16, 2009.
Hence, the present petition for certiorari, alleging that public respondent acted with grave abuse
of discretion amounting to lack or excess of jurisdiction in rashly and precipitately dismissing the
rape case against private respondent. Respondents counter that there was no grave abuse
committed by the trial court and setting aside the dismissal of the rape case would put private
respondent in double jeopardy.
The Court finds the petition bereft of merit.
Firstly, petitioners failed to observe the doctrine on hierarchy of courts. In Garcia v. Miro,14 the
Court, quoting Vergara, Sr. v. Suelto,15 ruled thus:
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. It cannot and
should not be burdened with the task of dealing with causes in the first instance. Its original
jurisdiction to issue the so-called extraordinary writs should be exercised only where absolutely

necessary or where serious and important reasons exist therefor. Hence, that jurisdiction should
generally be exercised relative to actions or proceedings before the Court of Appeals, or before
constitutional or other tribunals, bodies or agencies whose acts for some reason or another are
not controllable by the Court of Appeals. Where the issuance of an extraordinary writ is also
within the competence of the Court of Appeals or a Regional Trial Court, it is in either of these
courts that the specific action for the writ's procurement must be presented. This is, and should
continue, to be the policy in this regard, a policy that courts and lawyers must strictly observe.16
(Emphasis supplied.)
On this point alone, the petition is already dismissible. However, on several occasions, this Court
found compelling reasons to relax the rule on observance on hierarchy of courts. In Pacoy v.
Cajigal,17 the Court opted not to strictly apply said doctrine, since the issue involved is double
jeopardy, considered to be one of the most fundamental constitutional rights of an accused.
Hence, the Court also finds sufficient reason to relax the rule in this case as it also involves the
issue of double jeopardy, necessitating a look into the merits of the petition.
Petitioners insist that the RTC dismissed the criminal case against private respondent too
hurriedly, despite the provision in Section 10 of the Speedy Trial Act of 1998 (Republic Act No.
8493), now incorporated in Section 3, Rule 119 of the Rules of Court, to wit:
SEC. 3. Exclusions. - The following periods of delay shall be excluded in computing the time
within which trial must commence:
(a) Any period of delay resulting from other proceedings concerning the accused, including
but not limited to the following:
xxxx
(5) Delay resulting from orders of inhibition, or proceedings relating to change of venue of cases
or transfer from other courts;
x x x x18
A careful reading of the above rule would show that the only delays that may be excluded from
the time limit within which trial must commence are those resulting from proceedings
concerning the accused. The time involved in the proceedings in a petition for transfer of venue
can only be excluded from said time limit if it was the accused who instituted the same. Hence,
in this case, the time during which the petition for transfer of venue filed by the private
complainant is pending, cannot be excluded from the time limit of thirty (30) days from receipt
of the pre-trial order imposed in Section 1, Rule 119 of the Rules of Court.
The records reveal that the 30-day time limit set by Section 1, Rule 119 of the Rules of Court
had, in fact, already been breached. The private prosecutor received the Pre-trial Order19 dated
November 24, 2008 on December 3, 2008, while the Provincial Prosecutor received the same on
December 2, 2008.20 This means that at the latest, trial should have commenced by January 2,
2009, or if said date was a Sunday or holiday, then on the very next business day. Yet, because of

the prosecution's failure to appear at the December 12, 2008 hearing for the initial presentation of
the prosecution's evidence, the RTC was constrained to reset the hearing to January 16, 2009,
which is already beyond the 30-day time limit. Nevertheless, the prosecution again failed to
appear at the January 16, 2009 hearing. Indeed, as aptly observed by the RTC, petitioners
showed recalcitrant behavior by obstinately refusing to comply with the RTC's directives to
commence presentation of their evidence. Petitioners did not even show proper courtesy to the
court, by filing motions for cancellation of the hearings on the very day of the hearing and not
even bothering to appear on the date they set for hearing on their motion. As set forth in the
narration of facts above, the prosecution appeared to be intentionally delaying and trifling with
court processes.
Petitioners are likewise mistaken in their notion that mere pendency of their petition for transfer
of venue should interrupt proceedings before the trial court. Such situation is akin to having a
pending petition for certiorari with the higher courts. In People v. Hernandez,21 the Court held
that "delay resulting from extraordinary remedies against interlocutory orders" must be read in
harmony with Section 7, Rule 65 of the Rules of Court which provides that the "[p]etition [under
Rule 65] shall not interrupt the course of the principal case unless a temporary restraining
order or a writ of preliminary injunction has been issued against the public respondent
from further proceeding in the case."22 The trial court was then correct and acting well within
its discretion when it refused to grant petitioners' motions for postponement mainly because of
the pendency of their petition for transfer of venue.
The trial court cannot be faulted for refusing to countenance delays in the prosecution of the
case. The Court's ruling in Tan v. People23 is quite instructive, to wit:
An accused's right to "have a speedy, impartial, and public trial" is guaranteed in criminal cases
by Section 14 (2) of Article III of the Constitution. This right to a speedy trial may be defined as
one free from vexatious, capricious and oppressive delays, its "salutary objective" being to assure
that an innocent person may be free from the anxiety and expense of a court litigation or, if
otherwise, of having his guilt determined within the shortest possible time compatible with the
presentation and consideration of whatsoever legitimate defense he may interpose. Intimating
historical perspective on the evolution of the right to speedy trial, we reiterate the old legal
maxim, "justice delayed is justice denied." This oft-repeated adage requires the expeditious
resolution of disputes, much more so in criminal cases where an accused is constitutionally
guaranteed the right to a speedy trial.
Following the policies incorporated under the 1987 Constitution, Republic Act No. 8493,
otherwise known as "The Speedy Trial Act of 1998," was enacted, with Section 6 of said act
limiting the trial period to 180 days from the first day of trial. Aware of problems resulting in the
clogging of court dockets, the Court implemented the law by issuing Supreme Court Circular No.
38-98, which has been incorporated in the 2000 Rules of Criminal Procedure, Section 2 of Rule
119.
In Corpuz v. Sandiganbayan, the Court had occasion to state -

The right of the accused to a speedy trial and to a speedy disposition of the case against him was
designed to prevent the oppression of the citizen by holding criminal prosecution suspended over
him for an indefinite time, and to prevent delays in the administration of justice by mandating the
courts to proceed with reasonable dispatch in the trial of criminal cases. Such right to a speedy
trial and a speedy disposition of a case is violated only when the proceeding is attended by
vexatious, capricious and oppressive delays. The inquiry as to whether or not an accused has
been denied such right is not susceptible by precise qualification. The concept of a speedy
disposition is a relative term and must necessarily be a flexible concept.
While justice is administered with dispatch, the essential ingredient is orderly, expeditious and
not mere speed. It cannot be definitely said how long is too long in a system where justice is
supposed to be swift, but deliberate. It is consistent with delays and depends upon circumstances.
It secures rights to the accused, but it does not preclude the rights of public justice. Also, it must
be borne in mind that the rights given to the accused by the Constitution and the Rules of Court
are shields, not weapons; hence, courts are to give meaning to that intent.
The Court emphasized in the same case that:
A balancing test of applying societal interests and the rights of the accused necessarily compels
the court to approach speedy trial cases on an ad hoc basis.
In determining whether the accused has been deprived of his right to a speedy disposition of the
case and to a speedy trial, four factors must be considered: (a) length of delay; (b) the reason for
the delay; (c) the defendant's assertion of his right; and (d) prejudice to the defendant. x x x.
Closely related to the length of delay is the reason or justification of the State for such
delay.1wphi1 Different weights
should be assigned to different reasons or justifications invoked by the State. x x x.
Exhaustively explained in Corpuz v. Sandiganbayan, an accused's right to speedy trial is deemed
violated only when the proceeding is attended by vexatious, capricious, and oppressive delays.
In determining whether petitioner was deprived of this right, the factors to consider and
balance are the following: (a) duration of the delay; (b) reason therefor; (c) assertion of the
right or failure to assert it; and (d) prejudice caused by such delay.
xxxx
We emphasize that in determining the right of an accused to speedy trial, courts are
required to do more than a mathematical computation of the number of postponements of
the scheduled hearings of the case. A mere mathematical reckoning of the time involved is
clearly insufficient, and particular regard must be given to the facts and circumstances
peculiar to each case.24
Here, it must be emphasized that private respondent had already been deprived of his liberty on
two occasions. First, during the preliminary investigation before the MCTC, when he was

incarcerated from November 18, 2004 to March 16, 2005, or a period of almost four months;
then again, when an Information had already been issued and since rape is a non-bailable
offense, he was imprisoned beginning June 27, 2008 until the case was dismissed on January 16,
2009, or a period of over 6 months. Verily, there can be no cavil that deprivation of liberty for
any duration of time is quite oppressive. Because of private respondent's continued incarceration,
any delay in trying the case would cause him great prejudice. Thus, it was absolutely vexatious
and oppressive to delay the trial in the subject criminal case to await the outcome of petitioners'
petition for transfer of venue, especially in this case where there is no temporary restraining
order or writ of preliminary injunction issued by a higher court against herein public respondent
from further proceeding in the case.
Hence, the Court does not find any grave abuse of discretion committed by the trial court in
dismissing the case against private respondent for violation of his constitutional right to speedy
trial.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162575

December 15, 2010

BEATRIZ SIOK PING TANG, Petitioner,


vs.
SUBIC BAY DISTRIBUTION, INC., Respondent.
DECISION
PERALTA, J.:
Before us is a petition for review on certiorari filed by petitioner Beatriz Siok Ping Tang seeking
to annul and set aside the Decision1 dated October 17, 2003 and the Resolution2 dated March 5,
2004 of the Court of Appeals (CA) in CA-G.R. SP No. 74629.
The antecedent facts are as follows:
Petitioner is doing business under the name and style of Able Transport. Respondent Subic Bay
Distribution, Inc. (SBDI) entered in two Distributorship Agreements with petitioner and Able

Transport in April 2002. Under the Agreements, respondent, as seller, will sell, deliver or procure
to be delivered petroleum products, and petitioner, as distributor, will purchase, receive and pay
for its purchases from respondent. The two Agreements had a period of one year, commencing
on October 2001 to October 2002, which shall continue on an annual basis unless terminated by
either party upon thirty days written notice to the other prior to the expiration of the original term
or any extension thereof.
Section 6.3 of the Distributorship Agreement provides that respondent may require petitioner to
put up securities, real or personal, or to furnish respondent a performance bond issued by a
bonding company chosen by the latter to secure and answer for petitioner's outstanding account,
and or faithful performance of her obligations as contained or arising out of the Agreement.
Thus, petitioner applied for and was granted a credit line by the United Coconut Planters Bank
(UCPB), International Exchange Bank (IEBank), and Security Bank Corporation (SBC).
Petitioner also applied with the Asia United Bank (AUB) an irrevocable domestic standby letter
of credit in favor of respondent. All these banks separately executed several undertakings setting
the terms and conditions governing the drawing of money by respondent from these banks.
Petitioner allegedly failed to pay her obligations to respondent despite demand, thus, respondent
tried to withdraw from these bank undertakings.
Petitioner then filed with the Regional Trial Court (RTC) of Quezon City separate petitions 3
against the banks for declaration of nullity of the several bank undertakings and domestic letter
of credit which they issued with the application for the issuance of a temporary restraining order
(TRO) and writ of preliminary injunction. The cases were later consolidated and were assigned
to Branch 101. Petitioner asked for the annulment of the bank undertakings/letter of credit which
she signed on the ground that the prevailing market rate at the time of respondent's intended
drawings with which petitioner will be charged of as interests and penalties is oppressive,
exorbitant, unreasonable and unconscionable rendering it against public morals and policy; and
that to make her automatically liable for millions of pesos on the bank undertakings, these banks
merely required the submission of a mere certification from the company (respondent) that the
customer (petitioner) has not paid its account (and its statement of account of the client) without
first verifying the truthfulness of the alleged petitioner's total liability to the drawer thereon.
Therefore, such contracts are oppressive, unreasonable and unconscionable as they would result
in her obtaining several millions of liability.
On November 28, 2002, a hearing was conducted for the issuance of the TRO and the writ of
preliminary injunction wherein the petitioner and the bank representatives were present. On
query of the respondent Judge Normandie Pizarro (Judge Pizarro) to the bank representatives
with regard to the eventual issuance of the TRO, the latter all replied that they will abide by the
sound judgment of the court. The court then issued an Order4 granting the TRO and requiring
petitioner to implead respondent as an indispensable party and for the latter to submit its position
paper on the matter of the issuance of the injunction. Petitioner and respondent submitted their
respective position papers.
On December 17, 2002, the RTC rendered an Order,5 the dispositive portion of which reads:

ACCORDINGLY, let a Writ of Preliminary Injunction be issued restraining and enjoining herein
Respondent UCPB, IEB, SB and AUB from releasing any funds to SBDI, pursuant to the Bank
Undertakings and/or Domestic Standby Letter of Credit until further orders from this Court.
Consequently, Petitioner is hereby DIRECTED to post a bond in the amount of TEN MILLION
PESOS (P10,000,000.00), to answer for whatever damages respondent banks and SBDI may
suffer should this Court finally decide that petitioner was not entitled thereto. 6
The RTC found that both respondent and petitioner have reasons for the enforcement or nonenforcement of the bank undertakings, however, as to whether said reasons were justifiable or
not, in view of the attending circumstances, the RTC said that these can only be determined after
a full blown trial. It ruled that the outright denial of petitioner's prayer for the issuance of
injunction, even if the evidence warranted the reasonable probability that real injury will occur if
the relief for shall not be granted in favor of petitioner, will not serve the ends of justice.
Respondent filed with the CA a petition for certiorari with prayer for the issuance of a TRO and
writ of preliminary injunction against respondent Judge Pizarro and petitioner. Subsequently,
petitioner filed her Comment and respondent filed its Reply.
On July 4, 2003, the CA issued a Resolution7 granting the TRO prayed for by respondent after
finding that it was apparent that respondent has a legal right under the bank undertakings issued
by UCPB, SBC, and IEBank; and that until those undertakings were nullified, respondent's rights
under the same should be maintained.
On July 11, 2003, the CA issued a Supplemental Resolution8 wherein the Domestic Standby
Letter of Credit issued by AUB was ordered included among the bank undertakings, to which
respondent has a legal right.
On October 17, 2003, the CA rendered its assailed Decision, the decretal portion of which reads:
WHEREFORE, the petition is hereby GRANTED. The Order dated December 17, 2002 is
hereby ANNULLED AND SET ASIDE. The writ of preliminary injunction issued by the lower
court is hereby LIFTED.9
In so ruling, the CA said that the grant or denial of an injunction rests on the sound discretion of
the RTC which should not be intervened, except in clear cases of abuse. Nonetheless, the CA
continued that the RTC should avoid issuing a writ of preliminary injunction which would, in
effect, dispose of the main case without trial. It found that petitioner was questioning the validity
of the bank undertakings and letter of credit for being oppressive, unreasonable and
unconscionable. However, as provided under the law, private transactions are presumed to be fair
and regular and that a person takes ordinary care of his concerns. The CA ruled that the RTC's
issuance of the injunction, which was premised on the abovementioned justification, would be a
virtual acceptance of petitioner's claim, thus, already a prejudgment of the main case. It also said
that contracts are presumed valid until they are voided by a court of justice, thus, until such time
that petitioner has presented sufficient evidence to rebut such presumption, her legal right to the
writ is doubtful.

As to petitioner's claim of respondent's non-filing of a motion for reconsideration before


resorting to a petition for certiorari, the CA said that it is not a rigid rule, as jurisprudence had
said, that when a definite question has been properly raised, argued and submitted in the RTC
and the latter had decided the question, a motion for reconsideration is no longer necessary
before filing a petition for certiorari. The court found that both parties had fully presented their
sides on the issuance of the writ of preliminary injunction and that the RTC had squarely
resolved the issues presented by both parties. Thus, respondent could not be faulted for not filing
a motion for reconsideration.
In a Resolution dated March 5, 2004, petitioner's motion for reconsideration was denied.
Hence, this petition, wherein petitioner raises the following assignment of errors:
I. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A SERIOUS AND
REVERSIBLE ERROR IN GIVING DUE COURSE AND GRANTING THE
PETITION FOR CERTIORARI FILED BY PRIVATE RESPONDENT SBDI, DESPITE
THE FACT THAT THE ORIGINAL PARTIES IN THE TRIAL COURT, WHO ARE
EQUALLY MANDATED BY THE QUESTIONED ORDER OF THE TRIAL COURT,
NAMELY; UCPB, IEBANK, SBC AND AUB, AS DEFENDANTS IN THE MAIN
CASE, WERE NOT IMPLEADED AS INDISPENSABLE PARTIES IN THE
PETITION.
II. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A SERIOUS
AND REVERSIBLE ERROR IN GIVING DUE COURSE AND GRANTING PRIVATE
RESPONDENT SBDI'S PETITION WHEN THE LATTER ADMITTEDLY FAILED TO
FILE A PRIOR MOTION FOR RECONSIDERATION BEFORE THE TRIAL COURT,
MORESO WHEN INDISPENSABLE PARTIES WERE NOT IMPLEADED WHICH
SHOULD HAVE RENDERED THE COURT OF APPEALS IN WANT OF
JURISDICTION TO ACT.10
Petitioner claims that the CA decision is void for want of authority of the CA to act on the
petition as the banks should have been impleaded for being indispensable parties, since they are
the original party respondents in the RTC; that the filing with the CA of respondent's petition for
certiorari emanated from the RTC Order wherein the banks were the ones against whom the
questioned Order was issued; that the banks are the ones who stand to release hundred millions
of pesos which respondent sought to draw from the questioned bank undertakings and domestic
standby letter of credit through the certiorari proceedings, thus, they should be given an
opportunity to be heard. Petitioner claims that even the CA recognized the banks' substantial
interest over the subject matter of the case when, despite not being impleaded as parties in the
petition filed by respondent, the CA also notified the banks of its decision.
Petitioner argues that a petition for certiorari filed without a prior motion for reconsideration is a
premature action and such omission constitutes a fatal infirmity; that respondent explained its
omission only when petitioner already brought the same to the attention of the CA, thus, a mere
afterthought and an attempt to cure the fatal defects of its petition.

In its Comment, respondent contends that the banks which issued the bank undertakings and
letter of credit are not indispensable parties in the petition for certiorari filed in the CA.
Respondent argues that while the RTC preliminarily resolved the issue of whether or not
petitioner was entitled to an injunctive relief, and the enforcement of any decision granting such
would necessarily involve the banks, the resolution of the issue regarding the injunction does not
require the banks' participation. This is so because on one hand the entitlement or nonentitlement to an injunction is a matter squarely between petitioner and respondent, the latter
being the party that is ultimately enjoined from benefiting from the banks' undertakings. On the
other hand, respondent contends that the issue resolved by the CA was whether or not the RTC
gravely abused its discretion in granting the injunctive relief to respondent; that while the
enforcement of any decision enjoining the implementation of the injunction issued by the RTC
would affect the banks, the resolution of whether there is grave abuse of discretion committed by
the RTC does not require the banks' participation.
Respondent claims that while as a rule, a motion for reconsideration is required before filing a
petition for certiorari, the rule admits of exceptions, which are, among others: (1) when the
issues raised in the certiorari proceedings have been duly raised and passed upon by the RTC or
are the same as those raised and passed upon in the RTC; (2) there is an urgent necessity and
time is of the essence for the resolution of the issues raised and any further delay would
prejudice the interests of the petitioner; and (3) the issue raised is one purely of law, which are
present in respondent's case.
In her Reply, petitioner claims that the decree that will compel and order the banks to release any
funds to respondent pending the resolution of her petition in the RTC will have an injurious
effect upon her rights and interest. She reiterates her arguments in her petition.
Respondent filed a Rejoinder saying that it is misleading for petitioner to allege that the decree
sought by respondent before the CA is directed against the banks; that even the dispositive
portion of the CA decision did not include any express directive to the banks; that there was
nothing in the CA decision which compelled and ordered the banks to release funds in favor of
respondent as the CA decision merely annulled the RTC Order and lifted the writ of preliminary
injunction. Respondent contends that the banks are not persons interested in sustaining the RTC
decision as this was obvious from the separate answers they filed in the RTC wherein they
uniformly maintained that the bank undertakings/letter of credit are not oppressive, unreasonable
and unconscionable. Respondent avers that petitioner is the only person interested in upholding
the injunction issued by the RTC, since it will enable her to prevent the banks from releasing
funds to respondent. Respondent insists that petitioner's petition before the RTC and the instant
petition have caused and continues to cause respondent grave and irreparable damage.
Both parties were then required to file their respective memoranda, in which they complied.
Petitioner's insistence that the banks are indispensable parties, thus, should have been impleaded
in the petition for certiorari filed by respondent in the CA, is not persuasive.
In Arcelona v. Court of Appeals,11 we stated the nature of indispensable party, thus:

An indispensable party is a party who has such an interest in the controversy or subject matter
that a final adjudication cannot be made, in his absence, without injuring or affecting that
interest, a party who has not only an interest in the subject matter of the controversy, but also has
an interest of such nature that a final decree cannot be made without affecting his interest or
leaving the controversy in such a condition that its final determination may be wholly
inconsistent with equity and good conscience. It has also been considered that an indispensable
party is a person in whose absence there cannot be a determination between the parties already
before the court which is effective, complete, or equitable. Further, an indispensable party is one
who must be included in an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in the controversy or subject
matter is separable from the interest of the other parties, so that it will not necessarily be directly
or injuriously affected by a decree which does complete justice between them. Also, a person is
not an indispensable party if his presence would merely permit complete relief between him and
those already parties to the action, or if he has no interest in the subject matter of the action. It is
not a sufficient reason to declare a person to be an indispensable party that his presence will
avoid multiple litigation.12
Applying the foregoing, we find that the banks are not indispensable parties in the petition for
certiorari which respondent filed in the CA assailing the RTC Order dated December 17, 2002.
In fact, several circumstances would show that the banks are not parties interested in the matter
of the issuance of the writ of preliminary injunction, whether in the RTC or in the CA.
First. During the hearing of petitioner's prayer for the issuance of a TRO, the RTC, in open court,
elicited from the lawyer-representatives of the four banks their position in the event of the
issuance of the TRO, and all these representatives invariably replied that they will abide and/or
submit to the sound judgment of the court.13
Second. When the RTC issued its Order dated December 17, 2002 granting the issuance of the
writ of preliminary injunction, the banks could have challenged the same if they believe that they
were aggrieved by such issuance. However, they did not, and such actuations were in consonance
with their earlier position that they would submit to the sound judgment of the RTC.
Third. When respondent filed with the CA the petition for certiorari with prayer for the issuance
of a TRO and writ of preliminary injunction, and a TRO was subsequently issued, copies of the
resolution were also sent14 to the banks, although not impleaded, yet the latter took no action to
question their non-inclusion in the petition. Notably, the SBC filed an Urgent Motion for
Clarification15 on whether or not the issuance of the TRO has the effect of restraining the bank
from complying with the writ of preliminary injunction issued by the RTC or nullifying
/rendering ineffectual the said writ. In fact, SBC even stated that the motion was filed for no
other purpose, except to seek proper guidance on the issue at hand so that whatever action or
position it may take with respect to the CA resolution will be consistent with its term and
purposes.

Fourth. When the CA rendered its assailed Decision nullifying the injunction issued by the RTC,
and copies of the decision were furnished these banks, not one of these banks ever filed any
pleading to assail their non-inclusion in the certiorari proceedings.
Indeed, the banks have no interest in the issuance of the injunction, but only the petitioner. The
banks' interests as defendants in the petition for declaration of nullity of their bank undertakings
filed against them by petitioner in the RTC are separable from the interests of petitioner for the
issuance of the injunctive relief.
Moreover, certiorari, as a special civil action, is an original action invoking the original
jurisdiction of a court to annul or modify the proceedings of a tribunal, board or officer
exercising judicial or quasi-judicial functions.16 It is an original and independent action that is not
part of the trial or the proceedings on the complaint filed before the trial court.17 Section 5, Rule
65 of the Rules of Court provides:
Section 5. Respondents and costs in certain cases. - When the petition filed relates to the acts or
omissions of a judge, court, quasi-judicial agency, tribunal, corporation, board, officer or person,
the petitioner shall join, as private respondent or respondents with such public respondent or
respondents. the person or persons interested in sustaining the proceedings in the court; and it
shall be the duty of such private respondents to appear and defend, both in his or their own
behalf and in behalf of the public respondent or respondents affected by the proceedings, and the
costs awarded in such proceedings in favor of the petitioner shall be against the private
respondents only, and not against the judge, court, quasi-judicial agency, tribunal, corporation,
board, officer or person impleaded as public respondent or respondents.
xxxx
Clearly, in filing the petition for certiorari, respondent should join as party defendant with the
court or judge, the person interested in sustaining the proceedings in the court, and it shall be the
duty of such person to appear and defend, both in his own behalf and in behalf of the court or
judge affected by the proceedings. In this case, there is no doubt that it is only the petitioner who
is the person interested in sustaining the proceedings in court since she was the one who sought
for the issuance of the writ of preliminary injunction to enjoin the banks from releasing funds to
respondent. As earlier discussed, the banks are not parties interested in the subject matter of the
petition. Thus, it is only petitioner who should be joined as party defendant with the judge and
who should defend the judge's issuance of injunction.
Notably, the dispositive portion of the assailed CA Decision declared the annulment of the Order
dated December 17, 2002 and lifted the writ of preliminary injunction issued by the RTC. The
decision was directed against the order of the judge. There was no order for the banks to release
the funds subject of their undertakings/letter of credit although such order to lift the injunction
would ultimately result to the release of funds to respondent.
Petitioner contends that respondent filed its petition for certiorari in the CA without a prior
motion for reconsideration, thus, constitutes a fatal infirmity.

We do not agree.
Concededly, the settled rule is that a motion for reconsideration is a condition sine qua non for
the filing of a petition for certiorari.18 Its purpose is to grant an opportunity for the court to
correct any actual or perceived error attributed to it by the re-examination of the legal and factual
circumstances of the case.19 The rule is, however, circumscribed by well-defined exceptions,
such as (a) where the order is a patent nullity, as where the court a quo had no jurisdiction; (b)
where the questions raised in the certiorari proceeding have been duly raised and passed upon by
the lower court, or are the same as those raised and passed upon in the lower court; (c) where
there is an urgent necessity for the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner or the subject matter of the action is
perishable; (d) where, under the circumstances, a motion for reconsideration would be useless;
(e) where petitioner was deprived of due process and there is extreme urgency for relief; (f)
where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief
by the trial court is improbable; (g) where the proceedings in the lower court are a nullity for lack
of due process; (h) where the proceedings were ex parte, or in which the petitioner had no
opportunity to object; and (i) where the issue raised is one purely of law or where public interest
is involved.20
Respondent explained their omission of filing a motion for reconsideration before resorting to a
petition for certiorari based on exceptions (b), (c) and (i). The CA brushed aside the filing of the
motion for reconsideration based on the ground that the questions raised in the certiorari
proceedings have been duly raised and passed upon by the lower court, or are the same as those
raised and passed upon in the lower court.lawp++!1 We agree.
Respondent had filed its position paper in the RTC stating the reasons why the injunction prayed
for by petitioner should not be granted. However, the RTC granted the injunction. Respondent
filed a petition for certiorari with the CA and presented the same arguments which were already
passed upon by the RTC. The RTC already had the opportunity to consider and rule on the
question of the propriety or impropriety of the issuance of the injunction. We found no reversible
error committed by the CA for relaxing the rule since respondent's case falls within the
exceptions.
Petitioner's reliance on Philippine National Construction Corporation v. National Labor
Relations Commission,21 where we required the filing of a motion for reconsideration before the
filing of a petition for certiorari notwithstanding petitioner's invocation of the recognized
exception, i.e., the same questions raised before the public respondent were to be raised before
us, is not applicable. In said case, we ruled that petitioner failed to convince us that his case falls
under the recognized exceptions as the basis was only petitioner's bare allegation. In this case
before us, the CA found, and to which we agree, that both parties have fully presented their
respective arguments in the RTC on petitioner's prayer for the issuance of the writ of preliminary
injunction, and that respondent's argument that petitioner is not entitled to the injunctive relief
had been squarely resolved by the RTC.

WHEREFORE, the petition is DENIED. The Decision dated October 17, 2003 and the
Resolution dated March 5, 2004 of the Court of Appeals, in CA-G.R. SP No. 74629, are hereby
AFFIRMED.
SO ORDERED.

First Women Credit Corp. vs. Baybay, GR 166888, 31 January 2007, 513 SCRA 637

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 166888

January 31, 2007

FIRST WOMENS CREDIT CORPORATION and SHIG KATAYAMA, Petitioners,


vs.
HON. ROMMEL O. BAYBAY, in his capacity as the ACTING PRESIDING JUDGE OF
BRANCH 65, METROPOLITAN TRIAL COURT, MAKATI CITY [SIC]*, RAMON P.
JACINTO, JAIME C. COLAYCO, ANTONIO P. TAYAO and GLICERIO PEREZ,
Respondents.
DECISION
CARPIO MORALES, J.:
Assailed via Petition for Review on Certiorari are the September 28, 2004 Decision1 and January
25, 2005 Order2 of the Regional Trial Court (RTC) of Makati, Branch 59 affirming the July 22,
2002 Order3 of the Metropolitan Trial Court (MeTC) of Makati, Branch 65 granting the "Motion
to Withdraw Informations and to Dismiss the [Criminal] Cases" filed against respondents Ramon
P. Jacinto (Jacinto), Jaime C. Colayco (Colayco), Antonio P. Tayao (Tayao) and Glicerio Perez
(Perez) for falsification of private document and grave coercion.
First Womens Credit Corp. (the corporation), represented by stockholder and director Shig
Katayama (Katayama), filed on November 12, 1997 a petition before the Securities and
Exchange Commission (SEC) against the corporations officers Jacinto, Colayco, Concepcion T.
Sangil (Sangil) and Asuncion Cruz (Cruz), for alleged mismanagement of the corporation. The
case was docketed as SEC No. 11-97-5816.4
The SEC, in SEC Case No. 11-97-5816, created an Interim Management Committee (IMC) for
the corporation by Order of November 17, 1999. The Order was upheld by the SEC en banc on
July 4, 2000.
The IMC thereupon issued directives to the corporations president Antonio Tayao (Tayao) and
corporate secretary and treasurer Glicerio Perez (Perez) toward the preservation of assets and
records of the corporation.5
Allegedly in conspiracy with Jacinto and Colayco, Tayao and Perez defied the implementation of
the SEC November 17, 1999 Order6 when IMC attempted to enter the main office of the
corporation in Makati on December 3, 1999, December 29, 1999 and January 28, 2000.7
On April 6, 2000, Tayao filed a request with the Bureau of Immigration and Deportation (BID) to
include Katayama in its watch list.

The IMC, on April 14, 2000, later preventively suspended Tayao and Perez. Despite their
preventive suspension, however, the two, allegedly in conspiracy with Jacinto and Colayco, still
issued various directives/memoranda to the employees of the corporation to disobey the IMC.
On May 9, 2000, the IMC dismissed Tayao and Perez.8
In two follow-up letters to the BID both dated August 1, 2000, Tayao represented himself as
president of the corporation.9
Hence, the filing before the Makati City Prosecutors Office (CPO) on December 27, 2000 of
criminal complaints against Jacinto, Colayco, Tayao and Perez by the corporation, represented by
Katayama, for violation of the following offenses defined and punishable under the Revised
Penal Code:
a) Article 151 which punishes resistance and disobedience to person in authority or the
agents of such person (20 counts);
b) Article 154 which punishes the unlawful use of means of publication and unlawful
utterances (2 counts);
c) Article 172(2) which punishes falsification by private individuals and use of falsified
documents (2 counts);
d) Article 315, paragraph 2(a) Estafa by falsely pretending to be officers of FWCC (23
counts).10
Jacinto, Colayco, Tayao and Perez (hereafter respondents) denied the charges.11 They claimed
that the SEC Order creating the IMC was pending appeal at the Court of Appeals;12 that there was
no danger that the assets of the corporation would be dissipated or lost at the time the alleged
criminal acts were committed; and that Katayama had no authority to institute the criminal
charges in behalf of the corporation as he was merely a minority stockholder, aside from his lack
of personal knowledge of the circumstances giving rise to the filing of the charges.13
The Investigating Prosecutor, by Resolution of August 28, 2001, found probable cause to hale
respondents into court for falsification of private documents under Article 172(2), and three
informations for grave coercion against private respondent Tayao and three unnamed security
guards. The decretal text of the resolution reads:
Wherefore, finding sufficient evidence to charge respondents Ramon P. Jacinto, Jaime P.
Colayco, Antonio P. Tayao and Glicerio Perez for the offense of Falsification of Private
Document under Art. 172(2) on two (2) counts and, only as against respondent Tayao with three
(3) other unnamed security guards, three (3) counts of Grave Coercion under Art. 286, both of
the Revised Penal Code, but insufficient evidence for the offenses defined under Articles 151,
154 and 315, 2(a) of the Revised Penal Code as against all four (4) respondents, the undersigned
respectfully recommends that the charges for the latter three (3) offenses as against all

respondents be dismissed for insufficiency of evidence as these are dismissed upon approval but
the attached informations be approved for filing in court.
x x x x14
In finding probable cause, the Investigating Prosecutor declared:
On the other hand, there is sufficient evidence for the charge of Falsification of Private
Document as defined in Art. 172 (2) against respondents as the two (2) letters addressed to the
Bureau of Immigration and Deportation both dated 1 August 2000 but the first, received at the
BID on 10 August 2000 and the second, on 21 August 2000, clearly showed that respondents
colluded and connived with each other in making it appear in the said letters that respondent
Tayao was the President of complainant FWCC when as early as 9 May 2000, he has already
been dismissed as officer of the said corporation by the Management Committee. It has also been
shown that as a result of these two (2) letters, complainant Katayama suffered not only pecuniary
and material damage but also damage to his honor as well.
Finally, sufficient evidence has shown that respondent Tayao and three (3) other armed security
guards whose identities can be established later, without authority of law, with the use of
physical force and threats, prevented the Management committee from implementing their legal
mandate on 3 December 1999, on 29 December 1999 and 28 January 2000, by refusing them
entry into the FWCCs main office at 51 Polaris St., Makati City. They may therefore be held
liable for Grave Coercion under Art. 286 of the Revised Penal Code. No evidence, however, has
been presented showing the other respondents culpable participation in these three (3)
aforementioned instances.15 (Underscoring supplied)
The City Prosecutor approved the Investigating Prosecutors resolution.
Respondents appealed the CPO resolution to the Department of Justice (DOJ) via Petition for
Review.
The DOJ, by Resolution16 dated April 29, 2002, reversed the Resolution of the CPO which was
directed to move for the withdrawal of the information for falsification of private document
against private respondents and the informations for grave coercion against respondent Tayao
and the three John Does.
The corporation and Katayama (hereafter petitioners) moved to reconsider the DOJ April 29,
2002 Resolution but it was denied by Resolution of September 24, 2002.17
Petitioners thereupon assailed the DOJ Resolutions before the Court of Appeals via petition for
certiorari.18
In the meantime, respondents filed with Branch 65, MeTC Makati where the criminal cases were
raffled, a "Motion to Withdraw Informations and to Dismiss the Cases"19 to which motion
petitioners filed their Opposition.20 By Order21 of July 22, 2002, Acting Presiding Judge Rommel

Baybay found respondents motion to be well-taken and accordingly dismissed the criminal
cases.
Petitioners Motion for Reconsideration of the July 22, 2002 Order of the trial court was denied
by Order22 of December 3, 2002.
Petitioners assailed the trial courts orders via certiorari with the RTC of Makati which Branch
59 thereof dismissed by Decision23 of September 28, 2004 for lack of merit.
In denying their petition for certiorari, the RTC held that the grounds relied upon by petitioners
were mere errors of judgment, not necessarily of jurisdiction, and there being other legal
remedies to question the assailed orders, e.g., the filing of a Notice of Appeal, petitioners
petition for certiorari would not lie.24
Hence, the instant petition for review on certiorari filed directly with this Court, petitioners
contending that
IN ISSUING THE ASSAILED RTC DECISION AND ASSAILED RTC ORDER, THE
REGIONAL TRIAL COURT DECIDED NOT IN ACCORDANCE WITH LAW AND
APPLICABLE JURISPRUDENCE, IN THAT:
A. PURSUANT TO PEREZ V. HAGONOY RURAL BANK AND DEE V. COURT OF
APPEALS, PETITIONERS ONLY REMEDY FROM THE ASSAILED MTC ORDERS
WAS A PETITION FOR CERTIORARI AND NOT AN ORDINARY APPEAL.
B. CONTRARY TO ROBERTS V. COURT OF APPEALS, THE METROPOLITAN
TRIAL COURT FAILED TO DISCHARGE ITS JUDICIAL MANDATE TO MAKE AN
INDEPENDENT EVALUATION AND ASSESSMENT OF THE EVIDENCE ON
RECORD.
C. AN INDEPENDENT EVALUATION AND ASSESSMENT OF THE EVIDENCE ON
RECORD ESTABLISHES THE EXISTENCE OF PROBABLE CAUSE THAT
RESPONDENTS COMMITTED FALSIFICATION OF PRIVATE DOCUMENTS AND
GRAVE COERCION.25 (Italics in the original)
It is settled that the determination of whether probable cause exists to warrant the prosecution in
court of an accused should be consigned and entrusted to the Department of Justice, as reviewer
of the findings of public prosecutors.26 The courts duty in an appropriate case is confined to a
determination of whether the assailed executive or judicial determination of probable cause was
done without or in excess of jurisdiction or with grave abuse of discretion amounting to want of
jurisdiction. This is consistent with the general rule that criminal prosecutions may not be
restrained or stayed by injunction, preliminary or final,27 albeit in extreme cases, exceptional
circumstances have been recognized.28 The rule is also consistent with this Courts policy of noninterference in the conduct of preliminary investigations, and of leaving to the investigating
prosecutor sufficient latitude of discretion in the exercise of determination of what constitutes

sufficient evidence as will establish probable cause for the filing of an information against a
supposed offender.29
While prosecutors are given sufficient latitude of discretion in the determination of probable
cause, their findings are subject to review by the Secretary of Justice.30
Once a complaint or information is filed in court, however, any disposition of the case, e.g., its
dismissal or the conviction or acquittal of the accused rests on the sound discretion of the Court.31
In thus resolving a motion to dismiss the case or to withdraw the Information filed by the public
prosecutor on his own initiative or pursuant to the directive of the Secretary of Justice, either for
insufficiency of evidence or for lack of probable cause, the trial court should not rely solely and
merely on the findings of the public prosecutor or the Secretary of Justice that no crime was
committed or that the evidence in the possession of the public prosecutor is insufficient to
support a judgment of conviction of the accused.32 It is its bounden duty to independently assess
the merits of the motion. For while the ruling of the Secretary of Justice is persuasive, it is not
binding on courts.33
As to what mode of review petitioners may avail of after a court grants an accuseds motion to
withdraw information and/or to dismiss the case, Section 1 of Rule 122 of the 2000 Revised
Rules of Criminal Procedure instructs: "Any party may appeal from a judgment or final order,
unless the accused will be placed in double jeopardy."
In availing of the remedy of certiorari before the RTC, petitioners claim that they had no plain,
adequate and speedy remedy to question the MeTCs grant of the motion.
The records of the cases show, however, that the motion was granted by the MeTC before
respondents were arraigned. Thus, the prohibition against appeal in case a criminal case is
dismissed as the accused would be placed in double jeopardy does not apply.
Petitioners not having availed of the proper remedy to assail the dismissal of the cases, the
dismissal had become final and executory. On this score alone, the present petition must fail.
Technicality aside, the petition just the same fails.
Petitioners assertion that the trial court failed to comply with its mandate to make an
independent assessment and evaluation of the evidence before granting the motion does not
persuade.
The trial court did stress in its December 3, 2002 Order34 denying the motion for reconsideration
that it was bound to make, as it did, a preliminary finding independently of those of the Secretary
of Justice.
The trial judge need not state with specificity or make a lengthy exposition of the factual and
legal foundation relied upon by him to arrive at his decision. It suffices that upon his own

personal evaluation of the evidence and the law involved in the case, he is convinced that there is
no probable cause to indict the accused.
The trial judges grant of the motion after his independent finding that there was indeed lack of
probable cause to indict respondents should not then be brushed aside absent any evidence
showing that he overlooked relevant and material facts which, if considered, would glaringly
point to the presence of probable cause.
WHEREFORE, the petition is DENIED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 157775

October 19, 2007

LEYTE IV ELECTRIC COOPERATIVE, INC., Petitioner,


vs.
LEYECO IV Employees Union-ALU, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Resolution1 dated September 4, 2002 of the Court of Appeals (CA) in CA-G.R. SP
No. 72336 which dismissed outright petitioner's Petition for Certiorari for adopting a wrong
mode of appeal and the CA Resolution2 dated February 28, 2003 which denied petitioner's
Motion for Reconsideration.
The facts:
On April 6, 1998, Leyte IV Electric Cooperative, Inc. (petitioner) and Leyeco IV Employees
Union-ALU (respondent) entered into a Collective Bargaining Agreement (CBA)3 covering
petitioner rank-and-file employees, for a period of five (5) years effective January 1, 1998.
On June 7, 2000, respondent, through its Regional Vice-President, Vicente P. Casilan, sent a
letter to petitioner demanding holiday pay for all employees, as provided for in the CBA.4
On June 20, 2000, petitioner, through its legal counsel, sent a letter-reply to Casilan, explaining
that after perusing all available pay slips, it found that it had paid all employees all the holiday
pays enumerated in the CBA.5

After exhausting the procedures of the grievance machinery, the parties agreed to submit the
issues of the interpretation and implementation of Section 2, Article VIII of the CBA on the
payment of holiday pay, for arbitration of the National Conciliation and Mediation Board
(NCMB), Regional Office No. VIII in Tacloban City.6 The parties were required to submit their
respective position papers, after which the dispute was submitted for decision.
While admitting in its Position Paper7 that the employees were paid all of the days of the month
even if there was no work, respondent alleged that it is not prevented from making separate
demands for the payment of regular holidays concomitant with the provisions of the CBA, with
its supporting documents consisting of a letter demanding payment of holiday pay, petitioner's
reply thereto and respondent's rejoinder, a computation in the amount of P1,054,393.07 for the
unpaid legal holidays, and several pay slips.
Petitioner, on the other hand, in its Position Paper,8 insisted payment of the holiday pay in
compliance with the CBA provisions, stating that payment was presumed since the formula used
in determining the daily rate of pay of the covered employees is Basic Monthly Salary divided by
30 days or Basic Monthly Salary multiplied by 12 divided by 360 days, thus with said formula,
the employees are already paid their regular and special days, the days when no work is done, the
51 un-worked Sundays and the 51 un-worked Saturdays.
On March 1, 2001, Voluntary Arbitrator Antonio C. Lopez, Jr. rendered a Decision9 in favor of
respondent, holding petitioner liable for payment of unpaid holidays from 1998 to 2000 in the
sum of P1,054,393.07. He reasoned that petitioner miserably failed to show that it complied with
the CBA mandate that holiday pay be "reflected during any payroll period of occurrence" since
the payroll slips did not reflect any payment of the paid holidays. He found unacceptable not
only petitioner's presumption of payment of holiday pay based on a formula used in determining
and computing the daily rate of each covered employee, but also petitioner's further submission
that the rate of its employees is not less than the statutory minimum wage multiplied by 365 days
and divided by twelve.
On April 11, 2001, petitioner filed a Motion for Reconsideration10 but it was denied by the
Voluntary Arbitrator in a Resolution11 dated June 17, 2002. Petitioner received said Resolution on
June 27, 2002.12
Thirty days later, or on July 27, 2002,13 petitioner filed a Petition for Certiorari14 in the CA,
ascribing grave abuse of discretion amounting to lack of jurisdiction to the Voluntary Arbitrator:
(a) for ignoring that in said company the divisor for computing the applicable daily rate of rankand-file employees is 360 days which already includes payment of 13 un-worked regular
holidays under Section 2, Article VIII of the CBA;15 and (b) for holding the petitioner liable for
the unpaid holidays just because the payroll slips submitted as evidence did not show any
payment for the regular holidays.16
In a Resolution17 dated September 4, 2002, the CA dismissed outright petitioner's Petition for
Certiorari for adopting a wrong mode of appeal. It reasoned:

Considering that what is assailed in the present recourse is a Decision of a Voluntary Arbitrator,
the proper remedy is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure;
hence, the present petition for certiorari under Rule 65 filed on August 15, 2002, should be
rejected, as such a petition cannot be a substitute for a lost appeal. And in this case, the period for
appeal via a petition for review has already lapsed since the petitioner received a copy of the
Resolution denying its motion for reconsideration on June 27, 2002, so that its last day to appeal
lapsed on July 12, 2002.
x x x x18
Petitioner filed a Motion for Reconsideration19 but it was denied by the CA in a Resolution20
dated February 28, 2003.
Hence, the present petition anchored on the following grounds:
(1) The Honorable Court of Appeals erred in rejecting the petition for certiorari under
Rule 65 of the Rules of Court filed by herein petitioner to assail the Decision of the
Voluntary Arbitrator.21
(2) Even if decisions of voluntary arbitrator or panel of voluntary arbitrators are
appealable to the Honorable Court of Appeals under Rule 43, a petition for certiorari
under Rule 65 is still available if it is grounded on grave abuse of discretion. Hence, the
Honorable Court of Appeals erred in rejecting the petition for certiorari under Rule 65 of
the Rules of Court filed by herein petitioner.22
(3) The Honorable Court of Appeals erred in refusing to rule on the legal issue presented
by herein petitioner in the petition for certiorari that it had filed and in putting emphasis
instead on a technicality of procedure. The legal issues needs a clear-cut ruling by this
Honorable Court for the guidance of herein petitioner and private respondent.23
Petitioner contends that Rule 65 of the Rules of Court is the applicable mode of appeal to the CA
from judgments issued by a voluntary arbitrator since Rule 43 only allows appeal from
judgments of particular quasi-judicial agencies and voluntary arbitrators authorized by law and
not those judgments and orders issued under the Labor Code; that the petition before the CA did
not raise issues of fact but was founded on jurisdictional issues and, therefore, reviewable
through a special civil action for certiorari under Rule 65; that technicalities of law and
procedure should not be utilized to subvert the ends of substantial justice.
In its Comment,24 respondent avers that Luzon Development Bank v. Association of Luzon
Development Bank Employees25 laid down the prevailing rule that judgments of the Voluntary
Arbitrator are appealable to the CA under Section 1, Rule 43 of the Rules of Court; that having
failed to file the appropriate remedy due to the lapse of the appeal period, petitioner cannot
simply invoke Rule 65 for its own convenience, as an alternative remedy.
In its Reply,26 petitioner submits that the ruling in Luzon Development Bank does not expressly
exclude the filing of a petition for certiorari under Rule 65 of the Rules of Court to assail a

decision of a voluntary arbitrator. It reiterates that technicalities of law and procedure should not
be utilized to subvert the ends of substantial justice.
It has long been settled in the landmark case Luzon Development Bank that a voluntary arbitrator,
whether acting solely or in a panel, enjoys in law the status of a quasi-judicial agency; hence, his
decisions and awards are appealable to the CA. This is so because the awards of voluntary
arbitrators become final and executory upon the lapse of the period to appeal;27 and since their
awards determine the rights of parties, their decisions have the same effect as judgments of a
court. Therefore, the proper remedy from an award of a voluntary arbitrator is a petition for
review to the CA, following Revised Administrative Circular No. 1-95, which provided for a
uniform procedure for appellate review of all adjudications of quasi-judicial entities, which is
now embodied in Section 1, Rule 43 of the 1997 Rules of Civil Procedure, which reads:
SECTION 1. Scope. This Rule shall apply to appeals from judgments or final orders of the
Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized by
any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies
are the Civil Service Commission, Central Board of Assessment Appeals, Securities and
Exchange Commission, Office of the President, Land Registration Authority, Social Security
Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer,
National Electrification Administration, Energy Regulatory Board, National Telecommunications
Commission, Department of Agrarian Reform under Republic Act No. 6657, Government
Service Insurance System, Employees Compensation Commission, Agricultural Inventions
Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments,
Construction Industry Arbitration Commission, and voluntary arbitrators authorized by law.28
(Emphasis supplied)
Section 2, Rule 43 of the 1997 Rules of Civil Procedure which provides that:
SEC. 2. Cases not covered. - This Rule shall not apply to judgments or final orders issued under
the Labor Code of the Philippines.
did not alter the Court's ruling in Luzon Development Bank. Section 2, Rule 42 of the 1997 Rules
of Civil Procedure, is nothing more than a reiteration of the exception to the exclusive appellate
jurisdiction of the CA,29 as provided for in Section 9, Batas Pambansa Blg. 129,30 as amended by
Republic Act No. 7902:31
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or
commissions, including the Securities and Exchange Commission, the Employees
Compensation Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code
of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act and
of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.

The Court took into account this exception in Luzon Development Bank but, nevertheless, held
that the decisions of voluntary arbitrators issued pursuant to the Labor Code do not come within
its ambit, thus:
x x x. The fact that [the voluntary arbitrators] functions and powers are provided for in the
Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial
instrumentality as contemplated therein. It will be noted that, although the Employees
Compensation Commission is also provided for in the Labor Code, Circular No. 1-91, which is
the forerunner of the present Revised Administrative Circular No. 1-95, laid down the procedure
for the appealability of its decisions to the Court of Appeals under the foregoing rationalization,
and this was later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129.
A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise
be appealable to the Court of Appeals, in line with the procedure outlined in Revised
Administrative Circular No. 1-95, just like those of the quasi-judicial agencies, boards and
commissions enumerated therein.
This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to
provide a uniform procedure for the appellate review of adjudications of all quasi-judicial
entities not expressly excepted from the coverage of Sec. 9 of B.P. 129 by either the Constitution
or another statute. Nor will it run counter to the legislative intendment that decisions of the
NLRC be reviewable directly by the Supreme Court since, precisely, the cases within the
adjudicative competence of the voluntary arbitrator are excluded from the jurisdiction of the
NLRC or the labor arbiter.32
This ruling has been repeatedly reiterated in subsequent cases33 and continues to be the
controlling doctrine. Thus, the general rule is that the proper remedy from decisions of voluntary
arbitrators is a petition for review under Rule 43 of the Rules of Court.
Nonetheless, a special civil action for certiorari under Rule 65 of the Rules of Court is the proper
remedy for one who complains that the tribunal, board or officer exercising judicial or quasijudicial functions acted in total disregard of evidence material to or decisive of the
controversy.34 As this Court elucidated in Garcia v. National Labor Relations Commission35 [I]n Ong v. People, we ruled that certiorari can be properly resorted to where the factual
findings complained of are not supported by the evidence on record. Earlier, in Gutib v.
Court of Appeals, we emphasized thus:
[I]t has been said that a wide breadth of discretion is granted a court of justice in certiorari
proceedings. The cases in which certiorari will issue cannot be defined, because to do so would
be to destroy its comprehensiveness and usefulness. So wide is the discretion of the court that
authority is not wanting to show that certiorari is more discretionary than either prohibition or
mandamus. In the exercise of our superintending control over inferior courts, we are to be guided
by all the circumstances of each particular case "as the ends of justice may require." So it is that
the writ will be granted where necessary to prevent a substantial wrong or to do substantial
justice. 36

In addition, while the settled rule is that an independent action for certiorari may be availed of
only when there is no appeal or any plain, speedy and adequate remedy in the ordinary course of
law37 and certiorari is not a substitute for the lapsed remedy of appeal,38 there are a few
significant exceptions when the extraordinary remedy of certiorari may be resorted to despite the
availability of an appeal, namely: (a) when public welfare and the advancement of public policy
dictate; (b) when the broader interests of justice so require; (c) when the writs issued are null;
and (d) when the questioned order amounts to an oppressive exercise of judicial authority.39
In this case, while the petition was filed on July 27, 2002,40 15 days after July 12, 2002, the
expiration of the 15-day reglementary period for filing an appeal under Rule 43, the broader
interests of justice warrant relaxation of the rules on procedure. Besides, petitioner alleges that
the Voluntary Arbitrators conclusions have no basis in fact and in law; hence, the petition should
not be dismissed on procedural grounds.
The Voluntary Arbitrator gravely abused its discretion in giving a strict or literal interpretation of
the CBA provisions that the holiday pay be reflected in the payroll slips. Such literal
interpretation ignores the admission of respondent in its Position Paper41 that the employees
were paid all the days of the month even if not worked. In light of such admission, petitioner's
submission of its 360 divisor in the computation of employees salaries gains significance.
In Union of Filipro Employees v. Vivar, Jr.42 the Court held that "[t]he divisor assumes an
important role in determining whether or not holiday pay is already included in the monthly paid
employees salary and in the computation of his daily rate". This ruling was applied in
Wellington Investment and Manufacturing Corporation v. Trajano,43 Producers Bank of the
Philippines v. National Labor Relations Commission44 and Odango v. National Labor Relations
Commission,45 among others.46
In Wellington,47 the monthly salary was fixed by Wellington to provide for compensation for
every working day of the year including the holidays specified by law and excluding only
Sundays. In fixing the salary, Wellington used what it called the "314 factor"; that is, it simply
deducted 51 Sundays from the 365 days normally comprising a year and used the difference,
314, as basis for determining the monthly salary. The monthly salary thus fixed actually covered
payment for 314 days of the year, including regular and special holidays, as well as days when
no work was done by reason of fortuitous cause, such as transportation strike, riot, or typhoon or
other natural calamity, or cause not attributable to the employees.
In Producers Bank,48 the employer used the divisor 314 in arriving at the daily wage rate of
monthly salaried employees. The divisor 314 was arrived at by subtracting all Sundays from the
total number of calendar days in a year, since Saturdays are considered paid rest days. The Court
held that the use of 314 as a divisor leads to the inevitable conclusion that the ten legal holidays
are already included therein.
In Odango v. National Labor Relations Commission,49 the Court ruled that the use of a divisor
that was less than 365 days cannot make the employer automatically liable for underpayment of
holiday pay. In said case, the employees were required to work only from Monday to Friday and
half of Saturday. Thus, the minimum allowable divisor is 287, which is the result of 365 days,

less 52 Sundays and less 26 Saturdays (or 52 half Saturdays). Any divisor below 287 days meant
that the employees were deprived of their holiday pay for some or all of the ten legal holidays.
The 304-day divisor used by the employer was clearly above the minimum of 287 days.
In this case, the employees are required to work only from Monday to Friday.1wphi1 Thus, the
minimum allowable divisor is 263, which is arrived at by deducting 51 un-worked Sundays and
51 un-worked Saturdays from 365 days. Considering that petitioner used the 360-day divisor,
which is clearly above the minimum, indubitably, petitioner's employees are being given their
holiday pay.
Thus, the Voluntary Arbitrator should not have simply brushed aside petitioner's divisor formula.
In granting respondent's claim of non-payment of holiday pay, a "double burden" was imposed
upon petitioner because it was being made to pay twice for its employees' holiday pay when
payment thereof had already been included in the computation of their monthly salaries.
Moreover, it is absurd to grant respondent's claim of non-payment when they in fact admitted
that they were being paid all of the days of the month even if not worked. By granting
respondent's claim, the Voluntary Arbitrator sanctioned unjust enrichment in favor of the
respondent and caused unjust financial burden to the petitioner. Obviously, the Court cannot
allow this.
While the Constitution is committed to the policy of social justice50 and the protection of the
working class,51 it should not be supposed that every labor dispute would automatically be
decided in favor of labor. Management also has it own rights which, as such, are entitled to
respect and enforcement in the interest of simple fair play. Out of concern for those with less
privileges in life, this Court has inclined more often than not toward the worker and upheld his
cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the rule
that justice is in every case for the deserving, to be dispensed in the light of the established facts
and the applicable law and doctrine.52
WHEREFORE, the petition for review is GRANTED. The Resolutions dated September 4,
2002 and February 28, 2003 of the Court of Appeals in CA-G.R. SP No. 72336 are REVERSED
and SET ASIDE. The Decision dated March 1, 2001 and Resolution dated June 17, 2002 of the
Voluntary Arbitrator are declared NULL and VOID.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 160657

June 30, 2004

CIVIL SERVICE COMMISSION, petitioner,


vs.
NIMFA P. ASENSI, respondent.
RESOLUTION
TINGA, J.:
Respondent Nimfa Asensi was ordered dismissed by petitioner Civil Service Commission
("CSC") from her position as Revenue District Officer of the Bureau of Internal Revenue in
Lucena City. Her dismissal came after an investigation revealed that she had falsified entries in
her Personal Data Sheet (PDS) relative to her educational background.1 Aggrieved, respondent
filed a petition for certiorari with the Court of Appeals, assailing the CSC Resolution ordering
her dismissal.
On 9 July 2003, the Court of Appeals Fourth Division promulgated a D E C I S I O N2 holding
that the dismissal of respondent was not warranted, and setting aside the assailed resolution of
the CSC.3 Acting upon the CSCs motion for reconsideration, the Court of Appeals denied it in a
R E S O L U T I O N dated 29 October 2003.
The Office of the Solicitor General ("OSG") received a copy of the 29 October 2003 Resolution
on 7 November 2003. Having until 22 November 2003 to file a petition for review on certiorari
before this Court, on 21 November 2003, the OSG filed a motion for extension until 22
December 2003 to file the petition for review.4 This Court granted the OSGs motion in a
Resolution dated 9 December 2003.5
Apparently, the CSC remained in the dark as to the legal moves made by its counsel, the OSG.
On 25 November 2003, the CSC, filed a Manifestation To File Its Own Petition for Review.6 This
Manifestation was signed by three lawyers from the Office of Legal Affairs of the CSC.7
On 27 November 2003, the CSC, through its Office of Legal Affairs, filed with this Court a
Petition for Certiorari under Rule 65, assailing the 9 July 2003 Decision of the Court of Appeals,
which it received on 30 July 2003.8 In a Resolution dated 13 January 2004, the Court, without
giving due course to the petition, directed the respondent to file her comment thereon.9

The OSG was surprised by the twin legal moves taken by the CSC without their consent and
participation. On 22 December 2003, the OSG filed a Manifestation and Motion stating that
considering the CSCs manifested intention to file its own petition, the OSG had no recourse but
to withdraw its 21 November 2003 Motion for Extension and allow the CSC to actively pursue
its own case.10 We required the CSC to comment on the OSGs Manifestation and Motion.11 In
their Comment filed on 27 April 2004, the CSC asserted that Under Section 16 (3), Chapter 3,
Subtitle A, Title I, Book V of the Administrative Code of 1987, its Office for Legal Affairs was
authorized to represent the CSC "before any Court or tribunal".12
In the meantime, respondent filed her Comment on the Petition for Certiorari.13 She prayed for
the immediate dismissal of the petition, as the proper remedy for the CSC was not the special
civil action for certiorari under Rule 65, but a petition for review under Rule 45. Moreover, since
the period for filing a petition for review had already elapsed, according to the respondent, the
CSC had deliberately resorted to the special civil action.
We agree with the respondent. So, we dismiss the petition. There is little need to elaborate on the
reasons, which are after all, elementary in procedural law. The special civil action for certiorari
lies only to correct acts rendered without jurisdiction, in excess of jurisdiction, or with grave
abuse of discretion.14 The grave abuse of discretion imputed to the Court of Appeals was its
finding that respondent was not guilty of the charges against her, a charge that if true, would only
constitute an error in law. Certiorari will issue only to correct errors of jurisdiction, not errors of
procedure or mistakes in the findings or conclusions of the lower court. As long as a court acts
within its jurisdiction, any alleged errors committed in the exercise of its discretion will amount
to nothing more than errors of judgment which are reviewable by timely appeal and not by
special civil action for certiorari.15 Neither is certiorari warranted if there is another plain, speedy
and adequate remedy in the ordinary course of law.16 The remedy to the adverse decision of the
Court of Appeals in this case is a petition for review under Rule 45.17
The OSG, counsel of record for the CSC, well understood the proper procedure for appeal, and
undertook the initiatory step for a petition for review by filing a Motion for Extension of Time to
file such petition.18 It is unclear if the CSC had known about the OSGs Motion, though the
answer to that question does not really matter to the disposition of this case. The Court granted
the OSGs Motion, allowing the OSG to file its Petition until 22 December 2003. The OSG,
being the designated legal representative of the Government and its instrumentalities, has a long
history of association with this Court and acquired in the process an awesome wealth of
experience in appellate practice. Had the CSC relied on its counsels expertise, it would have
been spared of the needless burden of salvaging its petition from outright dismissal and, of
course, the inevitable ignominy which such dismissal entails.
Instead, the CSC, using its own lawyers, filed the wrong mode of review. The CSCs assertion as
to the capacity of its Office of Legal Affairs to appear before this Court is of dubious legal basis.
A similar issue was raised, albeit pertaining to the legal officers of the Bureau of Internal
Revenue, in the Courts R E S O L U T I O N in Commissioner of Internal Revenue v. La Suerte
Cigar and Cigarette Factory.19 The BIR therein asserted that on the basis of Section 220 of the
Tax Reform Act of 1997, its legal officers were allowed to institute civil and criminal actions and
proceedings in behalf of the government. The Court disagreed, saying that it is the Solicitor

General who has the primary responsibility to appear for the government in appellate
proceedings,20 it being the principal law officer and legal defender of the government.21 The
Court also cited with approval, the exception enunciated in Orbos v. Civil Service Commission22
which is that the government office may appear in its own behalf through its legal personnel or
representative only if it is adversely affected by the contrary position taken by the OSG. Herein,
there is no indication that the OSG has adopted a position contrary to that of the CSC; hence,
appearance by the CSC on its own behalf would not be warranted.
Yet, even if the CSC Office of Legal Affairs were allowed to represent the CSC in this petition,
still the dismissal of the case would still be warranted in view of the erroneous mode by which
the assailed Court of Appeals D E C I S I O N was elevated. Moreover, the OSG, which had been
given until 22 December 2003 to file the petition for review, did not file any such petition,
interposing instead the Manifestation and Motion.23 This Manifestation, of course, did not stay
the period for filing the petition for review. Thus, such period has already elapsed for good. On
account of the lapse of the period, there is no need for us to pass upon the OSGs Manifestation
and Motion.
We are hardly sympathetic to the CSCs predicament. Not only did it supply the noose by which
it was hung, it also tied the knot. Had the CSC been in consultation with its counsel of record, the
petition could have been taken without incident. Instead, without seeking the heed of sager
minds, it went off by its lonesome into high noon, ill-equipped. There is nothing left to do but
pronounce the demise of the case.
The Petition is DISMISSED. No costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 165486

May 31, 2006

CENTRO ESCOLAR UNIVERSITY FACULTY AND ALLIED WORKERS UNION


INDEPENDENT, Petitioner,
vs.
HON. COURT OF APPEALS, APRON MANGABAT as Voluntary Arbitrator, and
CENTRO ESCOLAR UNIVERSITY, Respondents.
DECISION
PUNO, J.:
Republic Act No. (R.A.) 6728, otherwise known as the "Government Assistance To Students and
Teachers in Private Education Act," allows private schools to increase their tuition fees on the
condition that 70% of the tuition fee increases shall go to the payment of salaries, wages,
allowances and other benefits of teaching and non-teaching personnel. The petition at bar poses
the issue of whether respondent Centro Escolar University may source from the 70% incremental
proceeds (IP) the integrated IP incorporated into the salaries of its teaching and non-teaching
staff pursuant to the collective bargaining agreements (CBAs) entered into by their union.
It appears that petitioner union, representing the teaching and the non-teaching staff of
respondent university, has existing CBAs with the university. Their respective CBAs granted
both the teaching and the non-teaching staff increases in their compensation. The following
increases were provided in the CBA of the teaching personnel for the period 2000 to 2005:
ARTICLE V
SALARIES
Section 1. Salary Scales. In order to achieve a sound and effective administration, the
UNIVERSITY and the UNION hereby agree on the salary scale based on the 2000 Faculty
Ranking, which shall be given during the lifetime of this Agreement.
Section 2. Hiring Rates. The following shall be the salary scale for the college teachers (inclusive
of the amount of P3.00 per hour for faculty members with rank and P1.50 for those without rank)
as a result of negotiation aimed at preventing distortion of the salary rate.
In addition to the above rates, an integration of IP is added according to the following
schedule:

xxx
Section 3. Improvement in salary due to Educational Qualifications. Any faculty member in the
College Level shall be given P3.00 per hour increase in pay upon presentation to the Human
Resource Department of his Special Order for a Masters Degree and P5.00 per hour increase in
pay upon presentation to the Human Resource Development of his Special Order for a Doctoral
Degree; provided the same has not been considered in the determination of his rank.
Section 4. Other benefits.
a) Emergency Financial Assistance. The faculty member shall receive an additional
P350.00 to the previous P800.00 for a total of P1,150.00 for the Emergency Financial
Assistant (EFA).
b) Mid-year Bonus. Mid-year bonus shall be improved from 115% to 120% of basic pay,
effective April 1, 2000 to March 31, 2003.
c) There shall be an improvement of summer pay for permanent faculty members with
masters degree using the following table:
xxx
Section 5. At no time shall a faculty member suffer a reduction of the salary rate he enjoyed
before the effectivity of this agreement even if his rate exceeds that which corresponds to his
rank as established in the CBA Pay Scale set forth.
Section 6. Salary increases arising from the CBAs (sic) and from faculty ranking shall not
be deductible from the 70% share in the Incremental Proceeds (IP) of the faculty and nonteaching staff.1 (emphases supplied)
Respondent university admits that salary increases provided under Sections 1, 2, 3 and 4 are
taken from the university fund, while the salary increases brought about by the IP integration are
deducted from the IP.2lawphil.net
The CBA for the non-teaching personnel, on the other hand, provided:
ARTICLE V
SALARIES
Section 1. Effective April 1, 2000 to March 31, 2005, all employees shall receive an additional
basic salary of P600.00 per month. This is an across the board increase, over and above legislated
wage increase.
All employees shall also receive an additional P350.00 or a total of P1,150.00 for their EFA.

Section 2. Job Classification and Salary Scale. The University agrees to adopt a table or
classification of jobs in the University with component grade levels and corresponding salary
ranges which shall form part of this contract by reference.
Starting April 1, 2000, an increase of not more than 50% of the improvement given to the faculty
shall be given to the non-teaching staff.
Section 3. Effective April 1, 2000 to March 31, 2005, longevity pay for the non-teaching staff
shall be improved, following this table:
xxx
Section 4. There shall be a partial integration of incremental proceeds in the basic pay
amounting to not more than P1,000/per month, according to the following schedule:
xxx
Section 5. Salary increases arising from CBAs (sic) from job classification shall not be
deductible from the 70% share of the IP of the faculty and non-teaching staff.3 (emphases
supplied)
As with the salary increases for the schools faculty, the increases provided under Sections 1, 2
and 3 are also taken from the university fund, while the increases under Section 4 are deducted
from the IP.4
Petitioner asserts that the integrated IP granted in the CBAs should not be deducted from the
personnels 70% share in the IP. It cites the common provision in the CBAs of the faculty and the
non-teaching staff prohibiting the deduction of salary increases arising from the CBA from their
70% share in the IP. Petitioner also sought the payment of additional IP for the faculty members
with overload and permanent substitution units.
On February 5, 2002, petitioner filed with the National Conciliation and Mediation Board a
preventive mediation for the recovery of IP losses due to the universitys alleged deduction of the
cost of CBA-won economic benefits from the 70% share of the teachers and employees in the IP.
The parties submitted their position papers before the voluntary arbitrator. Petitioner contended
that the deduction of the IP integration from the 70% share of tuition fee increase is illegal and
contrary to the CBA, as the IP integration in the salary is considered a CBA-won increase, hence,
may not be deducted from the 70%. It also claims that the IP is computed on a pro-rata basis,
depending on the number of hours worked. Hence, those who are assigned overload units must
also receive the corresponding IP for the extra assignment.5
Respondent university, meanwhile, averred that there are two kinds of salary increases in the
CBAthe CBA-negotiated increase taken from the university fund, and the increase as a result
of IP integration which, by its nature, is taken from the 70% share of the school personnel in the
IP. It further argued that it would not be feasible to grant additional IP to teachers with overload

or permanent substitution assignments, as the IP is distributed among all employees of the


school, whether teaching or non-teaching. The only conceivable formula to accommodate the
claim of teachers with overload or permanent substitution assignment is to reduce the share of
the employees who have no such load. This, respondent university claimed, would create more
problems than solutions for the university.6
In his decision dated April 10, 2003,7 Voluntary Arbitrator Apron Mangabat upheld the position
of respondent university and dismissed the case. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby issued in favor of the Centro Escolar
University and ordering that:
1. Integration of incremental proceeds in the basic pay as provided for in the Collective
Bargaining Agreement shall be deducted from the employees share on the incremental
proceeds;
2. Other than that currently provided in the Collective Bargaining Agreement, no other
incremental proceeds shall be integrated in the basic pay;
3. No additional incremental proceeds shall be granted to faculty members with overload
assignments and with permanent substitution classes; and,
4. The case is hereby dismissed.8
Petitioner elevated the case to the Court of Appeals via petition for certiorari under Rule 65 of
the 1997 Rules of Civil Procedure. The appellate court dismissed the petition on the ground that
petitioner used a wrong mode of appeal. It held that petitioner should have filed an appeal under
Rule 43 of the 1997 Rules of Civil Procedure.9
The Court of Appeals also denied the motion for reconsideration filed by petitioner.10
Hence, this petition based on the following grounds:
1. Respondent court committed reversible error in dismissing the instant petition on
technical ground that appeal under Rule 43 is the proper remedy, and not certiorari under
Rule 65, when no less than Section 2 of Rule 43 explicitly provides that Rule 43 does not
apply in labor cases.
2. Respondent court committed reversible error in relying on Bautista vs. Court of
Appeals when Bautista refers to criminal case (while this is a labor case) and the citation
is a mere obiter dictum, hence, inapplicable.
3. Respondent court committed reversible error in denying pertitioners motion for
reconsideration based on the case of Luzon Development Bank vs. Association of Luzon
Development Bank Employees, to further support the original ruling that Rule 43 is the
correct remedy. However, in that case, the Supreme Court equates the award or decisions

of voluntary arbitrator with that of RTC and ruled that in a petition for certiorari from that
award or decision, Court of Appeals have concurrent jurisdiction with Supreme Court.
Thus it ordered the remanding of the petition for certiorari to the Court of Appeals,
thereby recognizing certiorari as a proper remedy.
4. Respondent court committed reversible error in not holding that, as ruled by the
Honorable Supreme Court in a long line of cases, decision of voluntary arbitrator is final
and unappealable, except when there is want or excess of jurisdiction, grave abuse of
discretion, denial of substantial justice or erroneous interpretation of the law. In such
cases, certiorari is the proper remedy.
5. Respondent court committed reversible errors in not holding that the voluntary
arbitrator has acted with grave abuse of discretion, without or in excess of jurisdiction, in
ignoring the CBA as the law between the parties and in not deciding the grievances
through the interpretation or implementation of the CBA pursuant to his limited authority
under Article 260 of the New Labor Code.
6. Respondent court committed reversible error in conveniently disposing the merit of the
case on a one-sentence, one paragraph coup de grace that petitioner has failed to offer
meritorious reasons or arguments for allowance of petition. The truth is that petitioner has
adduced ample meritorious reasons and arguments. Since the assailed deductions and
estimated amounts are all uncontroverted only questions of law are involved, i.e., whether
the deductions are valid in view of the CBA prohibition, and whether the university is
liable to refund the deducted amount totaling P500 million.11
The issues in this case are two-pronged: first, the procedural issue whether the decision of the
voluntary arbitrator is appealable to the Court of Appeals under Rule 43 of the 1997 Rules of
Civil Procedure; and second, the substantive issues (1) whether the university may deduct from
the 70% share of the personnel in the IP the integrated IP granted in the CBAs of the teaching
and the non-teaching staff; and (2) whether the teaching staff is entitled to additional IP for
overload and permanent substitution units.
We shall first address the procedural issue.
We find that the Court of Appeals did not err in holding that petitioner used a wrong remedy
when it filed a special civil action on certiorari under Rule 65 instead of an appeal under Rule 43
of the 1997 Rules of Civil Procedure. The Court held in Luzon Development Bank v.
Association of Luzon Development Bank Employees12 that decisions of the voluntary
arbitrator under the Labor Code are appealable to the Court of Appeals. In that case, the Court
observed that the Labor Code was silent as regards the appeals from the decisions of the
voluntary arbitrator, unlike those of the Labor Arbiter which may be appealed to the National
Labor Relations Commission. The Court noted, however, that the voluntary arbitrator is a
government instrumentality within the contemplation of Section 9 of Batas Pambansa Blg. (BP)
12913 which provides for the appellate jurisdiction of
the Court of Appeals.14 The decisions of the voluntary arbitrator are akin to those of the Regional
Trial Court, and, therefore, should first be appealed to the Court of Appeals before being elevated

to this Court. This is in furtherance and consistent with the original purpose of Circular No. 1-91
to provide a uniform procedure for the appellate review of adjudications of all quasi-judicial
agencies not expressly excepted from the coverage of Section 9 of BP 129. Circular No. 1-91
was later revised and became Revised Administrative Circular No. 1-95. The Rules of Court
Revision Committee incorporated said circular in Rule 43 of the 1997 Rules of Civil Procedure.
The inclusion of the decisions of the voluntary arbitrator in the Rule was based on the Courts
pronouncements in Luzon Development Bank v. Association of Luzon Development Bank
Employees.15 Petitioners argument, therefore, that the ruling in said case is inapplicable in this
case is without merit.
Moreover, a petition for certiorari is an extraordinary remedy that is adopted to correct errors of
jurisdiction committed by the lower court or quasi-judicial agency, or when there is grave abuse
of discretion on the part of such court or agency amounting to lack or excess of jurisdiction.
Where the error is not one of jurisdiction, but of law or fact which is a mistake of judgment, the
proper remedy should be appeal.16 In addition, an independent action for certiorari may be
availed of only when there is no appeal or any plain, speedy and adequate remedy in the ordinary
course of law.17 There was no question of jurisdiction involved in the decision of the voluntary
arbitrator. What was being questioned was merely his findings of whether the universitys
practice of sourcing the integrated IP in the CBA from the 70% share of the personnel in the IP
violates the provisions of the CBA. Such is a proper subject of an appeal.
Nonetheless, even if we overlook petitioners procedural lapse, the case should still be dismissed
on substantive grounds.
Section 5 (2) of R.A. 6728 provides:
SEC. 5. Tuition Fee Supplement for Student in Private High School
xxx
(2) Assistance under paragraph (1), subparagraphs (a) and (b) shall be granted and tuition fee
under subparagraph (c) may be increased, on the condition that seventy percent (70%) of the
amount subsidized allotted for tuition fee or of the tuition fee increases shall go to the payment
of salaries, wages, allowances and other benefits of teaching and non-teaching personnel except
administrators who are principal stockholders of the school, and may be used to cover increases
as provided for in the collective bargaining agreements existing or in force at the time when this
Act is approved and made effective: Provided, That government subsidies are not used directly
for salaries of teachers of nonsecular subjects. x x x
In Cebu Institute of Medicine v. Cebu Institute of Medicine Employees Union-National
Federation of Labor,18 the Court held that the private institution concerned has the discretion on
the disposition of the seventy percent (70%) incremental tuition fee increase. It enjoys the
privilege of determining how much increase in salaries to grant and the kind and amount of
allowances and other benefits to give. The only precondition is that seventy percent (70%) of the
incremental tuition fee increase goes to the payment of salaries, wages, allowances and other
benefits of teaching and non-teaching personnel. In other words, the allocation of the 70% of the

IP is considered a management prerogative. In that case, the Court allowed the charging against
the 70% the employers share in the SSS, Medicare and Pag-ibig premiums, they falling within
the category of "other benefits" as provided in Section 5 (2) of RA 6728.
There is an additional element, however, in the case at bar. Here, the CBAs between the
university and the teaching and the non-teaching staff prohibit the deduction of the CBA-won
benefits from the 70% of the IP. The CBA is a negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit, including mandatory provisions for grievances
and arbitration machineries.19 It is the law between the parties, and they are obliged to comply
with its provisions. We need to resolve, therefore, whether the charging of the integrated IP
against the 70% is violative of the CBA.
We find that it is not.
The voluntary arbitrator described the nature of the IP, thus:
The allocation of 70% of the IP for payment of salaries, wages, allowances and other benefits of
teaching and non-teaching personnel is clearly mandated by law. Yet, nowhere is it provided in
Republic Act No. 6728 that the IP should be integrated with the salary and wages. The nature of
IP is that it bears a reasonable relation as to whether or not universities/schools will increase their
tuition fees. Like that of a bonus, IP is additional compensation subject to a resolutory condition
imposed for its payment. But unlike a bonus or commission, the IP is not given for extra efforts
exerted. Thus, a teacher originally handling a load of 21 units will not be provided IP the next
school year even with the same teaching load, should there be a tuition fee increase. Historically,
IP was allocated "to alleviate the sad plight of private schools, their personnel and all those
directly and indirectly dependent on school incomes." It is additional benefit accorded to the
employees. Hence, the determination of the amount of IP to be integrated into employees basic
salary entails the exercise of the right of an employer to regulate all aspects of employment.
Precisely, the employer has the right to change the basis of the payment of wages of the
employees, subject to provisions of law.
xxx
Distinct and separate from employees basic salary, IP are sourced from increase in tuition fees
while the basic salaries and wages and incidental salary increases i.e., due to educational
qualifications, emergency financial assistance, mid-year bonus, longevity pay, job classification,
among others are sourced from the university fund.
This distinction bears importance in the IP integration as provided under the Collective
Bargaining Agreement (CBA) between the parties. x x x20
The integrated IP provided in the CBAs of the teaching and the non-teaching staff is actually the
share of the employees in the 70% of the IP that is incorporated into their salaries as a result of
the negotiation between the university and its personnel. The purpose of the integration is to
regularize the receipt by the personnel of the benefits arising from the increase in the schools

tuition fees. But it does not change the nature of the benefit as IP. There is no basis, therefore, for
petitioners objection to the sourcing of the integrated IP from the 70% of the tuition fee
increases.
Finally, we agree with the discussion of the voluntary arbitrator as regards the award of
additional IP to members of the faculty with overload or permanent substitution assignment:
Coming now to the claim for additional IP for faculty members with overload assignments and
with permanent substitution classes, the same must be denied. To be entitled to IP, it matters not
that a teacher is handling a regular full teaching load or is handling extra teaching load.
Professors handling extra teaching loads are correspondingly compensated depending on the
extra units they are assigned. To grant them additional IP would amount to double compensation.
As argued by University, "[t]he only conceivable formula to satisfy petitioners claim for
additional incremental proceeds is to deduct from the IP benefits of teaching personnel who do
not have overload assignments or who do not have permanent substitution classes, and from nonteaching staff, which formula will create more problems than solution[s]."21
In view of the foregoing, we find that the Court of Appeals did not err in dismissing the petition
filed before it by herein petitioner.
IN VIEW WHEREOF, the petition is DENIED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 145391

August 26, 2002

AVELINO CASUPANAN and ROBERTO CAPITULO, petitioners,


vs.
MARIO LLAVORE LAROYA, respondent.
CARPIO, J.:
The Case
This is a petition for review on certiorari to set aside the Resolution1 dated December 28, 1999
dismissing the petition for certiorari and the Resolution2 dated August 24, 2000 denying the
motion for reconsideration, both issued by the Regional Trial Court of Capas, Tarlac, Branch 66,
in Special Civil Action No. 17-C (99).
The Facts
Two vehicles, one driven by respondent Mario Llavore Laroya ("Laroya" for brevity) and the
other owned by petitioner Roberto Capitulo ("Capitulo" for brevity) and driven by petitioner
Avelino Casupanan ("Casupanan" for brevity), figured in an accident. As a result, two cases were
filed with the Municipal Circuit Trial Court ("MCTC" for brevity) of Capas, Tarlac. Laroya filed
a criminal case against Casupanan for reckless imprudence resulting in damage to property,
docketed as Criminal Case No. 002-99. On the other hand, Casupanan and Capitulo filed a civil
case against Laroya for quasi-delict, docketed as Civil Case No. 2089.
When the civil case was filed, the criminal case was then at its preliminary investigation stage.
Laroya, defendant in the civil case, filed a motion to dismiss the civil case on the ground of
forum-shopping considering the pendency of the criminal case. The MCTC granted the motion in
the Order of March 26, 1999 and dismissed the civil case.
On Motion for Reconsideration, Casupanan and Capitulo insisted that the civil case is a separate
civil action which can proceed independently of the criminal case. The MCTC denied the motion
for reconsideration in the Order of May 7, 1999. Casupanan and Capitulo filed a petition for
certiorari under Rule 65 before the Regional Trial Court ("Capas RTC" for brevity) of Capas,
Tarlac, Branch 66,3 assailing the MCTCs Order of dismissal.
The Trial Courts Ruling

The Capas RTC rendered judgment on December 28, 1999 dismissing the petition for certiorari
for lack of merit. The Capas RTC ruled that the order of dismissal issued by the MCTC is a final
order which disposes of the case and therefore the proper remedy should have been an appeal.
The Capas RTC further held that a special civil action for certiorari is not a substitute for a lost
appeal. Finally, the Capas RTC declared that even on the premise that the MCTC erred in
dismissing the civil case, such error is a pure error of judgment and not an abuse of discretion.
Casupanan and Capitulo filed a Motion for Reconsideration but the Capas RTC denied the same
in the Resolution of August 24, 2000.
Hence, this petition.
The Issue
The petition premises the legal issue in this wise:
"In a certain vehicular accident involving two parties, each one of them may think and
believe that the accident was caused by the fault of the other. x x x [T]he first party,
believing himself to be the aggrieved party, opted to file a criminal case for reckless
imprudence against the second party. On the other hand, the second party, together with
his operator, believing themselves to be the real aggrieved parties, opted in turn to file a
civil case for quasi-delict against the first party who is the very private complainant in the
criminal case."4
Thus, the issue raised is whether an accused in a pending criminal case for reckless imprudence
can validly file, simultaneously and independently, a separate civil action for quasi-delict against
the private complainant in the criminal case.
The Courts Ruling
Casupanan and Capitulo assert that Civil Case No. 2089, which the MCTC dismissed on the
ground of forum-shopping, constitutes a counterclaim in the criminal case. Casupanan and
Capitulo argue that if the accused in a criminal case has a counterclaim against the private
complainant, he may file the counterclaim in a separate civil action at the proper time. They
contend that an action on quasi-delict is different from an action resulting from the crime of
reckless imprudence, and an accused in a criminal case can be an aggrieved party in a civil case
arising from the same incident. They maintain that under Articles 31 and 2176 of the Civil Code,
the civil case can proceed independently of the criminal action. Finally, they point out that
Casupanan was not the only one who filed the independent civil action based on quasi-delict but
also Capitulo, the owner-operator of the vehicle, who was not a party in the criminal case.
In his Comment, Laroya claims that the petition is fatally defective as it does not state the real
antecedents. Laroya further alleges that Casupanan and Capitulo forfeited their right to question
the order of dismissal when they failed to avail of the proper remedy of appeal. Laroya argues
that there is no question of law to be resolved as the order of dismissal is already final and a
petition for certiorari is not a substitute for a lapsed appeal.

In their Reply, Casupanan and Capitulo contend that the petition raises the legal question of
whether there is forum-shopping since they filed only one action - the independent civil action
for quasi-delict against Laroya.
Nature of the Order of Dismissal
The MCTC dismissed the civil action for quasi-delict on the ground of forum-shopping under
Supreme Court Administrative Circular No. 04-94. The MCTC did not state in its order of
dismissal5 that the dismissal was with prejudice. Under the Administrative Circular, the order of
dismissal is without prejudice to refiling the complaint, unless the order of dismissal expressly
states it is with prejudice.6 Absent a declaration that the dismissal is with prejudice, the same is
deemed without prejudice. Thus, the MCTCs dismissal, being silent on the matter, is a dismissal
without prejudice.
Section 1 of Rule 417 provides that an order dismissing an action without prejudice is not
appealable. The remedy of the aggrieved party is to file a special civil action under Rule 65.
Section 1 of Rule 41 expressly states that "where the judgment or final order is not appealable,
the aggrieved party may file an appropriate special civil action under Rule 65." Clearly, the
Capas RTCs order dismissing the petition for certiorari, on the ground that the proper remedy is
an ordinary appeal, is erroneous.
Forum-Shopping
The essence of forum-shopping is the filing of multiple suits involving the same parties for the
same cause of action, either simultaneously or successively, to secure a favorable judgment.8
Forum-shopping is present when in the two or more cases pending, there is identity of parties,
rights of action and reliefs sought.9 However, there is no forum-shopping in the instant case
because the law and the rules expressly allow the filing of a separate civil action which can
proceed independently of the criminal action.
Laroya filed the criminal case for reckless imprudence resulting in damage to property based on
the Revised Penal Code while Casupanan and Capitulo filed the civil action for damages based
on Article 2176 of the Civil Code. Although these two actions arose from the same act or
omission, they have different causes of action. The criminal case is based on culpa criminal
punishable under the Revised Penal Code while the civil case is based on culpa aquiliana
actionable under Articles 2176 and 2177 of the Civil Code. These articles on culpa aquiliana
read:
"Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
Art. 2177. Responsibility for fault or negligence under the preceding article is entirely
separate and distinct from the civil liability arising from negligence under the Penal

Code. But the plaintiff cannot recover damages twice for the same act or omission of the
defendant."
Any aggrieved person can invoke these articles provided he proves, by preponderance of
evidence, that he has suffered damage because of the fault or negligence of another. Either the
private complainant or the accused can file a separate civil action under these articles. There is
nothing in the law or rules that state only the private complainant in a criminal case may invoke
these articles.
Moreover, paragraph 6, Section 1, Rule 111 of the 2000 Rules on Criminal Procedure ("2000
Rules" for brevity) expressly requires the accused to litigate his counterclaim in a separate civil
action, to wit:
"SECTION 1. Institution of criminal and civil actions. (a) x x x.
No counterclaim, cross-claim or third-party complaint may be filed by the accused in the
criminal case, but any cause of action which could have been the subject thereof may be
litigated in a separate civil action." (Emphasis supplied)
Since the present Rules require the accused in a criminal action to file his counterclaim in a
separate civil action, there can be no forum-shopping if the accused files such separate civil
action.
Filing of a separate civil action
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure ("1985 Rules" for brevity), as
amended in 1988, allowed the filing of a separate civil action independently of the criminal
action provided the offended party reserved the right to file such civil action. Unless the offended
party reserved the civil action before the presentation of the evidence for the prosecution, all
civil actions arising from the same act or omission were deemed "impliedly instituted" in the
criminal case. These civil actions referred to the recovery of civil liability ex-delicto, the
recovery of damages for quasi-delict, and the recovery of damages for violation of Articles 32,
33 and 34 of the Civil Code on Human Relations.
Thus, to file a separate and independent civil action for quasi-delict under the 1985 Rules, the
offended party had to reserve in the criminal action the right to bring such action. Otherwise,
such civil action was deemed "impliedly instituted" in the criminal action. Section 1, Rule 111 of
the 1985 Rules provided as follows:
"Section 1. Institution of criminal and civil actions. When a criminal action is
instituted, the civil action for the recovery of civil liability is impliedly instituted with the
criminal action, unless the offended party waives the action, reserves his right to institute
it separately, or institutes the civil action prior to the criminal action.

Such civil action includes recovery of indemnity under the Revised Penal Code, and
damages under Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines arising
from the same act or omission of the accused.
A waiver of any of the civil actions extinguishes the others. The institution of, or the
reservation of the right to file, any of said civil actions separately waives the others.
The reservation of the right to institute the separate civil actions shall be made before the
prosecution starts to present its evidence and under circumstances affording the offended
party a reasonable opportunity to make such reservation.
In no case may the offended party recover damages twice for the same act or omission of
the accused.
x x x." (Emphasis supplied)
Section 1, Rule 111 of the 1985 Rules was amended on December 1, 2000 and now provides as
follows:
"SECTION 1. Institution of criminal and civil actions. (a) When a criminal action is
instituted, the civil action for the recovery of civil liability arising from the offense
charged shall be deemed instituted with the criminal action unless the offended party
waives the civil action, reserves the right to institute it separately or institutes the civil
action prior to the criminal action.
The reservation of the right to institute separately the civil action shall be made before the
prosecution starts presenting its evidence and under circumstances affording the offended
party a reasonable opportunity to make such reservation.
xxx
(b) x x x
Where the civil action has been filed separately and trial thereof has not yet commenced,
it may be consolidated with the criminal action upon application with the court trying the
latter case. If the application is granted, the trial of both actions shall proceed in
accordance with section 2 of this rule governing consolidation of the civil and criminal
actions." (Emphasis supplied)
Under Section 1 of the present Rule 111, what is "deemed instituted" with the criminal action is
only the action to recover civil liability arising from the crime or ex-delicto. All the other civil
actions under Articles 32, 33, 34 and 2176 of the Civil Code are no longer "deemed instituted,"
and may be filed separately and prosecuted independently even without any reservation in the
criminal action. The failure to make a reservation in the criminal action is not a waiver of the
right to file a separate and independent civil action based on these articles of the Civil Code. The
prescriptive period on the civil actions based on these articles of the Civil Code continues to run

even with the filing of the criminal action. Verily, the civil actions based on these articles of the
Civil Code are separate, distinct and independent of the civil action "deemed instituted" in the
criminal action.10
Under the present Rule 111, the offended party is still given the option to file a separate civil
action to recover civil liability ex-delicto by reserving such right in the criminal action before the
prosecution presents its evidence. Also, the offended party is deemed to make such reservation if
he files a separate civil action before filing the criminal action. If the civil action to recover civil
liability ex-delicto is filed separately but its trial has not yet commenced, the civil action may be
consolidated with the criminal action. The consolidation under this Rule does not apply to
separate civil actions arising from the same act or omission filed under Articles 32, 33, 34 and
2176 of the Civil Code.11
Suspension of the Separate Civil Action
Under Section 2, Rule 111 of the amended 1985 Rules, a separate civil action, if reserved in the
criminal action, could not be filed until after final judgment was rendered in the criminal action.
If the separate civil action was filed before the commencement of the criminal action, the civil
action, if still pending, was suspended upon the filing of the criminal action until final judgment
was rendered in the criminal action. This rule applied only to the separate civil action filed to
recover liability ex-delicto. The rule did not apply to independent civil actions based on Articles
32, 33, 34 and 2176 of the Civil Code, which could proceed independently regardless of the
filing of the criminal action.
The amended provision of Section 2, Rule 111 of the 2000 Rules continues this procedure, to
wit:
"SEC. 2. When separate civil action is suspended. After the criminal action has been
commenced, the separate civil action arising therefrom cannot be instituted until final
judgment has been entered in the criminal action.
If the criminal action is filed after the said civil action has already been instituted, the
latter shall be suspended in whatever stage it may be found before judgment on the
merits. The suspension shall last until final judgment is rendered in the criminal
action. Nevertheless, before judgment on the merits is rendered in the civil action, the
same may, upon motion of the offended party, be consolidated with the criminal action in
the court trying the criminal action. In case of consolidation, the evidence already
adduced in the civil action shall be deemed automatically reproduced in the criminal
action without prejudice to the right of the prosecution to cross-examine the witnesses
presented by the offended party in the criminal case and of the parties to present
additional evidence. The consolidated criminal and civil actions shall be tried and decided
jointly.
During the pendency of the criminal action, the running of the period of prescription of
the civil action which cannot be instituted separately or whose proceeding has been
suspended shall be tolled.

x x x." (Emphasis supplied)


Thus, Section 2, Rule 111 of the present Rules did not change the rule that the separate civil
action, filed to recover damages ex-delicto, is suspended upon the filing of the criminal action.
Section 2 of the present Rule 111 also prohibits the filing, after commencement of the criminal
action, of a separate civil action to recover damages ex-delicto.
When civil action may proceed independently
The crucial question now is whether Casupanan and Capitulo, who are not the offended parties in
the criminal case, can file a separate civil action against the offended party in the criminal case.
Section 3, Rule 111 of the 2000 Rules provides as follows:
"SEC 3. When civil action may proceed independently. - In the cases provided in Articles
32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civil action may
be brought by the offended party. It shall proceed independently of the criminal action
and shall require only a preponderance of evidence. In no case, however, may the
offended party recover damages twice for the same act or omission charged in the
criminal action." (Emphasis supplied)
Section 3 of the present Rule 111, like its counterpart in the amended 1985 Rules, expressly
allows the "offended party" to bring an independent civil action under Articles 32, 33, 34 and
2176 of the Civil Code. As stated in Section 3 of the present Rule 111, this civil action shall
proceed independently of the criminal action and shall require only a preponderance of evidence.
In no case, however, may the "offended party recover damages twice for the same act or
omission charged in the criminal action."
There is no question that the offended party in the criminal action can file an independent civil
action for quasi-delict against the accused. Section 3 of the present Rule 111 expressly states that
the "offended party" may bring such an action but the "offended party" may not recover damages
twice for the same act or omission charged in the criminal action. Clearly, Section 3 of Rule 111
refers to the offended party in the criminal action, not to the accused.
Casupanan and Capitulo, however, invoke the ruling in Cabaero vs. Cantos12 where the Court
held that the accused therein could validly institute a separate civil action for quasi-delict against
the private complainant in the criminal case. In Cabaero, the accused in the criminal case filed
his Answer with Counterclaim for malicious prosecution. At that time the Court noted the
"absence of clear-cut rules governing the prosecution on impliedly instituted civil actions and the
necessary consequences and implications thereof." Thus, the Court ruled that the trial court
should confine itself to the criminal aspect of the case and disregard any counterclaim for civil
liability. The Court further ruled that the accused may file a separate civil case against the
offended party "after the criminal case is terminated and/or in accordance with the new Rules
which may be promulgated." The Court explained that a cross-claim, counterclaim or third-party
complaint on the civil aspect will only unnecessarily complicate the proceedings and delay the
resolution of the criminal case.

Paragraph 6, Section 1 of the present Rule 111 was incorporated in the 2000 Rules precisely to
address the lacuna mentioned in Cabaero. Under this provision, the accused is barred from filing
a counterclaim, cross-claim or third-party complaint in the criminal case. However, the same
provision states that "any cause of action which could have been the subject (of the counterclaim,
cross-claim or third-party complaint) may be litigated in a separate civil action." The present
Rule 111 mandates the accused to file his counterclaim in a separate civil actiosn which shall
proceed independently of the criminal action, even as the civil action of the offended party is
litigated in the criminal action.
Conclusion
Under Section 1 of the present Rule 111, the independent civil action in Articles 32, 33, 34 and
2176 of the Civil Code is not deemed instituted with the criminal action but may be filed
separately by the offended party even without reservation. The commencement of the criminal
action does not suspend the prosecution of the independent civil action under these articles of the
Civil Code. The suspension in Section 2 of the present Rule 111 refers only to the civil action
arising from the crime, if such civil action is reserved or filed before the commencement of the
criminal action.
Thus, the offended party can file two separate suits for the same act or omission. The first a
criminal case where the civil action to recover civil liability ex-delicto is deemed instituted, and
the other a civil case for quasi-delict - without violating the rule on non-forum shopping. The
two cases can proceed simultaneously and independently of each other. The commencement or
prosecution of the criminal action will not suspend the civil action for quasi-delict. The only
limitation is that the offended party cannot recover damages twice for the same act or omission
of the defendant. In most cases, the offended party will have no reason to file a second civil
action since he cannot recover damages twice for the same act or omission of the accused. In
some instances, the accused may be insolvent, necessitating the filing of another case against his
employer or guardians.
Similarly, the accused can file a civil action for quasi-delict for the same act or omission he is
accused of in the criminal case. This is expressly allowed in paragraph 6, Section 1 of the present
Rule 111 which states that the counterclaim of the accused "may be litigated in a separate civil
action." This is only fair for two reasons. First, the accused is prohibited from setting up any
counterclaim in the civil aspect that is deemed instituted in the criminal case. The accused is
therefore forced to litigate separately his counterclaim against the offended party. If the accused
does not file a separate civil action for quasi-delict, the prescriptive period may set in since the
period continues to run until the civil action for quasi-delict is filed.
Second, the accused, who is presumed innocent, has a right to invoke Article 2177 of the Civil
Code, in the same way that the offended party can avail of this remedy which is independent of
the criminal action. To disallow the accused from filing a separate civil action for quasi-delict,
while refusing to recognize his counterclaim in the criminal case, is to deny him due process of
law, access to the courts, and equal protection of the law.

Thus, the civil action based on quasi-delict filed separately by Casupanan and Capitulo is proper.
The order of dismissal by the MCTC of Civil Case No. 2089 on the ground of forum-shopping is
erroneous.
We make this ruling aware of the possibility that the decision of the trial court in the criminal
case may vary with the decision of the trial court in the independent civil action. This possibility
has always been recognized ever since the Civil Code introduced in 1950 the concept of an
independent civil action under Articles 32, 33, 34 and 2176 of the Code. But the law itself, in
Article 31 of the Code, expressly provides that the independent civil action "may proceed
independently of the criminal proceedings and regardless of the result of the latter." In Azucena
vs. Potenciano,13 the Court declared:
"x x x. There can indeed be no other logical conclusion than this, for to subordinate the
civil action contemplated in the said articles to the result of the criminal prosecution
whether it be conviction or acquittal would render meaningless the independent
character of the civil action and the clear injunction in Article 31 that this action 'may
proceed independently of the criminal proceedings and regardless of the result of the
latter."
More than half a century has passed since the Civil Code introduced the concept of a civil action
separate and independent from the criminal action although arising from the same act or
omission. The Court, however, has yet to encounter a case of conflicting and irreconcilable
decisions of trial courts, one hearing the criminal case and the other the civil action for quasidelict. The fear of conflicting and irreconcilable decisions may be more apparent than real. In
any event, there are sufficient remedies under the Rules of Court to deal with such remote
possibilities.
One final point. The Revised Rules on Criminal Procedure took effect on December 1, 2000
while the MCTC issued the order of dismissal on December 28, 1999 or before the amendment
of the rules. The Revised Rules on Criminal Procedure must be given retroactive effect
considering the well-settled rule that "x x x statutes regulating the procedure of the court will be construed as applicable to
actions pending and undetermined at the time of their passage. Procedural laws are
retroactive in that sense and to that extent."14
WHEREFORE, the petition for review on certiorari is hereby GRANTED. The Resolutions
dated December 28, 1999 and August 24, 2000 in Special Civil Action No. 17-C (99) are
ANNULLED and Civil Case No. 2089 is REINSTATED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. Nos. 182382-83

February 24, 2010

JAIME S. DOMDOM, Petitioner,


vs.
HON. THIRD AND FIFTH DIVISIONS OF THE SANDIGANBAYAN, COMMISSION
ON AUDIT and THE PEOPLE OF THE PHILIPPINES, Respondents.
DECISION
CARPIO MORALES, J.:
By Affidavit of February 15, 2002, Hilconeda P. Abril, State Auditor V of the Commission on
Audit (COA) assigned at the Philippine Crop Insurance Corporation (PCIC), requested the
Office of the Ombudsman to conduct a preliminary investigation on the transactions-bases of the
claims of Jaime S. Domdom (petitioner) for miscellaneous and extraordinary expenses as a
Director of PCIC, the receipts covering which were alleged to be tampered.1
After preliminary investigation, the Office of the Ombudsman found probable cause to charge
petitioner with nine counts of estafa through falsification of documents in view of irregularities
in nine supporting receipts for his claims for miscellaneous and extraordinary expenses, after
verification with the establishments he had transacted with. It thus directed the filing of the
appropriate Informations with the Sandiganbayan.2
The Informations were separately raffled and lodged among the five divisions of the
Sandiganbayan. The First, Second and Fifth Divisions granted petitioners Motions for
Consolidation of the cases raffled to them with that having the lowest docket number, SB-07CRM-0052, which was raffled to the Third Division.3
The Sandiganbayan Third Division disallowed the consolidation, however, by Resolutions dated
February 12 and May 8, 2008, it holding mainly that the evidence in the cases sought to be
consolidated differed4 from that to be presented in the one which bore the lowest docket number.
It is gathered from the records that the Sandiganbayan Fourth Division also denied petitioners
Motion for Consolidation.5
Petitioner thus seeks relief from this Court via the present Petition for Certiorari, with prayer for
temporary restraining order (TRO) and/or writ of preliminary injunction, to enjoin the different
divisions of the Sandiganbayan from further proceeding with the cases against him during the
pendency of this petition.6

Petitioner argues that, among other things, all the cases against him arose from substantially
identical series of transactions involving alleged overstatements of miscellaneous and
extraordinary expenses.
Respondent People of the Philippines (People), in its Comment,7 counters that petitioner failed to
file a motion for reconsideration which is a condition precedent to the filing of a petition for
certiorari; that the petition was filed out of time since a motion for extension to file such kind of
a petition is no longer allowed; that consolidation is a matter of judicial discretion; and that the
proceedings in the different divisions of the Sandiganbayan may proceed independently as the
Informations charged separate crimes committed on separate occasions.
In the meantime, the Court issued a TRO8 enjoining all divisions of the Sandiganbayan from
further proceeding with the trial of the cases against petitioner until further orders.
Prefatorily, the People raises procedural questions which the Court shall first address.
Concededly, the settled rule is that a motion for reconsideration is a condition sine qua non for
the filing of a petition for certiorari, its purpose being to grant an opportunity for the court a quo
to correct any actual or perceived error attributed to it by a re-examination of the legal and
factual circumstances of the case.9
The rule is, however, circumscribed by well-defined exceptions, such as where the order is a
patent nullity because the court a quo had no jurisdiction; where the questions raised in the
certiorari proceeding have been duly raised and passed upon by the lower court, or are the same
as those raised and passed upon in the lower court; where there is an urgent necessity for the
resolution of the question, and any further delay would prejudice the interests of the Government
or of the petitioner, or the subject matter of the action is perishable; where, under the
circumstances, a motion for reconsideration would be useless; where the petitioner was deprived
of due process and there is extreme urgency for relief; where, in a criminal case, relief from an
order of arrest is urgent and the grant of such relief by the trial court is improbable; where the
proceedings in the lower court are a nullity for lack of due process; where the proceedings were
ex parte or in which the petitioner had no opportunity to object; and where the issue raised is one
purely of law or where public interest is involved.101 a vv p h i l
The Court finds that the issue raised by petitioner had been duly raised and passed upon by the
Sandiganbayan Third Division, it having denied consolidation in two resolutions; that the issue
calls for resolution and any further delay would prejudice the interests of petitioner; and that the
issue raised is one purely of law, the facts not being contested. There is thus ample justification
for relaxing the rule requiring the prior filing of a motion for reconsideration.
On the Peoples argument that a motion for extension of time to file a petition for certiorari is no
longer allowed, the same rests on shaky grounds. Supposedly, the deletion of the following
provision in Section 4 of Rule 65 by A.M. No. 07-7-12-SC11 evinces an intention to absolutely
prohibit motions for extension:

"No extension of time to file the petition shall be granted except for the most compelling reason
and in no case exceeding fifteen (15) days."
The full text of Section 4 of Rule 65, as amended by A.M. No. 07-7-12-SC, reads:
Sec. 4. When and where to file the petition. 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 petition shall be filed not
later than sixty (60) days counted from the notice of the denial of the motion.
If the petition relates to an act or an omission of a municipal trial court or of a corporation, a
board, an officer or a person, it shall be filed with the Regional Trial Court exercising jurisdiction
over the territorial area as defined by the Supreme Court. It may also be filed with the Court of
Appeals or with the Sandiganbayan, whether or not the same is in aid of the courts appellate
jurisdiction. If the petition involves an act or an omission of a quasi-judicial agency, unless
otherwise provided by law or these rules, the petition shall be filed with and be cognizable only
by the Court of Appeals.
In election cases involving an act or an omission of a municipal or a regional trial court, the
petition shall be filed exclusively with the Commission on Elections, in aid of its appellate
jurisdiction. (underscoring supplied)
That no mention is made in the above-quoted amended Section 4 of Rule 65 of a motion for
extension, unlike in the previous formulation, does not make the filing of such pleading
absolutely prohibited. If such were the intention, the deleted portion could just have simply been
reworded to state that "no extension of time to file the petition shall be granted." Absent such a
prohibition, motions for extension are allowed, subject to the Courts sound discretion. The
present petition may thus be allowed, having been filed within the extension sought and, at all
events, given its merits.
In Teston v. Development Bank of the Philippines,12 the Court laid down the requisites for the
consolidation of cases, viz:
A court may order several actions pending before it to be tried together where they arise from the
same act, event or transaction, involve the same or like issues, and depend largely or
substantially on the same evidence, provided that the court has jurisdiction over the cases to be
consolidated and that a joint trial will not give one party an undue advantage or prejudice the
substantial rights of any of the parties. (emphasis and underscoring supplied.)
The rule allowing consolidation is designed to avoid multiplicity of suits, to guard against
oppression or abuse, to prevent delays, to clear congested dockets, and to simplify the work of
the trial court in short, the attainment of justice with the least expense and vexation to the
parties-litigants.
Thus, in Philippine Savings Bank v. Maalac, Jr.,13 the Court disregarded the technical difference
between an action and a proceeding, and upheld the consolidation of a petition for the issuance

of a writ of possession with an ordinary civil action in order to achieve a more expeditious
resolution of the cases.
In the present case, it would be more in keeping with law and equity if all the cases filed against
petitioner were consolidated with that having the lowest docket number pending with the Third
Division of the Sandiganbayan. The only notable differences in these cases lie in the date of the
transaction, the entity transacted with and amount involved. The charge and core element are the
same estafa through falsification of documents based on alleged overstatements of claims for
miscellaneous and extraordinary expenses. Notably, the main witness is also the same
Hilconeda P. Abril.
It need not be underscored that consolidation of cases, when proper, results in the simplification
of proceedings which saves time, the resources of the parties and the courts, and a possible major
abbreviation of trial. It contributes to the swift dispensation of justice, and is in accord with the
aim of affording the parties a just, speedy and inexpensive determination of their cases before the
courts. Above all, consolidation avoids the possibility of rendering conflicting decisions in two
or more cases which would otherwise require a single judgment.14
WHEREFORE, the petition is GRANTED. The Third Division of the Sandiganbayan is
DIRECTED to allow the consolidation of the cases against petitioner for estafa through
falsification of documents with SB-07-CRM-0052, which has the lowest docket number pending
with it. All other Divisions of the Sandiganbayan are accordingly ORDERED to forward the
subject cases to the Third Division.
SO ORDERED.

Prohibition

City Engineer of Baguio et.al vs. Rolando Baniqued, GR 150270, 26 November 2008
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 150270

November 26, 2008

CITY ENGINEER OF BAGUIO and HON. MAURICIO DOMOGAN, petitioners


vs.
ROLANDO BANIQUED, respondent.
DECISION
REYES, R.T., J.:
OFT-QUOTED in cases involving searches and seizures is the principle that a man's home is his castle.
Not even the king would dare desecrate it. In protecting his home, the poorest and most humble citizen or
subject may bid defiance to all the powers of the State. 1 Indeed, a man is king in his own house.
The case before Us views the sanctity of a man's home in a different light. It is about a man's struggle
against the attempt of the State to demolish his house.
Petitioners Leo Bernardez, Jr. and Mauricio Domogan question by way of appeal under Rule 45 the
Decision2 and Resolution3 of the Court of Appeals (CA) which set aside the Order4 of the Regional Trial
Court (RTC) dismissing the complaint5 for prohibition with temporary restraining order (TRO)/injunction
filed by private respondent Rolando Baniqued.
The Facts
Generoso Bonifacio, acting as the attorney-in-fact of Purificacion de Joya, Milagros Villar, Minerva Baluyut
and Israel de Leon filed a complaint with the Office of the Mayor of Baguio City seeking the demolition of
a house built on a parcel of land6 located at Upper Quezon Hill, Baguio City.
On May 19, 1999, Domogan, the then city mayor of Baguio City, issued Notice of Demolition No. 55,
Series of 1999, against spouses Rolando and Fidela Baniqued. Pertinent parts of the notice read:
The investigation and ocular inspection conducted by the City Engineer's Office (memorandum
dated 18 February 1998) showed that you built your structures sometime in 1999 without any
building permit in violation of P.D. 1096 and possibly R.A. 7279, qualifying your structure
structures illegal, thus, subject to demolition.
The Anti-Squatting Committee in its Resolution No. 52-4 dated 22 April 1999 has recommended
for the demolition of your illegal structures.

IN VIEW OF THE FOREGOING, you are hereby notified to voluntarily remove/demolish your
illegal structures within seven (7) days from receipt of this notice, otherwise the City Demolition
Team will undertake the demolition of your illegal structures at your own expense. 7
Aggrieved, Rolando Baniqued filed a complaint for prohibition with TRO/injunction before Branch 60 of the
RTC in Baguio City.
In his complaint, Baniqued alleged that the intended demolition of his house was done without due
process of law and "was arrived at arbitrarily and in a martial-law like fashion." Specifically, Baniqued
alleged that he was (1) never given any copy of the complaint of Generoso Bonifacio; (2) "never
summoned nor subpoenaed to answer that complaint"; (3) "never allowed to participate in the
investigation and ocular inspection which the City Engineer's Office allegedly conducted, as a
consequence of the complaint of Bonifacio, much less to adduce evidence in support of his position"; (4)
"never summoned nor subpoenaed to appear before the Anti-Squatting Committee"; and (5) "not given
the opportunity to contest the complaint against him, before such complaint was decided and to be carried
out by the Defendants."8
Baniqued buttressed his complaint by arguing that Article 536 of the Civil Code should be applied, i.e.,
there should be a court action and a court order first before his house can be demolished and before he
can be ousted from the lot.9 More, under Section 28 of Republic Act 7279, an adequate relocation should
be provided first before demolition can be had.10 Too, by virtue of the National Building Code or
Presidential Decree (P.D.) No. 1096, the demolition of buildings or structures should only be resorted to in
case they are dangerous or ruinous. Otherwise, the remedy is criminal prosecution under Section 213 of
P.D. No. 1096.11 Lastly, the 1991 Local Government Code does not empower the mayor to order the
demolition of anything unless the interested party was afforded prior hearing and unless the provisions of
law pertaining to demolition are satisfied.12 Thus, Baniqued prayed for the following reliefs:
A. Immediately upon the filing hereof, a temporary restraining order be issued stopping the
Defendants, or any other person acting under their orders or authority, from carrying out, or
causing to carry out, the demolition of Plaintiff's residential unit at Upper Quezon Hill, Baguio City
under Notice of Demolition No. 55;
B. After due notice and hearing, a writ of preliminary injunction be issued for the same purpose as
to that of the TRO, and, thereafter, for this preliminary writ to be made permanent;
C. A writ of prohibition be issued, commanding the Defendants to stop carrying out, or causing to
carry out, the demolition of the aforesaid unit of the Plaintiffs. 13
On June 7, 1999, the RTC enjoined the carrying out of the demolition of the house of Baniqued. The
hearing on his application for preliminary injunction was also set. 14
On June 25, 1999, petitioners moved to dismiss15 the complaint of Baniqued on the ground of lack of
cause of action because (1) there is nothing to be enjoined "as there is no Demolition Order issued by the
City Mayor" and that the Demolition Team "does not demolish on the basis of a mere Notice of
Demolition"; (2) he has "no clear legal right to be protected as his structure is illegal, the same having
been built on a land he does not own without the consent of the owner thereof and without securing the
requisite building permit"; (3) the Notice of Demolition "was issued in accordance with law and in due
performance of the duties and functions of defendants, who being public officers, are mandated by law to
enforce all pertinent laws against illegal constructions"; and that (4) "[d]efendants do not exercise judicial
and quasi-judicial functions. Neither was the issuance of the assailed Notice of Demolition an exercise of
a ministerial function. Nor is there any allegation in the complaint that defendants acted without or in
excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction." 16
RTC and CA Dispositions

On October 15, 1999, the RTC granted the motion of petitioners and dismissed the complaint of Baniqued
with the following disposition:
WHEREFORE, finding merit in the motion to dismiss filed by the defendant, the same is hereby
GRANTED and this case is hereby DISMISSED without pronouncement as to costs.
Atty. Melanio Mauricio is hereby cited for contempt of court and is hereby warned that a repetition
of his use of improper language whether orally or in any of his pleadings will be dealt with more
severely in the future.
SO ORDERED.17
The RTC reasoned that petitioners "are unquestionably members of the executive branch whose
functions are neither judicial nor quasi-judicial."18 The RTC also sustained the argument of petitioners that
"the act complained of can hardly qualify as ministerial in nature as to put it within the ambit of the rule on
prohibition."19 Lastly, the complaint of Baniqued was procedurally infirm because he failed to exhaust
administrative remedies.20
Baniqued moved for reconsideration21 which was opposed.22 On March 3, 2000, the RTC denied the
motion.23
Refusing to give up, Baniqued appealed the decision of the RTC. The CA sustained Baniqued, disposing
as follows:
IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED and the appealed Orders
dated October 15, 1999 and March 3 2000 are both RECALLED and SET ASIDE and a new one
issued DENYING the Motion to Dismiss dated June 25, 1999. After the finality of this judgment,
let the entire original records of the case at bench be returned to the court a quo which is
reminded to decide the case on the merits and with dispatch. No pronouncement as to costs.
SO ORDERED.24
According to the CA, it may be true that the mayor is an executive official. However, as such, he has also
been given the authority to hear controversies involving property rights. In that regard, the Mayor
exercises quasi-judicial functions.25
The CA also held that the allegations in the complaint of Baniqued state a cause of action. The averments
in the complaint call for a determination whether court action is needed before Baniqued can be ousted
from the questioned lot.26
Petitioners attempted at a reconsideration27 to no avail. Left with no other recourse, they interposed the
present appeal.28
Issues
Petitioners impute to the CA the following errors, viz.:
1. THE COURT OF APPEALS GRAVELY ERRED AND ABUSED ITS DISCRETION IN RULING
THAT THE ACT OF THE CITY MAYOR IN ISSUING A NOTICE OF DEMOLITION IS A QUASIJUDICIAL FUNCTION;

2. THE COURT OF APPEALS GRAVELY ERRED AND ABUSED ITS DISCRETION IN RULING
THAT THE ACTION OF PROHIBITION FILED BY BANIQUED WITH THE TRIAL COURT IS
PROPER UNDER THE CIRCUMSTANCES;
3. THE COURT OF APPEALS GRAVELY ERRED AND ABUSED ITS DISCRETION IN
REVERSING THE DECISION OF THE TRIAL COURT.29 (Underscoring supplied)
In sum, petitioners claim that Baniqued incorrectly availed of the remedy of prohibition.
Our Ruling
The petition is unmeritorious.
Baniqued correctly availed of the remedy of prohibition. 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.30 As its name indicates, the writ is
one that commands the person or tribunal to whom it is directed not to do something which he or she is
about to do. The writ is also commonly defined as one to prevent a tribunal possessing judicial or quasijudicial powers from exercising jurisdiction over matters not within its cognizance or exceeding its
jurisdiction in matters of which it has cognizance.31 At common law, prohibition was a remedy used when
subordinate courts and inferior tribunals assumed jurisdiction which was not properly theirs.
Prohibition, at common law, was a remedy against encroachment of jurisdiction. Its office was to
restrain subordinate courts and inferior judicial tribunals from extending their jurisdiction and, in
adopting the remedy, the courts have almost universally preserved its original common-law
nature, object and function. Thus, as a rule, its proper function is to prevent courts, or other
tribunals, officers, or persons from usurping or exercising a jurisdiction with which they are not
vested by law, and confine them to the exercise of those powers legally conferred. However, the
function of the writ has been extended by some authorities to cover situations where, even
though the lower tribunal has jurisdiction, the superior court deems it necessary and advisable to
issue the writ to prevent some palpable and irremediable injustice, and, x x x the office of the
remedy in some jurisdictions has been enlarged or restricted by constitutional or statutory
provisions. While prohibition has been classified as an equitable remedy, it is generally referred to
as a common-law remedy or writ; it is a remedy which is in nature legal, although, x x x its
issuance is governed by equitable principles.32 (Citations omitted)
Prohibition is not a new concept. It is a remedy of ancient origin. It is even said that it is as old as common
law itself. The concept originated in conflicts of jurisdiction between royal courts and those of the church. 33
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.
The petition shall likewise be accompanied by a certified true copy of the judgment, order or
resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto
and a sworn certification of non-forum shopping as provided in the third paragraph of Section 3,
Rule 46.

It is very clear that before resorting to the remedy of prohibition, there should be "no appeal or any other
plain, speedy, and adequate remedy in the ordinary course of law." Thus, jurisprudence teaches that
resort to administrative remedies should be had first before judicial intervention can be availed of.
This Court in a long line of cases has consistently held that before a party is allowed to seek the
intervention of the court, it is a pre-condition that he should have availed of all the means of
administrative processes afforded him. Hence, if a remedy within the administrative machinery
can still be resorted to by giving the administrative officer concerned every opportunity to decide
on a matter that comes within his jurisdiction then such remedy should be exhausted first before
court's judicial power can be sought. The premature invocation of court's intervention is fatal to
one's cause of action. x x x34
Explaining the reason behind the rule, Mr. Justice Justo Torres, Jr., expounded, thus:
x x x This doctrine of exhaustion of administrative remedies was not without its practical and legal
reasons, for one thing, availment of administrative remedy entails lesser expenses and provides
for a speedier disposition of controversies. It is no less true to state that 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 to dispose of the case. x x x 35
Petitioners are of the view that the complaint of Baniqued for prohibition is fatally defective because he
failed to exhaust administrative remedies. If he felt aggrieved by the issuance of the notice of demolition,
administrative remedies were readily available to him. For example, he could have easily filed a motion
for reinvestigation or reconsideration.36
The argument fails to persuade.
The doctrine of exhaustion of administrative remedies is not an iron-clad rule.37 It admits of several
exceptions. Jurisprudence is well-settled that the doctrine does not apply in cases (1) when the question
raised is purely legal; (2) when the administrative body is in estoppel; (3) when the act complained of is
patently illegal; (4) when there is urgent need for judicial intervention; (5) when the claim involved is
small; (6) when irreparable damage will be suffered; (7) when there is no other plain, speedy, and
adequate remedy; (8) when strong public interest is involved; (9) when the subject of the proceeding is
private land; (10) in quo warranto proceedings; and (11) where the facts show that there was violation of
due process.38
Here, there was an urgent need for judicial intervention. The filing of a motion for reinvestigation or
reconsideration would have been a useless exercise. The notice of demolition is very clear and speaks for
itself. City Mayor Domogan already made up his mind that the house of Baniqued was illegally built and
was thus subject to demolition. It could reasonably be assumed that a motion for reinvestigation or
reconsideration would have also been denied outright. The irreparable damage to Baniqued in case his
house was demolished cannot be gainsaid.
Petitioners contend, though, that the complaint of Baniqued is premature. They say that what was issued
by City Mayor Domogan was only a notice of demolition, and not an order of demolition.39 In short,
petitioners are saying that Baniqued jumped the gun. He should have waited first for the issuance of a
demolition order because no demolition can be carried out in the absence of such order.
To Our mind, the distinction between a notice of demolition and an order of demolition is immaterial.
What is material is that Baniqued felt threatened with the impending demolition of his house. It would
have been too late and illogical if he waited first for his house to be actually demolished, before seeking
protection from the courts. Acting in the earliest opportunity and availing of the best remedy available to
protect his right was the prudent course of action.

Petitioners also argue that the complaint of Baniqued should not prosper because he never alleged that
the act complained of was done without or in excess of jurisdiction or with grave abuse of discretion. 40 To
support their stance, they cite Reyes v. Romero41 where this Court denied the petition for prohibition
because there was "no allegation whatsoever charging the respondent Judge with lack of jurisdiction or
with having committed grave abuse of discretion." 42 Put differently, petitioners argue that for a complaint
for prohibition to prosper, there should be a specific allegation that the act complained of was done
without or in excess of jurisdiction or with grave abuse of discretion.
The argument is specious on two grounds.
First, Romero is not necessarily applicable to the instant case because it involved a different set of facts.
There, a team of PC Rangers raided a house in Pasay City, Rizal, which was dubbed as a Gambling
Casino. As a result, twelve persons were charged for violating the gambling law. The case was tried in the
branch of the Municipal Trial Court in Pasay presided by Judge Lucio Tianco. The accused were later
acquitted for insufficiency of evidence.
An off-shoot of the raid was the prosecution of petitioners as maintainers of a gambling den. The case
was also assigned to the sala of Judge Tianco. However, as Judge Tianco was on leave, the Secretary of
Justice designated Judge Guillermo Romero to preside over said branch.
Sometime later, Judge Tianco returned to office and resumed his duties. This, notwithstanding, Judge
Romero ordered the continuation of the trial before him. Petitioners then sought the inhibition of Judge
Romero in view of the return of Judge Tianco. The motion was denied. The matter was brought directly to
this Court on petition for prohibition with preliminary injunction. One of the two issues resolved by the
Court was "whether respondent Judge in refusing to inhibit himself from continuing with the trial of the
criminal case in question, acted without or in excess of his jurisdiction or with grave abuse of discretion." 43
Clearly, the surrounding circumstances in Romero are absent in the case now before Us. They cannot be
remotely applied even by analogy.
Second, petitioners misconstrued Romero by interpreting it literally. The better interpretation is that the
absence of specific allegation that the act complained of was done without or in excess of jurisdiction or
with grave abuse of discretion would not automatically cause the dismissal of the complaint for
prohibition, provided that a reading of the allegations in the complaint leads to no other conclusion than
that the act complained of was, indeed, done without or in excess of jurisdiction. To subscribe to the
reasoning of petitioners may lead to an absurd situation. A patently unmeritorious complaint for prohibition
may not be given due course just because of an allegation that the act complained of was committed
without or in excess of jurisdiction or with grave abuse of discretion.
This interpretation is supported by Romero itself. Petitioners overlooked that the case goes on to say that
even if there were allegations of grave abuse of discretion, "there can be no abuse of discretion, much
less a grave one, for respondent Judge to comply with a valid and legal Administrative Order (No. 183) of
the Secretary of Justice."44
The Mayor, although performing executive functions, also exercises quasi-judicial function which
may be corrected by prohibition. As a parting argument, petitioners contend that the complaint of
Baniqued is outside the scope of the rule on prohibition which covers the proceedings of any "tribunal,
corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions."
The issuance of the notice of demolition by the City Mayor is never a judicial, ministerial or rule-making
function. It is strictly an act of law enforcement and implementation, which is purely an executive function.
Neither is the Office of the City Mayor a quasi-judicial body.45
Again, petitioners are mistaken. We need not belabor so much on this point. We quote with approval the
CA observations in this regard, viz.:

Under existing laws, the office of the mayor is given powers not only relative to its function as the
executive official of the town. It has also been endowed with authority to hear issues involving
property rights of individuals and to come out with an effective order or resolution thereon. In this
manner, it exercises quasi-judicial functions. This power is obviously a truism in the matter of
issuing demolition notices and/or orders against squatters and illegal occupants through some of
its agencies or authorized committees within its respective municipalities or cities.
There is no gainsaying that a city mayor is an executive official nor is the matter of issuing
demolition notices or orders not a ministerial one. But then, it cannot be denied as well that in
determining whether or not a structure is illegal or it should be demolished, property rights are
involved thereby needing notices and opportunity to be heard as provided for in the
constitutionally guaranteed right of due process. In pursuit of these functions, the city mayor has
to exercise quasi-judicial powers. Moreno, in his Philippine Law Dictionary, 3rd Edition, defines
quasi-judicial function as applying 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 (Midland Insurance Corp. v. Intermediate Appellate Court , 143 SCRA 458
[1986]). Significantly, the Notice of Demolition in issue was the result of the exercise of quasijudicial power by the Office of the Mayor.46
We also agree with the CA that the complaint of Baniqued states a cause of action. The averments in the
complaint "call for a determination of whether or not there is need for a court action or a court litigation to
oust plaintiff from the possession of the subject lot, or, it is within the jurisdictional prerogative of the Office
of the Mayor to eject [an] unlawful occupant from a private titled land he does not own." 47
Lest this Decision be misunderstood, We hasten to clarify that We have not prejudged the merits of the
case. Whether or not Baniqued is, indeed, entitled to a writ of prohibition is a matter which the trial court
should determine in the first instance without further delay.
WHEREFORE, the appealed Decision is AFFIRMED. The case is REMANDED to the trial court for
further proceedings.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 156684

April 6, 2011

SPOUSES ANTONIO and FE YUSAY, Petitioners,


vs.
COURT OF APPEALS, CITY MAYOR and CITY COUNCIL OF MANDALUYONG
CITY, Respondents.
RESOLUTION
BERSAMIN, J.:
The petitioners appeal the adverse decision promulgated on October 18, 20021 and resolution
promulgated on January 17, 2003,2 whereby the Court of Appeals (CA) reversed and set aside the
order issued in their favor on February 19, 2002 by the Regional Trial Court, Branch 214, in
Mandaluyong City (RTC).3 Thereby, the CA upheld Resolution No. 552, Series of 1997, adopted
by the City of Mandaluyong (City) authorizing its then City Mayor to take the necessary legal
steps for the expropriation of the parcel of land registered in the names of the petitioners.
We affirm the CA.
Antecedents
The petitioners owned a parcel of land with an area of 1,044 square meters situated between
Nueve de Febrero Street and Fernandez Street in Barangay Mauway, Mandaluyong City. Half of
their land they used as their residence, and the rest they rented out to nine other families.
Allegedly, the land was their only property and only source of income.
On October 2, 1997, the Sangguniang Panglungsod of Mandaluyong City adopted Resolution
No. 552, Series of 1997, to authorize then City Mayor Benjamin S. Abalos, Sr. to take the
necessary legal steps for the expropriation of the land of the petitioners for the purpose of
developing it for low cost housing for the less privileged but deserving city inhabitants. The
resolution reads as follows:
RESOLUTION NO. 552, S-19974
RESOLUTION AUTHORIZING HON. BENJAMIN S. ABALOS TO TAKE THE
NECESSARY LEGAL STEPS FOR THE EXPROPRIATION OF A PARCEL OF LAND

SITUATED ALONG DR. JOSE FERNANDEZ STREET, BARANGAY MAUWAY, CITY OF


MANDALUYONG, OWNED BY MR. ANTONIO YUSAY
WHEREAS, there is a parcel of land situated along Dr. Jose Fernandez Street, Barangay
Mauway, City of Mandaluyong, owned and registered in the name of MR. ANTONIO YUSAY;
WHEREAS, this piece of land have been occupied for about ten (10) years by many financially
hard-up families which the City Government of Mandaluyong desires, among other things, to
provide modest and decent dwelling;
WHEREAS, the said families have already negotiated to acquire this land but was refused by the
above-named owner in total disregard to the City Governments effort of providing land for the
landless;
WHEREAS, the expropriation of said land would certainly benefit public interest, let alone, a
step towards the implementation of social justice and urban land reform in this City;
WHEREAS, under the present situation, the City Council deems it necessary to authorize Hon.
Mayor BENJAMIN S. ABALOS to institute expropriation proceedings to achieve the noble
purpose of the City Government of Mandaluyong.
NOW, THEREFORE, upon motion duly seconded, the City Council of Mandaluyong, in session
assembled, RESOLVED, as it hereby RESOLVES, to authorize, as it is hereby authorizing, Hon.
Mayor BENJAMIN S. ABALOS, to institute expropriation proceedings against the above-named
registered owner of that parcel of land situated along Dr. Jose Fernandez Street, Barangay
Mauway, City of Mandaluyong, (f)or the purpose of developing it to a low-cost housing project
for the less privileged but deserving constituents of this City.
ADOPTED on this 2nd day of October 1997 at the City of Mandaluyong.
Sgd. Adventor R. Delos Santos
Acting Sanggunian Secretary
Attested:

Approved:

Sgd. Roberto J. Francisco


City Councilor & Acting City Mayor

Sgd. Benjamin S. Abalos


Presiding Officer

Notwithstanding that the enactment of Resolution No. 552 was but the initial step in the Citys
exercise of its power of eminent domain granted under Section 19 of the Local Government
Code of 1991, the petitioners became alarmed, and filed a petition for certiorari and prohibition
in the RTC, praying for the annulment of Resolution No. 552 due to its being unconstitutional,
confiscatory, improper, and without force and effect.

The City countered that Resolution No. 552 was a mere authorization given to the City Mayor to
initiate the legal steps towards expropriation, which included making a definite offer to purchase
the property of the petitioners; hence, the suit of the petitioners was premature.
On January 31, 2001, the RTC ruled in favor of the City and dismissed the petition for lack of
merit, opining that certiorari did not lie against a legislative act of the City Government, because
the special civil action of certiorari was only available to assail judicial or quasi-judicial acts
done without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction; that the special civil action of prohibition did not also lie under the
circumstances considering that the act of passing the resolution was not a judicial, or quasijudicial, or ministerial act; and that notwithstanding the issuance of Resolution No. 552, the City
had yet to commit acts of encroachment, excess, or usurpation, or had yet to act without or in
excess of jurisdiction or with grave abuse of discretion amounting lack or in excess of
jurisdiction.
However, on February 19, 2002, the RTC, acting upon the petitioners motion for
reconsideration, set aside its decision and declared that Resolution No. 552 was null and void.
The RTC held that the petition was not premature because the passage of Resolution No. 552
would already pave the way for the City to deprive the petitioners and their heirs of their only
property; that there was no due process in the passage of Resolution No. 552 because the
petitioners had not been invited to the subsequent hearings on the resolution to enable them to
ventilate their opposition; and that the purpose for the expropriation was not for public use and
the expropriation would not benefit the greater number of inhabitants.
Aggrieved, the City appealed to the CA.
In its decision promulgated on October 18, 2002, the CA concluded that the reversal of the
January 31, 2001 decision by the RTC was not justified because Resolution No. 552 deserved to
be accorded the benefit of the presumption of regularity and validity absent any sufficient
showing to the contrary; that notice to the petitioners (Spouses Yusay) of the succeeding hearings
conducted by the City was not a part of due process, for it was enough that their views had been
consulted and that they had been given the full opportunity to voice their protest; that to rule
otherwise would be to give every affected resident effective veto powers in law-making by a
local government unit; and that a public hearing, although necessary at times, was not
indispensable and merely aided in law-making.
The CA disposed as follows:
WHEREFORE, premises considered, the questioned order of the Regional Trial Court, Branch
214, Mandaluyong City dated February 19, 2002 in SCA Case No. 15-MD, which declared
Resolution No. 552, Series of 1997 of the City of Mandaluyong null and void, is hereby
REVERSED and SET ASIDE. No costs.
SO ORDERED.5

The petitioners moved for reconsideration, but the CA denied their motion. Thus, they appeal to
the Court, posing the following issues, namely:
1. Can the validity of Resolution No. 552 be assailed even before its implementation?
2. Must a citizen await the takeover and possession of his property by the local
government before he can go to court to nullify an unjust expropriation?
Before resolving these issues, however, the Court considers it necessary to first determine
whether or not the action for certiorari and prohibition commenced by the petitioners in the RTC
was a proper recourse of the petitioners.
Ruling
We deny the petition for review, and find that certiorari and prohibition were not available to the
petitioners under the circumstances. Thus, we sustain, albeit upon different grounds, the result
announced by the CA, and declare that the RTC gravely erred in giving due course to the petition
for certiorari and prohibition.
1.
Certiorari does not lie to assail the issuance of
a resolution by the Sanggunian Panglungsod
The special civil action for certiorari is governed by Rule 65 of the 1997 Rules of Civil
Procedure, whose Section 1 provides:
Section 1. Petition for certiorari. 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.
xxx
For certiorari to prosper, therefore, the petitioner must allege and establish the concurrence of the
following requisites, namely:
(a) The writ is directed against a tribunal, board, or officer exercising judicial or quasijudicial functions;
(b) Such tribunal, board, or officer has acted without or in excess of jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction; and

(c) There is no appeal or any plain, speedy, and adequate remedy in the ordinary course
of law.6
It is further emphasized that a petition for certiorari seeks solely to correct defects in
jurisdiction,7 and does not correct just any error or mistake committed by a court, board, or
officer exercising judicial or quasi-judicial functions unless such court, board, or officer thereby
acts without jurisdiction or in excess of jurisdiction or with such grave abuse of discretion
amounting to lack of jurisdiction.8
The first requisite is that the respondent tribunal, board, or officer must be exercising judicial or
quasi-judicial functions. Judicial function, according to Bouvier,9 is the exercise of the judicial
faculty or office; it also means the capacity to act in a specific way which appertains to the
judicial power, as one of the powers of government. "The term," Bouvier continues,10 "is used to
describe generally those modes of action which appertain to the judiciary as a department of
organized government, and through and by means of which it accomplishes its purpose and
exercises its peculiar powers."
Based on the foregoing, certiorari did not lie against the Sangguniang Panglungsod, which was
not a part of the Judiciary settling an actual controversy involving legally demandable and
enforceable rights when it adopted Resolution No. 552, but a legislative and policy-making body
declaring its sentiment or opinion.
Nor did the Sangguniang Panglungsod abuse its discretion in adopting Resolution No. 552. To
demonstrate the absence of abuse of discretion, it is well to differentiate between a resolution and
an ordinance. The first is upon a specific matter of a temporary nature while the latter is a law
that is permanent in character.11 No rights can be conferred by and be inferred from a resolution,
which is nothing but an embodiment of what the lawmaking body has to say in the light of
attendant circumstances. In simply expressing its sentiment or opinion through the resolution,
therefore, the Sangguniang Panglungsod in no way abused its discretion, least of all gravely, for
its expression of sentiment or opinion was a constitutionally protected right.
Moreover, Republic Act No. 7160 (The Local Government Code) required the City to pass an
ordinance, not adopt a resolution, for the purpose of initiating an expropriation proceeding. In
this regard, Section 19 of The Local Government Code clearly provides, viz:
Section 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 at
the time of the taking of the property.
A resolution like Resolution No. 552 that merely expresses the sentiment of the Sangguniang
Panglungsod is not sufficient for the purpose of initiating an expropriation proceeding. Indeed, in
Municipality of Paraaque v. V.M. Realty Corporation,12 a case in which the Municipality of
Paraaque based its complaint for expropriation on a resolution, not an ordinance, the Court
ruled so:
The power of eminent domain is lodged in the legislative branch of government, which may
delegate the exercise thereof to LGUs, other public entities and public utilities. An LGU may
therefore exercise the power to expropriate private property only when authorized by Congress
and subject to the latters control and restraints, imposed "through the law conferring the power
or in other legislations." In this case, Section 19 of RA 7160, which delegates to LGUs the power
of eminent domain, also lays down the parameters for its exercise. It provides as follows:
"Section 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 at
the time of the taking of the property." (Emphasis supplied)
Thus, the following essential requisites must concur before an LGU can exercise the power of
eminent domain:
1. An ordinance is enacted by the local legislative council authorizing the local chief
executive, in behalf of the LGU, to exercise the power of eminent domain or pursue
expropriation proceedings over a particular private property.
2. The power of eminent domain is exercised for public use, purpose or welfare, or for the
benefit of the poor and the landless.
3. There is payment of just compensation, as required under Section 9 Article III of the
Constitution and other pertinent laws.
4. A valid and definite offer has been previously made to the owner of the property sought
to be expropriated, but said offer was not accepted.

In the case at bar, the local chief executive sought to exercise the power of eminent domain
pursuant to a resolution of the municipal council. Thus, there was no compliance with the first
requisite that the mayor be authorized through an ordinance. Petitioner cites Camarines Sur vs.
Court of Appeals to show that a resolution may suffice to support the exercise of eminent domain
by an LGU. This case, however, is not in point because the applicable law at that time was BP
337, the previous Local Government Code, which had provided that a mere resolution would
enable an LGU to exercise eminent domain. In contrast, RA 7160, the present Local Government
Code which was already in force when the Complaint for expropriation was filed, explicitly
required an ordinance for this purpose.
We are not convinced by petitioners insistence that the terms "resolution" and "ordinance" are
synonymous. A municipal ordinance is different from a resolution. An ordinance is a law, but a
resolution is merely a declaration of the sentiment or opinion of a lawmaking body on a specific
matter. An ordinance possesses a general and permanent character, but a resolution is temporary
in nature. Additionally, the two are enacted differently -- a third reading is necessary for an
ordinance, but not for a resolution, unless decided otherwise by a majority of all the Sanggunian
members.
If Congress intended to allow LGUs to exercise eminent domain through a mere resolution, it
would have simply adopted the language of the previous Local Government Code. But Congress
did not. In a clear divergence from the previous Local Government Code, Section 19 of RA 7160
categorically requires that the local chief executive act pursuant to an ordinance. Indeed,
"[l]egislative intent is determined principally from the language of a statute. Where the language
of a statute is clear and unambiguous, the law is applied according to its express terms, and
interpretation would be resorted to only where a literal interpretation would be either impossible
or absurd or would lead to an injustice." In the instant case, there is no reason to depart from this
rule, since the law requiring an ordinance is not at all impossible, absurd, or unjust.
Moreover, the power of eminent domain necessarily involves a derogation of a fundamental or
private right of the people. Accordingly, the manifest change in the legislative language from
"resolution" under BP 337 to "ordinance" under RA 7160 demands a strict construction. "No
species of property is held by individuals with greater tenacity, and is guarded by the
Constitution and laws more sedulously, than the right to the freehold of inhabitants. When the
legislature interferes with that right and, for greater public purposes, appropriates the land of an
individual without his consent, the plain meaning of the law should not be enlarged by doubtful
interpretation."
xxx
In its Brief filed before Respondent Court, petitioner argues that its Sangguniang Bayan passed
an ordinance on October 11, 1994 which reiterated its Resolution No. 93-35, Series of 1993, and
ratified all the acts of its mayor regarding the subject expropriation.
This argument is bereft of merit. In the first place, petitioner merely alleged the existence of such
an ordinance, but it did not present any certified true copy thereof. In the second place, petitioner
did not raise this point before this Court. In fact, it was mentioned by private respondent, and

only in passing. In any event, this allegation does not cure the inherent defect of petitioners
Complaint for expropriation filed on September 23, 1993. It is hornbook doctrine that:
" x x x in a motion to dismiss based on the ground that the complaint fails to state a cause of
action, the question submitted before the court for determination is the sufficiency of the
allegations in the complaint itself. Whether those allegations are true or not is beside the point,
for their truth is hypothetically admitted by the motion. The issue rather is: admitting them to be
true, may the court render a valid judgment in accordance with the prayer of the complaint?"
The fact that there is no cause of action is evident from the face of the Complaint for
expropriation which was based on a mere resolution. The absence of an ordinance authorizing
the same is equivalent to lack of cause of action. Consequently, the Court of Appeals committed
no reversible error in affirming the trial courts Decision which dismissed the expropriation
suit.13 (Emphasis supplied)
In view of the absence of the proper expropriation ordinance authorizing and providing for the
expropriation, the petition for certiorari filed in the RTC was dismissible for lack of cause of
action.
2.
Prohibition does not lie against expropriation
The special civil action for prohibition is governed also by Section 2 of Rule 65 of the 1997
Rules of Civil Procedure, which states:
Section 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 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 law and justice may require.
xxx
The function of prohibition is to prevent the unlawful and oppressive exercise of legal authority
and to provide for a fair and orderly administration of justice.14 The writ of prohibition is directed
against proceedings that are done without or in excess of jurisdiction, or with grave abuse of
discretion, there being no appeal or other plain, speedy and adequate remedy in the ordinary
course of law.15 For grave abuse of discretion to be a ground for prohibition, the petitioner must
first demonstrate that the tribunal, corporation, board, officer, or person, whether exercising
judicial, quasi-judicial or ministerial functions, has exercised its or his power in an arbitrary or
despotic manner, by reason of passion or personal hostility, which must be so patent and gross as
would amount to an evasion, or to a virtual refusal to perform the duty enjoined or to act in

contemplation of law.16 On the other hand, the term excess of jurisdiction signifies that the court,
board, or officer has jurisdiction over a case but has transcended such jurisdiction or acted
without any authority.17
The petitioner must further allege in the petition and establish facts to show that any other
existing remedy is not speedy or adequate.18 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.191avvphi1
The rule and relevant jurisprudence indicate that prohibition was not available to the petitioners
as a remedy against the adoption of Resolution No. 552, for the Sangguniang Panglungsod, by
such adoption, was not exercising judicial, quasi-judicial or ministerial functions, but only
expressing its collective sentiment or opinion.
Verily, there can be no prohibition against a procedure whereby the immediate possession of the
land under expropriation proceedings may be taken, provided always that due provision is made
to secure the prompt adjudication and payment of just compensation to the owner. 20 This bar
against prohibition comes from the nature of the power of eminent domain as necessitating the
taking of private land intended for public use,21 and the interest of the affected landowner is thus
made subordinate to the power of the State. Once the State decides to exercise its power of
eminent domain, the power of judicial review becomes limited in scope, and the courts will be
left to determine the appropriate amount of just compensation to be paid to the affected
landowners. Only when the landowners are not given their just compensation for the taking of
their property or when there has been no agreement on the amount of just compensation may the
remedy of prohibition become available.
Here, however, the remedy of prohibition was not called for, considering that only a resolution
expressing the desire of the Sangguniang Panglungsod to expropriate the petitioners property
was issued. As of then, it was premature for the petitioners to mount any judicial challenge, for
the
power of eminent domain could be exercised by the City only through the filing of a verified
complaint in the proper court.22 Before the City as the expropriating authority filed such verified
complaint, no expropriation proceeding could be said to exist. Until then, the petitioners as the
owners could not also be deprived of their property under the power of eminent domain.23
WHEREFORE, we affirm the decision promulgated on October 18, 2002 in CA-G.R. SP No.
70618.
Costs to be paid by the petitioners.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 146031

February 19, 2008

DELTA DEVELOPMENT & MANAGEMENT SERVICES, INC., (DELTA) BY:


RICARDO S. DE LEON, SR., petitioner,
vs.
THE HOUSING AND LAND REGULATORY BOARD, respondent.
DECISION
TINGA, J.:
Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil
Procedure, assailing two Resolutions dated 25 July 20002 and 7 November 20003 of the Court
of Appeals in CA-G.R. SP No. 59694 and praying for the issuance of a preliminary injunction
and a writ of prohibition to enjoin the Housing and Land Use Regulatory Board (HLURB) from
further hearing the complaints against petitioner.
The following factual antecedents appear:
Petitioner is a domestic corporation duly licensed to engage in the real estate development of
Delta Homes which is situated in Aniban, Bacoor, Cavite. Respondent HLURB is the
governments regulatory body for housing and land development.
On 13 July 1999, Elizabeth Nicolas, one of the buyers of a house and lot at Delta Homes, filed a
Complaint4 against petitioner and Luzon Development Bank before the HLURB. The complaint,
docketed as HLURB Case No. RIV-071399-1083, alleged that petitioner violated certain
provisions of Presidential Decree No. 957 and Batas Pambansa Blg. 220. Thereafter, six other
complaints were separately lodged against petitioner by different lot buyers.
On 18 April 2000, Arbiter Raymundo A. Foronda rendered a decision in HLURB Case No. RIV071399-1083, the dispositive portion of which reads:
WHEREFORE, premises considered, a decision is hereby rendered as follows:
1. Ordering complainant to pay the amount of P191,613.85 representing her balance on
the maximum selling price of P375,000.00;

2. Upon full payment, ordering Delta to deliver the title in favor of the complainant free
from liens and encumbrances;
3. Pay complainant the amount of P50,000.00 as and by way of moral damages;
4. Pay complainant P50,000.00 as and by way of exemplary damages;
5. Pay complainant P10,000.00 as costs of suit;
6. Pay this Board the amount of P10,000.00 as administrative fine.
SO ORDERED.5
Sometime in May 2000, spouses Luis and Letty Sierra went to respondents office to verify the
complaints against petitioner. They disclosed that a staff/employee of the HLURB, a certain Jun
Labapi, admitted that he prepared all the other complaints and documents filed against petitioner
and informed them of the cost of the preparation of the complaint. Petitioner, through its
treasurer, confronted Labapi about the allegations of spouses Sierra. Although Labapi denied
those allegations, he purportedly admitted having prepared the answers on behalf of other buyers
named as respondents in a complaint filed against them by another developer.
On 11 July 2000, petitioner filed before the Court of Appeals a Petition for Prohibition6 against
HLURB praying for the issuance of a preliminary injunction and writ of prohibition to enjoin the
HLURB from further proceeding with the resolution of the complaints filed by the buyers of
Delta Homes against petitioner.
The petition mainly alleged that the proceedings before the HLURB were not impartial because
the HLURB itself was basically representing the interest of the lot buyers as one of its employees
prepared the complaints against petitioner on behalf of the lot buyers. It claimed that the HLURB
conducted hearings only to render an appearance of validity and impartiality in the proceedings.
According to petitioner, the act of HLURB in preparing the complaints of the buyers of Delta
Homes deprived petitioner of due process, invalidating the proceedings and any decision of the
HLURB.
On 25 July 2000, the Court of Appeals issued the first7 of the two assailed resolutions dismissing
the petition for prohibition on the ground that it violated the doctrine of exhaustion of
administrative remedies. The appellate court also noted petitioners failure to implead the various
complainants as respondents and to serve copies of the petition on them.
On 7 November 2000, the Court of Appeals issued the second questioned resolution8 which
denied petitioners motion for reconsideration.
Hence, the instant petition, raising the following issues:

1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS CORRECTLY


RULED THAT THE INSTANT PETITION IS A VIOLATION OF THE DOCTRINE OF
EXHAUSTION OF ADMINISTRATIVE REMEDIES;
2. WHETHER OR NOT THE RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF ITS JURISDICTION IN
HAVING BEEN INVOLVED IN THE PREPARATION OF THE COMPLAINTS FILED
BY THE COMPLAINING BUYERS AGAINST THE PETITIONER.9
Petitioner contends that the petition for prohibition before the Court of Appeals was the proper
remedy to enjoin the HLURB from further conducting what petitioner alleges as irregular and
void proceedings of the HLURB. According to petitioner, because the said petition for
prohibition did not assail any HLURB decision or resolution on the complaints filed against
petitioner but only the proceedings being conducted in relation to those complaints, there was yet
nothing to appeal to the HLURB Board of Commissioners, rendering the doctrine of exhaustion
of administrative remedies inapplicable.
In its Comment,10 the HLURB denies petitioners allegations. It contends that the quasi-judicial
hierarchy and appellate procedure in the HLURB ensure that no single person is able to
maneuver its proceedings or influence the outcome of any of its decisions. It argues that
petitioner was not without any recourse within the HLURBs quasi-judicial machinery to address
the alleged maneuvering by Labapi.
The instant petition must be denied.
Being an extraordinary remedy, prohibition cannot be resorted to when the ordinary and usual
remedies provided by law are adequate and available. Prohibition is granted only where no other
remedy is available or sufficient to afford redress. That the petitioner has another and complete
remedy at law, through an appeal or otherwise, is generally held sufficient reason for denying the
issuance of the writ.11
Also, a writ of prohibition will not be issued against an inferior court unless the attention of the
court whose proceedings are sought to be stayed has been called to the alleged lack or excess of
jurisdiction. The foundation of this rule is the respect and consideration due to the lower court
and the expediency of preventing unnecessary litigation; it cannot be presumed that the lower
court would not properly rule on a jurisdictional objection if it were properly presented to it.12
Contrary to petitioners stance, it has a remedy other than a petition for prohibition to assail the
alleged illegality of the proceedings before the HLURB. The 1996 HLURB Rules of Procedure,
which then governed the quasi-judicial proceedings in the HLURB, provides for a rule on the
inhibition and disqualification of an arbiter. Section 3 of Rule IX expressly directs the party
alleging partiality of the arbiter to file with the arbiter his objection in writing stating the grounds
therefor; thereafter, the arbiter shall decide the incident. This provision could have properly
addressed petitioners perception that the proceedings before the arbiter were tainted with bias.

Petitioners failure to avail of this remedy is fatal. The records show that petitioner did not bring
to the attention of the arbiter the alleged underhanded practice of the HLURB employee so as to
give the arbiter the opportunity to assess the same and determine if the proceedings had been
compromised. It was not even shown that said HLURB employee was a staff of or worked for
the arbiter before whom one of the cases against petitioner was pending. Instead, petitioner took
upon itself to decide that the determination of all the other cases filed against it had been affected
by the purported irregularity and sweepingly concluded that it would not be able to obtain an
impartial hearing before the HLURB.
Petitioner also asserts that the act of Labapi in preparing the complaints on behalf of the
complainants was tantamount to a denial of its right to due process before the HLURB; thus, its
failure to exhaust the remedies under the HLURB Rules of Procedure was permissible as an
exception to the doctrine of exhaustion of administrative remedies.
Petitioner should not be allowed to claim the denial of its right to due process based solely on its
perception that the HLURB and the complainants conspired in a sham proceeding when, to begin
with, it failed to raise the matter before the concerned arbiters who were in a position to correct
the alleged irregularity. On the contrary, petitioners prayer for the issuance of a writ of
injunction to enjoin the HLURB arbiters from hearing the cases against petitioner smacks of an
absolute denial of due process as far as the complainants are concerned because it would then
foreclose the avenue through which their complaints could be heard.
WHEREFORE, the instant petition is DENIED and the resolutions dated 25 July 2000 and 7
November 2000 of the Court of Appeals in CA-G.R. SP No. 59694 are AFFIRMED. Costs
against petitioner.
SO ORDERED.

Mandamus

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 176831

January 15, 2010

UY KIAO ENG, Petitioner,


vs.
NIXON LEE, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court,
assailing the August 23, 2006 Amended Decision1 of the Court of Appeals (CA) in CA-G.R. SP
No. 91725 and the February 23, 2007 Resolution,2 denying the motion for reconsideration
thereof.
The relevant facts and proceedings follow.
Alleging that his father passed away on June 22, 1992 in Manila and left a holographic will,
which is now in the custody of petitioner Uy Kiao Eng, his mother, respondent Nixon Lee filed,
on May 28, 2001, a petition for mandamus with damages, docketed as Civil Case No. 01100939,
before the Regional Trial Court (RTC) of Manila, to compel petitioner to produce the will so that
probate proceedings for the allowance thereof could be instituted. Allegedly, respondent had
already requested his mother to settle and liquidate the patriarchs estate and to deliver to the
legal heirs their respective inheritance, but petitioner refused to do so without any justifiable
reason.3
In her answer with counterclaim, petitioner traversed the allegations in the complaint and posited
that the same be dismissed for failure to state a cause of action, for lack of cause of action, and
for non-compliance with a condition precedent for the filing thereof. Petitioner denied that she
was in custody of the original holographic will and that she knew of its whereabouts. She,
moreover, asserted that photocopies of the will were given to respondent and to his siblings. As a
matter of fact, respondent was able to introduce, as an exhibit, a copy of the will in Civil Case
No. 224-V-00 before the RTC of Valenzuela City. Petitioner further contended that respondent
should have first exerted earnest efforts to amicably settle the controversy with her before he
filed the suit.4

The RTC heard the case. After the presentation and formal offer of respondents evidence,
petitioner demurred, contending that her son failed to prove that she had in her custody the
original holographic will. Importantly, she asserted that the pieces of documentary evidence
presented, aside from being hearsay, were all immaterial and irrelevant to the issue involved in
the petitionthey did not prove or disprove that she unlawfully neglected the performance of an
act which the law specifically enjoined as a duty resulting from an office, trust or station, for the
court to issue the writ of mandamus.5
The RTC, at first, denied the demurrer to evidence.6 In its February 4, 2005 Order,7 however, it
granted the same on petitioners motion for reconsideration. Respondents motion for
reconsideration of this latter order was denied on September 20, 2005.8 Hence, the petition was
dismissed.
Aggrieved, respondent sought review from the appellate court. On April 26, 2006, the CA
initially denied the appeal for lack of merit. It ruled that the writ of mandamus would issue only
in instances when no other remedy would be available and sufficient to afford redress. Under
Rule 76, in an action for the settlement of the estate of his deceased father, respondent could ask
for the presentation or production and for the approval or probate of the holographic will. The
CA further ruled that respondent, in the proceedings before the trial court, failed to present
sufficient evidence to prove that his mother had in her custody the original copy of the
will.91avvphi1
Respondent moved for reconsideration. The appellate court, in the assailed August 23, 2006
Amended Decision,10 granted the motion, set aside its earlier ruling, issued the writ, and ordered
the production of the will and the payment of attorneys fees. It ruled this time that respondent
was able to show by testimonial evidence that his mother had in her possession the holographic
will.
Dissatisfied with this turn of events, petitioner filed a motion for reconsideration. The appellate
court denied this motion in the further assailed February 23, 2007 Resolution.11
Left with no other recourse, petitioner brought the matter before this Court, contending in the
main that the petition for mandamus is not the proper remedy and that the testimonial evidence
used by the appellate court as basis for its ruling is inadmissible.12
The Court cannot sustain the CAs issuance of the writ.
The first paragraph of Section 3 of Rule 65 of the Rules of Court pertinently provides that
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 at 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.13
Mandamus is a command issuing from a court of law of competent jurisdiction, in the name of
the state or the sovereign, directed to some inferior court, tribunal, or board, or to some
corporation or person requiring the performance of a particular duty therein specified, which
duty results from the official station of the party to whom the writ is directed or from operation
of law.14 This definition recognizes the public character of the remedy, and clearly excludes the
idea that it may be resorted to for the purpose of enforcing the performance of duties in which
the public has no interest.15 The writ is a proper recourse for citizens who seek to enforce a
public right and to compel the performance of a public duty, most especially when the public
right involved is mandated by the Constitution.16 As the quoted provision instructs, mandamus
will lie if the tribunal, corporation, board, officer, or person unlawfully neglects the performance
of an act which the law enjoins as a duty resulting from an office, trust or station.17
The writ of mandamus, however, will not issue to compel an official to do anything which is not
his duty to do or which it is his duty not to do, or to give to the applicant anything to which he is
not entitled by law.18 Nor will mandamus issue to enforce a right which is in substantial dispute
or as to which a substantial doubt exists, although objection raising a mere technical question
will be disregarded if the right is clear and the case is meritorious.19 As a rule, mandamus will not
lie in the absence of any of the following grounds: [a] that the court, officer, board, or person
against whom the action is taken unlawfully neglected the performance of an act which the law
specifically enjoins as a duty resulting from office, trust, or station; or [b] that such court, officer,
board, or person has unlawfully excluded petitioner/relator from the use and enjoyment of a right
or office to which he is entitled.20 On the part of the relator, it is essential to the issuance of a writ
of mandamus that he should have a clear legal right to the thing demanded and it must be the
imperative duty of respondent to perform the act required.21
Recognized further in this jurisdiction is the principle that mandamus cannot be used to enforce
contractual obligations.22 Generally, mandamus will not lie to enforce purely private contract
rights, and will not lie against an individual unless some obligation in the nature of a public or
quasi-public duty is imposed.23 The writ is not appropriate to enforce a private right against an
individual.24 The writ of mandamus lies to enforce the execution of an act, when, otherwise,
justice would be obstructed; and, regularly, issues only in cases relating to the public and to the
government; hence, it is called a prerogative writ.25 To preserve its prerogative character,
mandamus is not used for the redress of private wrongs, but only in matters relating to the
public.26
Moreover, an important principle followed in the issuance of the writ is that there should be no
plain, speedy and adequate remedy in the ordinary course of law other than the remedy of
mandamus being invoked.27 In other words, mandamus can be issued only in cases where the
usual modes of procedure and forms of remedy are powerless to afford relief.28 Although
classified as a legal remedy, mandamus is equitable in its nature and its issuance is generally
controlled by equitable principles.29 Indeed, the grant of the writ of mandamus lies in the sound
discretion of the court.

In the instant case, the Court, without unnecessarily ascertaining whether the obligation involved
herethe production of the original holographic willis in the nature of a public or a private
duty, rules that the remedy of mandamus cannot be availed of by respondent Lee because there
lies another plain, speedy and adequate remedy in the ordinary course of law. Let it be noted that
respondent has a photocopy of the will and that he seeks the production of the original for
purposes of probate. The Rules of Court, however, does not prevent him from instituting probate
proceedings for the allowance of the will whether the same is in his possession or not. Rule 76,
Section 1 relevantly provides:
Section 1. Who may petition for the allowance of will.Any executor, devisee, or legatee named
in a will, or any other person interested in the estate, may, at any time, after the death of the
testator, petition the court having jurisdiction to have the will allowed, whether the same be in
his possession or not, or is lost or destroyed.
An adequate remedy is further provided by Rule 75, Sections 2 to 5, for the production of the
original holographic will. Thus
SEC. 2. Custodian of will to deliver.The person who has custody of a will shall, within twenty
(20) days after he knows of the death of the testator, deliver the will to the court having
jurisdiction, or to the executor named in the will.
SEC. 3. Executor to present will and accept or refuse trust.A person named as executor in a
will shall within twenty (20) days after he knows of the death of the testator, or within twenty
(20) days after he knows that he is named executor if he obtained such knowledge after the death
of the testator, present such will to the court having jurisdiction, unless the will has reached the
court in any other manner, and shall, within such period, signify to the court in writing his
acceptance of the trust or his refusal to accept it.
SEC. 4. Custodian and executor subject to fine for neglect.A person who neglects any of the
duties required in the two last preceding sections without excuse satisfactory to the court shall be
fined not exceeding two thousand pesos.
SEC. 5. Person retaining will may be committed.A person having custody of a will after the
death of the testator who neglects without reasonable cause to deliver the same, when ordered so
to do, to the court having jurisdiction, may be committed to prison and there kept until he
delivers the will.30
There being a plain, speedy and adequate remedy in the ordinary course of law for the
production of the subject will, the remedy of mandamus cannot be availed of. Suffice it to state
that respondent Lee lacks a cause of action in his petition. Thus, the Court grants the demurrer.
WHEREFORE, premises considered, the petition for review on certiorari is GRANTED. The
August 23, 2006 Amended Decision and the February 23, 2007 Resolution of the Court of
Appeals in CA-G.R. SP No. 91725 are REVERSED and SET ASIDE. Civil Case No. 01100939
before the Regional Trial Court of Manila is DISMISSED.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. Nos. 171947-48

December 18, 2008

METROPOLITAN MANILA DEVELOPMENT AUTHORITY, DEPARTMENT OF


ENVIRONMENT AND NATURAL RESOURCES, DEPARTMENT OF EDUCATION,
CULTURE AND SPORTS,1 DEPARTMENT OF HEALTH, DEPARTMENT OF
AGRICULTURE, DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS,
DEPARTMENT OF BUDGET AND MANAGEMENT, PHILIPPINE COAST GUARD,
PHILIPPINE NATIONAL POLICE MARITIME GROUP, and DEPARTMENT OF THE
INTERIOR AND LOCAL GOVERNMENT, petitioners,
vs.
CONCERNED RESIDENTS OF MANILA BAY, represented and joined by DIVINA V.
ILAS, SABINIANO ALBARRACIN, MANUEL SANTOS, JR., DINAH DELA PEA,
PAUL DENNIS QUINTERO, MA. VICTORIA LLENOS, DONNA CALOZA, FATIMA
QUITAIN, VENICE SEGARRA, FRITZIE TANGKIA, SARAH JOELLE LINTAG,
HANNIBAL AUGUSTUS BOBIS, FELIMON SANTIAGUEL, and JAIME AGUSTIN R.
OPOSA, respondents.
DECISION
VELASCO, JR., J.:
The need to address environmental pollution, as a cause of climate change, has of late gained the
attention of the international community. Media have finally trained their sights on the ill effects
of pollution, the destruction of forests and other critical habitats, oil spills, and the unabated
improper disposal of garbage. And rightly so, for the magnitude of environmental destruction is
now on a scale few ever foresaw and the wound no longer simply heals by itself.2 But amidst
hard evidence and clear signs of a climate crisis that need bold action, the voice of cynicism,
naysayers, and procrastinators can still be heard.
This case turns on government agencies and their officers who, by the nature of their respective
offices or by direct statutory command, are tasked to protect and preserve, at the first instance,
our internal waters, rivers, shores, and seas polluted by human activities. To most of these
agencies and their official complement, the pollution menace does not seem to carry the high
national priority it deserves, if their track records are to be the norm. Their cavalier attitude
towards solving, if not mitigating, the environmental pollution problem, is a sad commentary on
bureaucratic efficiency and commitment.

At the core of the case is the Manila Bay, a place with a proud historic past, once brimming with
marine life and, for so many decades in the past, a spot for different contact recreation activities,
but now a dirty and slowly dying expanse mainly because of the abject official indifference of
people and institutions that could have otherwise made a difference.
This case started when, on January 29, 1999, respondents Concerned Residents of Manila Bay
filed a complaint before the Regional Trial Court (RTC) in Imus, Cavite against several
government agencies, among them the petitioners, for the cleanup, rehabilitation, and protection
of the Manila Bay. Raffled to Branch 20 and docketed as Civil Case No. 1851-99 of the RTC, the
complaint alleged that the water quality of the Manila Bay had fallen way below the allowable
standards set by law, specifically Presidential Decree No. (PD) 1152 or the Philippine
Environment Code. This environmental aberration, the complaint stated, stemmed from:
x x x [The] reckless, wholesale, accumulated and ongoing acts of omission or
commission [of the defendants] resulting in the clear and present danger to public health
and in the depletion and contamination of the marine life of Manila Bay, [for which
reason] ALL defendants must be held jointly and/or solidarily liable and be collectively
ordered to clean up Manila Bay and to restore its water quality to class B waters fit for
swimming, skin-diving, and other forms of contact recreation.3
In their individual causes of action, respondents alleged that the continued neglect of petitioners
in abating the pollution of the Manila Bay constitutes a violation of, among others:
(1) Respondents constitutional right to life, health, and a balanced ecology;
(2) The Environment Code (PD 1152);
(3) The Pollution Control Law (PD 984);
(4) The Water Code (PD 1067);
(5) The Sanitation Code (PD 856);
(6) The Illegal Disposal of Wastes Decree (PD 825);
(7) The Marine Pollution Law (PD 979);
(8) Executive Order No. 192;
(9) The Toxic and Hazardous Wastes Law (Republic Act No. 6969);
(10) Civil Code provisions on nuisance and human relations;
(11) The Trust Doctrine and the Principle of Guardianship; and
(12) International Law

Inter alia, respondents, as plaintiffs a quo, prayed that petitioners be ordered to clean the Manila
Bay and submit to the RTC a concerted concrete plan of action for the purpose.
The trial of the case started off with a hearing at the Manila Yacht Club followed by an ocular
inspection of the Manila Bay. Renato T. Cruz, the Chief of the Water Quality Management
Section, Environmental Management Bureau, Department of Environment and Natural
Resources (DENR), testifying for petitioners, stated that water samples collected from different
beaches around the Manila Bay showed that the amount of fecal coliform content ranged from
50,000 to 80,000 most probable number (MPN)/ml when what DENR Administrative Order No.
34-90 prescribed as a safe level for bathing and other forms of contact recreational activities, or
the "SB" level, is one not exceeding 200 MPN/100 ml.4
Rebecca de Vera, for Metropolitan Waterworks and Sewerage System (MWSS) and in behalf of
other petitioners, testified about the MWSS efforts to reduce pollution along the Manila Bay
through the Manila Second Sewerage Project. For its part, the Philippine Ports Authority (PPA)
presented, as part of its evidence, its memorandum circulars on the study being conducted on
ship-generated waste treatment and disposal, and its Linis Dagat (Clean the Ocean) project for
the cleaning of wastes accumulated or washed to shore.
The RTC Ordered Petitioners to Clean Up and Rehabilitate Manila Bay
On September 13, 2002, the RTC rendered a Decision5 in favor of respondents. The dispositive
portion reads:
WHEREFORE, finding merit in the complaint, judgment is hereby rendered ordering the
abovenamed defendant-government agencies, jointly and solidarily, to clean up and
rehabilitate Manila Bay and restore its waters to SB classification to make it fit for
swimming, skin-diving and other forms of contact recreation. To attain this, defendantagencies, with defendant DENR as the lead agency, are directed, within six (6) months
from receipt hereof, to act and perform their respective duties by devising a consolidated,
coordinated and concerted scheme of action for the rehabilitation and restoration of the
bay.
In particular:
Defendant MWSS is directed to install, operate and maintain adequate [sewerage]
treatment facilities in strategic places under its jurisdiction and increase their capacities.
Defendant LWUA, to see to it that the water districts under its wings, provide, construct
and operate sewage facilities for the proper disposal of waste.
Defendant DENR, which is the lead agency in cleaning up Manila Bay, to install, operate
and maintain waste facilities to rid the bay of toxic and hazardous substances.

Defendant PPA, to prevent and also to treat the discharge not only of ship-generated
wastes but also of other solid and liquid wastes from docking vessels that contribute to
the pollution of the bay.
Defendant MMDA, to establish, operate and maintain an adequate and appropriate
sanitary landfill and/or adequate solid waste and liquid disposal as well as other
alternative garbage disposal system such as re-use or recycling of wastes.
Defendant DA, through the Bureau of Fisheries and Aquatic Resources, to revitalize the
marine life in Manila Bay and restock its waters with indigenous fish and other aquatic
animals.
Defendant DBM, to provide and set aside an adequate budget solely for the purpose of
cleaning up and rehabilitation of Manila Bay.
Defendant DPWH, to remove and demolish structures and other nuisances that obstruct
the free flow of waters to the bay. These nuisances discharge solid and liquid wastes
which eventually end up in Manila Bay. As the construction and engineering arm of the
government, DPWH is ordered to actively participate in removing debris, such as carcass
of sunken vessels, and other non-biodegradable garbage in the bay.
Defendant DOH, to closely supervise and monitor the operations of septic and sludge
companies and require them to have proper facilities for the treatment and disposal of
fecal sludge and sewage coming from septic tanks.
Defendant DECS, to inculcate in the minds and hearts of the people through education
the importance of preserving and protecting the environment.
Defendant Philippine Coast Guard and the PNP Maritime Group, to protect at all costs
the Manila Bay from all forms of illegal fishing.
No pronouncement as to damages and costs.
SO ORDERED.
The MWSS, Local Water Utilities Administration (LWUA), and PPA filed before the Court of
Appeals (CA) individual Notices of Appeal which were eventually consolidated and docketed as
CA-G.R. CV No. 76528.
On the other hand, the DENR, Department of Public Works and Highways (DPWH),
Metropolitan Manila Development Authority (MMDA), Philippine Coast Guard (PCG),
Philippine National Police (PNP) Maritime Group, and five other executive departments and
agencies filed directly with this Court a petition for review under Rule 45. The Court, in a
Resolution of December 9, 2002, sent the said petition to the CA for consolidation with the
consolidated appeals of MWSS, LWUA, and PPA, docketed as CA-G.R. SP No. 74944.

Petitioners, before the CA, were one in arguing in the main that the pertinent provisions of the
Environment Code (PD 1152) relate only to the cleaning of specific pollution incidents and do
not cover cleaning in general. And apart from raising concerns about the lack of funds
appropriated for cleaning purposes, petitioners also asserted that the cleaning of the Manila Bay
is not a ministerial act which can be compelled by mandamus.
The CA Sustained the RTC
By a Decision6 of September 28, 2005, the CA denied petitioners appeal and affirmed the
Decision of the RTC in toto, stressing that the trial courts decision did not require petitioners to
do tasks outside of their usual basic functions under existing laws.7
Petitioners are now before this Court praying for the allowance of their Rule 45 petition on the
following ground and supporting arguments:
THE [CA] DECIDED A QUESTION OF SUBSTANCE NOT HERETOFORE PASSED
UPON BY THE HONORABLE COURT, I.E., IT AFFIRMED THE TRIAL COURTS
DECISION DECLARING THAT SECTION 20 OF [PD] 1152 REQUIRES
CONCERNED GOVERNMENT AGENCIES TO REMOVE ALL POLLUTANTS
SPILLED AND DISCHARGED IN THE WATER SUCH AS FECAL COLIFORMS.
ARGUMENTS
I
[SECTIONS] 17 AND 20 OF [PD] 1152 RELATE ONLY TO THE CLEANING OF
SPECIFIC POLLUTION INCIDENTS AND [DO] NOT COVER CLEANING IN
GENERAL
II
THE CLEANING OR REHABILITATION OF THE MANILA BAY IS NOT A
MINISTERIAL ACT OF PETITIONERS THAT CAN BE COMPELLED BY
MANDAMUS.
The issues before us are two-fold. First, do Sections 17 and 20 of PD 1152 under the headings,
Upgrading of Water Quality and Clean-up Operations, envisage a cleanup in general or are they
limited only to the cleanup of specific pollution incidents? And second, can petitioners be
compelled by mandamus to clean up and rehabilitate the Manila Bay?
On August 12, 2008, the Court conducted and heard the parties on oral arguments.
Our Ruling
We shall first dwell on the propriety of the issuance of mandamus under the premises.

The Cleaning or Rehabilitation of Manila Bay


Can be Compelled by Mandamus
Generally, the writ of mandamus lies to require the execution of a ministerial duty.8 A ministerial
duty is one that "requires neither the exercise of official discretion nor judgment."9 It connotes an
act in which nothing is left to the discretion of the person executing it. It is a "simple, definite
duty arising under conditions admitted or proved to exist and imposed by law."10 Mandamus is
available to compel action, when refused, on matters involving discretion, but not to direct the
exercise of judgment or discretion one way or the other.
Petitioners maintain that the MMDAs duty to take measures and maintain adequate solid waste
and liquid disposal systems necessarily involves policy evaluation and the exercise of judgment
on the part of the agency concerned. They argue that the MMDA, in carrying out its mandate,
has to make decisions, including choosing where a landfill should be located by undertaking
feasibility studies and cost estimates, all of which entail the exercise of discretion.
Respondents, on the other hand, counter that the statutory command is clear and that petitioners
duty to comply with and act according to the clear mandate of the law does not require the
exercise of discretion. According to respondents, petitioners, the MMDA in particular, are
without discretion, for example, to choose which bodies of water they are to clean up, or which
discharge or spill they are to contain. By the same token, respondents maintain that petitioners
are bereft of discretion on whether or not to alleviate the problem of solid and liquid waste
disposal; in other words, it is the MMDAs ministerial duty to attend to such services.
We agree with respondents.
First off, we wish to state that petitioners obligation to perform their duties as defined by law, on
one hand, and how they are to carry out such duties, on the other, are two different concepts.
While the implementation of the MMDAs mandated tasks may entail a decision-making process,
the enforcement of the law or the very act of doing what the law exacts to be done is ministerial
in nature and may be compelled by mandamus. We said so in Social Justice Society v. Atienza11
in which the Court directed the City of Manila to enforce, as a matter of ministerial duty, its
Ordinance No. 8027 directing the three big local oil players to cease and desist from operating
their business in the so-called "Pandacan Terminals" within six months from the effectivity of the
ordinance. But to illustrate with respect to the instant case, the MMDAs duty to put up an
adequate and appropriate sanitary landfill and solid waste and liquid disposal as well as other
alternative garbage disposal systems is ministerial, its duty being a statutory imposition. The
MMDAs duty in this regard is spelled out in Sec. 3(c) of Republic Act No. (RA) 7924 creating
the MMDA. This section defines and delineates the scope of the MMDAs waste disposal
services to include:
Solid waste disposal and management which include formulation and implementation of
policies, standards, programs and projects for proper and sanitary waste disposal. It shall
likewise include the establishment and operation of sanitary land fill and related
facilities and the implementation of other alternative programs intended to reduce, reuse
and recycle solid waste. (Emphasis added.)

The MMDA is duty-bound to comply with Sec. 41 of the Ecological Solid Waste Management
Act (RA 9003) which prescribes the minimum criteria for the establishment of sanitary landfills
and Sec. 42 which provides the minimum operating requirements that each site operator shall
maintain in the operation of a sanitary landfill. Complementing Sec. 41 are Secs. 36 and 37 of
RA 9003,12 enjoining the MMDA and local government units, among others, after the effectivity
of the law on February 15, 2001, from using and operating open dumps for solid waste and
disallowing, five years after such effectivity, the use of controlled dumps.
The MMDAs duty in the area of solid waste disposal, as may be noted, is set forth not only in
the Environment Code (PD 1152) and RA 9003, but in its charter as well. This duty of putting up
a proper waste disposal system cannot be characterized as discretionary, for, as earlier stated,
discretion presupposes the power or right given by law to public functionaries to act officially
according to their judgment or conscience.13 A discretionary duty is one that "allows a person to
exercise judgment and choose to perform or not to perform."14 Any suggestion that the MMDA
has the option whether or not to perform its solid waste disposal-related duties ought to be
dismissed for want of legal basis.
A perusal of other petitioners respective charters or like enabling statutes and pertinent laws
would yield this conclusion: these government agencies are enjoined, as a matter of statutory
obligation, to perform certain functions relating directly or indirectly to the cleanup,
rehabilitation, protection, and preservation of the Manila Bay. They are precluded from choosing
not to perform these duties. Consider:
(1) The DENR, under Executive Order No. (EO) 192,15 is the primary agency responsible for the
conservation, management, development, and proper use of the countrys environment and
natural resources. Sec. 19 of the Philippine Clean Water Act of 2004 (RA 9275), on the other
hand, designates the DENR as the primary government agency responsible for its enforcement
and implementation, more particularly over all aspects of water quality management. On water
pollution, the DENR, under the Acts Sec. 19(k), exercises jurisdiction "over all aspects of water
pollution, determine[s] its location, magnitude, extent, severity, causes and effects and other
pertinent information on pollution, and [takes] measures, using available methods and
technologies, to prevent and abate such pollution."
The DENR, under RA 9275, is also tasked to prepare a National Water Quality Status Report, an
Integrated Water Quality Management Framework, and a 10-year Water Quality Management
Area Action Plan which is nationwide in scope covering the Manila Bay and adjoining areas.
Sec. 19 of RA 9275 provides:
Sec. 19 Lead Agency.The [DENR] shall be the primary government agency responsible
for the implementation and enforcement of this Act x x x unless otherwise provided
herein. As such, it shall have the following functions, powers and responsibilities:
a) Prepare a National Water Quality Status report within twenty-four (24) months from
the effectivity of this Act: Provided, That the Department shall thereafter review or revise
and publish annually, or as the need arises, said report;

b) Prepare an Integrated Water Quality Management Framework within twelve (12)


months following the completion of the status report;
c) Prepare a ten (10) year Water Quality Management Area Action Plan within 12 months
following the completion of the framework for each designated water management area.
Such action plan shall be reviewed by the water quality management area governing
board every five (5) years or as need arises.
The DENR has prepared the status report for the period 2001 to 2005 and is in the process of
completing the preparation of the Integrated Water Quality Management Framework.16 Within
twelve (12) months thereafter, it has to submit a final Water Quality Management Area Action
Plan.17 Again, like the MMDA, the DENR should be made to accomplish the tasks assigned to it
under RA 9275.
Parenthetically, during the oral arguments, the DENR Secretary manifested that the DENR, with
the assistance of and in partnership with various government agencies and non-government
organizations, has completed, as of December 2005, the final draft of a comprehensive action
plan with estimated budget and time frame, denominated as Operation Plan for the Manila Bay
Coastal Strategy, for the rehabilitation, restoration, and rehabilitation of the Manila Bay.
The completion of the said action plan and even the implementation of some of its phases should
more than ever prod the concerned agencies to fast track what are assigned them under existing
laws.
(2) The MWSS, under Sec. 3 of RA 6234,18 is vested with jurisdiction, supervision, and control
over all waterworks and sewerage systems in the territory comprising what is now the cities of
Metro Manila and several towns of the provinces of Rizal and Cavite, and charged with the duty:
(g) To construct, maintain, and operate such sanitary sewerages as may be necessary for
the proper sanitation and other uses of the cities and towns comprising the System; x x x
(3) The LWUA under PD 198 has the power of supervision and control over local water districts.
It can prescribe the minimum standards and regulations for the operations of these districts and
shall monitor and evaluate local water standards. The LWUA can direct these districts to
construct, operate, and furnish facilities and services for the collection, treatment, and disposal of
sewerage, waste, and storm water. Additionally, under RA 9275, the LWUA, as attached agency
of the DPWH, is tasked with providing sewerage and sanitation facilities, inclusive of the setting
up of efficient and safe collection, treatment, and sewage disposal system in the different parts of
the country.19 In relation to the instant petition, the LWUA is mandated to provide sewerage and
sanitation facilities in Laguna, Cavite, Bulacan, Pampanga, and Bataan to prevent pollution in
the Manila Bay.
(4) The Department of Agriculture (DA), pursuant to the Administrative Code of 1987 (EO
292),20 is designated as the agency tasked to promulgate and enforce all laws and issuances
respecting the conservation and proper utilization of agricultural and fishery resources.
Furthermore, the DA, under the Philippine Fisheries Code of 1998 (RA 8550), is, in coordination

with local government units (LGUs) and other concerned sectors, in charge of establishing a
monitoring, control, and surveillance system to ensure that fisheries and aquatic resources in
Philippine waters are judiciously utilized and managed on a sustainable basis.21 Likewise under
RA 9275, the DA is charged with coordinating with the PCG and DENR for the enforcement of
water quality standards in marine waters.22 More specifically, its Bureau of Fisheries and Aquatic
Resources (BFAR) under Sec. 22(c) of RA 9275 shall primarily be responsible for the prevention
and control of water pollution for the development, management, and conservation of the
fisheries and aquatic resources.
(5) The DPWH, as the engineering and construction arm of the national government, is tasked
under EO 29223 to provide integrated planning, design, and construction services for, among
others, flood control and water resource development systems in accordance with national
development objectives and approved government plans and specifications.
In Metro Manila, however, the MMDA is authorized by Sec. 3(d), RA 7924 to perform metrowide services relating to "flood control and sewerage management which include the formulation
and implementation of policies, standards, programs and projects for an integrated flood control,
drainage and sewerage system."
On July 9, 2002, a Memorandum of Agreement was entered into between the DPWH and
MMDA, whereby MMDA was made the agency primarily responsible for flood control in Metro
Manila. For the rest of the country, DPWH shall remain as the implementing agency for flood
control services. The mandate of the MMDA and DPWH on flood control and drainage services
shall include the removal of structures, constructions, and encroachments built along rivers,
waterways, and esteros (drainages) in violation of RA 7279, PD 1067, and other pertinent laws.
(6) The PCG, in accordance with Sec. 5(p) of PD 601, or the Revised Coast Guard Law of 1974,
and Sec. 6 of PD 979,24 or the Marine Pollution Decree of 1976, shall have the primary
responsibility of enforcing laws, rules, and regulations governing marine pollution within the
territorial waters of the Philippines. It shall promulgate its own rules and regulations in
accordance with the national rules and policies set by the National Pollution Control
Commission upon consultation with the latter for the effective implementation and enforcement
of PD 979. It shall, under Sec. 4 of the law, apprehend violators who:
a. discharge, dump x x x harmful substances from or out of any ship, vessel, barge, or any
other floating craft, or other man-made structures at sea, by any method, means or
manner, into or upon the territorial and inland navigable waters of the Philippines;
b. throw, discharge or deposit, dump, or cause, suffer or procure to be thrown, discharged,
or deposited either from or out of any ship, barge, or other floating craft or vessel of any
kind, or from the shore, wharf, manufacturing establishment, or mill of any kind, any
refuse matter of any kind or description whatever other than that flowing from streets and
sewers and passing therefrom in a liquid state into tributary of any navigable water from
which the same shall float or be washed into such navigable water; and

c. deposit x x x material of any kind in any place on the bank of any navigable water or
on the bank of any tributary of any navigable water, where the same shall be liable to be
washed into such navigable water, either by ordinary or high tides, or by storms or floods,
or otherwise, whereby navigation shall or may be impeded or obstructed or increase the
level of pollution of such water.
(7) When RA 6975 or the Department of the Interior and Local Government (DILG) Act of 1990
was signed into law on December 13, 1990, the PNP Maritime Group was tasked to "perform all
police functions over the Philippine territorial waters and rivers." Under Sec. 86, RA 6975, the
police functions of the PCG shall be taken over by the PNP when the latter acquires the
capability to perform such functions. Since the PNP Maritime Group has not yet attained the
capability to assume and perform the police functions of PCG over marine pollution, the PCG
and PNP Maritime Group shall coordinate with regard to the enforcement of laws, rules, and
regulations governing marine pollution within the territorial waters of the Philippines. This was
made clear in Sec. 124, RA 8550 or the Philippine Fisheries Code of 1998, in which both the
PCG and PNP Maritime Group were authorized to enforce said law and other fishery laws, rules,
and regulations.25
(8) In accordance with Sec. 2 of EO 513, the PPA is mandated "to establish, develop, regulate,
manage and operate a rationalized national port system in support of trade and national
development."26 Moreover, Sec. 6-c of EO 513 states that the PPA has police authority within the
ports administered by it as may be necessary to carry out its powers and functions and attain its
purposes and objectives, without prejudice to the exercise of the functions of the Bureau of
Customs and other law enforcement bodies within the area. Such police authority shall include
the following:
xxxx
b) To regulate the entry to, exit from, and movement within the port, of persons and
vehicles, as well as movement within the port of watercraft.27
Lastly, as a member of the International Marine Organization and a signatory to the International
Convention for the Prevention of Pollution from Ships, as amended by MARPOL 73/78,28 the
Philippines, through the PPA, must ensure the provision of adequate reception facilities at ports
and terminals for the reception of sewage from the ships docking in Philippine ports. Thus, the
PPA is tasked to adopt such measures as are necessary to prevent the discharge and dumping of
solid and liquid wastes and other ship-generated wastes into the Manila Bay waters from vessels
docked at ports and apprehend the violators. When the vessels are not docked at ports but within
Philippine territorial waters, it is the PCG and PNP Maritime Group that have jurisdiction over
said vessels.
(9) The MMDA, as earlier indicated, is duty-bound to put up and maintain adequate sanitary
landfill and solid waste and liquid disposal system as well as other alternative garbage disposal
systems. It is primarily responsible for the implementation and enforcement of the provisions of
RA 9003, which would necessary include its penal provisions, within its area of jurisdiction.29

Among the prohibited acts under Sec. 48, Chapter VI of RA 9003 that are frequently violated are
dumping of waste matters in public places, such as roads, canals or esteros, open burning of solid
waste, squatting in open dumps and landfills, open dumping, burying of biodegradable or nonbiodegradable materials in flood-prone areas, establishment or operation of open dumps as
enjoined in RA 9003, and operation of waste management facilities without an environmental
compliance certificate.
Under Sec. 28 of the Urban Development and Housing Act of 1992 (RA 7279), eviction or
demolition may be allowed "when persons or entities occupy danger areas such as esteros,
railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and other public places such
as sidewalks, roads, parks and playgrounds." The MMDA, as lead agency, in coordination with
the DPWH, LGUs, and concerned agencies, can dismantle and remove all structures,
constructions, and other encroachments built in breach of RA 7279 and other pertinent laws
along the rivers, waterways, and esteros in Metro Manila. With respect to rivers, waterways, and
esteros in Bulacan, Bataan, Pampanga, Cavite, and Laguna that discharge wastewater directly or
eventually into the Manila Bay, the DILG shall direct the concerned LGUs to implement the
demolition and removal of such structures, constructions, and other encroachments built in
violation of RA 7279 and other applicable laws in coordination with the DPWH and concerned
agencies.
(10) The Department of Health (DOH), under Article 76 of PD 1067 (the Water Code), is tasked
to promulgate rules and regulations for the establishment of waste disposal areas that affect the
source of a water supply or a reservoir for domestic or municipal use. And under Sec. 8 of RA
9275, the DOH, in coordination with the DENR, DPWH, and other concerned agencies, shall
formulate guidelines and standards for the collection, treatment, and disposal of sewage and the
establishment and operation of a centralized sewage treatment system. In areas not considered as
highly urbanized cities, septage or a mix sewerage-septage management system shall be
employed.
In accordance with Sec. 7230 of PD 856, the Code of Sanitation of the Philippines, and Sec.
5.1.131 of Chapter XVII of its implementing rules, the DOH is also ordered to ensure the
regulation and monitoring of the proper disposal of wastes by private sludge companies through
the strict enforcement of the requirement to obtain an environmental sanitation clearance of
sludge collection treatment and disposal before these companies are issued their environmental
sanitation permit.
(11) The Department of Education (DepEd), under the Philippine Environment Code (PD 1152),
is mandated to integrate subjects on environmental education in its school curricula at all levels.32
Under Sec. 118 of RA 8550, the DepEd, in collaboration with the DA, Commission on Higher
Education, and Philippine Information Agency, shall launch and pursue a nationwide educational
campaign to promote the development, management, conservation, and proper use of the
environment. Under the Ecological Solid Waste Management Act (RA 9003), on the other hand,
it is directed to strengthen the integration of environmental concerns in school curricula at all
levels, with an emphasis on waste management principles.33

(12) The Department of Budget and Management (DBM) is tasked under Sec. 2, Title XVII of
the Administrative Code of 1987 to ensure the efficient and sound utilization of government
funds and revenues so as to effectively achieve the countrys development objectives.34
One of the countrys development objectives is enshrined in RA 9275 or the Philippine Clean
Water Act of 2004. This law stresses that the State shall pursue a policy of economic growth in a
manner consistent with the protection, preservation, and revival of the quality of our fresh,
brackish, and marine waters. It also provides that it is the policy of the government, among
others, to streamline processes and procedures in the prevention, control, and abatement of
pollution mechanisms for the protection of water resources; to promote environmental strategies
and use of appropriate economic instruments and of control mechanisms for the protection of
water resources; to formulate a holistic national program of water quality management that
recognizes that issues related to this management cannot be separated from concerns about water
sources and ecological protection, water supply, public health, and quality of life; and to provide
a comprehensive management program for water pollution focusing on pollution prevention.
Thus, the DBM shall then endeavor to provide an adequate budget to attain the noble objectives
of RA 9275 in line with the countrys development objectives.
All told, the aforementioned enabling laws and issuances are in themselves clear, categorical, and
complete as to what are the obligations and mandate of each agency/petitioner under the law. We
need not belabor the issue that their tasks include the cleanup of the Manila Bay.
Now, as to the crux of the petition. Do Secs. 17 and 20 of the Environment Code encompass the
cleanup of water pollution in general, not just specific pollution incidents?
Secs. 17 and 20 of the Environment Code
Include Cleaning in General
The disputed sections are quoted as follows:
Section 17. Upgrading of Water Quality.Where the quality of water has deteriorated to
a degree where its state will adversely affect its best usage, the government agencies
concerned shall take such measures as may be necessary to upgrade the quality of such
water to meet the prescribed water quality standards.
Section 20. Clean-up Operations.It shall be the responsibility of the polluter to contain,
remove and clean-up water pollution incidents at his own expense. In case of his failure
to do so, the government agencies concerned shall undertake containment, removal and
clean-up operations and expenses incurred in said operations shall be charged against the
persons and/or entities responsible for such pollution.
When the Clean Water Act (RA 9275) took effect, its Sec. 16 on the subject, o, amended the
counterpart provision (Sec. 20) of the Environment Code (PD 1152). Sec. 17 of PD 1152
continues, however, to be operational.

The amendatory Sec. 16 of RA 9275 reads:


SEC. 16. Cleanup Operations.Notwithstanding the provisions of Sections 15 and 26
hereof, any person who causes pollution in or pollutes water bodies in excess of the
applicable and prevailing standards shall be responsible to contain, remove and clean up
any pollution incident at his own expense to the extent that the same water bodies have
been rendered unfit for utilization and beneficial use: Provided, That in the event
emergency cleanup operations are necessary and the polluter fails to immediately
undertake the same, the [DENR] in coordination with other government agencies
concerned, shall undertake containment, removal and cleanup operations. Expenses
incurred in said operations shall be reimbursed by the persons found to have caused such
pollution under proper administrative determination x x x. Reimbursements of the cost
incurred shall be made to the Water Quality Management Fund or to such other funds
where said disbursements were sourced.
As may be noted, the amendment to Sec. 20 of the Environment Code is more apparent than real
since the amendment, insofar as it is relevant to this case, merely consists in the designation of
the DENR as lead agency in the cleanup operations.
Petitioners contend at every turn that Secs. 17 and 20 of the Environment Code concern
themselves only with the matter of cleaning up in specific pollution incidents, as opposed to
cleanup in general. They aver that the twin provisions would have to be read alongside the
succeeding Sec. 62(g) and (h), which defines the terms "cleanup operations" and "accidental
spills," as follows:
g. Clean-up Operations [refer] to activities conducted in removing the pollutants
discharged or spilled in water to restore it to pre-spill condition.
h. Accidental Spills [refer] to spills of oil or other hazardous substances in water that
result from accidents such as collisions and groundings.
Petitioners proffer the argument that Secs. 17 and 20 of PD 1152 merely direct the government
agencies concerned to undertake containment, removal, and cleaning operations of a specific
polluted portion or portions of the body of water concerned. They maintain that the application
of said Sec. 20 is limited only to "water pollution incidents," which are situations that presuppose
the occurrence of specific, isolated pollution events requiring the corresponding containment,
removal, and cleaning operations. Pushing the point further, they argue that the aforequoted Sec.
62(g) requires "cleanup operations" to restore the body of water to pre-spill condition, which
means that there must have been a specific incident of either intentional or accidental spillage of
oil or other hazardous substances, as mentioned in Sec. 62(h).
As a counterpoint, respondents argue that petitioners erroneously read Sec. 62(g) as delimiting
the application of Sec. 20 to the containment, removal, and cleanup operations for accidental
spills only. Contrary to petitioners posture, respondents assert that Sec. 62(g), in fact, even
expanded the coverage of Sec. 20. Respondents explain that without its Sec. 62(g), PD 1152 may
have indeed covered only pollution accumulating from the day-to-day operations of businesses

around the Manila Bay and other sources of pollution that slowly accumulated in the bay.
Respondents, however, emphasize that Sec. 62(g), far from being a delimiting provision, in fact
even enlarged the operational scope of Sec. 20, by including accidental spills as among the water
pollution incidents contemplated in Sec. 17 in relation to Sec. 20 of PD 1152.
To respondents, petitioners parochial view on environmental issues, coupled with their narrow
reading of their respective mandated roles, has contributed to the worsening water quality of the
Manila Bay. Assuming, respondents assert, that petitioners are correct in saying that the cleanup
coverage of Sec. 20 of PD 1152 is constricted by the definition of the phrase "cleanup
operations" embodied in Sec. 62(g), Sec. 17 is not hobbled by such limiting definition. As
pointed out, the phrases "cleanup operations" and "accidental spills" do not appear in said Sec.
17, not even in the chapter where said section is found.
Respondents are correct. For one thing, said Sec. 17 does not in any way state that the
government agencies concerned ought to confine themselves to the containment, removal, and
cleaning operations when a specific pollution incident occurs. On the contrary, Sec. 17 requires
them to act even in the absence of a specific pollution incident, as long as water quality "has
deteriorated to a degree where its state will adversely affect its best usage." This section, to
stress, commands concerned government agencies, when appropriate, "to take such measures as
may be necessary to meet the prescribed water quality standards." In fine, the underlying duty to
upgrade the quality of water is not conditional on the occurrence of any pollution incident.
For another, a perusal of Sec. 20 of the Environment Code, as couched, indicates that it is
properly applicable to a specific situation in which the pollution is caused by polluters who fail
to clean up the mess they left behind. In such instance, the concerned government agencies shall
undertake the cleanup work for the polluters account. Petitioners assertion, that they have to
perform cleanup operations in the Manila Bay only when there is a water pollution incident and
the erring polluters do not undertake the containment, removal, and cleanup operations, is quite
off mark. As earlier discussed, the complementary Sec. 17 of the Environment Code comes into
play and the specific duties of the agencies to clean up come in even if there are no pollution
incidents staring at them. Petitioners, thus, cannot plausibly invoke and hide behind Sec. 20 of
PD 1152 or Sec. 16 of RA 9275 on the pretext that their cleanup mandate depends on the
happening of a specific pollution incident. In this regard, what the CA said with respect to the
impasse over Secs. 17 and 20 of PD 1152 is at once valid as it is practical. The appellate court
wrote: "PD 1152 aims to introduce a comprehensive program of environmental protection and
management. This is better served by making Secs. 17 & 20 of general application rather than
limiting them to specific pollution incidents."35
Granting arguendo that petitioners position thus described vis--vis the implementation of Sec.
20 is correct, they seem to have overlooked the fact that the pollution of the Manila Bay is of
such magnitude and scope that it is well-nigh impossible to draw the line between a specific and
a general pollution incident. And such impossibility extends to pinpointing with reasonable
certainty who the polluters are. We note that Sec. 20 of PD 1152 mentions "water pollution
incidents" which may be caused by polluters in the waters of the Manila Bay itself or by
polluters in adjoining lands and in water bodies or waterways that empty into the bay. Sec. 16 of
RA 9275, on the other hand, specifically adverts to "any person who causes pollution in or

pollutes water bodies," which may refer to an individual or an establishment that pollutes the
land mass near the Manila Bay or the waterways, such that the contaminants eventually end up in
the bay. In this situation, the water pollution incidents are so numerous and involve nameless and
faceless polluters that they can validly be categorized as beyond the specific pollution incident
level.
Not to be ignored of course is the reality that the government agencies concerned are so
undermanned that it would be almost impossible to apprehend the numerous polluters of the
Manila Bay. It may perhaps not be amiss to say that the apprehension, if any, of the Manila Bay
polluters has been few and far between. Hence, practically nobody has been required to contain,
remove, or clean up a given water pollution incident. In this kind of setting, it behooves the
Government to step in and undertake cleanup operations. Thus, Sec. 16 of RA 9275, previously
Sec. 20 of PD 1152, covers for all intents and purposes a general cleanup situation.
The cleanup and/or restoration of the Manila Bay is only an aspect and the initial stage of the
long-term solution. The preservation of the water quality of the bay after the rehabilitation
process is as important as the cleaning phase. It is imperative then that the wastes and
contaminants found in the rivers, inland bays, and other bodies of water be stopped from
reaching the Manila Bay. Otherwise, any cleanup effort would just be a futile, cosmetic exercise,
for, in no time at all, the Manila Bay water quality would again deteriorate below the ideal
minimum standards set by PD 1152, RA 9275, and other relevant laws. It thus behooves the
Court to put the heads of the petitioner-department-agencies and the bureaus and offices under
them on continuing notice about, and to enjoin them to perform, their mandates and duties
towards cleaning up the Manila Bay and preserving the quality of its water to the ideal level.
Under what other judicial discipline describes as "continuing mandamus,"36 the Court may, under
extraordinary circumstances, issue directives with the end in view of ensuring that its decision
would not be set to naught by administrative inaction or indifference. In India, the doctrine of
continuing mandamus was used to enforce directives of the court to clean up the length of the
Ganges River from industrial and municipal pollution.37
The Court can take judicial notice of the presence of shanties and other unauthorized structures
which do not have septic tanks along the Pasig-Marikina-San Juan Rivers, the National Capital
Region (NCR) (Paraaque-Zapote, Las Pias) Rivers, the Navotas-Malabon-Tullahan-Tenejeros
Rivers, the Meycuayan-Marilao-Obando (Bulacan) Rivers, the Talisay (Bataan) River, the Imus
(Cavite) River, the Laguna De Bay, and other minor rivers and connecting waterways, river
banks, and esteros which discharge their waters, with all the accompanying filth, dirt, and
garbage, into the major rivers and eventually the Manila Bay. If there is one factor responsible
for the pollution of the major river systems and the Manila Bay, these unauthorized structures
would be on top of the list. And if the issue of illegal or unauthorized structures is not seriously
addressed with sustained resolve, then practically all efforts to cleanse these important bodies of
water would be for naught. The DENR Secretary said as much.38
Giving urgent dimension to the necessity of removing these illegal structures is Art. 51 of PD
1067 or the Water Code,39 which prohibits the building of structures within a given length along
banks of rivers and other waterways. Art. 51 reads:

The banks of rivers and streams and the shores of the seas and lakes throughout
their entire length and within a zone of three (3) meters in urban areas, twenty (20)
meters in agricultural areas and forty (40) meters in forest areas, along their margins, are
subject to the easement of public use in the interest of recreation, navigation,
floatage, fishing and salvage. No person shall be allowed to stay in this zone longer
than what is necessary for recreation, navigation, floatage, fishing or salvage or to build
structures of any kind. (Emphasis added.)
Judicial notice may likewise be taken of factories and other industrial establishments standing
along or near the banks of the Pasig River, other major rivers, and connecting waterways. But
while they may not be treated as unauthorized constructions, some of these establishments
undoubtedly contribute to the pollution of the Pasig River and waterways. The DILG and the
concerned LGUs, have, accordingly, the duty to see to it that non-complying industrial
establishments set up, within a reasonable period, the necessary waste water treatment facilities
and infrastructure to prevent their industrial discharge, including their sewage waters, from
flowing into the Pasig River, other major rivers, and connecting waterways. After such period,
non-complying establishments shall be shut down or asked to transfer their operations.
At this juncture, and if only to dramatize the urgency of the need for petitioners-agencies to
comply with their statutory tasks, we cite the Asian Development Bank-commissioned study on
the garbage problem in Metro Manila, the results of which are embodied in the The Garbage
Book. As there reported, the garbage crisis in the metropolitan area is as alarming as it is
shocking. Some highlights of the report:
1. As early as 2003, three land-filled dumpsites in Metro Manila - the Payatas, Catmon
and Rodriquez dumpsites - generate an alarming quantity of lead and leachate or liquid
run-off. Leachate are toxic liquids that flow along the surface and seep into the earth and
poison the surface and groundwater that are used for drinking, aquatic life, and the
environment.
2. The high level of fecal coliform confirms the presence of a large amount of human
waste in the dump sites and surrounding areas, which is presumably generated by
households that lack alternatives to sanitation. To say that Manila Bay needs
rehabilitation is an understatement.
3. Most of the deadly leachate, lead and other dangerous contaminants and possibly
strains of pathogens seeps untreated into ground water and runs into the Marikina and
Pasig River systems and Manila Bay.40
Given the above perspective, sufficient sanitary landfills should now more than ever be
established as prescribed by the Ecological Solid Waste Management Act (RA 9003). Particular
note should be taken of the blatant violations by some LGUs and possibly the MMDA of Sec. 37,
reproduced below:
Sec. 37. Prohibition against the Use of Open Dumps for Solid Waste.No open dumps
shall be established and operated, nor any practice or disposal of solid waste by any

person, including LGUs which [constitute] the use of open dumps for solid waste, be
allowed after the effectivity of this Act: Provided, further that no controlled dumps shall
be allowed (5) years following the effectivity of this Act. (Emphasis added.)
RA 9003 took effect on February 15, 2001 and the adverted grace period of five (5) years which
ended on February 21, 2006 has come and gone, but no single sanitary landfill which strictly
complies with the prescribed standards under RA 9003 has yet been set up.
In addition, there are rampant and repeated violations of Sec. 48 of RA 9003, like littering,
dumping of waste matters in roads, canals, esteros, and other public places, operation of open
dumps, open burning of solid waste, and the like. Some sludge companies which do not have
proper disposal facilities simply discharge sludge into the Metro Manila sewerage system that
ends up in the Manila Bay. Equally unabated are violations of Sec. 27 of RA 9275, which enjoins
the pollution of water bodies, groundwater pollution, disposal of infectious wastes from vessels,
and unauthorized transport or dumping into sea waters of sewage or solid waste and of Secs. 4
and 102 of RA 8550 which proscribes the introduction by human or machine of substances to the
aquatic environment including "dumping/disposal of waste and other marine litters, discharge of
petroleum or residual products of petroleum of carbonaceous materials/substances [and other]
radioactive, noxious or harmful liquid, gaseous or solid substances, from any water, land or air
transport or other human-made structure."
In the light of the ongoing environmental degradation, the Court wishes to emphasize the
extreme necessity for all concerned executive departments and agencies to immediately act and
discharge their respective official duties and obligations. Indeed, time is of the essence; hence,
there is a need to set timetables for the performance and completion of the tasks, some of them as
defined for them by law and the nature of their respective offices and mandates.
The importance of the Manila Bay as a sea resource, playground, and as a historical landmark
cannot be over-emphasized. It is not yet too late in the day to restore the Manila Bay to its former
splendor and bring back the plants and sea life that once thrived in its blue waters. But the tasks
ahead, daunting as they may be, could only be accomplished if those mandated, with the help
and cooperation of all civic-minded individuals, would put their minds to these tasks and take
responsibility. This means that the State, through petitioners, has to take the lead in the
preservation and protection of the Manila Bay.
The era of delays, procrastination, and ad hoc measures is over. Petitioners must transcend their
limitations, real or imaginary, and buckle down to work before the problem at hand becomes
unmanageable. Thus, we must reiterate that different government agencies and instrumentalities
cannot shirk from their mandates; they must perform their basic functions in cleaning up and
rehabilitating the Manila Bay. We are disturbed by petitioners hiding behind two untenable
claims: (1) that there ought to be a specific pollution incident before they are required to act; and
(2) that the cleanup of the bay is a discretionary duty.
RA 9003 is a sweeping piece of legislation enacted to radically transform and improve waste
management. It implements Sec. 16, Art. II of the 1987 Constitution, which explicitly provides

that the State shall protect and advance the right of the people to a balanced and healthful
ecology in accord with the rhythm and harmony of nature.
So it was that in Oposa v. Factoran, Jr. the Court stated that the right to a balanced and healthful
ecology need not even be written in the Constitution for it is assumed, like other civil and
political rights guaranteed in the Bill of Rights, to exist from the inception of mankind and it is
an issue of transcendental importance with intergenerational implications.41 Even assuming the
absence of a categorical legal provision specifically prodding petitioners to clean up the bay, they
and the men and women representing them cannot escape their obligation to future generations
of Filipinos to keep the waters of the Manila Bay clean and clear as humanly as possible.
Anything less would be a betrayal of the trust reposed in them.
WHEREFORE, the petition is DENIED. The September 28, 2005 Decision of the CA in CAG.R. CV No. 76528 and SP No. 74944 and the September 13, 2002 Decision of the RTC in Civil
Case No. 1851-99 are AFFIRMED but with MODIFICATIONS in view of subsequent
developments or supervening events in the case. The fallo of the RTC Decision shall now read:
WHEREFORE, judgment is hereby rendered ordering the abovenamed defendantgovernment agencies to clean up, rehabilitate, and preserve Manila Bay, and restore and
maintain its waters to SB level (Class B sea waters per Water Classification Tables under
DENR Administrative Order No. 34 [1990]) to make them fit for swimming, skin-diving,
and other forms of contact recreation.
In particular:
(1) Pursuant to Sec. 4 of EO 192, assigning the DENR as the primary agency responsible for the
conservation, management, development, and proper use of the countrys environment and
natural resources, and Sec. 19 of RA 9275, designating the DENR as the primary government
agency responsible for its enforcement and implementation, the DENR is directed to fully
implement its Operational Plan for the Manila Bay Coastal Strategy for the rehabilitation,
restoration, and conservation of the Manila Bay at the earliest possible time. It is ordered to call
regular coordination meetings with concerned government departments and agencies to ensure
the successful implementation of the aforesaid plan of action in accordance with its indicated
completion schedules.
(2) Pursuant to Title XII (Local Government) of the Administrative Code of 1987 and Sec. 25 of
the Local Government Code of 1991,42 the DILG, in exercising the Presidents power of general
supervision and its duty to promulgate guidelines in establishing waste management programs
under Sec. 43 of the Philippine Environment Code (PD 1152), shall direct all LGUs in Metro
Manila, Rizal, Laguna, Cavite, Bulacan, Pampanga, and Bataan to inspect all factories,
commercial establishments, and private homes along the banks of the major river systems in
their respective areas of jurisdiction, such as but not limited to the Pasig-Marikina-San Juan
Rivers, the NCR (Paraaque-Zapote, Las Pias) Rivers, the Navotas-Malabon-TullahanTenejeros Rivers, the Meycauayan-Marilao-Obando (Bulacan) Rivers, the Talisay (Bataan)
River, the Imus (Cavite) River, the Laguna De Bay, and other minor rivers and waterways that
eventually discharge water into the Manila Bay; and the lands abutting the bay, to determine

whether they have wastewater treatment facilities or hygienic septic tanks as prescribed by
existing laws, ordinances, and rules and regulations. If none be found, these LGUs shall be
ordered to require non-complying establishments and homes to set up said facilities or septic
tanks within a reasonable time to prevent industrial wastes, sewage water, and human wastes
from flowing into these rivers, waterways, esteros, and the Manila Bay, under pain of closure or
imposition of fines and other sanctions.
(3) As mandated by Sec. 8 of RA 9275,43 the MWSS is directed to provide, install, operate, and
maintain the necessary adequate waste water treatment facilities in Metro Manila, Rizal, and
Cavite where needed at the earliest possible time.
(4) Pursuant to RA 9275,44 the LWUA, through the local water districts and in coordination with
the DENR, is ordered to provide, install, operate, and maintain sewerage and sanitation facilities
and the efficient and safe collection, treatment, and disposal of sewage in the provinces of
Laguna, Cavite, Bulacan, Pampanga, and Bataan where needed at the earliest possible time.
(5) Pursuant to Sec. 65 of RA 8550,45 the DA, through the BFAR, is ordered to improve and
restore the marine life of the Manila Bay. It is also directed to assist the LGUs in Metro Manila,
Rizal, Cavite, Laguna, Bulacan, Pampanga, and Bataan in developing, using recognized
methods, the fisheries and aquatic resources in the Manila Bay.
(6) The PCG, pursuant to Secs. 4 and 6 of PD 979, and the PNP Maritime Group, in accordance
with Sec. 124 of RA 8550, in coordination with each other, shall apprehend violators of PD 979,
RA 8550, and other existing laws and regulations designed to prevent marine pollution in the
Manila Bay.
(7) Pursuant to Secs. 2 and 6-c of EO 51346 and the International Convention for the Prevention
of Pollution from Ships, the PPA is ordered to immediately adopt such measures to prevent the
discharge and dumping of solid and liquid wastes and other ship-generated wastes into the
Manila Bay waters from vessels docked at ports and apprehend the violators.
(8) The MMDA, as the lead agency and implementor of programs and projects for flood control
projects and drainage services in Metro Manila, in coordination with the DPWH, DILG, affected
LGUs, PNP Maritime Group, Housing and Urban Development Coordinating Council
(HUDCC), and other agencies, shall dismantle and remove all structures, constructions, and
other encroachments established or built in violation of RA 7279, and other applicable laws
along the Pasig-Marikina-San Juan Rivers, the NCR (Paraaque-Zapote, Las Pias) Rivers, the
Navotas-Malabon-Tullahan-Tenejeros Rivers, and connecting waterways and esteros in Metro
Manila. The DPWH, as the principal implementor of programs and projects for flood control
services in the rest of the country more particularly in Bulacan, Bataan, Pampanga, Cavite, and
Laguna, in coordination with the DILG, affected LGUs, PNP Maritime Group, HUDCC, and
other concerned government agencies, shall remove and demolish all structures, constructions,
and other encroachments built in breach of RA 7279 and other applicable laws along the
Meycauayan-Marilao-Obando (Bulacan) Rivers, the Talisay (Bataan) River, the Imus (Cavite)
River, the Laguna De Bay, and other rivers, connecting waterways, and esteros that discharge
wastewater into the Manila Bay.

In addition, the MMDA is ordered to establish, operate, and maintain a sanitary landfill, as
prescribed by RA 9003, within a period of one (1) year from finality of this Decision. On matters
within its territorial jurisdiction and in connection with the discharge of its duties on the
maintenance of sanitary landfills and like undertakings, it is also ordered to cause the
apprehension and filing of the appropriate criminal cases against violators of the respective penal
provisions of RA 9003,47 Sec. 27 of RA 9275 (the Clean Water Act), and other existing laws on
pollution.
(9) The DOH shall, as directed by Art. 76 of PD 1067 and Sec. 8 of RA 9275, within one (1) year
from finality of this Decision, determine if all licensed septic and sludge companies have the
proper facilities for the treatment and disposal of fecal sludge and sewage coming from septic
tanks. The DOH shall give the companies, if found to be non-complying, a reasonable time
within which to set up the necessary facilities under pain of cancellation of its environmental
sanitation clearance.
(10) Pursuant to Sec. 53 of PD 1152,48 Sec. 118 of RA 8550, and Sec. 56 of RA 9003,49 the
DepEd shall integrate lessons on pollution prevention, waste management, environmental
protection, and like subjects in the school curricula of all levels to inculcate in the minds and
hearts of students and, through them, their parents and friends, the importance of their duty
toward achieving and maintaining a balanced and healthful ecosystem in the Manila Bay and the
entire Philippine archipelago.
(11) The DBM shall consider incorporating an adequate budget in the General Appropriations
Act of 2010 and succeeding years to cover the expenses relating to the cleanup, restoration, and
preservation of the water quality of the Manila Bay, in line with the countrys development
objective to attain economic growth in a manner consistent with the protection, preservation, and
revival of our marine waters.
(12) The heads of petitioners-agencies MMDA, DENR, DepEd, DOH, DA, DPWH, DBM, PCG,
PNP Maritime Group, DILG, and also of MWSS, LWUA, and PPA, in line with the principle of
"continuing mandamus," shall, from finality of this Decision, each submit to the Court a
quarterly progressive report of the activities undertaken in accordance with this Decision.
No costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 160932

January 14, 2013

SPECIAL PEOPLE, INC. FOUNDATION, REPRESENTED BY ITS CHAIRMAN,


ROBERTO P. CERICOS, Petitioner,
vs.
NESTOR M. CANDA, BIENVENIDO LIPA YON, JULIAN D. AMADOR, BOHOL
PROVINCIAL CHIEF, REGIONAL DIRECTOR, AND NATIONAL DIRECTOR,
RESPECTIVELY, ENVIRONMENTAL MANAGEMENT BUREAU, DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES, AND THE SECRETARY OF THE
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, ALL SUED IN
BOTH THEIR OFFICIAL AND PRIVATE CAPACITIES, Respondents.
DECISION
BERSAMIN, J.:
The peremptory writ of mandamus is an extraordinary remedy that is issued only in extreme
necessity, and the ordinary course of procedure is powerless to afford an adequate and speedy
relief to one who has a clear legal right to the performance of the act to be compelled.
Antecedents
The petitioner was a proponent of a water-resource development and utilization project in
Barangay Jimilia-an in the Municipality of Loboc, Bohol that would involve the tapping and
purifying of water from the Loboc River, and the distribution of the purified water to the
residents of Loboc and six other municipalities. The petitioner applied for a Certificate of NonCoverage (CNC) with the Environmental Management Bureau (EMB) of the Department of
Environment and Natural Resources (DENR), Region 7, seeking to be exempt from the
requirement of the Environmental Compliance Certificate (ECC) under Section 4 of Presidential
Decree No. 1586 on the following justifications, to wit:
1) The whole project simply involves tapping of water from the Loboc River, filtering
and purifying it, and distributing the same to the consumers in the covered towns;
2) From the source to the filtration plant, then to the purifier stations, then finally to the
consumers households, water flows through steel pipes;

3) The filtration and purifying process employs the latest technology


"electrocatalytic"internationally accepted for safety and environment friendliness;
4) No waste is generated, as the electrocatalytic process dissolves all impurities in the
water;
5) The project involves no destruction [n]or harm to the environment. On the other hand,
it is environment friendly.1
Upon evaluating the nature and magnitude of the environmental impact of the project,
respondent Nestor M. Canda, then Chief of EMB in Bohol, rendered his findings in a letter dated
December 4, 2001, as follows:
1) The project is located within a critical area; hence, Initial Environmental Examination
is required.
2) The project is socially and politically sensitive therefore proof of social acceptability
should be established. Proper indorsement from the Protected Area Management Bureau
or PAMB should be secured.2 (Emphasis supplied)
On January 11, 2002, the petitioner appealed Candas findings to respondent EMB Region 7
Director Bienvenido L. Lipayon (RD Lipayon), claiming that it should also be issued a CNC
because the project was no different from the Loboc-Loay waterworks project of the Department
of Public Works and Highways (DPWH) that had recently been issued a CNC.3
On April 3, 2002, RD Lipayon notified the petitioner that its documents substantially complied
with the procedural aspects of the EMBs review, and that the application was assigned EMBDENR-7 Control No. CNC-02-080 for easy reference in case of follow-up and submission of
additional requirements.4
Later on, RD Lipayon informed the petitioner that an Initial Environmental Examination
document was required for the project due to its significant impact in the area.5
On August 26, 2002, RD Lipayon required the petitioner to submit the following documents to
enable the EMB to determine whether the project was within an environmentally critical area or
not, to wit:
1. Certification from DENR, Provincial Environment and Natural Resources Office
(PENRO) that it is not within areas declared by law as national parks, watershed reserves,
wildlife preservation area, sanctuaries and not within the purview of Republic Act No.
7586 or the National Integrated Protected Areas System (NIPAS) Act, and other issuances
including international commitments and declarations;
2. Certification from the DENR Regional Office/ PENRO [that] the areas within the
project do not constitute the habitat for any endangered or threatened species or
indigenous wildlife (Flora and Fauna).

3. Certification from the following:


3.1. Philippine Atmospheric Geophysical and Astronomical Services
Administration (PAGASA) that the area is not frequently visited or hard-hit by
typhoons. This shall refer to all areas where typhoon signal no. 3 not hoisted for at
least twice a year during the last five (5) years prior to the year of reckoning.
Years to be considered shall be from January 1995 to December 2001.
3.2. Philippine Institute of Volcanology and Seismology (PHIVOLCS) that the
area was not subjected to an earthquake of at least intensity VII in the Rossi-Forel
scale or its equivalent and hit by tsunamis during the period of 1638 until the year
2001.
3.3. PHIVOLCS that the area was not subjected to earthquakes of at least
intensity VII in the Rossi-Forel scale or its equivalent during the period of 1949
until the year 2001.
3.4. PAGASA that the area is not storm surge-prone.
3.5. Mines and Geosciences Bureau Region 7 (MGB 7) that the area is not located
along fault lines or within fault zones and not located in critical slope.
3.6. City Mayor and/or City Engineers Office that the area is not flood prone.
3.7. Network of Protected Areas for Agriculture (NPAA) of the Bureau of Soils
and Water Management (BSWM) that the area is not classified as Prime
Agricultural Land.
4. Certification from the Provincial Tourism Office or its equivalent office that areas in
your project are not set-aside as aesthetic potential tourist spot.
5. Certification from the National Water Resources Board (NWRB) that areas within your
project are not recharged areas of aquifer.
6. Certification from DENR regional Office and/or Environmental Management Bureau 7
(EMB 7) that Loboc River is not characterized by one or any combination of the
following conditions:
a. Tapped for domestic purposes;
b. With controlled and/or protected areas declared by appropriate authorities; and
c. Which support wildlife and fishery activities.
A Certificate of Non-Coverage will duly be issued to your foundation once all the above
mentioned required certifications are complied with.

Projects that are covered by P.D. 1586 or the Environmental Impact System (EIS) Law should
not start unless the Project Proponent should secure an Environmental Compliance Certificate
(ECC), otherwise penalties shall be imposed.6 (Emphases supplied)
On January 28, 2003, the petitioner submitted eight certifications,7 including the certification
issued by the Philippine Institute of Volcanology and Seismology (PHIVOLCS), as follows:
That the project area, Loboc, Bohol was subjected to an earthquake of Intensity VII in the
adapted Rossi-Forel scale of I-IX last February 8, 1990. The magnitude of the earthquake is 6.8
and the highest intensity reported was VIII, based on the Rossi-Forel Intensity Scale. During the
said earthquake, the PMI Academy Building collapsed while minor cracks were sustained by the
municipal hall, public school, town church and some other houses in the town. There were
reports that immediately after the earthquake, the force of the incoming waves from the sea
caused Alijuan River in the town of Duero to flow inland. The report also states that the waves
affected 10-50 meters of the coastal beach of the towns of Jagna, Duero, Guindulman, Garcia
Hernandez and Valencia.8 (Emphases supplied)
The petitioner failed to secure a certification from the Regional Office of the Mines and
Geosciences Bureau (RO-MGB) to the effect that the project area was not located along a fault
line/fault zone or a critical slope because RO-MGB did not have the data and expertise to render
such finding, and thus had to forward the petitioners request to the MGB Central Office.9
Upon the MGBs advice, the petitioner sought and obtained the required certification from
PHIVOLCS, but the certification did not state whether the project area was within a critical
slope. Instead, the certification stated that the project site was approximately 18 kilometers west
of the East Bohol Fault.10
Given the tenor of the certification from PHIVOLCS, RD Lipayons letter dated February 4,
2003 declared that the project was within an environmentally critical area, and that the petitioner
was not entitled to the CNC, viz:
After thorough review of your submitted certifications, it was found out that the area was
subjected to an earthquake of Intensity VII in the adapted Rossi-Forel scale wherein the
magnitude of the earthquake is 6.8 with the highest intensity reported of VIII and you fail to
support certification that the project area is not within critical slope. And based on the Water
Usage and Classification per Department Order (DAO) 34 Series of 1990, subject river system
was officially classified as Class B intended for swimming and bathing purposes. Moreover, one
component of your project involves opening of roadway connected to the barangay road.
Therefore, we reiterate our previous stand that your project is covered by the EIS System
pursuant to P.D. 1586, the Environmental Impact Statement Law.11
On March 27, 2003, the petitioner filed a petition for mandamus and damages in the Regional
Trial Court (RTC) in Loay, Bohol,12 alleging that it was now entitled to a CNC as a matter of
right after having complied with the certification requirements; and that the EMB had earlier
issued a CNC to the DPWH for a similar waterworks project in the same area.

In the decision dated November 18, 2003,13 the RTC dismissed the petition for mandamus upon
the following considerations, namely: (1) PHIVOLCS certified that the project site had been
subjected to an Intensity VII earthquake in 1990; (2) the CNC issued by the EMB to a similar
waterworks project of the DPWH in the same area was only for the construction of a unit spring
box intake and pump house, and the DENR issued a cease and desist order relative to the
DPWHs additional project to put up a water filtration plant therein; (3) the determination of
whether an area was environmentally critical was a task that pertained to the EMB; (4) the
assignment of a control number by the EMB to the petitioners application did not mean that the
application was as good as approved; (5) the RTC would not interfere with the primary
prerogative of the EMB to review the merits of the petitioners application for the CNC; and (6)
there was already a pending appeal lodged with the DENR Secretary.
Hence, this appeal brought directly to the Court via petition for review on certiorari.
Issues
The petitioner submits the following issues:
A. WHETHER OR NOT, AFTER PETITIONERS DUE COMPLIANCE WITH THE
REQUIREMENTS MANDATED BY RESPONDENTS FOR THE ISSUANCE OF THE
CERTIFICATE OF NON-COVERAGE (CNC) APPLIED FOR BY PETITIONER, IT IS
NOW THE RIPENED DUTY OF RESPONDENTS, THROUGH RESPONDENT EMB
REGIONAL DIRECTOR, TO ISSUE SAID DOCUMENT IN FAVOR OF
PETITIONER;
B. WHETHER OR NOT PETITIONER HAS EXHAUSTED AVAILABLE
ADMINISTRATIVE REMEDIES THROUGH AN APPEAL TO RESPONDENT DENR
SECRETARY WHO HAS SAT ON SAID APPEAL UP TO THE PRESENT;
C. WHETHER OR NOT PETITIONER IS ENTITLED TO RECOVER DAMAGES
FROM RESPONDENTS IN THEIR PERSONAL CAPACITY.14
The petitioner insists that RD Lipayon already exercised his discretion by finding that the
application substantially complied with the procedural aspects for review and by assigning
Control No. CNC-02-080 to its application; that after the petitioner complied with the
requirements enumerated in the August 26, 2002 letter of RD Lipayon, the EMB became dutybound to issue the CNC to the petitioner; that the EMB issued a CNC to a similar project of the
DPWH in the same area; that it filed an appeal with the DENR Secretary, but the appeal
remained unresolved; and that it brought the petition for mandamus precisely as a speedier
recourse.
In their comment, RD Lipayon and Canda aver that the act complained of against them involved
an exercise of discretion that could not be compelled by mandamus; that the petitioners
proposed project was located within an environmentally critical area, and the activities to be
done were so significant that they would create massive earth movement and environmental

degradation; that the petitioner violated the rule against forum shopping; and that the petitioner
had no cause of action against them for failure to exhaust administrative remedies.
On his part, the DENR Secretary, through the Solicitor General, contends that the petition raises
questions of fact that are not proper in a petition for review; that the petitioner should have
appealed to the CA under Rule 41 of the Rules of Court; that the grant or denial of a CNC
application is discretionary and cannot be compelled by mandamus; and that the petitioner failed
to exhaust administrative remedies.
Accordingly, the Court is called upon to resolve, firstly, whether the appeal directly to this Court
from the RTC was proper, and, secondly, whether the petition for mandamus was the correct
recourse.
Ruling
The petition for review is denied for its lack of merit.
1.
Petitioners appeal is improper under Rule 45, Rules of Court
This appeal by certiorari is being taken under Rule 45, Rules of Court, whose Section 1 expressly
requires that the petition shall raise only questions of law which must be distinctly set forth. Yet,
the petitioner hereby raises a question of fact whose resolution is decisive in this appeal. That
issue of fact concerns whether or not the petitioner established that its project was not located in
an environmentally critical area. For this reason, the Court is constrained to deny due course to
the petition for review.
It is a settled rule, indeed, that in the exercise of our power of review, the Court is not a trier of
facts and does not normally undertake the re-examination of the evidence presented by the
contending parties during the trial of the case. The Court relies on the findings of fact of the
Court of Appeals or of the trial court, and accepts such findings as conclusive and binding unless
any of the following exceptions obtains, namely: (a) when the findings are grounded entirely on
speculation, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd
or impossible; (c) when there is grave abuse of discretion; (d) when the judgment is based on a
misapprehension of facts; (e) when the findings of facts are conflicting; (f) when in making its
findings the Court of Appeals or the trial court went beyond the issues of the case, or its findings
are contrary to the admissions of both the appellant and the appellee; (g) when the findings are
contrary to the trial court; (h) when the findings are conclusions without citation of specific
evidence on which they are based; (i) when the facts set forth in the petition as well as in the
petitioners main and reply briefs are not disputed by the respondent; (j) when the findings of
fact are premised on the supposed absence of evidence and contradicted by the evidence on
record; and (k) when the Court of Appeals or the trial court manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly considered, would justify a different
conclusion.15 However, none of the aforementioned exceptions applies herein.

2.
Mandamus was an improper remedy for petitioner
We dismiss the present recourse because the petitioner failed to exhaust the available
administrative remedies, and because it failed to show that it was legally entitled to demand the
performance of the act by the respondents.
It is axiomatic, to begin with, that a party who seeks the intervention of a court of law upon an
administrative concern should first avail himself of all the remedies afforded by administrative
processes. The issues that an administrative agency is authorized to decide should not be
summarily taken away from it and submitted to a court of law without first giving the agency the
opportunity to dispose of the issues upon due deliberation.16 The court of law must allow the
administrative agency to carry out its functions and discharge its responsibilities within the
specialized areas of its competence.17 This rests on the theory that the administrative authority is
in a better position to resolve questions addressed to its particular expertise, and that errors
committed by subordinates in their resolution may be rectified by their superiors if given a
chance to do so.18
The records show that the petitioner failed to exhaust the available administrative remedies. At
the time RD Lipayon denied the petitioners application for the CNC, Administrative Order No.
42 dated November 2, 200219 had just vested the authority to grant or deny applications for the
ECC in the Director and Regional Directors of the EMB. Notwithstanding the lack of a specific
implementing guideline to what office the ruling of the EMB Regional Director was to be
appealed, the petitioner could have been easily guided in that regard by the Administrative Code
of 1987, which provides that the Director of a line bureau, such as the EMB,20 shall have
supervision and control over all division and other units, including regional offices, under the
bureau.21 Verily, supervision and control include the power to "review, approve, reverse or
modify acts and decisions of subordinate officials or units."22 Accordingly, the petitioner should
have appealed the EMB Regional Directors decision to the EMB Director, who exercised
supervision and control over the former.
It is relevant to mention that the DENR later promulgated Administrative Order No. 2003-3023 in
order to define where appeals should be taken, providing as follows:
Section 6. Appeal
Any party aggrieved by the final decision on the ECC/CNC applications may, within 15 days
from receipt of such decision, file an appeal on the following grounds:
a. Grave abuse of discretion on the part of the deciding authority, or
b. Serious errors in the review findings.

The DENR may adopt alternative conflict/dispute resolution procedures as a means to settle
grievances between proponents and aggrieved parties to avert unnecessary legal action. Frivolous
appeals shall not be countenanced.
The proponent or any stakeholder may file an appeal to the following:
1wphi1
Deciding Authority

Where to file the appeal

EMB Regional Office Director

Office of the EMB Director

EMB Central Office Director

Office of the DENR Secretary

DENR Secretary

Office of the President

Moreover, the petitioner states in its pleadings that it had a pending appeal with the DENR
Secretary.1wphi1 However, the records reveal that the subject of the appeal of the petitioner
was an undated resolution of the DENR Regional Director, Region VII, denying its application
for the CNC,24 not the decision of RD Lipayon. Nonetheless, even assuming that the pending
appeal with the DENR Secretary had related to RD Lipayons decision, the petitioner should still
have waited for the DENR Secretary to resolve the appeal in line with the principle of exhaustion
of administrative remedies. Its failure to do so rendered its resort to mandamus in the RTC
premature. The omission is fatal, because mandamus is a remedy only when there is no appeal,
nor any plain, speedy and adequate remedy in the ordinary course of law.25
Another reason for denying due course to this review is that the petitioner did not establish that
the grant of its application for the CNC was a purely ministerial in nature on the part of RD
Lipayon. Hence, mandamus was not a proper remedy.
The CNC is a certification issued by the EMB certifying that a project is not covered by the
Environmental Impact Statement System (EIS System) and that the project proponent is not
required to secure an ECC.26 The EIS System was established by Presidential Decree (P.D.) No.
1586 pursuant to Section 4 of P.D. No. 1151 (Philippine Environmental Policy) that required all
entities to submit an EIS for projects that would have a significant effect on the environment,
thus:
Section 4. Environmental Impact Statements. Pursuant to the above enunciated policies and
goals, all agencies and instrumentalities of the national government, including governmentowned or controlled corporations, as well as private corporations, firms and entities shall
prepare, file and include in every action, project or undertaking which significantly affects the
quality of the environment a detailed statement on
(a) the environmental impact of the proposed action, project or undertaking
(b) any adverse environmental effect which cannot be avoided should the proposal be
implemented

(c) alternative to the proposed action


(d) a determination that the short-term uses of the resources of the environment are
consistent with the maintenance and enhancement of the long-term productivity of the
same; and
(e) whenever a proposal involves the use of depletable or non-renewable resources, a
finding must be made that such use and commitment are warranted.
xxxx
P.D. No. 1586 exempted from the requirement of an EIS the projects and areas not declared by
the President of the Philippines as environmentally critical,27 thus:
Section 5. Environmentally Non-Critical Projects. - All other projects, undertakings and areas not
declared by the Presidents as environmentally critical shall be considered as non-critical and
shall not be required to submit an environmental impact statement. The National Environmental
Protection Council, thru the Ministry of Human Settlements may however require non-critical
projects and undertakings to provide additional environmental safeguards as it may deem
necessary.
On December 14, 1981, the President issued Proclamation No. 2146 declaring areas and types of
projects as environmentally critical and within the scope of the EIS System, as follows:
A. Environmentally Critical Projects
I. Heavy Industries
a. Non-ferrous metal industries
b. Iron and steel mills
c. Petroleum and petro-chemical industries including oil and gas
d. Smelting plants
II. Resource Extractive Industries
a. Major mining and quarrying projects
b. Forestry projects
1. Logging
2. Major wood processing projects

3. Introduction of fauna (exotic-animals) in public/private forests


4. Forest occupancy
5. Extraction of mangrove products
6. Grazing
c. Fishery Projects
1. Dikes for fishpond development projects
III. Infrastructure Projects
a. Major dams
b. Major power plants (fossil-fueled, nuclear fueled, hydroelectric or geothermal)
c. Major reclamation projects
d. Major roads and bridges.
B. Environmentally Critical Areas
1. All areas declared by law as national parks, watershed reserves, wildlife
preserves and sanctuaries;
2. Areas set aside as aesthetic potential tourist spots;
3. Areas which constitute the habitat for any endangered or threatened species of
indigenous Philippine Wildlife (flora and fauna);
4. Areas of unique historic, archaeological, or scientific interests;
5. Areas which are traditionally occupied by cultural communities or tribes;
6. Areas frequently visited and/or hard-hit by natural calamities (geologic hazards,
floods, typhoons, volcanic activity, etc.);
7. Areas with critical slopes;
8. Areas classified as prime agricultural lands;
9. Recharged areas of aquifers;

10. Water bodies characterized by one or any combination of the following


conditions;
a. tapped for domestic purposes
b. within the controlled and/or protected areas declared by appropriate
authorities
c. which support wildlife and fishery activities
11. Mangrove areas characterized by one or any combination of the following
conditions:
a. with primary pristine and dense young growth;
b. adjoining mouth of major river systems;
c. near or adjacent to traditional productive fry or fishing grounds;
d. which act as natural buffers against shore erosion, strong winds and
storm floods;
e. on which people are dependent for their livelihood.
12. Coral reef, characterized by one or any combination of the following
conditions:
a. with 50% and above live coralline cover;
b. spawning and nursery grounds for fish;
c. which act as natural breakwater of coastlines.
Projects not included in the foregoing enumeration were considered non-critical to the
environment and were entitled to the CNC.
The foregoing considerations indicate that the grant or denial of an application for ECC/CNC is
not an act that is purely ministerial in nature, but one that involves the exercise of judgment and
discretion by the EMB Director or Regional Director, who must determine whether the project or
project area is classified as critical to the environment based on the documents to be submitted
by the applicant.
The petitioner maintains that RD Lipayon already exercised his discretion in its case when he
made his finding that the application substantially complied with the procedural requirements for
review. As such, he was then obliged to issue the CNC once the petitioner had submitted the
required certifications.

The petitioner errs on two grounds.


Firstly, RD Lipayon had not yet fully exercised his discretion with regard to the CNC application
when he made his finding. It is clear that his finding referred to the "procedural requirements for
review" only. He had still to decide on the substantive aspect of the application, that is, whether
the project and the project area were considered critical to the environment. In fact, this was the
reason why RD Lipayon required the petitioner to submit certifications from the various
government agencies concerned. Surely, the required certifications were not mere formalities,
because they would serve as the bases for his decision on whether to grant or deny the
application.
Secondly, there is no sufficient showing that the petitioner satisfactorily complied with the
requirement to submit the needed certifications. For one, it submitted no certification to the
effect that the project site was not within a critical slope. Also, the PHIVOLCSs certification
showed that the project site had experienced an Intensity VII earthquake in 1990, a fact that
sufficed to place the site in the category of "areas frequently visited and/or hard-hit by natural
calamities." Clearly, the petitioner failed to establish that it had the legal right to be issued the
CNC applied for, warranting the denial of its application.
It is not amiss for us to observe, therefore, that the petitioner grossly misunderstood the nature of
the remedy of mandamus. To avoid similar misunderstanding of the remedy hereafter, a short
exposition on the nature and office of the remedy is now appropriate.
The writ of mandamus is of very ancient and obscure origin. It is believed that the writ was
originally part of the class of writs or mandates issued by the English sovereign to direct his
subjects to perform a particular act or duty.28 The earliest writs were in the form of letters
missive, and were mere personal commands. The command was a law in itself, from which there
was no appeal. The writ of mandamus was not only declaratory of a duty under an existing law,
but was a law in itself that imposed the duty, the performance of which it commanded.29 The
King was considered as the fountain and source of justice, and when the law did not afford a
remedy by the regular forms of proceedings, the prerogative powers of the sovereign were
invoked in aid of the ordinary powers of the courts.30
A judicial writ of mandamus, issued in the Kings name out of the court of Kings Bench that had
a general supervisory power over all inferior jurisdictions and officers, gradually supplanted the
old personal command of the sovereign.31 The court of Kings Bench, acting as the general
guardian of public rights and in the exercise of its authority to grant the writ, rendered the writ of
mandamus the suppletory means of substantial justice in every case where there was no other
specific legal remedy for a legal right, and ensured that all official duties were fulfilled whenever
the subject-matter was properly within its control.32 Early on, the writ of mandamus was
particularly used to compel public authorities to return the petitioners to public offices from
which they had been unlawfully removed.33
Mandamus was, therefore, originally a purely prerogative writ emanating from the King himself,
superintending the police and preserving the peace within the realm.34 It was allowed only in
cases affecting the sovereign, or the interest of the public at large.35 The writ of mandamus grew

out of the necessity to compel the inferior courts to exercise judicial and ministerial powers
invested in them by restraining their excesses, preventing their negligence and restraining their
denial of justice.36
Over time, the writ of mandamus has been stripped of its highly prerogative features and has
been assimilated to the nature of an ordinary remedy. Nonetheless, the writ has remained to be an
extraordinary remedy in the sense that it is only issued in extraordinary cases and where the
usual and ordinary modes of proceeding and forms of remedy are powerless to afford redress to a
party aggrieved, and where without its aid there would be a failure of justice.37
The writ of mandamus has also retained an important feature that sets it apart from the other
remedial writs, i.e., that it is used merely to compel action and to coerce the performance of a
pre-existing duty.38 In fact, a doctrine well-embedded in our jurisprudence is that mandamus will
issue only when the petitioner has a clear legal right to the performance of the act sought to be
compelled and the respondent has an imperative duty to perform the same.39 The petitioner bears
the burden to show that there is such a clear legal right to the performance of the act, and a
corresponding compelling duty on the part of the respondent to perform the act.40
A key principle to be observed in dealing with petitions for mandamus is that such extraordinary
remedy lies to compel the performance of duties that are purely ministerial in nature, not those
that are discretionary.41 A purely ministerial act or duty is one that an officer or tribunal performs
in a given state of facts, in a prescribed manner, in obedience to the mandate of a legal authority,
without regard to or the exercise of its own judgment upon the propriety or impropriety of the act
done. The duty is ministerial only when its discharge requires neither the exercise of official
discretion or judgment.42
The petitioner's disregard of the foregoing fundamental requisites for mandamus rendered its
petition in the RTC untenable and devoid of merit.
WHEREFORE, the Court DENIES the petition for review on certiorari; and ORDERS the
petitioner to pay the costs of suit.
SO ORDERED.

E. Quo Warranto [Rule 66]

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 179895

December 18, 2008

FERDINAND S. TOPACIO, petitioner,


vs.
ASSOCIATE JUSTICE OF THE SANDIGANBAYAN GREGORY SANTOS ONG and
THE OFFICE OF THE SOLICITOR GENERAL, respondents.
DECISION
CARPIO MORALES, J.:
Ferdinand Topacio (petitioner) via the present petition for certiorari and prohibition seeks, in the
main, to prevent Justice Gregory Ong (Ong) from further exercising the powers, duties and
responsibilities of a Sandiganbayan Associate Justice.
It will be recalled that in Kilosbayan Foundation v. Ermita,1 the Court, by Decision of July 3,
2007, enjoined Ong "from accepting an appointment to the position of Associate Justice of the
Supreme Court or assuming the position and discharging the functions of that office, until he
shall have successfully completed all necessary steps, through the appropriate adversarial
proceedings in court, to show that he is a natural-born Filipino citizen and correct the records of
his birth and citizenship."2
On July 9, 2007, Ong immediately filed with the Regional Trial Court (RTC) of Pasig City a
Petition for the "amendment/ correction/ supplementation or annotation of an entry in [his]
Certificate of Birth," docketed as S.P. Proc No. 11767-SJ, "Gregory Santos Ong v. The Civil
Registrar of San Juan, Metro Manila, et al."3
Meanwhile, petitioner, by verified Letter-Request/Complaint4 of September 5, 2007, implored
respondent Office of the Solicitor General (OSG) to initiate post-haste a quo warranto
proceeding against Ong in the latters capacity as an incumbent Associate Justice of the
Sandiganbayan. Invoking paragraph 1, Section 7, Article VIII of the Constitution5 in conjunction
with the Courts Decision in Kilosbayan Foundation v. Ermita,6 petitioner points out that naturalborn citizenship is also a qualification for appointment as member of the Sandiganbayan and that
Ong has failed to meet the citizenship requirement from the time of his appointment as such in
October 1998.

The OSG, by letter of September 25, 2007, informed petitioner that it "cannot favorably act on
[his] request for the filing of a quo warranto petition until the [RTC] case shall have been
terminated with finality."7 Petitioner assails this position of the OSG as being tainted with grave
abuse of discretion, aside from Ongs continuous discharge of judicial functions.
Hence, this petition, positing that:
IN OCTOBER OF 1998, RESPONDENT WAS NOT DULY-QUALIFIED UNDER THE
FIRST SENTENCE OF PARAGRAPH 1, SECTION 7, OF THE 1987
CONSTITUTION, TO BE APPOINTED AN ASSOCIATE JUSTICE OF THE
SANDIGANBAYAN, MERELY ON THE STRENGTH OF AN IDENTIFICATION
CERTIFICATE ISSUED BY THE BUREAU OF IMMIGRATION AND A 1ST
INDORSEMENT DATED 22 MAY 1997 ISSUED BY THE SECRETARY OF JUSTICE,
BECAUSE, AS OF OCTOBER 1998, RESPONDETS BIRTH CERTIFICATE
INDICATED THAT RESPONDENT IS A CHINESE CITIZEN AND BECAUSE, AS OF
OCTOBER 1998, THE RECORDS OF THIS HONORABLE COURT DECLARED
THAT RESPONDENT IS A NATURALIZED FILIPINO CITIZEN.8 (Underscoring
supplied)
Petitioner thus contends that Ong should immediately desist from holding the position of
Associate Justice of the Sandiganbayan since he is disqualified on the basis of citizenship,
whether gauged from his birth certificate which indicates him to be a Chinese citizen or against
his bar records bearing out his status as a naturalized Filipino citizen, as declared in Kilosbayan
Foundation v. Ermita.
Ong, on the other hand, states that Kilosbayan Foundation v. Ermita did not annul or declare null
his appointment as Justice of the Supreme Court, but merely enjoined him from accepting his
appointment, and that there is no definitive pronouncement therein that he is not a natural-born
Filipino. He informs that he, nonetheless, voluntarily relinquished the appointment to the
Supreme Court out of judicial statesmanship.9
By Manifestation and Motion to Dismiss of January 3, 2008, Ong informs that the RTC, by
Decision of October 24, 2007, already granted his petition and recognized him as a natural-born
citizen. The Decision having, to him, become final,10he caused the corresponding annotation
thereof on his Certificate of Birth.11
Invoking the curative provisions of the 1987 Constitution, Ong explains that his status as a
natural-born citizen inheres from birth and the legal effect of such recognition retroacts to the
time of his birth.
Ong thus concludes that in view of the RTC decision, there is no more legal or factual basis for
the present petition, or at the very least this petition must await the final disposition of the RTC
case which to him involves a prejudicial issue.
The parties to the present petition have exchanged pleadings12 that mirror the issues in the
pending petitions for certiorari in G.R. No. 180543, "Kilosbayan Foundation, et al. v. Leoncio

M. Janolo, Jr., et al," filed with this Court and in CA-G.R. SP No. 102318, "Ferdinand S.
Topacio v. Leoncio M. Janolo, Jr., et al.,"13 filed with the appellate court, both of which assail,
inter alia, the RTC October 24, 2007 Decision.
First, on the objection concerning the verification of the petition.
The OSG alleges that the petition is defectively verified, being based on petitioners "personal
knowledge and belief and/or authentic records," and having been "acknowledged" before a
notary public who happens to be petitioners father, contrary to the Rules of Court14 and the
Rules on Notarial Practice of 2004,15 respectively.
This technicality deserves scant consideration where the question at issue, as in this case, is one
purely of law and there is no need of delving into the veracity of the allegations in the petition,
which are not disputed at all by respondents.16
One factual allegation extant from the petition is the exchange of written communications
between petitioner and the OSG, the truthfulness of which the latter does not challenge.
Moreover, petitioner also verifies such correspondence on the basis of the thereto attached
letters, the authenticity of which he warranted in the same verification-affidavit. Other
allegations in the petition are verifiable in a similar fashion, while the rest are posed as citations
of law.
The purpose of verification is simply to secure an assurance that the allegations of the petition or
complaint have been made in good faith; or are true and correct, not merely speculative. This
requirement is simply a condition affecting the form of pleadings, and non-compliance therewith
does not necessarily render it fatally defective. Indeed, verification is only a formal, not a
jurisdictional requirement.17
In the same vein, the Court brushes aside the defect, insofar as the petition is concerned, of a
notarial act performed by one who is disqualified by reason of consanguinity, without prejudice
to any administrative complaint that may be filed against the notary public.
Certiorari with respect to the OSG
On the issue of whether the OSG committed grave abuse of discretion in deferring the filing of a
petition for quo warranto, the Court rules in the negative.
Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary
or despotic manner by reason of passion or personal hostility, and it must be so patent and gross
as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or
to act at all in contemplation of law.18
The Court appreciates no abuse of discretion, much less, a grave one, on the part of the OSG in
deferring action on the filing of a quo warranto case until after the RTC case has been terminated

with finality. A decision is not deemed tainted with grave abuse of discretion simply because the
affected party disagrees with it.19
The Solicitor General is the counsel of the government, its agencies and instrumentalities, and its
officials or agents. In the discharge of its task, the Solicitor General must see to it that the best
interest of the government is upheld within the limits set by law.20
The pertinent rules of Rule 66 on quo warranto provide:
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;
(b) A public officer who does or suffers an act which, by the provision of law,
constitutes a ground for the forfeiture of his office; or
(c) An association which acts as a corporation within the Philippines without
being legally incorporated or without lawful authority so to act.
SEC. 2. When Solicitor General or public prosecutor must commence action. The
Solicitor General or a public prosecutor, when directed by the President of the
Philippines, or when upon complaint or otherwise he has good reason to believe that any
case specified in the preceding section can be established by proof, must commence such
action.
SEC. 3. When Solicitor General or public prosecutor may commence action with
permission of court. The Solicitor General or a public prosecutor may, with the
permission of the court in which the action is to be commenced, bring such an action at
the request and upon the relation of another person; but in such case the officer bringing
it may first require an indemnity for the expenses and costs of the action in an amount
approved by and to be deposited in the court by the person at whose request and upon
whose relation the same is brought. (Italics and emphasis in the original)
In the exercise of sound discretion, the Solicitor General may suspend or turn down the
institution of an action for quo warranto where there are just and valid reasons.21 Thus, in
Gonzales v. Chavez,22 the Court ruled:
Like the Attorney-General of the United States who has absolute discretion in choosing
whether to prosecute or not to prosecute or to abandon a prosecution already started, our
own Solicitor General may even dismiss, abandon, discontinue or compromise suits
either with or without stipulation with the other party. Abandonment of a case, however,
does not mean that the Solicitor General may just drop it without any legal and valid
reasons, for the discretion given him is not unlimited. Its exercise must be, not only

within the parameters get by law but with the best interest of the State as the ultimate
goal.23
Upon receipt of a case certified to him, the Solicitor General exercises his discretion in the
management of the case. He may start the prosecution of the case by filing the appropriate action
in court or he may opt not to file the case at all. He may do everything within his legal authority
but always conformably with the national interest and the policy of the government on the matter
at hand.24
It appears that after studying the case, the Solicitor General saw the folly of re-litigating the same
issue of Ongs citizenship in the quo warranto case simultaneously with the RTC case, not to
mention the consequent risk of forum-shopping. In any event, the OSG did not totally write finis
to the issue as it merely advised petitioner to await the outcome of the RTC case.
Certiorari and Prohibition with respect to Ong
By petitioners admission, what is at issue is Ongs title to the office of Associate Justice of
Sandiganbayan.25 He claims to have been constrained to file the present petition after the OSG
refused to heed his request to institute a suit for quo warranto. Averring that Ong is disqualified
to be a member of any lower collegiate court, petitioner specifically prays that, after appropriate
proceedings, the Court
. . . issue the writs of certiorari and prohibition against Respondent Ong, ordering
Respondent Ong to cease and desist from further exercising the powers, duties, and
responsibilities of a Justice of the Sandiganbayan due to violation of the first sentence of
paragraph 1, Section 7, of the 1987 Constitution; . . . issue the writs of certiorari and
prohibition against Respondent Ong and declare that he was disqualified from being
appointed to the post of Associate Justice of the Sandiganbayan in October of 1998,
considering that, as of October of 1998, the birth certificate of Respondent Ong declared
that he is a Chinese citizen, while even the records of this Honorable Court, as of October
of 1998, declared that Respondent Ong is a naturalized Filipino; x x x26
While denominated as a petition for certiorari and prohibition, the petition partakes of the nature
of a quo warranto proceeding with respect to Ong, for it effectively seeks to declare null and
void his appointment as an Associate Justice of the Sandiganbayan for being unconstitutional.
While the petition professes to be one for certiorari and prohibition, petitioner even adverts to a
"quo warranto" aspect of the petition.27
Being a collateral attack on a public officers title, the present petition for certiorari and
prohibition must be dismissed.
The title to a public office may not be contested except directly, by quo warranto proceedings;
and it cannot be assailed collaterally,28 even through mandamus29 or a motion to annul or set
aside order.30 In Nacionalista Party v. De Vera,31 the Court ruled that prohibition does not lie to
inquire into the validity of the appointment of a public officer.

x x x [T]he writ of prohibition, even when directed against persons acting as judges or
other judicial officers, cannot be treated as a substitute for quo warranto or be rightfully
called upon to perform any of the functions of the writ. If there is a court, judge or officer
de facto, the title to the office and the right to act cannot be questioned by prohibition. If
an intruder takes possession of a judicial office, the person dispossessed cannot obtain
relief through a writ of prohibition commanding the alleged intruder to cease from
performing judicial acts, since in its very nature prohibition is an improper remedy by
which to determine the title to an office.32
Even if the Court treats the case as one for quo warranto, the petition is, just the same,
dismissible.
A quo warranto proceeding is the proper legal remedy to determine the right or title to the
contested public office and to oust the holder from its enjoyment.33 It is brought against the
person who is alleged to have usurped, intruded into, or unlawfully held or exercised the public
office,34 and may be commenced by the Solicitor General or a public prosecutor, as the case may
be, or by any person claiming to be entitled to the public office or position usurped or unlawfully
held or exercised by another.35
Nothing is more settled than the principle, which goes back to the 1905 case of Acosta v. Flor,36
reiterated in the recent 2008 case of Feliciano v. Villasin,37 that for a quo warranto petition to
be successful, the private person suing must show a clear right to the contested office. In
fact, not even a mere preferential right to be appointed thereto can lend a modicum of legal
ground to proceed with the action.38
In the present case, petitioner presented no sufficient proof of a clear and indubitable franchise to
the office of an Associate Justice of the Sandiganbayan. He in fact concedes that he was never
entitled to assume the office of an Associate Justice of the Sandiganbayan.39
In the instance in which the Petition for Quo Warranto is filed by an individual in his own
name, he must be able to prove that he is entitled to the controverted public office,
position, or franchise; otherwise, the holder of the same has a right to the undisturbed
possession thereof. In actions for Quo Warranto to determine title to a public office, the
complaint, to be sufficient in form, must show that the plaintiff is entitled to the office. In
Garcia v. Perez, this Court ruled that the person instituting Quo Warranto proceedings on
his own behalf, under Section 5, Rule 66 of the Rules of Court, must aver and be able to
show that he is entitled to the office in dispute. Without such averment or evidence of
such right, the action may be dismissed at any stage.40 (Emphasis in the original)
The rightful authority of a judge, in the full exercise of his public judicial functions, cannot be
questioned by any merely private suitor, or by any other, except in the form especially provided
by law.41 To uphold such action would encourage every disgruntled citizen to resort to the courts,
thereby causing incalculable mischief and hindrance to the efficient operation of the
governmental machine.42

Clearly then, it becomes entirely unwarranted at this time to pass upon the citizenship of Ong.
The Court cannot, upon the authority of the present petition, determine said question without
encroaching on and preempting the proceedings emanating from the RTC case. Even petitioner
clarifies that he is not presently seeking a resolution on Ongs citizenship, even while he
acknowledges the uncertainty of Ongs natural-born citizenship.43
The present case is different from Kilosbayan Foundation v. Ermita, given Ongs actual physical
possession and exercise of the functions of the office of an Associate Justice of the
Sandiganbayan, which is a factor that sets into motion the de facto doctrine.
Suffice it to mention that a de facto officer is one who is in possession of the office and is
discharging its duties under color of authority, and by color of authority is meant that derived
from an election or appointment, however irregular or informal, so that the incumbent is not a
mere volunteer.44 If a person appointed to an office is subsequently declared ineligible therefor,
his presumably valid appointment will give him color of title that will confer on him the status of
a de facto officer.45
x x x A judge de facto assumes the exercise of a part of the prerogative of sovereignty,
and the legality of that assumption is open to the attack of the sovereign power alone.
Accordingly, it is a well-established principle, dating back from the earliest period and
repeatedly confirmed by an unbroken current of decisions, that the official acts of a de
facto judge are just as valid for all purposes as those of a de jure judge, so far as the
public or third persons who are interested therein are concerned.46
If only to protect the sanctity of dealings by the public with persons whose ostensible authority
emanates from the State, and without ruling on the conditions for the interplay of the de facto
doctrine, the Court declares that Ong may turn out to be either a de jure officer who is deemed,
in all respects, legally appointed and qualified and whose term of office has not expired, or a de
facto officer who enjoys certain rights, among which is that his title to said office may not be
contested except directly by writ of quo warranto,47 which contingencies all depend on the final
outcome of the RTC case.
With the foregoing disquisition, it becomes unnecessary to dwell on the ancillary issues raised by
the parties.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 191560

March 29, 2011

HON. LUIS MARIO M. GENERAL, Commissioner, National Police Commission,


Petitioner,
vs.
HON. ALEJANDRO S. URRO, in his capacity as the new appointee vice herein petitioner
HON. LUIS MARIO M. GENERAL, National Police Commission, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
HON. LUIS MARIO M. GENERAL, Commissioner, National Police Commission,
Petitioner,
vs.
President GLORIA MACAPAGAL-ARROYO, thru Executive Secretary LEANDRO
MENDOZA, in Her capacity as the appointing power, HON. RONALDO V. PUNO, in His
capacity as Secretary of the Department of Interior and Local Government and as ExOfficio Chairman of the National Police Commission and HON. EDUARDO U. ESCUETA,
ALEJANDRO S. URRO, and HON. CONSTANCIA P. DE GUZMAN as the midnight
appointees, Respondents.
DECISION
BRION, J.:
Before the Court are the Consolidated Petitions for Quo Warranto,1 and Certiorari and/or
Prohibition2 with urgent prayer for the issuance of a temporary restraining order (TRO) and/or
preliminary injunction filed by Atty. Luis Mario General (petitioner). The petitioner seeks to
declare unconstitutional the appointments of Alejandro S. Urro, Constancia P. de Guzman and
Eduardo U. Escueta (collectively, the respondents) as Commissioners of the National Police
Commission (NAPOLCOM), and to prohibit then Executive Secretary Leandro Mendoza and
Department of Interior and Local Government (DILG) Secretary Ronaldo V. Puno from
enforcing the respondents oath of office. Particularly, the petitioner asks that respondent Urro be
ousted as NAPOLCOM Commissioner and he be allowed to continue in office.
THE ANTECEDENTS
On September 20, 2004, then President Gloria Macapagal-Arroyo (PGMA) appointed Imelda C.
Roces (Roces) as acting Commissioner of the NAPOLCOM, representing the civilian sector.3 On

January 25, 2006, PGMA reappointed Roces as acting NAPOLCOM Commissioner.4 When
Roces died in September 2007, PGMA appointed the petitioner on July 21, 20085 as acting
NAPOLCOM Commissioner in place of Roces. On the same date, PGMA appointed Eduardo U.
Escueta (Escueta) as acting NAPOLCOM Commissioner and designated him as NAPOLCOM
Vice Chairman.6
Later, PGMA appointed Alejandro S. Urro (Urro) in place of the petitioner, Constancia P. de
Guzman in place of Celia Leones, and Escueta as permanent NAPOLCOM Commissioners.
Urros appointment paper is dated March 5, 2010; while the appointment papers of De Guzman
and Escueta are both dated March 8, 2010.7 On March 9, 2010, Escueta took his oath of office
before Makati Regional Trial Court Judge Alberico Umali.8
In a letter dated March 19, 2010, DILG Head Executive Assistant/Chief-of-Staff Pascual V.
Veron Cruz, Jr. issued separate congratulatory letters to the respondents. The letter uniformly
reads.
You have just been appointed COMMISSIONER xxx National Police Commission. xxx
Attached is your appointment paper duly signed by Her Excellency, President Macapagal
Arroyo.9
After being furnished a copy of the congratulatory letters on March 22, 2010,10 the petitioner
filed the present petition questioning the validity of the respondents appointments mainly on the
ground that it violates the constitutional prohibition against midnight appointments.11
On March 25, 2010 and April 27, 2010, respondents Urro and de Guzman took their oath of
office as NAPOLCOM Commissioners before DILG Secretary Puno and Sandiganbayan
Associate Justice Jose R. Hernandez, respectively.12
On July 30, 2010, the newly elected President of the Republic of the Philippines, His Excellency
Benigno S. Aquino III, issued Executive Order No. 2 (E.O. No. 2) "Recalling, Withdrawing, and
Revoking Appointments Issued by the Previous Administration in Violation of the Constitutional
Ban on Midnight Appointments." The salient portions of E.O. No. 2 read:
SECTION 1. Midnight Appointments Defined. The following appointments made by the
former President and other appointing authorities in departments, agencies, offices, and
instrumentalities, including government-owned or controlled corporations, shall be considered as
midnight appointments:
(a) Those made on or after March 11, 2010, including all appointments bearing dates
prior to March 11, 2010 where the appointee has accepted, or taken his oath, or assumed
public office on or after March 11, 2010, except temporary appointments in the executive
positions when continued vacancies will prejudice public service or endanger public
safety as may be determined by the appointing authority.
(b) Those made prior to March 11, 2010, but to take effect after said date or appointments
to office that would be vacant only after March 11, 2010.

(c) Appointments and promotions made during the period of 45 days prior to the May 10,
2010 elections in violation of Section 261 of the Omnibus Election Code.
SECTION 2. Recall, Withdraw, and Revocation of Midnight Appointments. Midnight
appointments, as defined under Section 1, are hereby recalled, withdrawn, and revoked. The
positions covered or otherwise affected are hereby declared vacant. (Emphasis supplied.)
THE PETITION
The petitioner claims that Roces was supposed to serve a full term of six years counted from the
date of her appointment in October (should be September) 2004.13 Since she failed to finish her
six-year term, then the petitioner is entitled to serve this unexpired portion or until October
(should be September) 2010.14 The petitioner invokes Republic Act (R.A.) No. 697515 (otherwise
known as the Department of the Interior and Local Government Act of 1990) which requires that
vacancies in the NAPOLCOM "shall be filled up for the unexpired term only."16 Because of the
mandatory word "shall," the petitioner concludes that the appointment issued to him was really a
"regular" appointment, notwithstanding what appears in his appointment paper. As a regular
appointee, the petitioner argues that he cannot be removed from office except for cause.
The petitioner alternatively submits that even if his appointment were temporary, a temporary
appointment does not give the President the license to abuse a public official simply because he
lacks security of tenure.17 He asserts that the validity of his termination from office depends on
the validity of the appointment of the person intended to replace him. He explains that until a
presidential appointment is "officially released," there is no "appointment" to speak of. Since the
appointment paper of respondent Urro, while bearing a date prior to the effectivity of the
constitutional ban on appointments,18 was officially released (per the congratulatory letter dated
March 19, 2010 issued to Urro) when the appointment ban was already in effect, then the
petitioners appointment, though temporary in nature, should remain effective as no new and
valid appointment was effectively made.
The petitioner assails the validity of the appointments of respondents De Guzman and Escueta,
claiming that they were also made in violation of the constitutional ban on appointments.
THE COMMENTS OF THE RESPONDENTS and THE OFFICE
OF THE SOLICITOR GENERAL (OSG)
Prefatorily, the respondents characterize Escuetas inclusion in the present petition as an error
since his appointment, acceptance and assumption of office all took place before the
constitutional ban on appointments started. Thus, there is no "case or controversy" as to Escueta.
The respondents posit that the petitioner is not a real party-in-interest to file a petition for quo
warranto since he was merely appointed in an acting capacity and could be validly removed from
office at anytime.
The respondents likewise counter that what the ban on midnight appointments under Section 15,
Article VII of the Constitution prohibits is only the making of an appointment by the President

sixty (60) days before the next presidential elections and until his term expires; it does not
prohibit the acceptance by the appointee of his appointment within the same prohibited period.19
The respondents claim that "appointment" which is a presidential act, must be distinguished from
the "acceptance" or "rejection" of the appointment, which is the act of the appointee. Section 15,
Article VII of the Constitution is directed only against the President and his act of appointment,
and is not concerned with the act/s of the appointee. Since the respondents were appointed (per
the date appearing in their appointment papers) before the constitutional ban took effect, then
their appointments are valid.
The respondents assert that their appointments cannot be considered as midnight appointments
under the Dominador R. Aytona v. Andres V. Castillo, et al.20 ruling, as restated in In Re:
Appointments dated March 30, 1998 of Hon. Mateo A. Valenzuela, et al.21 and Arturo M. de
Castro v. Judicial and Bar Council, et al.,22 since the petitioner failed to substantiate his claim that
their appointments were made only "for the purpose of influencing the Presidential elections," or
for "partisan reasons."23
The respondents pray for the issuance of a TRO to stop the implementation of E.O. No. 2, and
for the consolidation of this case with the pending cases of Tamondong v. Executive Secretary24
and De Castro v. Office of the President25 which similarly assail the validity of E.O. No. 2.
On the other hand, while the OSG considers the respondents appointments within the scope of
"midnight appointments" as defined by E.O. No. 2, the OSG nonetheless submits that the
petitioner is not entitled to the remedy of quo warranto in view of the nature of his appointment.
The OSG claims that since an appointment in an acting capacity cannot exceed one year, the
petitioners appointment ipso facto expired on July 21, 2009.26
PETITIONERS REPLY
The petitioner argues in reply that he is the legally subsisting commissioner until another
qualified commissioner is validly appointed by the new President to replace him.27
The petitioner likewise claims that the respondents appeared to have skirted the element of
issuance of an appointment in considering whether an appointment is made. The petitioner
asserts that to constitute an appointment, the Presidents act of affixing his signature must be
coupled with the physical issuance of the appointment to the appointee i.e., the appointment
paper is officially issued in favor of the appointee through the Presidents proper Cabinet
Secretary. The making of an appointment is different from its issuance since prior to the official
issuance of an appointment, the appointing authority enjoys the prerogative to change his mind.
In the present case, the respondents appointment papers were officially issued and
communicated to them only on March 19, 2010, well within the period of the constitutional ban,
as shown by the congratulatory letters individually issued to them.
Given this premise, the petitioner claims that he correctly impleaded Escueta in this case since
his appointment also violates the Constitution. The petitioner adds that Escueta was appointed on
July 21, 2008, although then as acting NAPOLCOM Commissioner. By permanently appointing

him as NAPOLCOM Commissioner, he stands to be in office for more than six years, in
violation of R.A. No. 6975.28
The petitioner argues that even granting that the President can extend appointments in an acting
capacity to NAPOLCOM Commissioners, it may not be done by "successive appointments" in
the same capacity without violating R.A. No. 6975, as amended, which provides a fixed and
staggered term of office for NAPOLCOM Commissioners.29
THE COURTS RULING
We dismiss the petition for lack of merit.
When questions of constitutional significance are raised, the Court can exercise its power of
judicial review only if the following requisites are present: (1) the existence of an actual and
appropriate case; (2) the existence of personal and substantial interest on the part of the party
raising the constitutional question; (3) recourse to judicial review is made at the earliest
opportunity; and (4) the constitutional question is the lis mota of the case.30
Both parties dwelt lengthily on the issue of constitutionality of the respondents appointments in
light of E.O. No. 2 and the subsequent filing before the Court of several petitions questioning
this Executive Order. The parties, however, appear to have overlooked the basic principle in
constitutional adjudication that enjoins the Court from passing upon a constitutional question,
although properly presented, if the case can be disposed of on some other ground.31 In
constitutional law terms, this means that we ought to refrain from resolving any constitutional
issue "unless the constitutional question is the lis mota of the case."
Lis mota literally means "the cause of the suit or action." This last requisite of judicial review is
simply an offshoot of the presumption of validity accorded the executive and legislative acts of
our co-equal branches of the government. Ultimately, it is rooted in the principle of separation of
powers. Given the presumed validity of an executive act, the petitioner who claims otherwise has
the burden of showing first that the case cannot be resolved unless the constitutional question he
raised is determined by the Court.32
In the present case, the constitutionality of the respondents appointments is not the lis mota of
the case. From the submitted pleadings, what is decisive is the determination of whether the
petitioner has a cause of action to institute and maintain this present petition a quo warranto
against respondent Urro. If the petitioner fails to establish his cause of action for quo warranto, a
discussion of the constitutionality of the appointments of the respondents is rendered completely
unnecessary. The inclusion of the grounds for certiorari and/or prohibition does not alter the
essential character of the petitioners action since he does not even allege that he has a personal
and substantial interest in raising the constitutional issue insofar as the other respondents are
concerned.
The resolution of whether a cause of action exists, in turn, hinges on the nature of the petitioners
appointment. We frame the issues under the following questions:

1. What is the nature of the petitioners appointment as acting NAPOLCOM


Commissioner?
2. Does the petitioner have the clear right to be reinstated to his former position and to
oust respondent Urro as NAPOLCOM Commissioner?
I. Nature of petitioners appointment
a. A staggered term of office is not inconsistent with an acting appointment
The petitioner asserts that contrary to what appears in his appointment paper, the appointment
extended to him was really a regular appointment; thus, he cannot be removed from office except
for cause. The petitioner argues that the appointment of an acting NAPOLCOM Commissioner
or, at the very least, the "successive appointments" of NAPOLCOM Commissioners in an acting
capacity contravenes the safeguards that the law - R.A. No. 697533 - intends through the
staggered term of office of NAPOLCOM Commissioners.
Notably, the petitioner does not expressly claim that he was issued a permanent appointment;
rather, he claims that his appointment is actually a regular appointment since R.A. No. 6975 does
not allegedly allow an appointment of a NAPOLCOM Commissioner in an acting capacity.
At the outset, the petitioners use of terms needs some clarification. Appointments may be
classified into two: first, as to its nature; and second, as to the manner in which it is made.34
Under the first classification, appointments can either be permanent or temporary (acting). A
basic distinction is that a permanent appointee can only be removed from office for cause;
whereas a temporary appointee can be removed even without hearing or cause.35 Under the
second classification, an appointment can either be regular or ad interim. A regular appointment
is one made while Congress is in session, while an ad interim appointment is one issued during
the recess of Congress. In strict terms, presidential appointments that require no confirmation
from the Commission on Appointments36 cannot be properly characterized as either a regular or
an ad interim appointment.
In this light, what the petitioner may have meant is a permanent (as contrasted to a temporary or
acting) appointment to the office of a NAPOLCOM Commissioner, at least for the duration of
the unexpired portion of his predecessor (Roces).
Generally, the power to appoint vested in the President includes the power to make temporary
appointments, unless he is otherwise specifically prohibited by the Constitution or by the law, or
where an acting appointment is repugnant to the nature of the office involved.37 The Presidents
power to issue an acting appointment is particularly authorized by the Administrative Code of
1987 (Executive Order No. 292).
CHAPTER 5
POWER OF APPOINTMENT

Section 16. Power of Appointment. - The President shall exercise the power to appoint such
officials as provided for in the Constitution and laws.
Section 17. Power to Issue Temporary Designation.
(1) The President may temporarily designate an officer already in the government service
or any other competent person to perform the functions of an office in the executive
branch, appointment to which is vested in him by law, when: (a) the officer regularly
appointed to the office is unable to perform his duties by reason of illness, absence or any
other cause; or (b) there exists a vacancy;
(2) xxx
(3) In no case shall a temporary designation exceed one (1) year.
The purpose of an acting or temporary appointment is to prevent a hiatus in the discharge of
official functions by authorizing a person to discharge those functions pending the selection of a
permanent or another appointee. An acting appointee accepts the position on the condition that
he shall surrender the office once he is called to do so by the appointing authority. Therefore, his
term of office is not fixed but endures at the pleasure of the appointing authority. His separation
from the service does not import removal but merely the expiration of his term a mode of
termination of official relations that falls outside the coverage of the constitutional provision on
security of tenure38 since no removal from office is involved.
The power to appoint is essentially executive in nature39 and the limitations on or qualifications
in the exercise of this power are strictly construed.40 In the present case, the petitioner posits that
the law itself, R.A. No. 6975, prohibits the appointment of a NAPOLCOM Commissioner in an
acting capacity by staggering his term of office. R.A. No. 6975, on the term of office, states:
Section 16. Term of Office. The four (4) regular and full-time Commissioners shall be
appointed by the President upon the recommendation of the Secretary. Of the first four (4)
commissioners to be appointed, two (2) commissioners shall serve for six (6) years and the two
(2) other commissioners for four (4) years. All subsequent appointments shall be for a period of
six (6) years each, without reappointment or extension.
Generally, the purpose for staggering the term of office is to minimize the appointing authoritys
opportunity to appoint a majority of the members of a collegial body. It also intended to ensure
the continuity of the body and its policies.41 A staggered term of office, however, is not a
statutory prohibition, direct or indirect, against the issuance of acting or temporary appointment.
It does not negate the authority to issue acting or temporary appointments that the Administrative
Code grants.
Ramon P. Binamira v. Peter D. Garrucho, Jr.,42 involving the Philippine Tourism Authority
(PTA), is an example of how this Court has recognized the validity of temporary appointments in
vacancies in offices whose holders are appointed on staggered basis. Under Presidential Decree
(P.D.) No. 189,43 (the charter of the PTA, as amended by P.D. No. 56444 and P.D. No. 140045), the

members of the PTAs governing body are all presidential appointees whose terms of office are
also staggered.46 This, notwithstanding, the Court sustained the temporary character of the
appointment extended by the President in favor of the PTA General Manager, even if the law47
also fixes his term of office at six years unless sooner removed for cause.
Interestingly, even a staggered term of office does not ensure that at no instance will the
appointing authority appoint all the members of a body whose members are appointed on
staggered basis.
The post-war predecessor of the NAPOLCOM was the Police Commission created under R.A.
No. 4864.48 Pursuant to the 1987 constitutional provision mandating the creation of one national
civilian police force,49 Congress enacted R.A. No. 6975 and created the NAPOLCOM to
exercise, inter alia, "administrative control over the Philippine National Police." Later, Congress
enacted R.A. No. 8551 which substantially retained the organizational structure, powers and
functions of the NAPOLCOM.50 Under these laws, the President has appointed the members of
the Commission whose terms of office are staggered.
Under Section 16 of R.A. No. 6975, the NAPOLCOM Commissioners are all given a fixed term
of six years (except the two of the first appointees who hold office only for four years). By
staggering their terms of office however, the four regular commissioners would not vacate their
offices at the same time since a vacancy will occur every two years.
Under the NAPOLCOM set up, the law does not appear to have been designed to attain the
purpose of preventing the same President from appointing all the NAPOLCOM Commissioners
by staggering their terms of office. R.A. No. 6975 took effect on January 1, 1991. In the usual
course, the term of office of the first two regular commissioners would have expired in 1997,
while the term of the other two commissioners would have expired in 1995. Since the term of the
President elected in the first national elections under the 1987 Constitution expired on June 30,
1998, then, theoretically, the sitting President for the 1992-1998 term could appoint all the
succeeding four regular NAPOLCOM Commissioners. The next President, on the other hand,
whose term ended in 2004, would have appointed the next succeeding Commissioners in 2001
and 2003.
It is noteworthy, too, that while the Court nullified the attempt of Congress to consider the terms
of office of the then NAPOLCOM Commissioners as automatically expired on the ground that
there was no bona fide reorganization of the NAPOLCOM,51 a provision on the staggering of
terms of office is evidently absent in R.A. No. 8551 - the amendatory law to R.A. No. 6975.
Section 7 of R.A. No. 8551 reads:
Section 7. Section 16 of Republic Act No. 6975 is hereby amended to read as follows:
"SEC. 16. Term of Office. The four (4) regular and full-time Commissioners shall be appointed
by the President for a term of six (6) years without re-appointment or extension."

Thus, as the law now stands, the petitioners claim that the appointment of an acting
NAPOLCOM Commissioner is not allowed based on the staggering of terms of office does not
even have any statutory basis.
Given the wide latitude of the Presidents appointing authority (and the strict construction against
any limitation on or qualification of this power), the prohibition on the President from issuing an
acting appointment must either be specific, or there must be a clear repugnancy between the
nature of the office and the temporary appointment. No such limitation on the Presidents
appointing power appears to be clearly deducible from the text of R.A. No. 6975 in the manner
we ruled in Nacionalista Party v. Bautista.52 In that case, we nullified the acting appointment
issued by the President to fill the office of a Commissioner of the Commission on Elections
(COMELEC) on the ground that it would undermine the independence of the COMELEC. We
ruled that given the specific nature of the functions performed by COMELEC Commissioners,
only a permanent appointment to the office of a COMELEC Commissioner can be made.
Under the Constitution, the State is mandated to establish and maintain a police force to be
administered and controlled by a national police commission. Pursuant to this constitutional
mandate, the Congress enacted R.A. No. 6975, creating the NAPOLCOM with the following
powers and functions:53
Section 14. Powers and Functions of the Commission. The Commission shall exercise the
following powers and functions:
(a) Exercise administrative control and operational supervision over the Philippine
National Police which shall mean the power to:
xxxx
b) Advise the President on all matters involving police functions and administration;
c) Render to the President and to the Congress an annual report on its activities and
accomplishments during the thirty (30) days after the end of the calendar year, which
shall include an appraisal of the conditions obtaining in the organization and
administration of police agencies in the municipalities, cities and provinces throughout
the country, and recommendations for appropriate remedial legislation;
d) Recommend to the President, through the Secretary, within sixty (60) days before the
commencement of each calendar year, a crime prevention program; and
e) Perform such other functions necessary to carry out the provisions of this Act and
as the President may direct. [Emphasis added.]
We find nothing in this enumeration of functions of the members of the NAPOLCOM that would
be subverted or defeated by the Presidents appointment of an acting NAPOLCOM
Commissioner pending the selection and qualification of a permanent appointee. Viewed as an
institution, a survey of pertinent laws and executive issuances54 will show that the NAPOLCOM

has always remained as an office under or within the Executive Department.55 Clearly, there is
nothing repugnant between the petitioners acting appointment, on one hand, and the nature of
the functions of the NAPOLCOM Commissioners or of the NAPOLCOM as an institution, on
the other.
b. R.A. No. 6975 does not prohibit the appointment of an acting NAPOLCOM Commissioner in
filling up vacancies in the NAPOLCOM
The petitioner next cites Section 18 of R.A. No. 6975 to support his claim that the appointment
of a NAPOLCOM Commissioner to fill a vacancy due to the permanent incapacity of a regular
Commissioner can only be permanent and not temporary:
Section 18. Removal from Office. The members of the Commission may be removed from
office for cause. All vacancies in the Commission, except through expiration of term, shall be
filled up for the unexpired term only: Provided, That any person who shall be appointed in this
case shall be eligible for regular appointment for another full term.
Nothing in the cited provision supports the petitioners conclusion. By using the word "only" in
Section 18 of R.A. No. 6975, the laws obvious intent is only to prevent the new appointee from
serving beyond the term of office of the original appointee. It does not prohibit the new
appointee from serving less than the unexpired portion of the term as in the case of a temporary
appointment.
While the Court previously inquired into the true nature of a supposed acting appointment for the
purpose of determining whether the appointing power is abusing the principle of temporary
appointment,56 the petitioner has not pointed to any circumstance/s which would warrant a
second look into and the invalidation of the temporary nature of his appointment.57
Even the petitioners citation of Justice Punos58 dissenting opinion in Teodoro B. Pangilinan v.
Guillermo T. Maglaya, etc.59 is inapt. Like the petitioner, Pangilinan was merely appointed in an
acting capacity and unarguably enjoyed no security of tenure. He was relieved from the service
after exposing certain anomalies involving his superiors. Upon hearing his plea for reinstatement,
the Court unanimously observed that Pangilinans relief was a punitive response from his
superiors. The point of disagreement, however, is whether Pangilinans lack of security of tenure
deprives him of the right to seek reinstatement. Considering that the law (Administrative Code of
1987) allows temporary appointments only for a period not exceeding twelve (12) months, the
majority considered Pangilinan to be without any judicial remedy since at the time of his
separation, he no longer had any right to the office. Justice Puno dissented, arguing that
Pangilinans superiors abuse of his temporary appointment furnishes the basis for the relief he
seeks.
In the present case, the petitioner does not even allege that his separation from the office
amounted to an abuse of his temporary appointment that would entitle him to the incidental
benefit of reinstatement.60 As we did in Pangilinan,61 we point out that the petitioners
appointment as Acting Commissioner was time-limited. His appointment ipso facto expired on
July 21, 2009 when it was not renewed either in an acting or a permanent capacity. With an

expired appointment, he technically now occupies no position on which to anchor his quo
warranto petition.
c. The petitioner is estopped
from claiming that he was permanently appointed
The petitioners appointment paper is dated July 21, 2008. From that time until he was apprised
on March 22, 2010 of the appointment of respondent Urro, the petitioner faithfully discharged
the functions of his office without expressing any misgivings on the character of his
appointment. However, when called to relinquish his office in favor of respondent Urro, the
petitioner was quick on his feet to refute what appeared in his appointment papers.
Under these facts, the additional circumstance of estoppel clearly militates against the petitioner.
A person who accepts an appointment in an acting capacity, extended and received without any
protest or reservation, and who acts by virtue of that appointment for a considerable time, cannot
later on be heard to say that the appointment was really a permanent one so that he could not be
removed except for cause.62
II. An acting appointee has no
cause of action for quo warranto
against the new appointee
The Rules of Court requires that an ordinary civil action must be based on a cause of action,63
which is defined as an act or omission of one party in violation of the legal right of the other
which causes the latter injury. While a quo warranto is a special civil action, the existence of a
cause of action is not any less required since both special and ordinary civil actions are governed
by the rules on ordinary civil actions subject only to the rules prescribed specifically for a
particular special civil action.64
Quo warranto is a remedy to try disputes with respect to the title to a public office.lihpwal
Generally, quo warranto proceedings are commenced by the Government as the proper partyplaintiff. However, under Section 5, Rule 66 of the Rules of Court, an individual may commence
such action if he claims to be entitled to the public office allegedly usurped by another. We stress
that the person instituting the quo warranto proceedings in his own behalf must show that he is
entitled to the office in dispute; otherwise, the action may be dismissed at any stage.65
Emphatically, Section 6, Rule 66 of the same Rules requires the petitioner to state in the petition
his right to the public office and the respondents unlawful possession of the disputed position.
As early as 1905,66 the Court already held that for a petition for quo warranto to be successful,
the suing private individual must show a clear right to the contested office.67 His failure to
establish this right warrants the dismissal of the suit for lack of cause of action; it is not even
necessary to pass upon the right of the defendant who, by virtue of his appointment, continues in
the undisturbed possession of his office.68
Since the petitioner merely holds an acting appointment (and an expired one at that), he clearly
does not have a cause of action to maintain the present petition.69 The essence of an acting

appointment is its temporariness and its consequent revocability at any time by the appointing
authority.70 The petitioner in a quo warranto proceeding who seeks reinstatement to an office, on
the ground of usurpation or illegal deprivation, must prove his clear right71 to the office for his
suit to succeed; otherwise, his petition must fail.
From this perspective, the petitioner must first clearly establish his own right to the disputed
office as a condition precedent to the consideration of the unconstitutionality of the respondents
appointments. The petitioners failure in this regard renders a ruling on the constitutional issues
raised completely unnecessary. Neither do we need to pass upon the validity of the respondents
appointment. These latter issues can be determined more appropriately in a proper case.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.

Burguete vs. Mayor, 94 Phil 930

SUPREME COURT
Manila
EN BANC
G.R. No. L-6538

May 10, 1954

PABLO BURGUETE, petitioner,


vs.
JOVENCIO Q. MAYOR, as Provincial Governor of Romblon, and ESTEBAN B. MONTESA, as
Acting Municipal Mayor of Badajoz, Romblon, respondents.
Aguedo F. Agbayani, Cirilo C. Montejo and Felix B. Morada for petitioner.
Francisco H. Marcial, Provincial Fiscal of Romblon, for respondents.
JUGO, J.:
The petitioner, Pablo Burguete, is the municipal mayor of Badajoz, Province of Romblon, and was
elected for that position in November, 1951; the respondent, Jovencio Q. Mayor, is the provincial
governor of Romblon; and Esteban B. Montesa, the acting municipal mayor of Badajoz, Province of
Romblon.
On August 21, 1952, a criminal complaint for serious slander was filed against Burguete in the
justice of the peace court of Badajoz.
On October 7, 1952, the case was forwarded to the Court of First Instance of Romblon.
On November 13, 1952, Jovencio Q. Mayor suspended the petitioner as mayor on the ground that a
criminal case against him was pending, and that it was the "standing policy of the Administration to
the place under suspension any elective official against whom a criminal action involving moral
turpitude is pending adjudication before the competent court."
The Governor directed Esteban B. Montesa, the vice-mayor, to act as mayor.
Burguete now files in this Court a petition for mandamus and quo warranto against Mayor and
Montesa.
The case for serious slander against Burguete is still, pending in the Court of First Instance.
Burguete has filed a motion to quash, but it was denied. The case could not be tried on the merits on
account of the non-appearance of the witnesses for the prosecution.
No administrative investigation by the provincial board has been conducted under section 2188 of
the Administrative Code.
The questions raised in this case are not new, as they have already been decided in the case of
Lacson vs. Roque,* (49 Off. Gaz., 93). There it was held that the mere filing of an

information for libel against a municipal officer is not a sufficient ground for

dispensing him. The same may be said with regard to serious slander, which
is another form of libel. Libel does not necessarily involve moral turpitude.
Furthermore, it would be an easy expedient to file a criminal complaint or
information against a municipal mayor for the purpose of suspending him, and
the suspension would last almost indefinitely, according to the time that would
elapse before the criminal case is finally terminated by conviction or acquittal.
It is unnecessary to elaborate here on the reasons given for the principle, as
they are set forth extensively in said decision.
Our conclusion is that the suspension of the petitioner is illegal and unjustified.
In view of the foregoing, the respondent Jovencio Q. Mayor is ordered to reinstate Pablo Burguete in
his office as municipal mayor of Badajoz, Romblon, and to oust the respondent Esteban B. Montesa,
as such officer, with costs against the respondents. It is so ordered.
Paras, C.J., Pablo, Bengzon, Montemayor, Reyes, Bautista Angelo, Labrador, and Concepcion, JJ.,
concur.

Footnotes
*

92 Phil., 456.
F. Expropriation [Rule 67]

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 168967

February 12, 2010

CITY OF ILOILO represented by HON. JERRY P. TREAS, City Mayor, Petitioner,


vs.
HON. LOLITA CONTRERAS-BESANA, Presiding Judge, Regional Trial Court, Branch
32, and ELPIDIO JAVELLANA, Respondents.
DECISION
DEL CASTILLO, J.:
It is arbitrary and capricious for the government to initiate expropriation proceedings, seize a
persons property, allow the order of expropriation to become final, but then fail to justly

compensate the owner for over 25 years. This is government at its most high-handed and
irresponsible, and should be condemned in the strongest possible terms. For its failure to
properly compensate the landowner, the City of Iloilo is liable for damages.
This Petition for Certiorari under Rule 65 of the Rules of Court with a prayer for the issuance of
a temporary restraining order seeks to overturn the three Orders issued by Regional Trial Court
(RTC) of Iloilo City, Branch 32 on the following dates: December 12, 2003 (the First Assailed
Order),1 June 15, 2004 (the Second Assailed Order),2 and March 9, 2005 (the Third Assailed
Order) (the three aforementioned Orders are collectively referred to as the Assailed Orders).3
Factual Antecedents
The essential facts are not in dispute.
On September 18, 1981, petitioner filed a Complaint4 for eminent domain against private
respondent Elpidio T. Javellana (Javellana) and Southern Negros Development Bank, the latter
as mortgagee. The complaint sought to expropriate two parcels of land known as Lot Nos. 3497CC and 3497-DD registered in Javellanas name under Transfer Certificate of Title (TCT) No. T44894 (the Subject Property) to be used as a school site for Lapaz High School.5 Petitioner
alleged that the Subject Property was declared for tax purposes in Tax Declaration No. 40080 to
have a value of P60.00 per square meter, or a total value of P43,560.00. The case was docketed
as Civil Case No. 14052 and raffled to then Court of First Instance of Iloilo, Branch 7.
On December 9, 1981, Javellana filed his Answer6 where he admitted ownership of the Subject
Property but denied the petitioners avowed public purpose of the sought-for expropriation, since
the City of Iloilo already had an existing school site for Lapaz High School. Javellana also
claimed that the true fair market value of his property was no less than P220.00 per square meter.
7

On May 11, 1982, petitioner filed a Motion for Issuance of Writ of Possession, alleging that it
had deposited the amount of P40,000.00 with the Philippine National Bank-Iloilo Branch.
Petitioner claimed that it was entitled to the immediate possession of the Subject Property, citing
Section 1 of Presidential Decree No. 1533,8 after it had deposited an amount equivalent to 10%
of the amount of compensation. Petitioner attached to its motion a Certification issued by
Estefanio C. Libutan, then Officer-in-Charge of the Iloilo City Treasurers Office, stating that
said deposit was made.9
Javellana filed an Opposition to the Motion for the Issuance of Writ of Possession10 citing the
same grounds he raised in his Answer that the city already had a vast tract of land where its
existing school site was located, and the deposit of a mere 10% of the Subject Propertys tax
valuation was grossly inadequate.
On May 17, 1983, the trial court issued an Order11 which granted petitioners Motion for
Issuance of Writ of Possession and authorized the petitioner to take immediate possession of the
Subject Property. The court ruled:

Premises considered, the Motion for the Issuance of a Writ of Possession dated May 10, 1982,
filed by plaintiff is hereby granted. Plaintiff is hereby allowed to take immediate possession,
control and disposition of the properties known as Lot Nos. 3497-CC and 3497-DD x x x.12
Thereafter, a Writ of Possession13 was issued in petitioners favor, and petitioner was able to take
physical possession of the properties sometime in the middle of 1985. At no time has Javellana
ever denied that the Subject Property was actually used as the site of Lapaz National High
School. Aside from the filing by the private respondent of his Amended Answer on April 21,
1984,14 the expropriation proceedings remained dormant.
Sixteen years later, on April 17, 2000, Javellana filed an Ex Parte Motion/Manifestation, where
he alleged that when he finally sought to withdraw the P40,000.00 allegedly deposited by the
petitioner, he discovered that no such deposit was ever made. In support of this contention,
private respondent presented a Certification from the Philippine National Bank stating that no
deposit was ever made for the expropriation of the Subject Property.15 Private respondent thus
demanded his just compensation as well as interest. Attempts at an amicable resolution and a
negotiated sale were unsuccessful. It bears emphasis that petitioner could not present any
evidence whether documentary or testimonial to prove that any payment was actually made
to private respondent.
Thereafter, on April 2, 2003, private respondent filed a Complaint16 against petitioner for
Recovery of Possession, Fixing and Recovery of Rental and Damages. The case was docketed as
Civil Case No. 03-27571, and raffled to Branch 28 of the Iloilo City Regional Trial Court.
Private respondent alleged that since he had not been compensated for the Subject Property,
petitioners possession was illegal, and he was entitled to recovery of possession of his lots. He
prayed that petitioner be ordered to vacate the Subject Property and pay rentals amounting to
P15,000.00 per month together with moral, exemplary, and actual damages, as well as attorneys
fees.1avvphi1
On May 15, 2003, petitioner filed its Answer,17 arguing that Javellana could no longer bring an
action for recovery since the Subject Property was already taken for public use. Rather, private
respondent could only demand for the payment of just compensation. Petitioner also maintained
that the legality or illegality of petitioners possession of the property should be determined in
the eminent domain case and not in a separate action for recovery of possession.
Both parties jointly moved to consolidate the expropriation case (Civil Case No. 14052) and the
case for recovery of possession (Civil Case No. 03-27571),18 which motion was granted by the
trial court in an Order dated August 26, 2003.19 On November 14, 2003, a commission was
created to determine the just compensation due to Javellana.20
On November 20, 2003, private respondent filed a Motion/Manifestation dated November 19,
2003 claiming that before a commission is created, the trial court should first order the
condemnation of the property, in accordance with the Rules of Court. Javellana likewise insisted
that the fair market value of the Subject Property should be reckoned from the date when the
court orders the condemnation of the property, and not the date of actual taking, since petitioners

possession of the property was questionable.21 Before petitioner could file its Comment, the RTC
issued an Order dated November 21, 2003 denying the Motion.22
Undeterred, Javellana filed on November 25, 2003, an Omnibus Motion to Declare Null and
Void the Order of May 17, 1983 and to Require Plaintiff to Deposit 10% or P254,000.00.
Javellana claimed that the amount is equivalent to the 10% of the fair market value of the Subject
Property, as determined by the Iloilo City Appraisal Committee in 2001, at the time when the
parties were trying to negotiate a settlement.23
First Assailed Order
On December 12, 2003, the RTC issued the First Assailed Order, which nullified the Order dated
May 17, 1983 (concerning the issuance of a writ of possession over the Subject Property). The
trial court ruled:
x x x the Order dated May 17, 1983 is hereby declared null and void and the plaintiff [is] hereby
ordered to immediately deposit with the PNB the 10% of the just compensation after the
Commission shall have rendered its report and have determined the value of the property not at
the time it was condemned but at the time the complaint was filed in court.24 (Emphasis ours)
Second Assailed Order
Neither party sought reconsideration of this Order.25 Nonetheless, about six months later, the
RTC issued the Second Assailed Order, which it denominated as an "Amended Order". The
Second Assailed Order was identical to the first, except that the reckoning point for just
compensation was now the "time this order was issued," which is June 15, 2004.
x x x the Order dated May 17, 1983 is hereby declared null and void and the plaintiff [is] hereby
ordered to immediately deposit with the PNB the 10% of the just compensation after the
Commission shall have rendered its report and have determined the value of the property not at
the time it was condemned but at the time this order was issued. (Underscoring in original text)
This time, petitioner filed a Motion for Reconsideration claiming that there was no legal basis for
the issuance of the Second Assailed Order.26 Javellana opposed, arguing that since the May 17,
1983 Order and the Second Assailed Order were interlocutory in character, they were always
subject to modification and revision by the court anytime.27
Third Assailed Order
After the parties were able to fully ventilate their respective positions,28 the public respondent
issued the Third Assailed Order, denying the Motion for Reconsideration, and ruling as follows:
The Order dated June 15, 2004 among other things stated that parties and counsels must be
bound by the Commissioners Report regarding the value of the property not at the time it was
condemned but at the time this order was issued.

This is true inasmuch as there was no deposit at the PNB and their taking was illegal.
The plaintiff thru [sic] Atty. Laurea alleged that this Court had a change of heart and issued an
Amended Order with the same wordings as the order of December 12, 2003 but this time stated
not at the time it was condemned but at the time the order was issued. Naturally, this Court in the
interest of justice, can amend its order because there was no deposit by plaintiff.
The jurisprudence cited by plaintiff that the just compensation must be determined as of the date
of the filing of the complaint is true if there was a deposit. Because there was none the filing was
not in accordance with law, hence, must be at the time the order was issued.
The allegation of defendant thru [sic] counsel that the orders attacked by plaintiff thru [sic]
counsel saying it has become final and executory are interlocutory orders subject to the control
of the Judge until final judgment is correct. Furthermore, it is in the interes[t] of justice to correct
errors.29
In the meantime, on April 15, 2004, the Commission submitted its Report, providing the
following estimates of value, but without making a proper recommendation:30
Reckoning
Point
1981 - at the
time the
complaint was
filed

Value per
square meter

P110.00/sqm

Fair Market
Value

Basis

P79,860.00

based on three or more recorded


sales of similar types of land in the
vicinity in the same year

1981 at the
time the
complaint was
filed

P686.81/sqm

P498,625.22

Appraisal by Southern Negros


Development Bank based on market
value, zonal value, appraised value
of other banks, recent selling price
of neighboring lots

2002

P3,500.00/sqm

P2,541,000.00

Appraisal by the City Appraisal


Committee, Office of the City
Assessor

2004

P4,200.00/sqm

PhP3,049,200.00

Private Appraisal Report (Atty.


Roberto Cal Catolico dated April 6,
2004)

Hence, the present petition.


Petitioners Arguments

Petitioner is before us claiming that (1) the trial court gravely abused its discretion amounting to
lack or excess of jurisdiction in overturning the Order dated May 17, 1983, which was already a
final order; and (2) just compensation for the expropriation should be based on the Subject
Propertys fair market value either at the time of taking or filing of the complaint.
Private Respondents Arguments
Private respondent filed his Comment on October 3, 2005,31 arguing that (1) there was no error of
jurisdiction correctible by certiorari; and (2) that the Assailed Orders were interlocutory orders
that were subject to amendment and nullification at the discretion of the court.
Issues
There are only two questions we need answer, and they are not at all novel. First, does an order
of expropriation become final? Second, what is the correct reckoning point for the determination
of just compensation?
Our Ruling
Expropriation proceedings have two stages. The first phase ends with an order of dismissal, or a
determination that the property is to be acquired for a public purpose.32 Either order will be a
final order that may be appealed by the aggrieved party.33 The second phase consists of the
determination of just compensation. 34 It ends with an order fixing the amount to be paid to the
landowner. Both orders, being final, are appealable.35
An order of condemnation or dismissal is final, resolving the question of whether or not the
plaintiff has properly and legally exercised its power of eminent domain.36 Once the first order
becomes final and no appeal thereto is taken, the authority to expropriate and its public use can
no longer be questioned.371avvphi1
Javellana did not bother to file an appeal from the May 17, 1983 Order which granted
petitioners Motion for Issuance of Writ of Possession and which authorized petitioner to take
immediate possession of the Subject Property. Thus, it has become final, and the petitioners
right to expropriate the property for a public use is no longer subject to review. On the first
question, therefore, we rule that the trial court gravely erred in nullifying the May 17, 1983
Order.
We now turn to the reckoning date for the determination of just compensation. Petitioner claims
that the computation should be made as of September 18, 1981, the date when the expropriation
complaint was filed. We agree.
In a long line of cases, we have constantly affirmed that:
x x x just compensation is to be ascertained as of the time of the taking, which usually coincides
with the commencement of the expropriation proceedings. Where the institution of the action

precedes entry into the property, the just compensation is to be ascertained as of the time of the
filing of the complaint.38
When the taking of the property sought to be expropriated coincides with the commencement of
the expropriation proceedings, or takes place subsequent to the filing of the complaint for
eminent domain, the just compensation should be determined as of the date of the filing of the
complaint.39 Even under Sec. 4, Rule 67 of the 1964 Rules of Procedure, under which the
complaint for expropriation was filed, just compensation is to be determined "as of the date of
the filing of the complaint." Here, there is no reason to depart from the general rule that the point
of reference for assessing the value of the Subject Property is the time of the filing of the
complaint for expropriation.40
Private respondent claims that the reckoning date should be in 2004 because of the "clear
injustice to the private respondent who all these years has been deprived of the beneficial use of
his properties."
We commiserate with the private respondent. The school was constructed and has been in
operation since 1985. Petitioner and the residents of Iloilo City have long reaped the benefits of
the property. However, non-payment of just compensation does not entitle the private landowners
to recover possession of their expropriated lot.41
Concededly, Javellana also slept on his rights for over 18 years and did not bother to check with
the PNB if a deposit was actually made by the petitioner. Evidently, from his inaction in failing
to withdraw or even verify the amounts purportedly deposited, private respondent not only
accepted the valuation made by the petitioner, but also was not interested enough to pursue the
expropriation case until the end. As such, private respondent may not recover possession of the
Subject Property, but is entitled to just compensation.42 It is high time that private respondent be
paid what was due him after almost 30 years.
We stress, however, that the City of Iloilo should be held liable for damages for taking private
respondents property without payment of just compensation. In Manila International Airport
Authority v. Rodriguez,43 the Court held that a government agencys prolonged occupation of
private property without the benefit of expropriation proceedings undoubtedly entitled the
landowner to damages:
Such pecuniary loss entitles him to adequate compensation in the form of actual or
compensatory damages, which in this case should be the legal interest (6%) on the value of
the land at the time of taking, from said point up to full payment by the MIAA. This is
based on the principle that interest "runs as a matter of law and follows from the right of the
landowner to be placed in as good position as money can accomplish, as of the date of the taking
x x x.
xxxx
For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of
expropriation proceedings and without the MIAA exerting efforts to ascertain ownership of the

lot and negotiating with any of the owners of the property. To our mind, these are wanton and
irresponsible acts which should be suppressed and corrected. Hence, the award of
exemplary damages and attorneys fees is in order. x x x.44 (Emphasis supplied)
WHEREFORE, the petition is GRANTED. The Orders of the Regional Trial Court of Iloilo
City, Branch 32 in Civil Case No. 14052 and Civil Case No. 03-27571 dated December 12, 2003,
June 15, 2004, and March 9, 2005 are hereby ANNULLED and SET ASIDE.
The Regional Trial Court of Iloilo City, Branch 32 is DIRECTED to immediately determine the
just compensation due to private respondent Elpidio T. Javellana based on the fair market value
of the Subject Property at the time Civil Case No. 14052 was filed, or on September 18, 1981
with interest at the legal rate of six percent (6%) per annum from the time of filing until full
payment is made.
The City of Iloilo is ORDERED to pay private respondent the amount of P200,000.00 as
exemplary damages.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 153974 August 7, 2006
MIGUEL BELUSO, NATIVIDAD BELUSO, PEDRO BELUSO, ANGELITA BELUSO,
RAMON BELUSO, and AMADA DANIEL, substituted by her heirs represented by
TERESITA ARROBANG, Petitioners,
vs.
THE MUNICIPALITY OF PANAY (CAPIZ), represented by its Mayor, VICENTE B.
BERMEJO, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before this Court is a petition for review questioning the Decision 1 of the Court of Appeals (CA)
dated March 20, 2002 in CA-G.R. SP No. 47052, as well the Resolution 2 dated June 11, 2002
denying petitioners Motion for Reconsideration thereof.
The facts are as follows:
Petitioners are owners of parcels of land with a total area of about 20,424 square meters, covered
by Free Patent Nos. 7265, 7266, 7267, 7268, 7269, and 7270. 3 On November 8, 1995, the
Sangguniang Bayan of the Municipality of Panay issued Resolution No. 95-29 authorizing the
municipal government through the mayor to initiate expropriation proceedings. 4 A petition for
expropriation was thereafter filed on April 14, 1997 by the Municipality of Panay (respondent)
before the Regional Trial Court (RTC), Branch 18 of Roxas City, docketed as Civil Case No. V6958. 5
Petitioners filed a Motion to Dismiss alleging that the taking is not for public use but only for the
benefit of certain individuals; that it is politically motivated because petitioners voted against the
incumbent mayor and vice-mayor; and that some of the supposed beneficiaries of the land sought
to be expropriated have not actually signed a petition asking for the property but their signatures
were forged or they were misled into signing the same. 6
On July 31, 1997, the trial court denied petitioners Motion to Dismiss and declared that the
expropriation in this case is for "public use" and the respondent has the lawful right to take the
property upon payment of just compensation. 7

Petitioners filed an Answer on August 12, 1997 reasserting the issues they raised in their Motion
to Dismiss. 8
On October 1, 1997, the trial court issued an Order appointing three persons as Commissioners
to ascertain the amount of just compensation for the property. 9 Petitioners filed a "Motion to
Hold in Abeyance the Hearing of the Court Appointed Commissioners to Determine Just
Compensation and for Clarification of the Courts Order dated October 1, 1997" which was
denied by the trial court on November 3, 1997. 10 Petitioners Motion for Reconsideration was
also denied on December 9, 1997. 11
Petitioners then filed on March 2, 1998 a Petition for Certiorari before the CA claiming that they
were denied due process when the trial court declared that the taking was for public purpose
without receiving evidence on petitioners claim that the Mayor of Panay was motivated by
politics in expropriating their property and in denying their Motion to Hold in Abeyance the
Hearing of the Court Appointed Commissioners; and that the trial court also committed grave
abuse of discretion when it disregarded the affidavits of persons denying that they signed a
petition addressed to the municipal government of Panay. 12 On January 17, 2001, petitioners
filed a Motion to Admit Attached Memorandum and the Memorandum itself where they argued
that based on the Petition for Expropriation filed by respondent, such expropriation was based
only on a resolution and not on an ordinance contrary to Sec. 19 of Republic Act (R.A.) No.
7160; there was also no valid and definite offer to buy the property as the price offered by
respondent to the petitioners was very low. 13
On March 20, 2002, the CA rendered its Decision dismissing the Petition for Certiorari. It held
that the petitioners were not denied due process as they were able to file an answer to the
complaint and were able to adduce their defenses therein; and that the purpose of the taking in
this case constitutes "public use". 14 Petitioners filed a Motion for Reconsideration which was
denied on June 11, 2002. 15
Thus, the present petition claiming that:
A. RESPONDENT IS WITHOUT, LACKS AND DOES NOT HAVE THE LAWFUL POWER
TO ACQUIRE ANY OR ALL OF THE SUBJECT PROPERTIES THROUGH EMINENT
DOMAIN, IT BEING EXERCISED BY MEANS OF A MERE RESOLUTION, AND NOT
THROUGH AN ORDINANCE AS REQUIRED BY LAW AND APPLICABLE
JURISPRUDENCE;
B. RESPONDENT IS LIKEWISE WITHOUT, LACKS AND DOES NOT HAVE THE
LAWFUL POWER TO ACQUIRE ANY OR ALL OF THE SUBJECT PROPERTIES
THROUGH EMINENT DOMAIN, ITS PREVIOUS OFFER TO BUY THEM BEING NOT
VALID; and
C. IT WAS A SERIOUS ERROR ON THE PART OF THE HONORABLE COURT OF
APPEALS NOT TO DISCUSS, MUCH LESS RULE ON, BOTH IN ITS QUESTIONED
DECISION AND ITS RESOLUTION PROMULGATED ON 11 JUNE 2002 PETITIONERS
ARGUMENTS THAT RESPONDENT IS WITHOUT, LACKS AND DOES NOT HAVE THE

LAWFUL POWER TO ACQUIRE ANY OR ALL OF THE SUBJECT PROPERTIES


THROUGH EMINENT DOMAIN, IT BEING EXERCISED BY MEANS OF A MERE
RESOLUTION, AND NOT THROUGH AN ORDINANCE AS REQUIRED BY LAW AND
APPLICABLE JURISPRUDENCE, AND ITS PREVIOUS OFFER TO BUY THEM BEING
NOT VALID, DESPITE THE FACT THAT THESE OBJECTIONS WERE PROPERLY
PLEADED IN PETITIONERS MEMORANDUM WHICH WAS DULY ADMITTED IN ITS
RESOLUTION PROMULGATED ON 29 JANUARY 2001; and
D. PETITIONERS WERE UTTERLY DENIED PROCEDURAL DUE PROCESS OF LAW BY
THE COURT A QUO, WHEN IT SIMPLY DECLARED IN ITS ORDER DATED 31 JULY
1997 THAT THE TAKING BY RESPONDENT OF PETITIONERS PROPERTIES IS
PURPORTEDLY FOR PUBLIC PURPOSE WITHOUT RECEIVING EVIDENCE ON THEIR
ASSERTED CLAIM THAT RESPONDENTS MUNICIPAL MAYOR WAS POLITICALLY
MOTIVATED IN SEEKING THE EXPROPRIATION OF THEIR PROPERTIES AND NOT
FOR PUBLIC PURPOSE. 16
Petitioners argue that: contrary to Sec. 19 of R.A. No. 7160 of the Local Government Code,
which provides that a local government may exercise the power of eminent domain only by
"ordinance," respondents expropriation in this case is based merely on a "resolution"; while
objection on this ground was neither raised by petitioners in their Motion to Dismiss nor in their
Answer, such objection may still be considered by this Court since the fact upon which it is
based is apparent from the petition for expropriation itself; a defense may be favorably
considered even if not raised in an appropriate pleading so long as the facts upon which it is
based are undisputed; courts have also adopted a more censorious attitude in resolving questions
involving the proper exercise of local bodies of the delegated power of expropriation, as
compared to instances when it is directly exercised by the national legislature; respondent failed
to give, prior to the petition for expropriation, a previous valid and definite offer to petitioners as
the amount offered in this case was only P10.00 per square meter, when the properties are
residential in nature and command a much higher price; the CA failed to discuss and rule upon
the arguments raised by petitioners in their Memorandum; attached to the Motion to Dismiss
were affidavits and death certificates showing that there were people whose names were in the
supposed petition asking respondent for land, but who did not actually sign the same, thus
showing that the present expropriation was not for a public purpose but was merely politically
motivated; considering the conflicting claims regarding the purpose for which the properties are
being expropriated and inasmuch as said issue may not be rightfully ruled upon merely on the
basis of petitioners Motion to Dismiss and Answer as well as respondents Petition for
Expropriation, what should have been done was for the RTC to conduct hearing where each party
is given ample opportunity to prove its claim. 17
Respondent for its part contends that its power to acquire private property for public use upon
payment of just compensation was correctly upheld by the trial court; that the CA was correct in
finding that the petitioners were not denied due process, even though no hearing was conducted
in the trial court, as petitioners were still able to adduce their objections and defenses therein;
and that petitioners arguments have been passed upon by both the trial court and the CA and
were all denied for lack of substantial merit. 18

Respondent filed a Memorandum quoting at length the decision of the CA to support its position.
19
Petitioners meanwhile opted to have the case resolved based on the pleadings already filed. 20
We find the petition to be impressed with merit.
Eminent domain, which is the power of a sovereign state to appropriate private property to
particular uses to promote public welfare, is essentially lodged in the legislature. 21 While such
power may be validly delegated to local government units (LGUs), other public entities and
public utilities the exercise of such power by the delegated entities is not absolute. 22 In fact, the
scope of delegated legislative power is narrower than that of the delegating authority and such
entities may exercise the power to expropriate private property only when authorized by
Congress and subject to its control and restraints imposed through the law conferring the power
or in other legislations. 23 Indeed, LGUs by themselves have no inherent power of eminent
domain. 24 Thus, strictly speaking, the power of eminent domain delegated to an LGU is in
reality not eminent but "inferior" since it must conform to the limits imposed by the delegation
and thus partakes only of a share in eminent domain. 25 The national legislature is still the
principal of the LGUs and the latter cannot go against the principals will or modify the same. 26
The exercise of the power of eminent domain necessarily involves a derogation of a fundamental
right. 27 It greatly affects a landowners right to private property which is a constitutionally
protected right necessary for the preservation and enhancement of personal dignity and is
intimately connected with the rights to life and liberty. 28 Thus, whether such power is exercised
directly by the State or by its authorized agents, the exercise of such power must undergo
painstaking scrutiny. 29
Indeed, despite the existence of legislative grant in favor of local governments, it is still the duty
of the courts to determine whether the power of eminent domain is being exercised in accordance
with the delegating law.
Sec. 19 of R.A. No. 7160, which delegates to LGUs the power of eminent domain expressly
provides:
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 at the time of the taking of the
property.

It is clear therefore that several requisites must concur before an LGU can exercise the power of
eminent domain, to wit:
1. An ordinance is enacted by the local legislative council authorizing the local chief executive,
in behalf of the local government unit, to exercise the power of eminent domain or pursue
expropriation proceedings over a particular private property.
2. The power of eminent domain is exercised for public use, purpose or welfare, or for the
benefit of the poor and the landless.
3. There is payment of just compensation, as required under Section 9, Article III of the
Constitution, and other pertinent laws.
4. A valid and definite offer has been previously made to the owner of the property sought to be
expropriated, but said offer was not accepted. 30
The Court in no uncertain terms have pronounced that a local government unit cannot authorize
an expropriation of private property through a mere resolution of its lawmaking body. 31 R.A. No.
7160 otherwise known as the Local Government Code expressly requires an ordinance for the
purpose and a resolution that merely expresses the sentiment of the municipal council will not
suffice. 32
A resolution will not suffice for an LGU to be able to expropriate private property; and the
reason for this is settled:
x x x A municipal ordinance is different from a resolution. An ordinance is a law, but a resolution
is merely a declaration of the sentiment or opinion of a lawmaking body on a specific matter. An
ordinance possesses a general and permanent character, but a resolution is temporary in nature.
Additionally, the two are enacted differently -- a third reading is necessary for an ordinance, but
not for a resolution, unless decided otherwise by a majority of all the Sanggunian members.
If Congress intended to allow LGUs to exercise eminent domain through a mere resolution, it
would have simply adopted the language of the previous Local Government Code. But Congress
did not. In a clear divergence from the previous Local Government Code, Sec. 19 of R.A. [No.]
7160 categorically requires that the local chief executive act pursuant to an ordinance. x x x 33
As respondents expropriation in this case was based merely on a resolution, such expropriation
is clearly defective. While the Court is aware of the constitutional policy promoting local
autonomy, the court cannot grant judicial sanction to an LGUs exercise of its delegated power of
eminent domain in contravention of the very law giving it such power. 34
The Court notes that petitioners failed to raise this point at the earliest opportunity. Still, we are
not precluded from considering the same. This Court will not hesitate to consider matters even
those raised for the first time on appeal in clearly meritorious situations, 35 such as in this case.
Thus, the Court finds it unnecessary to resolve the other issues raised by petitioners.

It is well to mention however that despite our ruling in this case respondent is not barred from
instituting similar proceedings in the future, provided that it complies with all legal requirements.
36

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R.
SP No. 47052 is REVERSED and SET ASIDE. The Complaint in Civil Action No. V-6958 is
DISMISSED without prejudice.
No costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 162474

October 13, 2009

HON. VICENTE P. EUSEBIO, LORNA A. BERNARDO, VICTOR ENDRIGA, and the


CITY OF PASIG, Petitioners,
vs.
JOVITO M. LUIS, LIDINILA LUIS SANTOS, ANGELITA CAGALINGAN, ROMEO M.
LUIS, and VIRGINIA LUIS-BELLESTEROS,* Respondents.
DECISION
PERALTA, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying
that the Decision1 of the Court of Appeals (CA) dated November 28, 2003, affirming the trial
court judgment, and the CA Resolution2 dated February 27, 2004, denying petitioners motion for
reconsideration, be reversed and set aside.
The antecedent facts are as follows:
Respondents are the registered owners of a parcel of land covered by Transfer Certificate of Title
Nos. 53591 and 53589 with an area of 1,586 square meters. Said parcel of land was taken by the
City of Pasig sometime in 1980 and used as a municipal road now known as A. Sandoval
Avenue, Barangay Palatiw, Pasig City. On February 1, 1993, the Sanggunian of Pasig City
passed Resolution No. 15 authorizing payments to respondents for said parcel of land. However,
the Appraisal Committee of the City of Pasig, in Resolution No. 93-13 dated October 19, 1993,
assessed the value of the land only at P150.00 per square meter. In a letter dated June 26, 1995,
respondents requested the Appraisal Committee to consider P2,000.00 per square meter as the
value of their land.
One of the respondents also wrote a letter dated November 25, 1994 to Mayor Vicente P. Eusebio
calling the latters attention to the fact that a property in the same area, as the land subject of this
case, had been paid for by petitioners at the price of P2,000.00 per square meter when said
property was expropriated in the year 1994 also for conversion into a public road. Subsequently,
respondents counsel sent a demand letter dated August 26, 1996 to Mayor Eusebio, demanding
the amount of P5,000.00 per square meter, or a total of P7,930,000.00, as just compensation for
respondents property. In response, Mayor Eusebio wrote a letter dated September 9, 1996
informing respondents that the City of Pasig cannot pay them more than the amount set by the
Appraisal Committee.

Thus, on October 8, 1996, respondents filed a Complaint for Reconveyance and/or Damages
(Civil Case No. 65937) against herein petitioners before the Regional Trial Court (RTC) of Pasig
City, Branch 155. Respondents prayed that the property be returned to them with payment of
reasonable rental for sixteen years of use at P500.00 per square meter, or P793,000.00, with legal
interest of 12% per annum from date of filing of the complaint until full payment, or in the event
that said property can no longer be returned, that petitioners be ordered to pay just compensation
in the amount of P7,930,000.00 and rental for sixteen years of use at P500.00 per square meter,
or P793,000.00, both with legal interest of 12% per annum from the date of filing of the
complaint until full payment. In addition, respondents prayed for payment of moral and
exemplary damages, attorneys fees and costs.
After trial, the RTC rendered a Decision3 dated January 2, 2001, the dispositive portion of which
reads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs
and against the defendants:
1. Declaring as ILLEGAL and UNJUST the action of the defendants in taking the
properties of plaintiffs covered by Transfer Certificates of Title Nos. 53591 and 53589
without their consent and without the benefit of an expropriation proceedings required by
law in the taking of private property for public use;
2. Ordering the defendants to jointly RETURN the subject properties to plaintiffs with
payment of reasonable rental for its use in the amount of P793,000.00 with legal interest
at the rate of 6% per annum from the filing of the instant Complaint until full payment is
made;
3. In the event that said properties can no longer be returned to the plaintiffs as the same
is already being used as a public road known as A. Sandoval Avenue, Pasig City, the
defendants are hereby ordered to jointly pay the plaintiffs the fair and reasonable value
therefore at P5,000.00 per square meter or a total of P7,930,000.00 with payment of
reasonable rental for its use in the amount of P500.00 per square meter or a total of
P793,000.00, both with legal interest at the rate of 6% per annum from the filing of the
instant Complaint until full payment is made; and
4. Ordering the defendants to jointly pay the plaintiffs attorneys fees in the amount of
P200,000.00.
No pronouncement as to costs.
SO ORDERED.
Petitioners then appealed the case to the CA, but the CA affirmed the RTC judgment in its
Decision dated November 28, 2003.1avvphi1

Petitioners motion for reconsideration of the CA Decision was denied per Resolution dated
February 27, 2004.
Hence, this petition where it is alleged that:
I. PUBLIC RESPONDENT COURT ERRED IN UPHOLDING THE RULING OF THE
LOWER COURT DESPITE THE APPARENT LACK OF JURISDICTION BY
REASON OF PRESCRIPTION OF PRIVATE RESPONDENTS CLAIM FOR JUST
COMPENSATION;
II. PUBLIC RESPONDENT COURT ERRED IN FIXING THE FAIR AND
REASONABLE COMPENSATION FOR RESPONDENTS PROPERTY AT P5,000.00
PER SQUARE METER DESPITE THE GLARING FACT THAT AT THE TIME OF
TAKING IN THE YEAR 1980 THE FAIR MARKET VALUE WAS PEGGED BY AN
APPRAISAL COMMITTEE AT ONE HUNDRED SIXTY PESOS (PHP160.00);
III. PUBLIC RESPONDENT COURT ERRED IN UPHOLDING THE JUDGMENT OF
THE LOWER COURT AWARDING THE AMOUNT OF P793,000.00 AS
REASONABLE RENTAL FOR THE USE OF RESPONDENTS PROPERTY IN SPITE
OF THE FACT THAT THE SAME WAS CONVERTED INTO A PUBLIC ROAD BY A
PREVIOUSLY ELECTED MUNICIPAL MAYOR WITHOUT RESPONDENTS
REGISTERING ANY COMPLAINT OR PROTEST FOR THE TAKING AND
DESPITE THE FACT THAT SUCH TAKING DID NOT PERSONALLY BENEFIT
THE PETITIONERS BUT THE PUBLIC AT LARGE; AND
IV. PUBLIC RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE
P200,000.00 AWARD FOR ATTORNEYS FEES TO THE PRIVATE RESPONDENTS
COUNSEL DESPITE THE ABSENCE OF NEGLIGENCE OR INACTION ON THE
PART OF PETITIONERS RELATIVE TO THE INSTANT CLAIM FOR JUST
COMPENSATION.4
At the outset, petitioners must be disabused of their belief that respondents action for recovery
of their property, which had been taken for public use, or to claim just compensation therefor is
already barred by prescription. In Republic of the Philippines v. Court of Appeals,5 the Court
emphasized "that where private property is taken by the Government for public use without first
acquiring title thereto either through expropriation or negotiated sale, the owners action to
recover the land or the value thereof does not prescribe." The Court went on to remind
government agencies not to exercise the power of eminent domain with wanton disregard for
property rights as Section 9, Article III of the Constitution provides that "private property shall
not be taken for public use without just compensation." 6
The remaining issues here are whether respondents are entitled to regain possession of their
property taken by the city government in the 1980s and, in the event that said property can no
longer be returned, how should just compensation to respondents be determined.

These issues had been squarely addressed in Forfom Development Corporation v. Philippine
National Railways,7 which is closely analogous to the present case. In said earlier case, the
Philippine National Railways (PNR) took possession of the private property in 1972 without
going through expropriation proceedings. The San Pedro-Carmona Commuter Line Project was
then implemented with the installation of railroad facilities on several parcels of land, including
that of petitioner Forfom. Said owner of the private property then negotiated with PNR as to the
amount of just compensation. No agreement having been reached, Forfom filed a complaint for
Recovery of Possession of Real Property and/or Damages with the trial court sometime in
August 1990.
In said case, the Court held that because the landowner did not act to question the lack of
expropriation proceedings for a very long period of time and even negotiated with the PNR as to
how much it should be paid as just compensation, said landowner is deemed to have waived its
right and is estopped from questioning the power of the PNR to expropriate or the public use for
which the power was exercised. It was further declared therein that:
x x x recovery of possession of the property by the landowner can no longer be allowed on the
grounds of estoppel and, more importantly, of public policy which imposes upon the public
utility the obligation to continue its services to the public. The non-filing of the case for
expropriation will not necessarily lead to the return of the property to the landowner. What is left
to the landowner is the right of compensation.
x x x It is settled that non-payment of just compensation does not entitle the private landowners
to recover possession of their expropriated lot.8
Just like in the Forfom case, herein respondents also failed to question the taking of their
property for a long period of time (from 1980 until the early 1990s) and, when asked during trial
what action they took after their property was taken, witness Jovito Luis, one of the respondents,
testified that "when we have an occasion to talk to Mayor Caruncho we always asked for
compensation."9 It is likewise undisputed that what was constructed by the city government on
respondents property was a road for public use, namely, A. Sandoval Avenue in Pasig City.
Clearly, as in Forfom, herein respondents are also estopped from recovering possession of their
land, but are entitled to just compensation.
Now, with regard to the trial courts determination of the amount of just compensation to which
respondents are entitled, the Court must strike down the same for being contrary to established
rules and jurisprudence.
The prevailing doctrine on judicial determination of just compensation is that set forth in
Forfom.10 Therein, the Court ruled that even if there are no expropriation proceedings instituted
to determine just compensation, the trial court is still mandated to act in accordance with the
procedure provided for in Section 5, Rule 67 of the 1997 Rules of Civil Procedure, requiring the
appointment of not more than three competent and disinterested commissioners to ascertain and
report to the court the just compensation for the subject property. The Court reiterated its ruling
in National Power Corporation v. Dela Cruz11 that "trial with the aid of commissioners is a
substantial right that may not be done away with capriciously or for no reason at all."12 It was

also emphasized therein that although ascertainment of just compensation is a judicial


prerogative, the commissioners findings may only be disregarded or substituted with the trial
courts own estimation of the propertys value only if the commissioners have applied illegal
principles to the evidence submitted to them, where they have disregarded a clear preponderance
of evidence, or where the amount allowed is either grossly inadequate or excessive. Thus, the
Court concluded in Forfom that:
The judge should not have made a determination of just compensation without first having
appointed the required commissioners who would initially ascertain and report the just
compensation for the property involved. This being the case, we find the valuation made by the
trial court to be ineffectual, not having been made in accordance with the procedure provided for
by the rules.13
Verily, the determination of just compensation for property taken for public use must be done not
only for the protection of the landowners interest but also for the good of the public. In Republic
v. Court of Appeals,14 the Court explained as follows:
The concept of just compensation, however, does not imply fairness to the property owner alone.
Compensation must be just not only to the property owner, but also to the public which
ultimately bears the cost of expropriation.15
It is quite clear that the Court, in formulating and promulgating the procedure provided for in
Sections 5 and 6, Rule 67, found this to be the fairest way of arriving at the just compensation to
be paid for private property taken for public use.
With regard to the time as to when just compensation should be fixed, it is settled jurisprudence
that where property was taken without the benefit of expropriation proceedings, and its owner
files an action for recovery of possession thereof before the commencement of expropriation
proceedings, it is the value of the property at the time of taking that is controlling.16 Explaining
the reason for this rule in Manila International Airport Authority v. Rodriguez,17 the Court,
quoting Ansaldo v. Tantuico, Jr.,18 stated, thus:
The reason for the rule, as pointed out in Republic v. Lara, is that
. . . [w]here property is taken ahead of the filing of the condemnation proceedings, the value
thereof may be enchanced by the public purpose for which it is taken; the entry by the plaintiff
upon the property may have depreciated its value thereby; or, there may have been a natural
increase in the value of the property from the time the complaint is filed, due to general
economic conditions. The owner of private property should be compensated only for what he
actually loses; it is not intended that his compensation shall extend beyond his loss or injury. And
what he loses is only the actual value of his property at the time it is taken. This is the only way
that compensation to be paid can be truly just; i.e., just not only to the individual whose property
is taken,' 'but to the public, which is to pay for it.19
In this case, the trial court should have fixed just compensation for the property at its value as of
the time of taking in 1980, but there is nothing on record showing the value of the property at

that time. The trial court, therefore, clearly erred when it based its valuation for the subject land
on the price paid for properties in the same location, taken by the city government only sometime
in the year 1994.
However, in taking respondents property without the benefit of expropriation proceedings and
without payment of just compensation, the City of Pasig clearly acted in utter disregard of
respondents proprietary rights. Such conduct cannot be countenanced by the Court. For said
illegal taking, the City of Pasig should definitely be held liable for damages to respondents.
Again, in Manila International Airport Authority v. Rodriguez,20 the Court held that the
government agencys illegal occupation of the owners property for a very long period of time
surely resulted in pecuniary loss to the owner. The Court held as follows:
Such pecuniary loss entitles him to adequate compensation in the form of actual or compensatory
damages, which in this case should be the legal interest (6%) on the value of the land at the time
of taking, from said point up to full payment by the MIAA. This is based on the principle that
interest "runs as a matter of law and follows from the right of the landowner to be placed in as
good position as money can accomplish, as of the date of the taking."
The award of interest renders unwarranted the grant of back rentals as extended by the courts
below. In Republic v. Lara, et al., the Court ruled that the indemnity for rentals is inconsistent
with a property owners right to be paid legal interest on the value of the property, for if the
condemnor is to pay the compensation due to the owners from the time of the actual taking of
their property, the payment of such compensation is deemed to retroact to the actual taking of the
property; and, hence, there is no basis for claiming rentals from the time of actual
taking.http://127.0.0.1:7860/source/2006.zip%3e17e,df|2006/FEB2006/161836.htm - _ftn#_ftn
More explicitly, the Court held in Republic v. Garcellano that:
The uniform rule of this Court, however, is that this compensation must be, not in the form of
rentals, but by way of 'interest from the date that the company [or entity] exercising the right of
eminent domain take possession of the condemned lands, and the amounts granted by the court
shall cease to earn interest only from the moment they are paid to the owners or deposited in
court x x x.
xxxx
For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of
expropriation proceedings and without the MIAA exerting efforts to ascertain ownership of the
lot and negotiating with any of the owners of the property. To our mind, these are wanton and
irresponsible acts which should be suppressed and corrected. Hence, the award of exemplary
damages and attorneys fees is in order. However, while Rodriguez is entitled to such exemplary
damages and attorneys fees, the award granted by the courts below should be equitably reduced.
We hold that Rodriguez is entitled only to P200,000.00 as exemplary damages, and attorneys
fees equivalent to one percent (1%) of the amount due.21
Lastly, with regard to the liability of petitioners Vicente P. Eusebio, Lorna A. Bernardo, and
Victor Endriga all officials of the city government the Court cannot uphold the ruling that

said petitioners are jointly liable in their personal capacity with the City of Pasig for payments to
be made to respondents. There is a dearth of evidence which would show that said petitioners
were already city government officials in 1980 or that they had any involvement whatsoever in
the illegal taking of respondents property. Thus, any liability to respondents is the sole
responsibility of the City of Pasig.
IN VIEW OF THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of
the Court of Appeals dated November 28, 2003 is MODIFIED to read as follows:
1. The valuation of just compensation and award of back rentals made by the Regional
Trial Court of Pasig City, Branch 155 in Civil Case No. 65937 are hereby SET ASIDE.
The City of Pasig, represented by its duly-authorized officials, is DIRECTED to institute
the appropriate expropriation action over the subject parcel of land within fifteen (15)
days from finality of this Decision, for the proper determination of just compensation due
to respondents, with interest at the legal rate of six (6%) percent per annum from the time
of taking until full payment is made.
2. The City of Pasig is ORDERED to pay respondents the amounts of P200,000.00 as
exemplary damages and P200,000.00 as attorneys fees.
No costs.
SO ORDERED.

Landbank of the Philippines vs. Spouses Rosa and Pedro Costo, GR 174647, 5
December 201

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 168105

July 27, 2011

LAND BANK OF THE PHILIPPINES, Petitioner,


vs.
SEVERINO LISTANA, Respondent.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 which seeks to set aside the
Decision1 dated November 12, 2004 and Resolution2 dated May 11, 2005 of the Court of Appeals
(CA) in CA-G.R. CV No. 70979. The CA affirmed the Order3 dated October 25, 2000 of the
Regional Trial Court (RTC) of Sorsogon, Sorsogon, Branch 52, sitting as a Special Agrarian
Court, in Civil Case No. 99-6639 dismissing the petition for determination of just compensation
on the ground of late filing.
Respondent Severino Listana is the owner of a 246.0561-hectare land located at Inlagadian,
Casiguran, Sorsogon and covered by Transfer Certificate of Title (TCT) No. T-20193. The land
was voluntarily offered for sale to the government under the Comprehensive Agrarian Reform
Program (CARP) pursuant to Republic Act (R.A.) No. 6657.
Petitioner Land Bank of the Philippines (LBP) valued the 240.9066 hectares for acquisition at
P5,871,689.03. Since the respondent rejected the said amount, a summary proceeding for
determination of just compensation was conducted by the Department of Agrarian Reform
(DAR). On May 2, 1996, respondent wrote LBP Department Manager III, Engr. Alex A. Lorayes,
requesting the release of payment of the cash portion of the "accepted x x x 151.1419 has. with
an equivalent valuation of P5,607,874.69." Consequently, on May 7, 1996, a Deed of Transfer
was executed by respondent over the said portion of his landholding in consideration of payment
received from the transferee Republic of the Philippines consisting of cash (P1,078,877.54) and
LBP bonds (P2,747,858.60).4
On October 14, 1998, DAR Provincial Adjudicator Manuel M. Capellan rendered a decision5
fixing the amount of just compensation at P10,956,963.25 for the entire acquired area of
240.9066 hectares. Copy of the said decision was received by petitioner on October 27, 1998.
Almost a year later, or on September 6, 1999, petitioner filed before the RTC of Sorsogon,
Sorsogon, Branch 52, a petition6] for judicial determination of just compensation (Civil Case No.

99-6639). Petitioner argued that the PARADs valuation is unacceptable and that the initial
valuation of P5,871,689.03 for the 240.9066 hectares is in accordance with Section 17 of R.A.
No. 6657 and DAR Administrative Order No. 11, series of 1994, as amended by DAR AO No. 5,
series of 1998.
Respondent filed a motion to dismiss7 contending that the landowners acceptance of the DARs
valuation resulted in a binding contract and therefore constitutes res judicata as it is in the nature
of a compromise agreement that has attained finality. Respondent also cited the contempt
proceedings against the LBP for its refusal to comply with the writ of execution issued by the
Provincial Agrarian Reform Adjudicators (PARADs) Office on June 18, 1999.
The matter of contempt proceedings was the subject of G.R. No. 152611 (Land Bank of the
Philippines v. Listana, Sr.). The PARAD had issued on August 20, 2000 an order granting
respondents motion for contempt and LBP Manager Alex A. Lorayes was cited for indirect
contempt and ordered to be imprisoned until he complied with the PARADs October 14, 1998
decision. After its motion for reconsideration was denied, petitioner filed a Notice of Appeal
which was likewise denied due course by PARAD Capellan who also ordered the issuance of an
alias Writ of Execution for the payment of the adjudged amount of just compensation and
subsequently directed the issuance of an arrest order against Lorayes. Petitioner then filed with
the RTC a petition for injunction with application for the issuance of a writ of preliminary
injunction to restrain PARAD Capellan from issuing the order of arrest. A writ of preliminary
injunction was eventually issued by the trial court and LBP posted a P5,644,773.02 cash bond.
Respondent went to the CA and challenged said writ via a special civil action for certiorari (CAG.R. SP No. 65276). On December 11, 2001, the CA rendered its decision nullifying the trial
courts orders. In our Decision dated August 5, 2003, we granted the petition filed by LBP and
reinstated the January 29, 2001 Order of the RTC of Sorsogon, Sorsogon, Branch 51 which
enjoined the PARAD from enforcing its order of arrest against Lorayes pending the final
termination of Civil Case No. 99-6639 of RTC Branch 52.8
Petitioner filed its opposition to the motion to dismiss,9 arguing that the filing of petition with
SAC is not an appeal from the decision of the PARAD which is deemed vacated upon filing of
the case before the SAC; hence res judicata cannot be applied. It stressed that the determination
of just compensation is inherently judicial in nature. There being no speedy and adequate remedy
in the ordinary course of law, petitioner averred that unless it is authorized to file this case it
cannot protect the interest of the government who is the owner of the Agrarian Reform Fund.
In an Amended Petition,10 petitioner additionally alleged the fact that respondent had already
accepted the valuation of the cocoland portion (151.1419 hectares) in the amount of
P5,312,190.23; that payment therefor had been received by respondent; and that a Deed of
Transfer of the said portion had been executed in favor of the government which was notarized
on May 7, 1996 and registered with the Registry of Deeds. Petitioner thus asserted that the
valuation and compensation process insofar as the 151.1419-hectare portion, should now be
considered terminated. Respondent, on his part, contended that by bringing the question of
valuation before the court, petitioner is estopped from asserting that such issue had already been
laid to rest with the alleged acceptance by respondent of the prior valuation.11

On April 28, 2000, the trial court denied the motion to dismiss.
In his Answer,12 the respondent asserted that petitioner, being part of the administrative
machinery charged under the law to determine the government land valuation/compensation
offer is bound by the compensation fixed by the DARAB. Hence, respondents acceptance of
such offered compensation resulted in a binding contract, especially under the Voluntary Offer to
Sell (VOS) scheme. The PARADs decision therefore constitutes res judicata as it is, in effect, a
judgment upon a compromise. Respondent also filed a motion for reconsideration of the order
denying his motion to dismiss.
On October 25, 2000, the trial court issued the order13 granting respondents motion for
reconsideration and dismissing the petition for having been filed almost one year from receipt of
the copy of the PARADs decision.
Petitioner filed a motion for reconsideration14 alleging that it had filed a motion for
reconsideration from the PARADs decision dated October 14, 1998 but the order denying said
motion was received only on May 12, 1999. It further averred that the cause of delay was not
solely attributable to it but also to the respondent through his counsel "because there was a
manifestation on their part to settle this case amicably." Petitioner stressed that while there was
really a late filing, it was done in good faith and without any intent to prejudice any person.
Invoking a liberal construction of procedural rules, petitioner argued that it is without any speedy
and adequate remedy in this case, which is necessary for the protection of the governments
interest.
In its Order dated March 27, 2001, the trial court denied petitioners motion for reconsideration.
Copy of the said order was received by petitioner on April 6, 2001 and on the same date it filed a
notice of appeal.15
In its memorandum, petitioner argued that on the matter of its late filing of the petition for
judicial determination of just compensation, the trial court should have given primacy to the very
clear demands of substantial justice over the rigid application of technicalities. It cited Section 57
of R.A. No. 6657 allowing a party to bring the issue of valuation of lands acquired by virtue of
CARP to the Special Agrarian Courts, which should be liberally construed to afford LBP the
amplest opportunity to prove that its valuation pertaining to the remaining portion of 89.1419
hectares of the subject landholding is in accordance with the legally prescribed formula spelled
out in DAR AO No. 5, series of 1998. Moreover, the government has not acceded to the
alteration of the valuation pertaining to the 151.1419 hectares, to which both the landowner and
government gave their consent, which had become a perfected contract having the force of law
between the parties.16
In the meantime, following this Courts ruling in Land Bank of the Philippines v. Listana, Sr.
(supra) which voided all contempt proceedings against LBP Manager Lorayes, petitioner filed
with the RTC a motion to withdraw the P5,644,773.02 cash bond. The RTC denied the motion
and petitioners motion for reconsideration was likewise denied. Petitioner challenged the trial
courts order before the CA which eventually dismissed the petition. When the case was elevated
to this Court, we affirmed the CA and sustained the RTCs orders denying LBPs motion to

withdraw the cash bond. By Decision dated May 30, 2011, we ruled that LBP cannot withdraw
the P5,644,773.02 cash bond which is a condition for the issuance of the writ of preliminary
injunction issued by the RTC enjoining the PARAD from implementing the warrant of arrest
against Manager Lorayes pending final determination of the amount of just compensation for the
property.17
By Decision dated November 12, 2004, the CA dismissed petitioners appeal from the SACs
dismissal of its petition for judicial determination of just compensation. The CA said that
petitioner failed to adequately explain its failure to abide by the rules and "its loss of appellate
recourse cannot be revived by invoking the mantra of liberality." We quote the pertinent portion
of the appellate courts ruling:
The argument of Listana that he rejected the pricing for the entire area and that the Request to
Open a Trust Fund x x x is proof of his refusal, is unmeritorious. If indeed Listana rejected the
entire valuation then he would not have executed a Deed of Transfer of Unsegregated Portion of
a Parcel of Land x x x covering the 51.1419 [sic] hectares. Said document is not only valid and
binding but also reflects the true intention of the parties and is athwart the claim of Listana that
he rejected the valuation of this portion of the property.
The PARAB in the summary proceeding it conducted to determine the land valuation, should not
have included in its determination of just compensation the accepted portion but should have
limited the scope to only the rejected portion of 89.7647 hectares.
While there is thus good cause to seek recourse against the PARAB ruling, Land Bank took
this appeal 117 days later and thus beyond the fifteen (15) day period provided by Rule
XIII Sec. 11 of the DARAB Rules of Procedure. Land Bank claims the court a quo was wrong
in saying that it was late for less than one year for it was tardy only for 120 days by its
reckoning. But whether it is one or the other, the fact is it was late for a considerable time and
cannot be absolved by the poor excuse that there was a prospect for an amicable settlement.
Rudimentary prudence dictated that appellate recourse should have been timely taken instead of
just relying with crossed fingers that settlement would come about.18 (Emphasis supplied.)
Petitioners motion for reconsideration was likewise denied by the CA.
Hence, this petition alleging that the CA committed serious errors of law, as follows:
A. THE DARAB ORDER DATED 14 OCTOBER 1998 WHICH ALLEGEDLY
BECAME FINAL AND EXECUTORY CANNOT ABROGATE OR RENDER
WITHOUT EFFECT A CONSUMMATED CONTRACT INVOLVING THE
GOVERNMENT AND RESPONDENT LISTANA RELATIVE TO 151.1419
HECTARES OF SUBJECT PROPERTY. BEING IMMUTABLE, THE
CONSUMMATED CONTRACT CAN NO LONGER BE DISTURBED OR
ABROGATED BY THE DARAB ORDER DATED 14 OCTOBER 1998, WHICH THE
COURT A QUO AND THE COURT OF APPEALS ERRONEOUSLY AFFIRMED.

B. THE CHALLENGED DECISION AND THE QUESTIONED RESOLUTION


PLACE SO MUCH PREMIUM ON A PROCEDURAL RULE AT THE EXPENSE OF
SUBSTANTIAL JUSTICE, A CIRCUMSTANCE THAT HAS UNNECESSARILY PUT
A COLOR OF VALIDITY TO THE DARAB ORDER WHICH IS VOID AB INITIO AS
IT UTTERLY DISREGARDED SECTION 17 OF R.A. NO. 6657 AND THE SUPREME
COURT RULING IN "LBP vs. SPOUSES BANAL," (G.R. NO. 143276, 20 JULY
2004).19
The sole issue to be resolved is whether the SAC may take cognizance of the petition for
determination of just compensation which is filed beyond the prescribed 15-day period or more
than 100 days after the PARAD rendered its valuation in a summary administrative proceeding.
The valuation of property in expropriation cases pursuant to R.A. No. 6657 or the
Comprehensive Agrarian Reform Law, is essentially a judicial function which is vested in the
RTC acting as Special Agrarian Court and cannot be lodged with administrative agencies such as
the DAR.20 Section 57 of said law explicitly states that:
SEC. 57. Special Jurisdiction. The Special Agrarian Courts shall have original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners, and the
prosecution of all criminal offenses under this Act. The Rules of Court shall apply to all
proceedings before the Special Agrarian Courts, unless modified by this Act.
The Special Agrarian Court shall decide all appropriate cases under their special jurisdiction
within thirty (30) days from submission of the case for decision.
The CA affirmed the SACs order of dismissal applying Section 11, Rule XIII of the 1994
DARAB Rules of Procedure which provides that:
Section 11. Land Valuation and Preliminary Determination and Payment of Just Compensation.
-- The decision of the Adjudicator on land valuation and preliminary determination and payment
of just compensation shall not be appealable to the Board but shall be brought directly to the
Regional Trial Courts designated as Special Agrarian Courts within fifteen (15) days from notice
thereof. Any party shall be entitled to only one motion for reconsideration. (Emphasis supplied.)
Petitioner admits the late filing of an action with the SAC but nonetheless argue that the serious
errors committed by the PARAD when it included the 151.1419 hectares -- despite the initial
valuation offered by LBP having been already accepted by respondent who already conveyed
said portion to the government -- in its decision fixing just compensation, and non-application of
the formula provided in Section 17 of R.A. No. 6657 and DAR AO No. 11, series of 1994, as
amended by DAR AO No. 5, series of 1998 on the remaining 89.1419 hectares, warrants a
review by this Court. It contends that this case deserves a relaxation of the procedural rule
governing finality of judgments, adding that its "thoughtlessness" should not be deemed fatal to
the instant petition "for at stake is an OVERPAYMENT amounting to more than SEVEN
MILLION PESOS, which is GREATLY PREJUDICIAL to public interest, as the said amount
shall be debited from the Agrarian Reform Fund (ARF)."

The petition is unmeritorious.


In Republic v. Court of Appeals,21 private respondent landowner rejected the governments offer
of its lands based on LBPs valuation and the case was brought before the PARAD which
sustained LBPs valuation. Private respondent then filed a Petition for Just Compensation in the
RTC sitting as Special Agrarian Court. However, the RTC dismissed its petition on the ground
that private respondent should have appealed to the DARAB, in accordance with the then
DARAB Rules of Procedure. Additionally, the RTC found that the petition had been filed more
than fifteen days after notice of the PARAD decision. Private respondent then filed a petition for
certiorari in the CA which reversed the order of dismissal of RTC and remanded the case to the
RTC for further proceedings. The government challenged the CA ruling before this Court via a
petition for review on certiorari. This Court, affirming the CA, ruled as follows:
Thus, under the law, the Land Bank of the Philippines is charged with the initial responsibility of
determining the value of lands placed under land reform and the compensation to be paid for
their taking. Through notice sent to the landowner pursuant to 16(a) of R.A. No. 6657, the DAR
makes an offer. In case the landowner rejects the offer, a summary administrative proceeding is
held and afterward the provincial (PARAD), the regional (RARAD) or the central (DARAB)
adjudicator as the case may be, depending on the value of the land, fixes the price to be paid for
the land. If the landowner does not agree to the price fixed, he may bring the matter to the RTC
acting as Special Agrarian Court. This in essence is the procedure for the determination of
compensation cases under R.A. No. 6657. In accordance with it, the private respondents case
was properly brought by it in the RTC, and it was error for the latter court to have dismissed the
case. In the terminology of 57, the RTC, sitting as Special Agrarian Court, has "original and
exclusive jurisdiction over all petitions for the determination of just compensation to
landowners." It would subvert this "original and exclusive" jurisdiction of the RTC for the DAR
to vest original jurisdiction in compensation cases in administrative officials and make the RTC
an appellate court for the review of administrative decisions.
Consequently, although the new rules speak of directly appealing the decision of adjudicators to
the RTCs sitting as Special Agrarian Courts, it is clear from 57 that the original and exclusive
jurisdiction to determine such cases is in the RTCs. Any effort to transfer such jurisdiction
to the adjudicators and to convert the original jurisdiction of the RTCs into appellate
jurisdiction would be contrary to 57 and therefore would be void. What adjudicators are
empowered to do is only to determine in a preliminary manner the reasonable compensation to
be paid to landowners, leaving to the courts the ultimate power to decide this question.22
(Emphasis supplied.)
The above ruling was reiterated in Philippine Veterans Bank v. Court of Appeals.23 In that case,
petitioner landowner who was dissatisfied with the valuation made by LBP and DARAB, filed a
petition for determination of just compensation in the RTC (SAC). However, the RTC dismissed
the petition on the ground that it was filed beyond the 15-day reglementary period for filing
appeals from the orders of the DARAB. On appeal, the CA upheld the order of dismissal. When
the case was elevated to this Court, we likewise affirmed the CA and declared that:

To implement the provisions of R.A. No. 6657, particularly 50 thereof, Rule XIII, 11 of the
DARAB Rules of Procedure provides:
Land Valuation and Preliminary Determination and Payment of Just Compensation. -- The
decision of the Adjudicator on land valuation and preliminary determination and payment of just
compensation shall not be appealable to the Board but shall be brought directly to the Regional
Trial Courts designated as Special Agrarian Courts within fifteen (15) days from receipt of the
notice thereof. Any party shall be entitled to only one motion for reconsideration.
As we held in Republic v. Court of Appeals, this rule is an acknowledgment by the DARAB that
the power to decide just compensation cases for the taking of lands under R.A. No. 6657 is
vested in the courts. It is error to think that, because of Rule XIII, 11, the original and exclusive
jurisdiction given to the courts to decide petitions for determination of just compensation has
thereby been transformed into an appellate jurisdiction. It only means that, in accordance with
settled principles of administrative law, primary jurisdiction is vested in the DAR as an
administrative agency to determine in a preliminary manner the reasonable compensation to be
paid for the lands taken under the Comprehensive Agrarian Reform Program, but such
determination is subject to challenge in the courts.
The jurisdiction of the Regional Trial Courts is not any less "original and exclusive"
because the question is first passed upon by the DAR, as the judicial proceedings are not a
continuation of the administrative determination. For that matter, the law may provide that
the decision of the DAR is final and unappealable. Nevertheless, resort to the courts cannot be
foreclosed on the theory that courts are the guarantors of the legality of the administrative action.
Accordingly, as the petition in the Regional Trial Court was filed beyond the 15-day period
provided in Rule XIII, 11 of the Rules of Procedure of the DARAB, the trial court correctly
dismissed the case and the Court of Appeals correctly affirmed the order of dismissal.24
(Emphasis supplied.)
The Court noted that Republic v. Court of Appeals does not serve as authority for disregarding
the 15-day period to bring an action for judicial determination of just compensation as there was
no pronouncement therein invalidating Rule XIII, Section 11 of the New Rules of Procedure of
the DARAB. Moreover, we stated that any speculation as to the applicability of said provision
was foreclosed by our subsequent ruling in Philippine Veterans Bank (supra) where we affirmed
the order of dismissal of a petition for determination of just compensation for having been filed
beyond the fifteen-day period under Section 11.25
However, in the 2007 case of Land Bank of the Philippines v. Suntay,26 the Court ruled that the
RTC erred in dismissing LBPs petition for determination of just compensation on the ground
that it was filed beyond the fifteen-day period provided in Section 11, Rule XIII of the DARAB
New Rules of Procedure. Citing Republic v. Court of Appeals (supra), we stressed therein the
original and exclusive -- not appellate -- jurisdiction of the SAC over all petitions for the
determination of just compensation to landowners.27

To foreclose any uncertainty brought by the Suntay ruling, this Court in its July 31, 2008
Resolution denying LBPs motion for reconsideration of the August 14, 2007 Decision in the
case of Land Bank of the Philippines v. Martinez28 held:
On the supposedly conflicting pronouncements in the cited decisions, the Court reiterates its
ruling in this case that the agrarian reform adjudicators decision on land valuation attains
finality after the lapse of the 15-day period stated in the DARAB Rules. The petition for the
fixing of just compensation should therefore, following the law and settled jurisprudence, be
filed with the SAC within the said period. This conclusion, as already explained in the assailed
decision, is based on the doctrines laid down in Philippine Veterans Bank v. Court of Appeals
and Department of Agrarian Reform Adjudication Board v. Lubrica.
xxxx
The Court notes that the Suntay ruling is based on Republic of the Philippines v. Court of
Appeals, decided in 1996 also through the pen of Justice Vicente V. Mendoza. In that case, the
Court emphasized that the jurisdiction of the SAC is original and exclusive, not appellate.
Republic, however, was decided at a time when Rule XIII, Section 11 was not yet present in the
DARAB Rules. Further, Republic did not discuss whether the petition filed therein for the fixing
of just compensation was filed out of time or not. The Court merely decided the issue of whether
cases involving just compensation should first be appealed to the DARAB before the landowner
can resort to the SAC under Section 57 of R.A. No. 6657.
To resolve the conflict in the rulings of the Court, we now declare herein, for the guidance of the
bench and the bar, that the better rule is that stated in Philippine Veterans Bank, reiterated in
Lubrica and in the August 14, 2007 Decision in this case. Thus, while a petition for the fixing of
just compensation with the SAC is not an appeal from the agrarian reform adjudicators decision
but an original action, the same has to be filed within the 15-day period stated in the DARAB
Rules; otherwise, the adjudicators decision will attain finality. This rule is not only in accord
with law and settled jurisprudence but also with the principles of justice and equity. Verily, a
belated petition before the SAC, e.g., one filed a month, or a year, or even a decade after the land
valuation of the DAR adjudicator, must not leave the dispossessed landowner in a state of
uncertainty as to the true value of his property.29 (Emphasis supplied.)
Petitioners action before the SAC having been filed, by its own reckoning, 117 days after notice
of the PARADs denial of its motion for reconsideration of the decision fixing the just
compensation for respondents landholding, the same has attained finality.
Anent petitioners plea of liberality and relaxation of procedural rules, it is contended that in the
interest of substantial justice, the matter of overpayment which is greatly prejudicial to the
agrarian reform fund must be addressed by this Court notwithstanding petitioners
"thoughtlessness" in the tardy filing of its case before the RTC.
In the more recent case of Land Bank of the Philippines v. Umandap,30 the Court, in a decision
penned by Associate Justice Teresita Leonardo-De Castro, set aside the CAs amended decision
affirming the RTCs order dismissing the petition for judicial determination of just compensation

which was re-filed beyond the 15-day period provided in Section 11, Rule XIII of the 1994
DARAB Rules of Procedure. After LBPs initial valuation of the landowners property was
rejected, a summary administrative proceeding was conducted by the DARs Regional Agrarian
Reform Adjudicator (RARAD). Dissatisfied with the valuation fixed by the RARAD, LBP
timely filed a petition for judicial determination of just compensation before the RTC. The RTC
dismissed the petition on the ground that LBP failed to submit a proper certification against
forum shopping. LBP immediately filed a motion for reconsideration attaching thereto a
certification signed by its LBP President confirming the authority of its regional operation
manager to sign the verification and certification against forum shopping. The RTC, however,
denied the motion for reconsideration, and the order of denial was received by LBP on May 29,
2003. On June 3, 2003, LBP re-filed the petition attaching more documents showing the
authority of its regional operation manager to sign the verification and certification against forum
shopping. The RTC still dismissed the petition, ruling that even though the previous dismissal
was without prejudice, LBP nevertheless failed to re-file the petition within the period allowed
by the DARAB Rules of Procedure, and thus, the Adjudicators decision fixing the just
compensation of the subject property attained finality. LBP filed a petition for certiorari in the
CA which initially reversed and nullified the RTCs orders. Respondent landowners filed a
motion for reconsideration and subsequently the CA rendered an Amended Decision dismissing
LBPs petition and holding that certiorari is not the proper remedy since the RTC order
dismissing the re-filed petition was a final order and based on res judicata, hence certiorari is not
the proper remedy.
In a petition for review on certiorari, LBP assailed the CAs amended decision dismissing its
petition for certiorari. The Court noted that at the core of the controversy is a jurisdictional issue,
that is, whether the SAC acted without jurisdiction in outrightly dismissing the petition for the
determination of just compensation. The Court declared that since the SAC statutorily exercises
original and exclusive jurisdiction over all petitions for determination of just compensation to
landowners, it cannot be said that the decision of the adjudicator, if not appealed to the SAC,
would be deemed final and executory, under all circumstances. Citing Philippine Veterans Bank
v. Court of Appeals (supra) which affirmed the order of dismissal of a petition for determination
of just compensation for having been filed beyond the said period and explained that Section 11
is not incompatible with the original and exclusive jurisdiction of the SAC, we held:
Notwithstanding this pronouncement, however, the statutorily mandated original and exclusive
jurisdiction of the SAC led this Court to adopt, over the years, a policy of liberally allowing
petitions for determination of just compensation, even though the procedure under DARAB rules
have not been strictly followed, whenever circumstances so warrant:
1. In the 1999 case of Land Bank of the Philippines v. Court of Appeals, we held that the
SAC properly acquired jurisdiction over the petition to determine just compensation filed
by the landowner without waiting for the completion of DARABs re-evaluation of the
land.
2. In the 2004 case of Land Bank of the Philippines v. Wycoco, we allowed a direct resort
to the SAC even where no summary administrative proceedings have been held before
the DARAB.

3. In the 2006 case of Land Bank of the Philippines v. Celada, this Court upheld the
jurisdiction of the SAC despite the pendency of administrative proceedings before the
DARAB. We held:
It would be well to emphasize that the taking of property under RA No. 6657 is an
exercise of the power of eminent domain by the State. The valuation of property or
determination of just compensation in eminent domain proceedings is essentially a
judicial function which is vested with the courts and not with administrative agencies.
Consequently, the SAC properly took cognizance of respondents petition for
determination of just compensation.
4. In the 2009 case of Land Bank of the Philippines v. Belista, this Court permitted a
direct recourse to the SAC without an intermediate appeal to the DARAB as mandated
under the new provision in the 2003 DARAB Rules of Procedure. We ruled:
Although Section 5, Rule XIX of the 2003 DARAB Rules of Procedure provides that the land
valuation cases decided by the adjudicator are now appealable to the Board, such rule could not
change the clear import of Section 57 of RA No. 6657 that the original and exclusive jurisdiction
to determine just compensation is in the RTC. Thus, Section 57 authorizes direct resort to the
SAC in cases involving petitions for the determination of just compensation. In accordance with
the said Section 57, petitioner properly filed the petition before the RTC and, hence, the RTC
erred in dismissing the case. Jurisdiction over the subject matter is conferred by law. Only a
statute can confer jurisdiction on courts and administrative agencies while rules of procedure
cannot.
In the case at bar, the refiling of the Petition for Judicial Determination of Just Compensation
was done within five days from the denial of the Motion for Reconsideration of the order
dismissing the original petition, during which time said dismissal could still be appealed to the
Court of Appeals. The SAC even expressly recognized that the rules are silent as regards the
period within which a complaint dismissed without prejudice may be refiled. The statutorily
mandated original and exclusive jurisdiction of the SAC, as well as the above
circumstances showing that LBP did not appear to have been sleeping on its rights in the
allegedly belated refiling of the petition, lead us to assume a liberal construction of the
pertinent rules. To be sure, LBPs intent to question the RARADs valuation of the land
became evident with the filing of the first petition for determination of just compensation
within the period prescribed by the DARAB Rules. Although the first petition was
dismissed without prejudice on a technicality, LBPs refiling of essentially the same petition
with a proper non-forum shopping certification while the earlier dismissal order had not
attained finality should have been accepted by the trial court.1avvphi1
In view of the foregoing, we rule that the RTC acted without jurisdiction in hastily dismissing
said refiled Petition. Accordingly, the Petition for Certiorari before the Court of Appeals assailing
this dismissal should be granted.31 (Emphasis supplied.)
In contrast to the diligence showed by LBP in the above-cited case, herein petitioner LBP
admitted its "thoughtless" filing of the petition before the SAC more than 100 days after notice

of the denial of its motion for reconsideration of the PARADs decision fixing the just
compensation for the subject property. Petitioner did not offer any explanation for its tardiness
and neglect, and simply reiterated the great prejudice to the agrarian reform fund with the
erroneous inclusion in the PARADs valuation of the 151.1419 hectares already conveyed to the
government. As to the remaining 89.1419 hectares, petitioner asserts that the PARADs valuation
failed to apply the computation provided in Sec. 17 of R.A. No. 6657 as translated in DAR AO
No. 5, series of 1998.
Petitioner clearly slept on its rights by not filing the petition in the SAC within the prescribed
fifteen-day period or a reasonable time after notice of the denial of its motion for reconsideration.
Even assuming there was already a consummated sale with respect to the 151.1419 hectares and
LBPs valuation thereof had been fully paid to the respondent, the amount already paid by LBP
shall be deducted from the total compensation as determined by the PARAD. Notably, LBP
exhibited lack of interest in the discharge of its statutory functions as it failed to actively
participate in the summary administrative proceeding despite due notice of the hearings. Clearly,
there exists no compelling reason to justify relaxation of the rule on the timely availment of
judicial action for the determination of just compensation.
It is a fundamental legal principle that a decision that has acquired finality becomes immutable
and unalterable, and may no longer be modified in any respect, even if the modification is meant
to correct erroneous conclusions of fact and law, and whether it be made by the court that
rendered it or by the highest court of the land. The only exceptions to the general rule on finality
of judgments are the so-called nunc pro tunc entries which cause no prejudice to any party, void
judgments, and whenever circumstances transpire after the finality of the decision which render
its execution unjust and inequitable.32 Indeed, litigation must end and terminate sometime and
somewhere, even at the risk of occasional errors.33
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated November
12, 2004 and Resolution dated May 11, 2005 of the Court of Appeals in CA-G.R. CV No. 70979
are AFFIRMED.
No costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 136349

January 23, 2006

LOURDES DE LA PAZ MASIKIP, Petitioner,


vs.
THE CITY OF PASIG, HON. MARIETTA A. LEGASPI, in her capacity as Presiding
Judge of the Regional Trial Court of Pasig City, Branch 165 and THE COURT OF
APPEALS, Respondents.

DECISION
SANDOVAL GUTIERREZ, J.:
Where the taking by the State of private property is done for the benefit of a small community which seeks to have its own sports and recreational facility,
notwithstanding that there is such a recreational facility only a short distance away, such taking cannot be considered to be for public use. Its expropriation
is not valid. In this case, the Court defines what constitutes a genuine necessity for public use.
This petition for review on certiorari assails the Decision1 of the Court of Appeals dated October 31, 1997 in CA-G.R. SP No. 41860 affirming the Order 2
of the Regional Trial Court, Branch 165, Pasig City, dated May 7, 1996 in S.C.A. No. 873. Likewise assailed is the Resolution 3 of the same court dated
November 20, 1998 denying petitioners Motion for Reconsideration.
The facts of the case are:
Petitioner Lourdes Dela Paz Masikip is the registered owner of a parcel of land with an area of 4,521 square meters located at Pag-Asa, Caniogan, Pasig
City, Metro Manila.
In a letter dated January 6, 1994, the then Municipality of Pasig, now City of Pasig, respondent, notified petitioner of its intention to expropriate a 1,500
square meter portion of her property to be used for the "sports development and recreational activities" of the residents of Barangay Caniogan. This was
pursuant to Ordinance No. 42, Series of 1993 enacted by the then Sangguniang Bayan of Pasig.
Again, on March 23, 1994, respondent wrote another letter to petitioner, but this time the purpose was allegedly "in line with the program of the Municipal
Government to provide land opportunities to deserving poor sectors of our community."
On May 2, 1994, petitioner sent a reply to respondent stating that the intended expropriation of her property is unconstitutional, invalid, and oppressive, as
the area of her lot is neither sufficient nor suitable to "provide land opportunities to deserving poor sectors of our community."
In its letter of December 20, 1994, respondent reiterated that the purpose of the expropriation of petitioners property is "to provide sports and recreational
facilities to its poor residents."
Subsequently, on February 21, 1995, respondent filed with the trial court a complaint for expropriation, docketed as SCA No. 873. Respondent prayed that
the trial court, after due notice and hearing, issue an order for the condemnation of the property; that commissioners be appointed for the purpose of
determining the just compensation; and that judgment be rendered based on the report of the commissioners.
On April 25, 1995, petitioner filed a Motion to Dismiss the complaint on the following grounds:
I

PLAINTIFF HAS NO CAUSE OF ACTION FOR THE EXERCISE OF THE POWER OF EMINENT DOMAIN, CONSIDERING THAT:
(A) THERE IS NO GENUINE NECESSITY FOR THE TAKING OF THE PROPERTY SOUGHT TO BE EXPROPRIATED.
(B) PLAINTIFF HAS ARBITRARILY AND CAPRICIOUSLY CHOSEN THE PROPERTY SOUGHT TO BE EXPROPRIATED.
(C) EVEN ASSUMING ARGUENDO THAT DEFENDANTS PROPERTY MAY BE EXPROPRIATED BY PLAINTIFF, THE FAIR
MARKET VALUE OF THE PROPERTY TO BE EXPROPRIATED FAR EXCEEDS SEVENTY-EIGHT THOUSAND PESOS (P78,000.00)
II
PLAINTIFFS COMPLAINT IS DEFECTIVE IN FORM AND SUBSTANCE, CONSIDERING THAT:
(A) PLAINTIFF FAILS TO ALLEGE WITH CERTAINTY THE PURPOSE OF THE EXPROPRIATION.
(B) PLAINTIFF HAS FAILED TO COMPLY WITH THE PREREQUISITES LAID DOWN IN SECTION 34, RULE VI OF THE RULES
AND REGULATIONS IMPLEMENTING THE LOCAL GOVERNMENT CODE; THUS, THE INSTANT EXPROPRIATION
PROCEEDING IS PREMATURE.
III
THE GRANTING OF THE EXPROPRIATION WOULD VIOLATE SECTION 261 (V) OF THE OMNIBUS ELECTION CODE.
IV
PLAINTIFF CANNOT TAKE POSSESSION OF THE SUBJECT PROPERTY BY MERELY DEPOSITING AN AMOUNT EQUAL TO FIFTEEN
PERCENT (15%) OF THE VALUE OF THE PROPERTY BASED ON THE CURRENT TAX DECLARATION OF THE SUBJECT PROPERTY.4
On May 7, 1996, the trial court issued an Order denying the Motion to Dismiss, 5 on the ground that there is a genuine necessity to expropriate the
property for the sports and recreational activities of the residents of Pasig. As to the issue of just compensation, the trial court held that the same is to
be determined in accordance with the Revised Rules of Court.
Petitioner filed a motion for reconsideration but it was denied by the trial court in its Order of July 31, 1996. Forthwith, it appointed the City Assessor and
City Treasurer of Pasig City as commissioners to ascertain the just compensation. This prompted petitioner to file with the Court of Appeals a special civil
action for certiorari, docketed as CA-G.R. SP No. 41860. On October 31, 1997, the Appellate Court dismissed the petition for lack of merit. Petitioners
Motion for Reconsideration was denied in a Resolution dated November 20, 1998.
Hence, this petition anchored on the following grounds:
THE QUESTIONED DECISION DATED 31 OCTOBER 1997 (ATTACHMENT "A") AND RESOLUTION DATED 20 NOVEMBER 1998
(ATTACHMENT "B") ARE CONTRARY TO LAW, THE RULES OF COURT AND JURISPRUDENCE CONSIDERING THAT:
I
A. THERE IS NO EVIDENCE TO PROVE THAT THERE IS GENUINE NECESSITY FOR THE TAKING OF THE PETITIONERS
PROPERTY.
B. THERE IS NO EVIDENCE TO PROVE THAT THE PUBLIC USE REQUIREMENT FOR THE EXERCISE OF THE POWER OF
EMINENT DOMAIN HAS BEEN COMPLIED WITH.
C. THERE IS NO EVIDENCE TO PROVE THAT RESPONDENT CITY OF PASIG HAS COMPLIED WITH ALL CONDITIONS
PRECEDENT FOR THE EXERCISE OF THE POWER OF EMINENT DOMAIN.
THE COURT A QUOS ORDER DATED 07 MAY 1996 AND 31 JULY 1996, WHICH WERE AFFIRMED BY THE COURT OF APPEALS,
EFFECTIVELY AMOUNT TO THE TAKING OF PETITIONERS PROPERTY WITHOUT DUE PROCESS OF LAW:
II
THE COURT OF APPEALS GRAVELY ERRED IN APPLYING OF RULE ON ACTIONABLE DOCUMENTS TO THE DOCUMENTS ATTACHED
TO RESPONDENT CITY OF PASIGS COMPLAINT DATED 07 APRIL 1995 TO JUSTIFY THE COURT A QUOS DENIAL OF PETITIONERS
RESPONSIVE PLEADING TO THE COMPLAINT FOR EXPROPRIATION (THE MOTION TO DISMISS DATED 21 APRIL 1995).

III
THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE RULE ON HYPOTHETICAL ADMISSION OF FACTS ALLEGED IN A
COMPLAINT CONSIDERING THAT THE MOTION TO DISMISS FILED BY PETITIONER IN THE EXPROPRIATION CASE BELOW WAS THE
RESPONSIVE PLEADING REQUIRED TO BE FILED UNDER THE THEN RULE 67 OF THE RULES OF COURT AND NOT AN ORIDNARY
MOTION TO DISMISS UNDER RULE 16 OF THE RULES OF COURT.
The foregoing arguments may be synthesized into two main issues one substantive and one procedural. We will first address the procedural issue.
Petitioner filed her Motion to Dismiss the complaint for expropriation on April 25, 1995. It was denied by the trial court on May 7, 1996. At that time, the
rule on expropriation was governed by Section 3, Rule 67 of the Revised Rules of Court which provides:
"SEC. 3. Defenses and objections. Within the time specified in the summons, each defendant, in lieu of an answer, shall present in a single motion to
dismiss or for other appropriate relief, all his objections and defenses to the right of the plaintiff to take his property for the use or purpose specified in the
complaint. All such objections and defenses not so presented are waived. A copy of the motion shall be served on the plaintiffs attorney of record and filed
with the court with proof of service."
The motion to dismiss contemplated in the above Rule clearly constitutes the responsive pleading which takes the place of an answer to the complaint for
expropriation. Such motion is the pleading that puts in issue the right of the plaintiff to expropriate the defendants property for the use specified in the
complaint. All that the law requires is that a copy of the said motion be served on plaintiffs attorney of record. It is the court that at its convenience will set
the case for trial after the filing of the said pleading. 6
The Court of Appeals therefore erred in holding that the motion to dismiss filed by petitioner hypothetically admitted the truth of the facts alleged in the
complaint, "specifically that there is a genuine necessity to expropriate petitioners property for public use." Pursuant to the above Rule, the motion is a
responsive pleading joining the issues. What the trial court should have done was to set the case for the reception of evidence to determine whether there is
indeed a genuine necessity for the taking of the property, instead of summarily making a finding that the taking is for public use and appointing
commissioners to fix just compensation. This is especially so considering that the purpose of the expropriation was squarely challenged and put in issue by
petitioner in her motion to dismiss.
Significantly, the above Rule allowing a defendant in an expropriation case to file a motion to dismiss in lieu of an answer was amended by the 1997 Rules
of Civil Procedure, which took effect on July 1, 1997. Section 3, Rule 67 now expressly mandates that any objection or defense to the taking of the
property of a defendant must be set forth in an answer.
The fact that the Court of Appeals rendered its Decision in CA-G.R. SP No. 41860 on October 31, after the 1997 Rules of Civil Procedure took effect, is of
no moment. It is only fair that the Rule at the time petitioner filed her motion to dismiss should govern. The new provision cannot be applied retroactively
to her prejudice.
We now proceed to address the substantive issue.
In the early case of US v. Toribio,7 this Court defined the power of eminent domain as "the right of a government to take and appropriate private property to
public use, whenever the public exigency requires it, which can be done only on condition of providing a reasonable compensation therefor." It has also
been described as the power of the State or its instrumentalities to take private property for public use and is inseparable from sovereignty and inherent in
government.8
The power of eminent domain is lodged in the legislative branch of the government. It delegates the exercise thereof to local government units, other public
entities and public utility corporations,9 subject only to Constitutional limitations. Local governments have no inherent power of eminent domain and may
exercise it only when expressly authorized by statute.10 Section 19 of the Local Government Code of 1991 (Republic Act No. 7160) prescribes the
delegation by Congress of the power of eminent domain to local government units and lays down the parameters for its exercise, thus:
"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, 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 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 expropriated
property shall be determined by the proper court, based on the fair market value at the time of the taking of the property."
Judicial review of the exercise of eminent domain is limited to the following areas of concern: (a) the adequacy of the compensation, (b) the necessity of
the taking, and (c) the public use character of the purpose of the taking. 11
In this case, petitioner contends that respondent City of Pasig failed to establish a genuine necessity which justifies the condemnation of her property.
While she does not dispute the intended public purpose, nonetheless, she insists that there must be a genuine necessity for the proposed use and purposes.
According to petitioner, there is already an established sports development and recreational activity center at Rainforest Park in Pasig City, fully operational
and being utilized by its residents, including those from Barangay Caniogan. Respondent does not dispute this. Evidently, there is no "genuine necessity" to
justify the expropriation.

The right to take private property for public purposes necessarily originates from "the necessity" and the taking must be limited to such necessity. In City of
Manila v. Chinese Community of Manila,12 we held that the very foundation of the right to exercise eminent domain is a genuine necessity and that
necessity must be of a public character. Moreover, the ascertainment of the necessity must precede or accompany and not follow, the taking of the land.
In City of Manila v. Arellano Law College,13 we ruled that "necessity within the rule that the particular property to be expropriated must be necessary, does
not mean an absolute but only a reasonable or practical necessity, such as would combine the greatest benefit to the public with the least inconvenience and
expense to the condemning party and the property owner consistent with such benefit."
Applying this standard, we hold that respondent City of Pasig has failed to establish that there is a genuine necessity to expropriate petitioners property.
Our scrutiny of the records shows that the Certification 14 issued by the Caniogan Barangay Council dated November 20, 1994, the basis for the passage of
Ordinance No. 42 s. 1993 authorizing the expropriation, indicates that the intended beneficiary is the Melendres Compound Homeowners Association, a
private, non-profit organization, not the residents of Caniogan. It can be gleaned that the members of the said Association are desirous of having their own
private playground and recreational facility. Petitioners lot is the nearest vacant space available. The purpose is, therefore, not clearly and categorically
public. The necessity has not been shown, especially considering that there exists an alternative facility for sports development and community recreation
in the area, which is the Rainforest Park, available to all residents of Pasig City, including those of Caniogan.
The right to own and possess property is one of the most cherished rights of men. It is so fundamental that it has been written into organic law of every
nation where the rule of law prevails. Unless the requisite of genuine necessity for the expropriation of ones property is clearly established, it shall be the
duty of the courts to protect the rights of individuals to their private property. Important as the power of eminent domain may be, the inviolable sanctity
which the Constitution attaches to the property of the individual requires not only that the purpose for the taking of private property be specified. The
genuine necessity for the taking, which must be of a public character, must also be shown to exist.
WHEREFORE, the petition for review is GRANTED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 41860 are
REVERSED. The complaint for expropriation filed before the trial court by respondent City of Pasig, docketed as SCA No. 873, is ordered DISMISSED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
EN BANC
G.R. No. 166429 December 19, 2005
REPUBLIC OF THE PHILIPPINES, Represented by Executive Secretary Eduardo R.
Ermita, the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS
(DOTC), and the MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA),
Petitioners,
vs.
HON. HENRICK F. GINGOYON, In his capacity as Presiding Judge of the Regional Trial
Court, Branch 117, Pasay City and PHILIPPINE INTERNATIONAL AIR TERMINALS
CO., INC., Respondents.
DECISION
TINGA, J.:
The Ninoy Aquino International Airport Passenger Terminal III (NAIA 3) was conceived,
designed and constructed to serve as the countrys show window to the world. Regrettably, it has
spawned controversies. Regrettably too, despite the apparent completion of the terminal complex
way back it has not yet been operated. This has caused immeasurable economic damage to the
country, not to mention its deplorable discredit in the international community.
In the first case that reached this Court, Agan v. PIATCO,1 the contracts which the Government
had with the contractor were voided for being contrary to law and public policy. The second case
now before the Court involves the matter of just compensation due the contractor for the terminal
complex it built. We decide the case on the basis of fairness, the same norm that pervades both
the Courts 2004 Resolution in the first case and the latest expropriation law.
The present controversy has its roots with the promulgation of the Courts decision in Agan v.
PIATCO,2 promulgated in 2003 (2003 Decision). This decision nullified the "Concession
Agreement for the Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International
Airport Passenger Terminal III" entered into between the Philippine Government (Government)
and the Philippine International Air Terminals Co., Inc. (PIATCO), as well as the amendments
and supplements thereto. The agreement had authorized PIATCO to build a new international
airport terminal (NAIA 3), as well as a franchise to operate and maintain the said terminal during
the concession period of 25 years. The contracts were nullified, among others, that Paircargo
Consortium, predecessor of PIATCO, did not possess the requisite financial capacity when it was
awarded the NAIA 3 contract and that the agreement was contrary to public policy.3

At the time of the promulgation of the 2003 Decision, the NAIA 3 facilities had already been
built by PIATCO and were nearing completion.4 However, the ponencia was silent as to the legal
status of the NAIA 3 facilities following the nullification of the contracts, as well as whatever
rights of PIATCO for reimbursement for its expenses in the construction of the facilities. Still, in
his Separate Opinion, Justice Panganiban, joined by Justice Callejo, declared as follows:
Should government pay at all for reasonable expenses incurred in the construction of the
Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of
Piatco and, in particular, its funders, contractors and investors both local and foreign.
After all, there is no question that the State needs and will make use of Terminal III, it being part
and parcel of the critical infrastructure and transportation-related programs of government.5
PIATCO and several respondents-intervenors filed their respective motions for the
reconsideration of the 2003 Decision. These motions were denied by the Court in its Resolution
dated 21 January 2004 (2004 Resolution).6 However, the Court this time squarely addressed the
issue of the rights of PIATCO to refund, compensation or reimbursement for its expenses in the
construction of the NAIA 3 facilities. The holding of the Court on this crucial point follows:
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.7

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.8 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,9 although the
Government has raised jurisdictional questions before those two bodies.10
Then, on 21 December 2004, the Government11 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 P3,002,125,000.0012 (3
Billion)13 in Cash with the Land Bank of the Philippines, representing the NAIA 3 terminals
assessed value for taxation purposes.14

The case15 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 Order16 directing 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,17 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.18
However, on 4 January 2005, the RTC issued another Order designed to supplement its 21
December 2004 Order 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."19
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 Order now 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."20
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 2005.21
The Government, in imputing grave abuse of discretion to the acts of Hon. Gingoyon, raises five
general arguments, to wit:
(i) that Rule 67, not Rep. Act No. 8974, governs the present expropriation proceedings;
(ii) that Hon. Gingoyon erred when he ordered the immediate release of the amount of US$62.3
Million to PIATCO considering that the assessed value as alleged in the complaint was only P3
Billion;
(iii) that the RTC could not have prohibited the Government from enjoining the performance of
acts of ownership;
(iv) that the appointment of the three commissioners was erroneous; and
(v) that Hon. Gingoyon should be compelled to inhibit himself from the expropriation case.22
Before we delve into the merits of the issues raised by the Government, it is essential to consider
the crucial holding of the Court in its 2004 Resolution in Agan, which we repeat below:
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.23
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.
The 2004 Resolution Which Is
Law of This Case Generally
Permits Expropriation
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.
The Government does not contest the efficacy of this pronouncement in the 2004 Resolution,24
thus its application
to the case at bar is not a matter of controversy. Of course, questions such as what is the standard
of "just compensation" and which particular laws and equitable principles are applicable, remain
in dispute and shall be resolved forthwith.
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.25 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.
The determination of just compensation could very well be agreed upon by the parties without
judicial intervention, and it appears that steps towards that direction had been engaged in. Still,
ultimately, the Government resorted to its inherent power of eminent domain through
expropriation proceedings. Is eminent domain appropriate in the first place, with due regard not
only to the law on expropriation but also to the Courts 2004 Resolution in Agan?
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.26 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]."27
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 Courts 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.
It is from these premises that we resolve the first question, whether Rule 67 of the Rules of Court
or Rep. Act No. 8974 governs the expropriation proceedings in this case.
Application of Rule 67 Violates
the 2004 Agan Resolution

The Government insists that Rule 67 of the Rules of Court governs the expropriation proceedings
in this case to the exclusion of all other laws. On the other hand, PIATCO claims that it is Rep.
Act No. 8974 which does apply. Earlier, we had adverted to the basic differences between the
statute and the procedural rule. Further elaboration is in order.
Rule 67 outlines the procedure under which eminent domain may be exercised by the
Government. Yet by no means does it serve at present as the solitary guideline through which the
State may expropriate private property. For example, Section 19 of the Local Government Code
governs as to the exercise by local government units of the power of eminent domain through an
enabling ordinance. And then there is Rep. Act No. 8974, which covers expropriation
proceedings intended for national government infrastructure projects.
Rep. Act No. 8974, which provides for a procedure eminently more favorable to the property
owner than Rule 67, inescapably applies in instances when the national government expropriates
property "for national government infrastructure projects."28 Thus, if expropriation is engaged in
by the national government for purposes other than national infrastructure projects, the assessed
value standard and the deposit mode prescribed in Rule 67 continues to apply.
Under both Rule 67 and Rep. Act No. 8974, the Government commences expropriation
proceedings through the filing of a complaint. Unlike in the case of local governments which
necessitate an authorizing ordinance before expropriation may be accomplished, there is no need
under Rule 67 or Rep. Act No. 8974 for legislative authorization before the Government may
proceed with a particular exercise of eminent domain. The most crucial difference between Rule
67 and Rep. Act No. 8974 concerns the particular essential step the Government has to undertake
to be entitled to a writ of possession.
The first paragraph of Section 2 of Rule 67 provides:
SEC. 2. Entry of plaintiff upon depositing value with authorized government depository.
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.
In contrast, Section 4 of Rep. Act No. 8974 relevantly states:
SEC. 4. Guidelines for Expropriation Proceedings. Whenever it is necessary to acquire real
property for the right-of-way, site or location for any national government infrastructure project
through expropriation, the appropriate proceedings before the proper court under the following
guidelines:
a) Upon the filing of the complaint, and after due notice to the defendant, the implementing
agency shall 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 Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or
structures as determined under Section 7 hereof;
...
c) 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 proffered value taking into consideration the
standards prescribed in Section 5 hereof.
Upon completion with the guidelines abovementioned, the court shall immediately issue to the
implementing agency an order to take possession of the property and start the implementation of
the project.
Before the court can issue a Writ of Possession, the implementing agency shall present to the
court a certificate of availability of funds from the proper official concerned.
...
As can be gleaned from the above-quoted texts, Rule 67 merely requires the Government to
deposit with an authorized government depositary the assessed value of the property for
expropriation for it to be entitled to a writ of possession. On the other hand, Rep. Act No. 8974
requires that the Government make a direct payment to the property owner before the writ may
issue. Moreover, such payment is based on the zonal valuation of the BIR in the case of land, the
value of the improvements or structures under the replacement cost method,29 or if no such
valuation is available and in cases of utmost urgency, the proffered value of the property to be
seized.
It is quite apparent why the Government would prefer to apply Rule 67 in lieu of Rep. Act No.
8974. Under Rule 67, it would not be obliged to immediately pay any amount to PIATCO before
it can obtain the writ of possession since all it need do is deposit the amount equivalent to the
assessed value with an authorized government depositary. Hence, it devotes considerable effort
to point out that Rep. Act No. 8974 does not apply in this case, notwithstanding the undeniable
reality that NAIA 3 is a national government project. Yet, these efforts fail, especially
considering the controlling effect of the 2004 Resolution in Agan on the adjudication of this case.
It is the finding of this Court that the staging of expropriation proceedings in this case with the
exclusive use of Rule 67 would allow for the Government to take over the NAIA 3 facilities in a
fashion that directly rebukes our 2004 Resolution in Agan. This Court cannot sanction deviation
from its own final and executory orders.
Section 2 of Rule 67 provides that the State "shall have the right to take or enter upon the
possession of the real property involved if [the plaintiff] 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."30 It is thus apparent that under the

provision, all the Government need do to obtain a writ of possession is to deposit the amount
equivalent to the assessed value with an authorized government depositary.
Would the deposit under Section 2 of Rule 67 satisfy the requirement laid down in the 2004
Resolution that "[f]or the government to take over the said facility, it has to compensate
respondent PIATCO as builder of the said structures"? Evidently not.
If Section 2 of Rule 67 were to apply, PIATCO would be enjoined from receiving a single
centavo as just compensation before the Government takes over the NAIA 3 facility by virtue of
a writ of possession. Such an injunction squarely contradicts the letter and intent of the 2004
Resolution. Hence, the position of the Government sanctions its own disregard or violation the
prescription laid down by this Court that there must first be just compensation paid to PIATCO
before the Government may take over the NAIA 3 facilities.
Thus, at the very least, Rule 67 cannot apply in this case without violating the 2004 Resolution.
Even assuming that Rep. Act No. 8974 does not govern in this case, it does not necessarily
follow that Rule 67 should then apply. After all, adherence to the letter of Section 2, Rule 67
would in turn violate the Courts requirement in the 2004 Resolution that there must first be
payment of just compensation to PIATCO before the Government may take over the property.
It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with
the scheme of "immediate payment" in cases involving national government infrastructure
projects. The following portion of the Senate deliberations, cited by PIATCO in its
Memorandum, is worth quoting to cogitate on the purpose behind the plain meaning of the law:
THE CHAIRMAN (SEN. CAYETANO). "x x x Because the Senate believes that, you know,
we have to pay the landowners immediately not by treasury bills but by cash.
Since we are depriving them, you know, upon payment, no, of possession, we might as well
pay them as much, no, hindi lang 50 percent.
xxx
THE CHAIRMAN (REP. VERGARA). Accepted.
xxx
THE CHAIRMAN (SEN. CAYETANO). Oo. Because this is really in favor of the landowners, e.
THE CHAIRMAN (REP. VERGARA). Thats why we need to really secure the availability of
funds.
xxx
THE CHAIRMAN (SEN. CAYETANO). No, no. Its the same. It says here: iyong first
paragraph, diba? Iyong zonal talagang magbabayad muna. In other words, you know,

there must be a payment kaagad. (TSN, Bicameral Conference on the Disagreeing Provisions
of House Bill 1422 and Senate Bill 2117, August 29, 2000, pp. 14-20)
xxx
THE CHAIRMAN (SEN. CAYETANO). Okay, okay, no. Unang-una, it is not deposit, no.
Its payment."
REP. BATERINA. Its payment, ho, payment." (Id., p. 63)31
It likewise bears noting that the appropriate standard of just compensation is a substantive matter.
It is well within the province of the legislature to fix the standard, which it did through the
enactment of Rep. Act No. 8974. Specifically, this prescribes the new standards in determining
the amount of just compensation in expropriation cases relating to national government
infrastructure projects, as well as the manner of payment thereof. At the same time, Section 14 of
the Implementing Rules recognizes the continued applicability of Rule 67 on procedural aspects
when it provides "all matters regarding defenses and objections to the complaint, issues on
uncertain ownership and conflicting claims, effects of appeal on the rights of the parties, and
such other incidents affecting the complaint shall be resolved under the provisions on
expropriation of Rule 67 of the Rules of Court."32
Given that the 2004 Resolution militates against the continued use of the norm under Section 2,
Rule 67, is it then possible to apply Rep. Act No. 8974? We find that it is, and moreover, its
application in this case complements rather than contravenes the prescriptions laid down in the
2004 Resolution.
Rep. Act No. 8974 Fits
to the Situation at Bar
and Complements the
2004 Agan Resolution
Rep. Act No. 8974 is entitled "An Act To Facilitate The Acquisition Of Right-Of-Way, Site Or
Location For National Government Infrastructure Projects And For Other Purposes." Obviously,
the law is intended to cover expropriation proceedings intended for national government
infrastructure projects. Section 2 of Rep. Act No. 8974 explains what are considered as "national
government projects."
Sec. 2. National Government Projects. The term "national government projects" shall refer to
all national government infrastructure, engineering works and service contracts, including
projects undertaken by government-owned and controlled corporations, all projects covered by
Republic Act No. 6957, as amended by Republic Act No. 7718, otherwise known as the BuildOperate-and-Transfer Law, and other related and necessary activities, such as site acquisition,
supply and/or installation of equipment and materials, implementation, construction, completion,

operation, maintenance, improvement, repair and rehabilitation, regardless of the source of


funding.
As acknowledged in the 2003 Decision, the development of NAIA 3 was made pursuant to a
build-operate-and-transfer arrangement pursuant to Republic Act No. 6957, as amended,33 which
pertains to infrastructure or development projects normally financed by the public sector but
which are now wholly or partly implemented by the private sector.34 Under the build-operateand-transfer scheme, it is the project proponent which undertakes the construction, including the
financing, of a given infrastructure facility.35 In Tatad v. Garcia,36 the Court acknowledged that
the operator of the EDSA Light Rail Transit project under a BOT scheme was the owner of the
facilities such as "the rail tracks, rolling stocks like the coaches, rail stations, terminals and the
power plant."37
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 PIATCOs 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.
Since the rights of PIATCO over the NAIA 3 facilities are established, the nature of these
facilities should now be determined. Under Section 415(1) of the Civil Code, these facilities are
ineluctably immovable or real property, as they constitute buildings, roads and constructions of
all kinds adhered to the soil.38 Certainly, the NAIA 3 facilities are of such nature that they cannot
just be packed up and transported by PIATCO like a traveling circus caravan.
Thus, the property subject of expropriation, the NAIA 3 facilities, are real property owned by
PIATCO. This point is critical, considering the Governments insistence that the NAIA 3
facilities cannot be deemed as the "right-of-way", "site" or "location" of a national government
infrastructure project, within the coverage of Rep. Act No. 8974.
There is no doubt that the NAIA 3 is not, under any sensible contemplation, a "right-of-way." Yet
we cannot agree with the Governments insistence that neither could NAIA 3 be a "site" or
"location". The petition quotes the definitions provided in Blacks Law Dictionary of "location"
as the specific place or position of a person or thing and site as pertaining to a place or location
or a piece of property set aside for specific use."39 Yet even Blacks Law Dictionary provides
that "[t]he term [site] does not of itself necessarily mean a place or tract of land fixed by definite
boundaries."40 One would assume that the Government, to back up its contention, would be able
to point to a clear-cut rule that a "site" or "location" exclusively refers to soil, grass, pebbles and
weeds. There is none.
Indeed, we cannot accept the Governments proposition that the only properties that may be
expropriated under Rep. Act No. 8974 are parcels of land. Rep. Act No. 8974 contemplates
within its coverage such real property constituting land, buildings, roads and constructions of all
kinds adhered to the soil. Section 1 of Rep. Act No. 8974, which sets the declaration of the laws

policy, refers to "real property acquired for national government infrastructure projects are
promptly paid just compensation."41 Section 4 is quite explicit in stating that the scope of the law
relates to the acquisition of "real property," which under civil law includes buildings, roads and
constructions adhered to the soil.
It is moreover apparent that the law and its implementing rules commonly provide for a rule for
the valuation of improvements and/or structures thereupon separate from that of the land on
which such are constructed. Section 2 of Rep. Act No. 8974 itself recognizes that the
improvements or structures on the land may very well be the subject of expropriation
proceedings. Section 4(a), in relation to Section 7 of the law provides for the guidelines for the
valuation of the improvements or structures to be expropriated. Indeed, nothing in the law would
prohibit the application of Section 7, which provides for the valuation method of the
improvements and or structures in the instances wherein it is necessary for the Government to
expropriate only the improvements or structures, as in this case.
The law classifies the NAIA 3 facilities as real properties just like the soil to which they are
adhered. Any sub-classifications of real property and divergent treatment based thereupon for
purposes of expropriation must be based on substantial distinctions, otherwise the equal
protection clause of the Constitution is violated. There may be perhaps a molecular distinction
between soil and the inorganic improvements adhered thereto, yet there are no purposive
distinctions that would justify a variant treatment for purposes of expropriation. Both the land
itself and the improvements thereupon are susceptible to private ownership independent of each
other, capable of pecuniary estimation, and if taken from the owner, considered as a deprivation
of property. The owner of improvements seized through expropriation suffers the same degree of
loss as the owner of land seized through similar means. Equal protection demands that all
persons or things similarly situated should be treated alike, both as to rights conferred and
responsibilities imposed. For purposes of expropriation, parcels of land are similarly situated as
the buildings or improvements constructed thereon, and a disparate treatment between those two
classes of real property infringes the equal protection clause.
Even as the provisions of Rep. Act No. 8974 call for that laws application in this case, the
threshold test must still be met whether its implementation would conform to the dictates of the
Court in the 2004 Resolution. 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.
Clearly then, we see no error on the part of the RTC when it ruled that Rep. Act No. 8974
governs the instant expropriation proceedings.

The Proper Amount to be Paid


under Rep. Act No. 8974
Then, there is the matter of the proper amount which should be paid to PIATCO by the
Government before the writ of possession may issue, consonant to Rep. Act No. 8974.
At this juncture, we must address the observation made by the Office of the Solicitor General in
behalf of the Government that there could be no "BIR zonal valuations" on the NAIA 3 facility,
as provided in Rep. Act No. 8974, since zonal valuations are only for parcels of land, not for
airport terminals. The Court agrees with this point, yet does not see it as an impediment for the
application of Rep. Act No. 8974.
It must be clarified that PIATCO cannot be reimbursed or justly compensated for the value of the
parcel of land on which NAIA 3 stands. PIATCO is not the owner of the land on which the NAIA
3 facility is constructed, and it should not be entitled to just compensation that is inclusive of the
value of the land itself. It would be highly disingenuous to compensate PIATCO for the value of
land it does not own. Its entitlement to just compensation should be limited to the value of the
improvements and/or structures themselves. Thus, the determination of just compensation cannot
include the BIR zonal valuation under Section 4 of Rep. Act No. 8974.
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."42
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.43 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]."44 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,45 as well as the certainty
of judicial determination of the propriety of the proffered value.46
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.
How should we appreciate the questioned order of Hon. Gingoyon, which pegged the amount to
be immediately paid to PIATCO at around $62.3 Million? The Order dated 4 January 2005,
which mandated such amount, proves problematic in that regard. While the initial sum of P3
Billion may have been based on the assessed value, a standard which should not however apply
in this case, the RTC cites without qualification Section 4(a) of Rep. Act No. 8974 as the basis
for the amount of $62.3 Million, thus leaving the impression that the BIR zonal valuation may
form part of the basis for just compensation, which should not be the case. Moreover, respondent
judge made no attempt to apply the enumerated guidelines for determination of just
compensation under Section 5 of Rep. Act No. 8974, as required for judicial review of the
proffered value.
The Court notes that in the 10 January 2005 Omnibus Order, the RTC noted that the concessions
agreement entered into between the Government and PIATCO stated that the actual cost of
building NAIA 3 was "not less than" US$350 Million.47 The RTC then proceeded to observe that
while Rep. Act No. 8974 required the immediate payment to PIATCO the amount equivalent to
100% of the value of NAIA 3, the amount deposited by the Government constituted only 18% of
this value. At this point, no binding import should be given to this observation that the actual cost
of building NAIA 3 was "not less than" US$350 Million, as the final conclusions on the amount
of just compensation can come only after due ascertainment in accordance with the standards set
under Rep. Act No. 8974, not the declarations of the parties. At the same time, the expressed
linkage between the BIR zonal valuation and the amount of just compensation in this case, is
revelatory of erroneous thought on the part of the RTC.
We have already pointed out the irrelevance of the BIR zonal valuation as an appropriate basis
for valuation in this case, PIATCO not being the owner of the land on which the NAIA 3
facilities stand. The subject order is flawed insofar as it fails to qualify that such standard is
inappropriate.
It does appear that the amount of US$62.3 Million was based on the certification issued by the
LBP-Baclaran that the Republic of the Philippines maintained a total balance in that branch

amounting to such amount. Yet the actual representation of the $62.3 Million is not clear. The
Land Bank Certification expressing such amount does state that it was issued upon request of the
Manila International Airport Authority "purportedly as guaranty deposit for the expropriation
complaint."48 The Government claims in its Memorandum that the entire amount was made
available as a guaranty fund for the final and executory judgment of the trial court, and not
merely for the issuance of the writ of possession.49 One could readily conclude that the entire
amount of US$62.3 Million was intended by the Government to answer for whatever guaranties
may be required for the purpose of the expropriation complaint.
Still, such intention the Government may have had as to the entire US$62.3 Million is only
inferentially established. In ascertaining the proffered value adduced by the Government, the
amount of P3 Billion as the amount deposited characterized in the complaint as "to be held by
[Land Bank] subject to the [RTCs] orders,"50 should be deemed as controlling. There is no clear
evidence that the Government intended to offer US$62.3 Million as the initial payment of just
compensation, the wording of the Land Bank Certification notwithstanding, and credence should
be given to the consistent position of the Government on that aspect.
In any event, for the RTC to be able to justify the payment of US$62.3 Million to PIATCO and
not P3 Billion Pesos, he would have to establish that the higher amount represents the valuation
of the structures/improvements, and not the BIR zonal valuation on the land wherein NAIA 3 is
built. The Order dated 5 January 2005 fails to establish such integral fact, and in the absence of
contravening proof, the proffered value of P3 Billion, as presented by the Government, should
prevail.
Strikingly, the Government submits that assuming that Rep. Act No. 8974 is applicable, the
deposited amount of P3 Billion should be considered as the proffered value, since the amount
was based on comparative values made by the City Assessor.51 Accordingly, it should be deemed
as having faithfully complied with the requirements of the statute.52 While the Court agrees that
P3 Billion should be considered as the correct proffered value, still we cannot deem the
Government as having faithfully complied with Rep. Act No. 8974. For the law plainly requires
direct payment to the property owner, and not a mere deposit with the authorized government
depositary. Without such direct payment, no writ of possession may be obtained.
Writ of Possession May Not
Be Implemented Until Actual
Receipt by PIATCO of Proferred
Value
The Court thus finds another error on the part of the RTC. The RTC authorized the issuance of
the writ of possession to the Government notwithstanding the fact that no payment of any
amount had yet been made to PIATCO, despite the clear command of Rep. Act No. 8974 that
there must first be payment before the writ of possession can issue. While the RTC did direct the
LBP-Baclaran to immediately release the amount of US$62 Million to PIATCO, it should have

likewise suspended the writ of possession, nay, withdrawn it altogether, until the Government
shall have actually paid PIATCO. This is the inevitable consequence of the clear command of
Rep. Act No. 8974 that requires immediate payment of the initially determined amount of just
compensation should be effected. Otherwise, the overpowering intention of Rep. Act No. 8974 of
ensuring payment first before transfer of repossession would be eviscerated.
Rep. Act No. 8974 represents a significant change from previous expropriation laws such as Rule
67, or even Section 19 of the Local Government Code. Rule 67 and the Local Government Code
merely provided that the Government deposit the initial amounts53 antecedent to acquiring
possession of the property with, respectively, an authorized
Government depositary54 or the proper court.55 In both cases, the private owner does not receive
compensation prior to the deprivation of property. On the other hand, Rep. Act No. 8974
mandates immediate payment of the initial just compensation prior to the issuance of the writ of
possession in favor of the Government.
Rep. Act No. 8974 is plainly clear in imposing the requirement of immediate prepayment, and no
amount of statutory deconstruction can evade such requisite. It enshrines a new approach
towards eminent domain that reconciles the inherent unease attending expropriation proceedings
with a position of fundamental equity. While expropriation proceedings have always demanded
just compensation in exchange for private property, the previous deposit requirement impeded
immediate compensation to the private owner, especially in cases wherein the determination
of the final amount of compensation would prove highly disputed. Under the new modality
prescribed by Rep. Act No. 8974, the private owner sees immediate monetary recompense with
the same degree of speed as the taking of his/her property.
While eminent domain lies as one of the inherent powers of the State, there is no requirement
that it undertake a prolonged procedure, or that the payment of the private owner be protracted as
far as practicable. In fact, the expedited procedure of payment, as highlighted under Rep. Act No.
8974, is inherently more fair, especially to the layperson who would be hard-pressed to fully
comprehend the social value of expropriation in the first place. Immediate payment placates to
some degree whatever ill-will that arises from expropriation, as well as satisfies the demand of
basic fairness.
The Court has the duty to implement Rep. Act No. 8974 and to direct compliance with the
requirement of immediate payment in this case. Accordingly, the Writ of Possession dated 21
December 2004 should be held in abeyance, pending proof of actual payment by the Government
to PIATCO of the proffered value of the NAIA 3 facilities, which totals P3,002,125,000.00.
Rights of the Government
upon Issuance of the Writ
of Possession

Once the Government pays PIATCO the amount of the proffered value of P3 Billion, it will be
entitled to the Writ of Possession. However, the Government questions the qualification imposed
by the RTC in its 4 January 2005 Order consisting of the prohibition on the Government from
performing acts of ownership such as awarding concessions or leasing any part of NAIA 3 to
other parties. To be certain, the RTC, in its 10 January 2005 Omnibus Order, expressly stated that
it was not affirming "the superfluous part of the Order [of 4 January 2005] prohibiting the
plaintiffs from awarding concessions or leasing any part of NAIA [3] to other parties."56 Still,
such statement was predicated on the notion that since the Government was not yet the owner of
NAIA 3 until final payment of just compensation, it was obviously incapacitated to perform such
acts of ownership.
In deciding this question, the 2004 Resolution in Agan cannot be ignored, particularly the
declaration that "[f]or the government to take over the said facility, it has to compensate
respondent PIATCO as builder of the said structures." The obvious import of this holding is that
unless PIATCO is paid just compensation, the Government is barred from "taking over," a phrase
which in the strictest sense could encompass even a bar of physical possession of NAIA 3, much
less operation of the facilities.
There are critical reasons for the Court to view the 2004 Resolution less stringently, and thus
allow the operation by the Government of NAIA 3 upon the effectivity of the Writ of Possession.
For one, the national prestige is diminished every day that passes with the NAIA 3 remaining
mothballed. For another, the continued non-use of the facilities contributes to its physical
deterioration, if it has not already. And still for another, the economic benefits to the Government
and the country at large are beyond dispute once the NAIA 3 is put in operation.
Rep. Act No. 8974 provides the appropriate answer for the standard that governs the extent of the
acts the Government may be authorized to perform upon the issuance of the writ of possession.
Section 4 states that "the court shall immediately issue to the implementing agency an order to
take possession of the property and start the implementation of the project." We hold that
accordingly, once the Writ of Possession is effective, the Government itself is authorized to
perform 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. These would include 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.
The Governments position is more expansive than that adopted by the Court. It argues that with
the writ of possession, it is enabled to perform acts de jure on the expropriated property. It cites
Republic v. Tagle,57 as well as the statement therein that "the expropriation of real property does
not include mere physical entry or occupation of land," and from them concludes that "its mere
physical entry and occupation of the property fall short of the taking of title, which includes all
the rights that may be exercised by an owner over the subject property."
This conclusion is indeed lifted directly from statements in Tagle,58 but not from the ratio
decidendi of that case. Tagle concerned whether a writ of possession in favor of the Government

was still necessary in light of the fact that it was already in actual possession of the property. In
ruling that the Government was entitled to the writ of possession, the Court in Tagle explains that
such writ vested not only physical possession, but also the legal right to possess the property.
Continues the Court, such legal right to possess was particularly important in the case, as there
was a pending suit against the Republic for unlawful detainer, and the writ of possession would
serve to safeguard the Government from eviction.59
At the same time, Tagle conforms to the obvious, that there is no transfer of ownership as of yet
by virtue of the writ of possession. Tagle may concede that the Government is entitled to exercise
more than just the right of possession by virtue of the writ of possession, yet it cannot be
construed to grant the Government the entire panoply of rights that are available to the owner.
Certainly, neither Tagle nor any other case or law, lends support to the Governments proposition
that it acquires beneficial or equitable ownership of the expropriated property merely through the
writ of possession.
Indeed, this Court has been vigilant in defense of the rights of the property owner who has been
validly deprived of possession, yet retains legal title over the expropriated property pending
payment of just compensation. We reiterated the various doctrines of such import in our recent
holding in Republic v. Lim:60
The recognized rule is that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. Jurisprudence on this settled
principle is consistent both here and in other democratic jurisdictions. In Association of Small
Landowners in the Philippines, Inc. et al., vs. Secretary of Agrarian Reform[61], thus:
"Title to property which is the subject of condemnation proceedings does not vest the
condemnor until the judgment fixing just compensation is entered and paid, but the
condemnors title relates back to the date on which the petition under the Eminent Domain Act,
or the commissioners report under the Local Improvement Act, is filed.
x x x Although the right to appropriate and use land taken for a canal is complete at the
time of entry, title to the property taken remains in the owner until payment is actually
made. (Emphasis supplied.)
In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to
property does not pass to the condemnor until just compensation had actually been made. In fact,
the decisions appear to be uniform to this effect. As early as 1838, in Rubottom v. McLure, it was
held that actual payment to the owner of the condemned property was a condition
precedent to the investment of the title to the property in the State albeit not to the
appropriation of it to public use. In Rexford v. Knight, the Court of Appeals of New York said
that the construction upon the statutes was that the fee did not vest in the State until the payment
of the compensation although the authority to enter upon and appropriate the land was complete
prior to the payment. Kennedy further said that both on principle and authority the rule is . . .
that the right to enter on and use the property is complete, as soon as the property is
actually appropriated under the authority of law for a public use, but that the title does not
pass from the owner without his consent, until just compensation has been made to him."

Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that:
If the laws which we have exhibited or cited in the preceding discussion are attentively
examined it will be apparent that the method of expropriation adopted in this jurisdiction
is such as to afford absolute reassurance that no piece of land can be finally and
irrevocably taken from an unwilling owner until compensation is paid...."(Emphasis
supplied.)
Clearly, without full payment of just compensation, there can be no transfer of title from the
landowner to the expropriator. Otherwise stated, the Republics acquisition of ownership is
conditioned upon the full payment of just compensation within a reasonable time.
Significantly, in Municipality of Bian v. Garcia[62] this Court ruled that the expropriation of
lands consists of two stages, to wit:
"x x x 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. In Republic v. Salem Investment Corporation[63] , we ruled that, "the process is not
completed until payment of just compensation." Thus, here, the failure of the Republic to pay
respondent and his predecessors-in-interest for a period of 57 years rendered the expropriation
process incomplete.
Lim serves fair warning to the Government and its agencies who consistently refuse to pay just
compensation due to the private property owner whose property had been
expropriated. At the same time, Lim emphasizes the fragility of the rights of the Government as
possessor pending the final payment of just compensation, without diminishing the potency of
such rights. Indeed, the public policy, enshrined foremost in the Constitution, mandates that the
Government must pay for the private property it expropriates. Consequently, the proper judicial
attitude is to guarantee compliance with this primordial right to just compensation.
Final Determination of Just
Compensation Within 60 Days

The issuance of the writ of possession does not write finis to the expropriation proceedings. As
earlier pointed out, expropriation is not completed until payment to the property owner of just
compensation. The proffered value stands as merely a provisional determination of the amount of
just compensation, the payment of which is sufficient to transfer possession of the property to the
Government. However, to effectuate the transfer of ownership, it is necessary for the
Government to pay the property owner the final just compensation.
In Lim, the Court went as far as to countenance, given the exceptional circumstances of that case,
the reversion of the validly expropriated property to private ownership due to the failure of the
Government to pay just compensation in that case.64 It was noted in that case that the
Government deliberately refused to pay just compensation. The Court went on to rule that "in
cases where the government failed to pay just compensation within five (5) years from the
finality of the judgment in the expropriation proceedings, the owners concerned shall have the
right to recover possession of their property."65
Rep. Act No. 8974 mandates a speedy method by which the final determination of just
compensation may be had. Section 4 provides:
In the event that the owner of the property contests the implementing agencys proffered value,
the court shall determine the just compensation to be paid the owner within sixty (60) days from
the date of filing of the expropriation case. When the decision of the court becomes final and
executory, the implementing agency shall pay the owner the difference between the amount
already paid and the just compensation as determined by the court.
We hold that this provision should apply in this case. The sixty (60)-day period prescribed in
Rep. Act No. 8974 gives teeth to the laws avowed policy "to ensure that owners of real property
acquired for national government infrastructure projects are promptly paid just compensation."66
In this case, there already has been irreversible delay in the prompt payment of PIATCO of just
compensation, and it is no longer possible for the RTC to determine the just compensation due
PIATCO within sixty (60) days from the filing of the complaint last 21 December 2004, as
contemplated by the law. Still, it is feasible to effectuate the spirit of the law by requiring the trial
court to make such determination within sixty (60) days from finality of this decision, in
accordance with the guidelines laid down in Rep. Act No. 8974 and its Implementing Rules.
Of course, once the amount of just compensation has been finally determined, the Government is
obliged to pay PIATCO the said amount. As shown in Lim and other like-minded cases, the
Governments refusal to make such payment is indubitably actionable in court.
Appointment of Commissioners
The next argument for consideration is the claim of the Government that the RTC erred in
appointing the three commissioners in its 7 January 2005 Order without prior consultation with
either the Government or PIATCO, or without affording the Government the opportunity to
object to the appointment of these commissioners. We can dispose of this argument without
complication.

It must be noted that Rep. Act No. 8974 is silent on the appointment of commissioners tasked
with the ascertainment of just compensation.67 This protocol though is sanctioned under Rule 67.
We rule that the appointment of commissioners under Rule 67 may be resorted to, even in
expropriation proceedings under Rep. Act No. 8974, since the application of the provisions of
Rule 67 in that regard do not conflict with the statute. As earlier stated, Section 14 of the
Implementing Rules does allow such other incidents affecting the complaint to be resolved under
the provisions on expropriation of Rule 67 of the Rules of Court. Even without Rule 67,
reference during trial to a commissioner of the examination of an issue of fact is sanctioned
under Rule 32 of the Rules of Court.
But while the appointment of commissioners under the aegis of Rule 67 may be sanctioned in
expropriation proceedings under Rep. Act No. 8974, the standards to be observed for the
determination of just compensation are provided not in Rule 67 but in the statute. In particular,
the governing standards for the determination of just compensation for the NAIA 3 facilities are
found in Section 10 of the Implementing Rules for Rep. Act No. 8974, which provides for the
replacement cost method in the valuation of improvements and structures.68
Nothing in Rule 67 or Rep. Act No. 8974 requires that the RTC consult with the parties in the
expropriation case on who should be appointed as commissioners. Neither does the Court feel
that such a requirement should be imposed in this case. We did rule in Municipality of Talisay v.
Ramirez69 that "there is nothing to prevent [the trial court] from seeking the recommendations of
the parties on [the] matter [of appointment of commissioners], the better to ensure their fair
representation."70 At the same time, such solicitation of recommendations is not obligatory on the
part of the court, hence we cannot impute error on the part of the RTC in its exercise of solitary
discretion in the appointment of the commissioners.
What Rule 67 does allow though is for the parties to protest the appointment of any of these
commissioners, as provided under Section 5 of the Rule. These objections though must be made
filed within ten (10) days from service of the order of appointment of the commissioners. 71 In
this case, the proper recourse of the Government to challenge the choice of the commissioners is
to file an objection with the trial court, conformably with Section 5, Rule 67, and not as it has
done, assail the same through a special civil action for certiorari. Considering that the
expropriation proceedings in this case were effectively halted seven (7) days after the Order
appointing the commissioners,72 it is permissible to allow the parties to file their objections with
the RTC within five (5) days from finality of this decision.
Insufficient Ground for Inhibition
of Respondent Judge
The final argument for disposition is the claim of the Government is that Hon. Gingoyon has
prejudged the expropriation case against the Governments cause and, thus, should be required to
inhibit himself. This grave charge is predicated on facts which the Government characterizes as
"undeniable." In particular, the Government notes that the 4 January 2005 Order was issued
motu proprio, without any preceding motion, notice or hearing. Further, such order, which
directed the payment of US$62 Million to PIATCO, was attended with error in the computation

of just compensation. The Government also notes that the said Order was issued even before
summons had been served on PIATCO.
The disqualification of a judge is a deprivation of his/her judicial power73 and should not be
allowed on the basis of mere speculations and surmises. It certainly cannot be predicated on the
adverse nature of the judges rulings towards the movant for inhibition, especially if these rulings
are in accord with law. Neither could inhibition be justified merely on the erroneous nature of the
rulings of the judge. We emphasized in Webb v. People:74
To prove bias and prejudice on the part of respondent judge, petitioners harp on the alleged
adverse and erroneous rulings of respondent judge on their various motions. By
themselves, however, they do not sufficiently prove bias and prejudice to disqualify
respondent judge. To be disqualifying, the bias and prejudice must be shown to have
stemmed from an extrajudicial source and result in an opinion on the merits on some basis
other than what the judge learned from his participation in the case. Opinions formed in the
course of judicial proceedings, although erroneous, as long as they are based on the evidence
presented and conduct observed by the judge, do not prove personal bias or prejudice on the part
of the judge. As a general rule, repeated rulings against a litigant, no matter how erroneous
and vigorously and consistently expressed, are not a basis for disqualification of a judge on
grounds of bias and prejudice. Extrinsic evidence is required to establish bias, bad faith,
malice or corrupt purpose, in addition to the palpable error which may be inferred from
the decision or order itself. Although the decision may seem so erroneous as to raise doubts
concerning a judge's integrity, absent extrinsic evidence, the decision itself would be
insufficient to establish a case against the judge. The only exception to the rule is when the
error is so gross and patent as to produce an ineluctable inference of bad faith or malice.75
The Governments contentions against Hon. Gingoyon are severely undercut by the fact that the
21 December 2004 Order, which the 4 January 2005 Order sought to rectify, was indeed severely
flawed as it erroneously applied the provisions of Rule 67 of the Rules of Court, instead of Rep.
Act No. 8974, in ascertaining compliance with the requisites for the issuance of the writ of
possession. The 4 January
2005 Order, which according to the Government establishes Hon. Gingoyons bias, was
promulgated precisely to correct the previous error by applying the correct provisions of law. It
would not speak well of the Court if it sanctions a judge for wanting or even attempting to
correct a previous erroneous order which precisely is the right move to take.
Neither are we convinced that the motu proprio issuance of the 4 January 2005 Order, without
the benefit of notice or hearing, sufficiently evinces bias on the part of Hon. Gingoyon. The motu
proprio amendment by a court of an erroneous order previously issued may be sanctioned
depending on the circumstances, in line with the long-recognized principle that every court has
inherent power to do all things reasonably necessary for the administration of justice within the
scope of its jurisdiction.76 Section 5(g), Rule 135 of the Rules of Court further recognizes the
inherent power of courts "to amend and control its process and orders so as to make them
conformable to law and justice,"77 a power which Hon. Gingoyon noted in his 10 January 2005
Omnibus Order.78 This inherent power includes the right of the court to reverse itself, especially

when in its honest opinion it has committed an error or mistake in judgment, and that to adhere
to its decision will cause injustice to a party litigant.79
Certainly, the 4 January 2005 Order was designed to make the RTCs previous order
conformable to law and justice, particularly to apply the correct law of the case. Of course, as
earlier established, this effort proved incomplete, as the 4 January 2005 Order did not correctly
apply Rep. Act No. 8974 in several respects. Still, at least, the 4 January 2005 Order correctly
reformed the most basic premise of the case that Rep. Act No. 8974 governs the expropriation
proceedings.
Nonetheless, the Government belittles Hon. Gingoyons invocation of Section 5(g), Rule 135 as
"patently without merit". Certainly merit can be seen by the fact that the 4 January 2005 Order
reoriented the expropriation proceedings towards the correct governing law. Still, the
Government claims that the unilateral act of the RTC did not conform to law or justice, as it was
not afforded the right to be heard.
The Court would be more charitably disposed towards this argument if not for the fact that the
earlier order with the 4 January 2005 Order sought to correct was itself issued without the
benefit of any hearing. In fact, nothing either in Rule 67 or Rep. Act No. 8975 requires the
conduct of a hearing prior to the issuance of the writ of possession, which by design is available
immediately upon the filing of the complaint provided that the requisites attaching thereto are
present. Indeed, this expedited process for the obtention of a writ of possession in expropriation
cases comes at the expense of the rights of the property owner to be heard or to be deprived of
possession. Considering these predicates, it would be highly awry to demand that an order
modifying the earlier issuance of a writ of possession in an expropriation case be barred until the
staging of a hearing, when the issuance of the writ of possession itself is not subject to hearing.
Perhaps the conduct of a hearing under these circumstances would be prudent. However, hearing
is not mandatory, and the failure to conduct one does not establish the manifest bias required for
the inhibition of the judge.
The Government likewise faults Hon. Gingoyon for using the amount of US$350 Million as the
basis for the 100% deposit under Rep. Act No. 8974. The Court has noted that this statement was
predicated on the erroneous belief that the BIR zonal valuation applies as a standard for
determination of just compensation in this case. Yet this is manifest not of bias, but merely of
error on the part of the judge. Indeed, the Government was not the only victim of the errors of
the RTC in the assailed orders. PIATCO itself was injured by the issuance by the RTC of the writ
of possession, even though the former had yet to be paid any amount of just compensation. At
the same time, the Government was also prejudiced by the erroneous ruling of the RTC that the
amount of US$62.3 Million, and not P3 Billion, should be released to PIATCO.
The Court has not been remiss in pointing out the multiple errors committed by the RTC in its
assailed orders, to the prejudice of both parties. This attitude of error towards all does not ipso
facto negate the charge of bias. Still, great care should be had in requiring the inhibition of
judges simply because the magistrate did err. Incompetence may be a ground for administrative
sanction, but not for inhibition, which requires lack of objectivity or impartiality to sit on a case.

The Court should necessarily guard against adopting a standard that a judge should be inhibited
from hearing the case if one litigant loses trust in the judge. Such loss of trust on the part of the
Government may be palpable, yet inhibition cannot be grounded merely on the feelings of the
party-litigants. Indeed, every losing litigant in any case can resort to claiming that the judge was
biased, and he/she will gain a sympathetic ear from friends, family, and people who do not
understand the judicial process. The test in believing such a proposition should not be the
vehemence of the litigants claim of bias, but the Courts judicious estimation, as people who
know better than to believe any old cry of "wolf!", whether such bias has been irrefutably
exhibited.
The Court acknowledges that it had been previously held that "at the very first sign of lack of
faith and trust in his actions, whether well-grounded or not, the judge has no other alternative but
to inhibit himself from the case."80 But this doctrine is qualified by the entrenched rule that "a
judge may not be legally prohibited from sitting in a litigation, but when circumstances appear
that will induce doubt to his honest actuations and probity in favor of either party, or incite such
state of mind, he should conduct a careful selfexamination. He should exercise his discretion in a way that the people's faith in the Courts of
Justice is not impaired."81 And a self-assessment by the judge that he/she is not impaired to hear
the case will be respected by the Court absent any evidence to the contrary. As held in Chin v.
Court of Appeals:
An allegation of prejudgment, without more, constitutes mere conjecture and is not one of the
"just and valid reasons" contemplated in the second paragraph of Rule 137 of the Rules of Court
for which a judge may inhibit himself from hearing the case. We have repeatedly held that mere
suspicion that a judge is partial to a party is not enough. Bare allegations of partiality and
prejudgment will not suffice in the absence of clear and convincing evidence to overcome the
presumption that the judge will undertake his noble role to dispense justice according to law and
evidence and without fear or favor. There should be adequate evidence to prove the allegations,
and there must be showing that the judge had an interest, personal or otherwise, in the
prosecution of the case. To be a disqualifying circumstance, the bias and prejudice must be
shown to have stemmed from an extrajudicial source and result in an opinion on the merits on
some basis other than what the judge learned from his participation in the case.82
The mere vehemence of the Governments claim of bias does not translate to clear and
convincing evidence of impairing bias. There is no sufficient ground to direct the inhibition of
Hon. Gingoyon from hearing the expropriation case.
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."83
(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 "law and
equity" as ordained in Again and the standard set under Implementing Rules of Rep. Act No.
8974 which is the "replacement cost method" as the standard of valuation of structures and
improvements.
(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.
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 2005 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 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.
SO ORDERED.
DANTE O. TINGA
Associate Justice
WE CONCUR:
HILARIO G. DAVIDE, JR.
Chief Justice
REYNATO S. PUNO, ARTEMIO V. PANGANIBAN
Associate Justice Associate Justice
LEONARDO A. QUISUMBING, CONSUELO YNARES-SANTIAGO
i>Associate Justice Associate Justice
ANGELINA SANDOVAL-GUTIERREZ, ANTONIO T. CARPIO
Associate Justice Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ, RENATO C. CORONA
Associate Justice Associate Justice
CONCHITA CARPIO-MORALES, ROMEO J. CALLEJO, SR.
Associate Justice Associate Justice

ADOLFO S. AZCUNA, MINITA V. CHICO-NAZARIO


Associate Justice Associate Justice
CANCIO C. GARCIA
Associate Justice
C E R T I F I C AT I O N
Pursuant to Article VIII, Section 13 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.
HILARIO G. DAVIDE, JR.
Chief Justice

Footnotes
1

450 Phil. 744 (2003). The Motions for Reconsideration were denied in a Resolution
dated 21 January 2004, see 420 SCRA 575.
2

Ibid.

"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." Id.
at 840.
4

Id. at 898. Per Separate Opinion, J. Panganiban.

Ibid at 899. Per Separate Opinion, J. Panganiban. Emphasis supplied.

G.R. Nos. 155001, 155547 & 155561, 21 January 2004, 420 SCRA 575.

Id. at 603. Emphasis supplied.

Rollo, pp. 27-28.

Id. at 60-61.

10

Ibid.

11

Particularly the Republic of the Philippines, represented by Executive Secretary


Eduardo Ermita, the Department of Transportation and Communcations, represented by
its Secretary Leandro Mendoza, and the Manila International Airport Authority,
represented by its General Manager Alfonso Cusi. See rollo, pp. 88-90.
12

Rollo, p. 93.

13

For brevitys sake, all further references to this amount will be to this rounded off figure
denominated in Philippine Pesos.
14

Based on the resolution by the Board of Directors of the Manila International Airport
Authority to use the amount of P16,450.00 per square meter as the assessed value of the
NAIA 3 Terminal. See rollo, p. 103.
15

Docketed as Civil Case No. 04-0876-9.

16

Rollo, pp. 108-109.

17

Cited as G.R. No. 142304, June 20, 2001. See rollo, p. 109.

18

Rollo, p. 255. According to PIATCO, on 21 December 2004, the same date of the filing
of the complaint for expropriation and the issuance of the writ of possession, "hundreds
of PNP fully armed (sic) SWAT teams flanked [the NAIA 3 facilities]", even though it
had not yet been served summons.
19

Id. at 76-77.

20

Id. at 87.

21

Id. at 240-241.

22

Id. at 34-35.

23

Id. at 603. Emphasis supplied.

24

See rollo, p. 297-298. "Petitioners agree with this Honorable Courts statement that
[f]or the government to take over the said facility, it has to compensate respondent
PIATCO as builder of the said structures. However, petitioners would like to stress the

qualification enunciated by this Honorable Court that the compensation must be just and
in accordance with law and equity."
25

The NAIA 3 facility stands on a parcel of land owned by the Bases Conversion
Development Authority. See rollo, p. 27.
26

See Article 415(1), Civil Code.

27

Rollo, infra.

28

See Section 1, Rep. Act No. 8974.

29

As prescribed by Section 10 of the Implementing Rules to Rep. Act No. 8974, in


relation to Sections 4(a) and 7, Rep. Act No. 8974.
30

See Section 2, Rule 67, Rules of Court.

31

Private Respondents Memorandum, pp. 26-27. Emphasis not ours. See rollo, infra.

32

See Section 14, Implementing Rules.

33

See Agan 1, supra note 1 at 631-632.

34

See Section 2(a), Rep. Act No. 6957, as amended.

35

See Section 2(b), Rep. Act No. 6957, as amended.

36

G.R. No. 114222, 6 April 1995, 243 SCRA 436.

37

Ibid.

38

See Article 415(1), Civil Code.

39

Rollo, p. 42.

40

Blacks Law Dictionary, 6th ed., p. 1387.

41

See Section 1, Rep. Act No. 8974.

42

See Section 10, Implementing Rules to Rep. Act No. 8974. The replacement cost
method is generally defined as "the amount necessary to replace the
improvements/structures, based on the current market prices for materials, equipment,
labor, contractors profit and overhead, and all other attendant costs associated with the
acquisition and installation in place of the affected improvements/structures."

43

The replacement cost method is generally defined as "the amount necessary to replace
the improvements/structures, based on the current market prices for materials, equipment,
labor, contractors profit and overhead, and all other attendant costs associated with the
acquisition and installation in place of the affected improvements/structures." Ibid.
44

See Section 4(c), Rep. Act No. 8974.

45

See Section 5, id.

46

"In the event that the owner of the property contests the implementing agencys
proffered value, the court shall determine the just compensation to be paid the owner
within sixty (60) days from the date of filing of the expropriation case." See Section 4, id.
47

Rollo, p. 84.

48

Annex "K-1" to Petition. See rollo, infra.

49

Rollo, p. 397.

50

Complaint dated 21 December 2004. See rollo, infra.

51

Rollo, p. 394.

52

Id. at 393.

53

The assessed market value under Rule 67 of the Rules of Court, and 15% of the fair
market value under the Local Government Code.
54

See Section 2, Rule 67, Rules of Court.

55

See Section 19, Local Government Code.

56

Ibid.

57

Cited as 299 SCRA 549 (1998). Rollo, p. 413.

58

"In exercising this power, petitioner intended to acquire not only physical possession
but also the legal right to possess and ultimately to own the subject property. Hence, its
mere physical entry and occupation of the property fall short of the taking of title, which
includes all the rights that may be exercised by an owner over the subject property."
Republic v. Tagle, 359 Phil. 892, 902 (1998).
59

Republic v. Tagle, id. at 903.

60

G.R. No. 161656, 29 June 2005.

61

G.R. No. 78742, July 14, 1989, 175 SCRA 343.

62

G.R. No. 69260, December 22, 1989, 180 SCRA 576, 583-584.

63

G.R. No. 137569, June 23, 2000, 334 SCRA 320, 329.

64

The Court in Republic v. Lim however recognized the exceptional circumstances in that
case, wherein the government had not paid just compensation in the 57 years that had
passed since the expropriation proceedings were terminated. The general rule, as stated in
Republic, remained that "non-payment of just compensation (in expropriation
proceedings) does not entitle the private landowners to recover possession of the
expropriated lots." Id.
65

Republic v. Lim, supra note 60. The 5 year period set in Lim was based on Section 6,
Rule 39 of the Rules of Court, which sets a 5 year period within which a final and
executory judgment or order may be executed on motion. Id.
66

See Section 1, Rep. Act No. 8974.

67

Section 11 of the Implementing Rules does allow the implementing government agency
to engage the services of government financing institutions or private appraisers duly
accredited by those institutions to undertake the appraisal of the property, including the
land and/or improvements and structures. Yet the engagement of these appraisers at the
election of the Government is clearly different from the appointment by the trial court of
commissioners. The differences extend beyond merely the selecting authority. The
engagement of appraisers under Section 11 primarily occurs before the filing of the
expropriation complaint, when the Government is obliged to determine the current
relevant zonal valuation of the land to be expropriated, the valuation of the structures and
improvements using the replacement cost method, or the proffered value of the property
for expropriation, all for the purpose of making the initial payment necessary for the writ
of possession under Section 4 of Rep. Act No. 8974. This initial determination of the
amount is generally made by the Government, and not by the courts, and the engagement
of appraisers is attuned for such purpose. However, if the Government engages these
appraisers after the initial payment has been made to the property owner, for the express
purpose of making the final determination of just compensation, there is no rule that
binds the trial court to the findings of these appraisers. Neither are these appraisers
obliged to receive evidence submitted by the parties, unlike the commissioners, who are
expressly authorized to do so under Section 6, Rule 67.
68

Supra note 42.

69

G.R. No. 77071, 22 March 1990, 183 SCRA 528.

70

Id. at 532.

71

See Section 5, Rule 67, Rules of Court.

72

By virtue of the issuance of the Temporary Restraining Order dated 14 January 2005.

73

See Estrada v. Desierto, G.R. Nos. 146710-15, 146738, 3 April 2001, 356 SCRA 108.

74

342 Phil. 206 (1997).

75

Id. at 216-217. See also Aleria v. Velez, G.R. No. 127400, 16 November 1998; People v.
Court of Appeals, G.R. No. 129120, 2 July 1999; Seveses v. Court of Appeals, G.R. No.
102675, 13 October 1999; Soriano v. Angeles, G.R. No. 109920, 31 August 2000; People
v. Gako, G.R. No. 135045, 15 December 2000; Gochan v. Gochan, G.R. No. 143089, 27
February 2003.
76

Shioji v. Harvey, 43 Phil. 333, 344 (1922).

77

Section 5, Rule 135, Rules of Court.

78

See rollo, p. 82.

79

Tocao v. Court of Appeals, G.R. No. 127405, 20 September 2001, 463 SCRA 365. See
also Astraquillo v. Javier, L-20034, January 26, 1965, 13 SCRA 125.
80

See e.g., Gacayan v. Pamintuan, A.M. No. RTJ-99-1483, 17 September 1999, 314
SCRA 682.
81

See e.g., Pimentel vs. Salanga, 21 SCRA 160.

82

G.R. No. 144618, 15 August 2003, 206 SCRA 409.

83

Infra.

The Lawphil Project - Arellano Law Foundation

G.R. No. 166429 December 19, 2005


REPUBLIC OF THE PHILIPPINES represented by Executive Secretary Eduardo R.
Ermita, the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS
(DOTC) and the MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA)
vs.
HON. HENRICK F. GINGOYON in his capacity as Presiding Judge of the Regional Trial
Court of Pasay City, Branch 117, and PHILIPPINE INTERNATIONAL AIR TERMINALS
CO., INC.
SEPARATE OPINION

PUNO, J.:
I join the exhaustive Dissent of Mr. Justice Corona. In addition, I proffer the following thoughts:
I
Agan case did not preclude
right of State to expropriate
The majority opinion took excruciating pains to reconcile our Decision in Agan and the inherent
right of the State to expropriate private property. With due respect, the effort is strained and
unnecessary for there nothing in Agan where it can be deduced that the right of the State to
expropriate the subject property has been impaired or diminished. In Agan, we simply held:
xxx
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 cannot unjustly enrich itself at the expense of PIATCO and its
investors.
Agan involved solely the issue of the validity of THE PIATCO contracts. After striking down the
contracts as void, we ruled that the State must pay just compensation to PIATCO before it could
exercise the right to take over considering the undeniable fact that the latter spent a considerable
sum of money to build the structures comprising the NAIA IPT III. The Court, however, did not
spell out a rigid formula for just compensation to be paid to PIATCO except to say that it must be
according to law and equity. The Courts language was carefully crafted to give the trial court
sufficient flexibility in determining just compensation considering the exchange of charges and
countercharges that the cost in building the said structures was unreasonably bloated. It ought to
be stressed again that in Agan, we did not rule that the State cannot expropriate the said
structures. Necessarily, we did not also set the procedure on how the expropriation proceedings
should be conducted if the State would opt to expropriate said structures. We need not, therefore,
strain in attempting to square our ruling in Agan with our ruling in the case at bar. If at all, Agan
will later be relevant in fixing just compensation but not in determining which procedure to
follow in the expropriation of NAIA IPT III.
II
R.A. No. 8974 cannot
amend Rule 67
Article VIII, sec. 5 of the 1987 Constitution gave the Supreme Court the following powers:

xxx
(5) Promulgate rules concerning the protection and enforcement of constitutional rights,
pleading, practice, and procedure in all courts, the admission to the practice of law, the Integrated
Bar, and legal assistance to the underprivileged. Such rules shall provide a simplified and
inexpensive procedure for the speedy disposition of cases, shall be uniform for all courts of the
same grade, and shall not diminish, increase, or modify substantive rights. Rules of procedure of
special courts and quasi-judicial bodies shall remain effective unless disapproved by the
Supreme Court.
In Echegaray v. Secretary of Justice1 we emphasized that the 1987 Constitution strengthened
the rule making power of this Court, thus:
The 1987 Constitution molded an even stronger and more independent judiciary. Among others,
it enhanced the rule making power of this Court. x x x
The rule making power of this Court was expanded. This Court for the first time was given the
power to promulgate rules concerning the protection and enforcement of constitutional rights. x x
x But most importantly, the 1987 Constitution took away the power of Congress to repeal,
alter, or supplement rules concerning pleading, practice and procedure. In fine, the power
to promulgate rules of pleading, practice and procedure is no longer shared by this Court
with Congress x x x.
Undoubtedly, Rule 67 is the rule this Court promulgated to govern the proceedings in
expropriation cases filed in court. It has been the undeviating rule for quite a length of time.
Following Article VIII, section 5(5) of the 1987 Constitution and the Echegaray jurisprudence,
Rule 67 cannot be repealed or amended by Congress. This prohibition against non- repeal or
non-amendment refers to any part of Rule 67 for Rule 67 is pure procedural law. Consequently,
the Court should not chop Rule 67 into pieces and hold that some can be changed by Congress
but others can be changed. The stance will dilute the rule making power of this Court which can
not be allowed for it will weaken its institutional independence.
III
On December 12, 2005, the Solicitor General filed a Supplemental Manifestation and Motion.
The Solicitor General informed the Court about an Order dated December 2, 2005 of the High
Court of Justice, Queens Bench Division, London which reads:
Claim No.: HT-05-269
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

MR. JUSTICE RAMSEY


BETWEEN:
TAKENAKA CORPORATION (PHILIPPINE BRANCH)
First Claimant
ASAHIKOSAN CORPORATION
Second Claimant
-vs.PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC.
Defendant
_______________________________
ORDER DATED 2 DECEMBER 2005
_______________________________
UPON Judgment in default of Defence having been entered on 28 November 2005.
AND UPON READING the Application Notice of the Claimants dated 28 November 2005 and
the evidence referred to in Part C.
AND UPON HEARING the solicitors for the Claimants and the solicitors for the Defendant
appearing.
IT IS ORDERED THAT:
1. Judgment be entered for the First Claimant in the sum of 21,688,012.18 United States dollars,
together with interest in the sum of 6,052,805.83 United State dollars.
2. Judgment be entered for the Second Claimant in the sum of 30,319,284.36 United States
dollars, together with interest in the sum of 5,442,628.26 United Stats dollars.
3. The Defendant do pay the Claimants costs in the action, to be subject to detailed assessment if
not agreed.
DATED this 2 day of December 2005.

To be sure, the said Order is not yet final. Be that as it may, the Court cannot turn a blind eye to
this new wrinkle of the case at bar. It is of judicial notice that despite Agan, the subject case has
reached the international arbitral tribunals where the government and the private respondent have
filed charges and countercharges. There is evident need to avoid the issues pestering the parties
from further multiplying and for new proceedings to be started in other courts, lest public interest
suffer further irretrievable prejudice. Towards this end, it is respectfully submitted that the Court
should exercise its power to compel the parties to interplead pursuant to Rule 62 and invoke the
need for orderly administration of justice. The parties may be given reasonable time to amend
their pleadings in the trial court.
IN VIEW WHEREOF, I join the Opinion of Mr. Justice Corona except the part calling for the
inhibition of the respondent judge. The issues resolved by the respondent judge are not the run of
the mill variety. Indeed, their novelty and complexity have divided even the members of this
Court. There may have been lapses by the respondent judge but they do not bespeak of a biased
predisposition.
REYNATO S. PUNO
Associate Justice

Footnotes
1

361 Phil. 76 (1999).

The Lawphil Project - Arellano Law Foundation

G.R. No. 166429 December 19, 2005


REPUBLIC OF THE PHILIPPINES, Represented by Executive Secretary Eduardo R.
Ermita, the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS
(DOTC), and the MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA),
Petitioners,
vs.
HON. HENRICK F. GINGOYON, In his capacity as Presiding Judge of the Regional Trial
Court, Branch 117, Pasay City, and PHILIPPINE INTERNATIONAL AIR TERMINALS
CO., INC., Respondents.
SEPARATE OPINION
CARPIO, J.:

I concur in the result of the majority opinion.


Congress has no power to amend or repeal rules of procedure adopted by the Supreme Court.1
However, Congress can enact laws on substantive matters which are the subject of court
procedures. Thus, Congress can prescribe the initial or minimum amount for just compensation
in expropriation cases, and require immediate payment of such initial or minimum amount as
condition for the immediate takeover of the property by the government. The rules of procedure,
like Rule 67 of the Rules of Court, must adjust automatically to such new laws on substantive
matters.
Section 4 of Republic Act No. 8974, mandating immediate payment to the property owner of the
full zonal or proffered value prior to takeover by the government, is a substantive requirement in
expropriation cases. Thus, Section 4 must apply to all expropriation cases under RA No. 8974
involving the acquisition of real property, like the NAIA Terminal III, for "national government
projects."
Even assuming, for the sake of argument, that Section 4 of RA 8974 is not applicable to the
expropriation of NAIA Terminal III, the Court must still apply the substantive concept in Section
4 of RA 8974 to expropriation proceedings under Rule 67 to insure equal protection of the law to
property owners.2 There is no substantial reason to discriminate against property owners in
expropriation cases under Rule 67. Under RA 8974, when private property is expropriated for a
national government project, the government must first pay the zonal or proffered value to the
property owner before the government can take over the property. In the present case, private
property is expropriated for an admittedly national government project. Thus, the Court must
extend the substantive benefits in Section 4 of RA 8974 to expropriation cases under Rule 67 to
prevent denial of the equal protection of the law.
Accordingly, I join in the result of the majority opinion.
ANTONIO T. CARPIO
Associate Justice

Footnotes
1

Section 5(5), Article VIII, 1987 Constitution; Echegaray v. Secretary of Justice, 361
Phil. 76 (1999).
2

Section 1, Article III, 1987 Constitution.

The Lawphil Project - Arellano Law Foundation

G. R. No. 166429
REPUBLIC OF THE PHILIPPINES represented by Executive Secretary Eduardo R.
Ermita, the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS
(DOTC) and the MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA),
petitioners,
vs.
HON. HENRICK F. GINGOYON in his capacity as Presiding Judge of the Regional Trial
Court of Pasay City, Branch 117, and PHILIPPINE INTERNATIONAL AIR TERMINALS
CO., INC., respondents.
DISSENTING OPINION
CORONA, J.:
The 1987 Constitution molded an even stronger and more independent judiciary. Among others,
it enhanced the rule making power of this Court. x x x
The rule making power of this Court was expanded. This Court for the first time was given the
power to promulgate rules concerning the protection and enforcement of constitutional rights. x x
x But most importantly, the 1987 Constitution took away the power of Congress to repeal,
alter, or supplement rules concerning pleading, practice and procedure. In fine, the power to
promulgate rules of pleading, practice and procedure is no longer shared by this Court with
Congress x x x. (emphasis supplied)
Echegaray v. Secretary of Justice, 361 Phil. 76 (1999)

Senator [Miriam] Santiago. Mr. President, will the gentleman yield for clarificatory interpellation
considering that I support the bill?
xxxxxxxxx
x x x I would now like to proceed with the clarificatory questions. I would like to go through the
pages chronologically. I will refer to Section 4 on page 2 of [Senate Bill No. 2038]. This is the
Section which sets out the procedures for acquisition of land or other real property,
including expropriation.
We all know in the legal profession that expropriation proceedings are covered by Rule 67 of the
Rules of Court. I think it is self-evident that Section 4 seeks to revise Rule 67 of the Rules of
Court.
x x x Is this section intended to amend Rules of Procedure promulgated by the Supreme
Court? x x x

Senator [Renato] Cayetano. x x x


Yes, Mr. President, to a certain extent, Section 4 would amend the provisions of the Rules of
Court vis--vis expropriation x x x.
xxxxxxxxx
x x x Section 4 of this bill x x x effectively amends certain portions of the Rules of Court on
expropriation.
Senate deliberations on July 25, 2000 on Senate Bill (SB) No. 2038 which later became SB No.
2117. SB No. 2117 was consolidated with House Bill No. 1422 and enacted by Congress as RA
8974.
This case involves the exercise by the national government of the power of eminent domain over
the Ninoy Aquino International Airport International Passenger Terminal III (NAIA IPT3). From
the start, there was never any doubt about the Republics position to exercise the power of eminent
domain. The discussions within the Court focused on which procedure shall govern the determination of the just
compensation due to PIATCO for the NAIA IPT3 facilities whether it would be Rule 67 of the Rules of Court or
RA 8974.
The majority ruled that RA 8974 should apply. It ordered the national government and its co-petitioners to
immediately pay the just compensation for NAIA IPT3 before taking over the facility. In so doing, the majority may
have unwittingly further delayed, if not virtually foreclosed, the expropriation of NAIA IPT3.
I submit it erroneously allowed the procedure set forth in an unconstitutional law.
The majority allowed Congress to encroach upon the rule-making power1 which the Constitution has reserved
exclusively to this Court. And it may have created another white elephant as a result.
Hence, I respectfully dissent.
Before us is a petition for certiorari and prohibition with urgent prayer for preliminary injunction and temporary
restraining order filed by the Republic of the Philippines (Republic), the Department of Transportation and
Communications (DOTC) and the Manila International Airport Authority (MIAA). The petition seeks to nullify and
set aside the January 4, 2005, January 7, 2005 and January 10, 2005 orders of the public respondent, Hon. Henrick F.
Gingoyon, presiding judge of the Regional Trial Court of Pasay City, Branch 117, in RTC Civil Case No. 04-0876.
The main case here is one of expropriation2 and is an offshoot of the decision3 and resolution4 of this Court in the
consolidated cases of Agan v. PIATCO, Baterina v. PIATCO and Lopez v. PIATCO. The object of the expropriation
proceedings is the NAIA IPT3.5
Petitioners Case
The actual construction and development of the NAIA IPT3 were undertaken by PIATCO as contractor of a buildoperate-transfer project6 pursuant to the following contracts: (1) Concession Agreement signed on July 12, 1997; (2)
Amended and Restated Concession Agreement (ARCA) dated November 26, 1998; (3) First Supplement to the
ARCA dated August 27, 1999; (4) Second Supplement to the ARCA dated September 4, 2000; and (5) Third
Supplement to the ARCA dated June 22, 2001 [collectively, the PIATCO Contracts].7

At the end of a 25-year concession, PIATCO will transfer the operation of the terminal to the MIAA. 8 PIATCO
commenced but did not complete the construction of NAIA IPT3 because of certain developments which will be
taken up in detail later.
NAIA IPT3 stands on a parcel of land owned by the Bases Conversion Development Authority (BCDA), an agency
of the Republic.9
By way of a brief background, this Court ruled in Agan that in view of the absence of the required financial capacity
of PIATCOs predecessor, the Paircargo Consortium,10 the award to it by the Prequalification Bids and Awards
Committee (PBAC) of the contract for the construction, operation and maintenance of the NAIA IPT3 was null and
void.11 Moreover, the 1997 Concession Agreement was nullified for being a substantially different agreement from
the contract bidded upon. It also contained a provision constituting a direct government guarantee which was
expressly prohibited by RA 6957 or the Build-Operate-Transfer (B-O-T) Law and its implementing rules. The 1999
ARCA and its supplements, being mere accessory contracts, were all similarly voided.
After invalidating all the PIATCO Contracts, the Court declared in a resolution dated January 21, 2004 (2004
resolution):
[that this] Court, however, is not unmindful of the reality that the structures comprising the NAIA [IPT3] facility are
almost complete and that funds have been spent by PIATCO in their construction. For the government to take over
the 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.12 (emphasis supplied)
More than a year later, however, the Republic still had not moved any closer to opening and operating a modern
international airport. Petitioners allegedly exerted efforts, unfortunately to no avail, to negotiate with PIATCO and
its foreign stockholder and lender, Fraport AG Frankfurt Airport Services Worldwide (Fraport), for the resolution of
the stalemate. Petitioners claimed that their request for a "walk-through" to arrive at a preliminary determination of
the safety and structural integrity of the terminal as well as their appeal for the submission of construction plans and
related documents were denied.
On the ground that, under the Constitution, (1) private property can be taken for public use under certain conditions
and (2) the State has the inherent power of eminent domain, the Republic resorted to an action for expropriation on
December 21, 2004.13
Upon filing the complaint for expropriation, petitioners made a cash deposit of P3,002,125,000 (NAIA IPT3s
assessed value for taxation purposes) at the Baclaran Branch of the Land Bank of the Philippines (LBP-Baclaran).
The amount, roughly equivalent to US$ 53 million, was subject to the orders of the trial court. A writ of possession
was thereafter issued, enabling petitioner to gain its first access to the terminal 14 after the promulgation of Agan.
With the writ,
petitioners entered and took possession of the NAIA IPT3. 15
Meanwhile, the sheriff was not able to serve summons at the indicated address of PIATCO since it apparently no
longer held office there.16 Petitioners claim that, as of January 3, 2005, the sheriff still had been unable to serve
summons on PIATCO.17
On January 4, 2005, respondent judge issued the first assailed order:
In view of the foregoing, this court hereby issues the following orders to supplement its Order dated 21 December
2004 and the writ of possession issued on the same date:

(a) The Land Bank of the Philippines, Baclaran Branch, is hereby directed to immediately, upon receipt of this
Order, release the amount of US$62,343,175.77 that plaintiffs specifically made available for the purpose of
expropriation, to and in favor of PIATCO. This amount shall be deducted from the amount of just compensation due
PIATCO that shall be determined by this court pursuant to Section 4 of R.A. No. 8974.
(b) The plaintiffs are hereby directed to submit to this court a Certificate of Availability of Funds signed by
authorized officials to cover the payment of just compensation.
(c) Pending expropriation proceedings and full payment of just compensation to PIATCO, the plaintiffs are directed
to maintain, preserve and safeguard NAIA IPT3, or perform such acts or activities in preparation for their direct
operation of NAIA IPT3. Plaintiffs, however, are prohibited from performing acts of ownership like awarding
concessions or leasing any part of NAIA IPT3 to other parties.
SO ORDERED.18
Petitioners filed an urgent motion for reconsideration on January 5, 2005, asserting that the amount ordered released
by the court (approximately US$ 62.3+ million) was excessive. The LBP-Baclaran had certified that the Republic
had a total deposit of approximately US$ 62.3+19 million with it. Apparently, it was this whole amount the trial court
wanted released to PIATCO.
On the other hand, petitioner Republic objected to the order of the court because, as could be allegedly concluded
from the documents it filed with the expropriation complaint, since there were no comparable values for the
expropriated property, "reasonable basis" should determine what the provisional value20 of NAIA IPT3 ought to be.
Using "reasonable basis" as a guide, the Republic arrived at a provisional value of P3,002,125,000 or about US$ 53
million which actually represented the assessed value of the property for taxation purposes. 21 The amount Judge
Gingoyon wanted to be released immediately to PIATCO was about US$ 9 million more or US$ 63.2+ million.
Hence, the Republics objection on the ground of excessiveness.
Petitioners contended that it was likewise erroneous for the trial court to order the release of the deposit motu propio
(that is, without any motion therefor) since just compensation was yet undetermined and the deposit itself was being
claimed by other parties.22 According to petitioners, since they had not been granted "full and relevant access to the
NAIA IPT3," it was impossible for them to fully assess its safety, structural integrity and real value after just one
perfunctory guided tour of the facility.23 As there was no opportunity to thoroughly inspect the property being
expropriated, the expenditure of public funds could not be legally justified. 24 Hence, it was error for the trial court to
order the release of any part of the Republics deposits in LBP-Baclaran to PIATCO.
Petitioners also questioned why the court a quo applied RA 897425 instead of Rule 6726 of the 1997 Rules of Court to
the expropriation proceedings. They argued that the title of RA 8974 itself defined its limited application: only for
the acquisition of a right of way, site or location for a national infrastructure project. NAIA IPT3 was not a right-ofway, site or location for any national government infrastructure project. It was the national government
infrastructure project itself.27
Furthermore, petitioners considered the trial courts prohibition against "acts of ownership like awarding
concessions or leasing any part of NAIA IPT3 to other parties" as, in effect, an injunction or restraining order
against a government infrastructure project and therefore a violation of RA 897528 which prohibits the issuance of an
injunction (except by the Supreme Court) against government infrastructure projects.29 In total disregard of due
process, the injunction was issued by the trial court without notice and hearing. 30 Petitioners argued that preventing
them from exercising the rights of a beneficial owner of NAIA IPT3 would negate the very purpose for which the
writ of possession was issued31 and the expropriation itself was being pursued.
Respondent judge, finding that petitioners had the legal right to expropriate NAIA IPT3, issued the second assailed
order on January 7, 2005.
WHEREFORE, finding plaintiffs to have the right to expropriate NAIA IPT3, this court hereby orders:

1. The EXPROPRIATION of NAIA IPT3, which is particularly described in the Writ of Possession issued by this
court on December 21, 2004;
2. The appointment of DR. FIORELLO R. ESTUAR, SOFRONIO B. URSAL and ANGELO I. PANGANIBAN
as commissioners to ascertain and report to this court the just compensation for the taking of NAIA IPT3. They shall
appear before this court within three (3) days from receipt hereof to take and subscribe an oath that they will
faithfully perform their duties as commissioners under Section 6, Rule 67 of the 1997 Rules of Civil Procedure.
a. The first session of the hearing to be held by the aforesaid commissioners shall be on January 14, 2005 at 10:00
A.M. at the NAIA International Passenger Terminal 3, Villamor Airbase, Pasay City.
b. Thereafter, the commissioners shall hold session at least twice a week.
c. The commissioners shall make a full and accurate report to the court of all their proceedings on or before
February 28, 2005.
d. The commissioners shall be paid reasonable fees that shall be taxed as part of the costs of the proceedings.
SO ORDERED.32
On January 10, 2005, the trial court denied the urgent motion for reconsideration of its January 4, 2005 order and
petitioners urgent motion for inhibition of respondent judge filed on January 7, 2005.33
WHEREFORE, plaintiffs['] Motion for Reconsideration of the Order dated January 4, 2005, and Urgent Motion for
Inhibition are DENIED.
Accordingly, except for the superfluous part of the Order prohibiting the plaintiffs from awarding concession or
leasing any part of NAIA IPT3 to other parties, the order sought to be reconsidered stands: (1) The Land Bank of the
Philippines, Baclaran Branch, must release the sum of US$62,343,175.77 in favor of PIATCO; (2) The Plaintiffs
must submit a certificate of availability of funds; and (3) Pending expropriation proceedings and full payment of just
compensation to PIATCO, the plaintiffs are directed to maintain, preserve and safeguard NAIA IPT3, or perform
such acts or activities in preparation for their direct operation of NAIA IPT3.
SO ORDERED.
Respondent PIATCOs Version of Events
On October 5, 1994, petitioners received an unsolicited offer from Asias Emerging Dragons Corporation (AEDC) to
construct, operate and maintain a state-of-the-art international passenger terminal under Section 4(a) of RA 6957
(the B-O-T Law),34 Section 4(a) because the government did not have the funds nor the expertise to do the same. 35
The project was considered an unsolicited proposal because it was not a government priority project.36 Paircargo
Consortium, which eventually incorporated with other investors under the name PIATCO, submitted a
counterproposal:
to construct IPT-3 at a cost of not less than US$ 350 Million, operate such terminal at no cost to the Government,
pay Government a total of at least P17.5 Billion in annual guaranteed payments over twenty-five (25) years and
thereafter transfer title over IPT-3 to the Government for P1.00.37
The government, considering Paircargo Consortiums counterproposal more beneficial, gave AEDC thirty days to
match it; this, AEDC failed to do.38 The DOTC then issued the notice of award for the NAIA IPT3 project to
PIATCOs predecessor, Paircargo Consortium. The government, through then DOTC Secretary Arturo T. Enrile, and
PIATCO, through its President, Henry T. Go, executed the so-called PIATCO Contracts whereby PIATCO was
granted a 25-year concession to operate NAIA IPT3, after which title was to pass on to the government. 39

The 1997 Concession Agreement was signed during former President Fidel V. Ramos administration while the
ARCA and the first two supplements were executed during the tenure of former President Joseph Ejercito Estrada. 40
In January 2001, the Estrada administration was overthrown by mass political action popularly known as EDSA
People Power II. Six months into the new administration of President Gloria Macapagal-Arroyo, on June 22, 2001,
the third supplement to the ARCA was signed. Since then, the NAIA IPT3 project has been beset by seemingly
interminable difficulties on all fronts.
According to PIATCO, long-term loans from Asian Development Bank, Kreditanstalt fr Wiederaufbau,
International Finance Corporation and Dresdner Bank could not be drawn on because of the refusal of the
government to cooperate in the fulfillment of conditions precedent demanded by the lenders. 41 Undaunted, PIATCO
nevertheless continued the construction of NAIA IPT3 through advances from stockholders and interim financing. It
would have completed NAIA IPT3 by now had it not been for the alleged lack of cooperation of the MacapagalArroyo administration and the obstacles it allegedly put up.42 (In her speech at the 2002 Golden Shell Export Awards
at Malacaang Palace, President Macapagal-Arroyo stated that she could not honor the PIATCO Contracts
denounced by government lawyers 43 as null and void.44)
Furthermore, while the government defended the validity of the PIATCO Contracts in the past, it suddenly made a
volte face and joined the parties who sought their nullification.45 On September 17, 2002, various petitions were filed
before this Court to annul the PIATCO Contracts and prohibit the DOTC and MIAA from implementing them. Agan
was promulgated on May 5, 2003. Although this Court voided the PIATCO Contracts because PIATCO was, among
other reasons, unqualified, this Court did not actually find private respondent to have acted fraudulently.46
Moreover, the Court required the government to pay PIATCO a fair and just compensation for NAIA IPT3 as a
prerequisite for any takeover of the terminal.47
According to PIATCO, since the nullification of the PIATCO Contracts in 2003, petitioners have not shown any
interest in the completion, opening and operation of NAIA IPT3. Instead of directing its resources and efforts to
actually take over and operate NAIA IPT3 and to compensate PIATCO as builder of the structures, the government
allegedly prepared to develop the Diosdado Macapagal International Airport in Clark Field, Pampanga. 48
Contrary to petitioners assertion that they were not being given access to NAIA IPT3, PIATCO alleged that
invitations to view and inspect the terminal were in fact extended to them on several occasions. According to private
respondent, the following were actually able to inspect NAIA IPT3:
(a) Secretary Leandro Mendoza;
(b) Solicitor General Alfredo Benipayo;
(c) Former Executive Secretary, now Foreign Affairs
Secretary Alberto Romulo;
(d) Former MIAA General Manager Edgardo Manda;
(e) MIAA General Manager Alfonso Cusi;
(f) Former Immigration Commissioner Andrea Domingo;
(g) Congressmen Alfonso Umali Jr., Raul Villareal,
Joseph Santiago, Roberto Cajes, Corazon
Malanyaon, Josephine Ramirez, Charity Leviste,

Jacinto Paras, Prospero Pichay, Prospero Nograles,


Willie Villarama, Perpetuo Ylagan, Eduardo Zialcita,
Carmen Cari, Jose Solis, Consuelo Dy, Aleta Suarez,
Rodolfo Bacani, Aurelio Umali, Augusto Syjuco Jr.,
Generoso Tulagan and Harlin Cast Abayon;
(h) Senators Ramon Revilla Jr., Alfredo Lim, Juan Ponce
Enrile, Edgardo Angara, Panfilo Lacson and Tessie
Aquino-Oreta.49
PIATCO is convinced that the governments intentions vis--vis NAIA IPT3 are suspect. "They did not negotiate.
They dictated."50 The government, with police assistance, allegedly seized control of NAIA IPT3 late in the
afternoon of December 21, 2004 on the basis of a writ of possession issued by the trial court after no more than a
unilateral assessment of the value of the facility.51
The Issues
In fine, petitioners seek the resolution of the following issues:
I.
WHETHER OR NOT RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AND ACTED
IN EXCESS OF JURISDICTION WHEN HE HELD THAT RA 8974, NOT RULE 67 OF THE RULES OF
COURT, IS APPLICABLE IN THE EXPROPRIATION PROCEEDINGS.
II.
WHETHER OR NOT RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AND ACTED
IN EXCESS OF HIS JURISDICTION WHEN HE MOTU PROPIO ISSUED THE ORDER DIRECTING THE
DEPOSITARY BANK TO IMMEDIATELY RELEASE PETITIONERS DEPOSIT IN THE AMOUNT OF US$
62,343,175.77 WHEN NAIA IPT3S ASSESSED VALUE FOR THE PURPOSE OF THE ISSUANCE OF THE
WRIT AS ALLEGED IN THE COMPLAINT FOR EXPROPRIATION IS ONLY P 3,002,125,000
(APPROXIMATELY US$ 53 MILLION).
III.
WHETHER OR NOT RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AND ACTED
IN EXCESS OF HIS JURISDICTION WHEN HE PROHIBITED PETITIONERS FROM PERFORMING "ACTS
OF OWNERSHIP" SUCH AS AWARDING CONCESSIONS OR LEASING ANY PART OF NAIA IPT3 TO
OTHER PARTIES.
IV.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED IN MOTU PROPIO ISSUING THE JANUARY
7, 2005 ORDER APPOINTING THREE COMMISSIONERS TO DETERMINE THE TERMINALS JUST
COMPENSATION.

V.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION IN REFUSING TO
INHIBIT HIMSELF FROM THE EXPROPRIATION CASE.
Parallel to the resolution of the foregoing issues, petitioners also sought: (1) a TRO commanding respondent judge
to cease and desist from implementing his orders dated January 4, 2005, January 7, 2005 and January 10, 2005 in
RTC Civil Case No. 04-876; (2) the nullification of the orders dated January 4, 2005; January 7, 2005; and January
10, 2005; and (3) an order to respondent judge in his capacity as presiding judge of the Regional Trial Court, Branch
117, Pasay City to inhibit himself from further actions on the subject case.
The Court issued the TRO, as prayed for, on January 14, 2005.52
I shall discuss the issues in seriatim.
The Constitutional Requirement of Public use
This case essentially pertains to the exercise by the Republic of its inherent power of eminent domain or the right of
the sovereign authority to acquire private property for public use upon payment of just compensation. It refers to the
right to take or reassert dominion over property within the state for public use or to meet a public exigency. 53 The
constitutional requirement of due process lays down a rule of procedure to be observed in the exercise of such
power.54 This rule of procedure is more familiarly known as expropriation,55 a term used interchangeably with
eminent domain.
The exercise of eminent domain is circumscribed by two limitations in the Constitution: (1) the taking must be for
public use and (2) just compensation must be paid to the owner of the private property.56 These twin proscriptions
are grounded on the necessity to achieve a balance between the interests of the State, on the one hand, and the
private rights of the individual, on the other hand, by effectively restraining the former and affording protection to
the latter.57
"Public use" as a limitation to the power of eminent domain is not defined in the Constitution. It is thus considered
in its general notion of meeting a public need or a public exigency.58 It is not restricted to clear cases of "use by the
public"59 but embraces whatever may be beneficially employed for the community.60 The concept now covers uses
which, while not directly available to the public, redound to their indirect advantage or benefit. 61 It is generally
accepted that it is just as broad as "public welfare."62
Viewed in this light, the "public use" dimension of a modern international airport need not be belabored. For it is
inextricably linked to air transport which, in turn, is vital to the economy, to business and to tourism. It enhances the
movement of goods, services and people across international borders. It serves as the countrys main gateway to the
world and as its major link to its neighbors in the global village. Hardly anyone can doubt the public need for a
modern international airport and the immeasurable boost it will give the countrys economy.63
Why Expropriate NAIA IPT3 in the First Place?
In Manotok v. National Housing Authority,64 we ruled that the exercise of the power of eminent domain should be
based on necessity. Is there such a necessity for the expropriation of NAIA IPT3?
First, in todays global market governed by the hard-hearted rules of business dominance and competitiveness, time
has become a precious resource and a critical determinant of either failure or success. Indeed, not only time but also
resources are at stake in the expropriation of NAIA IPT3, an infrastructure project that needs only to be completed to
become fully operational, instead of building an entirely new facility from scratch.

Second, NAIA IPT3 sits on 65 hectares (161 acres) of prime government land located in one of the most expensive
commercial areas in the country. But that valuable land will be completely laid to waste if NAIA IPT3 does not
become operational, either because government does not allow it to operate or petitioners decide to build, operate or
develop an entirely new international airport. In either case, both sides will only succeed in stalemating each other
and NAIA IPT3 will be absolutely of no use to both petitioners and private respondent PIATCO. The land will just
lie idle and unproductive while a white elephant abjectly sits on it. A repeat of the mothballed Bataan Nuclear Power
Plant? Certainly. On the other hand, will not expropriating NAIA IPT3, putting it to good use and paying off its
owner(s) redound to the benefit of the entire country and all parties concerned?
Third, there is no denying that a project like NAIA IPT3 is long overdue, such that the prestige of the entire country
before the international community is at stake. Politics and narrow vested interests have a peculiar way of
extirpating the most salutary and beneficial ventures in this country. The undertaking appears headed for the same
fate unless this Court intervenes and exercises its judicial discretion to settle the destructive impasse. Shall this
Court watch in silence while the parties claw at each other before international arbitration bodies?
The majority opinion effectively disregarded this necessity.
Public Use and Just Compensation
None of the parties actually questioned the public purpose of the expropriation not the petitioners of course, not
the respondent judge, not even private respondent PIATCO. In fact, petitioners exerted special effort to show that the
taking was intended to encourage and promote international air traffic as well as to develop an airport with facilities,
accommodations and services meeting international standards. As for PIATCO, the records do not show that it
questioned the public purpose of the expropriation at all. The respondent judge, for his part, recognized that the
NAIA IPT3 was undoubtedly a structure for a well-defined public purpose, being of critical importance to the
Philippine economy in terms of the carriage of goods, services and people.65 Thus, there was never any question that
the expropriation of NAIA IPT3 was for a public purpose.
The policy underlying the constitutional provision for eminent domain is to make the private owner "whole" after
his property is taken.66 Thus, private property cannot be taken in any way for public use without adequate
compensation.67
Just compensation is the just and complete equivalent of the loss which the owner of the thing expropriated has to
suffer by reason of the expropriation.68 The compensation given to the owner is just if he receives for his property a
sum equivalent to its market value at the time of the taking. 69 "Market value" is the price fixed by the buyer and the
seller in the open market in the usual and ordinary course of legal trade and competition.70
RA 8974 or Rule 67 of the Rules of Court?
At bottom, the bone of contention is the procedure that should govern the determination and payment of just
compensation, i.e., whether it should be that under RA 897471 or that under Rule 67 of the Rules of Court.
Under the relevant provisions of Rule 67 of the Rules of Court, possession is given to the condemnor and just
compensation is determined in accordance with the following procedures:
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SECTION 2. Entry of plaintiff upon depositing value with authorized government depositary. 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. x x x

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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.
SECTION 3. Defenses and objections.
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If a defendant has any objection to the filing of or the allegations in the complaint, or any objection or defense to the
taking of his property, he shall serve his answer within the time stated in the summons. The answer shall specifically
designate or identify the property in which he claims to have an interest, state the nature and extent of the interest
claimed, and adduce all his objections and defenses to the taking of his property. x x x
x x x However, at the trial of the issue of just compensation, whether or not a defendant has previously appeared or
answered, he may present evidence as to the amount of the compensation to be paid for his property, and he may
share in the distribution of the award.
SECTION 4. Order of expropriation. If the objections to and the defenses against the right of the plaintiff to
expropriate the property are overruled, or when no party appears to defend as required by this Rule, the court may
issue an order of expropriation declaring that the plaintiff has a lawful right to take the property sought to be
expropriated, 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 taking of the property or the filing of the complaint, whichever came first.
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SECTION 5. Ascertainment of compensation. Upon the rendition of the order of expropriation, the court shall
appoint not more than three (3) competent and disinterested persons as commissioners to ascertain and report to the
court the just compensation for the property sought to be taken. The order of appointment shall designate the time
and place of the first session of the hearing to be held by the commissioners and specify the time within which their
report shall be submitted to the court.
Copies of the order shall be served on the parties. Objections to the appointment of any of the commissioners shall
be filed with the court within ten (10) days from service, and shall be resolved within thirty (30) days after all the
commissioners shall have received copies of the objections. (emphasis supplied)
On the other hand, RA 8974 provides for the observance of the following guidelines:
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SECTION 4. Guidelines for Expropriation Proceedings. Whenever it is necessary to acquire real property for the
right-of-way, site or location for any national government infrastructure project through expropriation, the
appropriate implementing agency shall initiate the expropriation proceedings before the proper court under the
following guidelines:
(a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall
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 Bureau of Internal
Revenue (BIR); and (2) the value of the improvements and/or structures as determined under Section 7
hereof;
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(c) 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 proffered value taking into consideration the standards prescribed in Section 5 hereof.
Upon compliance with the guidelines abovementioned, the court shall immediately issue to the implementing
agency an order to take possession of the property and start the implementation of the project.
Before the court can issue a Writ of Possession, the implementing agency shall present to the court a certificate of
availability of funds from the proper official concerned.
In the event that the owner of the property contests the implementing agency's proffered value, the court shall
determine the just compensation to be paid the owner within sixty (60) days from the date of filing of the
expropriation case. When the decision of the court becomes final and executory, the implementing agency shall pay
the owner the difference between the amount already paid and the just compensation as determined by the court.
(emphasis supplied)
To implement the above "guidelines", the Implementing Rules and Regulations (IRR) of RA 8974 provide:
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SECTION 8. Expropriation. If the owner of a private property needed by the government implementing agency
does not agree to convey his property to the government by any of the foregoing modes of acquiring and/or
transferring ownership of the property, then the government shall exercise its right of eminent domain by filing a
complaint with the proper Court for the expropriation of the private property.
The verified complaint shall state with certainty the right and purpose of expropriation, describe the real or personal
property sought to be expropriated, and join as defendants all persons owning or claiming to own, or occupying, any
part thereof or interest therein, showing as far as practicable, the interest of each defendant separately. If the title of
any property sought to be condemned appears to be in the name of the Republic of the Philippines, although
occupied by private individuals, or if the title is otherwise obscure or doubtful so that the plaintiff cannot with
accuracy or certainty specify the real owners, averment to the effect may be made in the complaint.
Pursuant to Section 4 of the Act, the Implementing Agency shall comply with the following guidelines:
a. Upon the filing of the complaint, and after due notice to the defendant/property owner, the Implementing
Agency shall immediately pay the property owner the amount equivalent to the sum of (1) one hundred
percent (100%) of the value of the property based on the current zonal valuation of the BIR; and (2) the value
of the improvements and/or structures as determined by the Implementing Agency, in accordance with
Section 10 hereof, pursuant to Section 7 of the Act.
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c. In case the completion of a national government 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 proffered value taking into consideration the standards stated in the second paragraph of Section 8 hereof,
pursuant to Section 5 of the Act.
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SECTION 10. Valuation of Improvements and/or Structures. Pursuant to Section 7 of the Act, the Implementing
Agency shall determine the valuation of the improvements and/or structures on the land to be acquired using the
replacement cost method. The replacement cost of the improvements/structures is defined as the amount necessary
to replace the improvements/structures, based on the current market prices for materials, equipment, labor,

contractor's profit and overhead, and all other attendant costs associated with the acquisition and installation in place
of the affected improvements/structures. In the valuation of the affected improvements/structures, the Implementing
Agency shall consider, among other things, the kinds and quantities of materials/equipment used, the location,
configuration and other physical features of the properties, and prevailing construction prices.
SECTION 11. Engagement of Appraisers. The Implementing Agency may, if it deems necessary, engage the
services of government financing institutions and/or private appraisers duly accredited by the said institutions to
undertake the appraisal of the property, i.e., the land and/or improvements/structures, and to determine its fair
market value. The Implementing Agency concerned shall consider the recommendations of the said appraisers in
deciding on the purchase price of or just compensation for the property.
SECTION 12. Writ of Possession. Pursuant to Section 4 of the Act, upon compliance with the guidelines stated in
Section 8 of this IRR, the court shall immediately issue to the Implementing Agency an order to take possession of
the property and start the implementation of the project.
Before the Court can issue a Writ of Possession, however, the Implementing Agency shall present to the Court of
Certificate of Availability of Funds signed by authorized officials to cover the payment to be made to the property
owner.
After the Implementing Agency has complied with the foregoing requirements, the Court shall immediately issue the
Writ of Possession to the complainant Implementing Agency.
SECTION 13. Payment of Compensation. Should the property owner concerned contest the proffered value of the
Implementing Agency, the Court shall determine the just compensation to be paid to the owner within sixty (60)
days from the date of the filling of the expropriation case, considering the standards set out in Sections 8, 9 and 10
hereof, pursuant to Section 5 of the Act. When the decision of the Court becomes final and executory, the
Implementing Agency shall pay the owner the difference between the amount already paid as provided in Section 8
(a) hereof and the just compensation determined by the court, pursuant to Section 4 of the Act.
SECTION 14. Trial Proceedings. Within the sixty (60)-day period prescribed by the Act, all matters regarding
defenses and objections to the complaint, issues on uncertain ownership and conflicting claims, effects of appeal on
the rights of the parties, and such other incidents affecting the complaint shall be resolved under the provisions on
expropriation of Rule 67 of the Rules of Court. (emphasis supplied)
Petitioners assert that the provisions on expropriation of Rule 67 of the Rules of Court should apply. The trial court
and respondent PIATCO opine that it should be RA 8974.
Rule 67 and RA 8974 differ in the manner of compensating the owner of the property under expropriation. Under
Rule 67, before the government can take possession of the property to be expropriated, the deposit of an amount
equivalent to the assessed value of the property for taxation purposes is sufficient for the time being, that is, until the
conclusion of the court proceedings where both parties shall have proven their claims and the court shall have made
a factual determination of the price of the property. Under RA 8974, on the other hand, immediate payment of the
full zonal value (a much bigger sum than the assessed value required by Rule 67) of the property and improvements
and/or structures as determined under Section 7 of the law is required before the government can take possession of
the property.
Petitioners maintain that the very title of RA 8974 states that it only covers the acquisition of right of way, site or
location for government infrastructure projects. Thus, the law itself defines the limits of its application.
Obviously, according to petitioners, an airport is not a right of way because a "right of way" refers to the right to
pass through property owned by another, which is not so in this case. Neither is it a "site or location" because
"location" is the specific place or position of a person or thing and "site" pertains to a place or location or a piece of
property set aside for a specific use. They further aver that even the bicameral deliberations on the law reveal that

the legislature never contemplated the use of this special law for the acquisition of land for a purpose other than a
right of way, site or location for government infrastructure projects. 72
Moreover, the provisions73 of RA 8974 cited by respondent judge speak of "relevant current zonal valuation of the
[Bureau of Internal Revenue (BIR)]" as the amount of deposit necessary for the issuance of a writ of possession.
BIR zonal valuations are only for parcels of land, not for airport facilities. There is no BIR zonal valuation for an
airport terminal precisely because the latter is not land.
The majority opinion ruled that RA 8974 applies in this case. It premised its conclusion on the argument that the
application of Rule 67 will violate this Courts 2004 resolution in Agan, the alleged governing law of the case.
The ruling is basically flawed as it is grounded on a wrong premise.
It is incorrect to say that Agan constitutes the law of the case. The "law of the case" doctrine is defined as a term
applied to an established rule that, when an appellate court passes on a question and remands the case to the lower
court for further proceedings, the question there settled becomes the law of the case on subsequent appeal. 74 Unlike
the doctrine of stare decisis, the doctrine of the law of the case operates only in the particular case. 75
The law of the case finds application only in the same case between the parties. This case (which refers to the
expropriation of NAIA IPT3) is irrefutably not the same as Agan (which was about the validity of the so-called
"PIATCO contracts"). Hence, the pronouncements in Agan cannot constitute the law of the case here.
The majority opinion claims that "the staging of expropriation proceedings in this case with the exclusive use of
Rule 67 would allow for the government to take over the NAIA 3 facilities in a fashion that directly rebukes our
2004 resolution in Agan (which) mandated that there must be first payment of just compensation before the
Government could take over the NAIA IPT3 facilities." This is very misleading.
The full text of the relevant statement of the Court in its 2004 resolution in Agan is as follows:
This Court, however, is not unmindful of the reality that the structures comprising the NAIA [IPT3] facility are
almost complete and that funds have been spent by PIATCO in their construction. For the government to take over
the 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. (emphasis supplied)
Clearly, the resolution only requires that PIATCO be given just compensation as a condition for any government
take-over of NAIA IPT3. The just compensation should be in accordance with law and equity. There is something
seriously wrong with the argument that RA 8974 is the only legal and equitable way to compensate PIATCO in
accordance with our 2004 resolution.
The application of Rule 67 in the expropriation proceedings of NAIA IPT3 is in consonance with Agan. The
determination and payment of just compensation pursuant to Rule 67 are in accordance with law. Under Rule 67,
PIATCO will be given FULL JUST COMPENSATION by the government for the taking of NAIA IPT3. That is
mandatory. The Constitution itself ordains it.
Under Rule 67, there is no way the government can unjustly enrich itself at the expense of PIATCO. Section 9 of
Rule 67 ensures this by requiring the payment of interest from the time government takes possession of the property.
Moreover, I dare say the majority opinion actually got caught up in a self-contradiction. At first, it claimed that the
2004 resolution in Agan laid down the following directives: (1) PIATCO must receive payment of just compensation
determined in accordance with law and equity, and (2) the government is barred from taking over NAIA IPT3 until
such just compensation is paid. It continued to argue that the 2004 resolution requires the payment of just
compensation before the takeover of NAIA IPT3 facilities. Subsequently, however, it backtracked and stated that

"the 2004 resolution does not particularize the extent such payment must be effected before the takeover, but it
actually requires at least some degree of payment to the private owner before a writ of possession may issue."
However, neither the proffered value nor the zonal valuation under RA 8974 is equivalent to just compensation. If
the majority opinion were to pursue its argument to its logical conclusion, no takeover can be had without payment
of the just compensation itself, not merely of a value corresponding to what it vaguely referred to as "some degree of
payment".
The requirement to pay the proffered value was a strained and belabored way of establishing that the application of
RA 8974 is in consonance with the 2004 resolution in Agan. If the majority opinion were to be true to its
pronouncement that the 2004 resolution demands payment of just compensation prior to the take over of NAIA
IPT3, then payment of the proffered value is not enough. The proffered value is definitely not equivalent to just
compensation.
The majority failed to realize that respondent judge gravely abuse his discretion when he issued his January 10,
2005 order. Respondent judge precipitately ruled that Rule 67 of the Rules of Court and all the laws on expropriation
involving infrastructure projects had been expressly repealed by RA 8974 and its implementing rules and
regulations. Worse, respondent judge justified his conclusion by erroneously invoking a footnote in City of Iloilo v.
Legaspi76. His order read:
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[Petitioners] relied solely and this court initially went along with their reliance on Rule 67 on Expropriation (an
perchance of P.D. Nos. 42 and 1533) as the applicable authority on the instant case for expropriation. But this court
did not know then that Rule [67] and all the laws on expropriation involving infrastructure projects have
been expressly repealed by R.A. No. 8974 and its Implementing Rules and Regulations insofar as they are
inconsistent with said Act. In the footnote of the recent case of City of lloilo vs. Judge Legaspi (G.R. No.
154614, November 25, 2004), the Supreme Court recognized that:
"Section 4 of Rep. Act No. 8974 (An Act To Facilitate The Acquisition of Right-Of-Way, Site Or Location For
National Government Infrastructure Projects and For Other Purposes) provides for the guidelines for expropriation
proceedings."
Plaintiffs argument that R.A. No. 8974 is not applicable because NAIA IPT3 is "not right-of-way, site or location"
for a national infrastructure project "but the infrastructure itself" is absurd. It is very plain to see, and this court
hereby holds, that the NAIA IPT3 is itself the very right-of-way, the site or location of the national governments
infrastructure project; it is the very right-of-way, site or location of an airport that will make them attain their "goal
of encouraging and promoting international and domestic air traffic as well as developing an internationally
acceptable airport accommodation and service."77 (emphasis supplied)
Respondent judges theory about Rule 67s supposed repeal by RA 8974 was totally devoid of factual and legal
basis. RA 8974 did not repeal Rule 67 at all. The Constitution will not allow it. In fact, neither its repealing clause
nor any of its provisions even mentioned or referred to the Rules of Court, whether on expropriation or anything
else. But even assuming (but not conceding) that respondent judges theory had been based on an implied repeal,
still there would have been no legal justification for it.
Settled is the rule in statutory construction that implied repeals are not favored. Thus:
The two laws must be absolutely incompatible, and a clear finding thereof must surface, before the inference of
implied repeal may be drawn. The rule is expressed in the maxim, interpretare et concordare legibus est optimus
interpretendi, i.e., every statute must be so interpreted and brought into accord with other laws as to form a uniform
system of jurisprudence. The fundament is that the legislature should be presumed to have known the existing laws
on the subject and not have enacted conflicting statutes. Hence, all doubts must be resolved against any implied
repeal, and all efforts should be exerted in order to harmonize and give effect to all laws on the subject.78

The foregoing becomes all the more significant when, as in this case, the provisions of RA 8974 reveal no manifest
intent to revoke Rule 67. In fact, Section 14 of the IRR of RA 8974 makes an explicit reference to Rule 67 and
mandates its applicability to all matters regarding defenses and objections to the complaint, issues on uncertain
ownership and conflicting claims, effects of appeal on the rights of the parties and such other incidents affecting the
complaint. If only for this reason, respondent judges "repeal theory" is totally erroneous.
The footnote in City of Iloilo79 was not in any way necessary to resolve any of the issues in that case. Thus, it was
merely part of an obiter dictum. Respondent judge should be reminded of our pronouncement in City of Manila v.
Entote80 that a remark made or opinion expressed by a judge in a decision upon a cause, incidentally or collaterally,
and not directly upon the question before the court, or upon a point not necessarily involved in the determination of
the cause, is obiter dictum lacking the force of an adjudication. An obiter dictum is an opinion entirely unnecessary
for the decision of the case and is not binding as precedent.81
Not only was there no pronouncement from us in City of Iloilo about Rule 67s repeal by RA 8974, we in fact
applied Rule 67 in that case. The Court invoked Section 1 of Rule 67 in resolving the issue of the sufficiency in form
and substance of the amended complaint for expropriation and Section 2 of the same Rule in holding that the City of
Iloilo was not in estoppel since it simply followed the procedure that a prior hearing was not required before a writ
of possession could be issued. Indeed, the Court could not even have applied RA 8974 in City of Iloilo because it did
not involve a project of the national government but that of a local government unit,82 thus requiring the application
of RA 7160 (the Local Government Code).83
More importantly, any talk of repeal (whether express or implied) by legislative enactment of the rules of procedure
duly promulgated by this Court goes against the Constitution itself. The power to promulgate rules of pleading,
practice and procedure was granted by the Constitution to this Court to enhance its independence. 84 It is no longer
shared by this Court with Congress. 85 The legislature now has no power to annul, modify or augment the Rules of
Court. We expressly declared in Echegaray v. Secretary of Justice86 that the 1987 Constitution took away the
power of Congress to repeal, alter or supplement rules concerning pleading, practice and procedure.87
The majority properly recognized that Rule 67 governs the procedure undertaken for eminent domain. It is thus
surprising when they unequivocally declared that, as a rule of procedure, Rule 67 can be superseded by statutory
enactment.
A perusal of the so-called "Guidelines for Expropriation Proceedings" provided for under Section 4 of RA 8974
shows that the "guidelines" radically alter the rules for expropriation under Rule 67. The majority even declared that
"RA 8974 represents a significant change from previous expropriation laws such as Rule 67." The majority
however failed to realize that such change brought about by a legislative enactment subverts the fundamental law
and defeats the constitutional intent to strengthen the independence of this Court.
There is no question that the appropriate standard of just compensation is a substantive matter, not procedural.
However, the manner of determining just compensation (including how it shall be paid and under what conditions a
writ of possession may be issued) is a matter of procedure, not of substantive law.
If a rule or statute creates a right or takes away a vested right, it is substantive. If it operates as a means of
implementing an existing right, then it is procedural.88
The provisions of Rule 67 neither vest a new power on the State nor create a new right in favor of the property
owner. Rule 67 merely provides the procedure for the States exercise of eminent domain and, at the same time,
ensures the enforcement of the right of the private owner to receive just compensation for the taking of his property.
It is purely a matter of procedure. It is therefore exclusively the domain of this Court. The Constitution prohibits
Congress from transgressing this sphere.
Congress cannot legislate the manner of payment of just compensation. Neither can Congress impose a condition on
the issuance of a writ of possession. Yet that is what RA 8974 precisely does.

The records of the 11th Congress which enacted RA 8974 reveal that Congress intended to revise and amend Rule
67. The Senate deliberations quoted at the beginning of this dissenting opinion show this legislative intent. 89 I am
therefore disheartened that the majority opinion is in effect sanctioning the arrogation of judicial power by Congress.
In denying the petition, the majority effectively sustained respondent judges repeal theory. Thus, they allowed
Congress to infringe on the Courts rule-making power, a power vested by the Constitution exclusively on this
Court.
Assuming ex gratia argumenti that the procedure outlined under RA 8974 does not constitute an impermissible
encroachment on the Courts rule-making power, the law still does not apply here. Section 1 of the IRR of RA 8974
provides that the law covers:
[A]ll acquisition of private real properties, including improvements therein, needed as right-of-way, site or location
for national government projects undertaken by any department, office or agency of the national government,
including any government-owned or controlled corporation or state college or university, authorized by law or its
respective charter to undertake national government projects.
From this, we can clearly infer that the law does not apply to the following:
(1) expropriation of private property which is personal or movable property;
(2) taking of private property, whether personal or real, for a purpose other than for right-of-way, site or location of
a national government project;
(3) appropriation of private property for right-of-way, site or location of a project not classified as a national
government project;
(4) acquisition of private property for right-of-way, site or location of a national government project but to be
undertaken by an entity not enumerated in Section 1 of the IRR of RA 8974.
In the foregoing situations, it is Rule 67 of the Rules of Court or the relevant special law (if any) 90 that will apply.
Here, the expropriation of NAIA IPT3 falls under the second category since petitioners seek to take private property
for a purpose other than for a right-of-way, site or location for a national government project.
Unfortunately, the majority sided with respondent judge and completely disregarded the fact that NAIA IPT3 was
the national government infrastructure project itself and ruled instead that it was the right-of-way, site or location of
a national government project. That was wrong and the reasoning was even more difficult to understand.
True, under Section 2(d) of the IRR of RA 8974 defining "national government projects", an airport (which NAIA
IPT3 essentially is) is specifically listed among the national government projects for which expropriation
proceedings may be initiated under the law. However, the law and its IRR also provide that the expropriation should
be for the purpose of providing for a right of way, site or location for the intended national government project. A
national government project is separate and distinct from the purpose of expropriation. Otherwise, there would have
been no need to define them separately. Thus, respondent judge erred when he equated one with the other and
obliterated the clear distinction made by the law.
Moreover, under Section 2(e) of the IRR, the specific objects or purposes of expropriation were lumped as ROW
which is defined as the "right-of-way, site or location, with defined physical boundaries, used for a national
government project." Obviously, the NAIA IPT3 is not a right of way, site or location for any national government
infrastructure project but the infrastructure itself albeit still under construction. The construction (and now the
completion) of NAIA IPT3 never required the acquisition of private property for a right of way, site or location since
the terminal, including all its access roads, stands completely on government land.

Conformably, RA 8974 does not apply to the expropriation of NAIA IPT3. And there being no special law on the
matter, Rule 67 of the Rules of Court governs the procedure for its expropriation.
Amount Ordered to be Released
Having determined Rule 67 to be the applicable procedure to follow in this expropriation case, I now turn to the
other issues.
In its complaint91 for the expropriation of NAIA IPT3, petitioners prayed for the immediate issuance of a writ of
possession of the airport terminal and deposited the amount of P3,002,125,00 (about $53 million) at LBP-Baclaran
for this purpose. This amount was based on the assessed value of NAIA IPT3 for taxation purposes.92 As requested
by petitioners and in support of their complaint for expropriation, LBP-Baclaran issued a certification of deposit, 93
which was in effect the functional equivalent of a certificate of availability of said funds.
In his January 4, 2005 order,94 respondent judge without any motion by PIATCO ordered petitioners to
immediately pay PIATCO US$62,343,175.77, the total balance of MIAAs deposits in LBP-Baclaran. Respondent
judge reiterated the above directive in his January 10, 2005 omnibus order.95 The amount directed to be released was
about US$ 9 million (or P500 million) more than the provisional value required by Rule 67 for issuance of the writ
of possession.
I refuse to join the majority who turned a blind eye on respondent judges orders which were issued with grave
abuse of discretion.
Respondent judge should not have issued his disputed orders without any motion by PIATCO. There were very
compelling reasons why. Considering that respondent judge knew or should have known how extremely
controversial NAIA IPT3 had become, he should have granted the parties unimpeded opportunity to confront each
other on the propriety of releasing such a huge amount to the owner of the property under expropriation. There were
in fact still so many pending contentious issues on which the parties had taken radically opposite positions, such as
whether it was respondent PIATCO alone that was entitled to payment or whether there were other parties like
Takenaka Corporation (to be discussed later in this decision) that had valid claims thereon and, if so, how much each
was entitled to. Furthermore, inasmuch as petitioners had been vigorously complaining that they were never really
able to inspect and evaluate the structural integrity and real worth of NAIA IPT3, respondent judge should have at
least tried to determine the reasonableness of petitioners provisional deposit and therefore, he ought not to have
been in such a hurry to order the release of petitioners funds to PIATCO which was not even asking for it. In other
words, all the foregoing warning signs considered, he should have been more circumspect, deliberate and careful in
handling the case.
On a more academic note, however, and as already quoted previously, one significant difference between RA 8974
and Rule 67 is that, under RA 8974, immediate payment of the full zonal value of the land and
improvements/structures is required before the writ of possession is issued. On the other hand, under Rule 67, the
deposit of an amount equivalent to the assessed value of the property for taxation purposes is enough.
Under Section 2 of Rule 67, the only requisites for authorizing immediate entry (that is, for the issuance of the writ
of possession) in expropriation proceedings are: (1) the filing of a complaint for expropriation sufficient in form and
substance, and (2) a deposit equivalent to the assessed value for taxation purposes of the property subject to
expropriation. Upon compliance with these two requirements, the issuance of a writ of possession becomes
ministerial.96
Petitioners complied fully with the requirements of Rule 67 pertaining to the issuance of the writ allowing entry into
the expropriated facility. First, they duly filed the verified complaint with the court a quo. Second, PIATCO was
served with and notified of the complaint. Third, petitioners set aside and earmarked P3,022,125,000 as provisional
deposit, equivalent to the assessed value of the property for taxation purposes with the depositary bank. From then
on, it became the ministerial duty of the trial court presided over by respondent judge to issue the writ of possession.

Section 2 of Rule 67 categorically prescribes the amount to be deposited with the authorized government depositary
as the pre-condition for the issuance of a writ of possession. This is the assessed value of the property for purposes
of taxation. The figure is exact and permits the court no discretion in determining what the provisional value should
be.97
Respondent judge committed grave abuse of discretion when he ordered the release not only of the provisional
deposit (as computed under Rule 67) but also of the entire bank balance of petitioner MIAA. He exercised discretion
in a matter where no discretion was allowed.
Respondent judge thus disregarded established rules by unilaterally increasing the amount of the provisional deposit
required for the issuance of the writ of possession. This Court has had occasions in the past where we denounced the
acts of trial courts in unilaterally increasing such provisional deposits. After issuing the writ of possession, the
provisional deposit is fixed and the court can no longer change it. As the Court ruled in National Power Corporation
v. Jocson98:
After having fixed these provisional values, x x x and upon deposit by petitioner of the said amounts, respondent
Judge lost, as was held in Manila Railroad Company vs. Paredes, "plenary control over the order fixing the amount
of the deposit, and has no power to annul, amend or modify it in matters of substance pending the course of the
condemnation proceedings." The reason for this rule is that a contrary ruling would defeat the very purpose of the
law which is to provide a speedy and summary procedure whereby the peaceable possession of the property subject
of the expropriation proceedings "may be secured without the delays incident to prolonged and vexatious litigation
touching the ownership and value of such lands, which should not be permitted to delay the progress of work."
Even assuming for the sake of argument that it was RA 8974 that was applicable, still the trial court could not order
petitioners to increase their deposit and to immediately pay the zonal value of NAIA IPT3. Section 4(c) of the law 99
states that, in cases where there is no existing valuation of the property concerned, only the proferred value of the
property by the agency requesting expropriation is required to be paid for issuance of the writ.
So even if it had been RA 8974 that was applicable which was not so the amount deposited by petitioners
would have constituted the proffered value estimated by them, based on comparative values made by the City
Assessor. In any case, the final determination of the total just compensation due the owner will have to be made in
accordance with Rule 67. The provisional deposit shall then be deducted and petitioners shall pay the balance plus
legal interest from the time petitioners took possession of the property until PIATCO is fully paid.
The majority opinion asserted that the determination of the amount of just compensation to be made pursuant to RA
8974 is limited to the value of the improvements/structures that constitute the NAIA IPT3 complex and cannot
include the BIR zonal valuation which serves as one of the bases for just compensation under the law. This is,
however, based on the assumption that the law is valid and Congress can substantially amend the rules of practice
and procedure duly promulgated by this Court. It cannot.
Even assuming that RA 8974 is valid, it still does not support the conclusions of the majority opinion.
The law makes clear the distinction between the valuation of the land itself, and the improvements and structures
constructed therein. While PIATCO is not entitled to the valuation that is inclusive of the value of the land, it is
entitled to just compensation limited to the value of the improvements and/or structures.
True, Section 4 distinguishes between the valuations of the land itself and of the improvements and structures
constructed therein. However, it is erroneous to infer that such difference in the manner of valuation justifies the
application of RA 8974 to the expropriation of improvements and structures alone, i.e., separate from the land. The
language of the law itself does not warrant the conclusion made in the majority opinion.
Section 4 of RA 8974 on the valuation of improvements and structures expressly refers to Section 7 of the law.
Section 4 is therefore to be construed in the light of Section 7. The latter provision (Section 7) speaks of
"improvements and/or structures on the land to be expropriated." Hence, the expropriation of the improvements and

structures under RA 8974 should be properly viewed not in isolation from but in connection with (or as an incident
of) the expropriation of land.
Moreover, any discussion of the expropriation under RA 8974 cannot be divorced from (1) the purpose of the
expropriation and (2) the nature or character of the project. Here, the expropriation does not meet the first requisite.
Hence, assuming the validity of RA 8974, its provisions still cannot be applied.
Even the reference to the proffered value by the majority opinion is inappropriate. The law is clear that such
proffered value applies only "[i]n case the completion of a national government project is of utmost urgency and
importance, and there is no existing valuation of the area concerned." The majority opinion recognizes the
correctness of the position of the Solicitor General that zonal valuations are only for parcels of land and, hence, there
can be no zonal valuation for improvements or structures such as an airport terminal like NAIA IPT3. Since it is
impossible for improvements or structures to have an existing valuation, then there can be no proffered value for
NAIA IPT 3 to speak of.
The fact that the proffered value does not apply to improvements is buttressed by the provisions of RA 8974. The
law provides that in the determination of the proffered value, the standards prescribed in Section 5 of RA 8974 shall
be taken into consideration. Section 5 expressly refers to "Standards for the Assessment of the Value of the Land
Subject of Expropriation Proceedings or Negotiated Sale." On the other hand, the valuation of improvements and/or
structures is separately governed by Section 7 of the law.
To reiterate, the determination of the proffered value categorically refers to Section 5 on the valuation of the land,
not to valuation of improvements or structures under Section 7. Thus, the majority opinion unduly enlarged the
concept of proffered value when it extended the same to improvements or structures.
Performance of Acts of Ownership
Petitioners contend that respondent judge committed grave abuse of discretion when he prohibited petitioners in his
January 4, 2005 order from performing "acts of ownership". Although six days later, in his January 10, 2005
omnibus order, respondent judge removed this prohibition, it was only because he thought it to be a "superfluity"
inasmuch as petitioners were not yet the owners of the terminal.100
Petitioners allege that the order of respondent judge unduly limited them to mere physical entry to the property
without, however, affording them the means to accomplish the public purpose of the expropriation. They argue that a
writ of possession in an expropriation proceeding carries with it the right to perform acts de jure which are necessary
to attain the purpose for which the expropriation is intended. In deciding to exercise the power of eminent domain,
petitioners intended to acquire not only physical possession but also ownership of the property ultimately. By NAIA
IPT3s very nature as an international airport terminal, awarding concessions and leasing space to third parties are
necessary and related activities in its operation.101 Petitioners assert that, upon the issuance of the writ of possession,
they acquired equitable or beneficial ownership of NAIA IPT3. What PIATCO retained until full payment of just
compensation was the mere legal title to the terminal.102
PIATCO, on the other hand, alleges that petitioners, not being the owners of NAIA IPT3, cannot exercise rights of
ownership. It cites the doctrine that title to the property does not transfer to the expropriating authority until full
payment of the just compensation.103
I agree with petitioners.
In expropriation, private property is taken for public use.104 What constitutes taking is well-settled in our
jurisprudence. The owner is ousted from his property and deprived of his beneficial enjoyment thereof. 105 The
owners right to possess and exploit the property (that is to say, his beneficial ownership of it) is "destroyed". 106 And
it is only after the property is taken that the court proceeds to determine just compensation, 107 upon full payment of
which shall title pass on to the expropriator.

Citing the case of Association of Small Landowners in the Phils., Inc. v. Secretary of Agrarian Reform, 108 PIATCO
contends that title to the property expropriated can only cede from the owner to the expropriator only upon full
payment of just compensation. The citation is incomplete, however. We actually held that:
(T)he right to enter on and use the property is complete, as soon as the property is actually appropriated under the
authority of law for a public use, but (the) title does not pass from the owner without his consent, until just
compensation has been made to him.109 (emphasis supplied)
True, title remains with the owner until just compensation is fully paid. This is only proper to protect the rights of
the property owner. But that is not the point here. The issue is whether or not the expropriating authority has the
right to enter and use the property even prior to full payment.110 In other words, can the property be taken and used
even before full payment of just compensation? Yes. Full payment of just compensation, though a condition
precedent for the transfer of title or ownership, is not a condition precedent for the taking of the property. As
discussed earlier, an important element of taking is that the owners right to possess and exploit the land (in other
words, his beneficial ownership of it) is transferred to and thenceforth exercised by the expropriator.
This is consistent with our ruling in Republic v. Tagle111 where the issue was whether the quashal of the writ of
possession, on the ground that the Republic was already occupying the property sought to be expropriated, was
proper. We held there that it was not and that the expropriation of real property was not limited to mere physical
entry or occupation:
(I)t is manifest that the petitioner, in pursuit of an objective beneficial to public interest, seeks to realize the same
through its power of eminent domain. In exercising this power, petitioner intended to acquire not only physical
possession but also the legal right to possess and ultimately to own the subject property. Hence, its mere physical
entry and occupation of the property fall short of the taking of title, which includes all the rights that may be
exercised by an owner over the subject property.
xxx xxx xxx
Ineludibly, said writ (of possession) is both necessary and practical, because mere physical possession that is
gained by entering the property is not equivalent to expropriating it with the aim of acquiring ownership over, or
even the right to possess, the expropriated property.112 (emphasis supplied)
The question now is whether this right of beneficial ownership enjoyed by the expropriator includes the right to
lease out the property (or portions thereof) and to award concessions within NAIA IPT3 to third parties. It does.
In Estate of Salud Jimenez v. Philippine Export Processing Zone (PEZA),113 we allowed the lease by the PEZA of the
property under expropriation to third parties even before payment of just compensation. PEZAs charter provided it
"substantial leeway in deciding for what public use the expropriated property would be utilized." 114 Thus, the Court
declared that it would not question the lease because it was in furtherance of the public purpose of the
expropriation.115
In this case, petitioners aim to acquire the NAIA IPT3 as the site of a world-class passenger terminal and airport, and
to complete its construction and operate it for the benefit of the Filipino people. 116 This is the "public use" purpose of
the expropriation. On the other hand, the lease and concession contracts are the means by which the public purpose
of the expropriation can be attained. Since PIATCO never challenged the "public use" purpose of the expropriation,
the reasonable implications of such public use, including the award of leases and concessions in the terminal, are
deemed admitted as necessary consequences of such expropriation.
Furthermore, in a contract of lease, only the use and enjoyment of the thing are extended to the lessee.117 Thus, one
need not be the legal owner of the property in order to give it in lease.118 The same is true for the award of
concessions which petitioners, as beneficial owner of the property, can legally grant.

Hence, respondent judge committed grave abuse of discretion when he prohibited petitioners from exercising acts of
ownership in NAIA IPT3.
Appointment of Commissioners
In petitioners complaint for expropriation, they prayed inter alia for the appointment of commissioners to determine
the terminals just compensation.119 Respondent judge, in the assailed order dated January 7, 2005, granted
petitioners prayer and appointed three commissioners.120
Petitioners now assail the appointment because it was allegedly issued by respondent judge without prior
consultation, notice and hearing to all parties who claim an interest in the just compensation to be determined.
Respondent judge also disregarded petitioners right to object to any of the appointed commissioners within ten days
from notice under Section 5, Rule 67 of the Rules of Court. Petitioners question as well the competence of the
appointed commissioners.
Petitioners contentions are untenable.
Section 5 of Rule 67 provides:
Section 5. Ascertainment of Compensation. Upon the rendition of the order of expropriation, the court shall
appoint not more than three (3) competent and disinterested persons as commissioners to ascertain and report to the
court the just compensation for the property sought to be taken. The order of appointment shall designate the time
and place of the first session of the hearing to be held by the commissioners and specify the time within which their
report shall be submitted to the court.
Copies of the order shall be served on the parties. Objections to the appointment of any of the commissioners shall
be filed with the court within ten (10) days from service, and shall be resolved within thirty (30) days after all the
commissioners shall have received copies of the objections.
Contrary to petitioners position, Rule 67 does not require consultation with the parties before the court appoints the
commissioners. Neither notice to the parties nor hearing is required for the appointment of commissioners by the
judge.
However, in Municipality of Talisay v. Ramirez,121 we held that "while it is true that, strictly speaking, it is the court
that shall appoint the said commissioners, there is nothing to prevent it from seeking the recommendations of the
parties on this matter x x x to ensure their fair representation."
This ruling was more or less integrated into the revised rules of court as the latter now gives the parties ten days
from the service of the order appointing the commissioners to file their objections to any of the appointees. This, in
effect, allows them to protest the appointment of the commissioners while providing them the opportunity to
recommend their own choices.
But the objection must come after the appointment. This is apparent from the second paragraph of Section 5, Rule
67:
"[o]bjections to the appointment of any of the commissioners shall be filed in court within ten (10) days from
service, and shall be resolved within thirty (30) days after all the commissioners shall have received copies of the
objections." (emphasis supplied)
Consequently, if petitioners are unable to accept the competence of any of the commissioners, their remedy is to file
an objection with the trial court within the stated period. Initiating a certiorari proceeding on this issue is premature.

In any case, even if the commissioners are appointed by the court, the latter is not bound by their findings. 122 Section
8 of Rule 67 provides:
Section 8. Action upon the Commissioners Report. Upon the expiration of the period of ten (10) days referred to
in the preceding section123, but after all the interested parties have filed their objections to the report or their
statement of agreement therewith, the court may, after hearing, accept the report and render judgment in accordance
therewith; or, for cause shown, it may recommit the same to the commissioners for further report of facts; or it may
set aside the report and appoint new commissioners; or it may accept the report in part and reject it in part; and it
may make such order or render such judgment as shall secure to the plaintiff the property essential to the exercise of
his right of expropriation, and to the defendant just compensation for the property so taken.
The report of the commissioners on the value of the condemned property is neither final nor conclusive. The court is
permitted to act on the report in any of several ways enumerated in the rules, at its discretion.124 It may render such
judgment as shall secure to the plaintiff the property essential to the exercise of his right of condemnation and, to the
defendant, just compensation for the property expropriated. The court may substitute its own estimate of the value as
gathered from the records.125
I therefore find no abuse of discretion on the part of respondent judge in the appointment of the three
commissioners.
However, to ensure the parties fair representation, they should be allowed to object, if they so desire, to any of the
appointed commissioners within ten days from receipt of this decision.
Inhibition of Respondent Judge
According to petitioners, respondent judge should have inhibited himself from the expropriation case because he had
already prejudged it and was extremely biased against their cause.
Petitioners charge that respondent judges January 4, 2005 order authorizing PIATCO to immediately withdraw the
sum of US$62,343,175.77 was irregularly and unfairly issued. Apart from the fact that the amount was in excess126
of what petitioners proffered, no motion or notice preceded the order. In other words, PIATCO was not even asking
for what the judge granted. To petitioners, respondent judges extreme diligence and assiduousness were uncalled
for. The swiftness by which the order was issued could only mean collusion between respondent judge and PIATCO.
This explained why PIATCO did not bother to file any motion or pleading as even without it, the orders of
respondent judge were always in its favor.
In seeking respondent judges recusation, petitioners aver that they are "not shopping for a sympathetic judge." 127
They ask for his inhibition in order to have a competent judge who can hear the parties impartially and with an open
mind.
As a general rule, judges are mandated to hear and decide cases, unless legally disqualified. 128 However, they may
voluntarily excuse themselves, in the exercise of their sound discretion, for just or valid reasons. 129
The rule on disqualification of a judge to hear a case finds its rationale in the principle that no judge should preside
in a case in which he is not wholly free, disinterested, impartial and independent. It is aimed at preserving the
peoples faith and confidence in the courts of justice.
In compulsory disqualification, the law conclusively presumes that a judge cannot objectively or impartially sit in a
case.130 In voluntary inhibition, the law leaves it to the judge to decide for himself whether he will desist from sitting
in a case with only his conscience to guide him.131
In Pimentel v. Salanga,132 the Court provided guidance in case a judges capacity to try and decide a case fairly and

judiciously is challenged by any of the parties:


A judge may not be legally prohibited from sitting in a litigation. But when suggestion is made of record that he
might be induced to act in favor of one party or with bias or prejudice against a litigant arising out of circumstances
reasonably capable of inciting such a state of mind, he should conduct a careful self-examination. He should
exercise his discretion in a way that the peoples faith in the courts of justice is not impaired. A salutary norm is that
he reflect on the probability that a losing party might nurture at the back of his mind the thought that the judge had
unmeritoriously tilted the scales of justice against him. That passion on the part of a judge may be generated because
of serious charges of misconduct against him by a suitor or his counsel, is not altogether remote. He is a man,
subject to the frailties of other men. He should, therefore, exercise great care and caution before making up his mind
to act or withdraw from a suit where that party or counsel is involved. He could in good grace inhibit himself where
that case could be heard by another judge and where no appreciable prejudice would be occasioned to others
involved therein. On the result of his decisions to sit or not to sit may depend to a great extent the all-important
confidence in the impartiality of the judiciary. If after reflection he should resolve to voluntarily desist from sitting
in a case where his motives or fairness might be seriously impugned, his action is to be interpreted as giving
meaning and substance to the second paragraph of Section 1, Rule 137. He serves the cause of the law who forestalls
miscarriage of justice.
Here, petitioners skepticism of respondent judges ability to display the cold neutrality of an impartial judge was
evident:
Respondent judge ought to have inhibited himself from the expropriation case. xxx [H]e lacks the competence and
more importantly, the impartiality necessary for justice to prevail.
x x x xxx xxx
[I]f respondent judge did not ambush petitioners with his Orders dated January 4 and 10, 2005, petitioners would
have had the restraint and patience to contest in the ordinary course of law the Order dated January 7, 2005 hastily
appointing three commissioners for the determination of just compensation. But the pattern of fraud and
deception has become too obvious and too dangerous to be ignored. Petitioners have had enough of respondent
judges onslaught. Three successive orders of incredible implications have raised the levels of concern to a tsunami.
This was no longer a matter for polite presumptions; hostile facts were already staring petitioners in the face. Thus,
before the die could be cast, the Republic was constrained to act deliberately and decisively by bringing the matter
to this Honorable Court. Otherwise, the expropriation case would irreversibly become the plaything of one who had
lost the virtues of a good magistrate.133 (emphasis supplied)
A judge, like Caesars wife, must be above suspicion.134 He must hold himself above reproach and suspicion. At the
very first sign of lack of faith and trust in his actions, whether well-grounded or not, the judge has no other
alternative but to inhibit himself from the case. That way, he avoids being misunderstood. His reputation for probity
and objectivity is maintained. Even more important, the ideal of an impartial administration of justice is preserved. 135
Justice must not merely be done but must also be seen and perceived to be done.136
Besides, where a case has generated a strained personal relationship, animosity and hostility between the party or his
counsel and the judge that the former has lost confidence in the judges impartiality or the latter is unable to display
the cold neutrality of an impartial judge, 137 it is a violation of due process for the judge not to recuse himself from
hearing the case. Due process cannot be satisfied in the absence of that objectivity on the part of a judge sufficient to
reassure litigants of his being fair and just.138
Respondent judge should have recused himself from hearing the case in the light of petitioners patent distrust:
The presiding judges impartiality has been irreparably impaired. x x x [A]ny decision, order or resolution he would
make on the incidents of the case would now be under a cloud of distrust and skepticism. The presiding judge is no
longer effective in dispensing justice to the parties herein.139

Clearly, it would have been more prudent for respondent judge to inhibit himself instead of placing any of his
decisions, orders or resolutions under a cloud of distrust. It would have likewise deprived petitioners or any one else
of reason to cast doubt on the integrity of these expropriation proceedings with national and international
implications.
One final note.
The complaint for expropriation before the RTC named PIATCO as the sole defendant. However, both petitioners
and PIATCO claim that there are other parties who assert an interest in NAIA IPT3. According to the parties, one of
these parties is Takenaka Corporation, PIATCOs contractor for the construction of NAIA IPT3. Petitioners are
aware that all the parties who claim an interest in the just compensation should be notified and heard on the matter.
They have even signified their intention to file an amended complaint impleading Takenaka Corporation as a
necessary party so that complete relief may be accorded to all interested parties. 140
Section 1, Rule 67 of the Rules of Court provides:
Section 1. The complaint. The right of eminent domain shall be exercised by the filing of a verified complaint
which shall state with certainty the right and purpose of expropriation, describe the real or personal property sought
to be expropriated, and join as defendants all persons owning or claiming to own, or occupying, any part
thereof or interest therein, showing as far as practicable, the separate interest of each defendant. If the title to
any property sought to be expropriated appears to be in the name of the Republic of the Philippines, although
occupied by private individuals, or if the title is otherwise obscure or doubtful so that the plaintiff cannot with
accuracy or certainty specify who are the real owners, averment to the effect may be made in the complaint.
(Emphasis supplied)
Just compensation is not due to the owner alone:141
The defendants in an expropriation case are not limited to the owners of the property condemned. They include all
other persons owning occupying, or claiming to own the property. When [property] is taken by eminent domain, the
owner is not necessarily the only person who is entitled to compensation. In American jurisdiction, the term
owner when employed in statutes relating to eminent domain to designate the persons who are to be made parties
to the proceeding, refer, as is the rule in respect of those entitled to compensation, to all those who have lawful
interest in the property to be condemned, including a mortgagee, a lessee and a vendee in possession under an
executory contract. Every person having an estate or interest at law or in equity in the land taken is entitled to share
in the award. If a person claiming an interest in the land is not made a party, he is given the right to intervene and lay
claim to the compensation.142
In accordance with the foregoing rule, petitioners should be ordered to amend their complaint for expropriation to
include as defendants Takenaka Corporation and all other parties who occupy, own or claim to own any part of or
interest in NAIA IPT3.
Epilogue
The government got entangled in the present legal controversy as a result of its decision to resort to expropriation
proceedings for the take-over of NAIA IPT3. It could have avoided this imbroglio had it pursued the options
available to it under the 2004 resolution in Agan. Among these options was the filing in this Court of a motion for
the determination of just compensation. Immediately after the 2004 resolution was promulgated, the right, purpose
and propriety of expropriation could not have been seriously contested. The sole issue that remained was the amount
of just compensation to be paid. Thus, a motion could have easily been filed to determine the just compensation for
the facility. The Court could have then appointed a panel of commissioners in accordance with Section 5 of Rule 67
and the problem could have been completely resolved.

Another option the government could have taken at that time was to take over NAIA IPT3 in the exercise of its
police power. Thereafter, it could have bidded out the facilitys operations. PIATCO could have then been paid from
the revenues from the winning bidder.
Nonetheless, the present expropriation proceedings are proper. Even the majority opinion recognizes this. The
government has all the right to institute the proceedings where Rule 67 should be applied.
Rule 67 is designed to expedite expropriation proceedings as well as to strike the needed balance between the
interests of the State and that of the private owner. Applying its provisions here is grounded not only in law but also
in reality.
The provisional deposit having been paid, petitioners can take possession of NAIA IPT3. They can also perform acts
of ownership over the property. NAIA IPT3 can then be made operational and the public purpose for its
expropriation will be satisfied. PIATCO, on the other hand, will receive full and just compensation after the court
finally determines the fair market value of the property.
RA 8974 provides that there should be immediate payment direct to the property owner prior to the take over of the
property. Pursuant thereto, the majority opinion ordered the payment of the proffered value to PIATCO as a
condition for the implementation of the writ of possession earlier issued by respondent judge. On the other hand,
Rule 67 requires only the making of a down payment in the form of a provisional deposit. It cannot be withdrawn
without further orders from the court, i.e., until just compensation is finally determined.
It is disturbing that the majority opinion allows PIATCO to take hold of the money without giving the government
the opportunity to first inspect the facility thoroughly to ascertain its structural integrity and to make a preliminary
valuation. With the money already in its possession, PIATCO may make use of the same in whatever way it may see
fit. I dread to think what will happen if the government later on decides to back out after finding either irremediable
structural defects or an excessively bloated valuation, such that it will cost more to put NAIA IPT3 in operational
readiness than to build (or develop) and operate another airport. What happens then? Will not the government be left
holding an empty bag losing no less than US$ 53 million for an inoperable facility?
Furthermore, the exchange of opinion between Senator Renato Cayetano and Congressman Salacnib Baterina
quoted by the majority opinion reveals that there should be a legislative appropriation of funds to finance the
acquisition of right of way, site or location for a national government project. Based on PIATCOs estimate, the
value of the NAIA IPT3 may well be $400 million. This amount may be fair or it may be bloated. Nonetheless, in
the event the trial court determines the just compensation after 60 days from finality of the decision in this case, the
government cannot just release the amount, assuming that it has the necessary funds. The release of that huge
amount in one shot should have congressional fiat for it is Congress after all which holds the purse under our system
of government.
Given the foregoing, while the procedure under RA 8974 is (as the majority opinion describes it) "eminently more
favorable to the property owner than Rule 67," it is clearly onerous to the government. In contrast, Rule 67 will be
advantageous to the government without being cumbersome to the private owner. It provides a procedure that is
sensitive to the governments financial condition and, at the same time, fair and just to the owner of the property.
In ordering the application of RA 8974, the majority opinion favors the interests of PIATCO over that of the
government. Rather than striking the desired balance between legitimate State interests and private rights, it
sacrifices public interest in favor of individual benefit.
The majority opinion constantly and unabashedly proclaims the objectives of RA 8974 to benefit the property
owner and to expedite expropriation proceedings for national government projects. The majority opinion tilted the
balance in favor of private interest to the prejudice of the common good. Moreover, besides being erroneous, resort
to RA 8974 will be counter-productive and self-defeating.

The national government operates on a "collection-for-payment" system. It has to collect money first before it can
make payments to its creditors. If the government is allowed to undertake acts of ownership over NAIA IPT3, the
facility can be utilized not only to serve the public but also to contribute to the collections needed by the
government. Payment of just compensation to PIATCO will then come "easier and sooner."
Applying RA 8974, on the other hand, will bring about the exact opposite result. Considering the limited funds and
scarce resources of the national government, it will not be able to come up with the amount equivalent to the full just
compensation within the short period envisioned in the majority opinion. It is absurd to expect or require the
government to pay the full just compensation for NAIA IPT3 allegedly worth several hundred million dollars in one
shot. The expropriation proceedings will grind to a halt. The hands of the government will be tied. The public
interest sought to be met by the expropriation will be adversely affected. NAIA IPT3 will remain idle and the prime
government property on which it stands will be a complete waste. In such a case, nobody wins. Everybody loses
PIATCO, the government, the Filipino people and our national prestige. Indeed, another mothballed white elephant!
Accordingly, I vote to grant the petition except insofar as it assails the January 7, 2005 order directing the
appointment of three commissioners to assist the trial court in determining just compensation.
RENATO C. CORONA
Associate Justice

G. Foreclosure of Real Estate Mortgage [Rule 68]

Planters Bank vs. James ng, et.al. GR187556, 5 May 2010

PNB vs. Sanao Marketing Corp., GR 153951, 29 July 2005, 465 SCRA 287

Metropolitan Bank and Trust company vs. Penafiel, GR 173976, 27 February 2009

Resort hotels corp. vs

Republic of the Philippines


SUPREME COURT
THIRD DIVISION
G.R. No. 128567

September 1, 2000

HUERTA ALBA RESORT INC., petitioner,


vs.
COURT OF APPEALS and SYNDICATED MANAGEMENT GROUP INC., respondents.
PURISIMA, J.:
Litigation must at some time be terminated, even at the risk of occasional errors. Public policy
dictates that once a judgment becomes final, executory and unappealable, the prevailing party
should not be denied the fruits of his victory by some subterfuge devised by the losing party.
Unjustified delay in the enforcement of a judgment sets at naught the role of courts in disposing
justiciable controversies with finality.
The Case
At bar is a petition assailing the Decision, dated November 14, 1996, and Resolution, dated
March 11, 1997, of the Court of Appeals in CA-G.R. No. 38747, which set aside the Order, dated
July 21, 1995 and Order, dated September 4, 1997, of the Regional Trial Court of Makati City, in
Civil Case No. 89-5424. The aforesaid orders of the trial court held that petitioner had the right
to redeem subject pieces of property within the one-year period prescribed by Section 78 of
Republic Act No. 337 otherwise known as the General Banking Act.
Section 78 of R.A. No. 337 provides that "in case of a foreclosure of a mortgage in favor of a
bank, banking or credit institution, whether judicially or extrajudicially, the mortgagor shall have
the right, within one year after the sale of the real estate as a result of the foreclosure of the
respective mortgage, to redeem the property."
The Facts
The facts that matter are undisputed:
In a complaint for judicial foreclosure of mortgage with preliminary injunction filed on October
19, 1989, docketed as Civil Case No. 89-5424 before the Regional Trial Court of Makati City,
the herein private respondent sought the foreclosure of four (4) parcels of land mortgaged by
petitioner to Intercon Fund Resource, Inc. ("Intercon").

Private respondent instituted Civil Case No. 89-5424 as mortgagee-assignee of a loan amounting
to P8.5 million obtained by petitioner from Intercon, in whose favor petitioner mortgaged the
aforesaid parcels of land as security for the said loan.
In its answer below, petitioner questioned the assignment by Intercon of its mortgage right
thereover to the private respondent, on the ground that the same was ultra vires. Petitioner also
questioned during the trial the correctness of the charges and interest on the mortgage debt in
question.
On April 30, 1992, the trial court, through the then Judge now Court of Appeals Justice
Buenaventura J. Guerrero, came out with its decision "granting herein private respondent SMGI's
complaint for judicial foreclosure of mortgage", disposing as follows:
"WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff the
following:
(1) P8,500,000.00 representing the principal of the amount due;
(2) P850,000.00 as penalty charges with interest at 6% per annum, until fully
paid;
(3) 22% per annum interest on the above principal from September 6, 1998, until
fully paid;
(4) 5% of the sum total of the above amounts, as reasonable attorney's fees; and,
(5) Costs.
All the above must be paid within a period of not less than 150 days from receipt hereof
by the defendant. In default of such payment, the four parcels of land subject matter of
the suit including its improvements shall be sold to realize the mortgage debt and costs, in
the manner and under the regulations that govern sales of real estate under execution."1
Petitioner appealed the decision of the trial court to the Court of Appeals, the appeal docketed as
CA-G.R. CV No. 39243 before the Sixth Division of the appellate court, which dismissed the
case on June 29, 1993 on the ground of late payment of docket fees.
Dissatisfied with the dismissal of CA-G.R. No. 39243, petitioner came to this Court via a
petition for certiorari, docketed as G.R. No. 112044, which this court resolved to dismiss on
December 13, 1993, on the finding that the Court of Appeals erred not in dismissing the appeal
of petitioner.
Petitioner's motion for reconsideration of the dismissal of its petition in G.R. No. 112044 was
denied with finality in this Court's Resolution promulgated on February 16, 1994. On March 10,
1994, leave to present a second motion for reconsideration in G.R. No. 112044 or to submit the

case for hearing by the Court en banc was filed, but to no avail. The Court resolved to deny the
same on May 11, 1994.
On March 14, 1994, the Resolution dated December 13, 1993, in G.R. No. 112044 became final
and executory and was entered in the Book of Entries of Judgment.
On July 4, 1994, private respondent filed with the trial court of origin a motion for execution of
the Decision promulgated on April 30, 1992 in Civil Case No. 89-5424. The said motion was
granted on July 15, 1994.
Accordingly, on July 15, 1994 a writ of execution issued and, on July 20, 1994, a Notice of Levy
and Execution was issued by the Sheriff concerned, who issued on August 1, 1994 a Notice of
Sheriff's Sale for the auction of subject properties on September 6, 1994.
On August 23, 1994, petitioner filed with the same trial court an Urgent Motion to Quash and Set
Aside Writ of Execution ascribing to it grave abuse of discretion in issuing the questioned Writ
of Execution. To support its motion, petitioner invited attention and argued that the records of the
case were still with the Court of Appeals and therefore, issuance of the writ of execution was
premature since the 150-day period for petitioner to pay the judgment obligation had not yet
lapsed and petitioner had not yet defaulted in the payment thereof since no demand for its
payment was made by the private respondent. In petitioner's own words, the dispute between the
parties was "principally on the issue as to when the 150-day period within which Huerta Alba
may exercise its equity of redemption should be counted."
In its Order of September 2, 1994, the lower court denied petitioner's urgent motion to quash the
writ of execution in Civil Case No. 89-5424, opining that subject judgment had become final and
executory and consequently, execution thereof was a matter of right and the issuance of the
corresponding writ of execution became its ministerial duty.
Challenging the said order granting execution, petitioner filed once more with the Court of
Appeals another petition for certiorari and prohibition with preliminary injunction, docketed as
C.A.-G.R. SP No. 35086, predicated on the same grounds invoked for its Motion to Quash Writ
of Execution.
On September 6, 1994, the scheduled auction sale of subject pieces of properties proceeded and
the private respondent was declared the highest bidder. Thus, private respondent was awarded
subject bidded pieces of property. The covering Certificate of Sale issued in its favor was
registered with the Registry of Deeds on October 21, 1994.
On September 7, 1994, petitioner presented an Ex-Parte Motion for Clarification asking the trial
court to "clarify" whether or not the twelve (12) month period of redemption for ordinary
execution applied in the case.
On September 26, 1994, the trial court ruled that the period of redemption of subject property
should be governed by the rule on the sale of judicially foreclosed property under Rule 68 of the
Rules of Court.

Thereafter, petitioner then filed an Exception to the Order dated September 26, 1994 and Motion
to Set Aside Said Order, contending that the said Order materially altered the Decision dated
April 30, 1992 "which declared that the satisfaction of the judgment shall be in the manner and
under the regulation that govern sale of real estate under execution."
Meanwhile, in its Decision of September 30, 1994, the Court of Appeals resolved the issues
raised by the petitioner in C.A.-G.R. SP No. 35086, holding that the one hundred-fifty day period
within which petitioner may redeem subject properties should be computed from the date
petitioner was notified of the Entry of Judgment in G.R. No. 112044; and that the 150-day period
within which petitioner may exercise its equity of redemption expired on September 11, 1994.
Thus:
"Petitioner must have received the resolution of the Supreme Court dated February 16,
1994 denying with finality its motion for reconsideration in G.R. No. 112044 before
March 14, 1994, otherwise the Supreme Court would not have made an entry of judgment
on March 14, 1994. While, computing the 150-day period. Petitioner may have until
September 11, 1994. within which to pay the amounts covered by the judgment, such
period has already expired by this time, and therefore, this Court has no more reason to
pass upon the parties' opposing contentions, the same having become moot and
academic."2 (Emphasis supplied).
Petitioner moved for reconsideration of the Decision of the Court of Appeals in C.A.-G.R. SP
No. 35086. In its Motion for Reconsideration dated October 18, 1994, petitioner theorized that
the period of one hundred fifty (150) days should not be reckoned with from Entry of Judgment
but from receipt on or before July 29, 1994 by the trial court of the records of Civil Case No. 895424 from the Court of Appeals. So also, petitioner maintained that it may not be considered in
default, even after the expiration of 150 days from July 29, 1994, because prior demand to pay
was never made on it by the private respondent. According to petitioner, it was therefore,
premature for the trial court to issue a writ of execution to enforce the judgment.
The trial court deferred action on the Motion for Confirmation of the Certificate of Sale in view
of the pendency of petitioner's Motion for Reconsideration in CA-G.R. SP No. 35086.
On December 23, 1994, the Court of Appeals denied petitioner's motion for reconsideration in
CA-G.R. SP No. 35086. Absent any further action with respect to the denial of the subject
motion for reconsideration, private respondent presented a Second Motion for Confirmation of
Certificate of Sale before the trial court.
As regards the Decision rendered on September 30, 1994 by the Court of Appeals in CA G.R. SP
No. 35086 it became final and executory on January 25, 1995.
On February 10, 1995, the lower court confirmed the sale of subject properties to the private
respondent. The pertinent Order declared that all pending incidents relating to the Order dated
September 26, 1994 had become moot and academic. Conformably, the Transfer Certificates of
Title to subject pieces of property were then issued to the private respondent.

On February 27, 1995, petitioner filed with the Court of Appeals a Motion for Clarification
seeking "clarification" of the date of commencement of the one (1) year period for the
redemption of the properties in question.
In its Resolution dated March 20, 1995, the Court of Appeals merely noted such Motion for
Clarification since its Decision promulgated on September 30, 1994 had already become final
and executory; ratiocinating thus:
"We view the motion for clarification filed by petitioner, purportedly signed by its
proprietor, but which we believe was prepared by a lawyer who wishes to hide under the
cloak of anonymity, as a veiled attempt to buy time and to delay further the disposition of
this case.
Our decision of September 30, 1994 never dealt on the right and period of redemption of
petitioner, but was merely circumscribed to the question of whether respondent judge
could issue a writ of execution in its Civil Case No. 89-5424 . . .
We further ruled that the one-hundred fifty day period within which petitioner may
exercise its equity of redemption should be counted, not from the receipt of respondent
court of the records of Civil Case No. 89-5424 but from the date petitioner was notified
of the entry of judgment made by the appellate court.
But we never made any pronouncement on the one-year right of redemption of petitioner
because, in the first place, the foreclosure in this case is judicial. and as such the
mortgagor has only the equity not the right of redemption . . . While it may be true that
under Section 78 of R.A. 337 as amended, otherwise known as the General Banking Act,
a mortgagor of a bank, banking or credit institution, whether the foreclosure was done
judicially or extrajudicially, has a period of one year from the auction sale within which
to redeem the foreclosed property, the question of whether the Syndicated Management
Group,. Inc., is a bank or credit institution was never brought before us squarely, and it is
indeed odd and strange that petitioner would now sarcastically ask a rhetorical question
in its motion for clarification."3 (Emphasis supplied).
Indeed, if petitioner did really act in good faith, it would have ventilated before the Court of
Appeals in CA-G.R. No. 35086 its pretended right under Section 78 of R.A. No. 337 but it never
did so.
At the earliest opportunity, when it filed its answer to the complaint for judicial foreclosure,
petitioner should have averred in its pleading that it was entitled to the beneficial provisions of
Section 78 of R.A. No. 337; but again, petitioner did not make any such allegation in its answer.
From the said Resolution, petitioner took no further step such that on March 31, 1995, the private
respondent filed a Motion for Issuance of Writ of Possession with the trial court.

During the hearing called on April 21, 1995, the counsel of record of petitioner entered
appearance and asked for time to interpose opposition to the Motion for Issuance of Writ of
Possession.
On May 2, 1995, in opposition to private respondent's Motion for Issuance of writ of Possession,
petitioner filed a "Motion to Compel Private Respondent to Accept Redemption." It was the first
time petitioner ever asserted the right to redeem subject properties under Section 78 of R.A. No.
337, the General Banking Act; theorizing that the original mortgagee, being a credit institution,
its assignment of the mortgage credit to petitioner did not remove petitioner from the coverage of
Section 78 of R.A. No. 337. Therefore, it should have the right to redeem subject properties
within one year from registration of the auction sale, theorized the petitioner which concluded
that in view of its "right of redemption," the issuance of the titles over subject parcels of land to
the private respondent was irregular and premature.
In its Order of July 21, 1995, the trial court, presided over by Judge Napoleon Inoturan, denied
private respondent's motion for a writ of possession, opining that Section 78 of the General
Banking Act was applicable and therefore, the petitioner had until October 21, 1995 to redeem
the said parcels of land, said Order ruled as follows:
"It is undisputed that Intercon is a credit institution from which defendant obtained a loan
secured with a real estate mortgage over four (4) parcels of land. Assuming that the
mortgage debt had not been assigned to plaintiff, there is then no question that defendant
would have a right of redemption in case of foreclosure, judicially or extrajudicially,
pursuant to the above quoted Section 78 of RA 337, as amended.
However, the pivotal issue here is whether or not the defendant lost its right of
redemption by virtue of the assignment of its mortgage debt by Intercon to plaintiff,
which is not a bank or credit institution. The issue is resolved in the negative. The right of
redemption in this case is vested by law and is therefore an absolute privilege which
defendant may not lose even though plaintiff-assignee is not a bank or credit institution
(Tolentino versus Court of Appeals, 106 SCRA 513). Indeed, a contrary ruling will lead to
a possible circumvention of Section 78 because all that may be needed to deprive a
defaulting mortgagor of his right of redemption is to assign his mortgage debt from a
bank or credit institution to one which is not. Protection of defaulting mortgagors, which
is the avowed policy behind the provision, would not be achieved if the ruling were
otherwise. Consequently, defendant still possesses its right of redemption which it may
exercise up to October 21, 1995 only, which is one year from the date of registration of
the certificate of sale of subject properties (GSIS versus Iloilo, 175 SCRA 19, citing
Limpin versus IAC, 166 SCRA 87).
Since the period to exercise defendant's right of redemption has not yet expired, the
cancellation of defendant's transfer certificates of title and the issuance of new ones in
lieu thereof in favor of plaintiff are therefore illegal for being premature, thereby
necessitating reconveyance (see Sec. 63 (a) PD 1529, as amended).
WHEREFORE, the Court hereby rules as follows:

(1) The Motion for Issuance of Writ of Possession is hereby denied;


(2) Plaintiff is directed to accept the redemption on or before October 21, 1995 in
an amount computed according to the terms stated in the Writ of Execution dated
July 15, 1994 plus all other related costs and expenses mentioned under Section
78, RA 337, as amended; and
(3) The Register of Deeds of Valenzuela, Bulacan is directed (a) to reconvey to
the defendant the following titles of the four (4) parcels of land, namely TCT Nos.
V-38878, V-38879, V-38880, and V-38881, now in the name of plaintiff, and (b)
to register the certificate of sale dated October 7, 1994 and the Order confirming
the sale dated February 10, 1995 by a brief memorandum thereof upon the
transfer certificates of title to be issued in the name of defendant, pursuant to Sec.
63 (a) PD 1529, as amended.
The Omnibus Motion dated June 5, 1995, together with the Opposition thereto, is now
deemed resolved.
SO ORDERED."4
Private respondent interposed a Motion for Reconsideration seeking the reversal of the Order but
to no avail. In its Order dated September 4, 1995, the trial court denied the same.
To attack and challenge the aforesaid order of July 21, 1995 and subsequent Order of September
4, 1995 of the trial court, the private respondent filed with this court a Petition for Certiorari,
Prohibition and Mandamus, docketed as G.R. No. 121893, but absent any special and cogent
reason shown for entertaining the same, the Court referred the petition to the Court of Appeals,
for proper determination.
Docketed as G.R. No. 387457 on November 14, 1996, the Court of Appeals gave due course to
the petition and set aside the trial court's Order dated July 21, 1995 and Order dated September 4,
1995.
In its Resolution of March 11, 1997, the Court of Appeals denied petitioner's Motion for
Reconsideration of the Decision promulgated on November 14, 1996 in CA-G.R. No. 38747.
Undaunted, petitioner has come to this Court via the present petition, placing reliance on the
assignment of errors, that:
I
THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN HOLDING THAT
THE COURT OF APPEALS (TWELFTH DIVISION) IN CA G.R. SP NO. 35086 HAD
RESOLVED "WITH FINALITY" THAT PETITIONER HUERTA ALBA HAD NO
RIGHT OF REDEMPTION BUT ONLY THE EQUITY OF REDEMPTION.

II
THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN IGNORING THAT
PETITIONER HUERTA ALBA POSSESSES THE ONE-YEAR RIGHT OF
REDEMPTION UNDER SECTION 78, R.A. NO. 337 (THE GENERAL BANKING
ACT).
III
THE RESPONDENT COURT OF APPEALS ERRED GRAVELY IN HOLDING THAT
PRIVATE RESPONDENT SYNDICATED MANAGEMENT GROUP, INC. IS
ENTITLED TO THE ISSUANCE OF A WRIT OF POSSESSION OVER THE
SUBJECT PROPERTY.5
In its comment on the petition, private respondent countered that:
"A. THE HONORABLE COURT OF APPEALS CORRECTLY HELD THAT IT
RESOLVED WITH FINALITY IN C.A.-G.R. SP NO. 35086 THAT PETITIONER
ONLY HAD THE RIGHT OF REDEMPTION IN RESPECT OF THE SUBJECT
PROPERTIES.
B. THE PETITION IS AN INSIDIOUS AND UNDERHANDED ATTEMPT TO EVADE
THE FINALITY OF VARIOUS DECISIONS, RESOLUTIONS AND ORDERS WHICH
HELD THAT, PETITIONER ONLY POSSESSES THE EQUITY OF REDEMPTION IN
RESPECT OF THE SUBJECT PROPERTIES.
C. PETITIONER IS BARRED BY ESTOPPEL FROM BELATEDLY RAISING THE
ISSUE OF ITS ALLEGED 'RIGHT OF REDEMPTION. HDAECI
D. IN HOLDING THAT THE PETITIONER HAD THE 'RIGHT OF REDEMPTION'
OVER THE SUBJECT PROPERTIES, THE TRIAL COURT MADE A MOCKERY OF
THE 'LAW OF THE CASE."'6
And by way of Reply, petitioner argued, that:
I.
THE COURT OF APPEALS IN CA G.R. SP NO. 35086 COULD NOT HAVE
POSSIBLY RESOLVED THEREIN WHETHER WITH FINALITY OR
OTHERWISE - THE ISSUE OF PETITIONER HUERTA ALBA'S RIGHT OF
REDEMPTION UNDER SECTION 78, R.A. NO. 337.
II.
THERE IS NO ESTOPPEL HERE. PETITIONER HUERTA ALBA INVOKED ITS
RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 337 IN TIMELY

FASHION, i.e., AFTER CONFIRMATION BY THE COURT OF THE FORECLOSURE


SALE, AND WITHIN ONE (1) YEAR FROM THE DATE OF REGISTRATION OF
THE CERTIFICATE OF SALE.
III.
THE PRINCIPLE OF 'THE LAW OF THE CASE' HAS ABSOLUTELY NO BEARING
HERE:
(1)
THE RIGHT OF REDEMPTION UNDER SECTION 78, R.A. NO. 337 IS IN FACT
PREDICATED UPON THE FINALITY AND CORRECTNESS OF THE DECISION IN
CIVIL CASE NO. 89-5424.
(2)
THUS, THE RTC'S ORDER RECOGNIZING PETITIONER HUERTA ALBA'S RIGHT
OF REDEMPTION UNDER SECTION 78, R.A. NO. 37 DOES NOT IN ANY WAY
HAVE THE EFFECT OF AMENDING, MODIFYING, OR SETTING ASIDE THE
DECISION IN CIVIL CASE NO. 89-5424.
The above arguments and counter-arguments advanced relate to the pivotal issue of whether or
not the petitioner has the one-year right of redemption of subject properties under Section 78 of
Republic Act No. 337 otherwise known as the General Banking Act.
The petition is not visited by merit.
Petitioner's assertion of right of redemption under Section 78 of Republic Act No. 337 is
premised on the submission that the Court of Appeals did not resolve such issue in CA-G.R. SP
No. 35086; contending thus:
(1)
BY NO STRETCH OF LOGIC CAN THE 20 MARCH 1995 RESOLUTION IN CA
G.R. SP NO. 35086 BE INTERPRETED TO MEAN THE COURT OF APPEALS HAD
RESOLVED 'WITH FINALITY' THE ISSUE OF WHETHER PETITIONER HUERTA
ALBA HAD THE RIGHT OF REDEMPTION WHEN ALL THAT THE RESOLUTION
DID WAS TO MERELY NOTE THE MOTION FOR CLARIFICATION.
(2)
THE 20 MARCH 1995 RESOLUTION IN CA G.R. SP NO. 35086 IS NOT A FINAL
JUDGMENT, ORDER OR DECREE. IT IS NOT EVEN A JUDGMENT OR ORDER
TO BEGIN WITH. IT ORDERS NOTHING; IT ADJUDICATES NOTHING.

(3)
PETITIONER HUERTA ALBA'S RIGHT OF REDEMPTION UNDER SECTION 78,
R.A. NO. 37 WAS NOT AN ISSUE AND WAS NOT IN ISSUE, AND COULD NOT
HAVE POSSIBLY BEEN AN ISSUE NOR IN ISSUE, IN CA G.R. SP NO. 35086.
(4)
THE 30 SEPTEMBER 1994 DECISION IN CA G.R. SP NO. 35086 HAVING
ALREADY BECOME FINAL EVEN BEFORE THE FILING OF THE MOTION FOR
CLARIFICATION, THE COURT OF APPEALS NO LONGER HAD ANY
JURISDICTION TO ACT OF THE MOTION OR ANY OTHER MATTER IN CA G.R.
SP NO. 35086, EXCEPT TO MERELY NOTE THE MOTION. EASIHa
II.
IN STARK CONTRAST, THE ISSUE OF PETITIONER HUERTA ALBA'S RIGHT OF
REDEMPTION UNDER SECTION 78, R.A. NO. 337 WAS DIRECTLY RAISED AND
JOINED BY THE PARTIES, AND THE SAME DULY RESOLVED BY THE TRIAL
COURT.
III.
THE RIGHT OF REDEMPTION UNDER SECTION 78 OF R.A. NO. 337 IS
MANDATORY AND AUTOMATICALLY EXISTS BY LAW. THE COURTS ARE
DUTY-BOUND TO RECOGNIZE SUCH RIGHT.
IV.
EQUITABLE CONSIDERATIONS WEIGH HEAVILY IN FAVOR OF PETITIONER
HUERTA ALBA, NOT THE LEAST OF WHICH IS THE WELL-SETTLED POLICY
OF THE LAW TO AID RATHER THAN DEFEAT THE RIGHT OF REDEMPTION.
V.
THEREFORE THE 21 JULY 1995 AND 04 SEPTEMBER 1995 ORDERS OF THE
TRIAL COURT ARE VALID AND PROPER IN ACCORDANCE WITH THE
MANDATE OF THE LAW.
From the various decisions, resolutions and orders a quo it can be gleaned that what petitioner
has been adjudged to have was only the equity of redemption over subject properties. On the
distinction between the equity of redemption and right of redemption, the case of Gregorio Y.
Limpin vs. Intermediate Appellate Court,7 comes to the fore. Held the Court in the said case:
"The equity of redemption is, to be sure, different from and should not be confused with
the right of redemption.

The right of redemption in relation to a mortgage understood in the sense of a


prerogative to re-acquire mortgaged property after registration of the foreclosure sale
exists only in the case of the extrajudicial foreclosure of the mortgage. No such right is
recognized in a judicial foreclosure except only where the mortgagee is the Philippine
National Bank or a bank or banking institution.
Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the
right of redemption within one (1) year from the registration of the sheriff's certificate of
foreclosure sale.
Where the foreclosure is judicially effected, however, no equivalent right of redemption
exists. The law declares that a judicial foreclosure sale 'when confirmed be an order of
the court. . . . shall operate to divest the rights of all the parties to the action and to vest
their rights in the purchaser, subject to such rights of redemption as may be allowed by
law.' Such rights exceptionally 'allowed by law' (i.e., even after confirmation by an order
of the court) are those granted by the charter of the Philippine National Bank (Acts No.
2747 and 2938), and the General Banking Act (R.A. 337). These laws confer on the
mortgagor, his successors in interest or any judgment creditor of the mortgagor, the right
to redeem the property sold on foreclosure after confirmation by the court of the
foreclosure sale which right may be exercised within a period of one (1) year, counted
from the date of registration of the certificate of sale in the Registry of Property.
But, to repeat, no such right of redemption exists in case of judicial foreclosure of a
mortgage if the mortgagee is not the PNB or a bank or banking institution. In such a case,
the foreclosure sale, 'when confirmed by an order of the court. . . shall operate to divest
the rights of all the parties to the action and to vest their rights in the purchaser.' There
then exists only what is known as the equity of redemption. This is simply the right of the
defendant mortgagor to extinguish the mortgage and retain ownership of the property by
paying the secured debt within the 90-day period after the judgment becomes final, in
accordance with Rule 68, or even after the foreclosure sale but prior to its confirmation.
Section 2, Rule 68 provides that
'. . If upon the trial . . the court shall find the facts set forth in the complaint to be true, it
shall ascertain the amount due to the plaintiff upon the mortgage debt or obligation,
including interest and costs, and shall render judgment for the sum so found due and
order the same to be paid into court within a period of not less than ninety (90) days from
the date of the service of such order, and that in default of such payment the property be
sold to realize the mortgage debt and costs.'
This is the mortgagor's equity (not right) of redemption which, as above stated, may be
exercised by him even beyond the 90-day period 'from the date of service of the order,'
and even after the foreclosure sale itself, provided it be before the order of confirmation
of the sale. After such order of confirmation, no redemption can be effected any longer."8
(Emphasis supplied)

Petitioner failed to seasonably invoke its purported right under Section 78 of R.A. No. 337.
Petitioner avers in its petition that the Intercom, predecessor in interest of the private respondent,
is a credit institution, such that Section 78 of Republic Act No. 337 should apply in this case.
Stated differently, it is the submission of petitioner that it should be allowed to redeem subject
properties within one year from the date of sale as a result of the foreclosure of the mortgage
constituted thereon.
The pivot of inquiry here therefore, is whether the petitioner seasonably invoked its asserted
right under Section 78 of R.A. No. 337 to redeem subject properties.
Petitioner theorizes that it invoked its "right" in "timely fashion", that is, after confirmation by
the court of the foreclosure sale, and within one (1) year from the date of registration of the
certificate of sale. Indeed, the facts show that it was only on May 2, 1995 when, in opposition to
the Motion for Issuance of Writ of Possession, did petitioner file a Motion to Compel Private
Respondent to Accept Redemption, invoking for the very first time its alleged right to redeem
subject properties under to Section 78 of R.A. No. 337.
In light of the aforestated facts, it was too late in the day for petitioner to invoke a right to
redeem under Section 78 of R.A. No. 337. Petitioner failed to assert a right to redeem in several
crucial stages of the proceedings.
For instance, on September 7, 1994, when it filed with the trial court an Ex-part Motion for
Clarification, petitioner failed to allege and prove that private respondent's predecessor in interest
was a credit institution and therefore, Section 78 of R.A. No. 337 was applicable. Petitioner
merely asked the trial court to clarify whether the sale of subject properties was execution sale or
judicial foreclosure sale.
So also, when it presented before the trial court an Exception to the Order and Motion to Set
Aside Said Order dated October 13, 1994, petitioner again was silent on its alleged right under
Section 78 of R.A. No. 337, even as it failed to show that private respondent's predecessor in
interest is a credit institution. Petitioner just argued that the aforementioned Order materially
altered the trial court's Decision of April 30, 1992.
Then, too, nothing was heard from petitioner on its alleged right under Section 78 of R.A. No.
337 and of the predecessor in interest of private respondent as a credit institution, when the trial
court came out with an order on February 10, 1995, confirming the sale of subject properties in
favor of private respondent and declaring that all pending incidents with respect to the Order
dated September 26, 1994 had become moot and academic.
Similarly, when petitioner filed on February 27, 1995 a Motion for Clarification with the Court
of Appeals, seeking "clarification" of the date of commencement of the one (1) year redemption
period for the subject properties, petitioner never intimated any alleged right under Section 78 of
R.A. No. 337 nor did it invite attention to its present stance that private respondent's predecessorin-interest was a credit institution. Consequently, in its Resolution dated March 20, 1995, the
Court of Appeals ruled on the said motion thus:

"But we never made any pronouncement on the one-year right of redemption of petitioner
because, in the first place, the foreclosure in this case is judicial, and as such. the
mortgagor has only the equity. not the right of redemption . . . While it may be true that
under Section 78 of R.A. 337 as amended, otherwise known as the General Banking Act,
a mortgagor of a bank, banking or credit institution, whether the foreclosure was done
judicially or extrajudicially, has a period of one year from the auction sale within which
to redeem the foreclosed property, the question of whether the Syndicated Management
Group. Inc., is bank or credit institution was never brought before us squarely, and it is
indeed odd and strange that petitioner would now sarcastically ask a rhetorical question
in its motion for clarification."9 (Emphasis supplied).
If petitioner were really acting in good faith, it would have ventilated before the Court of
Appeals in CA-G.R. No. 35086 its alleged right under Section 78 of R.A. No. 337; but petitioner
never did do so.
Indeed, at the earliest opportunity, when it submitted its answer to the complaint for judicial
foreclosure, petitioner should have alleged that it was entitled to the beneficial provisions of
Section 78 of R.A. No. 337 but again, it did not make any allegation in its answer regarding any
right thereunder. It bears stressing that the applicability of Section 78 of R.A. No. 337 hinges on
the factual question of whether or not private respondent's predecessor in interest was a credit
institution. As was held in Limpin, a judicial foreclosure sale, "when confirmed by an order of
the court, . . shall operate to divest the rights of all the parties to the action and to vest their rights
in the purchaser, subject to such rights of redemption as may be allowed by law',"10 which confer
on the mortgagor, his successors in interest or any judgment creditor of the mortgagor, the right
to redeem the property sold on foreclosure after confirmation by the court of the judicial
foreclosure sale. Thus, the claim that petitioner is entitled to the beneficial provisions of Section
78 of R.A. No. 337 since private respondent's predecessor-in-interest is a credit institution
is in the nature of a compulsory counterclaim which should have been averred in petitioner's
answer to the compliant for judicial foreclosure.
". . . A counterclaim is, most broadly, a cause of action existing in favor of the defendant
against the plaintiff. More narrowly, it is a claim which. if established, will defeat or in
some way qualify a judgment or relief to which plaintiff is otherwise entitled It is
sometimes defined as any cause of action arising in contract available against any action
also arising in contract and existing at the time of the commencement of such an action. It
is frequently defined by the codes as a cause of action arising out of the contract or
transaction set forth in the complaint as the foundation of the plaintiff's claim, or
connected with the subject of the action."11 (emphasis supplied)
"The counterclaim is in itself a distinct and independent cause of action, so that when
properly stated as such, the defendant becomes, in respect to the matters stated by him, an
actor, and there are two simultaneous actions pending between the same parties, wherein
each is at the same time both a plaintiff and a defendant. Counterclaim is an offensive as
well as a defensive plea and is not necessarily confined to the justice of the plaintiff's
claim. It represents the right of the defendant to have the claims of the parties
counterbalanced in whole or in part, and judgment to be entered in excess, if any. A

counterclaim stands on the same footing, and is to be tested be the same rules, as if it
were an independent action."12 (emphasis supplied)
The very purpose of a counterclaim would have been served had petitioner alleged in its answer
its purported right under Section 78 of R.A. No. 337:
". . . The rules of counterclaim are designed to enable the disposition of a whole
controversy of interested parties' conflicting claims, at one time and in one action,
provided all parties' be brought before the court and the matter decided without
prejudicing the rights of any party."13
The failure of petitioner to seasonably assert its alleged right under Section 78 of R.A. No. 337
precludes it from so doing at this late stage case. Estoppel may be successfully invoked if the
party fails to raise the question in the early stages of the proceedings.14 Thus, "a party to a case
who failed to invoked his claim in the main case, while having the opportunity to do so, will be
precluded, subsequently, from invoking his claim, even if it were true, after the decision has
become final, otherwise the judgment may be reduced to a mockery and the administration of
justice may be placed in disrepute."15
All things viewed in proper perspective, it is decisively clear that the trial court erred in still
allowing petitioner to introduce evidence that private respondent's predecessor-in-interest was a
credit institution, and to thereafter rule that the petitioner was entitled to avail of the provisions
of Section 78 of R.A. No. 337. In effect, the trial court permitted the petitioner to accomplish
what the latter failed to do before the Court of Appeals, that is, to invoke its alleged right under
Section 78 of R.A. No. 337 although the Court of Appeals in CA-G.R. no. 35086 already found
that 'the question of whether the Syndicated Management Council Group, Inc. is a bank or credit
institution was never brought before (the Court of Appeals) squarely." The said pronouncement
by the Court of Appeals unerringly signified that petitioner did not make a timely assertion of
any right under Section 78 of R.A. No. 337 in all the stages of the proceedings below.
Verily, the petitioner has only itself to blame for not alleging at the outset that the predecessor-ininterest of the private respondent is a credit institution. Thus, when the trial court, and the Court
of Appeals repeatedly passed upon the issue of whether or not petitioner had the right of
redemption or equity of redemption over subject properties in the decisions, resolutions and
orders, particularly in Civil Case no. 89-5424, CA-G.R. CV No. 39243, CA-G.R. SP No. 35086,
and CA-G.R. SP No. 38747, it was unmistakable that the petitioner was adjudged to just have the
equity of redemption without any qualification whatsoever, that is, without any right of
redemption allowed by law.
The "law of case" holds that petitioner has the equity of redemption without any
qualification.
There is, therefore, merit in private respondent's contention that to allow petitioner to belatedly
invoke its right under Section 78 of R.A. No. 337 will disturb the "law of the case." However,
private respondent's statement of what constitutes the "law of the case" is not entirely accurate.
The "law of the case" is not simply that the defendant possesses an equity of redemption. As the

Court has stated, the "law of the case" holds that petitioner has the equity of the redemption
without any qualification whatsoever, that is, without the right of redemption afforded by Section
78 of R.A. No. 337. Whether or not the "law of the case" is erroneous is immaterial, it still
remains the "law of the case". A contrary rule will contradict both the letter and spirit of the
rulings of the Court of Appeals in CA-G.R. SP No. 35086, CA-G.R. CV No. 39243, and CAG.R. 38747, which clearly saw through the repeated attempts of petitioner to forestall so simple a
matter as making the security given for a just debt to answer for its payment.
Hence, in conformity with the ruling in Limpin, the sale of the subject properties, as confirmed
by the Order dated February 10, 1995 of the trial court in Civil Case No. 89-5424 operated to
divest the rights of all the parties to the action and to vest their rights in private respondent. There
then existed only what is known as the equity of redemption, which is simply the right of the
petitioner to extinguish the mortgage and retain ownership of the property by paying the secured
debt within the 90-day period after the judgment became final. There being an explicit finding on
the part of the Court of Appeals in its Decision of September 30, 1994 in CA-G.R. No. 35086
that the herein petitioner failed to exercise its equity of redemption within the prescribed period,
redemption can no longer be effected. The confirmation of the sale and the issuance of the
transfer certificates of title covering the subject properties to private respondent was then, in
order. The trial court therefore, has the ministerial duty to place private respondent in the
possession of subject properties.
WHEREFORE, the petition is DENIED, and the assailed decision of the Court of Appeals,
declaring null and void the Order dated 21 July 1995 and Order dated 4 September 1997 of the
Regional Trial Court of Makati City in Civil Case No. 89-5424, AFFIRMED. No pronouncement
as to costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 170241

April 19, 2010

PHILIPPINE SAVINGS BANK, Petitioner,


vs.
SPOUSES DIONISIO GERONIMO and CARIDAD GERONIMO, Respondents.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 30 August 2005 Decision2 and 3 November 2005 Resolution3
of the Court of Appeals in CA-G.R. CV No. 66672. The Court of Appeals reversed the decision
of Branch 121 of the Regional Trial Court of Caloocan City, National Capital Region (trial court)
by declaring void the questioned extrajudicial foreclosure of real estate mortgage for noncompliance with the statutory requirement of publication of the notice of sale.
The Facts
On 9 February 1995, respondents Spouses Dionisio and Caridad Geronimo (respondents)
obtained a loan from petitioner Philippine Savings Bank (petitioner) in the amount of
P3,082,000, secured by a mortgage on respondents land situated in Barrio Talipapa, Caloocan
City and covered by Transfer Certificate of Title No. C-50575.4 Respondents defaulted on their
loan, prompting petitioner to initiate the extra-judicial foreclosure of the real estate mortgage. At
the auction sale conducted on 29 March 1996, the mortgaged property was sold to petitioner,5
being the highest bidder, for P3,000,000. Consequently, a Certificate of Sale was issued in favor
of petitioner.6
Claiming that the extrajudicial foreclosure was void for non-compliance with the law,
particularly the publication requirement, respondents filed with the trial court a complaint for the
annulment of the extrajudicial foreclosure.7
The trial court sustained the validity of the extrajudicial foreclosure, and disposed of the case as
follows:
WHEREFORE, premises considered, the instant Complaint for Annulment of Foreclosure of
Mortgage and Damages is hereby DISMISSED for lack of merit.

SO ORDERED.8
On appeal, the Court of Appeals held:
WHEREFORE, the assailed decision dated 26 November 1999 of the Regional Trial Court of
Caloocan City is REVERSED and SET ASIDE. The Extrajudicial Foreclosure of Mortgage
conducted on 29 March 1996 is declared NULL and VOID.
SO ORDERED.9
The Court of Appeals denied petitioners motion for reconsideration.
Hence, this petition.
The Ruling of the Trial Court
The trial court held that "personal notice on the mortgagor is not required under Act No. 3135."
All that is required is "the posting of the notices of sale for not less than 20 days in at least three
public places in the municipality or city where the property is situated, and publication once a
week for at least three consecutive weeks in a newspaper of general circulation in the
municipality or city, if the property is worth more than four hundred pesos."
The trial court further ruled there was compliance with the statutory publication requirement.
Since the affidavit of publication was excluded as petitioners evidence, the trial court relied
instead on the positive testimony of Deputy Sheriff Alberto Castillo, that he caused the
publication of the Notice of Sale, in holding there was publication of the notice of sale in a
newspaper of general circulation. In relation to this, the trial court cited the presumption of
regularity in the performance of official duty. The trial court found that respondents, as plaintiffs,
failed to discharge their burden of proving petitioners alleged non-compliance with the requisite
publication. The trial court stated that the testimony of respondents witness, a newsstand owner,
"that he has never sold Ang Pinoy newspaper can never lead to the conclusion that such
publication does not exist."
The Ruling of the Court of Appeals
The Court of Appeals reversed the ruling of the trial court.
The Court of Appeals found no sufficient evidence to prove that Ang Pinoy is a newspaper of
general circulation in Caloocan City. In a Resolution dated 2 February 2005, the Court of
Appeals required the then Executive Judge of the Regional Trial Court of Caloocan City to
inform the appellate court of the following facts:
1. If Ang Pinoy newspaper is a newspaper of general circulation particularly for the years
1995 and 1996; and
2. If there was compliance with Sec. 2 of P.D. No. 1079 which provides:

"The executive judge of the court of first instance shall designate a regular working day and a
definite time each week during which the said judicial notices or advertisements shall be
distributed personally by him for publication to qualified newspapers or periodicals x x x, which
distribution shall be done by raffle."10
Executive Judge Victoria Isabel A. Paredes (Executive Judge Paredes) complied with the
directive by stating that:
a) Ang Pinoy newspaper is not an accredited periodical in Caloocan City. Hence, we are
unable to categorically state whether it is a newspaper of general circulation at present or
for the years 1995 and 1996 (Certification marked as Annex "A")
b) Sec. 2, P.D. No. 1079 is being observed and complied with in that the raffle of judicial
notices for publication, is a permanent agenda item in the regular raffle with the RTC,
Caloocan City, holds every Monday at 2 oclock in the afternoon at the courtroom of
RTC, Branch 124 (Certification marked as Annex "B"); and
c) We have no knowledge on whether Ang Pinoy was included in the raffles conducted in
1995 and 1996, as we do not have the case record where the information may be
verified.11
The Court of Appeals concluded that, based on the compliance of Executive Judge Paredes, Ang
Pinoy is not a newspaper of general circulation in Caloocan City. Therefore, the extrajudicial
foreclosure is void for non-compliance with the requirement of the publication of the notice of
sale in a newspaper of general circulation.
The Issue
Basically, the issue in this case is whether the extra-judicial foreclosure is void for noncompliance with the publication requirement under Act No. 3135.
The Ruling of the Court
The petition lacks merit.
Section 3 of Act No. 313512 reads:
SECTION 3. Notice shall be given by posting notices of the sale for not less than twenty days in
at least three public places of the municipality or city where the property is situated, and if such
property is worth more than four hundred pesos, such notice shall also be published once a week
for at least three consecutive weeks in a newspaper of general circulation in the municipality or
city. (Emphasis supplied)
Petitioner claims that it complied with the above provision in foreclosing extrajudicially the
subject real estate mortgage. To buttress its claim, petitioner presented the testimony of Deputy
Sheriff Alberto Castillo of the trial court, the pertinent portion of which states:

ATTY. DAVIS:
Do you remember having come across a certain property owned by spouses Geronimo
covered by TCT No. 50576 of the Register of Deeds of Caloocan City?
xxxx
A. Yes, sir.
ATTY. DAVIS:
Q. In what connection?
A. In connection with the extra judicial foreclosure filed by the PS Bank, sir.
xxxx
Q. When this was assigned to you what action did you take thereon?
A. I prepared the notice of sale having published in the newspaper which the executive
judge awarded it. Sent notice to the said parties and posted it to the three conspicuous
places of Caloocan City, sir.
Q. You mentioned about your issuance of Notice of Sale I am referring you now to the
document previously marked as Exhibit "6." What relation is this if any to the one you
have mentioned?
A. This is the Notice of Sale I have prepared, sir.
Q. Now you also mentioned that you have caused the publication of this Notice of
Sheriffs Sale to a newspaper of general circulation, do you remember what newspaper it
was?
A. Ang Pinoy, sir.
Q. How come that this newspaper was selected for purposes of publication?
A. It was the executive judge who awarded that publication, sir.
Q. How do you know particularly that this notice was published in the newspaper?
A. That during the auction sale the mortgagee bank presented affidavit of publication,
sir.13
On the other hand, respondents dispute the existence of the publication of the notice of
sale. Assuming that the notice of sale was published, respondents contend that Ang Pinoy,

where it was published, is not a newspaper of general circulation. To bolster their claim
of non-publication, respondents offered the testimony of Danilo Magistrado, a newsstand
owner, which pertinently states:
ATTY. SAYA:
Do you know by chance the Pinoy Newspaper?
ATTY. DAVIS:
No basis.
COURT:
Objection overruled. Witness may answer.
A. None, sir. I do not sell Pinoy Newspaper, sir.
ATTY. SAYA:
Why do you say that you do not know Pinoy Newspaper?
A. From the time I sold newspapers, sir, I have not seen Pinoy Newspaper.
ATTY. SAYA:
That would be all, your Honor.
Before resolving the principal issue, we must point out the requirement of accreditation was
imposed by the Court only in 2001, through A.M. No. 01-1-07-SC or the Guidelines in the
Accreditation of Newspapers and Periodicals Seeking to Publish Judicial and Legal Notices and
Other Similar Announcements and in the Raffle Thereof.14 The present case involves an
extrajudicial foreclosure conducted in 1996; thus, there were no such guidelines in effect during
the questioned foreclosure. At any rate, the accreditation by the Executive Judge is not decisive
of whether a newspaper is of general circulation.15
It is settled that for the purpose of extrajudicial foreclosure of mortgage, the party alleging noncompliance with the requisite publication has the burden of proving the same.16 In this case,
respondents presented the testimony of a newsstand owner to prove that Ang Pinoy is not a
newspaper of general circulation. However, this particular evidence is unreliable, as the same
witness testified that he sells newspapers in Quezon City, not in Caloocan City, and that he is
unaware of Ang Pinoy newspaper simply because he is not selling the same and he had not heard
of it. His testimony states:
Q. Where is this place that you traditionally or usually sell newspaper?

A. Corner of A. Bonifacio and 6th Avenue.


Q. This is in Quezon City?
A. Yes, sir.
Q. Not in Caloocan?
A. In Quezon City, sir.
xxxx
COURT: Clarificatory question.
Q. You said that there is no Pinoy magazine simply because you are not selling Pinoy
magazine?
A. Yes, your Honor.
Q. But you are not certain that there is really no Pinoy magazine?
COURT:
But have you heard about Pinoy magazine or Pinoy newspaper?
A. I have not heard, your Honor.17
Notwithstanding, petitioner could have easily produced the affidavit of publication and other
competent evidence (such as the published notices) to refute respondents claim of lack of
publication of the notice of sale. In Spouses Pulido v. Court of Appeals,18 the Court held:
While it may be true that the party alleging non-compliance with the requisite publication has the
burden of proof, still negative allegations need not be proved even if essential to ones cause of
action or defense if they constitute a denial of the existence of a document the custody of which
belongs to the other party.
In relation to the evidentiary weight of the affidavit of publication, the Court ruled in China
Banking Corporation v. Spouses Martir19 that the affidavit of publication executed by the account
executive of the newspaper is prima facie proof that the newspaper is generally circulated in the
place where the properties are located.20
In the present case, the Affidavit of Publication or Exhibit "8," although formally offered by
petitioner, was excluded by the trial court for being hearsay.21 Petitioner never challenged the
exclusion of the affidavit of publication. Instead, petitioner relies solely on the testimony of
Deputy Sheriff Alberto Castillo to prove compliance with the publication requirement under
Section 3 of Act No. 3135. However, there is nothing in such testimony to clearly and

convincingly prove that petitioner complied with the mandatory requirement of publication.
When Sheriff Castillo was asked how he knew that the notice of sale was published, he simply
replied that "during the auction sale the mortgagee bank presented the affidavit of publication."22
Evidently, such an answer does not suffice to establish petitioners claim of compliance with the
statutory requirement of publication. On the contrary, Sheriff Castillos testimony reveals that he
had no personal knowledge of the actual publication of the notice of sale, much less the extent of
the circulation of Ang Pinoy.
Moreover, the Court notes that Ang Pinoy is a newspaper of general circulation printed and
published in Manila, not in Caloocan City where the mortgaged property is located, as indicated
in the excluded Affidavit of Publication. This is contrary to the requirement under Section 3 of
Act No. 3135 pertaining to the publication of the notice of sale in a newspaper of general
circulation in the city where the property is situated. Hence, even if the Affidavit of Publication
was admitted as part of petitioners evidence, it would not support petitioners case as it does not
clearly prove petitioners compliance with the publication requirement.
Petitioners invocation of the presumption of regularity in the performance of official duty on the
part of Sheriff Castillo is misplaced. While posting the notice of sale is part of a sheriffs official
functions,23 the actual publication of the notice of sale cannot be considered as such, since this
concerns the publishers business. Simply put, the sheriff is incompetent to prove that the notice
of sale was actually published in a newspaper of general circulation.
The Court further notes that the Notice of Extra-Judicial Sale,24 prepared and posted by Sheriff
Castillo, does not indicate the newspaper where such notice would be published. The space
provided where the name of the newspaper should be was left blank, with only the dates of
publication clearly written. This omission raises serious doubts as to whether there was indeed
publication of the notice of sale.1avvphi1
Once again, the Court stresses the importance of the notice requirement, as enunciated in
Metropolitan Bank and Trust Company, Inc. v. Peafiel,25 thus:
The object of a notice of sale is to inform the public of the nature and condition of the property to
be sold, and of the time, place and terms of the sale. Notices are given for the purpose of
securing bidders and to prevent a sacrifice [sale] of the property. The goal of the notice
requirement is to achieve a "reasonably wide publicity" of the auction sale. This is why
publication in a newspaper of general circulation is required. The Court has previously taken
judicial notice of the "far-reaching effects" of publishing the notice of sale in a newspaper of
general circulation.
In addition, the Court reminds mortgagees of their duty to comply faithfully with the statutory
requirements of foreclosure. In Metropolitan Bank v. Wong,26 the Court declared:
While the law recognizes the right of a bank to foreclose a mortgage upon the mortgagors
failure to pay his obligation, it is imperative that such right be exercised according to its clear
mandate. Each and every requirement of the law must be complied with, lest, the valid exercise

of the right would end. It must be remembered that the exercise of a right ends when the right
disappears, and it disappears when it is abused especially to the prejudice of others.
In sum, petitioner failed to establish its compliance with the publication requirement under
Section 3 of Act No. 3135. Consequently, the questioned extrajudicial foreclosure of real estate
mortgage and sale are void.27
WHEREFORE, we DENY the petition. We AFFIRM the 30 August 2005 Decision and 3
November 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 66672.
SO ORDERED.

H. Partition [Rule 69]

Cruz vs. CA, 456 SCRA 165

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 69260 December 22, 1989
MUNICIPALITY OF BIAN, petitioner,
vs.
HON. JOSE MAR GARCIA, Judge of the Regional Trial Court at Bian, Laguna
(BRANCH XXXIV, Region IV), and ERLINDA FRANCISCO, respondents.
The Provincial Fiscal for petitioner.
Roman M. Alonte for private respondent.

NARVASA, J.:
Three (3) questions are resolved in the action of certiorari at bar. The first is whether the
special civil action of eminent domain under Rule 67 of the Rules of Court is a case
"wherein multiple appeals are allowed, 1 as regards which 'the period of appeal shall be thirty [30]
days, 2 instead of fifteen (15) days. 3 The second is whether or not the Trial Court may treat the motion to
dismiss" filed by one of the defendants in the action of eminent domain as a "motion to dismiss" under
Rule 16 of the Rules of Court, reverse the sequence of trial in order and hear and determine said motion
to dismiss, and thereafter dismiss the expropriation suit as against the movant. And the third is whether or
not a "locational clearance issued by the Human Settlements Regulatory Commission relative to use of
land is a bar to an expropriation suit involving that land.
The expropriation suit involved in this certiorari proceeding was commenced by complaint of the
Municipality of Bian, Laguna 4 filed in the Regional Trial Court of Laguna and City of San Pablo, presided
over by respondent Judge Jose Mar Garcia. The complaint named as defendants the owners of eleven
(11) adjacent parcels of land in Bian with an aggregate area of about eleven and a half (11-1/2)
hectares. The land sought to be expropriated was intended for use as the new site of a modern public
market and the acquisition was authorized by a resolution of the Sangguniang Bayan of Bian approved
on April 11, 1983.
One of the defendants was Erlinda Francisco. She filed a "Motion to Dismiss" dated August 26, 1983, on
the following grounds; (a) the allegations of the complaint are vague and conjectural; (b) the complaint
violates the constitutional limitations of law and jurisprudence on eminent domain; (c) it is oppressive; (d)
it is barred by prior decision and disposition on the subject matter; and (e) it states no cause of action. 5
Now, her motion to dismiss" was filed pursuant to Section 3, Rule 67 of the Rules of Court:
Sec. 3. Defenses and objections within the time specified in the summons, each
defendant, in lieu of an answer, shall present in a single motion to dismiss or for other
apppropriate relief, all of his objections and defenses to the right of the plaintiff to take his

property for the use or purpose specified in the complaint. All such objections and
defenses not so presented are waived. A copy of the motion shall be served on the
plaintiffs attorney of record and filed with the court with the proof of service.
Her "motion to dismiss" was thus actually a pleading, taking the place of an answer in an ordinary civil
action; 6 it was not an ordinary motion governed by Rule 15, or a "motion to dismiss" within the
contemplation of Rule 16 of the Rules of Court.
On October 23, 1983, respondent Judge issued a writ of possession in favor of the plaintiff Municipality.
On February 3, 1984, Erlinda Francisco filed a "Motion for Separate Trial," invoking Section 2, Rule 31. 7
She alleged that there had already been no little delay in bringing all the defendants within the court's
jurisdiction, and some of the defendants seemed "nonchalant or without special interest in the case" if not
mere "free riders;" and "while the cause of action and defenses are basically the same;" she had, among
other defenses, "a constitutional defense of vested right via a pre-existing approved Locational Clearance
from the H.S.R.C." 8 Until this clearance was revoked, Francisco contended, or the Municipality had
submitted and obtained approval of a "rezoning of the lots in question," it was premature for it to "file a
case for expropriation. 9 The Court granted the motion. By Order dated March 2, 1984, it directed that a
separate trial be held for defendant Erlinda Francisco regarding her special defenses mentioned in her ..
Motion for Separate Trial and in her Motion to Dismiss, distinct from and separate from the defenses
commonly raised by all the defendants in their respective motions to dismiss."
At the separate trial, the Fiscal, in representation of the Municipality called the Trial Court's attention to
the irregularity of allowing Francisco to present her evidence ahead of the plaintiff, "putting the cart before
the horse, as it were." He argued that the motion to dismiss was in truth an answer, citing Rural Progress
Administration v. Judge de Guzman, and its filing did "not mean that the order of presentation of evidence
will be reversed," but the usual procedure should be followed; and the evidence adduced should be
deemed "evidence only for the motion for reconsideration of the writ of possession." 10
Nevertheless, at the hearing of March 5, and March 26, 1984, the Court directed Francisco to commence
the presentation of evidence. Francisco presented the testimony of Atty. Josue L. Jorvina, Jr. and certain
exhibits the Land Use Map of the Municipality of Bian, the Locational Clearance and Development
Permit issued by the H.S.R.C. in favor of "Erlinda Francisco c/o Ferlins Realty & Development
Corporation, and Executive Order No. 648 and Letter of Instruction No. 729, etc. Thereafter, the
respondent Judge issued an Order dated July 24, 1984 dismissing the complaint "as against defendant
ERLINDA FRANCISCO," and amending the Writ of Possession dated October 18, 1983 so as to "exclude
therefrom and from its force and effects said defendant .. and her property ..." His Honor found that1) a Locational Clearance had been issued on May 4,1983 by the Human
Settlements Regulatory Commission to the "Ferlin's Realty .. owned by
defendant Erlinda Francisco to convert .. (her) lot to a commercial
complex;"
2) according to the testimony of Atty. Jorvina of the H.S.R.C., a grantee
of a locational clearance acquires a vested right over the subject property
in the sense that .. said property may not be subject of an application for
locational clearance by another applicant while said locational clearance
is subsisting;"
3) such a clearance should be "considered as a decision and disposition
of private property co-equal with or in parity with a disposition of private
property through eminent domain;

4) the clearance was therefore "a legal bar against the right of plaintiff
Municipality .. to expropriate the said property."
The Municipality filed on August 17, 1984 a Motion for Reconsideration. Therein it (a) reiterated its
contention respecting the irregularity of the reversal of the order of trial, supra. 11 (b) decried the act of the
Court in considering the case submitted for decision after the presentation of evidence by Francisco
without setting the case for further hearing for the reception of the plaintiffs own proofs, (c) pointed out
that as admitted by Atty. Jorvina, the locational clearance did not "mean that other persons are already
prevented from filing locational clearance for the same project, and so could not be considered a bar to
expropriation, (d) argued that the locational clearance issued on May 4, 1983, became a "worthless sheet
of paper" one year later, on May 4, 1984 in accordance with the explicit condition in the clearance that it
"shall be considered automatically revoked if not used within a period of one (1) year from date of issue,"
the required municipal permits to put up the commercial complex never having been obtained by
Francisco; and (e) alleged that all legal requirements for the expropriation of the property had been duly
complied with by the Municipality. 12
The Municipality set its motion for reconsideration for hearing on August 28, 1984 after furnishing
Francisco's counsel with copy thereof The Court however re-scheduled the hearing more than two (2)
months later, on November 20, 1984. 13 Why the hearing was reset to such a remote date is not
explained.
On September 13, 1984, Francisco filed an "Ex-Parte Motion for Execution and/or Finality of Order,"
contending that the Order of July 27, 1984 had become "final and executory on August 12, 1984" for
failure of the Municipality to file a motion for reconsideration and/or appeal within the reglementary
period," 14 i.e "fifteen (15) days counted from the notice of the final order .. appealed from. 15
On October 10, 1984, the Court issued an Order declaring the Municipality's motion for reconsideration
dated August 15, 1984 to have been "filed out of time," on account of which the Court 49 could not give
due course to and/or act x x (thereon) except to dismiss (as it did thereby dismiss) the same." 16 It drew
attention to the fact that notice of its Order of July 24, 1984 (dismissing the complaint as against
Francisco) was served on plaintiff Municipality on July 27, 1984, but its motion for reconsideration was not
presented until August 17, 1984, beyond the fifteen-day period for appeal prescribed by law. And on
October 15, 1985, His Honor promulgated another Order directing the issuance of (1) a writ of execution
of the Order of July 24, 1984, and (2) a "certificate of finality" of said order. 17
The Municipality attempted to have the respondent Court reconsider both and Orders of October 10, and
October 15, 1984. To this end it submitted a motion contending that: 18
1) "multiple appeals are allowed by law" in actions of eminent domain,
and hence the period of appeal is thirty (30), not fifteen (15) days;
2) moreover, the grant of a separate trial at Francisco's instance had
given rise "ipso facto to a situation where multiple appeals became
available (Sections 4 and 5, Rule 36, .. Santos v. Pecson, 79 Phil. 261);"
3) it was wrong for the Trial Court to have acted exparte on the motion for
execution, the motion being "litigable in character;" and
4) it (the Municipality) was denied due process when the Court, after
receiving Francisco's evidence and admitting her exhibits, immediately
resolved the case on the merits as regards Francisco, without setting the
case "for further hearing for reception of evidence for the plaintiff."

The motion was denied, by Order dated October 18, 1984; hence, the special civil action of certiorari at
bar.
1. There are two (2) stages in every action of expropriation. 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. 19 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." 20 An order of dismissal, if this be
ordained, would be a final one, of course, since it finally disposes of the action and leaves
nothing more to be done by the Court on the Merits. 21 So, too, would an order of
condemnation be a final one, for thereafter, as the Rules expressly state, in the
proceedings before the Trial Court, "no objection to the exercise of the right of
condemnation (or the propriety thereof) shall be flied or heard. 22
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. 23 The order fixing the just compensation on the basis of the
evidence before, and findings of, the commissioners would be final, too. It would finally dispose of the
second stage of the suit, and leave nothing more to be done by the Court regarding the issue. Obviously,
one or another of the parties may believe the order to be erroneous in its appreciation of the evidence or
findings of fact or otherwise. Obviously, too, such a dissatisfied party may seek reversal of the order by
taking an appeal therefrom.
A similar two-phase feature is found in the special civil action of partition and accounting under Rule 69 of
the Rules of Court. 24
The first phase of a partition and/or accounting suit is taken up with the determination of whether or not a
co-ownership in fact exists, and a partition is proper (i.e., not otherwise legally prescribed) and may be
made by voluntary agreement of all the parties interested in the property. 25 This phase may end with a
declaration that plaintiff is not entitled to have a partition either because a co-ownership does not exist, or
partition is legally prohibited. 26 It may end, on the other hand, with an adjudgment that a co-ownership
does in truth exist, partition is proper in the premises and an accounting of rents and profits received by
the defendant from the real estate in question is in order. 27 In the latter case, "the parties may, ff they are
able to agree, make partition among themselves by proper instruments of conveyance, and the court shall
confirm the partition so agreed upon. 28, In either case i.e. either the action is dismissed or partition and/or
accounting is decreed the order is a final one, and may be appealed by any party aggrieved thereby. 29
The second phase commences when it appears that "the parties are unable to agree upon the partition"
directed by the court. In that event partition shall be done for the parties by the Court with the assistance
of not more than three (3) commissioners. 30 This second stage may well also deal with the rendition of
the accounting itself and its approval by the Court after the parties have been accorded opportunity to be
heard thereon, and an award for the recovery by the party or parties thereto entitled of their just share in
the rents and profits of the real estate in question." 31 Such an order is, to be sure, final and appealable.
Now, this Court has settled the question of the finality and appealability of a decision or order decreeing
partition or recovery of property and/or accounting. In Miranda v. Court of Appeals, decided on June 18,
1986,32 the Court resolved the question affirmatively, and expressly revoked the ruling in Zaldarriaga v.
Enriquez 33 -that a decision or order of partition is not final because it leaves something more to be done
in the trial court for the complete disposition of the case, i.e, the appointment of commissioners, the
proceedings for the determination by said commissioners of just compensation, the submission of their
reports, and hearing thereon, and the approval of the partition-and in Fuentebella vs. Carrascoso 34 -that a
judgement for recovery of property with account is not final, but merely interlocutory and hence not
appealable until the accounting is made and passed upon. As pointed out in Miranda, imperative

considerations of public policy, of sound practice and adherence to the constitutional mandate of
simplified, just, speedy and inexpensive determination of every action require that judgments for recovery
(or partition) of property with accounting be considered as final judgments, duly appealable. This,
notwithstanding that further proceedings will still have to be rendered by the party required to do so, it will
be ventilated and discussed by the parties, and will eventually be passed upon by the Court. It is of
course entirely possible that the Court disposition may not sit well with either the party in whose favor the
accounting is made, or the party rendering it. In either case, the Court's adjudication on the accounting is
without doubt a final one, for it would finally terminate the proceedings thereon and leave nothing more to
be done by the Court on the merits of the issue. And it goes without saying that any party feeling
aggrieved by that ultimate action of the Court on the accounting may seek reversal or modification thereof
by the Court of Appeals or the Supreme Court. 35
The Miranda doctrine was reiterated in de Guzman v. C.A.- 36 Valdez v. Bagaso; 37 Lagunzad v. Gonzales;
38
Cease v. C.A., 39 Macadangdang v. C.A. 40 and Hernandez v. C.A., 41 Gabor v. C.A. 42 Fabrica v. C.A . 43
No reason presents itself for different disposition as regards cases of eminent domain. On the contrary,
the close analogy between the special actions of eminent domain and partition already pointed out,
argues for the application of the same rule to both proceedings.
The Court therefore holds that in actions of eminent domain, as in actions for partition, since no less than
two (2) appeals are allowed by law, the period for appeal from an order of condemnation 44 is thirty (30)
days counted from notice of order and not the ordinary period of fifteen (15) days prescribed for actions in
general, conformably with the provision of Section 39 of Batas Pambansa Bilang 129, in relation to
paragraph 19 (b) of the Implementing Rules to the effect that in "appeals in special proceedings in
accordance with Rule 109 of the Rules of Court and other cases wherein multiple appeals are allowed,
the period of appeal shall be thirty (30) days, a record of appeal being required. 45
The municipality's motion for reconsideration filed on August 17, 1984 was therefore timely presented,
well within the thirty-day period laid down by law therefor; and it was error for the Trial Court to have ruled
otherwise and to have declared that the order sought to be considered had become final and executory.
2. As already observed, the Municipality's complaint for expropriation impleaded eleven
(11) defendants. A separate trial was held on motion of one of them, Erlinda Francisco, 46
it appearing that she had asserted a defense personal and peculiar to her, and
inapplicable to the other defendants, supra. Subsequently, and on the basis of the
evidence presented by her, the Trial Court promulgated a separate Order dismissing the
action as to her, in accordance with Section 4, Rule 36 of the Rules of Court reading as
follows:
Sec. 4. Several judgments in an action against several defendants, the court may, when a
several judgment is proper, render judgment against one or more of them, leaving the
action to proceed against the others.
It is now claimed by the Municipality that the issuance of such a separate, final order or judgment had
given rise "ipso facto to a situation where multiple appeals became available." The Municipality is right.
In the case at bar, where a single complaint was filed against several defendants having individual,
separate interests, and a separate trial was held relative to one of said defendants after which a final
order or judgment was rendered on the merits of the plaintiff s claim against that particular defendant, it is
obvious that in the event of an appeal from that separate judgment, the original record cannot and should
not be sent up to the appellate tribunal. The record will have to stay with the trial court because it will still
try the case as regards the other defendants. As the rule above quoted settles, "In an action against
several defendants, the court may, when a several judgment is proper, render judgment against one or
more of them, leaving the action to proceed against the others. " 47 In lieu of the original record, a record

on appeal will perforce have to be prepared and transmitted to the appellate court. More than one appeal
being permitted in this case, therefore, "the period of appeal shall be thirty (30) days, a record of appeal
being required as provided by the Implementing Rules in relation to Section 39 of B.P. Blg. 129, supra. 48
3. Erlinda Francisco filed a "motion to dismiss" intraverse of the averments of the
Municipality's complaint for expropriation. That "motion to dismiss" was in fact the
indicated responsive pleading to the complaint, "in lieu of an answer." 49
Now, the Trial Court conducted a separate trial to determine whether or not, as alleged by Francisco in
her "motion to dismiss," she had a "vested right via a pre-existing approved Locational Clearance from the
HRSC.," making the expropriation suit premature. 50 While such a separate trial was not improper in the
premises, 51 and was not put at issue by the Municipality, the latter did protest against the Trial Court's (a)
reversing the order of trial and receiving first, the evidence of defendant Francisco, and (b) subsequently
rendering its order sustaining Francisco's defense and dismissing the action as to her, solely on the basis
of said Francisco's evidence and without giving the plaintiff an opportunity to present its own evidence on
the issue. The Trial Court was clearly wrong on both counts. The Court will have to sustain the
Municipality on these points.
Nothing in the record reveals any valid cause to reverse the order of trial. What the Trial Court might have
had in mind was the provision of Section 5, Rule 16 of the Rules of Court allowing "any of the grounds for
dismissal" in Rule 16 to "be pleaded as an affirmative defense and authorizing the holding of a
"preliminary hearing .. thereon as if a motion to dismiss had been filed." Assuming this to be the fact, the
reception of Francisco's evidence first was wrong, because obviously, her asserted objection or defense
that the locational clearance issued in her favor by the HSRC was a legal bar to the expropriation suit was
not a ground for dismissal under Rule 16. She evidently meant to prove the Municipality's lack of cause of
action; but lack of cause of action is not a ground for dismissal of an action under Rule 16; the ground is
the failure of the complaint to state a cause of action, which is obviously not the same as plaintiff's not
having a cause of action.
Nothing in the record, moreover, discloses any circumstances from which a waiver by the Municipality of
the right to present contrary proofs may be inferred. So, in deciding the issue without according the
Municipality that right to present contrary evidence, the Trial Court had effectively denied the Municipality
due process and thus incurred in another reversible error.
4. Turning now to the locational clearance issued by the HSRC in Francisco's favor on
May 4, 1983, it seems evident that said clearance did become a "worthless sheet of
paper," as averred by the Municipality, upon the lapse of one (1) year from said date in
light of the explicit condition in the clearance that it 44 shall be considered automatically
revoked if not used within a period of one (1) year from date of issue," and the unrebutted
fact that Francisco had not really made use of it within that period. The failure of the Court
to consider these facts, despite its attention having been drawn to them, is yet another
error which must be corrected.
WHEREFORE, the challenged Order issued by His Honor on July 24,1984 in Civil Case No. 8-1960 is
ANNULLED AND SET ASIDE, and the case is remanded to the Trial Court for the reception of the
evidence of the plaintiff Municipality of Bian as against defendant Erlinda Francisco, and for subsequent
proceedings and judgment in accordance with the Rules of Court and the law. Costs against private
respondent.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 165427

March 21, 2011

BETTY B. LACBAYAN, Petitioner,


vs.
BAYANI S. SAMOY, JR., Respondent.
DECISION
VILLARAMA, JR., J.:
This settles the petition for review on certiorari filed by petitioner Betty B. Lacbayan against
respondent Bayani S. Samoy, Jr. assailing the September 14, 2004 Decision1 of the Court of
Appeals (CA) in CA-G.R. CV No. 67596. The CA had affirmed the February 10, 2000 Decision2
of the Regional Trial Court (RTC), Branch 224, of Quezon City declaring respondent as the sole
owner of the properties involved in this suit and awarding to him P100,000.00 as attorneys fees.
This suit stemmed from the following facts.
Petitioner and respondent met each other through a common friend sometime in 1978. Despite
respondent being already married, their relationship developed until petitioner gave birth to
respondents son on October 12, 1979.3
During their illicit relationship, petitioner and respondent, together with three more
incorporators, were able to establish a manpower services company.4 Five parcels of land were
also acquired during the said period and were registered in petitioner and respondents names,
ostensibly as husband and wife. The lands are briefly described as follows:
1. A 255-square meter real estate property located at Malvar St., Quezon City covered by
TCT No. 303224 and registered in the name of Bayani S. Samoy, Jr. "married to Betty
Lacbayan."5
2. A 296-square meter real estate property located at Main Ave., Quezon City covered by
TCT No. 23301 and registered in the name of "Spouses Bayani S. Samoy and Betty
Lacbayan."6
3. A 300-square meter real estate property located at Matatag St., Quezon City covered by
TCT No. RT-38264 and registered in the name of Bayani S. Samoy, Jr. "married to Betty
Lacbayan Samoy."7

4. A 183.20-square meter real estate property located at Zobel St., Quezon City covered
by TCT No. 335193 and registered in the name of Bayani S. Samoy, Jr. "married to Betty
L. Samoy."8
5. A 400-square meter real estate property located at Don Enrique Heights, Quezon City
covered by TCT No. 90232 and registered in the name of Bayani S. Samoy, Jr. "married
to Betty L. Samoy."9
Initially, petitioner lived with her parents in Mapagbigay St., V. Luna, Quezon City. In 1983,
petitioner left her parents and decided to reside in the property located in Malvar St. in Project 4,
Quezon City. Later, she and their son transferred to Zobel St., also in Project 4, and finally to the
400-square meter property in Don Enrique Heights.10
Eventually, however, their relationship turned sour and they decided to part ways sometime in
1991. In 1998, both parties agreed to divide the said properties and terminate their business
partnership by executing a Partition Agreement.11 Initially, respondent agreed to petitioners
proposal that the properties in Malvar St. and Don Enrique Heights be assigned to the latter,
while the ownership over the three other properties will go to respondent.12 However, when
petitioner wanted additional demands to be included in the partition agreement, respondent
refused.13 Feeling aggrieved, petitioner filed a complaint for judicial partition14 of the said
properties before the RTC in Quezon City on May 31, 1999.
In her complaint, petitioner averred that she and respondent started to live together as husband
and wife in 1979 without the benefit of marriage and worked together as business partners,
acquiring real properties amounting to P15,500,000.00.15 Respondent, in his Answer,16 however,
denied petitioners claim of cohabitation and said that the properties were acquired out of his
own personal funds without any contribution from petitioner.17
During the trial, petitioner admitted that although they were together for almost 24 hours a day in
1983 until 1991, respondent would still go home to his wife usually in the wee hours of the
morning.18 Petitioner likewise claimed that they acquired the said real estate properties from the
income of the company which she and respondent established.19
Respondent, meanwhile, testified that the properties were purchased from his personal funds,
salaries, dividends, allowances and commissions.20 He countered that the said properties were
registered in his name together with petitioner to exclude the same from the property regime of
respondent and his legal wife, and to prevent the possible dissipation of the said properties since
his legal wife was then a heavy gambler.21 Respondent added that he also purchased the said
properties as investment, with the intention to sell them later on for the purchase or construction
of a new building.22
On February 10, 2000, the trial court rendered a decision dismissing the complaint for lack of
merit.23 In resolving the issue on ownership, the RTC decided to give considerable weight to
petitioners own admission that the properties were acquired not from her own personal funds
but from the income of the manpower services company over which she owns a measly 3.33%
share.24

Aggrieved, petitioner elevated the matter to the CA asserting that she is the pro indiviso owner of
one-half of the properties in dispute. Petitioner argued that the trial courts decision subjected the
certificates of title over the said properties to collateral attack contrary to law and jurisprudence.
Petitioner also contended that it is improper to thresh out the issue on ownership in an action for
partition.25
Unimpressed with petitioners arguments, the appellate court denied the appeal, explaining in the
following manner:
Appellants harping on the indefeasibility of the certificates of title covering the subject realties
is, to say the least, misplaced. Rather than the validity of said certificates which was nowhere
dealt with in the appealed decision, the record shows that what the trial court determined therein
was the ownership of the subject realties itself an issue correlative to and a necessary adjunct
of the claim of co-ownership upon which appellant anchored her cause of action for partition. It
bears emphasizing, moreover, that the rule on the indefeasibility of a Torrens title applies only to
original and not to subsequent registration as that availed of by the parties in respect to the
properties in litigation. To our mind, the inapplicability of said principle to the case at bench is
even more underscored by the admitted falsity of the registration of the selfsame realties in the
parties name as husband and wife.
The same dearth of merit permeates appellants imputation of reversible error against the trial
court for supposedly failing to make the proper delineation between an action for partition and an
action involving ownership. Typically brought by a person claiming to be co-owner of a
specified property against a defendant or defendants whom the plaintiff recognizes to be coowners, an action for partition may be seen to present simultaneously two principal issues, i.e.,
first, the issue of whether the plaintiff is indeed a co-owner of the property sought to be
partitioned and, second assuming that the plaintiff successfully hurdles the first the issue of
how the property is to be divided between plaintiff and defendant(s). Otherwise stated, the court
must initially settle the issue of ownership for the simple reason that it cannot properly issue an
order to divide the property without first making a determination as to the existence of coownership. Until and unless the issue of ownership is definitely resolved, it would be premature
to effect a partition of the properties. This is precisely what the trial court did when it discounted
the merit in appellants claim of co-ownership.26
Hence, this petition premised on the following arguments:
I. Ownership cannot be passed upon in a partition case.
II. The partition agreement duly signed by respondent contains an admission against
respondents interest as to the existence of co-ownership between the parties.
III. An action for partition cannot be defeated by the mere expedience of repudiating coownership based on self-serving claims of exclusive ownership of the properties in
dispute.

IV. A Torrens title is the best evidence of ownership which cannot be outweighed by
respondents self-serving assertion to the contrary.
V. The properties involved were acquired by both parties through their actual joint
contribution of money, property, or industry.27
Noticeably, the last argument is essentially a question of fact, which we feel has been squarely
threshed out in the decisions of both the trial and appellate courts. We deem it wise not to disturb
the findings of the lower courts on the said matter absent any showing that the instant case falls
under the exceptions to the general rule that questions of fact are beyond the ambit of the Courts
jurisdiction in petitions under Rule 45 of the 1997 Rules of Civil Procedure, as amended. The
issues may be summarized into only three:
I. Whether an action for partition precludes a settlement on the issue of ownership;
II. Whether the Torrens title over the disputed properties was collaterally attacked in the
action for partition; and
III. Whether respondent is estopped from repudiating co-ownership over the subject
realties.
We find the petition bereft of merit.
Our disquisition in Municipality of Bian v. Garcia28 is definitive. There, we explained that the
determination as to the existence of co-ownership is necessary in the resolution of an action for
partition. Thus:
The first phase of a partition and/or accounting suit is taken up with the determination of whether
or not a co-ownership in fact exists, and a partition is proper (i.e., not otherwise legally
proscribed) and may be made by voluntary agreement of all the parties interested in the property.
This phase may end with a declaration that plaintiff is not entitled to have a partition either
because a co-ownership does not exist, or partition is legally prohibited. It may end, on the other
hand, with an adjudgment that a co-ownership does in truth exist, partition is proper in the
premises and an accounting of rents and profits received by the defendant from the real estate in
question is in order. x x x
The second phase commences when it appears that "the parties are unable to agree upon the
partition" directed by the court. In that event[,] partition shall be done for the parties by the
[c]ourt with the assistance of not more than three (3) commissioners. This second stage may well
also deal with the rendition of the accounting itself and its approval by the [c]ourt after the
parties have been accorded opportunity to be heard thereon, and an award for the recovery by the
party or parties thereto entitled of their just share in the rents and profits of the real estate in
question. x x x29 (Emphasis supplied.)
While it is true that the complaint involved here is one for partition, the same is premised on the
existence or non-existence of co-ownership between the parties. Petitioner insists she is a co-

owner pro indiviso of the five real estate properties based on the transfer certificates of title
(TCTs) covering the subject properties. Respondent maintains otherwise. Indubitably, therefore,
until and unless this issue of co-ownership is definitely and finally resolved, it would be
premature to effect a partition of the disputed properties.30 More importantly, the complaint will
not even lie if the claimant, or petitioner in this case, does not even have any rightful interest
over the subject properties.31
Would a resolution on the issue of ownership subject the Torrens title issued over the disputed
realties to a collateral attack? Most definitely, it would not.
There is no dispute that a Torrens certificate of title cannot be collaterally attacked,32 but that rule
is not material to the case at bar. What cannot be collaterally attacked is the certificate of title and
not the title itself.33 The certificate referred to is that document issued by the Register of Deeds
known as the TCT. In contrast, the title referred to by law means ownership which is, more often
than not, represented by that document.34 Petitioner apparently confuses title with the certificate
of title. Title as a concept of ownership should not be confused with the certificate of title as
evidence of such ownership although both are interchangeably used.35
Moreover, placing a parcel of land under the mantle of the Torrens system does not mean that
ownership thereof can no longer be disputed. Ownership is different from a certificate of title, the
latter only serving as the best proof of ownership over a piece of land. The certificate cannot
always be considered as conclusive evidence of ownership.36 In fact, mere issuance of the
certificate of title in the name of any person does not foreclose the possibility that the real
property may be under co-ownership with persons not named in the certificate, or that the
registrant may only be a trustee, or that other parties may have acquired interest over the
property subsequent to the issuance of the certificate of title.37 Needless to say, registration does
not vest ownership over a property, but may be the best evidence thereof.1avvphi1
Finally, as to whether respondents assent to the initial partition agreement serves as an
admission against interest, in that the respondent is deemed to have admitted the existence of coownership between him and petitioner, we rule in the negative.
An admission is any statement of fact made by a party against his interest or unfavorable to the
conclusion for which he contends or is inconsistent with the facts alleged by him.38 Admission
against interest is governed by Section 26 of Rule 130 of the Rules of Court, which provides:
Sec. 26. Admissions of a party. The act, declaration or omission of a party as to a relevant fact
may be given in evidence against him.
To be admissible, an admission must (a) involve matters of fact, and not of law; (b) be
categorical and definite; (c) be knowingly and voluntarily made; and (d) be adverse to the
admitters interests, otherwise it would be self-serving and inadmissible.39
A careful perusal of the contents of the so-called Partition Agreement indicates that the document
involves matters which necessitate prior settlement of questions of law, basic of which is a
determination as to whether the parties have the right to freely divide among themselves the

subject properties. Moreover, to follow petitioners argument would be to allow respondent not
only to admit against his own interest but that of his legal spouse as well, who may also be
lawfully entitled co-ownership over the said properties. Respondent is not allowed by law to
waive whatever share his lawful spouse may have on the disputed properties. Basic is the rule
that rights may be waived, unless the waiver is contrary to law, public order, public policy,
morals, good customs or prejudicial to a third person with a right recognized by law.40
Curiously, petitioner herself admitted that she did not assent to the Partition Agreement after
seeing the need to amend the same to include other matters. Petitioner does not have any right to
insist on the contents of an agreement she intentionally refused to sign.
As to the award of damages to respondent, we do not subscribe to the trial courts view that
respondent is entitled to attorneys fees. Unlike the trial court, we do not commiserate with
respondents predicament. The trial court ruled that respondent was forced to litigate and
engaged the services of his counsel to defend his interest as to entitle him an award of
P100,000.00 as attorneys fees. But we note that in the first place, it was respondent himself who
impressed upon petitioner that she has a right over the involved properties. Secondly,
respondents act of representing himself and petitioner as husband and wife was a deliberate
attempt to skirt the law and escape his legal obligation to his lawful wife. Respondent, therefore,
has no one but himself to blame the consequences of his deceitful act which resulted in the filing
of the complaint against him.
WHEREFORE, the petition is DENIED. The September 14, 2004 Decision of the Court of
Appeals in CA-G.R. CV No. 67596 is AFFIRMED with MODIFICATION. Respondent Bayani
S. Samoy, Jr. is hereby declared the sole owner of the disputed properties, without prejudice to
any claim his legal wife may have filed or may file against him. The award of P100,000.00 as
attorneys fees in respondents favor is DELETED.
No costs.
SO ORDERED.

I. Ejectment [Rule 70]

Heirs of Olarte, et.al. vs. Office of the President, GR 177995, 15 June 2011

Rosa Delos Reyes vs. Spouses Odones, et.al. GR 178096, 23 March 2011 [unlawful
detainer]

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178159

March 2, 2011

SPS. VICENTE DIONISIO AND ANITA DIONISIO, Petitioner,


vs.
WILFREDO LINSANGAN, Respondent.
DECISION
ABAD, J.:
The case is about a) amendments in the complaint that do not alter the cause of action and b) the
effect in an unlawful detainer action of the tolerated possessors assignment of his possession to
the defendant.
The Facts and the Case
Gorgonio M. Cruz (Cruz) owned agricultural lands in San Rafael, Bulacan, that his tenant,
Romualdo San Mateo (Romualdo) cultivated. Upon Romualdos death, his widow, Emiliana, got
Cruzs permission to stay on the property provided she would vacate it upon demand.
In September 1989 spouses Vicente and Anita Dionisio (the Dionisios) bought the property from
Cruz.1 In April 2002, the Dionisios found out that Emiliana had left the property and that it was
already Wilfredo Linsangan (Wilfredo) who occupied it under the strength of a "Kasunduan ng
Bilihan ng Karapatan"2 dated April 7, 1977.
The Dionisios wrote Wilfredo on April 22, 2002, demanding that he vacate the land but the latter
declined, prompting the Dionisios to file an eviction suit3 against him before the Municipal Trial
Court (MTC) of San Rafael, Bulacan. Wilfredo filed an answer with counterclaims in which he
declared that he had been a tenant of the land as early as 1977.
At the pre-trial, the Dionisios orally asked leave to amend their complaint. Despite initial
misgivings over the amended complaint, Wilfredo asked for time to respond to it. The Dionisios
filed their amended complaint on August 5, 2003; Wilfredo maintained his original answer.
The MTC issued a pre-trial order4 specifying the issues. For the plaintiffs: (1) whether or not the
defendant can be ejected from the property and (2) whether or not the plaintiffs are entitled to
reasonable rent for the use of the property, damages, and attorneys fees. For the defendant: (1)
whether or not the MTC has jurisdiction to try this case; (2) whether or not the defendant can be

ejected from the questioned property; and (3) whether or not the defendant is entitled to damages
and attorneys fees.
On May 3, 2004 the MTC rendered judgment, ordering Wilfredo to vacate the land and remove
his house from it. Further, the MTC ordered Wilfredo to pay the Dionisios P3,000.00 a month as
reasonable compensation for the use of the land and P20,000.00 as attorneys fees and to pay the
cost of suit.
On appeal,5 the Regional Trial Court (RTC) of Malolos, Bulacan, affirmed the MTC decision,
holding that the case was one for forcible entry. On review,6 however, the Court of Appeals (CA)
rendered judgment on July 6, 2006, reversing the decisions of the courts below, and ordering the
dismissal of the Dionisios action. The CA held that, by amending their complaint, the Dionisios
effectively changed their cause of action from unlawful detainer to recovery of possession which
fell outside the jurisdiction of the MTC. Further, since the amendment introduced a new cause of
action, its filing on August 5, 2003 marked the passage of the one year limit from demand
required in ejectment suits. More, since jurisdiction over actions for possession depended on the
assessed value of the property and since such assessed value was not alleged, the CA cannot
determine what court has jurisdiction over the action.
The Issues Presented
The issues presented in this case are:
1. Whether or not the Dionisios amendment of their complaint effectively changed their
cause of action from one of ejectment to one of recovery of possession; and
2. Whether or not the MTC had jurisdiction over the action before it.
The Rulings of the Court
One. An amended complaint that changes the plaintiffs cause of action is technically a new
complaint. Consequently, the action is deemed filed on the date of the filing of such amended
pleading, not on the date of the filing of its original version. Thus, the statute of limitation
resumes its run until it is arrested by the filing of the amended pleading. The Court
acknowledges, however, that an amendment which does not alter the cause of action but merely
supplements or amplifies the facts previously alleged, does not affect the reckoning date of filing
based on the original complaint. The cause of action, unchanged, is not barred by the statute of
limitations that expired after the filing of the original complaint.7
Here, the original complaint alleges that the Dionisios bought the land from Cruz on September
30, 1989; that Romualdo used to be the lands tenant; that when he died, the Dionisios allowed
his widow, Emiliana, to stay under a promise that she would leave the land upon demand; that in
April 2002 the Dionisios discovered on visit to the land that Emiliana had left it and that
Wilfredo now occupied it under a claim that he bought the right to stay from Emiliana under a
"Kasunduan ng Bilihan ng Karapatan;" that the Dionisios did not know of and gave no consent to
this sale which had not been annotated on their title; that the Dionisios verbally told Wilfredo to

leave the property by April 31, 2002; that their lawyer reiterated such demand in writing on April
22, 2002; that Wilfredo did not heed the demand; that the Dionisios wanted to get possession so
they could till the land and demolish Wilfredos house on it; that Wilfredo did not give the
Dionisios just share in the harvest; and that the Dionisios were compelled to get the services of
counsel for P100,000.00.
The amended complaint has essentially identical allegations. The only new ones are that the
Dionisios allowed Emiliana, Romualdos widow to stay "out of their kindness, tolerance, and
generosity;" that they went to the land in April 2002, after deciding to occupy it, to tell Emiliana
of their plan; that Wilfredo cannot deny that Cruz was the previous registered owner and that he
sold the land to the Dionisios; and that a person occupying anothers land by the latters
tolerance or permission, without contract, is bound by an implied promise to leave upon demand,
failing which a summary action for ejectment is the proper remedy.
To determine if an amendment introduces a different cause of action, the test is whether such
amendment now requires the defendant to answer for a liability or obligation which is
completely different from that stated in the original complaint.8 Here, both the original and the
amended complaint required Wilfredo to defend his possession based on the allegation that he
had stayed on the land after Emiliana left out of the owners mere tolerance and that the latter
had demanded that he leave. Indeed, Wilfredo did not find the need to file a new answer.
Two. Wilfredo points out that the MTC has no jurisdiction to hear and decide the case since it
involved tenancy relation which comes under the jurisdiction of the DARAB.9 But the
jurisdiction of the court over the subject matter of the action is determined by the allegations of
the complaint.10 Besides, the records show that Wilfredo failed to substantiate his claim that he
was a tenant of the land. The MTC records show that aside from the assertion that he is a tenant,
he did not present any evidence to prove the same. To consider evidence presented only during
appeal is offensive to the idea of fair play.
The remaining question is the nature of the action based on the allegations of the complaint. The
RTC characterized it as an action for forcible entry, Wilfredo having entered the property and
taken over from widow Emiliana on the sly. The problem with this characterization is that the
complaint contained no allegation that the Dionisios were in possession of the property before
Wilfredo occupied it either by force, intimidation, threat, strategy, or stealth, an element of that
kind of eviction suit.11 Nowhere in the recitation of the amended complaint did the Dionisios
assert that they were in prior possession of the land and were ousted from such possession by
Wilfredos unlawful occupation of the property.
Is the action one for unlawful detainer? An action is for unlawful detainer if the complaint
sufficiently alleges the following: (1) initially, the defendant has possession of property by
contract with or by tolerance of the plaintiff; (2) eventually, however, such possession became
illegal upon plaintiffs notice to defendant, terminating the latters right of possession; (3) still,
the defendant remains in possession, depriving the plaintiff of the enjoyment of his property; and
(4) within a year from plaintiffs last demand that defendant vacate the property, the plaintiff files
a complaint for defendants ejectment.12 If the defendant had possession of the land upon mere

tolerance of the owner, such tolerance must be present at the beginning of defendants
possession.13
Here, based on the allegations of the amended complaint, the Dionisios allowed Emiliana, tenant
Romualdos widow, to stay on the land for the meantime and leave when asked to do so. But,
without the knowledge or consent of the Dionisios, she sold her "right of tenancy" to Wilfredo.
When the Dionisios visited the land in April 2002 and found Wilfredo there, they demanded that
he leave the land. They did so in writing on April 22, 2002 but he refused to leave. The Dionisios
filed their eviction suit within the year.
It is pointed out that the original complaint did not allege that the Dionisios "tolerated"
Emilianas possession of the land after her husband died, much less did it allege that they
"tolerated" Wilfredos possession after he took over from Emiliana. But the rules do not require
the plaintiff in an eviction suit to use the exact language of such rules. The Dionisios alleged that
Romualdo used to be the lands tenant and that when he died, the Dionisios allowed his widow,
Emiliana, to stay under a promise that she would leave upon demand. These allegations clearly
imply the Dionisios "tolerance" of her stay meantime that they did not yet need the land.
As for Wilfredo, it is clear from the allegations of the complaint that Emiliana assigned to him
her right to occupy the property. In fact that assignment was in writing. Consequently, his claim
to the land was based on the Dionisios "tolerance" of the possession of Emiliana and, impliedly,
of all persons claiming right under her.
True, the "Kasunduan ng Bilihan ng Karapatan" under which Emiliana transferred her tenancy
right to Wilfredo appears to have been executed in 1977, years before Cruz sold the land to the
Dionisios, implying that Wilfredo had already been in possession of the property before the sale.
But what is controlling in ascertaining the jurisdiction of the court are the allegations of the
complaint. The Dionisios alleged in their complaint that they were the ones who allowed
Emiliana (and all persons claiming right under her) to stay on the land meantime that they did
not need it. The MTC and the RTC gave credence to the Dionisios version. The Court will
respect their judgment on a question of fact.
WHEREFORE, the Court GRANTS the petition, REVERSES and SETS ASIDE the Decision
of the Court of Appeals in CA-G.R. SP 92643 dated July 6, 2006, and REINSTATES the
Decision of the Municipal Trial Court of San Rafael, Bulacan, in Civil Case 1160-SRB-2003
dated May 3, 2004.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 176413

November 25, 2009

SPOUSES DANILO T. SAMONTE and ROSALINDA N. SAMONTE, Petitioners,


vs.
CENTURY SAVINGS BANK, Respondent.
DECISION
NACHURA, J.:
This is a petition for review on certiorari of the Court of Appeals (CA) Decision1 dated
September 27, 2006 and Resolution2 dated January 24, 2007 in CA-G.R. SP No. 86875. The
assailed decision affirmed in toto the Regional Trial Court (RTC)3 Decision4 dated September 17,
2004 in Civil Case No. 04-913, which in turn affirmed the Metropolitan Trial Court (MeTC)5
Decision6 dated May 6, 2004 in Civil Case No. 79002 for Ejectment.
The facts are as follows:
Petitioners Danilo T. Samonte and Rosalinda N. Samonte obtained a loan amounting to
P1,500,000.00 from respondent Century Savings Bank secured by a Real Estate Mortgage7 over
a property located at 7142 M. Ocampo Street, Pio del Pilar, Makati City. For petitioners failure
to pay the obligation, the mortgage was extrajudicially foreclosed on December 9, 1999 and the
property was sold at public auction and was eventually awarded to respondent as the highest
bidder.8
Having failed to redeem the property, petitioners entered into a Contract of Lease9 with
respondent, wherein the former agreed to pay the latter a monthly rental of P10,000.00 for and in
consideration of their continuing occupation of the subject property from January 16, 2001January 16, 2002. Petitioners further acknowledged respondents valid and legal title to enter into
the contract as absolute owner of the property in question.10
On March 28, 2001, respondent consolidated its ownership over the property, which led to the
cancellation of petitioners title and the issuance of a new one in respondents name.11
Of the agreed monthly rentals, petitioners only paid a total amount of P40,000.00. On April 4,
2002, respondent sent a letter12 to petitioners demanding that the latter pay their unpaid rentals
and vacate the leased premises. Petitioners, however, refused to heed the demand. Hence, the
complaint for ejectment docketed as Civil Case No. 79002.

In their Answer,13 petitioners admitted having entered into the contract of lease but claimed that it
was void, since their consent was vitiated by mistake and they were made to believe that it was a
requirement for the loan-restructuring agreement with the bank. To justify their failure to pay the
rents and to vacate the premises, petitioners insisted on the nullity of the foreclosure proceedings.
Petitioners had, in fact, commenced an action for the nullification of the foreclosure proceedings
docketed as Civil Case No. 01-1564.14
On May 6, 2004, the MeTC rendered a decision in favor of respondent, the dispositive portion of
which reads:
WHEREFORE, judgment is rendered in favor of plaintiff Century Savings Bank Corporation.
Defendants spouses Danilo T. Samonte and Rosalinda N. Samonte and all persons unlawfully
withholding subject property located at 7142 M. Ocampo Street, Pio Del Pilar, Makati City,
and/or claiming rights under them are directed, as follows:
1. To immediately vacate subject property and peacefully surrender possession thereof to
plaintiff;
2. To pay plaintiff, jointly and severally, P80,000.00 as monthly rental in arrears plus
P10,000.00 per month as reasonable compensation for their continued use and occupancy
of subject premises starting 16 January 2002 until they actually vacate and surrender
possession to it;
3. To pay plaintiff, jointly and severally, P10,000.00 as Attorneys fees; and
4. To pay plaintiff, jointly and severally, the cost of suits.
SO ORDERED.15
On appeal, the RTC affirmed the MeTC decision, thus:
WHEREFORE, premises considered, the decision of the Metropolitan Trial Court, Branch 67,
Makati City in Civil Case No. 79002 dated May 6, 2004 is hereby AFFIRMED IN TOTO with
costs against the defendants-appellants.
SO ORDERED.16
Aggrieved, petitioners elevated the matter to the CA. They insisted that the ejectment case
should await the result of the separate action they instituted for the nullification of the
foreclosure proceedings. They likewise contended that should the court declare respondent
entitled to the possession of the subject property, the same should be provisional and subject to
the courts decision in the nullification case. Lastly, they questioned the award of back rentals as
they were allegedly awarded based on incorrect computation.17

On September 27, 2006, the CA rendered the assailed decision affirming the RTC decision. The
appellate court concluded that the nullification of foreclosure proceedings is not a valid reason to
frustrate the summary remedy of ejectment. The CA also refused to make a declaration that
respondents right to possess the subject property would depend on the outcome of the
nullification case as it would be in the nature of a conditional judgment which is void. The CA
thus upheld respondents better right to possess the property subject matter of this controversy.
Hence, the instant petition.
The only issue for determination is whether the instant ejectment case should be suspended
pending the resolution of the action for nullity of foreclosure.
We answer in the negative.
As a general rule, an ejectment suit cannot be abated or suspended by the mere filing of another
action raising ownership of the property as an issue.18 The Court has, in fact, affirmed this rule in
the following precedents:
1. Injunction suits instituted in the RTC by defendants in ejectment actions in the
municipal trial courts or other courts of the first level (Nacorda v. Yatco, 17 SCRA 920
[1966]) do not abate the latter; and neither do proceedings on consignation of rentals
(Lim Si v. Lim, 98 Phil. 868 [1956], citing Pue, et al. v. Gonzales, 87 Phil. 81 [1950]).
2. An "accion publiciana" does not suspend an ejectment suit against the plaintiff in the
former (Ramirez v. Bleza, 106 SCRA 187 [1981]).
3. A "writ of possession case" where ownership is concededly the principal issue before
the Regional Trial Court does not preclude nor bar the execution of the judgment in an
unlawful detainer suit where the only issue involved is the material possession or
possession de facto of the premises (Heirs of F. Guballa, Sr. v. C.A., et al.; etc., 168
SCRA 518 [1988]).
4. An action for quieting of title to property is not a bar to an ejectment suit involving the
same property (Quimpo v. de la Victoria, 46 SCRA 139 [1972]).
5. Suits for specific performance with damages do not affect ejectment actions (e.g., to
compel renewal of a lease contract) (Desamito v. Cuyegkeng, 18 SCRA 1184 [1966];
Rosales v. CFI, 154 SCRA 153 [1987]; Commander Realty, Inc. v. C.A., 161 SCRA 264
[1988]).
6. An action for reformation of instrument (e.g., from deed of absolute sale to one of sale
with pacto de retro) does not suspend an ejectment suit between the same parties (Judith
v. Abragan, 66 SCRA 600 [1975]).
7. An action for reconveyance of property or "accion reivindicatoria" also has no effect
on ejectment suits regarding the same property (Del Rosario v. Jimenez, 8 SCRA 549

[1963]; Salinas v. Navarro, 126 SCRA 167; De la Cruz v. C.A., 133 SCRA 520 [1984]);
Drilon v. Gaurana, 149 SCRA 352 [1987]; Ching v. Malaya, 153 SCRA 412 [1987];
Philippine Feeds Milling Co., Inc. v. C.A., 174 SCRA 108; Dante v. Sison, 174 SCRA
517 [1989]; Guzman v. C.A. [annulment of sale and reconveyance], 177 SCRA 604
[1989]; Demamay v. C.A., 186 SCRA 608 [1990]; Leopoldo Sy v. C.A., et al.,
[annulment of sale and reconveyance], G.R. No. 95818, Aug. 2, 1991).
8. Neither do suits for annulment of sale, or title, or document affecting property operate
to abate ejectment actions respecting the same property (Salinas v. Navarro [annulment of
deed of sale with assumption of mortgage and/or to declare the same an equitable
mortgage], 126 SCRA 167 [1983]; Ang Ping v. RTC [annulment of sale and title], 154
SCRA 153 [1987]; Caparros v. C.A. [annulment of title], 170 SCRA 758 [1989]; Dante v.
Sison [annulment of sale with damages], 174 SCRA 517; Galgala v. Benguet
Consolidated, Inc. [annulment of document], 177 SCRA 288 [1989]).19
Only in rare instances is suspension allowed to await the outcome of a pending civil action. In
Vda. de Legaspi v. Avendao,20 and Amagan v. Marayag,21 we ordered the suspension of the
ejectment proceedings on considerations of equity. We explained that the ejectment of petitioners
therein would mean a demolition of their house and would create confusion, disturbance,
inconvenience, and expense.22 Needlessly, the court would be wasting much time and effort by
proceeding to a stage wherein the outcome would at best be temporary but the result of
enforcement would be permanent, unjust and probably irreparable.23
In the present case, petitioners were the previous owners of the subject property. However, they
lost their right over the property in an extrajudicial foreclosure of mortgage wherein respondent
emerged as the highest bidder. Petitioners, however, remained in possession thereof as lessees in
a contract of lease executed after the expiration of the redemption period. For failure to pay the
stipulated rents, respondent commenced an action for ejectment. Petitioners, in turn, instituted a
case for the nullification of the foreclosure proceedings involving the same property. When the
ejectment case reached the CA, petitioners sought the suspension of the proceedings solely by
reason of the pendency of the nullification case.
Given these factual antecedents, the instant case hardly falls within the exception cited in Vda. de
Legaspi and Amagan as the resolution of the ejectment suit will not result in the demolition of
the leased premises.24 Verily, petitioners failed to show "strong reasons of equity" to sustain the
suspension or dismissal of the ejectment case. Faced with the same scenario on which the general
rule is founded, and finding no reason to deviate therefrom, the Court adheres to settled
jurisprudence that suits involving ownership may not be successfully pleaded in abatement of an
action for ejectment.25 This rule is not without good reason. If the rule were otherwise, ejectment
cases could easily be frustrated through the simple expedient of filing an action contesting the
ownership over the property subject of the controversy. This would render nugatory the
underlying philosophy of the summary remedy of ejectment which is to prevent criminal
disorder and breaches of the peace and to discourage those who, believing themselves entitled to
the possession of the property, resort to force rather than to some appropriate action in court to
assert their claims.26

We are not unmindful of the afflictive consequences that will be suffered by petitioners if the
ejectment is ordered, only to be reinstated later if they eventually win the nullification of the
foreclosure case. However, respondent will also suffer an injustice if denied the remedy of
ejectment, resort to which is not only allowed but, in fact, encouraged by law.27
We would like to stress that unlawful detainer and forcible entry suits under Rule 70 of the Rules
of Court are designed to summarily restore physical possession of a piece of land or building to
one who has been illegally or forcibly deprived thereof, without prejudice to the settlement of the
parties opposing claims of juridical possession in appropriate proceedings.28 These actions are
intended to avoid disruption of public order by those who would take the law in their hands
purportedly to enforce their claimed right of possession.29 In these cases, the issue is pure
physical or de facto possession, and pronouncements made on questions of ownership are
provisional in nature.30 The provisional determination of ownership in the ejectment case cannot
be clothed with finality.31
In any case, we sustain the finding that respondent has the better right to possess the subject
property. The Contract of Lease executed by petitioners and respondent remains valid. It is
undisputed that petitioners failed to comply with the terms thereof by their failure to pay the
stipulated rent. As lessor of the subject property, respondent has the right to demand that
petitioners pay their unpaid obligations and, in case of their failure, that they vacate the premises.
Considering that the lease contract has long expired, with more reason should respondent be
allowed to recover the subject property.
There is also no doubt that the plaintiff in the ejectment case (respondent herein) is entitled to
damages caused by the loss of the use and possession of the premises.32 We quote with approval
the appellate courts findings, viz.:
On the matter of whether the court a quo erred in the computation of the amounts awarded,
representing back rentals and reasonable value for the use and occupation of the premises, We
rule in the negative.
The award of back rentals amounting to Php80,000.00 and Php10,000.00 as reasonable
compensation for the continued use and occupation of the property is proper.
As stated in the decision of the court a quo, to which We agree, the monthly rentals in arrears
amounted to Php80,000.00 as of 16 January 2002, the date of expiration of the contract of lease.
Petitioners were only able to pay Php40,000.00, equivalent to four-month rentals at the rate of
Php10,000.00 per month. It would not be in accord with the law if petitioners are not also made
to pay Php10,000.00 commencing 16 January 2002 until they finally vacate and surrender
possession of the property to respondent. The latter amount represents the reasonable value for
the continued use and occupancy of the property after the lease contract has expired.
Inevitably, no error can be imputed to the court a quo when it ordered petitioners to pay
respondent jointly and severally the amount of Php80,000.00 as monthly rental in arrears plus
Php10,000.00 per month as reasonable compensation for the continued use and occupancy of the

property starting January 16, 2002 until they actually vacate and surrender possession of the
property to respondent.33
WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of
Appeals Decision dated September 27, 2006 and Resolution dated January 24, 2007 in CA-G.R.
SP No. 86875 are AFFIRMED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 182716

June 20, 2012

HEIRS OF JOSE MALIGASO, SR., namely, ANTONIO MALIGASO, CARMELO


MALIGASO and JOSE MALIGASO, JR., Petitioners,
vs.
SPOUSES SIMON D. ENCINAS and ESPERANZA E. ENCINAS, Respondents.
DECISION
REYES, J.:
This is a petition for review under Rule 45 of the Rules of Court of the Decision1 dated
November 26, 2007 and Resolution2 dated April 28, 2008 of the Court of Appeals (CA) in CAG.R. SP No. 64775. The CA reversed and set aside the Decision3 dated April 2, 2001 of Branch
51 of the Regional Trial Court (RTC) of Sorsogon, Sorsogon, which affirmed the Decision4 dated
August 22, 2000 of the Municipal Trial Court (MTC) of Sorsogon, Sorsogon dismissing the
Spouses Simon D. Encinas and Esperanza E. Encinas (respondents) complaint for unlawful
detainer.
Respondents are the registered owners of Lot No. 3517 of the Cadastral Survey of Sorsogon,
which has an area of 2,867 square meters and covered by Transfer Certificate of Title (TCT) No.
T-4773.5 The subject matter of this controversy is a portion of Lot No. 3517 with an area of 980
square meters, which the Heirs of Jose Maligaso, Sr. (petitioners) continue to occupy despite
having received two (2) notices to vacate from the respondents.
Lot No. 3517 was previously covered by Original Certificate of Title (OCT) No. 543, which was
issued in the name of Maria Maligaso Ramos (Maria), the petitioners aunt, on February 7, 1929.
Sometime in May 1965, Maria sold Lot No. 3517 to Virginia Escurel (Virginia). Three (3) years
later, on April 5, 1968, Virginia sold Lot No. 3517 to the respondents, resulting to the
cancellation of OCT No. 543 and issuance of TCT No. T-4773.6
On March 16, 1998 and June 19, 1998 or approximately thirty (30) years from the time they
purchased Lot No. 3517, the respondents issued two (2) demand letters to the petitioners, asking
them to vacate the contested area within thirty (30) days from notice.7 The petitioners refused to
leave, claiming that the subject area was the share of their father, Jose Maligaso, Sr. (Jose, Sr.), in
their grandparents estate. Thus, the respondents filed a complaint for unlawful detainer against
them with the MTC, alleging that the petitioners occupation is by mere tolerance and had

become illegal following their refusal to vacate the property despite being demanded to do so
twice.
The petitioners, in their defense, denied that their possession of the disputed area was by mere
tolerance and claimed title thereto on the basis of their fathers successional rights. That the
petitioners occupation remained undisturbed for more than thirty (30) years and the respondents
failure to detail and specify the petitioners supposedly tolerated possession suggest that they and
their predecessors-in-interest are aware of their claim over the subject area. The petitioners also
attacked the validity of OCT No. 543 and TCT No. T-4773, alleging that it was thru fraud that
Maria was able to register Lot No. 3517, including the disputed area, under her name. The
petitioners likewise moved for the dismissal of the complaint, claiming that the allegations
therein indicate that it was actually an action for reconveyance. Further, laches had already set in
view of the respondents failure to assail their possession for more than thirty (30) years. 8
In an August 22, 2000 Decision,9 the dispositive portion of which is quoted below, the MTC
dismissed the respondents complaint.
WHEREFORE, premises considered, judgment is hereby rendered
1. Dismissing the instant case;
2. Adjudicating the possessory rights over the litigated portion to the defendants;
3. Ordering the Register of Deeds to cause the annotation of the equitable title of
defendants, who are entitled to their fathers rightful inheritance which is part of the
property in plaintiffs TCT No. T-4773 as a lien or encumbrance;
4. Ordering the plaintiffs to pay defendants the amount of [P]10,000.00 as attorneys fees;
and
5. The cost of suit.
SO ORDERED.10
The MTC gave more weight to the petitioners possession of the contested area than the
respondents title as the former is founded on Jose Sr.s successional rights and even held that the
registration of Lot No. 3517 in Marias name created a trust in Jose Sr.s favor insofar as the
disputed portion is concerned. The MTC also held that the respondents are barred by laches from
pursuing their cause of action against the petitioners given their inaction for more than thirty (30)
years despite being fully aware of the petitioners adverse possession and claim over the subject
property.
The RTC dismissed the respondents appeal and affirmed the MTCs Decision dated August 22,
2000. In a Decision11 dated April 2, 2001, the RTC found the respondents allegations relative to
the petitioners merely tolerated possession of the subject area to be wanting. The RTC also
concluded, albeit implicitly, that the petitioners possession is a necessary consequence of their

title as evidenced by their occupation in the concept of an owner for a significant period of time.
The dispositive portion thereof states:
WHEREFORE, premises considered, the appealed decision is AFFIRMED with the modification
that the annotations and the payment of attorney[]s fees as ordered by the Court a quo be
deleted. The instant appeal is DISMISSED, for lack of merit.12
Consequently, the respondents filed with the CA a petition for review under Rule 42 of the Rules
of Court. This was given due course and the RTCs Decision dated April 2, 2001 was reversed
and set aside. In its Decision13 dated November 26, 2007, the CA had a different view and
rationalized the grant of possession to the respondents as follows:
The rule is well-entrenched that a person who has a Torrens title over the property is entitled to
the possession thereof. In like manner, prior physical possession by the plaintiff is not necessary
in unlawful detainer cases as the same is only required in forcible entry cases. Moreover, the
allegations in the answer of [the] defendant as to the nullity of plaintiffs title is unavailing and
has no place in an unlawful detainer suit since the issue of the validity of a Torrens title can only
be assailed in an action expressly instituted for that purpose. This may be gleaned from Spouses
Apostol vs. Court of Appeals and Spouses Emmanuel, where the Supreme Court held that:
xxx
In the case at bench, petitioners are the registered owners of Lot No. 3517 and, as a consequence
of such, are entitled to the material and physical possession thereof. Thus, both the MTC and
RTC erred in ruling that respondents prior physical possession and actual possession of the 980square meter disputed portion of Lot No. 3517 should prevail over petitioners Torrens title over
the said property. Such pronouncement contravenes the law and settled jurisprudence on the
matter.14 (Citation omitted)
The CA denied the petitioners motion for reconsideration in its Resolution dated April 28,
2008.15
As earlier intimated, the petitioners anchor their possession of the subject property on their
fathers right thereto as one of his parents heirs. The petitioners insist on the nullity of the
respondents title, TCT No. T-4773, as the inclusion of the contested area in its coverage was
never intended. The petitioners accuse Maria of fraud for having registered Lot No. 3517 in her
name, including the portion that their father allegedly inherited from his parents, thus, reneging
on her promise to cause the registration of such portion in his name. It was their father who had a
legitimate claim over the subject area and Maria never acquired any right thereto. Therefore,
respondents purchase of Lot No. 3517 did not include the portion occupied by the petitioners,
who succeeded to Jose Sr.s rights thereto.
On the other hand, the respondents cause of action is based on their ownership of Lot No. 3517,
which is evidenced by TCT No. T-4773, and on their claim that they merely tolerated the
petitioners occupation thereof. According to the respondents, their being registered owners of
Lot No. 3517, including the portion possessed by the petitioners, entitles them to the possession

thereof and their right to recovery can never be barred by laches. They also maintain that the
petitioners cannot collaterally attack their title to the subject property.
The point of inquiry is whether the respondents have the right to evict the petitioners from the
subject property and this should be resolved in the respondents favor. Between the petitioners
unsubstantiated self-serving claim that their father inherited the contested portion of Lot No.
3517 and the respondents Torrens title, the latter must prevail. The respondents title over such
area is evidence of their ownership thereof. That a certificate of title serves as evidence of an
indefeasible and incontrovertible title to the property in favor of the person whose name appears
therein and that a person who has a Torrens title over a land is entitled to the possession thereof16
are fundamental principles observed in this jurisdiction. Alternatively put, the respondents title
and that of their predecessors-in-interest give rise to the reasonable presumption that the
petitioners have no right over the subject area and that their stay therein was merely tolerated.
The petitioners failed to overcome this presumption, being inadequately armed by a narration
that yearns for proof and corroboration. The petitioners harped that the subject area was their
fathers share in his parents estate but the absence of any evidence that such property was indeed
adjudicated to their father impresses that their claim of ownership is nothing but a mere
afterthought. In fact, Lot No. 3517 was already registered in Marias name when Jose Sr. built
the house where the petitioners are now presently residing. It is rather specious that Jose Sr.
chose inaction despite Marias failure to cause the registration of the subject area in his name and
would be contented with a bungalow that is erected on a property that is supposedly his but
registered in anothers name. That there is allegedly an unwritten agreement between Maria and
Virginia that Jose Sr.s and the petitioners possession of the subject area would remain
undisturbed was never proven, hence, cannot be the basis for their claim of ownership. Rather
than proving that Jose Sr. and the petitioners have a right over the disputed portion of Lot No.
3517, their possession uncoupled with affirmative action to question the titles of Maria and the
respondents show that the latter merely tolerated their stay.
Forcible entry and unlawful detainer cases are summary proceedings designed to provide for an
expeditious means of protecting actual possession or the right to the possession of the property
involved. The avowed objective of actions for forcible entry and unlawful detainer, which have
purposely been made summary in nature, is to provide a peaceful, speedy and expeditious means
of preventing an alleged illegal possessor of property from unjustly continuing his possession for
a long time, thereby ensuring the maintenance of peace and order in the community.17 The said
objectives can only be achieved by according the proceedings a summary nature. However, its
being summary poses a limitation on the nature of issues that can be determined and fully
ventilated. It is for this reason that the proceedings are concentrated on the issue on possession.
Thus, whether the petitioners have a better right to the contested area and whether fraud attended
the issuance of Marias title over Lot No. 3517 are issues that are outside the jurisdiction and
competence of a trial court in actions for unlawful detainer and forcible entry. This is in addition
to the long-standing rule that a Torrens title cannot be collaterally attacked, to which an
ejectment proceeding, is not an exception.
In Soriente v. Estate of the Late Arsenio E. Concepcion,18 a similar allegation possession of the
property in dispute since time immemorial was met with rebuke as such possession, for

whatever length of time, cannot prevail over a Torrens title, the validity of which is presumed
and immune to any collateral attack.
In this case, the trial court found that respondent owns the property on the basis of Transfer
Certificate of Title No. 12892, which was "issued in the name of Arsenio E. Concepcion, x x x
married to Nenita L. Songco." It is a settled rule that the person who has a Torrens title over a
land is entitled to possession thereof. Hence, as the registered owner of the subject property,
respondent is preferred to possess it.
The validity of respondents certificate of title cannot be attacked by petitioner in this case for
ejectment. Under Section 48 of Presidential Decree No. 1529, a certificate of title shall not be
subject to collateral attack. It cannot be altered, modified or cancelled, except in a direct
proceeding for that purpose in accordance with law. The issue of the validity of the title of the
respondents can only be assailed in an action expressly instituted for that purpose. Whether or
not petitioner has the right to claim ownership over the property is beyond the power of the trial
court to determine in an action for unlawful detainer.19 (Citations omitted)
In Salandanan,20 the prohibition against the collateral attack of a Torrens title was reiterated:
In Malison, the Court emphasized that when [a] property is registered under the Torrens system,
the registered owners title to the property is presumed and cannot be collaterally attacked,
especially in a mere action for unlawful detainer. In this particular action where petitioners
alleged ownership cannot be established, coupled with the presumption that respondents title to
the property is legal, then the lower courts are correct in ruling that respondents are the ones
entitled to possession of the subject premises.21 (Citation omitted)
Given the foregoing, the petitioners attempt to remain in possession by casting a cloud on the
respondents title cannot prosper.
Neither will the sheer lapse of time legitimize the petitioners refusal to vacate the subject area or
bar the respondents from gaining possession thereof. As ruled in Spouses Ragudo v. Fabella
Estate Tenants Association, Inc.,22 laches does not operate to deprive the registered owner of a
parcel of land of his right to recover possession thereof:
It is not disputed that at the core of this controversy is a parcel of land registered under the
Torrens system. In a long line of cases, we have consistently ruled that lands covered by a title
cannot be acquired by prescription or adverse possession. So it is that in Natalia Realty
Corporation vs. Vallez, et al., we held that a claim of acquisitive prescription is baseless when the
land involved is a registered land because of Article 1126 of the Civil Code, in relation to Act
496 (now, Section 47 of Presidential Decree No. 1529).
xxxx
Petitioners would take exception from the above settled rule by arguing that FETA as well as its
predecessor[-]in[-]interest, Don Dionisio M. Fabella, are guilty of laches and should, therefore,
be already precluded from asserting their right as against them, invoking, in this regard, the

rulings of this Court to the effect that while a registered land may not be acquired by
prescription, yet, by virtue of the registered owners inaction and neglect, his right to recover the
possession thereof may have been converted into a stale demand.
While, at a blush, there is apparent merit in petitioners posture, a closer look at our
jurisprudence negates their submission.
To start with, the lower court found that petitioners possession of the subject lot was merely at
the tolerance of its former lawful owner. In this connection, Bishop vs. Court of Appeals teaches
that if the claimants possession of the land is merely tolerated by its lawful owner, the latters
right to recover possession is never barred by laches.
As registered owners of the lots in question, the private respondents have a right to eject any
person illegally occupying their property. This right is imprescriptible. Even if it be supposed
that they were aware of the petitioners occupation of the property, and regardless of the length of
that possession, the lawful owners have a right to demand the return of their property at any time
as long as the possession was unauthorized or merely tolerated, if at all. This right is never barred
by laches.23 (Citations omitted)
It is, in fact, the petitioners who are guilty of laches. Petitioners, who claimed that Maria
fraudulently registered the subject area inherited by their father, did not lift a finger to question
the validity of OCT No. 543, which was issued in 1929. Petitioners waited for the lapse of a
substantial period of time and if not for the respondents demands to vacate, they would not have
bothered to assert their fathers supposed successional rights. The petitioners inaction is contrary
to the posture taken by a reasonably diligent person whose rights have supposedly been trampled
upon and the pretense of ignorance does not provide justification or refuge. Maria was able to
register Lot No. 3517 in her name as early as 1929 and respondents acquired title in April 5,
1968 and knowledge of these events is imputed to the petitioners by the fact of registration.
In fine, this Court finds no cogent reason to reverse and set aside the findings and conclusions of
the CA.
WHEREFORE, premises considered, the petition is DENIED and the Decision dated November
26, 2007 and Resolution dated April 28, 2008 of the Court of Appeals in CA-G.R. SP No. 64775
are hereby AFFIRMED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 136274

September 3, 2003

SUNFLOWER NEIGHBORHOOD ASSOCIATION, represented by FLORO ARAGAN,


petitioners,
vs.
COURT OF APPEALS, HON. ACTING PRESIDING JUDGE LORIFEL LACAP
PHIMNA, MeTC, Branch 77, Paraaque City and ELISA MAGLAQUI-CAPARAS,
respondents.
CORONA, J.:
This is a petition for review of the July 16, 1998 decision of the Court of Appeals1 in CA-G.R.
SP No. 46861 (a) declaring null and void the injunction orders respectively issued by Judge
Amelita Tolentino2 in Civil Case No. 96-0253, for Expropriation, and Judge Rolando G. How in
Civil Case No. 96-0480, for Prohibition with Preliminary Injunction; and (b) ordering the
Metropolitan Trial Court (MeTC) of Paraaque City, Branch 78, to enforce its July 8, 1996 Writ
of Demolition. The dispositive portion read:
WHEREFORE, foregoing considered, the injunction orders subject of the instant petition are
hereby DECLARED NULL AND VOID. Corollary thereto, the Court of origin, Metropolitan
Trial Court, Branch 78, Paraaque, is hereby directed to ENFORCE its Writ of Demolition dated
July 8, 1996.3
The antecedent facts follow.
Private respondent Elisa Maglaqui-Caparas, in her capacity as executrix of the testate estate of
Macaria Maglaqui, filed on March 16, 1993 a complaint for unlawful detainer (Civil Case No.
8550) against Alfredo Mogar and 46 other persons4 who were occupying several parcels of land
(Lots 1-A, B, C, E, F and G) in Yellow Ville, United Paraaque Subdivision IV, Metro Manila.
These parcels of land are covered by individual transfer certificates of title5 registered in the
name of Macaria Maglaqui, private respondents mother.
The MeTC of Paraaque City, Branch 78, eventually decided in favor of private respondent. On
appeal, the decision of the MeTC was affirmed by the Regional Trial Court (RTC) of Makati
City, Branch 66. Mogar et al. elevated the case to the Court of Appeals but their petition was
dismissed by the appellate court on December 12, 1994. After the dismissal became final, a writ
of demolition was issued by the MeTC of Paraaque City, Branch 78. The writ, however, was not
immediately implemented because the case was transferred to Branch 77 of the same court. On

February 6, 1997, Mogar et al. filed a petition with the RTC of Paraaque City, Branch 257,
presided over by Judge Rolando G. How, to enjoin the implementation of the writ of demolition.
However, this petition was denied and subsequently, an alias writ of demolition was issued by
Judge Vivencio G. Lirio of MeTC Branch 77, the court of origin.
The alias writ of demolition was, again, not executed, this time due to the ex parte issuance of a
writ of preliminary injunction by Judge Amelita Tolentino, in connection with the expropriation
case (Civil Case No. 96-0253) filed by the Municipality of Paraaque against the Testate Estate
of Macaria Maglaqui.
Meanwhile, another group of persons occupying portions of the parcels of land (Lots I-F and IG) subject of the unlawful detainer case, organized themselves into the Sunflower Neighborhood
Association (Sunflower), the petitioner herein. On November 18, 1996, Sunflower, represented
by one Floro Aragan, filed a complaint for prohibition/injunction with preliminary injunction
against private respondent also with the RTC of Paraaque City, Branch 257. Sunflower argued
that its members should be excluded from the demolition order as they were not parties to the
original unlawful detainer case. To include their houses in the demolition would be to deprive
them of due process. This time, Judge How granted the injunction and ordered the exclusion of
the houses belonging to petitioner from demolition.
Thus, private respondent filed a petition for certiorari, prohibition and mandamus with the Court
of Appeals (CA GR SP No. 46861) assailing both the injunction orders issued by Judge Tolentino
in the expropriation case and by Judge How in the prohibition case.
The Court of Appeals ruled in favor of private respondent holding that, as the judgment in the
unlawful detainer case had already become final, the execution could not be enjoined.
Consequently, the MeTC of Paraaque City, Branch 77 issued another alias writ of demolition on
September 14, 1998.
In order to stay the execution of the writ of demolition, Sunflower filed on January 7, 1999 an
urgent motion in this Court for the issuance of a status quo order. This we granted in a resolution
dated January 20, 1999. Prior to the issuance of our resolution, however, the writ of demolition
was implemented on January 14, 1999. Petitioner thus filed a motion to allow its members to
return to the premises, which we granted in another resolution dated April 28, 1999. Thereafter,
we required both parties to submit their memoranda.
Sometime in November 1998, the group of Mogar et al. filed in this Court a petition for review
of the decision of the Court of Appeals in CA GR SP No. 46861. However, we dismissed the
same on January 18, 1999 for failure of said petitioners to comply with certain procedural
requirements, including their failure to submit a certification of non-forum shopping.6
For its part, petitioner Sunflower likewise assailed the same decision of the Court of Appeals in
this petition for review on certiorari under Rule 45 of the Revised Rules of Court.
Before we proceed, it should be pointed out that any issue relating to the expropriation case
(Civil Case No. 96-0253) filed by the Municipality of Paraaque has been rendered moot by the

dismissal of that case. This Court, in a Resolution dated January 29, 2003,7 ordered the presiding
judge of the RTC of Paraaque City, Branch 274 to report on the status of the expropriation case
filed by the Municipality of Paraaque against herein private respondent. The presiding judge
reported that the case was already dismissed on June 1, 1999 in an order issued by then Presiding
Judge Amelita Tolentino who granted the motion to dismiss filed by herein private respondent.
Said dismissal was not challenged by the Municipality of Paraaque.8
The basic issue before us is whether petitioners members, who were not parties to the unlawful
detainer case, may be ejected from the land subject of this case.
We rule in the affirmative. It is well-settled that, although an ejectment suit is an action in
personam wherein the judgment is binding only upon the parties properly impleaded and given
an opportunity to be heard, the judgment becomes binding on anyone who has not been
impleaded if he or she is: (a) a trespasser, squatter or agent of the defendant fraudulently
occupying the property to frustrate the judgment; (b) a guest or occupant of the premises with the
permission of the defendant; (c) a transferee pendente lite; (d) a sublessee; (e) a co-lessee or (f) a
member of the family, relative or privy of the defendant.9
In the case at bar, the records show that petitioners members are trespassers or squatters who do
not have any right to occupy the property of respondent. Petitioner does not dispute the
ownership of the parcels of land in question. In fact, it even admitted that the subject property is
owned by Macaria Maglaqui, mother of private respondent.10 Petitioner failed to establish any
right which would entitle its members to occupy the land in any capacity, whether as lessees,
tenants and the like. Petitioners only defense against the eviction and demolition orders is their
supposed non-inclusion in the original detainer case. This defense, however, has no legal support
since its members are trespassers or squatters who are bound by the judgment.
Petitioners argument that the parcels of land occupied by its members (Lots I-F and I-G) were
not included in the original ejectment complaint has no basis. The complaint private respondent
filed with the MeTC of Paraaque City, Branch 78, clearly included Lots I-F and I-G as part of
the subject matter under litigation in the unlawful detainer case.11 Thus, petitioners members,
together with all the parties in the unlawful detainer case, must vacate the disputed land.
The Court commiserates with respondent, already in her twilight years, who has been unlawfully
deprived of her land for a good number of years. Thus, we exhort the court of origin to execute
this decision with reasonable dispatch, consistent with the requirements of Section 28 of RA
7279 and EO 152,12 on eviction and demolition.
WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals in CAGR SP No. 46861 is AFFIRMED.
SO ORDERED.

J. Contempt of Court [Rule 71]

Lorenzo Shipping vs. Distribution Button Management Association of the Phil,


GR 155849, 31 August 2011

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 180699

October 13, 2010

BANK OF THE PHILIPPINE ISLANDS, Petitioner,


vs.
LABOR ARBITER RODERICK JOSEPH CALANZA, SHERIFF ENRICO Y. PAREDES,
AMELIA ENRIQUEZ, and REMO L. SIA, Respondents.
DECISION
NACHURA, J.:
This is a Petition for Indirect Contempt filed by petitioner Bank of the Philippine Islands (BPI)
against respondents Labor Arbiter Roderick Joseph Calanza (LA Calanza), Sheriff Enrico Y.
Paredes (Sheriff Paredes), Amelia Enriquez (Enriquez), and Remo L. Sia (Sia).
The case stemmed from the following facts:
Enriquez and Sia were the branch manager and the assistant branch manager, respectively, of
Bacolod-Singcang Branch of petitioner. On September 3, 2003, they were dismissed from
employment on grounds of breach of trust and confidence and dishonesty. The following day,
they filed separate complaints for illegal dismissal against petitioner before the National Labor
Relations Commission (NLRC), Regional Arbitration Branch No. VI, Bacolod City.1
After the submission of their respective position papers, Executive LA Danilo C. Acosta
rendered a decision on March 29, 2004, finding that Enriquez and Sia had been illegally
dismissed from employment. The dispositve portion of LA Acostas decision reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. DECLARING that complainants were illegally dismissed by respondents;
2. ORDERING respondents to reinstate complainants to their former position without
loss of seniority rights and to pay them their corresponding full back wages inclusive of
allowances and other benefits as computed, in the sum of Pesos: ONE MILLION ONE
HUNDRED SEVENTY-THREE THOUSAND, FOUR HUNDRED THIRTY-FOUR
AND 50/100 ONLY (P1,173,434.50).2
Pursuant to the aforesaid decision, Enriquez and Sia were reinstated in petitioners payroll. 3

Petitioner appealed to the NLRC. The NLRC ruled that petitioner had just cause to terminate
Enriquez and Sia. Hence, it reversed and set aside the LA decision and, although it dismissed the
complaint, it ordered petitioner to give the dismissed employees financial assistance equivalent
to one-half months pay for every year of service.4 In view of this decision, petitioner stopped the
payroll reinstatement.5
Enriquez and Sia elevated the matter to the Court of Appeals (CA), but failed to obtain a
favorable decision. On November 30, 2005, the appellate court affirmed in toto the NLRC
decision. The case eventually reached this Court and was docketed as G.R. No. 172812.
During the pendency of the petition before this Court, Enriquez and Sia filed a Motion for Partial
Execution6 of the LA decision dated March 29, 2004. Citing Roquero v. Philippine Airlines,7 they
claimed that the reinstatement aspect of the LA decision was immediately executory during the
entire period that the case was on appeal.
In an Order8 dated October 13, 2007, LA Calanza granted Enriquez and Sias motion despite the
opposition of petitioner. He opined that so long as there is no finality yet of the decision
reversing a ruling of the lower tribunal (in this case, the LA) awarding reinstatement, the same
should be enforced. Considering that the case was then pending before this Court, he sustained
Enriquez and Sias claim, applying the cases of Roquero and Air Philippines Corporation v.
Zamora.9 The corresponding writ of execution was subsequently issued.10 Upon service of the
writ, Sheriff Paredes served on petitioner a notice of sale of a parcel of land owned by petitioner
to satisfy its obligation.11
Aggrieved, petitioner immediately filed an Urgent Petition for Injunction with prayer for the
issuance of a Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction with the
NLRC, Fourth Division, Cebu City. On November 26, 2007, the NLRC issued a TRO.12
Disappointed with the conduct of LA Calanza, Sheriff Paredes, Enriquez, and Sia, and in view of
the pendency of G.R. No. 172812, entitled Enriquez v. Bank of the Philippine Islands,13 before
this Court, petitioner instituted the present petition for indirect contempt. Petitioner avers that LA
Calanzas Order granting Enriquez and Sias motion for partial writ of execution preempts the
decision of this Court and eventually results in the payment of Enriquez and Sia's claims which
may be contrary to this Courts conclusion. Petitioner adds that respondents obstinately persist in
applying jurisprudence which is clearly inapplicable. Finally, petitioner argues that the execution
proceedings were done with undue haste that petitioner was not given an opportunity to submit
evidence in its defense to stop the execution. These, according to petitioner, clearly indicate utter
disrespect to the Court and are grounds to cite respondents in indirect contempt.
Meanwhile, on February 12, 2008, this Court rendered a Decision in G.R. No. 172812, denying
the petition filed by Enriquez and Sia, thereby sustaining the NLRC and the CAs conclusion that
Enriquez and Sia were validly dismissed from employment by petitioner.
In a decision14 dated June 30, 2008, the NLRC, Fourth Division, Cebu City, granted BPIs
petition for injunction, the dispositive portion of which is quoted below:

WHEREFORE, premises considered, the instant petition is hereby GRANTED. The Order dated
12 October 2007 issued by public respondent Labor Arbiter granting the Writ of Execution is
declared NULL and VOID. The Writ of Execution issued in pursuance to said Order is likewise
declared NULL and VOID. Public respondent Labor Arbiter Roderick Joseph B. Calanza, and
any person acting for and in his behalf, is DIRECTED to take no further action in pursuance of
the aforementioned Order and Writ of Execution.
The Writ of Preliminary Injunction issued by this Commission dated 12 December 2007 is
hereby MADE PERMANENT.
SO ORDERED.15
On October 27, 2008, LA Calanza issued an Order16 considering the case closed and terminated
based on Enriquez and Sias manifestation and motion to dismiss in view of the satisfaction and
full payment of their claims.
Hence, the only issue that is left unsettled is whether or not respondents are guilty of indirect
contempt.
Indirect contempt of court is governed by Section 3, Rule 71 of the Rules of Court, which
provides:
SEC. 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:
(a) Misbehavior of an officer of a court in the performance of his official duties or in his
official transactions;
(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court,
including the act of a person who, after being dispossessed or ejected from any real
property by the judgment or process of any court of competent jurisdiction, enters or
attempts or induces another to enter into or upon such real property, for the purpose of
executing acts of ownership or possession, or in any manner disturbs the possession given
to the person adjudged to be entitled thereto;
(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;
(e) Assuming to be an attorney or an officer of a court, and acting as such without
authority;

(f) Failure to obey a subpoena duly served;


(g) The rescue, or attempted rescue, of a person or property in the custody of an officer
by virtue of an order or process of a court held by him. x x x.
Do the acts of respondents Enriquez and Sia in filing a motion for partial execution; of LA
Calanza in granting the writ of execution and applying or not applying established jurisprudence;
and of Sheriff Paredes in serving the notice of sale of the real property owned by petitioner fall
under the above enumeration?
We answer in the negative.
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.17 It is a defiance of the authority, justice, or dignity of the court which tends to bring the
authority and administration of the law into disrespect or to interfere with or prejudice partylitigants or their witnesses during litigation.18
The power to punish for contempt is inherent in all courts and is essential to the preservation of
order in judicial proceedings and to the enforcement of judgments, orders, and mandates of the
court, and consequently, to the due administration of justice.19 However, such power should be
exercised on the preservative, not on the vindictive, principle. Only occasionally should the court
invoke its inherent power in order to retain that respect, without which the administration of
justice will falter or fail.20 Only in cases of clear and contumacious refusal to obey should the
power be exercised. Such power, being drastic and extraordinary in its nature, should not be
resorted to unless necessary in the interest of justice.21
It is true that, at the time of the filing by Enriquez and Sia of the motion for the partial execution
of the LA decision which directed their reinstatement, the decision had already been reversed by
the NLRC, and such reversal was affirmed by the CA. The case was then on appeal to this Court
via a petition for review on certiorari under Rule 45 of the Rules of Court. We find that their
motion for partial execution was a bona fide attempt to implement what they might have
genuinely believed they were entitled to in accordance with existing laws and jurisprudence.22
This is especially true in the instant case where the means of livelihood of the dismissed
employees was at stake. Any man in such an uncertain and economically threatened condition
would be expected to take whatever measures are available to ensure a means of sustenance for
himself and his family.23 Clearly, Enriquez and Sia were merely pursuing a claim which they
honestly believed was due them. Their act is far from being contumacious.
On the other hand, LA Calanza, on motion of Enriquez and Sia, issued the writ of execution
considering that at the time of the application of the writ, this Court had yet to decide G.R. No.
172812. LA Calanza opined that so long as there is no finality yet of the decision reversing a
ruling of the LA awarding reinstatement, the same should be enforced. This was how he
interpreted this Courts pronouncements in Roquero24 and Zamora;25 that "even if the order of

reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the
employer to reinstate and pay the wages of the dismissed employee during the period of appeal
until reversal by the higher court."
But as we clearly discussed in Bago v. National Labor Relations Commission,26 while it is true
that the reinstatement aspect of the LA decision is immediately executory, the reversal thereof by
the NLRC becomes final and executory after ten (10) days from receipt thereof by the parties.
That the CA may take cognizance of and resolve a petition for the nullification of the NLRC
decision on jurisdictional and due process considerations does not affect the statutory finality of
the NLRC decision. It then logically follows that, at the time of the application for the writ
since the Court eventually sustained the NLRC and the CA decisions in G.R. No. 172812 no
issue of payroll reinstatement may be considered at all after the reversal of the LA decision by
the NLRC.1avvphi1
Still, the erroneous issuance of the writ of execution by LA Calanza can only be deemed grave
abuse of discretion which is more properly the subject of a petition for certiorari and not a
petition for indirect contempt.27 No one who is called upon to try the facts or interpret the law in
the process of administering justice can be infallible in his judgment.28
Finally, Sheriff Paredes, in serving the notice of sale, was only performing his duty pursuant to
the writ of execution. No matter how erroneous the writ was, it was issued by LA Calanza and
was addressed to him as the sheriff, commanding him to collect from petitioner the amount due
Enriquez and Sia. In the event he failed to collect the amount, he was authorized to cause the
satisfaction of the same on the movable and immovable properties of petitioner not exempt from
execution.29 Thus, any act performed by Sheriff Paredes pursuant to the aforesaid writ cannot be
considered contemptuous. At the time of the service of the notice of sale, there was no order
from any court or tribunal restraining him from enforcing the writ. It was ministerial duty for
him to implement it.
To be considered contemptuous, an act must be clearly contrary to or prohibited by the order of
the court or tribunal. A person cannot, for disobedience, be punished for contempt unless the act
which is forbidden or required to be done is clearly and exactly defined, so that there can be no
reasonable doubt or uncertainty as to what specific act or thing is forbidden or required.30
WHEREFORE, premises considered, the petition is DISMISSED for lack of merit.
SO ORDERED.

Luciano Ladano vs. Felino Neri et.al. GR 178622, 12 November 2012

Lipata vs. Tutaan, GR L-16643, September 1983

vs. Ibay, AM RTJ-09-2715, 28 July 2009

Other provisional remedies:

1. Temporary Protection Order [RA 9262]


2. Temporary Visitation Rights [AM 02-11-12; Rule on Provisional Remedies]
3. Temporary Child Custody [AM 02-1-19 and AM 02-11-12]
4. Child Guardian Ad Litem [AM 02-1-19; Rule on Involuntary Commitment of Children]
5. Spousal and Child Support [AM 02-11-12; Rule on Provisional Remedies]
6. Administration of Common Property [AM 02-11-12; Rule on Provisional Remedies]
7. Stay Order [AM 00-8-10; Rules on Corporate Rehabilitation]
8. Witness Protection Order [RA 6981; Rule on Writ Amparo]
9. Inspection Order [RA 6981; Rule on Writ Amparo]
10. Production Order [RA 6981; Rule on Writ Amparo]
11. Freeze Order under Anti-Money Laundering Act [RA 9160 as amended]
12. Bank Inquiry Order under Anti-Money Laundering Act [RA 9160 as amended]
13. Freeze Order under Human Security Act [RA 9372 as amended]
14. Bank Inquiry Order [Inspection and examination] under Human Security Act [RA 9372
as amended]
15. Seizure and sequestration of Accounts and Assets under Human Security Act [RA 9372
as amended]
16. Order for Travel Restriction under Human Security Act [RA 9372 as amended]
17. Hold Departure Order [Department Circular for Criminal Cases 39-97, AM 02-11-12]

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