G.R. No.

173373 July 29, 2013

H. TAMBUNTING PAWNSHOP, INC., Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

BERSAMIN, J.:

To be entitled to claim a tax deduction, the taxpayer must competently establish

the factual and documentary bases of its claim.

Antecedents

H. Tambunting Pawnshop, Inc. (petitioner), a domestic corporation duly licensed

and authorized to engage in the pawnshop business, appeals the adverse decision
promulgated on April 24, 2006,1 whereby the Court of Tax Appeals En Bane
(CTA En Bane) affirmed the decision of the CTA First Division ordering it to pay
deficiency income taxes in the amount of P4,536,687.15 for taxable yaar 1997,
plus 20% delinquency interest computed from August 29, 2000 until full
payment, but cancelling the compromise penalties for lack of basis.

On June 26, 2000, the Bureau of Internal Revenue (BIR), through then Acting
Regional Director Lucien E. Sayuno of Revenue Region No. 6 in Manila, issued
assessment notices and demand letters, all numbered 32-1-97, assessing
Tambunting for deficiency percentage tax, income tax and compromise penalties
for taxable year 1997,2 as follows:

Deficiency Percentage Tax

P12,749,135.25
Taxable Sales/Receipts
============
Percentage Tax due (5%) P 637,456.76
Add: 20% Interest up to 320,513.24
7-26-00 --------------------
Total Percentage Tax P 957,970.00
Due 1
============
Deficiency Income Tax
Taxable Net Income per
P 54,107.36
Return
Adjustments per
investigation Section
28
Overstatement of
gain/loss on auction
sales
Gain/Loss P
per F/S 4,914,967.50
Gain/Loss 4,781,910.00
133,057.40
per Audit --------------------
Unsupported Security/Janitorial Expenses
Per F/S 2,183,573.02
1,824,773.02
Per Audit 358,800.00
--------------------
Unsupported Rent
Expenses
Per F/S 2,293,631.13
1,859,224.35
Per Audit 434,406.77
--------------------
Unsupported Interest
1,155,154.28
Expenses
Unsupported Management
96,761.00
& Professional Fees
Unsupported Repairs &
348,074.68
Maintenance
Unsupported 13th Month
317,730.73
Pay & Bonus
Disallowed Loss on Fire 906,560.00
& Theft --------------------
Taxable Net Income per P 11,344,295.43
Investigation ============
Income Tax Due2 (35%) P 3,970,503.40
18,937.57
Less Income Tax Paid
---------------------
Deficiency Income Tax 3,951,565.83
 Add: 20% Interest to 7- 1,799,938.23
26-00 ---------------------
Total Income Tax Due 5,751,504.06
Compromise Penalties
Late Payment of Income
25,000.00
Tax
Late Payment of
20,000.00
Percentage Tax
Failure to Pay
Withholding Tax Return
for
the Months of April and 24,000.00
May -----------------
69,000.00
==========
On July 26, 2000, Tambunting instituted an administrative protest against the
assessment notices and demand letters with the Commissioner of Internal
Revenue.3

On February 21, 2001, Tambunting brought a petition for review in the CTA,
pursuant to Section 228 of the National Internal Revenue Code of 1997,4 citing
the inaction of the Commissioner of Internal Revenue on its protest within the
180-day period prescribed by law.

On October 8, 2004, the CTA First Division rendered a decision, the pertinent
portion of which is hereunder quoted, to wit:

In view of all the foregoing verification, petitioners allowable deductions are

summarized below:

Per Petitioner's
Particular Per BIR's Per Court's
Financial
s Examination Verification
Statement
Loss on
Auction P 4,914,967.50
3
P 133,057.40 P 133,057.40
Sale
Security &
Janitorial 2,183,573.02 358,800.00 736,044.26
Services
Rent
2,293,631.13 434,406.77 642,619.10
Expense
Interest
1,155,154.28 - 1,155,154.28
Expense
Profession
al &
96,761.00 - -
Management
Fees
Repairs &
Maintenanc 348,074.68 - 329,399.18
e
13th
Month pay
317,730.73 - 317,730.73
&
Bonuses
Loss on
906,560.00 - -
Fire
----------------- ----------------- -----------------
--- --- ---
Total
P 12,216,452.34 P 926,264.17 P 3,314,004.95
============= ============= =============
Apparently, petitioner is still liable for deficiency income tax in the reduced
amount of P4,536,687.15, computed as follows:

Net Income Per Return P54,107.36

Add: Overstatement of Gain/Loss on Auction Sales
Gain/Loss on Auction Sales per
P4,914,967.50
F/S
Gain/Loss on Auction Sales per
Courts 133,057.40 4,781,910.00
Verification
------------------
Unsupported Security/Janitorial Services
4
Security, Janitorial Services
P2,183,573.02
per F/S
Security, Janitorial Services
736,044.26 1,447,528.76
per Courts Verification
 ------------------
Unsupported Rent Expenses
Rent Expenses per F/S P2,293,631.13
Rent Expenses per Courts
642,619.10 1,651,012.03
Verification
------------------
Unsupported Management & Professional Fees 96,761.00
Unsupported Repairs & Maintenance
(P348,074.68 - P329,399.18) 18,675.50
906,560.00
Disallowed Loss on Fire & Theft
---------------

Net Income P 8,956,554.65

=============
Income Tax Due Thereon P 3,134,794.13
Less: Amount Paid 18,937.57
------------------
Balance P 3,115,856.56
Add: 20% Interest until 7-26-00 1,420,830.59
------------------

TOTAL INCOME TAX DUE P4,536,687.15

=============
WHEREFORE, petitioner is ORDERED to PAY the respondent the amount of
P4,536,687.15 representing deficiency income tax for the year 1997, plus 20%
delinquency interest computed from August 29, 2000 until full payment thereof
pursuant to Section 249 (C) of the National Internal Revenue Code. However, the
compromise penalties in the sum of P49,000.00 is hereby CANCELLED for lack
of legal basis.

SO ORDERED.5
5
After its motion for reconsideration was denied for lack of merit on February 18,
2005,6 Tambunting filed a petition for review in the CTA En Banc, arguing that
the First Division erred in disallowing its deductions on the ground that it had not
substantiated them by sufficient evidence.
On April 24, 2006, the CTA En Banc denied Tambuntings petition for review,7
disposing:

WHEREFORE, the Court en banc finds no reversible error to warrant the

reversal of the assailed Decision and Resolution promulgated on October 8, 2004
and February 11, 2005, respectively, the instant Petition for Review is hereby
DISMISSED. Accordingly, the aforesaid Decision and Resolution are hereby
AFFIRMED in toto.

SO ORDERED.

On June 29, 2006, the CTA En Banc also denied Tambuntings motion for
reconsideration for its lack of merit.8

Issues

Hence, this appeal by petition for review on certiorari.

Tambunting argues that the CTA should have allowed its deductions because it
had been able to point out the provisions of law authorizing the deductions; that
it proved its entitlement to the deductions through all the documentary and
testimonial evidence presented in court;9 that the provisions of Section 34 (A)(1)
(b) of the 1997 National Internal Revenue Code, governing the types of evidence
to prove a claim for deduction of expenses, were applicable because the law took
effect during the pendency of the case in the CTA;10 that the CTA had allowed
deductions for ordinary and necessary expenses on the basis of cash vouchers
issued by the taxpayer or certifications issued by the payees evidencing receipt of
interest on loans as well as agreements relating to the imposition of interest;11
that it had thus shown beyond doubt that it had incurred the losses in its auction
sales;12 and that it substantially complied with the requirements of Revenue
Regulations No. 12-77 on the deductibility of its losses.13

On December 5, 2006, the Commissioner of Internal Revenue filed a

comment,14 stating that the conclusions of the CTA were entitled to respect,15
due to its being a highly specialized body specifically created for the purpose of
reviewing tax cases;16 and that the petition involved factual and evidentiary
matters not reviewable by the Court in an appeal by certiorari.17
6

On March 22, 2007, Tambunting reiterated its arguments in its reply.18

Ruling

The petition has no merit.

At the outset, the Court agrees with the CTA En Banc that because this case
involved assessments relating to transactions incurred by Tambunting prior to the
effectivity of Republic Act No. 8424 (National Internal Revenue Code of 1997,
or NIRC of 1997), the provisions governing the propriety of the deductions was
Presidential Decree 1158 (NIRC of 1977). In that regard, the pertinent provisions
of Section 29 (d) (2) & (3)of the NIRC of 1977 state:

xxxx

(2) By corporation. In the case of a corporation, all losses actually sustained

and charged off within the taxable year and not compensated for by insurance or
otherwise.

(3) Proof of loss. In the case of a non-resident alien individual or foreign

corporation, the losses deductible are those actually sustained during the year
incurred in business or trade conducted within the Philippines, and losses
actually sustained during the year in transactions

entered into for profit in the Philippines although not connected with their
business or trade, when such losses are not compensated for by insurance or
otherwise. The Secretary of Finance, upon recommendation of the Commissioner
of Internal Revenue, is hereby authorized to promulgate rules and regulations
prescribing, among other things, the time and manner by which the taxpayer shall
submit a declaration of loss sustained from casualty or from robbery, theft, or
embezzlement during the taxable year: Provided, That the time to be so
prescribed in the regulations shall not be less than 30 days nor more than 90 days
from the date of the occurrence of the casualty or robbery, theft, or embezzlement
giving rise to the loss.

The CTA En Banc ruled thusly:

To prove the loss on auction sale, petitioner submitted in evidence its

"Rematado" and "Subasta" books and the "Schedule of Losses on Auction Sale".
The "Rematado" book contained a record of items foreclosed by the pawnshop
while the "Subasta" book contained a record of the auction sale of pawned items
foreclosed.

However, as elucidated by 7the petitioner, the gain or loss on auction sale

represents the difference between the capital (the amount loaned to the pawnee,
the unpaid interest and other expenses incurred in connection with such loan) and
the price for which the pawned articles were sold, as reflected in the "Subasta"
Book. Furthermore, it explained that the amounts appearing in the "Rematado"
book do not reflect the total capital of petitioner as it merely reflected the
amounts loaned to the pawnee. Likewise, the amounts appearing in the "Subasta"
book, are not representative of the amount of sale made during the "subastas"
since not all articles are eventually sold and disposed of by petitioner.

Petitioner submits that based on the evidence presented, it was able to show
beyond doubt that it incurred the amount of losses on auction sale claimed as
deduction from its gross income for the taxable year 1997. And that the
documents/records submitted in evidence as well as the facts contained therein
were neither contested nor controverted by the respondent, hence, admitted.

xxxx

In this case, petitioner's reliance on the entries made in the "Subasta" book were
not sufficient to substantiate the claimed deduction of loss on auction sale. As
admitted by the petitioner, the contents in the "Rematado" and "Subasta" books
do not reflect the true amounts of the total capital and the auction sale,
respectively. Be that as it may, petitioner still failed to adduce evidence to
substantiate the other expenses alleged to have been incurred in connection with
the sale of pawned items.

As correctly held by the Court's Division in the assailed decision, and We quote:

x x x The remaining evidence is neither conclusive to sustain its claim of loss on

auction sale in the aggregate amount of P4,915,967.50. While it appears that the
basis of respondent is not strong, petitioner, nevertheless, should not rely on the
weakness of such evidence but on the strength of its own documents. The facts
essential for the proper disposition of the said controversy were available to the
petitioner. Petitioner should have endeavored to make the facts clear to this court.
Sad to say, it failed to dispute the same with clear and convincing proof. x x x19

We affirm the aforequoted ruling of the CTA En Banc.

The rule that tax deductions, being in the nature of tax exemptions, are to be
construed in strictissimi juris against the taxpayer is well settled.20 Corollary to
this rule is the principle that when a taxpayer claims a deduction, he must point
to some specific provision of the statute in which that deduction is authorized and
must be able to prove that he 8is entitled to the deduction which the law allows.21
An item of expenditure, therefore, must fall squarely within the language of the
law in order to be deductible.22 A mere averment that the taxpayer has incurred a
loss does not automatically warrant a deduction from its gross income.
As the CTA En Banc held, Tambunting did not properly prove that it had incurred
losses. The subasta books it presented were not the proper evidence of such
losses from the auctions because they did not reflect the true amounts of the
proceeds of the auctions due to certain items having been left unsold after the
auctions. The rematado books did not also prove the amounts of capital because
the figures reflected therein were only the amounts given to the pawnees. It is
interesting to note, too, that the amounts received by the pawnees were not the
actual values of the pawned articles but were only fractions of the real values.

As to business expenses, Section 29 (a) (1) (A) of the NIRC of 1977 provides:

(a) Expenses. (1) Business expenses. (A) In general. All ordinary and
necessary expenses paid or incurred during the taxable year in carrying on any
trade or business, including a reasonable allowance for salaries or other
compensation for personal services actually rendered; traveling expenses while
away from home in the pursuit of a trade, profession or business, rentals or other
payments required to be made as a condition to the continued use or possession,
for the purpose of the trade, profession or business, of property to which the
taxpayer has not taken or is not taking title or in which he has no equity.

The requisites for the deductibility of ordinary and necessary trade or business
expenses, like those paid for security and janitorial services, management and
professional fees, and rental expenses, are that: (a) the expenses must be ordinary
and necessary; (b) they must have been paid or incurred during the taxable year;
(c) they must have been paid or incurred in carrying on the trade or business of
the taxpayer; and (d) they must be supported by receipts, records or other
pertinent papers.23

In denying Tambuntings claim for deduction of its security and janitorial

expenses, management and professional fees, and its rental expenses, the CTA En
Banc explained:

Contrary to petitioners contention, the security/janitorial expenses paid to

Pathfinder Investigation were not duly substantiated. The certification issued by
Mr. Balisado was not the proper document required by law to substantiate its
expenses. Petitioner should have presented the official receipts or invoices to
prove its claim as provided9 for under Section 238 of the National Internal
Revenue Code of 1977, as amended, to wit:

"SEC. 238. Issuance of receipts or sales or commercial invoices. All persons

subject to an internal revenue tax shall for each sale or transfer of merchandise or
for services rendered valued at P25.00 or more, issue receipts or sales or
commercial invoices, prepared at least in duplicate, showing the date of
transaction, quantity, unit cost and description of merchandise or nature of
service; Provided, That in the case of sales, receipts or transfers in the amount of
P100.00 or more, or, regardless of amount, where the sale or transfer is made by
persons subject to value-added tax to other persons also subject to value-added
tax; or, where the receipts is issued to cover payment made as rentals,
commissions, compensation or fees, receipts or invoices shall be issued which
shall show the name, business style, if any, and address of the purchaser,
customer, or client. The original of each receipt or invoice shall be issued to the
purchases, customer or client at the time the transaction is effected, who, if
engaged in business or in the exercise of profession, shall keep and preserve the
same in his place of business for a period of 3 years from the close of the taxable
year in which such invoice or receipt was issued, while the duplicate shall be
kept and preserved by the issuer, also in his place of business, for a like period.

With regard to the misclassified items of expenses, petitioner's statements were

self-serving, likewise it failed to substantiate its allegations by clear and
convincing evidence as provided under the foregoing provision of law.

Bearing in mind the principle in taxation that deductions from gross income
partake the nature of tax exemptions which are construed in strictissimi juris
against the taxpayer, the Court en banc is not inclined to believe the self-serving
statements of petitioner regarding the misclassified items of office supplies,
advertising and rent expenses.

Among the expenses allegedly incurred, courts may consider only those
supported by credible evidence and which appear to have been genuinely
incurred in connection with the trade or business of the taxpayer.24

xxxx

As previously discussed, the proper substantiation requirement for an expense to

be allowed is the official receipt or invoice. While the rental payments were
subjected to the applicable expanded withholding taxes, such returns are not the
documents required by law to substantiate the rental expense. Petitioner should
have submitted official receipts to support its claim.
10
Moreover, the issue on the submission of cash vouchers as evidence to prove
expenses incurred has been addressed by this Court in the assailed Resolution, to
wit:
"The trend then was to allow deductions based on cash vouchers which are
signed by the payees. It bears to note that the cases cited by petitioner are
pronouncements by this Court in 1980, 1982 and 1989.

However, latest jurisprudence has deviated from such interpretation of the law.
Thus, this Court held in the case of Pilmico-Mauri Foods Corporation vs.
Commissioner of Internal Revenue C.T.A. Case No. 6151, December 15, 2004;

[P]etitioners contention that the NIRC of 1977 did not impose substantiation
requirements on deductions from gross income is bereft of merit. Section 238 of
the 1977 Tax Code [now Section 237] provides:

xxxx

From the foregoing provision of law, a person who is subject to an internal

revenue tax shall issue receipts, sales or commercial invoices, prepared at least in
duplicate. The provision likewise imposed a responsibility upon the purchaser to
keep and preserve the original copy of the invoice or receipt for a period of three
years from the close of the taxable year in which the invoice or receipt was
issued. The rationale behind the latter requirement is the duty of the taxpayer to
keep adequate records of each and every transaction entered into in the conduct
of its business. So that when their books of accounts are subjected to a tax audit
examination, all entries therein could be shown as adequately supported and
proven as legitimate business transactions. Hence, petitioners claim that the
NIRC of 1977 did not require substantiation requirements is erroneous."

In order that the cash vouchers may be given probative value, these must be
validated with official receipts.25

xxxx

Petitioners management and professional fees were disallowed as these were

supported merely by cash vouchers, which the Courts Division correctly found
to have little probative value.26

Again, we affirm the foregoing holding of the CTA En Banc for the reasons
therein stated. To reiterate, deductions for income tax purposes partake of the
nature of tax exemptions and11 are strictly construed against the taxpayer, who
must prove by convincing evidence that he is entitled to the deduction claimed.27
Tambunting did not discharge its burden of substantiating its claim for deductions
due to the inadequacy of its documentary support of its claim. Its reliance on
withholding tax returns, cash vouchers, lessors certifications, and the contracts
of lease was futile because such documents had scant probative value. As the
CTA En Banc succinctly put it, the law required Tambunting to support its claim
for deductions with the corresponding official receipts issued by the service
providers concerned.

Regarding proof of loss due to fire, the text of Section 29(d) (2) & (3) of P.D.
1158 (NIRC of 1977) then in effect, is clear enough, to wit:

(2) By corporation. In the case of a corporation, all losses actually sustained

and charged off within the taxable year and not compensated for by insurance or
otherwise.

(3) Proof of loss. In the case of a non-resident alien individual or foreign

corporation, the losses deductible are those actually sustained during the year
incurred in business or trade conducted within the Philippines, and losses
actually sustained during the year in transactions entered into for profit in the
Philippines although not connected with their business or trade, when such losses
are not compensated for by insurance or otherwise. The Secretary of Finance,
upon recommendation of the Commissioner of Internal Revenue, is hereby
authorized to promulgate rules and regulations prescribing, among other things,
the time and manner by which the taxpayer shall submit a declaration of loss
sustained from casualty or from robbery, theft, or embezzlement during the
taxable year: Provided, That the time to be so prescribed in the regulations shall
not be less than 30 days nor more than 90 days from the date of the occurrence of
the casualty or robbery, theft, or embezzlement giving rise to the loss.

The implementing rules for deductible losses are found in Revenue Regulations
No. 12-77, as follows:

SECTION 1. Nature of deductible losses. Any loss arising from fires, storms
or other casualty, and from robbery, theft or embezzlement, is allowable as a
deduction under Section 30 (d) for the taxable year in which the loss is sustained.
The term "casualty" is the complete or partial destruction of property resulting
from an identifiable event of a sudden, unexpected, or unusual nature. It denotes
accident, some sudden invasion by hostile agency, and excludes progressive
deterioration through steadily operating cause. Generally, theft is the criminal
appropriation of anothers property
12 for the use of the taker. Embezzlement is the
fraudulent appropriation of another's property by a person to whom it has been
entrusted or into whose hands it has lawfully come.

SECTION 2. Requirements of substantiation. The taxpayer bears the burden

of proving and substantiating his claim for deduction for losses allowed under
Section 30 (d) and should comply with the following substantiation
requirements:

(a) A declaration of loss which must be filed with the Commissioner of Internal
Revenue or his deputies within a certain period prescribed in these regulations
after the occurrence of the casualty, robbery, theft or embezzlement.

(b) Proof of the elements of the loss claimed, such as the actual nature and
occurrence of the event and amount of the loss.

SECTION 3. Declaration of loss. Within forty-five days after the date of the
occurrence of casualty or robbery, theft or embezzlement, a taxpayer who
sustained loss therefrom and who intends to claim the loss as a deduction for the
taxable year in which the loss was sustained shall file a sworn declaration of loss
with the nearest Revenue District Officer. The sworn declaration of loss shall
contain, among other things, the following information:

(a) The nature of the event giving rise to the loss and the time of its occurrence;

(b) A description of the damaged property and its location;

(c) The items needed to compute the loss such as cost or other basis of the
property; depreciation allowed or allowable if any; value of property before and
after the event; cost of repair;

(d) Amount of insurance or other compensation received or receivable.

Evidence to support these items should be furnished, if available. Examples are

purchase contracts and deeds, receipted bills for improvements, and pictures and
competent appraisals of the property before and after the casualty.

SECTION 4. Proof of loss. (a) In general. The declaration of loss, being

one of the essential requirements of substantiation of a claim for a loss deduction,
is subject to verification and does not constitute sufficient proof of the loss that
will justify its deductibility for income tax purposes. Therefore, the mere filing of
a declaration of loss does not automatically entitle the taxpayer to deduct the
alleged loss from gross income. The failure, however, to submit the said
declaration of loss within the 13period prescribed in these regulations will result in
the disallowance of the casualty loss claimed in the taxpayer's income tax return.
The taxpayer should therefore file a declaration of loss and should be prepared to
support and substantiate the information reported in the said declaration with
evidence which he should gather immediately or as soon as possible after the
occurrence of the casualty or event causing the loss.

xxxx

(b) Casualty loss. Photographs of the property as it existed before it was

damaged will be helpful in showing the condition and value of the property prior
to the casualty. Photographs taken after the casualty which show the extent of
damage will be helpful in establishing the condition and value of the property
after it was damaged. Photographs showing the condition and value of the
property after it was repaired, restored or replaced may also be helpful.

Furthermore, since the valuation of the property is of extreme importance in

determining the amount of loss sustained, the taxpayer should be prepared to
come forward with documentary proofs, such as cancelled checks, vouchers,
receipts and other evidence of cost.

The foregoing evidence should be kept by the taxpayer as part of his tax records
and be made available to a revenue examiner, upon audit of his income tax return
and the declaration of loss.

(c) Robbery, theft or embezzlement losses. - To support the deduction for losses
arising from robbery, theft or embezzlement, the taxpayer must prove by
credible. evidence all the elements of the loss, the amount of the loss, and the
proper year of the deduction. The taxpayer bears the burden of proof, and no
deduction will be allowed unless he shows the property was stolen, rather than
misplaced or lost. A mere disappearance of property is not enough, nor is a mere
error or shortage in accounts.

Failure to report theft or robbery to the police may be a factor against the
taxpayer. On the other hand, a mere report of alleged theft or robbery to the
police authorities is not a conclusive proof of the loss arising therefrom. (Bold
underscoring supplied for emphasis)

In the context of the foregoing rules, the CT A En Bane aptly rejected Tam
bunting's claim for deductions due to losses from fire and theft. The documents it
had submitted to support the claim, namely: (a) the certification from the Bureau
14
of Fire Protection in Malolos; (b) the certification from the Police Station in
Malolos; (c) the accounting entry for the losses; and (d) the list of properties lost,
were not enough. What were required were for Tambunting to submit the sworn
declaration of loss mandated by Revenue Regulations 12-77. Its failure to do so
was prejudicial to the claim because the sworn declaration of loss was necessary
to forewarn the BIR that it had suffered a loss whose extent it would be claiming
as a deduction of its tax liability, and thus enable the BIR to conduct its own
investigation of the incident leading to the loss. Indeed, the documents
Tambunting submitted to the BIR could not serve the purpose of their submission
without the sworn declaration of loss.

WHEREFORE, the Court AFFIRMS the decision promulgated on April 24,

2006; and ORDERS petitioner to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN

15
G.R. No. 157900 July 22, 2013

ZUELLIG FREIGHT AND CARGO SYSTEMS, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND
RONALDO V. SAN MIGUEL, Respondents.

DECISION

BERSAMIN, J.:

The mere change in the corporate name is not considered under

the law as the creation of a new corporation; hence, the renamed
corporation remains liable for the illegal dismissal of its
employee separated under that guise.

The Case

Petitioner employer appeals the decision promulgated on

November 6, 2001,1 whereby the Court of Appeals (CA)
dismissed its petition for certiorari and upheld the adverse
decision of the National Labor Relations Commission (NLRC)
finding respondent Ronaldo V. San Miguel to have been illegally
dismissed.

Antecedents

San Miguel brought a complaint for unfair labor practice, illegal

dismissal, non-payment of salaries and moral damages against
petitioner, formerly known as Zeta Brokerage Corporation
(Zeta).2 He alleged that he had been a checker/customs
representative of Zeta since December 16, 1985; that in January
1994, he and other employees of Zeta were informed that Zeta
would cease operations, and that all affected employees,
including him, would be separated; that by letter dated February
28, 1994, Zeta informed him of his termination effective March
31, 1994; that he reluctantly accepted his separation pay subject
to the standing offer to be hired to his former position by
petitioner; and that on April 15, 1994, he was summarily
terminated, without any valid cause and due process.

San Miguel contended that the amendments of the articles of

incorporation of Zeta were for the purpose of changing the
corporate name, broadening the primary functions, and
increasing the capital stock; and that such amendments could
not mean that Zeta had been thereby dissolved.3

On its part, petitioner countered that San Miguels termination

from Zeta had been for a cause authorized by the Labor Code;
that its non-acceptance of him had not been by any means
irregular or discriminatory; that its predecessor-in-interest had
complied with the requirements for termination due to the
cessation of business operations; that it had no obligation to
employ San Miguel in the exercise of its valid management
prerogative; that all employees had been given sufficient time to
make their decision whether to accept its offer of employment or
not, but he had not responded to its offer within the time set; that
because of his failure to meet the deadline, the offer had
expired; that he had nonetheless been hired on a temporary
basis; and that when it decided to hire another employee instead
of San Miguel, such decision was not arbitrary because of
seniority considerations.4

Decision of the Labor Arbiter

On November 15, 1999, Labor Arbiter Francisco A. Robles

rendered a decision holding that San Miguel had been illegally
dismissed,5 to wit:

Contrary to respondents claim that Zeta ceased operations and

closed its business, we believe that there was merely a change of
business name and primary purpose and upgrading of stocks of
the corporation. Zuellig and Zeta are therefore legally the same
person and entity and this was admitted by Zuelligs counsel in
its letter to the VAT Department of the Bureau of Internal
Revenue on 08 June 1994 (Reply, Annex "A"). As such, the
termination of complainants services allegedly due to cessation
of business operations of Zeta is deemed illegal.
Notwithstanding his receipt of separation benefits from
respondents, complainant is not estopped from questioning the
legality of his dismissal.6

xxxx

WHEREFORE, in view of the foregoing, complainant is found

to have been illegally dismissed. Respondent Zuellig Freight
and Cargo Systems, Inc. is hereby ordered to pay complainant
his backwages from April 1, 1994 up to November 15, 1999, in
the amount of THREE HUNDRED TWENTY FOUR
THOUSAND SIX HUNDRED FIFTEEN PESOS
(P324,615.00).

The same respondent is ordered to pay the complainant Ronaldo

San Miguel attorneys fees equivalent to ten percent (10%) of
the total award.

All other claims are dismissed.

SO ORDERED.7

Decision of the NLRC

Petitioner appealed, but the NLRC issued a resolution on April

4, 2001,8 affirming the decision of the Labor Arbiter.

The NLRC later on denied petitioners motion for

reconsideration via its resolution dated June 15, 2001.9

Decision of the CA

Petitioner then filed a petition for certiorari in the CA, imputing

to the NLRC grave abuse of discretion amounting to lack or
excess of jurisdiction, as follows:

1. In failing to consider the circumstances attendant to the

cessation of business of Zeta;
2. In failing to consider that San Miguel failed to meet the
deadline Zeta fixed for its employees to accept the offer of
petitioner for re-employment;

3. In failing to consider that San Miguels employment with

petitioner from April 1 to 15, 1994 could in no way be
interpreted as a continuation of employment with Zeta;

4. In admitting in evidence the letter dated January 21, 1994 of

petitioners counsel to the Bureau of Internal Revenue; and

5. In awarding attorneys fees to San Miguel based on Article

2208 of the Civil Code and Article 111 of the Labor Code.

On November 6, 2002, the CA promulgated its assailed decision

dismissing the petition for certiorari,10 viz:

A careful perusal of the records shows that the closure of

business operation was not validly made. Consider the
Certificate of Filing of the Amended Articles of Incorporation
which clearly shows that petitioner Zuellig is actually the former
Zeta as per amendment dated January 21, 1994. The same
observation can be deduced with respect to the Certificate of
Filing of Amended By-Laws dated May 10, 1994. As aptly
pointed out by private respondent San Miguel, the amendment
of the articles of incorporation merely changed its corporate
name, broadened its primary purpose and increased its
authorized capital stocks. The requirements contemplated in
Article 283 were not satisfied in this case. Good faith was not
established by mere registration with the Securities and
Exchange Commission (SEC) of the Amended Articles of
Incorporation and ByLaws. The factual milleu of the case,
considered in its totality, shows that there was no closure to
speak of. The termination of services allegedly due to cessation
of business operations of Zeta was illegal. Notwithstanding
private respondent San Miguels receipt of separation benefits
from petitioner Zuellig, the former is not estopped from
questioning the legality of his dismissal.
Petitioner Zuelligs allegation that the five employees who
refused to receive the termination letters were verbally informed
that they had until 6:00 p.m. of March 1, 1994 to receive the
termination letters and sign the employment contracts, otherwise
the former would be constrained to withdraw its offer of
employment and seek for replacements in order to ensure the
smooth operations of the new company from its opening date, is
of no moment in view of the foregoing circumstances. There
being no valid closure of business operations, the dismissal of
private respondent San Miguel on alleged authorized cause of
cessation of business pursuant to Article 283 of the Labor Code,
was utterly illegal. Despite verbal notice that the employees had
until 6:00 p.m. of March 1, 1994 to receive the termination
letters and sign the employment contracts, the dismissal was still
illegal for the said condition is null and void. In point of facts
and law, private respondent San Miguel remained an employee
of petitioner Zuellig. If at all, the alleged closure of business
operations merely operates to suspend employment relation
since it is not permanent in character.

Where there is no showing of a clear, valid, and legal cause for

the termination of employment, the law considers the matter a
case of illegal dismissal and the burden is on the employer to
prove that the termination was for a valid or authorized cause.

Findings of facts of the NLRC, particularly when both the

NLRC and Labor Arbiter are in agreement, are deemed binding
and conclusive upon the Supreme Court.

As regards the second and last argument advanced by petitioner

Zuellig that private respondent San Miguel is not entitled to
attorneys fees, this Court finds no reason to disturb the ruling of
the public respondent NLRC. Petitioner Zuellig maintains that
the factual backdraft (sic) of this petition does not call for the
application of Article 2208 of the Civil Code and Article 111 of
the Labor Code as private respondents wages were not
withheld. On the other hand, public respondent NLRC argues
that paragraphs 2 and 3, Article 2208 of the Civil Code and
paragraph (a), Article 111 of the Labor Code justify the award of
attorneys fees. NLRC was saying to the effect that by petitioner
Zuelligs act of illegally dismissing private respondent San
Miguel, the latter was compelled to litigate and thus incurred
expenses to protect his interest. In the same passion, private
respondent San Miguel contends that petitioner Zuellig acted in
gross and evident bad faith in refusing to satisfy his plainly
valid, just and demandable claim.

After careful and judicious evaluation of the arguments

advanced to support the propriety or impropriety of the award of
attorneys fees to private respondent San Miguel, this Court
finds the resolutions of public respondent NLRC supported by
laws and jurisprudence. It does not need much imagination to
see that by reason of petitioner Zuelligs feigned closure of
business operations, private respondent San Miguel incurred
expenses to protect his rights and interests. Therefore, the award
of attorneys fees is in order.

WHEREFORE, in view of the foregoing, the resolutions dated

April 4, 2001 and June 15, 2001 of the National Labor Relations
Commission affirming the November 15, 1999 decision of the
Labor

Arbiter in NLRC NCR 05-03639-94 (CA No. 022861-00) are

hereby AFFIRMED and the instant petition for certiorari is
hereby DENIED and ordered DISMISSED.

SO ORDERED.

Hence, petitioner appeals.

Issues

Petitioner asserts that the CA erred in holding that the NLRC did
not act with grave abuse of discretion in ruling that the closure
of the business operation of Zeta had not been bona fide, thereby
resulting in the illegal dismissal of San Miguel; and in holding
that the NLRC did not act with grave abuse of discretion in
ordering it to pay San Miguel attorneys fees.11

In his comment,12 San Miguel counters that the CA correctly

found no grave abuse of discretion on the part of the NLRC
because the ample evidence on record showed that he had been
illegally terminated; that such finding accorded with applicable
laws and jurisprudence; and that he was entitled to back wages
and attorneys fees.

In its reply,13 petitioner reiterates that the cessation of Zetas

business, which resulted in the severance of San Miguel from
his employment, was valid; that the CA erred in upholding the
NLRCs finding that San Miguel had been illegally terminated;
that his acknowledgment of the validity of his separation from
Zeta by signing a quitclaim and waiver estopped him from
claiming that it had subsequently employed him; and that the
award of attorneys fees had no basis in fact and in law.

Ruling

The petition for review on certiorari is denied for its lack of

merit.

First of all, the outcome reached by the CA that the NLRC did
not commit any grave abuse of discretion was borne out by the
records of the case. We cannot undo such finding without
petitioner making a clear demonstration to the Court now that
the CA gravely erred in passing upon the petition for certiorari
of petitioner.

Indeed, in a special civil action for certiorari brought against a

court or quasi-judicial body with jurisdiction over a case,
petitioner carries the burden of proving that the court or quasi-
judicial body committed not a merely reversible error but a
grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the impugned order.14 Showing mere
abuse of discretion is not enough, for it is necessary to
demonstrate that the abuse of discretion was grave. Grave abuse
of discretion 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. 15
Under the circumstances, the CA committed no abuse of
discretion, least of all grave, because its justifications were
supported by the records and by the applicable laws and
jurisprudence.

Secondly, it is worthy to point out that the Labor Arbiter, the

NLRC, and the CA were united in concluding that the cessation
of business by Zeta was not a bona fide closure to be regarded
as a valid ground for the termination of employment of San
Miguel within the ambit of Article 283 of the Labor Code. The
provision pertinently reads:

Article 283. Closure of establishment and reduction of

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

The unanimous conclusions of the CA, the NLRC and the Labor
Arbiter, being in accord with law, were not tainted with any
abuse of discretion, least of all grave, on the part of the NLRC.
Verily, the amendments of the articles of incorporation of Zeta to
change the corporate name to Zuellig Freight and Cargo
Systems, Inc. did not produce the dissolution of the former as a
corporation. For sure, the Corporation Code defined and
delineated the different modes of dissolving a corporation, and
amendment of the articles of incorporation was not one of such
modes. The effect of the change of name was not a change of the
corporate being, for, as well stated in Philippine First Insurance
Co., Inc. v. Hartigan:16 "The changing of the name of a
corporation is no more the creation of a corporation than the
changing of the name of a natural person is begetting of a
natural person. The act, in both cases, would seem to be what
the language which we use to designate it imports a change of
name, and not a change of being."

The consequences, legal and otherwise, of the change of name

were similarly dealt with in P.C. Javier & Sons, Inc. v. Court of
Appeals,17 with the Court holding thusly:

From the foregoing documents, it cannot be denied that

petitioner corporation was aware of First Summa Savings and
Mortgage Banks change of corporate name to PAIC Savings
and Mortgage Bank, Inc. Knowing fully well of such change,
petitioner corporation has no valid reason not to pay because the
IGLF loans were applied with and obtained from First Summa
Savings and Mortgage Bank. First Summa Savings and
Mortgage Bank and PAIC Savings and Mortgage Bank, Inc., are
one and the same bank to which petitioner corporation is
indebted. A change in the corporate name does not make a new
corporation, whether effected by a special act or under a general
law. It has no effect on the identity of the corporation, or on its
property, rights, or liabilities. The corporation, upon to change in
its name, is in no sense a new corporation, nor the successor of
the original corporation. It is the same corporation with a
different name, and its character is in no respect changed. (Bold
underscoring supplied for emphasis)

In short, Zeta and petitioner remained one and the same

corporation. The change of name did not give petitioner the
license to terminate employees of Zeta like San Miguel without
just or authorized cause. The situation was not similar to that of
an enterprise buying the business of another company where the
purchasing company had no obligation to rehire terminated
employees of the latter.18 Petitioner, despite its new name, was
the mere continuation of Zeta's corporate being, and still held
the obligation to honor all of Zeta's obligations, one of which
was to respect San Miguel's security of tenure. The dismissal of
San Miguel from employment on the pretext that petitioner,
being a different corporation, had no obligation to accept him as
its employee, was illegal and ineffectual.

And, lastly, the CA rightfully upheld the NLRC's affirmance of

the grant of attorney's fees to San Miguel. Thereby, the NLRC
did not commit any grave abuse of its discretion, considering
that San Miguel had been compelled to litigate and to incur
expenses to protect his rights and interest. In Producers Bank of
the Philippines v. Court of Appeals, 19 the Court ruled that
attorney's fees could be awarded to a party whom an unjustified
act of the other party compelled to litigate or to incur expenses
to protect his interest. It was plain that petitioner's refusal to
reinstate San Miguel with backwages and other benefits to
which he had been legally entitled was unjustified, thereby
entitling him to recover attorney's fees.

WHEREFORE, the Court AFFIRMS the decision of the Court

of Appeals promulgated on November 6, 2002; and ORDERS
petitioner to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
G.R. No. 159371 July 29, 2013

D.M. CONSUNJI CORPORATION, Petitioner,

vs.
ROGELIO P. BELLO, Respondent.

DECISION

BERSAMIN, J.:

For the resignation of an employee to be a viable defense in an

action for illegal dismissal, an employer must prove that the
resignation was voluntary, and its evidence thereon must be
clear, positive and convincing. The employer cannot rely on the
weakness of the employee's evidence.

The Case

We now review the decision promulgated on February 18,

2003,1 whereby the Court of Appeals (CA) granted the petition
for certiorari of respondent Rogelio P. Bello, reversed and set
aside the resolutions dated January 3, 2002 2 and February 26,
20023 of the National Labor Relations Commission (NLRC),
and reinstated the decision rendered on January 9, 2001 by the
Executive Labor Arbiter (ELA) declaring Bello to have been
illegally dismissed and ordering petitioner D.M. Consunji
Corporation (DMCI) to reinstate him, and to pay him full
backwages reckoned from the time of his dismissal until his
actual reinstatement.4

Antecedents

Bello brought a complaint for illegal dismissal and damages

against DMCI and/or Rachel Consunji. In his position paper, he
claimed that DMCI had employed him as a mason without any
interruption from February 1, 1990 until October 10, 1997 at an
hourly rate of P25.081; that he had been a very diligent and
devoted worker and had served DMCI as best as he could and
without any complaints; that he had never violated any company
rules; that his job as a mason had been necessary and desirable
in the usual business or trade of DMCI; that he had been
diagnosed to be suffering from pulmonary tuberculosis, thereby
necessitating his leave of absence; that upon his recovery, he had
reported back to work, but DMCI had refused to accept him and
had instead handed to him a termination paper; that he had been
terminated due to "RSD" effective November 5, 1997; that he
did not know the meaning of "RSD" as the cause of his
termination; that the cause had not been explained to him; that
he had not been given prior notice of his termination; that he had
not been paid separation pay as mandated by law; that at that
time of his dismissal, DMCIs projects had not yet been
completed; and that even if he had been terminated due to an
authorized cause, he should have been given at least one month
pay or at least one-half month pay for every year of service he
had rendered, whichever was higher.

In its position paper submitted on March 6, 2000, 5 DMCI

contended that Bello had only been a project employee, as borne
out by his contract of employment and appointment papers; that
after his termination from employment, it had complied with the
reportorial requirements of the Department of Labor and
Employment (DOLE) pursuant to the mandates of Policy
Instruction No. 20, as revised by Department Order No. 19,
series of 1993; and that although his last project employment
contract had been set to expire on October 7, 1997, he had
tendered his voluntary resignation on October 4, 1997 for health
reasons that had rendered him incapable of performing his job,
per his resignation letter.

On January 9, 2001, ELA Isabel G. Panganiban-Ortiguerra

rendered a decision,6 disposing thusly:

WHEREFORE, premises considered, judgment is hereby

rendered declaring respondent company DM Consunji, Inc.,
guilty of illegal dismissal and it is hereby ordered to reinstate
complainant to his former position without loss of seniority
rights and to pay him full backwages reckoned from the time of
his dismissal up to his actual reinstatement which as of this date
is in the amount of P232,648,81.

SO ORDERED.

DMCI appealed to the NLRC, citing the following grounds,

namely:

I. THE LABOR ARBITER A QUO GRAVELY ABUSED HER

DISCRETION IN HOLDING THAT COMPLAINANT IS A
REGULAR EMPLOYEE NOT EVEN AS THIS IS
CONTRARY TO LAW, EVIDENCE AND JURISPRUDENCE.

II. THE LABOR ARBITER A QUO GRAVELY ABUSED HER

DISCRETION IN DECLARING COMPLAINANTS
TERMINATION AS ILLEGAL EVEN AS HE HAD
VOLUNTARILY RESIGNED

FROM HIS LAST PROJECT EMPLOYMENT.7

On January 3, 2002, the NLRC issued its resolution setting aside

the decision of ELA Panganiban-Ortiguerra, and dismissing
Bellos claims,8 viz:

Addressing the first issue on appeal, a cursory reading of the

records indeed show that contrary to the declaration of the Labor
Arbiter that complainants years of service was without any gaps
and was continuous to warrant regularity of employment, the
same was not so. In fine what was clearly illustrated by
respondents in their appeal memorandum by way of matrix,
there were considerable and substantial gaps between
complainants employment. In addition, it is of judicial notice
that respondent company, being one of the biggest and well
known construction company, as even admitted by the Executive
Labor Arbiter, cater to so many clients/projects. So much that it
is not improbable that complainant may be hired continuously
one after the other in different projects considering that he is a
mason whose functions are more than highly needed in
construction. Even as it is, the matrix presented by respondents
still showed considerable gaps. The fact that sometimes
complainants contract is extended beyond approximated date of
finish contract, do not in anyway (sic) readily make his
employment regular. For it is common among construction
projects for a certain phase of work to be extended, depending
on varied factors such as weather, availability of materials,
whims and caprice of clients and many more. So much so, it was
error on the part of the Executive Labor Arbiter to take this
against respondents and pin it as another determining factor of
regularity of employment. Neither can it be said that as mason
complainants function is necessary and desirable to respondents
business hence, he is a regular employee. x x x we simply
cannot close our eyes to the reality that complainant is a project
employee and that the case she is citing does not fit herein as it
is akin to a square peg being in a round hole. To top it all,
records show that respondents have faithfully complied with the
provision of Policy Instruction No. 20 on project employees.

Lastly, records do show that complainant executed a voluntary

resignation. And while there may indeed be a slight difference in
the signature and handwriting, this do not readily mean that
complainant did not execute the same as was the inclination of
the Executive Labor Arbiter. For one, she has no expertise to
determine so. Secondly, and as was validly pointed out,
complainant if indeed he was coerced, cheated or shortchanged,
would ordinarily almost immediately seek redress. In the case at
bar, he sat it out and waited two (2) years. Is this case, an
afterthought? We believe so.1wphi1

ACCORDINGLY, finding merit in respondents appeal, the

decision of the Executive Labor Arbiter is hereby SET ASIDE
and this case DISMISSED for want of merits (sic).

SO ORDERED.

Bello moved for a reconsideration, 9 but the NLRC denied his

motion on February 26, 2002.10

Ruling of the CA
Bello then assailed the dismissal of his complaint via petition for
certiorari,11 averring that the NLRC committed grave abuse of
discretion amounting to lack of jurisdiction in upholding
DMCIs appeal, in setting aside the decision of the ELA, and in
dismissing his complaint and denying his motion for
reconsideration.

On February 18, 2003, the CA promulgated its assailed

decision,12 finding Bello to have acquired the status of a regular
employee although he had started as a project employee of
DMCI by his having been employed as a mason who had
performed tasks that had been usually necessary and desirable in
the business or trade of DMCI continuously from February 1,
1990 to October 5, 1997; that his repeated re-hiring and the
continuing need for his services over a long span of time had
undeniably made him a regular employee; that DMCIs
compliance with the reportorial requirements under Policy
Instruction No. 20 (by which the project employer was required
to make a report to the Department of Labor and Employment of
every termination of its projects) could not preclude the
acquisition of tenurial security by the employee; that the cause
of his dismissal after he had acquired the status of a regular
employee the completion of the phase of work could not be
considered as a valid cause under Article 282 of the Labor Code;
and that his supposedly voluntary resignation could not be
accorded faith after the ELA had concluded that the handwriting
in the supposed resignation letter was "undeniably different
from that of complainant," a fact "not rebutted by herein
respondents."

DMCI sought the reconsideration of the decision, but the CA

denied its motion on July 24, 2003.13

Issues

Hence, DMCI appeals, presenting the following issues for our

consideration and resolution, to wit:
I. WHETHER OR NOT PRIVATE RESPONDENT WAS A
REGULAR EMPLOYEE; AND

II. WHETHER OR NOT PRIVATE RESPONDENT WAS

DISMISSED OR VOLUNTARILY RESIGNED.

Ruling of the Court

The petition for review lacks merit.

The provision that governs the first issue is Article 280 of the
Labor Code, which is quoted hereunder as to its relevant part,
viz:
Article 280. Regular and Casual Employment
The provisions of written agreement to
the contrary notwithstanding and
regardless of the oral agreement of the
parties, an employment shall be deemed to
be regular where the employee has been
engaged to perform activities which are
usually necessary and desirable to the
usual business or trade of the employer,
except where the employment has been fixed
for a specific project or undertaking the
completion or termination of which has
been determined at the time of the
engagement of the employee or where the
work or service to be performed is
seasonal in nature and the employment is
for the duration of the season. (Emphasis
supplied)
x x x x
A project employee is, therefore, one who is hired for a specific
project or undertaking, and the completion or termination of
such project or undertaking has been determined at the time of
engagement of the employee.14 In the context of the law, Bello
was a project employee of DMCI at the beginning of their
employer-employee relationship. The project employment
contract they then entered into clearly gave notice to him at the
time of his engagement about his employment being for a
specific project or phase of work. He was also thereby notified
of the duration of the project, and the determinable completion
date of the project.

However, the history of Bellos appointment and employment

showed that he performed his tasks as a mason in DMCIs
various constructions projects, as the following tabulation
indicates, to wit:15

Duration of Actual
Project Cause Annexes
Employment Termination
2-01-90 to
SM Megamall 10-28-91 CPW 1 & 1-A
05-01-90
10-28-91 to
JMT 05-29-92 CPW 2 & 2-A
01-28-91
05-29-92 to
Renaissance 09-10-92 CPW 3 & 3-A
08-29-92
09-11-92 to
Bayview 06-15-93 CPW 4 &4-A
12-11-92
Golden Bay 06-17-93 to
04-18-94 CPW 5 & 5-A
I 09-17-93
Golden Bay 04-18-94 to
09-06-94 CPW 6& 6-A
II 07-18-94
09-07-94 to
ADC 02-09-96 CPW 7 & 7-A
10-07-94
02-10-96 to
ADC 10-01-96 CPW 8 & 8-A
03-10-96
09-07-97 to
ICEC 10-07-97 CPW 9 & 9-A
10-07-97
Based on the foregoing, we affirm the CAs conclusion that
Bello acquired in time the status of a regular employee by virtue
of his continuous work as a mason of DMCI. The work of a
mason like him a skilled workman working with stone or
similar material16 was really related to building or
constructing, and was undoubtedly a function necessary and
desirable to the business or trade of one engaged in the
construction industry like DMCI. His being hired as a mason by
DMCI in not one, but several of its projects revealed his
necessity and desirability to its construction business.

It is settled that the extension of the employment of a project

employee long after the supposed project has been completed
removes the employee from the scope of a project employee and
makes him a regular employee.17 In this regard, the length of
time of the employees service, while not a controlling
determinant of project employment, is a strong factor in
determining whether he was hired for a specific undertaking or
in fact tasked to perform functions vital, necessary and
indispensable to the usual business or trade of the employer.18
On the other hand, how DMCI chose to categorize the
employment status of Bello was not decisive of his employment
status. What were of consequence in that respect were his actual
functions and the length of his stay with DMCI. Verily, the
principal test for determining whether an employee is a project
employee, as distinguished from a regular employee, is whether
or not he is assigned to carry out a specific project or
undertaking, the duration and scope of which are specified at the
time he is engaged for the project.19

Still, DMCI contends that Bellos services as a mason were

deemed necessary and desirable in its usual business only for the
period of time it had taken it to complete the project.

The contention may be correct if each engagement of Bello as a

mason over the span of eight years was to be treated separately.
The contention cannot be upheld, however, simply because his
successive reengagement in order to perform the same kind of
work as a mason firmly manifested the necessity and desirability
of his work in DMCIs usual business of construction.20
Lastly, DMCI claims that Bello voluntarily resigned from work.
It presented his supposed handwritten resignation letter to
support the claim. However, Bello denied having resigned,
explaining that he had signed the letter because DMCI had made
him believe that the letter was for the purpose of extending his
sick leave.

In resolving the matter against DMCI, the CA relied on the

conclusion by ELA Panganiban-Ortiguerra that she could not
give credence to the voluntary resignation for health reasons in
the face of Bellos declaration that he had been led to sign the
letter to obtain the extension of his leave of absence due to
illness, and on her observation that "the handwriting in the
supposed resignation letter is undeniably different from that of
complainant," something that she said DMCI had not rebutted.21

The CAs reliance on the conclusion and finding by ELA

Panganiban-Ortiguerra was warranted. Her observation that the
handwriting in the resignation letter was "undeniably different"
from that of Bello could not be ignored or shunted aside simply
because she had no expertise to make such a determination, as
the NLRC tersely stated in its decision. To begin with, her
supposed lack of expertise did not appear in the records,
rendering the NLRC's statement speculative and whimsical. If
we were now to outrightly discount her competence to make that
observation, we would disturb the time-honored practice of
according respect to the findings of the first-line trier of facts in
order to prefer the speculative and whimsical statement of an
appellate forum like the NLRC. Yet, even had the letter been
actually signed by him, the voluntariness of the resignation
could not be assumed from such fact alone. His claim that he
had been led to believe that the letter would serve only as the
means of extending his sick leave from work should have
alerted DMCI to the task of proving the voluntariness of the
resignation. It was obvious that, if his claim was true, then he
did not fully comprehend the import of the letter, rendering the
resignation farcical. The doubt would then be justifiably raised
against the letter being at all intended to end his employment.
Under the circumstances, DMCI became burdened with the
obligation to prove the due execution and genuineness of the
document as a letter of resignation.22

We reiterate that it is axiomatic in labor law that the employer

who interposes the defense of voluntary resignation of the
employee in an illegal dismissal case must prove by clear,
positive and convincing evidence that the resignation was
voluntary; and that the employer cannot rely on the weakness of
the defense of the employee.23 The requirement rests on the need
to resolve any doubt in favor of the working man.

WHEREFORE, the Court AFFIRMS the decision promulgated

on February 18, 2003; and ORDERS petitioner to pay the costs
of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
A.M. No. 08-5-305-RTC July 9, 2013

RE: FAILURE OF FORMER JUDGE ANTONIO A.

CARBONELL TO DECIDE CASES SUBMITTED FOR
DECISION AND TO RESOLVE PENDING MOTIONS IN
THE REGIONAL TRIAL COURT, BRANCH 27, SAN
FERNANDO, LA UNION.

RESOLUTION

BERSAMIN, J.:

This administrative case originates from the judicial audit

conducted by the Office of the Court Administrator (OCA) on
March 3 and 4, 2008 in the Regional Trial Court of San
Fernando, La Union, Branch 27, in view of the disability
retirement of Presiding Judge Antonio A. Carbonell on
December 31, 2007.

According to the Audit Teams Report, Branch 27 had a total

caseload of 231 cases, consisting of 147 criminal cases and 84
civil cases, and Judge Carbonell failed to decide 41 criminal
cases (one inherited) and 22 civil cases (four inherited), namely:
Criminal Case Nos. 1183, 4559, 5117, 3532, 3672, 5165, 5007,
5946, 6934, 5763, 7014, 5991, 4724, 6311, 6076, 4789, 6297,
5424, 4928, 6403, 6816, 5635, 5666, 5134, 5865, 6284, 6454,
5394, 6770, 5375, 5356, 7557, 5940, 6311, 6333, 7729, 7111,
6325, 6068, 6517, and 7766; and Civil Case Nos. 3009, 4564,
4563, 4714, 3647, 4362, 6041, 4798, 4561, 6989, 2882, 6185,
7153, 7163, LRC 2332, SCA 7198, 7310, 3487, 7327, 7331,
7298, and 7323.1

Judge Carbonell was also reported to have failed to resolve

pending motions or incidents in four criminal cases and 12 civil
cases, to wit: Criminal Case Nos. 7559, 6409, 7787, and 7788;
and Civil Case Nos. 4793, LRC 1308, 7064, 4973, SP 2901, SP
2952, AC 1797, 7100, 7152, 7060, SP 2986, and SP 2987.2
In a Memorandum dated May 15, 2008, the OCA recommended
to the Court that a fine of P50,000.00 be imposed upon Judge
Carbonell for gross inefficiency for failing to promptly decide
the cases and to resolve pending motions and incidents.3

On June 17, 2008, the Court directed the Clerk of Court to

furnish Judge Carbonell with a copy of the Audit Teams Report,
and ordered him to submit his comment on the report within ten
days from notice.4

Not having received the comment from Judge Carbonell despite

the lapse of the time given, the Court resolved on September 21,
2010 to require him to show cause why he should not be
disciplinarily dealt with or held in contempt.5

Judge Carbonell replied,6 stating that he had incorporated his

comment/compliance to the June 17, 2008 resolution in the
letter dated July 17, 2008 (Re: Very Urgent Request for Release
of Disability Retirement Benefits and Money Value of Accrued
Leave Credits) he had sent to Chief Justice Reynato S. Puno. 7
He remarked that the Court had actually granted his request for
the payment of his disability retirement benefits subject to the
retention of P200,000.00 pending resolution of the pending
administrative cases against him.8

In his July 17, 2008 letter to Chief Justice Puno, Judge

Carbonell surmised that the Audit Team might have overlooked
the fact that he had inherited some of the undecided cases from
the predecessor judge; that said cases had no transcripts of
stenographic notes, because of which he was impelled to require
the parties to submit their respective memoranda; that the cases
would only be considered submitted for decision after the
parties would have filed their respective memoranda; and that he
had undergone a quadruple heart bypass operation in 2005 that
had adversely affected his pace in deciding the cases.

On November 23, 2010, the Court referred Judge Carbonells

letter to the OCA for evaluation, report, and recommendation.9
In its Memorandum dated February 2, 2011,10 the OCA
reiterated its recommendation to impose a fine of P50,000.00 on
Judge Carbonell, noting that he had failed to render any valid
reason for his delay in deciding the cases submitted for decision
and in resolving the pending motions or incidents in other cases.
The OCA noted that only five cases submitted for decision had
been inherited; and that the case records did not bear any
requests for extension of time or any directive for the
transcription of stenographic notes. It stressed that heavy
caseload would not justify the failure to promptly decide and
resolve cases because he could have simply asked the Court for
an extension of time.

The recommendation of the OCA is well-taken, subject to the

modification of the penalty to be imposed.

As a frontline official of the Judiciary, a trial judge should at all

times act with efficiency and probity. He is duty-bound not only
to be faithful to the law, but also to maintain professional
competence. The pursuit of excellence ought always to be his
guiding principle. Such dedication is the least that he can do to
sustain the trust and confidence that the public have reposed in
him and the institution he represents.11

The Court cannot overstress its policy on prompt disposition or

resolution of cases.12 Delay in the disposition of cases is a major
culprit in the erosion of public faith and confidence in the
judicial system, as judges have the sworn duty to administer
justice without undue delay.13 Thus, judges have been constantly
reminded to strictly adhere to the rule on the speedy disposition
of cases and observe the periods prescribed by the Constitution
for deciding cases, which is three months from the filing of the
last pleading, brief or memorandum for lower courts. 14 To
further impress upon judges such mandate, the Court has issued
guidelines (Administrative Circular No. 3-99 dated January 15,
1999) that would insure the speedy disposition of cases and has
therein reminded judges to scrupulously observe the periods
prescribed in the Constitution.
Nonetheless, the Court has been mindful of the plight of our
judges and understanding of circumstances that may hinder
them from promptly disposing of their businesses. Hence, the
Court has allowed extensions of time to decide cases beyond the
90-day period. All that a judge needs to do is to request and
justify an extension of time to decide the cases, and the Court
has almost invariably granted such request.

Judge Carbonell failed to decide a total of 63 cases and to

resolve 16 pending motions or incidents within the 90-day
reglementary period. He intimated that his poor health affected
his pace in deciding the cases. Had such been the case, then he
should have explained his predicament to the Court and asked
for an extension of time to decide the cases. Unfortunately, he
failed to do so.

Judge Carbonell claims that some of the inherited cases had no

transcripts of stenographic notes, thereby preventing him from
resolving the cases on time. He posits that a case would not be
considered submitted for decision if the parties did not yet file
their respective memoranda.1wphi1

The Audit Teams Report shows that, in an apparent attempt to

suspend the running of the 90-day period to decide the cases,
Judge Carbonell liberally gave the parties in most of the overdue
cases several extensions of time to file their respective
memoranda. Some extensions were even for indefinite periods,
with the parties being simply given "ample time to file their
memo," as the relevant court orders stated.

In view of the foregoing, Judge Carbonells excuses are futile in

the light of the following provisions of Administrative Circular
No. 28, dated July 3, 1989, viz:
(3)
A case is considered submitted for
decision upon the admission of the
evidence of the parties at the termination
 of the trial. The ninety (90) days period
for deciding the case shall commence to
run from submission of the case for
decision without memoranda; in case the
Court requires or allows its filing, the
case shall be considered submitted for
decision upon the filing of the last
memorandum or the expiration of the period
to do so, whichever is earlier. Lack of
transcript of stenographic notes shall not
be a valid reason to interrupt or suspend
the period for deciding the case unless
the case was previously heard by another
judge not the deciding judge in which case
the latter shall have the full period of
ninety (90) days from the completion of
the transcripts within which to decide the
same.
(4)
The court may grant extension of time to
file memoranda, but the ninety (90) day
period for deciding shall not be
interrupted thereby.
Without a doubt, Judge Carbonells failure to decide several
cases within the reglementary period, without justifiable and
credible reasons, constituted gross inefficiency, warranting the
imposition of administrative sanctions,15 like fines. The fines
imposed have varied in each case, depending chiefly on the
number of cases not decided within the reglementary period and
other factors, including the presence of aggravating or
mitigating circumstances like the damage suffered by the parties
from the delay, the health condition and age of the judge, etc. 16
Thus, in one case, the Court mitigated the liability of a Judge
who had been suffering from illnesses and who had later retired
due to disability, and imposed upon him a fine of P20,000.00 for
failure to decide 31 cases.17
Considering that Judge Carbonell similarly retired due to
disability, the Court believes that his poor health condition
greatly contributed to his inability to efficiently perform his
duties as a trial judge. That mitigated his administrative liability,
for which reason the Court reduces the recommended penalty of
fine from P50,000.00 to P20,000.00.

WHEREFORE, Retired Judge Antonio A. Carbonell is

ORDERED to pay a fine of P20,000.00 to be deducted from the
P200,000.00 that was withheld from his retirement benefits, and
the balance to be immediately released to him.

SO ORDERED.

Sereno, C.J. Carpio, Velasco, Jr., Leonardo-De Castro,

Peralta, Del Castillo, Abad, Villarama, Jr., Perez, Mendoza,
Reyes, Perlas-Bernabe, and Leonen, JJ., concur.
Brion, J., on leave.
G.R. No. 206236 July 15, 2013

GILFREDO BACOLOD, a.k.a. GILARDO BACOLOD,

Accused-Petitioner,
vs.
PEOPLE OF THE PHILIPPINES, Plaintiff-Respondent.

RESOLUTION

BERSAMJN, J.:

It is imperative that the courts prescribe the proper penalties

when convicting the accused, and determine the civil liability to
be imposed on the accused, unless there has been a reservation
of the action to recover civil liability or a waiver of its recovery.

Antecedents

On March 31, 2008, the Regional Trial Court (RTC), Branch 9,

in Cebu City convicted the petitioner of arson,1 viz:

WHEREFORE, in finding the accused GUILTY beyond

reasonable doubt of the crime of Arson, this Court hereby
sentences him to suffer imprisonment for a period of Ten (10)
Years of Prision Mayor in its medium period as minimum to
Sixteen (16) Years of Reclusion Temporal in its medium period
as maximum.

SO ORDERED.

On December 9, 2011, the Court of Appeals (CA) affirmed the

conviction,2 disposing thusly:

WHEREFORE, in view of the foregoing, the Decision dated

March 31, 2008 of the Regional Trial Court, Branch 9, Cebu
City in Criminal Case No. CBU-74629 is hereby AFFIRMED in
full. The Formal Entry of Appearance of Atty. Valeriano S. Loon
as the new counsel for the private complainant by reason of the
death of his former counsel, Atty. Celestino Allanic, is hereby
noted.
SO ORDERED.

Issues

Hence, this appeal by petition for review on certiorari.

The petitioner submits that both the RTC and the CA erred in
their appreciation of the evidence. He insists that no witness had
actually seen him set the house on fire; that the State did not
show that he had the motive to commit the arson; and that only
circumstantial evidence was presented against him, but such
evidence, not being incompatible with the hypothesis favoring
his innocence, was insufficient to support a conviction beyond
reasonable doubt.

Ruling

The Court affirms the conviction.

The lack or absence of direct evidence does not necessarily

mean that the guilt of the accused cannot be proved by evidence
other than direct evidence. Direct evidence is not the sole means
of establishing guilt beyond reasonable doubt, because
circumstantial evidence, if sufficient, can supplant the absence
of direct evidence. The crime charged may also be proved by
circumstantial evidence, sometimes referred to as indirect or
presumptive evidence. Circumstantial evidence has been defined
as that which "goes to prove a fact or series of facts other than
the facts in issue, which, if proved, may tend by inference to
establish a fact in issue."3

The RTCs reliance on circumstantial evidence was sanctioned

by Rule 133, Section 4 of the Rules of Court,4 which requires for
circumstantial evidence to warrant the conviction of an accused
that, firstly, there are more than one circumstance; secondly, the
facts from which the circumstances arose are duly established in
court; and, thirdly, the circumstances form and unbroken chain
of events leading to the fair conclusion of the culpability of the
accused for the crime for which he is convicted. Ostensibly, our
rules "make no distinction between direct evidence of a fact and
evidence of circumstances from which the existence of a fact
may be inferred. No greater degree of certainty is required when
the evidence is circumstantial than when it is direct, for in either
case, the trier of fact must be convinced beyond a reasonable
doubt of the guilt of the accused."5

The States witnesses credibly and reliably described a chain of

circumstances that absolutely incriminated the petitioner in the
criminal burning of the house of complainants Spouses Ceferino
and Gemma Cogtas. As both the trial and appellate courts found,
the following interconnected factual links were proved, namely:
(1) prosecution witness Ruben Gonzales heard the loud voices
of the petitioner and his sister coming from the Cogtas house
that the Bacolod family had been renting, with the petitioner
demanding money from his sister Daisy Mae Bacolod but the
latter not acceding to the demand; he was then only about 15
arms lengths away from the Cogtas house; (2) not soon after,
Gonzales heard a commotion inside the Cogtas house, and then
immediately saw Daisy Mae and three other persons running out
of the house asking for help; (3) Gonzales himself going
towards the house to see what was happening, saw the petitioner
in the kitchen waving a flaming blanket that he had lit from the
burner stove; (4) the petitioner then came out of the house,
daring anyone to arrest him; (5) Gonzales turned off the burner
stove in the kitchen, even as he saw the ceiling of the kitchen
already in flames; and (6) the fire immediately spread to the
other parts of the house, and which eventually burned down the
house completely. Gonzales account about the commotion
inside the house was corroborated by Alexander Cernal, a
barangay tanod who happened to be on board his tricycle at the
same subdivision where the Cogtas house was located.

The CA did not err in holding that the States circumstantial

evidence sufficed for the conviction of the petitioner. Indeed, the
unbroken chain of circumstances established from the
recollections of witnesses whose motives had not been
impugned at all by the petitioner warranted no conclusion but
that the petitioner had deliberately caused the burning of the
house.

Nonetheless, the Court needs to correct the penalty the RTC

imposed on the petitioner, and which the CA affirmed "in full".
The indeterminate sentence of 10 years of prision mayor in its
medium period, as minimum, to 16 years of reclusion temporal
in its medium period, as maximum, prescribed by the RTC was
legally erroneous.

The information specifically alleged that the house burned by

the accused was an inhabited dwelling. Pursuant to Section 3(2)
of Presidential Decree No. 1613 (Amending the Law on Arson),
the penalty to be imposed if the property burned is an inhabited
house or dwelling is from reclusion temporal to reclusion
perpetua. Not being composed of three periods, however, such
penalty should be divided into three equal portions of time, and
each portion forms one period of the penalty.6 Yet, reclusion
perpetua, being an indivisible penalty, immediately becomes the
maximum period, leaving reclusion temporal to be divided into
two in order to fix the medium and minimum periods of the
penalty. The three periods of the prescribed penalty of reclusion
temporal to reclusion perpetua are then as follows:

Minimum period 12 years and 1 day to 16 years;

Medium period 16 years and 1 day to 20 years;

Maximum period reclusion perpetua.

Section 1 of the Indeterminate Sentence Law requires the court,

in imposing a prison sentence for an offense punished by the
Revised Penal Code, or its amendments, to sentence the accused
"to an indeterminate sentence the maximum term of which shall
be that which, in view of the attending circumstances, could be
properly imposed under the rules of the said Code, and the
minimum which shall be within the range of the penalty next
lower to that prescribed by the Code for the offense." 7
Accordingly, the maximum of the indeterminate penalty in this
case should be within the range of the medium period of the
penalty, i.e., from 16 years and 1 day to 20 years, because
neither aggravating nor mitigating circumstance attended the
commission of the crime; and the minimum of the indeterminate
sentence should be within the range of the penalty next lower in
degree to that prescribed for the crime, without regard to its
periods.8

It appears, therefore, that the maximum of the indeterminate

penalty fixed by the RTC fell short by one day in order to come
within the medium period of the prescribed penalty. Although
such fixing by the RTC was contrary to the Indeterminate
Sentence Law, the CA uncharacteristically condoned the
violation. The correction should now be made to make the
sentence conform to law. Accordingly, the maximum of the
indeterminate sentence of the petitioner is 16 years and one day
of reclusion temporal.

Another substantial detail left out by the RTC, and, later on, by
the CA pertained to the civil liability to be assessed against the
petitioner in favor of the Spouses Cogtas as owners of the
burned house. Having pronounced the petitioner guilty of
committing arson, a crime against property, the RTC and the CA
were bound to have then adjudged him civilly liable to
compensate the Spouses Cogtas for their substantial economic
damage and prejudice as the owners of the house. The RTC
briefly discussed the economic loss of the Spouses Cogtas in its
judgment but surprisingly omitted any award from the decretal
portion.

The unfair omission should be rectified. In the records was

testimony given by Architect Gabriel F. Abear to the effect that
the Spouses Cogtas would need to spend P869,590.00 to restore
their burned dwelling to its condition before the crime. In the
absence of a showing that such amount had been actually
expended in a manner capable of substantiation by any
document or receipt, Abears valuation remained a mere
estimate, and could not be the measure of an award for actual
damages. This is because, as reiterated in Tan v. OMC Carriers,
Inc.:9

Actual damages, to be recoverable, must not only be capable of

proof, but must actually be proved with a reasonable degree of
certainty. Courts cannot simply rely on speculation, conjecture
or guesswork in determining the fact and amount of damages.
To justify an award of actual damages, there must be competent
proof of the actual amount of loss, credence can be given only to
claims which are duly supported by receipts.

Nonetheless, the failure to present competent proof of actual

damages should not deprive the Spouses Cogtas of some degree
of indemnity for the substantial economic damage and prejudice
they had suffered. According to Article 2224 of the Civil Code,
temperate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds
that some pecuniary loss has been suffered but its amount
cannot, from the nature of the case, be proved with certainty.10
For this purpose, the determination of the temperate damages
rests in the sound discretion of the courts. To illustrate, in People
v. Murcia,11 the Court reduced the amount of P250,000.00 fixed
by the RTC, although affirmed by the CA, to P200,000.00 by
way of temperate damages upon noting that the former amount
had been based only on the complainants estimate of the value
of his house. Consequently, the Court holds that the amount of
P500,000.00 in the form of temperate damages is reasonable
considering that the dwelling of the Spouses Cogtas had been
completely burned down.

It is not amiss to stress that both the RTC and the CA

disregarded their express mandate under Section 2, Rule 120 of
the Rules of Court to have the judgment, if it was of conviction,
state: "(1) the legal qualification of the offense constituted by
the acts committed by the accused and the aggravating or
mitigating circumstances which attended its commission; (2) the
participation of the accused in the offense, whether as principal,
accomplice, or accessory after the fact; (3) the penalty imposed
upon the accused; and (4) the civil liability or damages caused
by his wrongful act or omission to be recovered from the
accused by the offended party, if there is any, unless the
enforcement of the civil liability by a separate civil action has
been reserved or waived." Their disregard compels us to act as
we now do lest the Court be unreasonably seen as tolerant of
their omission. That the Spouses Cogtas did not themselves seek
the correction of the omission by an appeal is no hindrance to
this action because the Court, as the final reviewing tribunal, has
not only the authority but also the duty to correct at any time a
matter of law and justice.

We also pointedly remind all trial and appellate courts to avoid

omitting reliefs that the parties are properly entitled to by law or
in equity under the established facts. Their judgments will not be
worthy of the name unless they thereby fully determine the
rights and obligations of the litigants. It cannot be otherwise, for
only by a full determination of such rights and obligations
would they be true to the judicial office of administering justice
and equity for all. Courts should then be alert and cautious in
their rendition of judgments of conviction in criminal cases.
They should prescribe the legal penalties, which is what the
Constitution and the law require and expect them to do. Their
prescription of the wrong penalties will be invalid and
ineffectual for being done without jurisdiction or in manifest
grave abuse of discretion amounting to lack of jurisdiction. They
should also determine and set the civil liability ex delicto of the
accused, in order to do justice to the complaining victims who
are always entitled to them. The Rules of Court mandates them
to do so unless the enforcement of the civil liability by separate
actions has been reserved or waived.

WHEREFORE, we AFFIRM the decision promulgated on

December 9, 2011 by the Court of Appeals, subject to the
MODIFICATIONS that:

(1) the indeterminate sentence for GILFREDO BACOLOD

a.k.a. GILARDO BACOLOD is corrected from 10 years of
prision mayor, as minimum, to 16 years and one day of
reclusion temporal, as maximum; and

(2) GILFREDO BACOLOD a.k.a. GILARDO BACOLOD is

ORDERED to pay the amount of P500,000.00 as temperate
damages to SPOUSES CEFERINO AND GEMMA COGT AS,
plus interest of 6% per annum reckoned from the finality of this
decision, plus the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
 FIRST DIVISION

G.R. No. 161075 July 15, 2013

RAFAEL JOSE-CONSING, JR., Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

BERSAMIN, J.:

An independent civil action based on fraud initiated by the

defrauded party does not raise a prejudicial question to stop the
proceedings in a pending criminal prosecution of the defendant
for estafa through falsification. This is because the result of the
independent civil action is irrelevant to the issue of guilt or
innocence of the accused.

The Case

On appeal is the amended decision promulgated on August 18,

2003,1 whereby the Court of Appeals (CA) granted the writ of
certiorari upon petition by the State in C.A.-G.R. No. 71252
entitled People v. Han. Winlove M Dumayas, Presiding Judge,
Branch 59, Regional Trial Court, Makati City and Rafael
Consing, Jr., and set aside the assailed order issued on
November 26, 2001 by the Regional Trial Court (RTC), Branch
59, in Makati City deferring the arraignment of petitioner in
Criminal Case No. 00-120 entitled People v. Rafael Consing, Jr.
upon his motion on the ground of the existence of a prejudicial
question in the civil cases pending between him and the
complainant in the trial courts in Pasig City and Makati City.

Antecedents

Petitioner negotiated with and obtained for himself and his

mother, Cecilia de la Cruz (de la Cruz) various loans totaling
P18,000,000.00 from Unicapital Inc. (Unicapital). The loans
were secured by a real estate mortgage constituted on a parcel of
land (property) covered by Transfer Certificate of Title (TCT)
No. T-687599 of the Registry of Deeds for the Province of
Cavite registered under the name of de la Cruz. 2 In accordance
with its option to purchase the mortgaged property, Unicapital
agreed to purchase one-half of the property for a total
consideration of P21,221,500.00. Payment was effected by off-
setting the amounts due to

Unicapital under the promissory notes of de la Cruz and

Consing in the amount of P18,000,000.00 and paying an
additional amount of P3,145,946.50. The other half of the
property was purchased by Plus Builders, Inc. (Plus Builders), a
joint venture partner of Unicapital.3

Before Unicapital and Plus Builders could develop the property,

they learned that the title to the property was really TCT No.
114708 in the names of Po Willie Yu and Juanito Tan Teng, the
parties from whom the property had been allegedly acquired by
de la Cruz. TCT No. 687599 held by De la Cruz appeared to be
spurious.4

On its part, Unicapital demanded the return of the total amount

of P41,377,851.48 as of April 19, 1999 that had been paid to and
received by de la Cruz and Consing, but the latter ignored the
demands.5

On July 22, 1999, Consing filed Civil Case No. 1759 in the
Pasig City Regional Trial Court (RTC) (Pasig civil case) for
injunctive relief, thereby seeking to enjoin Unicapital from
proceeding against him for the collection of the P41,377,851.48
on the ground that he had acted as a mere agent of his mother.

On the same date, Unicapital initiated a criminal complaint for

estafa through falsification of public document against Consing
and de la Cruz in the Makati City Prosecutors Office.6

On August 6, 1999, Unicapital sued Consing in the RTC in

Makati City (Civil Case No. 99-1418) for the recovery of a sum
of money and damages, with an application for a writ of
preliminary attachment (Makati civil case).7

On January 27, 2000, the Office of the City Prosecutor of

Makati City filed against Consing and De la Cruz an
information for estafa through falsification of public document
in the RTC in Makati City (Criminal Case No. 00-120), which
was assigned to Branch 60 (Makati criminal case).8

On February 15, 2001, Consing moved to defer his arraignment

in the Makati criminal case on the ground of existence of a
prejudicial question due to the pendency of the Pasig and Makati
civil cases. On September 25, 2001, Consing reiterated his
motion for deferment of his arraignment, citing the additional
ground of pendency of CA-G.R. SP No. 63712 in the CA. On
November 19, 2001, the Prosecution opposed the motion.9

On November 26, 2001, the RTC issued an order suspending the

proceedings in the Makati criminal case on the ground of the
existence of a prejudicial question, and on March 18, 2001, the
RTC denied the Prosecutions motion for reconsideration.10

The State thus assailed in the CA the last two orders of the RTC
in the Makati criminal case via petition for certiorari (C.A.-G.R.
SP No. 71252).

On May 20, 2003, the CA promulgated its decision in C.A.-G.R.

SP No. 71252,11 dismissing the petition for certiorari and
upholding the RTCs questioned orders, explaining:

Is the resolution of the Pasig civil case prejudicial to the Cavite

and Makati criminal cases?

We hold that it is. The resolution of the issue in the Pasig case,
i.e. whether or not private respondent may be held liable in the
questioned transaction, will determine the guilt or innocence of
private respondent Consing in both the Cavite and Makati
criminal cases.
The analysis and comparison of the Pasig civil case, Makati
criminal case, Makati civil case and Cavite criminal case show
that: (1) the parties are identical; (2) the transactions in
controversy are identical; (3) the Transfer Certificate of Titles
(TCT) involved are identical; (4) the questioned Deeds of
Sale/Mortgage are identical; (5) the dates in question are
identical; and (6) the issue of private respondents culpability for
the questioned transactions is identical in all the proceedings.

As discussed earlier, not only was the issue raised in the Pasig
civil case identical to or intimately related to the criminal cases
in Cavite and Makati. The similarities also extend to the parties
in the cases and the TCT and Deed of Sale/ Mortgage involved
in the questioned transactions.

The respondent Judge, in ordering the suspension of the

arraignment of private respondent in the Makati case, in view of
CA-G.R. SP No. 63712, where Unicapital was not a party
thereto, did so pursuant to its mandatory power to take judicial
notice of an official act of another judicial authority. It was also
a better legal tack to prevent multiplicity of action, to which our
legal system abhors.

Applying the Tuanda ruling, the pendency of CA-G.R. SP No.

63712 may be validly invoked to suspend private respondents
arraignment in the Makati City criminal case, notwithstanding
the fact that CA-G.R. SP No. 63712 was an offshoot, merely, in
the Cavite criminal case.12

In the meanwhile, on October 13, 1999, Plus Builders

commenced its own suit for damages against Consing (Civil
Case No. 99-95381) in the RTC in Manila (Manila civil case).13

On January 21, 2000, an information for estafa through

falsification of public document was filed against Consing and
De la Cruz in the RTC in Imus, Cavite, docketed as Criminal
Case No. 7668-00 and assigned to Branch 21 (Cavite criminal
case). Consing filed a motion to defer the arraignment on the
ground of the existence of a prejudicial question, i.e., the
pendency of the Pasig and Manila civil cases. On January 27,
2000, however, the RTC handling the Cavite criminal case
denied Consings motion. Later on, it also denied his motion for
reconsideration. Thereafter, Consing commenced in the CA a
special civil action for certiorari with prayer for the issuance of
a temporary restraining order (TRO) and/or writ of preliminary
injunction (C.A.-G.R. SP No. 63712), seeking to enjoin his
arraignment and trial in the Cavite criminal case. The CA
granted the TRO on March 19, 2001, and later promulgated its
decision on May 31, 2001, granting Consing petition for
certiorari and setting aside the January 27, 2000 order of the
RTC, and permanently enjoining the RTC from proceeding with
the arraignment and trial until the Pasig and Manila civil cases
had been finally decided.

Not satisfied, the State assailed the decision of the CA in this

Court (G.R. No. 148193), praying for the reversal of the May
31, 2001 decision of the CA. On January 16, 2003, the Court
granted the petition for review in G.R. No. 148193, and reversed
and set aside the May 31, 2001 decision of the CA,14 viz:

In the case at bar, we find no prejudicial question that would

justify the suspension of the proceedings in the criminal case
(the Cavite criminal case). The issue in Civil Case No. SCA
1759 (the Pasig civil case) for Injunctive Relief is whether or
not respondent (Consing) merely acted as an agent of his
mother, Cecilia de la Cruz; while in Civil Case No. 99-95381
(the Manila civil case), for Damages and Attachment, the
question is whether respondent and his mother are liable to pay
damages and to return the amount paid by PBI for the purchase
of the disputed lot. Even if respondent is declared merely an
agent of his mother in the transaction involving the sale of the
questioned lot, he cannot be adjudged free from criminal
liability. An agent or any person may be held liable for
conspiring to falsify public documents. Hence, the
determination of the issue involved in Civil Case No. SCA 1759
for Injunctive Relief is irrelevant to the guilt or innocence of the
respondent in the criminal case for estafa through falsification of
public document.

Likewise, the resolution of PBIs right to be paid damages and

the purchase price of the lot in question will not be
determinative of the culpability of the respondent in the criminal
case for even if PBI is held entitled to the return of the purchase
price plus damages, it does not ipso facto follow that respondent
should be held guilty of estafa through falsification of public
document. Stated differently, a ruling of the court in the civil
case that PBI should not be paid the purchase price plus
damages will not necessarily absolve respondent of liability in
the criminal case where his guilt may still be established under
penal laws as determined by other evidence.

Moreover, neither is there a prejudicial question if the civil and

the criminal action can, according to law, proceed independently
of each other. Under Rule 111, Section 3 of the Revised Rules
on Criminal Procedure, in the cases provided in Articles 32, 33,
34 and 2176 of the Civil Code, 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.

Thus, in Rojas v. People, the petitioner was accused in a

criminal case for violation of Article 319 of the Revised Penal
Code, for executing a new chattel mortgage on personal
property in favor of another party without consent of the
previous mortgagee. Thereafter, the offended party filed a civil
case for termination of management contract, one of the causes
of action of which consisted of petitioner having executed a
chattel mortgage while the previous chattel mortgage was still
valid and subsisting. Petitioner moved that the arraignment and
trial of the criminal case be held in abeyance on the ground that
the civil case was a prejudicial question, the resolution of which
was necessary before the criminal proceedings could proceed.
The trial court denied the suspension of the criminal case on the
ground that no prejudicial question exist. We affirmed the order
of the trial court and ruled that:

the resolution of the liability of the defendant in the civil case

on the eleventh cause of action based on the fraudulent
misrepresentation that the chattel mortgage the defendant
executed in favor of the said CMS Estate, Inc. on February 20,
1957, that his D-6 "Caterpillar" Tractor with Serial No. 9-U-
6565 was "free from all liens and encumbrances" will not
determine the criminal liability of the accused in the said
Criminal Case No. 56042 for violation of paragraph 2 of Article
319 of the Revised Penal Code. . . . (i) That, even granting for
the sake of argument, a prejudicial question is involved in this
case, the fact remains that both the crime charged in the
information in the criminal case and the eleventh cause of action
in the civil case are based upon fraud, hence both the civil and
criminal cases could proceed independently of the other
pursuant to Article 33 of the new Civil Code which provides: "In
cases of defamation, fraud and physical injuries, a civil action
for damages, entirely separate and distinct from the criminal
action shall proceed independently of the criminal prosecution,
and shall require only a preponderance of evidence." (j) That,
therefore, the act of respondent judge in issuing the orders
referred to in the instant petition was not made with "grave
abuse of discretion."

In the instant case, Civil Case No. 99-95381, for Damages and
Attachment on account of the alleged fraud committed by
respondent and his mother in selling the disputed lot to PBI is an
independent civil action under Article 33 of the Civil Code. As
such, it will not operate as a prejudicial question that will justify
the suspension of the criminal case at bar.15

Turning back to the Makati criminal case, the State moved for
the reconsideration of the adverse decision of the CA, citing the
ruling in G.R. No. 148193, supra, to the effect that the Pasig and
Manila civil cases did not present a prejudicial question that
justified the suspension of the proceedings in the Cavite
criminal case, and claiming that under the ruling in G.R. No.
148193, the Pasig and Makati civil cases did not raise a
prejudicial question that would cause the suspension of the
Makati criminal case.

In his opposition to the States motion for reconsideration,

Consing contended that the ruling in G.R. No. 148193 was not
binding because G.R. No. 148193 involved Plus Builders, which
was different from Unicapital, the complainant in the Makati
criminal case. He added that the decision in G.R. No. 148193
did not yet become final and executory, and could still be
reversed at any time, and thus should not control as a precedent
to be relied upon; and that he had acted as an innocent attorney-
in-fact for his mother, and should not be held personally liable
under a contract that had involved property belonging to his
mother as his principal.

On August 18, 2003, the CA amended its decision, reversing

itself. It relied upon the ruling in G.R. No. 148193, and held
thusly:

CA-G.R. SP No. 63712 is similar with the case at bench. The

transactions in controversy, the documents involved; the issue of
the respondents culpability for the questioned transactions are
all identical in all the proceedings; and it deals with the same
parties with the exception of private complainant Unicapital.

However, the Supreme Court, upon review of CA-G.R. SP No.

63712, People of the Philippines vs. Rafael Jose Consing, Jr.
(G.R. No. 148193, January 16, 2003) held that "Civil Case No.
99-95381, for Damages and attachment on account of alleged
fraud committed by respondent and his mother in selling the
disputed lot to Plus Builders, Inc. is an independent civil action
under Article 33 of the Civil Code. As such, it will not operate
as a prejudicial question that will justify the suspension of the
criminal case at bar." In view of the aforementioned decision of
the Supreme Court, We are thus amending Our May 20, 2003
decision.

WHEREFORE, the petitioners motion for reconsideration is

GRANTED. The Orders dated November 26, 2001 and March
18, 2002 issued by the respondent Judge are hereby
REVERSED and SET ASIDE. Respondent Judge is hereby
ordered to proceed with the hearing of Criminal Case No. 00-
120 with dispatch.

SO ORDERED.16

Consing filed a motion for reconsideration, 17 but the CA denied

the motion through the second assailed resolution of December
11, 2003.18

Hence, this appeal by petition for review on certiorari.

Issue

Petitioner reiterates his contention that the decision in G.R. No.

148193 was not controlling in relation to C.A.-G.R. No. 71252,
which involved Plus Builders, not Unicapital, the complainant in
Criminal Case No. 00-120. He posits that in arriving at its
amended decision, the CA did not consider the pendency of the
Makati civil case (Civil Case No. 99-1418), which raised a
prejudicial question, considering that the resolution of such civil
action would include the issue of whether he had falsified a
certificate of title or had willfully defrauded Unicapital, the
resolution of either of which would determine his guilt or
innocence in Criminal Case No. 00-120.

In its comment,19 the Office of the Solicitor General (OSG)

counters that Unicapital brought the Makati civil case as an
independent civil action intended to exact civil liability
separately from Criminal Case No. 00-120 in a manner fully
authorized under Section 1(a) and Section 2, Rule 111 of the
Rules of Court.20 It argues that the CA correctly took cognizance
of the ruling in G.R. No. 148193, holding in its challenged
amended decision that the Makati civil case, just like the Manila
civil case, was an independent civil action instituted by virtue of
Article 33 of the Civil Code; that the Makati civil case did not
raise a prejudicial question that justified the suspension of
Criminal Case No. 00-120; and that as finally settled in G.R.
No. 148193, the Pasig civil case did not also raise any
prejudicial question, because the sole issue thereat was whether
Consing, as the mere agent of his mother, had any obligation or
liability toward Unicapital.

In his reply,21 Consing submits that the Pasig civil case that he
filed and Unicapitals Makati civil case were not intended to
delay the resolution of Criminal Case No. 00-120, nor to pre-
empt such resolution; and that such civil cases could be validly
considered determinative of whether a prejudicial question
existed to warrant the suspension of Criminal Case No. 00-120.

Did the CA err in reversing itself on the issue of the existence of

a prejudicial question that warranted the suspension of the
proceedings in the Makati criminal case?

Ruling

The petition for review on certiorari is absolutely meritless.

Consing has hereby deliberately chosen to ignore the firm

holding in the ruling in G.R. No. 148193 to the effect that the
proceedings in Criminal Case No. 00-120 could not be
suspended because the Makati civil case was an independent
civil action, while the Pasig civil case raised no prejudicial
question. That was wrong for him to do considering that the
ruling fully applied to him due to the similarity between his case
with Plus Builders and his case with Unicapital.

A perusal of Unicapitals complaint in the Makati civil case

reveals that the action was predicated on fraud. This was
apparent from the allegations of Unicapital in its complaint to
the effect that Consing and de la Cruz had acted in a "wanton,
fraudulent, oppressive, or malevolent manner in offering as
security and later object of sale, a property which they do not
own, and foisting to the public a spurious title." 22 As such, the
action was one that could proceed independently of Criminal
Case No. 00-120 pursuant to Article 33 of the Civil Code, which
states as follows:

Article 33. In cases of defamation, fraud, and physical injuries a

civil action for damages, entirely separate and distinct from the
criminal action, may be brought by the injured party. Such civil
action shall proceed independently of the criminal prosecution,
and shall require only a preponderance of evidence.

It is well settled that a civil action based on defamation, fraud

and physical injuries may be independently instituted pursuant
to Article 33 of the Civil Code, and does not operate as a
prejudicial question that will justify the suspension of a criminal
case.23 This was precisely the Courts thrust in G.R. No. 148193,
thus:

Moreover, neither is there a prejudicial question if the civil and

the criminal action can, according to law, proceed independently
of each other. Under Rule 111, Section 3 of the Revised Rules
on Criminal Procedure, in the cases provided in Articles 32, 33,
34 and 2176 of the Civil Code, 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.

xxxx

In the instant case, Civil Case No. 99-95381, for Damages and
Attachment on account of the alleged fraud committed by
respondent and his mother in selling the disputed lot to PBI is an
independent civil action under Article 33 of the Civil Code. As
such, it will not operate as a prejudicial question that will justify
the suspension of the criminal case at bar.24
Contrary to Consings stance, it was not improper for the CA to
apply the ruling in G.R. No. 148193 to his case with Unicapital,
for, although the Manila and Makati civil cases involved
different complainants (i.e., Plus Builders and Unicapital), the
civil actions Plus Builders and Unicapital had separately
instituted against him were undeniably of similar mold, i.e., they
were both based on fraud, and were thus covered by Article 33
of the Civil Code. Clearly, the Makati criminal case could not be
suspended pending the resolution of the Makati civil case that
Unicapital had filed.

As far as the Pasig civil case is concerned, the issue of

Consings being a mere agent of his mother who should not be
criminally liable for having so acted due to the property
involved having belonged to his mother as principal has also
been settled in G.R. No. 148193, to wit:

In the case at bar, we find no prejudicial question that would

justify the suspension of the proceedings in the criminal case
(the Cavite criminal case). The issue in Civil Case No. SCA
1759 (the Pasig civil case) for Injunctive Relief is whether or
not respondent (Consing) merely acted as an agent of his
mother, Cecilia de la Cruz; while in Civil Case No. 99-95381
(the Manila civil case), for Damages and Attachment, the
question is whether respondent and his mother are liable to pay
damages and to return the amount paid by PBI for the purchase
of the disputed lot. Even if respondent is declared merely an
agent of his mother in the transaction involving the sale of the
questioned lot, he cannot be adjudged free from criminal
liability. An agent or any person may be held liable for
conspiring to falsify public documents. Hence, the
determination of the issue involved in Civil Case No. SCA 1759
for Injunctive Relief is irrelevant to the guilt or innocence of the
respondent in the criminal case for estafa through falsification of
public document.25 (Words in parentheses supplied; bold
underscoring supplied for emphasis)
WHEREFORE, the Court AFFIRMS the amended decision
promulgated on August 18, 2003; and ORDERS petitioner to
pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
 FIRST DIVISION

G.R. No. 162385 July 15, 2013

SAMAR-MED DISTRIBUTION, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, AND
JOSAFAT GUTANG, Respondents.

DECISION

BERSAMIN, J.:

Although an employer may legally dismiss an employee for a

just cause, the non-observance of the requirements of due
process before effecting the dismissal leaves the employer liable
for nominal damages.

The Case

The employer appeals the decision promulgated on November

24, 20031 whereby the Court of Appeals (CA) in CA-G.R. SP
No. 74561annulled and set aside the resolution dated February
28, 2001 of the National Labor Relations Commission (NLRC)
in Cebu City dismissing the complaint for illegal dismissal 2 and
declared respondent Josafat Gutang to have been illegally
dismissed. Consequently, the CA reinstated the decision of the
Labor Arbiter, and ordered the remand of the claim to the Labor
Arbiter for the proper computation of the monetary awards.

Antecedents

Samar-Med Distribution, a sole proprietorship registered in the

name of Danilo V. Roleda (Roleda), engaged in the sale and
distribution of intravenous fluids (IVs) in Region VIII
(comprised by the several Samar and Leyte provinces). Gutang
was hired for a basic salary of P7,000.00/month and an
allowance of P2,000.00/month, and had the task of supervising
the companys sales personnel and sales agents, and of
representing Samar-Med in transactions with the government in
Region VIII.3

On August 16, 1996, Gutang filed a complaint for money claims

against Roleda/Samar-Med in the NLRC. He refiled the
complaint on March 4, 1999 because the records were
misplaced.4 He claimed that Samar-Med had difficulty paying
his compensation during his employment, resulting in his not
being paid salaries since November 1995, allowances since June
1994, and commissions from sales and 13th month pay in 1996;
that Samar-Med made illegal deductions in June 1994 and
February 1995; that he had no knowledge of any infraction that
had caused his dismissal; that he did not receive any notice
informing him of the cessation of Samar-Meds business
operations; and that he had been compelled to look for other
sources of income beginning on March 26, 1996 in order to
survive.5

Roleda/Samar-Med denied liability for Gutangs monetary

claims, contending that Gutang was not his employee but an
employee of the City Council of Manila; that Gutang had
approached and asked him if he could assist in the operation of
the business of Samar-Med in order to have extra income; that
Gutang was thus permitted to sell Samar-Meds products in his
own hometown in Region VIII; that Gutang stopped selling and
no longer returned to Manila after he was tasked to conduct an
investigation of the shortage in sales collections; 6 that there was
no dismissal of Gutang, to speak of, but abandonment on his
part; and that the complaint was a harassment suit to retaliate for
the criminal case he (Roleda) had meanwhile filed against
Gutang for misappropriating Samar-Meds funds totaling
P3,302,000.71, as reflected in the demand letter dated May 15,
1996.

Decision of the Labor Arbiter

In his decision dated October 29, 1999,7 Executive Labor

Arbiter Vito C. Bose (ELA Bose) declared Gutang an employee
of Samar-Med, and ruled that he had been illegally dismissed.
ELA Bose further ruled that Roledas allegation of abandonment
by Gutang could not be believed because no written notice was
served on Gutang to substantiate the allegation; that the
immediate filing of the complaint in 1996 disproved the claim of
abandonment; that Gutang was forced to obtain interim
employment elsewhere in March 1996 because Samar-Med
failed to pay his salary beginning November 1995; that Roleda,
as the proprietor of Samar-Med, had to pay Gutang backwages
fixed at one year only and separation pay in lieu of
reinstatement in the total amount of P171,000.00: ELA Bose
also ruled, however, that Gutangs claim for 13th month pay
could not be granted because he had been a managerial
employee exempted from the coverage of Presidential Decree
No. 851; and that Gutangs other monetary claims lacked of
factual and legal bases.

Ruling of the NLRC

The NLRC initially denied Roledas appeal on August 14, 2000

for his failure to post the required appeal bond.

Upon Roledas motion for reconsideration, the NLRC gave due

course to the appeal through its resolution of February 28, 2001,
and dismissed the complaint of Gutang,8 viz:

On the other hand, We find in the records copies of Official

Receipts signed and issued by the complainant, a copy of a
Purchase Order as well as a Voucher for the payment of the
Order which clearly shows his participation in the transactions
(pp. 71-79, Records). However, upon close examination, We
find no conflict between the Certification and the Receipts,
Purchase Order and Voucher. The certification shows that
complainant was employed by City Hall Manila from July 16,
1992 to April 30, 1994, while the Purchase Order was dated
September 9, 1994 (p. 78, records). Clearly, the transactions
entered into by complainant were made after his employment
with City Hall Manila. Indubitably, complainant was an
employee of respondent. Moreover, contrary to respondents
later denials, it already admitted complainants status as a
managerial employee when it stated in its position paper that "as
discussed above, complainant is a managerial employee." (p. 13,
Records).

That notwithstanding, We simply cannot gloss over the fact that

complainant stands charged of embezzling not just a few
thousand pesos, but Three Million (P3,000,000.00) Pesos. While
the Official Receipts, Purchase Order and Voucher proved his
status as a managerial employee, it likewise shows that he
received sums of money in behalf of respondent including the
One Million, Six Hundred Thirty-Six Thousand, Seven Hundred
Seventy-seven and Fifty-seven Centavos (1,636,777.57) paid by
the Province of Leyte as evidence by his signature (p. 79,
records).

Obviously, complainant failed to account for the money hence

the demand letter by respondents counsel dated May 15, 1996
(p. 98, records). When complainant failed to pay, the proper
complaint was filed in the Provincial Prosecutors Office Cavite,
who conducted the preliminary investigation before filing the
appropriate Information for Estafa in Court. Indeed, the
certification appended to the Information signed by Manuel
Tano, Asst. Provincial Prosecutor, reads as follows: "It is hereby
certified as shown by the records that the preliminary
investigation in this case has been conducted by the Asst. City
Prosecutor Mary June P. Orquiza; that upon review of the
records, there is reasonable ground to believe that the crime
charged has been committed and that the accused is probably
guilty thereof." (p. 26-27, records). Such findings made by a
fellow government agency especially tasked with resolving
criminal complaints filed before it is persuasive and deserves
full weight and credence. Pursuant thereto, a Warrant of Arrest
was issued by the RTC, Branch 20, Imus, Cavite (p. 28,
records).
Under the above circumstances, respondent has sufficient
reasons to lose its trust and confidence on the complainant.
More so, in this case where complainant is a managerial
employee. "When an employee accepts a promotion to a
managerial position or to an office requiring full trust and
confidence, she gives up some of the rigid guarantees available
to an ordinary worker. Infraction which if committed by others
would be overlooked or condoned or penalties mitigated, may
be visited with more serious disciplinary action." (Metro Drug
Corporation vs. NLRC, 143 SCRA 132).

Complainant claimed that he had elevated on appeal to the

Department of Justice the findings of the Provincial Prosecutor.
Whatever the outcome, the fact remains that the trust and
confidence reposed on him by respondent has been breached as
respondent has ample reasons to distrust him. "it has been
repeatedly held by this Court in a long line of decisions that
where an employee has been guilty of breach of trust or his
employer has ample reason to distrust him, a labor tribunal
cannot deny the employer the authority to dismiss the employee.
Loss of trust and confidence by management justifies grant of
clearance to dismiss. Indeed, it is an established principle that an
employer cannot be compelled to continue in employment an
employee guilty of acts inimical to the interests of the employer
and justifying loss of confidence in him. (San Miguel Corp. vs.
Deputy Minister of Labor and Employment, 145 SCRA 196).

xxxx

"Loss of confidence as a ground for dismissal does not entail

proof beyond reasonable doubt of the employees misconduct. It
is enough that there be "some basis" for such loss of confidence
or that "the employer has reasonable grounds to believe, if not to
entertain the moral conviction that the employee concerned is
responsible for the misconduct and that the nature of his
participation therein rendered him absolutely unworthy of the
trust and confidence demanded by his position." (Tabacalera
Insurance Co. vs. NLRC, 152 SCRA 667).
WHEREFORE, premises considered, Our decision is hereby
MODIFIED, reinstating and giving due course to respondents
appeal. The decision of the Executive Labor Arbiter is hereby
SET ASIDE and a new one entered DISMISSING the complaint
for illegal dismissal.

SO ORDERED.

Gutang sought reconsideration, but the NLRC denied his

motion.

Ruling of the CA

Gutang then assailed the outcome in the NLRC through a

petition for certiorari that he filed in the CA, submitting the
following issues, namely:

WHETHER OR NOT THE NLRC GRAVELY ABUSED ITS

DISCRETION WHEN IT ADMITTED PRIVATE
RESPONDENTS APPEAL DESPITE THE LATE
POSTING OF AN APPEAL BOND.
WHETHER OR NOT PETITIONER WAS ILLEGALLY
DISMISSED.
On November 24, 2003, the CA promulgated its decision, 9 to
wit:

The petition is partly meritorious.

On the first issue, this Court finds that the NLRC did not abuse
its discretion when it considered private respondents appeal as
perfected. Indeed, the Supreme Court has relaxed the
requirement of posting a supersedeas bond for the perfection of
appeal when there is a substantial compliance with the rules
(Star Angel Handicraft v. NLRC, 236 SCRA 580, Globe General
Services and Security Agency v. NLRC, 249 SCRA 408).

It appears from the records that private respondent filed a

manifestation to allow the late filing of a surety bond within the
period to appeal. Thereafter, it filed the surety bond on March 8,
2000. As such, the NLRC acted within its discretion when it
reconsidered its resolution dismissing the appeal for failure to
post a bond and considered petitioners manifestation as a
motion to reduce bond. It is worthy to note that the purpose of
the posting of a bond is to assure the workers that if they finally
prevail in the case the monetary award will be given to them
upon dismissal of the employers appeal. It is further meant to
discourage employers from using the appeal to delay or evade
payment of their obligations to the employees (Coral Point
Development Corporation v. NLRC, 336 SCRA 554).

On the second issue, however, the Court finds the same

meritorious. It is clear from the records that there is an
employer-employee relationship between the parties. As such, a
valid termination of the same by the employer may only be had
after the latter has complied with both the substantive and
procedural requirements of the law. The Labor Code in Articles
282 and 283 provide for the just and authorized causes for
termination while the procedural requirement pertains to the two
notices and hearing requirements. These requirements provide
that the employer must: 1) serve notice to the employee
informing him/her of the grounds for his/her possible
termination, 2) give the employee a chance to be heard, and 3)
serve termination notice to the employee therefore (Rules
Implementing the Labor Code, Rule XXIII, Section 2). The
employer has the burden of proving the same.

Based on the foregoing requirements, petitioners termination

from employment is illegal. Private respondent submitted that it
was petitioner who abandoned his job. The records, however, is
bereft of proof to show abandonment on the part of petitioner. It
is settled that for abandonment to be a just cause for termination,
the following requisites must concur: 1) the employees
intention to abandon employment, and 2) overt acts from which
such intention may be inferred as when the employee shows
no desire to resume work (Hyatt Taxi Service, Inc. v. Catinoy,
359 SCRA 686). It is well to note that petitioner looked for
another source of income after he was not paid his salary for
several months. Thereafter, he filed a complaint for money
claims against private respondent only several months after he
decided to look for other sources of income. This circumstance
would show that petitioner had no intention to abandon his
work.

Moreover, even granting that petitioner abandoned his job,

private respondent still failed to provide petitioner with the
procedural due process required by law consisting of the two
notices and hearing requirements. Thus, since private respondent
failed to prove the valid termination of petitioner, the decision of
the Labor Arbiter granting the money claims of petitioner
including his backwages and separation pay is proper.

WHEREFORE, based on the foregoing, the instant petition is

hereby GRANTED. The assailed decision and resolution of the
NLRC are ANNULLED and SET ASIDE. The decision of the
Labor Arbiter is hereby REINSTATED. The records of the case
are remanded to the Labor Arbiter for proper computation of the
monetary awards.

SO ORDERED.

As stated, the CA denied Roledas motion for reconsideration.10

Issues

Hence, this appeal by petition for review, with Roleda urging for
our consideration the following issues:

1. Whether the fact that respondent's complaint against Samar-

Med before the Labor Arbiter did not include "illegal dismissal"
as his cause of action means that the instant case does not
involve the issue of "illegal dismissal";

2. Whether the fact that respondent crossed out the word

"dismissed" and replaced it with the word "stopped" is
indicative that he voluntarily abandoned his work and had no
intention to continue employment with Samar-Med;

3. Whether the notice requirement was complied with when

respondent received the demand letter from Samar-Med to
return the amount of P3,302,000.71;

4. Assuming that respondent was dismissed, the same was

justified as he was guilty of loss of trust and confidence and/or
abandonment;

5. Whether there was a need for the CA to determine anew the

facts of the case considering that NLRC's decision and findings
were supported by substantial evidence.11

In sum, Roleda harps on whether or not Gutangs dismissal was

a proper issue even if he had not raised it in his complaint; and
on whether or not Gutangs dismissal had been justified on the
ground of the latters abandonment and/or breach of trust and
confidence.

Ruling of the Court

The petition is partly meritorious.

At the outset, we must stress that only questions of law may be

raised in and resolved in this appeal under Rule 45 of the Rules
of Court. The Court is not a trier of facts and does not routinely
re-examine the evidence presented by the contending parties.
Nonetheless, although the question of whether or not Gutang
had been illegally dismissed from employment or had
abandoned his job was factual and should not now be delved
into, the divergence in the findings of fact by the Labor Arbiter
and the NLRC is a basis for the Court to open and scrutinize the
records to determine whether the CA, in the exercise of its
certiorari jurisdiction, erred in annulling and setting aside the
decision of the NLRC.
Firstly, petitioners contention that the validity of Gutangs
dismissal should not be determined because it had not been
included in his complaint before the NLRC is bereft of merit.
The complaint of Gutang was a mere checklist of possible
causes of action that he might have against Roleda. Such
manner of preparing the complaint was obviously designed to
facilitate the filing of complaints by employees and laborers
who are thereby enabled to expediently set forth their grievances
in a general manner.12 But the non-inclusion in the complaint of
the issue on the dismissal did not necessarily mean that the
validity of the dismissal could not be an issue. The rules of the
NLRC require the submission of verified position papers by the
parties should they fail to agree upon an amicable settlement,
and bar the inclusion of any cause of action not mentioned in the
complaint or position paper from the time of their submission by
the parties. In view of this, Gutangs cause of action should be
ascertained not from a reading of his complaint alone but also
from a consideration and evaluation of both his complaint and
position13 paper.

With Gutangs position paper having alleged not only the bases
for his money claims, but also that he had been "compelled to
look for other sources of income in order to survive" and that his
employment had not been formally terminated, thereby entitling
him to "full backwages aside from his other claims for unpaid
monies,"14 the consideration and ruling on the propriety of
Gutangs dismissal by the Labor Arbiter and the NLRC were
proper.

Secondly, Roleda assails the conclusion that Gutang had been

illegally dismissed from his employment, insisting instead that
he had voluntarily stopped working and had thus abandoned his
job.

The onus of proving that an employee was not dismissed or, if

dismissed, his dismissal was not illegal fully rests on the
employer, and the failure to discharge the onus would mean that
the dismissal was not justified and was illegal. 15 In Gutangs
case, Roleda tendered no showing outside of his mere
allegations to substantiate his averment of abandonment by
Gutang. Moreover, although Gutang had undoubtedly stopped
working for Samar Med, his doing so had been for a justifiable
reason, consisting in the non-payment of his salary since
November 1995 and his being forced to stop working for Samar
Med to enable him to seek employment elsewhere, albeit
temporarily, in order to survive.

Thirdly, the CA concluded that Gutangs termination from

employment had been illegal. It buttressed its conclusion on the
absence of proof of abandonment of his employment by Gutang.
It observed that Gutang had not been shown to have had no
desire to resume work; and that instead Gutang had been forced
to look for another gainful employment primarily because of
Roledas non-payment of his salary for several months, which
actually proved that Gutang had no intention to abandon his
work.

It is plain, however, that the NLRC did not gravely abuse its
discretion in concluding that Gutangs dismissal had been
warranted. We note that Gutang was a managerial employee
whom Roleda had vested with confidence on delicate matters,
such as the custody, handling, care and protection of Samar
Meds properties and funds, as well as its operations and
transactions in Region VIII. Gutang was shown to have failed to
account for and to turn over his sales collections. In that regard,
Roledas filing of the criminal case against Gutang and the
public prosecutors finding of a prima facie case for the offense
charged after preliminary investigation amounted to substantial
evidence of Gutangs breach of the trust and confidence reposed
in him, a just cause to terminate the employment based on loss
of trust and confidence.16

Under Article 282(c) of the Labor Code, an employer may

terminate an employees employment on the ground of the
latters fraud or willful breach of the trust and confidence
reposed in him. For loss of trust and confidence to constitute a
sufficient ground for termination, the employer must have a
reasonable ground to believe, if not to entertain the moral
conviction, that the employee was responsible for the
misconduct, and that the nature of his participation therein
rendered him absolutely unworthy of the trust and confidence
demanded by his position.17 Those requirements were
undeniably met in Gutangs case.

The finding of a just cause to dismiss Gutang notwithstanding,

we also find that he was not accorded due process. Roleda as the
employer had the obligation to send to him two written notices
before finally dismissing him. Article 277 of the Labor Code, as
amended, enunciated this requirement of two written notices,
viz:

Article 277. Miscellaneous provisions. x x x

xxxx

(b) Subject to the constitutional right of workers to security of

tenure and their right to be protected against dismissal except for
a just and authorized cause and without prejudice to the
requirement of notice under Article 283 of this Code, the
employer shall furnish the worker whose employment is sought
to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the
assistance of his representative if he so desires in accordance
with company rules and regulations promulgated pursuant to
guidelines set by the Department of Labor and Employment.
Any decision taken by the employer shall be without prejudice
to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the
National Labor Relations Commission. The burden of proving
that the termination was for a valid or authorized cause shall rest
on the employer. The Secretary of the Department of Labor and

Employment may suspend the effects of the termination pending

resolution of the dispute in the event of a prima facie finding by
the appropriate official of the Department of Labor and
Employment before whom such dispute is pending that the
termination may cause a serious labor dispute or is in
implementation of a mass lay-off.18 (Bold underscoring supplied
for emphasis) x x x x

The requirement was also imposed in Section 219 and Section7,20

Rule I, Book VI of the Implementing Rules of the Labor Code.

The first written notice would inform Gutang of the particular

acts or omissions for which his dismissal was being sought. The
second written notice would notify him of the employers
decision to dismiss him. But the second written notice must not
be made until after he was given a reasonable period after
receiving the first written notice within which to answer the
charge, and after he was given the ample opportunity to be heard
and to defend himself with the assistance of his representative, if
he so desired.21 The requirement was mandatory.22

Gutangs receipt of the demand letter from Samar-Med to return

the amount of P3,302,000.71 was certainly not even a
substantial compliance with the twin-notice requirement,
because the purpose of the demand letter was different from
those defined for the sending of the required notices. Nor was he
thereby allowed a meaningful opportunity to be heard or to be
notified of his impending termination.

Conformably with the ruling in Agabon v. National Labor

Relations Commission,23 the lack of statutory due process would
not nullify the dismissal or render it illegal or ineffectual when
the dismissal was for just cause. But the violation of Gutangs
right to statutory due process clearly warranted the payment of
indemnity in the form of nominal damages, whose amount is
addressed to the sound discretion of the Court taking into
account the relevant circumstances. Accordingly, the Court
deems the amount of P30,000.00 as nominal damages sufficient
vindication of Gutang's right to due process under the
circumstances.
WHEREFORE, the Court PARTIALLY GRANTS the petition
for review; REVERSES AND SETS ASIDE the decision
promulgated on November 24, 2003; and REINSTATES the
resolution dated February 28, 2001 of the National Labor
Relations Commission in Cebu City, subject to the
MODIFICATION that the petitioner shall pay respondent
Josafat N. Gutang the sum of !!30,000.00 by way of nominal
damages for non-compliance with statutory due process.

No pronouncements on costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
 EN BANC

A.M. OCA IPI No. 02-1321-P July 16, 2013

CONCERNED CITIZEN, Complainant,

vs.
NONITA V. CATENA, COURT STENOGRAPHER III,
REGIONAL TRIAL COURT, BRANCH 50, PUERTO
PRINCESA, PALAWAN, Respondent.

DECISION

BERSAMIN, J.:

Gross dishonesty on the part of an employee of the Judiciary is a

very serious offense that must be severely punished. Dismissal
may be meted on the employee, unless she had meanwhile
ceased to be an employee, in which case a high fine shall be
imposed.

Antecedents

This administrative case stemmed from an undated anonymous

letter-complaint charging respondent Nonita Catena (Catena), a
Court Stenographer III of Branch 50 of the Regional Trial Court
in Puerto Princesa City, Palawan (RTC) with gross dishonesty
she allegedly committed in connection with her Civil Service
eligibility accusing her of having caused another person to take
the Civil Service Eligibility Examination in her stead.

The letter reads,1 thus:

Sir:
I would like to bring to your attention an
anomaly brought about by one Noneta
Catina.
She is permanently employed as
stenographer under the Regional Trial
 Court (RTC) Branch 50 here in the Justice
Hall of Puerto Princesa City.
In 1998, somebody took the stenographers
examination in her behalf in Leyte. She
allegedly passed said examination that
gave her the permanent position of
stenographer in 1998.
May I request for a verification and if
found guilty, I hope CSC will do something
in fairness to those who are taking your
Stenographers examination.
Thank you very much and more power!
Concerned Citizen
On January 18, 2002, Justice Jose P. Perez, a Member of this
Court, as Deputy Court Administrator, forwarded the complaint
against Catena for investigation by the Legal Division of the
Office of the Court Administrator (OCA). The investigation
revealed discrepancies between the pictures, signatures and
other details contained in the Career Service Examination permit
submitted to the Civil Service Commission (CSC), on one hand,
and the 201 file of Catena, on the other.2

On February 21, 2002, Justice Presbitero J. Velasco, a Member

of this Court, the Court Administrator then, directed Catena to
comment within ten days on the anonymous complaint.3

Catena implored the OCA for a 30-day extension of the period

within which to submit her comment.4 Despite her request being
granted, she failed to submit a comment, causing the Court to
issue a tracer letter on September 24, 2002,5 but still enjoining
her to comply with the previous directive to file a comment
within five days from notice, or else the complaint would be
resolved without her comment.
On August 13, 2003, the OCA recommended that a resolution
addressed to Catenas home and office addresses requiring her to
comment within 10 days from notice be issued.6 On October 1,
2003, therefore, the Court, after noting the anonymous
complaint, required Catena to comment on it within 10 days
from notice.7

Catena still failed to comment on the complaint thereafter,

prompting the Court to require her on March 17, 2004 to show
cause why she should not be disciplinarily dealt with or held in
contempt for such failure, and to comply with the October 1,
2003 resolution by submitting the comment within 10 days. 8
Subsequently, on November 24, 2004, the Court issued another
resolution to reiterate the show-cause order of March 17, 2004.9

On March 9, 2005, however, Judge Nelia Yap-Fernandez of the

RTC formally informed the Court that Catena had already
resigned from her position effective on January 2, 2003.10

In view of this communication, the Court resolved on April 11,

2005, to await the compliance of Catena with the resolution
dated November 24, 2004.11 On September 26, 2005, the Court
required Judge Yap-Fernandez to provide Catenas current and
correct address within 15 days from notice because Catena
continued to ignore the previous resolutions.12

Eventually on February 12, 2007, the Court directed the Branch

Clerk of Court of the RTC to provide Catenas current and
correct address within 10 days13 because of Judge Yap-
Fernandezs intervening disability retirement.14 In turn, Ms.
Jessie C. Gipal, as Officer-in-Charge of the RTC, complied, and
furnished Catenas current and correct address to be at Purok
Sandiwa, Brgy. New Princess 5300, Puerto Princesa City,15
which compliance was duly noted on June 25, 2007. 16
Subsequently, on February 4, 2008, the Court considered as
served on Catena the previous resolutions of June 25 2007,
October 1, 2003, March 17, 2004 and November 24, 2004
because of the return on the service at that address being
"Return to Sender-unclaimed."17

On April 28, 2008, the Court resolved anew to await Catenas

comment,18 and decided to dispense with her comment only on
August 20, 2008, and to refer the complaint to the OCA for
evaluation, report and recommendation.19

The complaint was later on re-docketed as a regular

administrative matter on the basis of the recommendation made
on October 7, 2009 by Justice Perez, then already the Court
Administrator, who recommended that Catena be held liable for
dishonesty and be dismissed from the service with prejudice to
re-employment in any branch, agency, instrumentality of the
government, including government owned and controlled
corporations.20

On October 26, 2009, the Court required Catena to manifest if

she was willing to submit the case for resolution on the basis of
the records and pleadings filed within 10 days from notice. 21 On
December 13, 2010, the Court resent the resolution because the
postal carrier reported that Catena as the addressee had been
"out of town" and did not receive the mail matter.22

After the subsequent attempt to serve still failed because, as

noted on the envelope, Catena as the addressee had "moved
out," the Court deemed the resolution of October 26, 2009 as
served on her on April 13, 2011.23

Still, on May 30, 2011,24 the Court directed the Director of the
National Bureau of Investigation (NBI) to locate the
whereabouts of Catena and to submit a report thereon within 10
days from notice.

On August 5, 2011, Head Agent (HA) Rosauro D. Bautista of

the NBI District Office in Puerto Princesa City sent the
following report, viz:
Respondent, NONITA V. CATENA was located at her residence
in Purok Sandiwa, Barangay Tiniguiban, Puerto Princesa but
refused to sign the herein NOTICE, nevertheless received the
document. Agent of the Puerto Princesa District Office served
the herein NOTICE on respondent on July 25, 2011 and the
same was communicated to the Office of the Deputy Director
for Operations Services in Manila. Photograph of herein
respondent was taken for identitifcation and reference
purposes.25

On August 9, 2011, NBI Director Magtanggol Gatdula, citing

and quoting the foregoing report of HA Bautista, submitted his
compliance with the resolution of May 30, 2011,26 praying that
the compliance be accepted.

Hence, we resolve.

Ruling

Based on its investigation, the OCA found discrepancies

between the pictures, signatures and other details contained in
Catenas Career Service Examination permit submitted to the
CSC, on one hand, and those found in her 201 file, 27 on the
other; and concluded that she was thereby guilty of gross
dishonesty. It recommended her dismissal from the service, with
prejudice to re-employment in any branch, agency,
instrumentality or agency of the government including
government-owned and -controlled corporations.28

The findings and recommendation of the OCA, being based on

established facts, are well-taken, but we modify the
recommended sanction in view of Catenas intervening
resignation from the service effective on January 2, 2003.

Let it be said at the outset that Catenas resignation from the

service did not cause the Court to lose its jurisdiction to proceed
against her in this administrative case. Her cessation from office
by virtue of her intervening resignation did not warrant the
dismissal of the administrative complaint against her, for the act
complained of had been committed when she was still in the
service. Nor did such cessation from office render the
administrative case moot and academic. Indeed, the Courts
jurisdiction at the time of the filing of the administrative
complaint was not lost because the respondent had ceased in
office during the pendency of the case.29 Otherwise, exacting
responsibility for administrative liabilities incurred would be
easily avoided or evaded.

The point of the complaint against Catena is that she

misrepresented in her Personal Data Sheet (PDS) that she held a
Sub-Professional Civil Service Eligibility, but in truth another
person had taken the Civil Service Examination in her place.
Her claim that she held a Sub-Professional Civil Service
Eligibility with a rating of 86.48%, as stated in her PDS
submitted to the Court, was, therefore, entirely false.30

Attempting to disprove the charge that she did not take the
eligibility examination herself, Catena submitted her approved
leave application and her daily time records corresponding to
the period of the eligibility examination. Her submission was
really not enough, however, because said documents did not
establish that she had herself taken the examination, or that she
had been personally at the testing site on the date of the
examination. At best, the approved leave application attested
only that she had applied for a leave of absence from work, and
that her application had been approved, while her daily time
records affirmed only that she did not report to her office on the
dates that she had supposedly gone on leave.

Perhaps anticipating that her submission of the daily time

records and approved leave application would not suffice to
support her explanation, she stated in her request for the 30-day
extension to file the comment that she would be needing the
time to gather the documents she would submit as her evidence
to disprove the charge of gross dishonesty,31 specifically: (1) a
certification from the head office of the Negros Navigation
Company in Manila, to show that she had travelled from Puerto
Princesa City to Iloilo City, and from Cebu City to Leyte on the
date of the examination; (2) affidavits of residents of Leyte
attesting to her being in the locality of the examination and to
her taking the examination herself; (3) records on file with the
CSC office in Leyte; and (4) other evidence of similar nature.
But ultimately she did not come forward with the promised
documentary evidence, notwithstanding her awareness of the
desire of the Court to hear her side.

Compounding Catenas situation was her unusual silence on the

complaint despite the very ample opportunity accorded her to
comment. Being conscious of the gravity of the complaint
against her, she should have come forward to explain her side.
In that regard, too, we have to stress that the directives for her to
comment were not mere requests to be lightly taken, but firm
commands to be obeyed without the least delay.32 What her
silence signified was that she had no desire to clear her name
and to save her employment in the Judiciary. Worse, her silence
now also signifies that she had nothing to say in her own
defense, because it was naturally expected of her based on the
natural instinct of man for self-preservation to resist the serious
charge if it was untrue and unfair. Her silence in the face of the
accusation of gross dishonesty was justifiably construed as her
implied admission of the truth thereof.33

Considering that Catenas misrepresentation of her eligibility

concerned a material fact that enabled her to secure her
appointment equated to her deliberate fabrication of the truth
concerning her eligibility, she was guilty of gross dishonesty.
She should not be allowed to remain in the service of the
Judiciary, because no other office in the Government exacted a
greater demand for mortal righteousness from an official or
employee than a position in the Judiciary.34

A finding of dishonesty against an employee in the Civil Service

carries with it the penalty of dismissal. Under Rule IV Section
52 (A) (1) of the Revised Uniform Rules on Administrative
Cases in the Civil Service Rules (Revised Uniform Rules),
dishonesty is classified as a grave offense that is already
punishable by dismissal from the service even at the first
offense.

In addition, Section 57 and Section 58 of the Revised Uniform

Rules provide as follows:

Section 57. Administrative Disabilities/Accessories to

Administrative Penalties.

a. Cancellation of eligibility

b. Forfeiture of retirement benefits.

c. Disqualification for reinstatement or reemployment.

d. Disqualification for promotion.

e. Bar from taking any Civil Service Examination

Section 58. Administrative Disabilities Inherent in Certain

Penalties.

a. The penalty of dismissal shall carry with it that of cancellation

of eligibility, forfeiture of retirement benefits, and the perpetual
disqualification for reemployment in the government service,
unless otherwise provided in the decision.

b. The penalty of transfer shall carry with it disqualification for

promotion for a period of six (6) months from the date of
respondent reports to the new position or station.

c. The penalty of demotion shall carry with it disqualification for

promotion at the rate of two (2) months for every step or one (1)
month for every range of salary by which he was demoted to be
computed from the date respondent reports to the new position
or station.1wphi1

d. The penalty of suspension shall carry with it disqualification

for promotion corresponding to the period of suspension.
e. The penalty of fine shall carry with it disqualification for
promotion for a period of twice the number of days he was
fined.

f. The penalty of fine shall be paid to the agency imposing the

same, computed on the basis of respondents salary at the time
the decision becomes final and executor.

g. The following are the Guidelines for the payment of fine:

xxxx

In Civil Service Commission v. Macud,35 the penalty of

dismissal was prescribed with the accessory penalties against
respondent who had been found guilty of making a false
declaration in her PDS that she had passed the Professional
Board Examination for Teachers. In Cruz v. Civil Service
Commission36 and Civil Service Commission v. Sta. Ana,37 the
employees found guilty of similar offenses were dismissed. In
Cruz, Zenaida Paitim had masqueraded as Gilda Cruz, and had
taken the Civil Service examination in lieu of Cruz. Both Paitim
and Cruz were meted the penalty of dismissal from the service.
In Sta. Ana, another person had taken the Civil Service
examination for Sta. Ana, who was held guilty of dishonesty and
dismissed from the service.

We do not deviate from such precedents. Catenas dismissal

from the service is the appropriate penalty, with her eligibility to
be cancelled, her retirement benefits to be forfeited, and her
disqualification from reemployment in the government service
to be perpetual. Nonetheless, we do not forfeit her accrued leave
credits to accord with the ruling in Sta. Ana.38

Catenas intervening resignation necessarily means that the

penalty of dismissal could no longer be implemented against
her. Instead, fine is imposed, the determination of the amount of
which is subject to the sound discretion of the Court. 39 As earlier
clarified, the resignation did not prevent this resolution from
being made, because resignation should not be used as a
convenient means or strategy to evade administrative liability.40

Section 56 (e) of Rule IV of the Revised Uniform Rules

provides that the penalty of fine shall be in an amount not
exceeding the salary for six months had respondent not resigned,
the rate for which is that obtaining upon at the time of her
resignation.

Finally, even though her penalty is a fine, she should still suffer
the accessory penalty of perpetual disqualification from re-
employment in the Government that the penalty of dismissal
carried. A contrary holding would have the undesirable effect of
giving the erring employee the means to avoid the accessory
penalty by the simple expedient of resigning.

Let it be stressed that all court employees of the Judiciary, being

public servants in an office dispensing justice, must always act
with a high degree of professionalism and responsibility. Their
conduct must not only be characterized by propriety and
decorum, but must also be in accordance with the law and court
regulations. They should be models of uprightness, fairness and
honesty, for that is the only way to maintain the people's respect
for and faith in the Judiciary. They should avoid any act or
conduct that would diminish public trust and confidence in the
courts.41

WHEREFORE, the Court FINDS and DECLARES NONITA V.

CATENA, former Court Stenographer III, Branch 50, Regional
Trial Court in Puerto Princesa City, Palawan, GUILTY of
GROSS DISHONESTY; and ORDERS her to pay a FINE
equivalent to her salary for six months computed at the salary
rate for her former position at the time of her resignation, with
prejudice to her re-employment in any branch of the
Government, including government-owned or -controlled
corporations.
In the event that her leave credits are insufficient to answer for
the fine, NONITA V. CATENA shall pay the fine to the Court
within 10 days from the date of finality of this decision.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
 EN BANC

A.C. No. 6664 July 16, 2013

FERDINAND A. SAMSON, Complainant,

vs.
ATTY. EDGARDO O. ERA, Respondent.

DECISION

BERSAMIN, J.:

An attorney who wittingly represents and serves conflicting

interests may be suspended from the practice of law, or even
disbarred when circumstances so warrant.

Antecedents

Ferdinand A. Samson has brought this complaint for disbarment

charging respondent Atty. Edgardo O. Era with violation of his
trust and confidence of a client by representing the interest of
Emilia C. Sison, his present client, in a manner that blatantly
conflicted with his interest.

Samson and his relatives were among the investors who fell
prey to the pyramiding scam perpetrated by ICS Exports, Inc.
Exporter, Importer, and Multi-Level Marketing Business (ICS
Corporation), a corporation whose corporate officers were led
by Sison. The other officers were Ireneo C. Sison, William C.
Sison, Mimosa H. Zamudio, Mirasol H. Aguilar and Jhun Sison.

Samson engaged Atty. Era to represent and assist him and his
relatives in the criminal prosecution of Sison and her group.
Pursuant to the engagement, Atty. Era prepared the demand
letter dated July 19, 2002 demanding the return or refund of the
money subject of their complaints. He also prepared the
complaint-affidavit that Samson signed and swore to on July 26,
2002. Subsequently, the complaint-affidavit charging Sison and
the other corporate officials of ICS Corporation with several
counts of estafa1was presented to the Office of the City
Prosecutor of Quezon City (OCPQC). After the preliminary
investigation, the OCPQC formally charged Sison and the others
with several counts of estafa in the Regional Trial Court, Branch
96 (RTC), in Quezon City.2

In April 2003, Atty. Era called a meeting with Samson and his
relatives to discuss the possibility of an amicable settlement
with Sison and her cohorts. He told Samson and the others that
undergoing a trial of the cases would just be a waste of time,
money and effort for them, and that they could settle the cases
with Sison and her group, with him guaranteeing the turnover to
them of a certain property located in Antipolo City belonging to
ICS Corporation in exchange for their desistance. They acceded
and executed the affidavit of desistance he prepared, and in turn
they received a deed of assignment covering land registered
under Transfer Certificate of Title No. R-4475 executed by
Sison in behalf of ICS Corporation.3

Samson and his relatives later demanded from Atty. Era that
they be given instead a deed of absolute sale to enable them to
liquidate the property among themselves. It took some period of
negotiations between them and Atty. Era before the latter
delivered to them on November 27, 2003 five copies of a deed
of absolute sale involving the property. However, Atty. Era told
them that whether or not the title of the property had been
encumbered or free from lien or defect would no longer be his
responsibility. He further told them that as far as he was
concerned he had already accomplished his professional
responsibility towards them upon the amicable settlement of the
cases between them and ICS Corporation.4

When Samson and his co-complainants verified the title of the

property at the Registry of Deeds and the Assessors Office of
Antipolo City, they were dismayed to learn that they could not
liquidate the property because it was no longer registered under
the name of ICS Corporation but was already under the name of
Bank Wise Inc.5 Upon their urging, Atty. Era negotiated as their
counsel with ICS Corporation.

Due to the silence of Atty. Era for sometime thereafter, Samson

and his group wrote to him on September 8, 2004 to remind him
about his guarantee and the promise to settle the issues with
Sison and her cohorts. But they did not hear from Atty. Era at
all.6

During the hearings in the RTC, Atty. Era did not anymore
appear for Samson and his group. This forced them to engage
another lawyer. They were shocked to find out later on,
however, that Atty. Era had already been entering his appearance
as the counsel for Sison in her other criminal cases in the other
branches of the RTC in Quezon City involving the same
pyramiding scam that she and her ICS Corporation had
perpetrated.7 In this regard, they established Atty. Eras legal
representation of Sison by submitting several certified copies of
the minutes of the proceedings in the criminal cases involving
Sison and her group issued by Branch 102 and Branch 220 of
the RTC in Quezon City showing that Atty. Era had appeared as
the counsel of Sison in the cases for estafa pending and being
tried in said courts.8 They also submitted a certification issued
on November 3, 2004 indicating that Atty. Era had visited Sison,
an inmate in the Female Dormitory in Camp Karingal, Sikatuna
Village, Quezon City as borne out by the blotter logbook of that
unit.9

On January 20, 2005, Samson executed an affidavit alleging the

foregoing antecedents, and praying for Atty. Eras disbarment on
the ground of his violation of the trust, confidence and respect
reposed in him as their counsel.10

Upon being required by the Court to comment on the complaint

against him within 10 days from notice, Atty. Era several times
sought the extension of his period to file the comment to
supposedly enable him to collate documents relevant to his
comment.11 The Court granted his request and allowed him an
extension totaling 40 days. But despite the lapse of the extended
period, he did not file his comment.

On September 27, 2005, Samson reiterated his complaint for

disbarment against Atty. Era.12

By its resolution dated March 1, 2006,13 the Court required Atty.

Era to show cause why he should not be disciplinarily dealt with
or held in contempt for such failure to submit his comment.

In the comment that he subsequently filed on April 11, 2006 in

the Office of the Bar Confidant,14 Atty. Era alleged that the
conclusion on April 23, 2002 of the compromise settlement
between Samson and his group, on one hand, and Sison and her
ICS Corporation, on the other, had terminated the lawyer-client
relationship between him and Samson and his group; and that on
September 1, 2003, he had been appointed as counsel de officio
for Sison by Branch 102 of the RTC in Quezon City only for
purposes of her arraignment.

On July 17, 2006, the Court referred the case to the Integrated
Bar of the Philippines (IBP) for investigation, report and
recommendation.15

In his report and recommendation dated October 1, 2007, 16 the

Investigating Commissioner of the IBP Commission on Bar
Discipline (IBPCBD) found Atty. Era guilty of misconduct for
representing conflicting interests, for failing to serve his clients
with competence and diligence, and for failing to champion his
clients cause with wholehearted fidelity, care and devotion.

The Investigating Commissioner observed that the evidence did

not sustain Atty. Eras claim that his legal services as counsel for
Samson and his group had terminated on April 23, 2003 upon
the execution of the compromise settlement of the criminal
cases; that he even admitted during the mandatory conference
that there was no formal termination of his legal services; 17 that
his professional obligation towards Samson and his group as his
clients did not end upon execution of the settlement agreement,
because he remained duty-bound to see to it that the settlement
was duly implemented; that he also had the obligation to appear
in the criminal cases until their termination; and that his
acceptance of the engagement to appear in behalf of Sison
invited suspicion of his double-dealing and unfaithfulness.

The Investigating Commissioner recommended that Atty. Era be

suspended from the practice of law for six months, viz:

From the foregoing, it is clear that respondent is guilty of

misconduct for representing conflicting interests, failing to serve
his client, complainant herein, with competence and diligence
and champion the latters cause with wholehearted fidelity, care
and devotion. It is respectfully recommended that respondent be
SUSPENDED from the practice of law for a period of six (6)
months and WARNED that a repetition of the same or similar
act would merit a more severe penalty.18

In Resolution No. XVIII-2007-195 passed on October 19,

2007,19 the IBP Board of Governors adopted and approved the
report and recommendation of the Investigating Commissioner
of the IBP-CBD, with the modification that Atty. Era be
suspended from the practice of law for two years.

On June 9, 2012, the IBP Board of Governors passed Resolution

No. XX-2012-180,20 denying Atty. Eras motion for
reconsideration and affirming Resolution No. XVIII-2007-195.

The IBP Board of Governors then forwarded the case to the

Court pursuant to Section 12(b), Rule 139-B of the Rules of
Court.21

On October 17, 2012, Atty. Era filed a Manifestation and Motion

(With Leave of Court).22 However, on November 26, 2012, the
Court merely noted the manifestation, and denied the motion for
its lack of merit.23

Ruling
We affirm the findings of the IBP.

In his petition for disbarment, Samson charged Atty. Era with

violating Canon 15 of the Code of Professional Responsibility
for representing conflicting interests by accepting the
responsibility of representing Sison in the cases similar to those
in which he had undertaken to represent Samson and his group,
notwithstanding that Sison was the very same person whom
Samson and his group had accused with Atty. Eras legal
assistance. He had drafted the demand letters and the complaint-
affidavit that became the bases for the filing of the estafa
charges against Sison and the others in the RTC in Quezon City.

Atty. Eras contention that the lawyer-client relationship ended

when Samson and his group entered into the compromise
settlement with Sison on April 23, 2002 was unwarranted. The
lawyer-client relationship did not terminate as of then, for the
fact remained that he still needed to oversee the implementation
of the settlement as well as to proceed with the criminal cases
until they were dismissed or otherwise concluded by the trial
court. It is also relevant to indicate that the execution of a
compromise settlement in the criminal cases did not ipso facto
cause the termination of the cases not only because the approval
of the compromise by the trial court was still required, but also
because the compromise would have applied only to the civil
aspect, and excluded the criminal aspect pursuant to Article
2034 of the Civil Code.24

Rule 15.03, Canon 15 of the Code of Professional

Responsibility provides that: "A lawyer shall not represent
conflicting interests except by written consent of all concerned
given after a full disclosure of the facts." Atty. Era thus owed to
Samson and his group entire devotion to their genuine interest,
and warm zeal in the maintenance and defense of their rights. 25
He was expected to exert his best efforts and ability to preserve
the clients cause, for the unwavering loyalty displayed to his
clients likewise served the ends of justice.26
In Hornilla v. Atty. Salunat,27 the Court discussed the concept of
conflict of interest in this wise:

There is conflict of interest when a lawyer represents

inconsistent interests of two or more opposing parties. The test
is "whether or not in behalf of one client, it is the lawyers duty
to fight for an issue or claim, but it is his duty to oppose it for
the other client. In brief, if he argues for one client, this
argument will be opposed by him when he argues for the other
client." This rule covers not only cases in which confidential
communications have been confided, but also those in which no
confidence has been bestowed or will be used. Also, there is
conflict of interests if the acceptance of the new retainer will
require the attorney to perform an act which will injuriously
affect his first client in any matter in which he represents him
and also whether he will be called upon in his new relation to
use against his first client any knowledge acquired through their
connection. Another test of the inconsistency of interests is
whether the acceptance of a new relation will prevent an
attorney from the full discharge of his duty of undivided fidelity
and loyalty to his client or invite suspicion of unfaithfulness or
double dealing in the performance thereof.28

The prohibition against conflict of interest rests on five

rationales, rendered as follows:

x x x. First, the law seeks to assure clients that their lawyers will
represent them with undivided loyalty. A client is entitled to be
represented by a lawyer whom the client can trust. Instilling
such confidence is an objective important in itself. x x x.

Second, the prohibition against conflicts of interest seeks to

enhance the effectiveness of legal representation. To the extent
that a conflict of interest undermines the independence of the
lawyers professional judgment or inhibits a lawyer from
working with appropriate vigor in the clients behalf, the clients
expectation of effective representation x x x could be
compromised.
Third, a client has a legal right to have the lawyer safeguard the
clients confidential information xxx.1wphi1 Preventing use of
confidential client information against the interests of the client,
either to benefit the lawyers personal interest, in aid of some
other client, or to foster an assumed public purpose is facilitated
through conflicts rules that reduce the opportunity for such
abuse.

Fourth, conflicts rules help ensure that lawyers will not exploit
clients, such as by inducing a client to make a gift to the lawyer
xxx.

Finally, some conflict-of-interest rules protect interests of the

legal system in obtaining adequate presentations to tribunals. In
the absence of such rules, for example, a lawyer might appear
on both sides of the litigation, complicating the process of
taking proof and compromise adversary argumentation x x x.29

The rule prohibiting conflict of interest was fashioned to prevent

situations wherein a lawyer would be representing a client
whose interest is directly adverse to any of his present or former
clients. In the same way, a lawyer may only be allowed to
represent a client involving the same or a substantially related
matter that is materially adverse to the former client only if the
former client consents to it after consultation. 30 The rule is
grounded in the fiduciary obligation of loyalty.31 Throughout the
course of a lawyer-client relationship, the lawyer learns all the
facts connected with the client's case, including the weak and
strong points of the case. Knowledge and information gathered
in the course of the relationship must be treated as sacred and
guarded with care.1wphi1 It behooves lawyers not only to keep
inviolate the clients confidence, but also to avoid the
appearance of treachery and double-dealing, for only then can
litigants be encouraged to entrust their secrets to their lawyers,
which is paramount in the administration of justice. 32 The nature
of that relationship is, therefore, one of trust and confidence of
the highest degree.33
Contrary to Atty. Eras ill-conceived attempt to explain his
disloyalty to Samson and his group, the termination of the
attorney-client relationship does not justify a lawyer to represent
an interest adverse to or in conflict with that of the former client.
The spirit behind this rule is that the clients confidence once
given should not be stripped by the mere expiration of the
professional employment. Even after the severance of the
relation, a lawyer should not do anything that will injuriously
affect his former client in any matter in which the lawyer
previously represented the client. Nor should the lawyer disclose
or use any of the clients confidences acquired in the previous
relation.34 In this regard, Canon 17 of the Code of Professional
Responsibility expressly declares that: "A lawyer owes fidelity
to the cause of his client and he shall be mindful of the trust and
confidence reposed in him."

The lawyers highest and most unquestioned duty is to protect

the client at all hazards and costs even to himself. 35 The
protection given to the client is perpetual and does not cease
with the termination of the litigation, nor is it affected by the
clients ceasing to employ the attorney and retaining another, or
by any other change of relation between them. It even survives
the death of the client.36

In the absence of the express consent from Samson and his

group after full disclosure to them of the conflict of interest,
therefore, the most ethical thing for Atty. Era to have done was
either to outrightly decline representing and entering his
appearance as counsel for Sison, or to advice Sison to engage
another lawyer for herself. Unfortunately, he did neither, and
should now suffer the proper sanction.

WHEREFORE, the Court FINDS and PRONOUNCES Atty.

EDGARDO O. ERA guilty of violating Rule 15.03 of Canon 15,
and Canon 17 of the Code of Professional Responsibility; and
SUSPENDS him from the practice of law for two years effective
upon his receipt of this decision, with a warning that his
commission of a similar offense will be dealt with more
severely.

Let copies of this decision be included in the personal record of

Atty. EDGARDO 0. ERA and entered m his file in the Office of
the Bar Confidant.

Let copies of this decision be disseminated to all lower courts by

the Office of the Court Administrator, as well as to the
Integrated Bar of the Philippines for its guidance.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
G.R. No. 161211 July 17, 2013

SPOUSES CELSO DICO, SR. AND ANGELES DICO,

Petitioners,
vs.
VIZCAYA MANAGEMENT CORPORATION, Respondent.

DECISION

BERSAMIN, J.:

The prescription of actions for the reconveyance of real property

based on implied trust is 10 years.

The Case

This appeal by petition for review on certiorari seeks to set aside

the adverse decision promulgated on September 11, 2002,1
whereby the Court of Appeals (CA) reversed the decision
rendered by the Regional Trial Court (RTC) of Negros
Occidental in favor of petitioners.

Antecedents

Celso Dico was the registered owner of Lot No. 486 of the
Cadiz Cadastre, comprising an area of 67,300 square meters and
covered by Transfer Certificate of Title (TCT) No. 22922 of the
land records of Negros Occidental. Lot No. 486 was adjacent to
Lot No. 29-B and Lot No. 1412 (formerly Lot No. 1118-B), both
also of the Cadiz Cadastre. Celso and his wife Angeles resided
on Lot No. 486 since 1958. On May 30, 1964, Angeles filed in
the District Office of the Bureau of Lands in Bacolod City, her
free patent application covering a portion of Lot No. 29-B. On
his part, Celso also filed in the same office an application for
free patent covering Lot No. 1412. It does not appear, however,
that the Bureau of Lands acted on their applications.2

Respondent Vizcaya Management Corporation (VMC) was the

registered owner under TCT No. T-41835 of Lot No. 29-B, also
of the Cadiz Cadastre, comprising an area of 369,606 square
meters, more or less.3 VMC derived its title to Lot No. 29-B
from Eduardo and Cesar, both surnamed Lopez, the registered
owners under TCT No. T-14827, which emanated from TCT No.
RT-9933 (16739) in the names of Victoria, Eduardo and Cesar,
all surnamed Lopez. TCT No. RT-9933 (16739) was a transfer
from TCT No. T-14281, which had been transferred from
Original Certificate of Title (OCT) No. 21331 in the name of
Negros Philippines Lumber Company. OCT No. 21331 was
issued pursuant to Decree No. 190483 of G.L.R.O. Cadastral
Record No. 196.

VMC likewise claimed to be the owner of Lot No. 1412,

formerly known as Lot No. 1118-B, also of the Cadiz Cadastre,
containing an area of 85,239 square meters, more or less, and
registered in its name under TCT No. T-41834.4

Lot Nos. 1426-B, with an area of 6,635 square meters covered

by TCT No. T-24135, and 1426-C, with an area of 6,107 square
meters covered by TCT No. T-24136, appear to be registered in
the names of Eduardo Lopez and Cesar Lopez, who had earlier
formed VMC.

In 1967, VMC, then newly formed, caused the consolidation and

subdivision of Lot No. 29-B, Lot No. 1412, Lot No. 1426-B,
and Lot No. 1426-C. The consolidation-subdivision plan was
prepared by Engr. Ricardo Quilop and filed in the Land
Registration Commission (LRC), renamed National Land Titles
and Deeds Registration Administration, but presently known as
the Land Registration Authority. The consolidation-subdivision
plan was assigned the number (LRC) PCS-6611. On July 26,
1967, LRC Commissioner Antonio L. Noblejas approved the
consolidation-subdivision plan, resulting in Lot No. 29-B, Lot
No. 1412, Lot No. 1426-B, and Lot No. 1426-C being
consolidated and subdivided as follows: Lot No. 1 with an area
of 238,518 square meters under TCT No. T-47854; Lot No. 2
with an area of 216,176 square meters under TCT No. T-47855;
Lot No. 3 with an area of 11,496 square meters under TCT No.
T-47856; and Lot No. 4 with an area of 15,392 square meters
under TCT No. T-47857.5 In all, the total landholding of VMC
after the consolidation was 481,583 square meters.

VMC proceeded to develop the Don Eusebio Subdivision

project using Lot No. 1 of the consolidation-subdivision plan
under (LRC) PCS-6611. The subdivision plan under PSD-
102560 subdivided Lot No. 1 into 547 small lots. Subsequently,
VMC also developed the Cristina Village Subdivision project
using Lots Nos. 2, 3, and 4 under (LRC) PCS-6611. Under PSD-
12746 of the subdivision plan for Cristina Village Subdivision,
consolidated Lots Nos. 2, 3, and 4 were subdivided into 348
small lots. Starting 1971, VMC sold lots in its Don Eusebio
Subdivision and Cristina Village Subdivision.

In 1981, VMC filed against the Dicos a complaint for unlawful

detainer in the City Court of Cadiz (Civil Case No. 649). On
April 24, 1981, the City Court of Cadiz rendered its decision in
favor of VMC, ordering the Dicos to demolish the concrete
water gate or sluice gate (locally known as trampahan) located
inside Lot No. 1, Block 3 of the Cristina Village Subdivision.
Inasmuch as the Dicos did not appeal, the decision attained
finality. On July 3, 1981, the City Court of Cadiz issued a writ
of execution. On November 11, 1985, a second alias writ of
execution was issued.

On May 12, 1986, the Dicos commenced an action for the

annulment and cancellation of the titles of VMC (Civil Case No.
180-C), impleading VMC, the National Land Titles and Deeds
Registration Administration, and the Director of the Bureau of
Lands. On March 12, 1987, the Dicos amended the complaint.
They averred, among others, that they were the registered
owners of Lot No. 486 and the possessors-by-succession of Lot
No. 1412 (formerly Lot No. 1118) and Lot No. 489; that VMC
had land-grabbed a portion of their Lot No. 486 totaling 111,966
square meters allegedly brought about by the expansion of
Cristina Village Subdivision; and that on May 30, 1964 they had
filed free patent applications in the Bureau of Lands for Lot No.
1412 and Lot No. 489.6 They prayed that the possession of Lot
No. 486, Lot No. 1412, and Lot No. 489 be restored to them;
and that the judgment in Civil Case No. 649 be annulled.

Celso died during the pendency of the action, and was

substituted by Angeles and their children pursuant to the order
of November 22, 1991.

Ruling of the RTC

On January 8, 1998, the RTC ruled in favor of the Dicos, viz:

WHEREFORE, IN VIEW OF THE FOREGOING, judgement is

rendered in favor of the plaintiffs and against the defendants in
this wise:

1. The plaintiffs are hereby declared absolute owners of the

111,959 square meter portion of Lot 486 and the defendant
Vizcaya Management Corporation, its agent, representatives and
any persons acting in its behalf are hereby ordered to peacefully
vacate the said premises and to turn over the possession of the
111, 959 square meters, a portion of Lot 486 Cadiz Cadastre, in
favor of the plaintiffs;

2. The Certificate of Titles from RT-9933 (16739) and all other

titles derived therefrom are all hereby declared spurious and
ordered cancelled;

3. That defendant Vizcaya Management Corporation is hereby

ordered to pay plaintiffs P3,000.00 as monthly rental on the 111,
959 square meters, portion of Lot 486, Cadiz Cadastre, which
the defendant Vizcaya Management Corporation had occupied
from May 12, 1986 until the plaintiffs property is fully restored
to the latter;

4. That defendant Vizcaya Management Corporation is hereby

ordered to pay the plaintiffs the sum of P100,000.00 by way of
attorneys fees and P100,000.00 by way of moral damages and
P50,000.00 for exemplary damages;
5. That defendant National Land Titles and Deeds
Administration is hereby ordered to make the necessary
rectification on the titles of the defendants;

6. The Solicitor General is hereby directed to look into the

possibility of reversion of Lots 29-A, 29-B and 1412, Cadiz
Cadastre in favor of the Government and initiate the Escheat
proceedings thereon;

7. The counterclaims of the defendants are ordered dismissed;

and

8. Defendants to pay the costs.

SO ORDERED.7

Ruling of the CA

On appeal, VMC assigned the following errors, to wit:

I
THE TRIAL COURT ERRED IN NOT DISMISSING
PLAINTIFFS COMPLAINT FOR BEING BARRED BY
PRESCRIPTION AND/OR LACHES AND FOR LACK OF
CAUSE OF ACTION.
II
THE TRIAL COURT ERRED IN CAPRICIOUSLY
DISREGARDING THE CONCLUSIVENESS AND
INDEFEASIBILITY OF THE SUBJECT
CERTIFICATES OF TITLE AND IN IGNORING
WELL-ENTRENCHED DOCTRINES, PRINCIPLES AND
PRESUMPTIONS OF REGULARITY AND VALIDITY
ATTENDANT TO THEIR ISSUANCES.
III
THE TRIAL COURT ERRED IN HOLDING THAT IN
THE CONSOLIDATION AND SUBDIVISION OF THE
LOTS COMPRISING THE EUSEBIO AND CRISTINA
 SUBDIVISIONS, VMC UNJUSTIFIABLY INCREASED
THE AREA OF LOT NO. 29-B AND ENCROACHED ON
LOT 486.
IV
THE TRIAL COURT ERRED IN HOLDING THAT LOT
NOS. 29-B AND 1412 REVERTED BACK (sic) TO
THE GOVERNMENT AND IN DIRECTING THE
SOLICITOR GENERAL TO INITIATE ESCHEAT
PROCEEDINGS THEREON.
V
THE TRIAL COURT ERRED IN DECLARING THAT
TRANSFER CERTIFICATE OF TITLE ("TCT") NO.
RT-9933 (EXHIBIT "K") IS A SPURIOUS TITLE
AND IN ORDERING SAID TITLE, AND ALL TITLES
DERIVED THEREFROM, CANCELLED.
VI
THE TRIAL COURT ERRED IN RULING THAT THERE
WAS FRAUD IN VMCS ACQUISITION OF LOT
NOS. 29-B AND 1412.
VII
THE TRIAL COURT ERRED IN NOT FINDING THAT
THE DESIGNATION OF LOT NO. 1246-B AND
1246-C IN THE TECHNICAL DESCRIPTIONS OF
THE TITLES OF LOT NOS. 1 TO 4 IS MERELY
TYPROGRAPHICAL ERROR.
VIII
THE TRIAL COURT ERRED IN ORDERING VMC TO
PAY RENTALS, DAMAGES AND COSTS TO
PLAINTIFFS AND IN DISMISSING THE
COUNTERCLAIMS PLEADED BY VMC. 8

As earlier mentioned, the CA reversed the RTC through its

decision promulgated on September 11, 2002,9 ruling as follows:
WHEREFORE, in view of the foregoing, and finding the appeal
impressed with merit, the same is hereby GRANTED. The
Decision dated January 8, 1998 of Branch 60 of the Regional
Trial Court of Negros Occidental in Civil Case No. 180-C is
hereby REVERSED and SET ASIDE, and a new judgment is
hereby rendered as follows:

1. Civil Case No. 180-C is DISMISSED for lack of merit.

2. Defendant-appellant Vizcaya Management Corporation is

declared the absolute owner of Lot No. 29-B under TCT No. T-
41835.

3. Defendant-appellant Vizcaya Management Corporation is

declared the absolute owner of Lot No. 1412 under TCT No. T-
41834.

4. Original Certificate of Title No. 21331 and Transfer

Certificate of Title No. RT-9933 (16739) are declared valid and
genuine;

5. Plaintiffs-appellees Angeles Dico, et al. are declared the

absolute owners of Lot No. 486 under TCT No. T-22922;

6. The Decision dated April 24, 1981 of the City Court of Cadiz
in Civil Case No. 649 is hereby declared VALID and UPHELD;
and

7. No cost.

SO ORDERED.10

On October 7, 2003, the CA denied the Dicos motion for

reconsideration.11

Issues

Hence, this appeal, wherein the Dicos contend that the CA erred
in holding that prescription and/or laches already barred them
from asserting their right;12 in accepting the theory of VMC that
the consolidation of Lot No. 1246-B and Lot No. 1246-C had
resulted from a merely typographical error; 13 in reversing the
decision of the RTC despite its finding that VMC had committed
land grabbing;14 and in reversing the RTC based on non-existing
evidence that was contradicted by the evidence on records.15

In its comment,16 VMC counters that the petition for review

should not be given due course because petitioners came to
court with unclean hands; that the petition was filed out of time
even with the extension given by the Court; that the petition was
fatally defective in form and in substance; and that the dismissal
of the complaint was in accord with applicable laws and
jurisprudence.

In their reply,17 the Dicos reiterate that the findings and

conclusions of the RTC were supported by evidence establishing
fraud, encroachment and other anomalies perpetrated by VMC;
that the rules of procedure must not be rigidly applied to
override substantial justice; and that VMC could not validly
invoke the indefeasibility of its titles to defeat their right over
the encroached land.

The decisive issue is whether prescription already barred

petitioners cause of action. All the other issues are subsumed
therein.

Ruling

We find and hold that the action of the Dicos for reconveyance
was properly dismissed.

To start with, the CAs explanations for reversing the RTC were
very thorough, well-founded and well-reasoned, to wit:

Granting arguendo that fraud intervened in the procurement of

the Certificates of Title to Lot No. 29-B and plaintiffs-appellees
had the personality to seek the reconveyance thereof on the basis
of implied or constructive trust, their complaint filed on May 12,
1986, or about 29 years after the issuance of the certificate of
title to defendant-appellant, indeed came too late. They were
deemed to have discovered the fraud as early as September 20,
1934 when TCT No. RT-9933 (16739) of the Lopezes was
recorded or on November 10, 1956 when TCT No. T-41835 of
defendant-appellant was registered. Their right to seek
reconveyance of a portion of Lot No. 29-B, if it existed at all,
had already prescribed.

Plaintiffs-appellees also contend that defendant-appellant

secured its Certificate of Title to Lot No. 1412 through fraud.
They contend that Celso Dico had filed with the Bureau of
Lands his Free Patent Application (Exh. "D", pp. 733-735,
Records Vol. 3) with respect to Lot No. 1412. On the other hand,
the evidence on record shows that Lot No. 1412, formerly Lot
No. 1118-B, appears to have been already registered in the name
of defendant-appellant under TCT No. T-41834 (Exh. "11").

We fail to see the fraud allegedly committed by defendant-

appellant in securing its Certificate of Title to Lot No. 1412. In
their vain effort to show that Celso Dico filed a Free Patent
Application for Lot No. 1412, plaintiffs-appellees presented his
alleged Free Patent Application, Exhibit "D". Said Exhibit "D",
however, is without evidentiary weight since while the name of
plaintiff-appellee Angeles Dico, as applicant therein, appears in
the Application for Free Patent, the Joint Affidavit in support
thereof, and Notice of Application for Free Patent, the signature
of one Celso Dico was only clearly super-imposed thereon to
make it appear he was the applicant. Exhibit "D" is, in fact, a
forged document.

Thus, the court a quo erred when it concluded that defendant-

appellants title to Lot No. 1412 came from a doubtful source.
There is no evidence on record that clearly showed the fraud
allegedly employed by defendant-appellant when it secured its
title to Lot No. 1412. Moreover, plaintiffs-appellees have not
established their personality to seek the reconveyance of Lot No.
1412 as they are not the registered owners thereof.
In fine, Lots Nos. 29-B and 1412 did not revert to the
government, as they are already the private properties of
defendant-appellant corporation.

Anent the issue of encroachment on Lot No. 486 by defendant-

appellant, the court a quo found that defendant-appellant
encroached on Lot 486 when it consolidated and subdivided the
contested lots.

The court a quo ruled, thus:

"From the evidence presented as revealed by the records of the

case, this Court is of the judicious finding that defendant
Viscaya (sic) had encroached on lot 486 considering that even if
it claims it has a title over lot 29-B, still it had exceeded its area
of possession over lot 29-B. Exhibits "J", "K" and "L" reveal
that lot 29-B only contains an area of 369,606 square meters,
however, when defendant Vizcaya caused the consolidation of
their lots the total area which is supposed to be 369,606 square
meters was increased. Basing on defendants exhibits "3" to "6"
this Court finds that TCT No. 1735 (lot 1) has an area of
238,518 square meters, TCT No. 1736 (Lot 2), 216,176 square
meters, TCT No. 1737 (Lot 3) 11,496 square meters and TCT
No. 1738, 15,392 square meters which when added together will
sum up to a total of 481,582 square meters, clearly exceeding
the original area of 369,606 square meters appearing and
described in

Exhibits "J":, "K" and "L".

"Likewise, this Court further finds after an exhausted (sic)

examination of the records, that defendant Vizcaya increased the
area on the plan of Cristina Village Subdivision which is Lot 2
contrary to what is contained in TCT No. 1736 (Exhibits "P-1"
and "4") containing an area of only 216,176 square meters.

"The increase in area in the title of defendant Vizcaya is 111,976

square meters. This area was taken from the portion of Lot 486
of the plaintiffs covered by TCT No. T-22922 (Exh. "E") and
which was derived from OCT No. 0-3146 (21337) adjacent to
Lot 29-B (Exh. "J") and later became Lot 2 covered by TCT No.
(T-47855) 1736, Lot 1 covered by TCT No. (T-47854) 1735
(Exh. "P") Lot 3 covered by TCT No. (T-47856) 1737 (Exh. "P-
2") and Lot 4 covered by TCT No. (T-47857) 1738 (Exh. "P-3").
To the mind of this Court, the intrustion (sic) of the defendants
over the area of Lot 486 is a clear and willful manipulation
hatched between defendant Vizcaya and its surveyor without
regard to the existing technical and (sic) descriptions of the
adjacent lot, particularly the lot belonging to the plaintiffs. Upon
close examination of all the evidence on record, it appears that
the method and scheme employed in order to hide and confuse
the increase in the area was to consolidate lots 29-B, 1246-B,
1246-C and 1412 and then subdivide these lots into several parts
to become lots 1, 2, 3 and 4 with its corresponding titles,
technical descriptions and already containing variable but
increased areas can no longer be ascertained or if ascertained the
same can be done with greater difficulty as the one tasked to
unravel these confusing mazes (sic) of lots will have to dig deep
into the history of the original titles. What this Court finds
amusing, however, is the fact that Lots 1246-B and 1246-C were
consolidated with Lots 29-B and 1412 which former lots are
located in Barangay Tinampa-an, Cadiz City while Lots 29-B
and 1412 are located in the City Proper and are non adjacent or
contigeous (sic) lots.

"The claim of the defendants that the plaintiffs cannot establish

a better right or title to real properties over and above a valid
and existing title, cannot be given credence by this Court
considering that a torrens title cannot cover fraud, and more
particularly so, because Lot 486 is also titled property registered
in the name of the plaintiff Dico." (pp. 30-31, Decision; pp. 79-
80, Rollo)

We do not agree with the above findings of the court a quo. The
documentary evidence found in the records reveals that
defendant-appellant had two lots titled in its name, namely: Lot
No. 29-B comprising an area of 369,606 square meters,
containing identical technical description as appearing in
plaintiffs-appellees Exhs. "J", "K" and "L" and Lot No. 1412,
formerly 1118-B, comprising an area of 85,239 square meters
covered by TCT No. T-41834 (Exh. "11"). Further, Eduardo and
Cesar Lopez were the registered owners of Lot No. 1426-B
comprising an area of 6,635 square meters, covered by TCT No.
T-21435 (Exh. "9") and Lot No. 1426-C comprising an area of
6,107 square meters, covered by TCT No. T-21436 (Exh. "10").
As contended by defendant-appellant, it caused the
consolidation and subdivision of these four lots following the
approved consolidation-subdivision plan (Exh. "7", p. 958,
Records Vol. 4) it submitted to the then Land Registration
Commission. The said approved consolidation-subdivision plan
was assigned the number (LRC) PCS-6611. Hence, adding the
land area of the four consolidated lots, the total landholding of
defendant-appellant after the approved consolidation-
subdivision plan would be 467,587 square meters only, thus:

Lot No. Area in Square Meters

Lot No. 29-B 369,606 square meters

Lot No. 1412 85,239 square meters

Lot No. 1426-B 6,635 square meters

Lot No. 1426-C 6,107 square meters

Total 467,587 square meters

Defendant-appellants approved consolidation-subdivision plan

(Exh. "7") reveals that it was a consolidation-subdivision of Lots
Nos. 29-B (Exh. "L"; Exh. "8"), PSD-5573; 1426-B (Exh. "9")
& 1426-C (Exh. "10"), PSD-44080, and 1412 (Exh. "11"), all of
Cadiz Cadastre, which contained a total area of 481,583 square
meters. However, the total land area of the four consolidated lots
as added above is only 467,587 square meters. Clearly, there
exists an excess of 13,996 square meters, which was included in
the approved consolidation-subdivision plan of defendant-
appellant. Worth noting is the fact that defendant-appellants
approved consolidation-subdivision plan contained a
handwritten entry which stated that the "x x x area is increased
by 13996 sq.m" (Exh. "7", p. 958, Records Vol. 4).

Thus, the court a quo erred when it concluded that there was an
excess of 111,959 square meters in defendant-appellants
landholdings. We agree with the contention of defendant-
appellant that the basis for computing its total landholding
should not be limited to the land area of Lot No. 29-B since
three (3) other individual lots were included in the
consolidation-subdivision survey. The evidence on record
reveals that Lots Nos. 1412, 1426-B and 1426-C were included
in the approved consolidation-subdivision plan (Exh. "7").

Further, the Trial Courts finding that defendant-appellant

encroached by 111,959 square meters on Lot 486 belonging to
plaintiffs-appellees finds no justifiable support from the
evidence on record. Lot No. 486 under TCT No. T-22922 (Exh.
"E", p. 736, Records Vol. 3) in the name of Celso Dico
contained an area of 67,300 square meters only. Following the
Trial Courts reasoning, defendant-appellant shall return to
plaintiffs-appellees 111,959 square meters it allegedly land
grabbed from Lot No. 486. Thus, Lot No. 486 would now
contain an area of 179,259 square meters, substantially
increased by 111,959 square meters which is clearly beyond
what is stated in TCT No. T-22922.

As We have found earlier, the excess in defendant-appellants

landholding is only 13,996 square meters.

It is likewise the contention of plaintiffs-appellees that PCS-

6611 does not exist in the records of the then Land Registration
Commission, as evidenced by the Certifications (Exhs. "Q" and
"R", pp. 758-758A, Records Vol. 3) issued by the Subdivision
and Consolidation Division, Vault Section I, Land Registration
Authority.

The court a quo ruled:

"x x x. Thus, the defendants failed to overcome the
preponderance of evidence presented by the plaintiffs,
particularly on Certifications (Exhs. "Q" and "R") certifying to
the effect that Pcs-6611 is not existing x x x" (p. 34, Decision).

We cannot agree with conclusion of the court a quo. The

evidence on record clearly reveals that defendant-appellant
presented a copy of the approved consolidation-subdivision plan
(Exh. "7") prominently showing the number (LRC) PCS-6611
assigned by the Land Registration Commission, which is located
at the bottom-right portion of the document. The Certifications
(Exhs. "Q" and "R") issued by the then Land Registration
Authority are not conclusive proof of the non-existence of the
original of the consolidation-subdivision plan (LRC) PCS-6611
together with all the survey records pertaining thereto. As
correctly pointed out by defendant-appellant, the person who
issued said certifications was not presented in court to identify
and affirm the veracity of their contents. Thus, as between the
approved consolidation-subdivision plan (Exh. "7") and the
certifications (Exhs. "Q" and "R"), the former carries greater
evidentiary weight.

Granting arguendo that no records pertaining to (LRC) PCS-

6611 could be found in the Vault Section of the then Land
Registration Commission, the existence of (LRC) PCS-6611
was already established with the presentation in evidence of a
copy of the said approved consolidation-subdivision plan (Exh.
"7") prominently reflecting therein the number (LRC) PCS-
6611 assigned by the Land Registration Commission. The
authenticity and existence of (LRC) PCS-6611 within the
records of the Land Registration Commission (now Land
Registration Authority) was established by the fact that it was
used as a basis for the approval of the consolidation-subdivision
plan for the Don Eusebio Subdivision under (LRC) PSD-102560
(Exh. "14", "14-A", "14-B", pp. 983-985, Records, Vol. 4) and
Cristina Village Subdivision under (LRC) PCS-12746 (Exh.
"16", p. 982, Records, Vol. 4). In Exhibits "14" and "16", (LRC)
PCS-6611 was clearly reflected as the source of the consolidated
lots.

Lastly, defendant-appellant contends that the court a quo erred

in finding that there was no typographical error committed in
designating Lots Nos. 1246-B and 1246-C instead of 1426-B
and 1426-C, respectively, in its approved consolidation-
subdivision plan.

The court a quo ruled:

"x x x. What this Court finds amusing, however, is the fact that
Lots 1246-B and 1246-C were consolidated with Lots 29-B and
1412 which former lots are located in Barangay Tinampa-an,
Cadiz City while Lots 29-B and 1412 are located in the City
Proper and are non adjacent or contigeous (sic) lots.

"x x x x

"Granting arguendo, that the denomination of Lots 1246-B and

1246-C are merely typographical errors of Lots 1426-B and
1426-C as claimed by defendant Vizcaya, this Court, upon
judicious evaluation of the records cannot accept the argument
relied upon by the defendants since it is obvious from the
evidence that defendant Vizcaya employs a retained surveyor for
purposes of their subdivision, and despite the technical
knowledge of its surveyor it did not bother to correct the error if
indeed it is one, on the lots subject matter of the case, but had
invoked the said ground only during the litigation proper" (pp.
30-35, Decision; pp. 179-184, Rollo).

Defendant-appellant contends that it failed to correct this

typographical error as such fact came to its knowledge only
during the trial and two years after issuance of TCT No. T-
47854-57 (Exhs. "P", "P-1" to "P-3"; Exhs. "3" to "6", pp. 750-
756 Records Vol. 3), these Certificates of Title were
subsequently cancelled and new TCTs were issued. On the other
hand, plaintiffs-appellees contend that Lots Nos. 1246-B and
1246-C could not be possibly consolidated with Lot No. 29-B
because the former lots were situated some 4 kilometers away
from defendant-appellants subdivision area, besides being
owned by other persons.

We agree with defendant-appellant.

While we agree with plaintiffs-appellees assertion that

consolidation of non-contiguous and non-adjacent lots are not
possible especially so when the lots are situated considerably far
from each other, the case at hand does not fall under this
scenario. As correctly explained by defendant-appellant there
was a typographical error in the technical description of its
consolidated lots in that what was stated therein as included in
the consolidation plan were Lots Nos. 1246-B and 1246-C, Psd-
44080, instead of Lots Nos. 1426-B and 1426-C, Psd-44080.

Worth noting are the technical description of the subject lots

before and after their consolidation.

Transfer Certificate of Title No. T-24135 (Exh. "9") covering

Lot No. 1426-B reads:

"A parcel of land (Lot No. 1426-B of the subdivision plan Psd-
44080, being a portion of Lot 1426 of the Cadastral Survey of
Cadiz, G.L.R.O. Cad. Record No. 196), situated in the
Poblacion, Municipality of Cadiz, Province of Negros
Occidental, Bounded on the NE., by Lot 1426-A of the
subdivision plan; on the SE., by Lot No. 1423 of Cadiz, Cad.;
and on the SW., by Lot 1426-C of the subdivision plan. x x x"

Transfer Certificate of Title No. T-24136 (Exh. "10") covering

Lot No. 1426-C reads.

"A parcel of land (Lot No. 1426-C of the subdivision plan Psd-
44080, being a portion of Lot 1426 of the Cadastral Survey of
Cadiz, G.L.R.O. Cad. Record No. 196), situated in the
Poblacion, Municipality of Cadiz, Province of Negros
Occidental, Bounded on the NE., by Lot 1426-B of the
subdivision plan; on the SE., by Lot 1423 of Cadiz Cad., and on
the SW., by Calle Cabahug. x x x."

On the other hand, the technical descriptions of the properties

covered by Transfer Certificates of Title Nos. T-47854 to T-
47857 pertaining to Lot Nos. 1 to 4 (Exhs. "P", "P-1" to "P-3)
read:

Transfer Certification of Title No. T-14754:

"A parcel of land (Lot 1 of the consolidation-subdivision plan

(LRC) Pcs-6611, being a portion of the consolidation of Lots
29-B, Psd-5573, 1246-B, & 1246-C, Psd-44080 & 1412, Cadiz
Cad., LRC (GLRO) Cad. Rec. No. 196), situated in the City of
Cadiz, Island of Negros x x x containing an area of two hundred
thirty-eight thousand five hundred eighteen (238, 518) square
meters, more or less. x x x."

Transfer Certificate of Title No. T-14755:

"A parcel of land (Lot 2 of the consolidation-subdivision plan

(LRC) Pcs-6611, being a portion of the consolidation of Lots
29-B, Psd-5573, 1246-B, & 1246-C, Psd-44080 & 1412, Cadiz
Cad., LRC (GLRO) Cad. Rec. No. 196, situated in the City of
Cadiz, Island of Negros x x x containing an area of TWO
HUNDRED SIXTEEN THOUSAND ONE HUNDRED
SEVENTY-SIX (216,176) Square Meters, more or less. x x x."

Transfer Certificate of Title No. T-14756:

"A parcel of land (Lot 3 of the consolidation-subdivision plan

(LRC) Pcs-6611, being a portion of the consolidation of Lots
29B, Psd-5573, 1246-B, & 1246-C, Psd-44080 & 1412, Cadiz
Cad., LRC (GLRO) Cad. Rec. No. 196), situated in the City of
Cadiz, Island of Negros x x x containing an area of eleven
thousand four hundred ninety-six (11,496) square meters, more
or less. x x x."

Transfer Certificate of Title No. T-14757:

"A parcel of land (Lot 4 of the consolidation-subdivision plan
(LRC) Pcs-6611, being a portion of the consolidation of Lots
29-B, Psd-5573, 1246-B, & 1246-C, Psd-44080 & 1412, Cadiz
Cad., LRC (GLRO) Cad. Rec. No. 196), situated in the City of
Cadiz, Island of Negros. Bounded on the NE., points 31 to 1 and
1 to 6 by Lot 1426-A, Psd-44080 x x x containing an area of
fifteen thousand three hundred ninety-two (15,932) square
meters, more or less. x x x."

As can be gleaned clearly from the foregoing, Lots Nos. 1426-B

and 1426-C came from Psd-44080. In the same way that Lots
Nos. 1246-B and 1246-C came from Psd-44080. Defendant-
appellant submitted a certified copy of the Cadastral Map of
Cadiz (Exh. "12", p. 986, Records Vol. 4) showing that adjacent
to Lot No. 29-B was Lot No. 1426 and being continguous, these
lots could be consolidated. Even plaintiffs-appellees witness
Engr. Luvimin Canoy testified on the possibility that a
typographical error might have been committed in listing the lot
numbers in the title (pp. 39-41, TSN, September 9, 1992).

There was no evidence to the effect that defendant-appellant

caused the erroneous designation of Lots Nos. 1426-B and
1426-C as Lots Nos. 1246-B and 1246-C, respectively, when it
consolidated these lots. The error indeed was only typographical
as the subject lots all came from Psd-44080. In the absence of
evidence that defendant-appellant employed fraud in
consolidating these lots, a typographical error in the designation
of lot numbers in the Certificates of Title would not warrant
their cancellation. An amendment may cure the error. It has been
aptly ruled in one case that in the interest of justice and equity,
the title-holder may not be made to bear the unfavorable effect
of the mistake or negligence of the States agents, in the absence
of proof of his complicity in a fraud or of manifest damage to
third persons (Republic vs. Court of Appeals, 301 SCRA 366).18

We have examined the factual bases of the CA in reaching its

decision, and have found that its aforequoted findings of fact
and conclusions were based on the evidence presented at the
trial. In view of this, the Court accepts the findings of fact and
conclusions of the CA, not just because we are not a trier of
facts, but, more importantly, because the CA creditably
performed its main task of conducting a thorough review of the
evidence and records of the case in order to eruditely and
carefully address each of the issues raised and argued by the
Dicos.

Secondly, the CA correctly pointed out that under Article 1456

of the Civil Code, the person obtaining property through mistake
or fraud is considered by force of law a trustee of an implied
trust for the benefit of the person from whom the property
comes. Under Article 1144, Civil Code, an action upon an
obligation created by law must be brought within 10 years from
the time the right of action accrues. Consequently, an action for
reconveyance based on implied or constructive trust prescribes
in 10 years.

Here, the CA observed that even granting that fraud intervened

in the issuance of the transfer certificates of title, and even
assuming that the Dicos had the personality to demand the
reconveyance of the affected property on the basis of implied or
constructive trust, the filing of their complaint for that purpose
only on May 12, 1986 proved too late for them.

That observation was correct and in accord with law and

jurisprudence.1wphi1 Verily, the reckoning point for purposes
of the Dicos demand of reconveyance based on fraud was their
discovery of the fraud. Such discovery was properly pegged on
the date of the registration of the transfer certificates of title in
the adverse parties names, because registration was a
constructive notice to the whole world.19 The long period of 29
years that had meanwhile lapsed from the issuance of the
pertinent transfer certificate of title on September 30, 1934 (the
date of recording of TCT No. RT-9933 (16739) in the name of
the Lopezes) or on November 10, 1956 (the date of recording of
TCT No. T-41835 in VMCs name) was way beyond the
prescriptive period of 10 years.
And, lastly, the insistence of the Dicos that prescription could
not be used by the CA to bar their claim for reconveyance by
virtue of VMCs failure to aver them m a motion to dismiss or m
the answer was unwarranted.

We agree with VMC's contention to the contrary. Although

defenses and objections not pleaded in a motion to dismiss or in
an answer are deemed waived, it was really incorrect for the
Dicos to insist that prescription could not be appreciated against
them for that reason. Their insistence was contrary to Section l,
Rule 9 of the Rules of Court, which provides as follows:

Section 1. Defenses and objections not pleaded.- Defenses and

objections not pleaded either in a motion to dismiss or in the
answer are deemed waived. However, when it appears from the
pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the
action is barred by a prior judgment or by statute of limitations,
the court shall dismiss the claim. (2a)

Under the rule, the defenses of lack of jurisdiction over the

subject matter, litis pendentia, res judicata, and prescription of
action may be raised at any stage of the proceedings, even for
the first time on appeal, except that the objection to the lack of
jurisdiction over the subject matter may be barred by laches.20

WHEREFORE, the Court AFFIRMS the decision of the Court

of Appeals promulgated on September II, 2002; and ORDERS
the petitioners to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
G.R. No. 173307 July 17, 2013

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
VICTORINO REYES, Accused-Appellant.

DECISION

BERSAMIN, J.:

Slightest penetration of the labia of the female victim's genitalia

consummates the crime of rape.

The Case

Victorino Reyes appeals his .conviction for the rape of his 13-
year-old neighbor AAA,1 for which the Regional Trial Court
(RTC), Branch 53, in Rosales, Pangasinan had imposed the
penalty of reclusion perpetua under its decision of April 23,
2001,2 and which conviction the Court of Appeals (CA) affirmed
on appeal by its assailed decision promulgated on April 20,
2006.3

Antecedents

As the RTC and the CA both found, Reyes raped AAA at around
9:00 p.m. on December 26, 1996 in Barangay San Aurelio,
Balungao, Pangasinan. Earlier, at around 7:00 p.m., AAA and
her 9-year-old sister, BBB, had watched television at his house
just across the street from their house.1wphi1 Only Reyes and
his two sons, aged seven and five, were the other persons in the
house, for his wife had gone to another barangay to sell
refreshments. By 9:00 p.m., AAA and BBB rose to go home, but
as they were leaving, Reyes suddenly pulled AAA into the store
attached to the sala of his house. He told her in the dialect:
Umaykan ta agiyyot ta. (Come here and let us have sex). 4
Alarmed by what his words denoted, AAA struggled to free
herself from him. BBB went to her succor by pulling her away
from him, but his superior strength prevailed. BBB could only
cry as he dragged AAA into the store. BBB was left outside the
store crying.

Inside the store, Reyes kissed AAA and mashed her breasts. He
threatened her: If you will shout, I will kill you. 5 He pulled
down her long pants and panties below her knees, took out his
penis, grabbed her by the waist, and used his body to anchor her
back to a nearby table. She fought back by boxing and pushing
him away, but her efforts were futile. He twice tried to pry open
her legs, but she strained hard to close them. On the second
attempt, however, her effort was not enough to prevent him from
pulling her legs apart, and he then thrust his penis into her
vagina and made push and pull movements.6 Although his penis
achieved only a slight penetration of her vagina,7 he succeeded
in satisfying his lust, as confirmed later on when CCC, the
mother of the victim, found semen on AAAs panties.8

After he had satisfied his lust, Reyes threatened to kill both

AAA and BBB should they tell anyone else about what had
happened. Then they hurriedly left for home.9 Upon their arrival
in their house, CCC called out to her daughters to go to bed.
Only BBB immediately complied because AAA tarried outside,
only to have her mother again call her inside. AAA entered the
house this time, but went to where the aparador was and took
out fresh panties. CCC saw her doing so and became suspicious.
She also saw fear in the face of her daughter. When she
inspected the soiled underwear of AAA, CCC discovered that
her panties were wet with semen.10 Upon being interrogated,
AAA admitted that Reyes had raped her.11

At around 6:00 a.m. of the next day, December 27, 1996, CCC
reported the rape of her daughter by Reyes to the Barangay
Chairman of San Aurelio, who accompanied AAA and her father
to the Balungao Police Station to bring the criminal complaint
for rape. At the request of the Balungao Police, Dr. Ingrid Irena
B. Gancinia, the Municipal Health Officer of Rosales,
Pangasinan, conducted a medical examination on AAA at
around 3:30 p.m. of that day.
The findings reflected in Dr. Gancinias medico-legal report
showed the following:

IE: Contusion, labia majora, Right and Left;

No hymenal lacerations noted with one examining finger

difficult to penetrate the vaginal canal.12

Subsequently, the Office of the Provincial Prosecutor of

Pangasinan filed the information dated February 3, 1997
charging Reyes with rape committed as follows:

That on or about the 26th day of December, 1996, in the

evening, in Brgy. San Aurelio 1st, Municipality of Balungao,
Province of Pangasinan, and within the jurisdiction of this
Honorable Court, the above-named accused, with lewd designs,
did then and there, willfully, unlawfully, and feloniously have
carnal knowledge with AAA, a minor of about thirteen (13)
years old, against her will and to her damage and prejudice.

Contrary to Article 335, Revised Penal Code.13

Upon his arraignment on February 23, 1998,14 Reyes pleaded

not guilty to the information.

Although admitting that AAA and BBB had watched television

in his house at the time of the rape, Reyes insisted that he had
been sleeping on the sofa in front of the television set in the sala
of his house from 7:30 p.m. of December 26, 1996 until 2:30
a.m. of the next day. He denied the accusation, and called
attention to the medical findings showing that AAAs hymen
was intact; hence, she was still a virgin.

On April 23, 2001, after the trial on the merits, the RTC
convicted Reyes as charged. It regarded AAAs narration of the
circumstances of her rape as clear, convincing and consistent on
all material points. It concluded that the contusion (pamamaga)
on AAAs labia majora found by Dra. Gancinia proved that
penile penetration had been achieved; that AAAs fragile
personality manifested during the trial explained why she had
cried and refused to answer in the face of the often browbeating
questions during her cross-examination; that Reyes had also
made intimidating glares towards her while she testified; and
that she had remained consistent in her claim of rape and
insistent that she was telling the truth.

The RTC disposed as follows:

WHEREFORE, the Court finds the accused Victorino Reyes

guilty beyond reasonable doubt of the crime of rape as charged
and hereby sentences him to suffer imprisonment of
RECLUSION PERPETUA and to indemnify the private
complainant AAA in the amount of Seventy Five Thousand
(P75,000.00) Pesos. No pronouncement as to costs.

SO ORDERED.15

On intermediate review, Reyes argued 16 that AAA and her

mother had concocted the charge as their way of escaping their
debts at his store.17 He denied having carnal knowledge of AAA,
and stated that he had merely kissed her, citing the lack of
medical findings of any hymenal lacerations in the medico-legal
report.18 He posited that even assuming that there had been
carnal knowledge, the act could only be consensual considering
that AAAs hand had landed on his shoulders during the
supposed sexual encounter.

Nonetheless, the CA affirmed Reyes conviction.19

Hence, this appeal, wherein Reyes reiterates his submissions.

Ruling

The appeal has no merit.

To start with, both the CA and the RTC unanimously found that
the testimonies of AAA and BBB were credible and reliable. It
consequently behooved Reyes to come forward with a good
reason or cause to have us depart from the age-old rule of
according conclusiveness to the findings of the RTC that the CA
affirmed. The Court is not a trier of facts, and has to depend on
the findings of fact of the trial court by virtue of its direct access
to the witnesses as they testified in court. Only when the
appellant convincingly demonstrates that such findings of fact
were either erroneous, or biased, or unfounded, or incomplete,
or unreliable, or conflicted with the findings of fact of the CA
would the Court assume the rare role of a trier of facts. But that
convincing demonstration was not done here by Reyes.

Secondly, the decisive question is whether the evidence adduced

by the State competently proved that the crime reached the
consummated stage. Reyes insists that the fact that AAAs
hymen had remained intact, per the medico-legal report,
revealed that no rape had been committed.

His insistence is not persuasive.

Article 335 of the Revised Penal Code, as amended by Section

11 of Republic Act No. 7659,20 the law applicable at the time of
the rape of AAA, defined and punished rape thusly:

Article 335. When and how rape is committed. Rape is

committed by having carnal knowledge of a woman under any
of the following circumstances:

1. By using force or intimidation;

2. When the woman is deprived of reason or otherwise

unconscious; and

3. When the woman is under twelve years of age or is demented.

The crime of rape shall be punished by reclusion perpetua.21

As the text of the law itself shows, the breaking of the hymen of
the victim is not among the means of consummating rape. All
that the law required is that the accused had carnal knowledge of
a woman under the circumstances described in the law. By
definition, carnal knowledge was "the act of a man having
sexual bodily connections with a woman." 22 This understanding
of rape explains why the slightest penetration of the female
genitalia consummates the crime.

During her examination of AAA, Dra. Gancinia found

pamamaga (swelling) on the victims labia majora. Dra.
Gancinia opined that such swelling was possibly caused by the
insertion of a hard object, like a hard penis, or by friction with
hard objects even without removing the panties or pants of
AAA.23 Although such medical finding, left alone, was
susceptible of different probable interpretations, AAAs
testimonial narration about how Reyes had sexually assaulted
her, including how his penis had only slightly penetrated her
vagina, confirmed that he had carnal knowledge of her.

More specifically, the presence of the swelling in AAAs labia

majora was an indication of the penetration by the erect penis of
the labia majora of the accused. As such, there was sufficient
factual foundation for finding him guilty beyond reasonable
doubt of rape,24 for, as the Court explains in People v. Teodoro:25

In objective terms, carnal knowledge, the other essential element

in consummated statutory rape, does not require full penile
penetration of the female. The Court has clarified in People v.
Campuhan26 that the mere touching of the external genitalia by a
penis capable of consummating the sexual act is sufficient to
constitute carnal knowledge. All that is necessary to reach the
consummated stage of rape is for the penis of the accused
capable of consummating the sexual act to come into contact
with the lips of the pudendum of the victim. This means that the
rape is consummated once the penis of the accused capable of
consummating the sexual act touches either labia of the
pudendum. As the Court has explained in People v. Bali-balita, 27
the touching that constitutes rape does not mean mere epidermal
contact, or stroking or grazing of organs, or a slight brush or a
scrape of the penis on the external layer of the victims vagina,
or the mons pubis, but rather the erect penis touching the labias
or sliding into the female genitalia. Accordingly, the conclusion
that touching the labia majora or the labia minora of the
pudendum constitutes consummated rape proceeds from the
physical fact that the labias are physically situated beneath the
mons pubis or the vaginal surface, such that for the penis to
touch either of them is to attain some degree of penetration
beneath the surface of the female genitalia. It is required,
however, that this manner of touching of the labias must be
sufficiently and convincingly established. (Emphasis supplied)

Finally, although the RTC and the CA correctly imposed

reclusion perpetua because the crime was simple rape, we need
to revise the civil liability fixed and allowed by the RTC in order
to have it accord with pertinent jurisprudence to the effect that
civil indemnity of P50,000.00 and moral damages of P50,000.00
should be awarded to the victim of simple rape without need of
proof other than the fact of rape.28 This is because the victim
unquestionably suffered actual loss and moral injuries from her
experience. In addition, the attendance of AAAs minority as an
aggravating circumstance, which, although not a proper basis to
raise the penal sanction on account of the failure to allege it in
the information, should still justify the grant of exemplary
damages in order to set a public example and to establish a
deterrent against elders who abuse and corrupt the youth. 29
According to People v. Catubig,30 exemplary damages are
justified regardless of whether or not the generic or qualifying
aggravating circumstances are alleged in the information,
considering that the grant of such damages pursuant to Article
2230 of the Civil Code is intended for the sole benefit of the
victim and does not affect the criminal liability, the exclusive
concern of the State. The grant in this regard should be in the
sum of P30,000.00.31

WHEREFORE, we AFFIRM the decision promulgated on April

20, 2006 by the Court of Appeals, with the MODIFICATION
that Victorino Reyes shall pay to AAA P50,000.00 as civil
indemnity, P50,000.00 as moral damages, and P30,000.00 as
exemplary damages, plus interest of 6% per annum from the
finality of this decision.

Costs of suit to be paid by the appellant.

SO ORDERED.

LUCAS P. BERSAMIN
G.R. No. 160739 July 17, 2013

ANITA MANGILA, Petitioner,

vs.
JUDGE HERIBERTO M. PANGILINAN, ASST. CITY
PROSECUTOR II LUCIA JUDY SOLINAP, and
NATIONAL BUREAU OF INVESTIGATION (DIRECTOR
REYNALDO WYCOCO), Respondents.

DECISION

BERSAMIN, J.:

Restraint that is lawful and pursuant to a court process cannot be

inquired into through habeas corpus.

Antecedents

On June 16, 2003, seven criminal complaints charging petitioner

Anita Mangila and four others with syndicated estafa in
violation of Article 315 of the Revised Penal Code, in relation to
Presidential Decree No. 1689, and with violations of Section
7(b) of Republic Act No. 8042 (Migrant Workers and Overseas
Filipino Act of 1995) were filed in the Municipal Trial Court in
Cities in Puerto Princesa City (MTCC), docketed as Criminal
Cases No. 16916 to No. 16922. The complaints arose from the
recruiting and promising of employment by Mangila and the
others to the private complainants as overseas contract workers
in Toronto, Canada, and from the collection of visa processing
fees, membership fees and on-line application the private
complainants without lawful authority from the Philippine
Overseas Employment Administration (POEA).1

On the following day, June 17, 2003, Judge Heriberto M.

Pangilinan, Presiding Judge of the MTCC, conducted a
preliminary investigation on the complaints. After examining
Miguel Aaron Palayon, one of the complainants, Judge
Pangilinan issued a warrant for the arrest of Mangila and her
cohorts without bail.2 On the next day, the entire records of the
cases, including the warrant of arrest, were transmitted to the
City Prosecutor of Puerto Princesa City for further proceedings
and appropriate action in accordance with the prevailing rules.3

As a consequence, Mangila was arrested on June 18, 2003 and

detained at the headquarters on Taft Avenue, Manila of the
National Bureau of Investigation (NBI).4

Claiming that Judge Pangilinan did not have the authority to

conduct the preliminary investigation; that the preliminary
investigation he conducted was not yet completed when he
issued the warrant of arrest; and that the issuance of the warrant
of arrest was without sufficient justification or without a prior
finding of probable cause, Mangila filed in the Court of Appeals
(CA)a petition for habeas corpus to obtain her release from
detention. Her petition averred that the remedy of habeas corpus
was available to her because she could no longer file a motion to
quash or a motion to recall the warrant of arrest considering that
Judge Pangilinan had already forwarded the entire records of the
case to the City Prosecutor who had no authority to lift or recall
the warrant.5

In its resolution promulgated on October 14, 2003,6 the CA

denied the petition for habeas corpus for its lack of merit,
explaining:

As a general rule, a writ of habeas corpus will not be granted

where relief may be had or could have been procured by resort
to another general remedy. As pointed out in Luna vs. Plaza, if
petitioner is detained by virtue of a warrant of arrest, which is
allegedly invalid, the remedy available to her is not a petition for
habeas corpus but a petition to quash the warrant of arrest or a
petition for a reinvestigation of the case by the Municipal Judge
or by the Provincial Fiscal.

Section 5, Rule 112 of the Revised Rules of Criminal Procedure

provides that the Municipal Judge who conducted the
preliminary investigation shall transmit his resolution, together
with the record of the case, including the warrant of arrest, to the
Provincial Prosecutor, who shall review the same and order the
release of an accused who is detained if no probable cause is
found against him. Thus, the proper remedy available to
petitioner is for her to file with the Provincial Prosecutor a
motion to be released from detention on the grounds alleged in
the instant petition.

WHEREFORE, the petition for habeas corpus is DENIED for

lack of merit.

SO ORDERED.7

Mangila moved for the reconsideration of the denial of her

petition for habeas corpus,8 but the CA denied the motion on
November 19, 2003.9

Hence, this appeal via petition for review on certiorari.

Issue

Did the CA err in ruling that habeas corpus was not the proper
remedy to obtain the release of Mangila from detention?

Ruling of the Court

The petition for review lacks merit.

The high prerogative writ of habeas corpus has been devised as

a speedy and effective remedy to relieve persons from unlawful
restraint. In Caballes v. Court of Appeals,10 the Court discoursed
on the nature of the special proceeding of habeas corpus in the
following manner:

A petition for the issuance of a writ of habeas corpus is a special

proceeding governed by Rule 102 of the Rules of Court, as
amended. In Ex Parte Billings, it was held that habeas corpus is
that of a civil proceeding in character. It seeks the enforcement
of civil rights. Resorting to the writ is not to inquire into the
criminal act of which the complaint is made, but into the right of
liberty, notwithstanding the act and the immediate purpose to be
served is relief from illegal restraint. The rule applies even when
instituted to arrest a criminal prosecution and secure freedom.
When a prisoner petitions for a writ of habeas corpus, he thereby
commences a suit and prosecutes a case in that court.

Habeas corpus is not in the nature of a writ of error; nor

intended as substitute for the trial courts function. It cannot take
the place of appeal, certiorari or writ of error. The writ cannot be
used to investigate and consider questions of error that might be
raised relating to procedure or on the merits. The inquiry in a
habeas corpus proceeding is addressed to the question of
whether the proceedings and the assailed order are, for any
reason, null and void. The writ is not ordinarily granted where
the law provides for other remedies in the regular course, and in
the absence of exceptional circumstances. Moreover, habeas
corpus should not be granted in advance of trial. The orderly
course of trial must be pursued and the usual remedies
exhausted before resorting to the writ where exceptional
circumstances are extant. In another case, it was held that habeas
corpus cannot be issued as a writ of error or as a means of
reviewing errors of law and irregularities not involving the
questions of jurisdiction occurring during the course of the trial,
subject to the caveat that constitutional safeguards of human life
and liberty must be preserved, and not destroyed. It has also
been held that where restraint is under legal process, mere errors
and irregularities, which do not render the proceedings void, are
not grounds for relief by habeas corpus because in such cases,
the restraint is not illegal.

Habeas corpus is a summary remedy. It is analogous to a

proceeding in rem when instituted for the sole purpose of having
the person of restraint presented before the judge in order that
the cause of his detention may be inquired into and his
statements final. The writ of habeas corpus does not act upon the
prisoner who seeks relief, but upon the person who holds him in
what is alleged to be the unlawful authority. Hence, the only
parties before the court are the petitioner (prisoner) and the
person holding the petitioner in custody, and the only question to
be resolved is whether the custodian has authority to deprive the
petitioner of his liberty. The writ may be denied if the petitioner
fails to show facts that he is entitled thereto ex merito justicias.

A writ of habeas corpus, which is regarded as a "palladium of

liberty," is a prerogative writ which does not issue as a matter of
right but in the sound discretion of the court or judge. It is,
however, a writ of right on proper formalities being made by
proof. Resort to the writ is not to inquire into the criminal act of
which a complaint is made but unto the right of liberty,
notwithstanding the act, and the immediate purpose to be served
is relief from illegal restraint. The primary, if not the only object
of the writ of habeas corpus ad subjuciendum, is to determine
the legality of the restraint under which a person is held. 11 (Bold
underscoring supplied for emphasis)

The object of the writ of habeas corpus is to inquire into the

legality of the detention, and, if the detention is found to be
illegal, to require the release of the detainee. Equally well-
settled however, is that the writ will not issue where the person
in whose behalf the writ is sought is out on bail, or is in the
custody of an officer under process issued by a court or judge
with jurisdiction or by virtue of a judgment or order of a court of
record.12

There is no question that when the criminal complaints were

lodged against Mangila and her cohorts on June 16, 2003,Judge
Pangilinan, as the Presiding Judge of the MTCC, was
empowered to conduct preliminary investigations involving "all
crimes cognizable by the proper court in their respective
territorial jurisdictions." His authority was expressly provided in
Section 2, Rule 112 of the Revised Rules of Criminal Procedure,
to wit:

Section 2.Officers authorized to conduct preliminary

investigations.

The following may conduct preliminary investigations:

(a) Provincial or City Prosecutors and their assistants;

(b) Judges of the Municipal Trial Courts and Municipal Circuit

Trial Courts;

(c) National and Regional State Prosecutors; and

(d) Other officers as may be authorized by law.

Their authority to conduct preliminary investigations shall

include all crimes cognizable by the proper court in their
respective territorial jurisdictions. (2a)

Under Section 6(b) of Rule 112of the Revised Rules of Criminal

Procedure, the investigating judge could issue a warrant of arrest
during the preliminary investigation even without awaiting its
conclusion should he find after an examination in writing and
under oath of the complainant and the witnesses in the form of
searching questions and answers that a probable cause existed,
and that there was a necessity of placing the respondent under
immediate custody in order not to frustrate the ends of
justice.1wphi1 In the context of this rule, Judge Pangilinan
issued the warrant of arrest against Mangila and her cohorts.
Consequently, the CA properly denied Mangilas petition for
habeas corpus because she had been arrested and detained by
virtue of the warrant issued for her arrest by Judge Pangilinan, a
judicial officer undeniably possessing the legal authority to do
so.

It is relevant to point out at this juncture that the authority of the

MTC and MTCC judges to conduct preliminary investigations
was removed only effective on October 3, 2005 pursuant to
A.M. No. 05-8-26-SC.

With Mangilas arrest and ensuing detention being by virtue of

the order lawfully issued by Judge Pangilinan, the writ of habeas
corpus was not an appropriate remedy to relieve her from the
restraint on her liberty. This is because the restraint, being
lawful and pursuant to a court process, could not be inquired
into through habeas corpus. To quote the dictum enunciated by
Justice Malcolm in Quintos v. Director of Prisons:13

The writ of habeas corpus secures to a prisoner the right to have

the cause of his detention examined and determined by a court
of justice, and to have ascertained if he is held under lawful
authority. The function of habeas corpus, where the party who
has appealed to its aid is in custody under process, does not
extend beyond an inquiry into the jurisdiction of the court by
which it was issued and the validity of the process upon its face.
It is not a writ of error. xxx (Bold underscoring supplied for
emphasis)

Accordingly, Section 4, Rule 102 of the Rules of Court

explicitly states:

Section 4.When writ not allowed or discharge authorized. If

it appears that the person alleged to be restrained of his liberty is
in the custody of an officer under process issued by a court or
judge or by virtue of a judgment or order of a court of record,
and that the court or judge had jurisdiction to issue the process,
render the judgment, or make the order, the writ shall not be
allowed; or if the jurisdiction appears after the writ is allowed,
the person shall not be discharged by reason of any informality
or defect in the process, judgment, or order. Nor shall anything
in this rule be held to authorize the discharge of a person
charged with or convicted of an offense in the Philippines, or of
a person suffering imprisonment under lawful judgment. (Bold
underscoring supplied for emphasis)

Still, Mangila harps on the procedural flaws supposedly

committed by Judge Pangilinan in her attempt to convince the
Court on her entitlement to the issuance of the writ of habeas
corpus. She insists that the illegality and invalidity of the
warrant of arrest because of its having been issued without an
exhaustive examination of the complainants and the witnesses in
writing and under oath; without a prior finding of probable
cause; and without consideration of the necessity for its issuance
in order not to frustrate the ends of justice were enough reasons
for granting the writ of habeas corpus.14

Mangila fails to persuade.

To begin with, Judge Pangilinan issued the order of arrest after

examining Palayon, one of the complainants against Mangila
and her cohorts. If he, as the investigating judge, considered
Palayons evidence sufficient for finding probable cause against
her and her cohorts, which finding the Court justifiably
presumes from his act of referring the case and its records to the
Office of the City Prosecutor on the day immediately following
the preliminary investigation he conducted, her petition for
habeas corpus could not be the proper remedy by which she
could assail the adequacy of the adverse finding. Even granting
that there was a failure to adhere to the law or rule, such failure
would not be the equivalent of a violation of her constitutional
rights.15

Secondly, it was not procedurally correct for her to impugn the

issuance of the warrant of arrest by hinting that the investigating
judge did not at all consider the necessity of determining the
existence of probable cause for its issuance due to time
constraints and in order not to frustrate the ends of justice, for
that consideration was presumed.

And, lastly, it was clear that under Section 5, 16 Rule 112 of the
Revised Rules of Criminal Procedure, the resolution of the
investigating judge was not final but was still subject to the
review by the public prosecutor who had the power to order the
release of the detainee if no probable cause should beultimately
found against her. In the context of the rule, Mangila had no
need to seek the issuance of the writ of habeas corpus to secure
her release from detention. Her proper recourse was to bring the
supposed irregularities attending the conduct of the preliminary
investigation and the issuance of the warrant for her arrest to the
attention of the City Prosecutor, who had been meanwhile given
the most direct access to the entire records of the case, including
the warrant of arrest, following Judge Pangilinans transmittal of
them to the City Prosecutor for appropriate action.17 We agree
with the CA, therefore, that the writ of habeas corpus could not
be used as a substitute for another available remedy.18

WHEREFORE, the Court AFFIRMS the resolutions

promulgated on October 14, 2003 and November 19, 2003 in
C.A.-G.R. SP No. 79745; and ORDERS the petitioner to pay the
costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
 EN BANC

A.M. No. CA-13-51-J July 2, 2013

RE: LETTER COMPLAINT OF MERLITA B. FABIANA

AGAINST PRESIDING JUSTICE ANDRES B. REYES,
JR., ASSOCIATE JUSTICES ISAIAS P. DICDICAN AND
STEPHEN C. CRUZ; CARAG JAMORA SOMERA AND
VILLAREAL LAW OFFICES AND ITS LAWYERS
ATTYS. ELPIDIO C. JAMORA, JR. AND BEATRIZ O.
GERONILLA-VILLEGAS, LAWYERS FOR MAGSAYSAY
MARITIME CORPORATION AND VISAYAN SURETY
AND INSURANCE CORPORATION.

DECISION

BERSAMIN, J.:

This administrative matter stems from the claim for death

benefits by the heirs of the late Marlon Fabiana (heirs of
Fabiana) against manning agent Magsaysay Maritime
Corporation and its principal Air Sea Holiday GMBH-Stable
Organizations Italia.

Complainant Merlita B. Fabiana, Marlons surviving spouse,

hereby accuses Court of Appeals (CA) Presiding Justice Andres
B. Reyes, Jr., Associate Justice Isaias P. Dicdican and Associate
Justice Stephen C. Cruz, as the former Members of the CAs
First Division, of having openly defied the resolution
promulgated by the Court on January 13, 2010 in G.R. No.
189726 entitled Heirs of the Late Marlon A. Fabiana, [herein
represented by Merlita B. Fabiana] v. Magsaysay Maritime
Corp., et al., whereby the Court had allegedly "fixed with
finality complainants claims for death benefits and other
monetary claims, including damages and attorneys fees, against
the Maritime Company arising from the death of her husband."1

The relevant antecedents follow.

On December 19, 2007, the Labor Arbiter granted the following
claims to the heirs of Fabiana, to wit:

WHEREFORE, considering all the foregoing premises,

respondents are liable to pay the following to the complainants:

US $82,500.00 death benefits to complainant Merlita B.

Fabiana;

US $16,500.00 to complainant Jomari Paul B. Fabiana;

Salary differentials from July 17, 2006 to April 23, 2007

computed at US $1,038 deducting the US $424.00 monthly
salaries already paid by the respondents;

The difference of 1,500.00 Euro contributed by fellow Filipino

seafarer and US $1,000 remitted by respondents computed at the
rate of exchange at the time of payment;

Sick benefits from April 23, 2007 to May 11, 2007 computed at
US $1,038.00 monthly salary rate;

US $331.00 guaranteed overtime pay;

P7,574.00 actual damages;

P100,000.00 for moral damages;

P1,000,000.00 exemplary damages;

Ten percent (10%) attorneys fees computed on the total

awards.2

On December 10, 2008, the National Labor Relations

Commission (NLRC) rendered its decision,3 disposing:

WHEREFORE, foregoing premises considered, the appeal is

MODIFIED in the sense that the award of moral and exemplary
damages are reduced to P50,000.00 each while the other awards
are AFFIRMED.
SO ORDERED.

The parties then separately brought their respective petitions for

certiorari to the CA, specifically:

(a)

C.A.-G.R. SP No. 109382 entitled Heirs of the late Marlon A.

Fabiana, herein represented by Merlita B. Fabiana v. National
Labor Relations Commission, Magsaysay Maritime Corporation
and Air Sea Holiday GMBH-Stab[i]le Organizations Italia
(Hotel), assailing the jurisdiction of the NLRC in entertaining
the appeal of Magsaysay Maritime Corporation and its principal,
and seeking the reinstatement of the moral and exemplary
damages as awarded by the Labor Arbiter (first petition);4 and

(b)

C.A.-G.R. SP No. 109699 entitled Magsaysay Maritime

Corporation, Eduardo Manese, Prudential Guarantee (Surety),
and Air Sea Holiday GMBH-Stable Organizations, Italia v.
Heirs of the late Marlon Fabiana, and National Labor Relations
Commission challenging the propriety of the monetary awards
granted to the heirs of Fabiana (second petition).5

In the second petition, the petitioners averred that the late

Marlon Fabiana had died from a non-work related disease after
his employment contract had terminated.

On August 20, 2009, when the heirs of Fabiana filed their

comment vis--vis the second petition, they sought the
consolidation of the two petitions. Their request for
consolidation was not acted upon, however, but was soon
mooted a month later by the First Division of the CA
promulgating its decision on the first petition (C.A.-G.R. No.
109382) on September 29, 2009,6 to wit:

WHEREFORE, premises considered, the petition is partly

GRANTED. Accordingly, the challenged Decision is
AFFIRMED but MODIFIED insofar as interest at the rate of six
percent per annum (6% p.a.) is imposed on all the monetary
awards, reckoned from the Labor Arbiters judgment on 19
December 2007, except moral and exemplary damages to which
the same rate of interest is imposed, but reckoned from the time
the aforementioned decision was promulgated on 10 December
2008 by the NLRC Sixth Division. An additional interest of
twelve percent per annum (12% p.a.) is applied on the total
amount ultimately awarded upon finality of the decision until
fully paid.

The petitioners motion for preliminary mandatory injunction is

deemed resolved by this decision.

IT IS SO ORDERED.

Magsaysay Maritime Corporation filed on October 25, 2009 a

motion for clarification in C.A.-G.R. No. 109382 instead of a
motion for reconsideration.7 In response, the CA issued its
clarification on November 26, 2009 by stating that the
"affirmance with modification" was but the "consequence of the
certiorari petition being merely partially granted."8

On their part, the heirs of Fabiana filed a motion for

reconsideration in C.A.-G.R. No. 109382, which the CA denied.
Hence, on November 23, 2009, they appealed to the Court by
petition for review on certiorari (G.R. No. 189726). However,
the Court, through the Third Division,9 denied the petition for
review on certiorari through the resolution of January 13,
2010,10 quoted as follows:

Acting on the petition for review on certiorari assailing the

Decision dated 29 September 2009 of the Court of Appeals in
CA-G.R. SP No. 109382, the Court resolves to DENY the
petition for failure to sufficiently show that the appellate court
committed any reversible error in the challenged decision as to
warrant the exercise by this Court of its discretionary appellate
jurisdiction.
A careful consideration of the petition indicates a failure of the
petitioners to show any cogent reason why the actions of the
Labor Arbiter, the National Labor Relations Commission and
the Court of Appeals which have passed upon the same issue
should be reversed. Petitioners failed to show that their factual
findings are not based on substantial evidence or that their
decisions are contrary to applicable law and jurisprudence.

SO ORDERED.

In the meanwhile, on October 16, 2009, the heirs of Fabiana

moved to dismiss the second petition (C.A.-G.R. SP. No.
109699) on the ground that the intervening promulgation on
September 29, 2009 by the First Division of the decision on the
first petition (C.A.-G.R. No. 109382) had rendered the second
petition moot and academic.11

On June 4, 2010, however, the First Division of the CA, then

comprised by Presiding Justice Reyes, Jr., Associate Justice
Dicdican (ponente) and Associate Justice Cruz, denied the
motion to dismiss filed in C.A.-G.R. SP. No. 109699,12 holding
thusly:

This has reference to the motion filed by the private

respondents, through their counsel, to dismiss the petition in the
case at bench on the ground that it has been rendered moot and
academic by the decision promulgated on September 29, 2009
by this Court in CA-G.R. SP No. 109382.

After a judicious scrutiny of the whole matter, we find the said

motion to dismiss to be wanting in merit. It is not true that the
petition in this case has been rendered moot and academic by
the decision promulgated by this Court on September 29, 2009
in CA-G.R. SP No. 109382. The said decision rendered by this
Court passed upon two limited issues only, namely, the NLRCs
jurisdiction to allow the petitioners appeal thereto despite flaws
in their verification and non-forum shopping papers and the
propriety of the reduction by the NLRC of the amount of
damages awarded to the private respondents. A reading of the
said decision will unmistakably bear this out. However, in the
case at bench, the petitioners have assailed omnibously the
NLRCs awards in favor of the private respondents for death
benefits, sickness allowance, salary differentials and other
monetary claims. We have to pass upon the propriety of all these
monetary awards.

WHEREFORE, in view of the foregoing premises, we hereby

DENY the aforementioned motion to dismiss filed in this case.

We hereby give the parties a fresh period of fifteen (15) days

from notice hereof within which to file memoranda in support of
their respective sides of the case.

SO ORDERED.

The second petition (C.A.-G.R. SP. No. 109699) was ultimately

resolved on September 16, 2011 by the Sixth Division of the
CA, composed of Associate Justice Amelita G. Tolentino,
Associate Justice Normandie B. Pizarro (ponente) and Associate
Justice Rodil V. Zalameda, dismissing the petition upon not
finding the NLRC to have gravely abused its discretion.

As earlier adverted to, the complainant accuses Presiding Justice

Reyes, Jr., Associate Justice Dicdican and Associate Justice
Cruz with thereby willfully disobeying the resolution of January
13, 2010 promulgated by the Court.

The complaint lacks merit.

In administrative proceedings, the burden of substantiating the

charges falls on the complainant who must prove her allegations
in the complaint by substantial evidence.13 Here, the allegation
of willful disobedience against respondent CA Justices was
unsubstantiated and baseless. The issues raised in the first
petition (C.A.-G.R. No. 109382) were limited to the NLRCs
jurisdiction over the appeal by Magsaysay Maritime
Corporation and its principal, and to the reduction of the
amounts awarded as moral and exemplary damages. In contrast,
the second petition (C.A.-G.R. SP. No. 109699) concerned only
the propriety of awarding monetary benefits. Under the
circumstances, the promulgation by the Court of the resolution
of January 13, 2010 in G.R. No. 189726 did not divest the
respondents as members of the First Division of the CA of the
jurisdiction to entertain and pass upon the second petition (C.A.-
G.R. SP. No. 109699), something that they sought to explain
through their resolution promulgated on June 4, 2010. The
explanation, whether correct or not, was issued in the exercise of
judicial discretion. It is not for us to say now in a resolution of
this administrative complaint whether the explanation was
appropriate or not, nor for the complainant to herself hold them
in error. The recourse open to the heirs of Fabiana, including the
complainant, was to move for the correction of the resolution, if
they disagreed with it, and, should their motion be denied, to
assail the denial in this Court through the remedy warranted
under the law.

The complainants initiation of her complaint would take

respondent Justices to task for their regular performance of their
office. Yet, as the surviving spouse of the late-lamented Marlon,
she was understandably desirous of the most favorable and
quickest outcome for the claim for death benefits because his
intervening demise had rendered her and her family bereft of his
support. Regardless of how commendable were her motives for
initiating this administrative complaint, however, she could not
substitute a proper judicial remedy not taken with an improper
administrative denunciation of the Justices she has hereby
charged. That is impermissible. If she felt aggrieved at all, she
should have resorted to the available proper judicial remedy, and
exhausted it, instead of resorting to the unworthy disciplinary
charge.

Truly, disciplinary proceedings and criminal actions brought

against any Judge or Justice in relation to the performance of
official functions are neither complementary to nor suppletory
of appropriate judicial remedies, nor a substitute for such
remedies.14 The Court has fittingly explained why in In Re:
Joaquin T. Borromeo,15 to wit:

Given the nature of the judicial function, the power vested by

the Constitution in the Supreme Court and the lower courts
established by law, the question submits to only one answer: the
administrative or criminal remedies are neither alternative nor
cumulative to judicial review where such review is available,
and must wait on the result thereof.

Simple reflection will make this proposition amply clear, and

demonstrate that any contrary postulation can have only
intolerable legal implications. Allowing a party who feels
aggrieved by a judicial order or decision not yet final and
executory to mount an administrative, civil or criminal
prosecution for unjust judgment against the issuing judge would,
at a minimum and as an indispensable first step, confer the
prosecutor (Ombudsman) with an incongruous function
pertaining, not to him, but to the courts: the determination of
whether the questioned disposition is erroneous in its findings of
fact or conclusions of law, or both. If he does proceed despite
that impediment, whatever determination he makes could well
set off a proliferation of administrative or criminal litigation, a
possibility hereafter more fully explored.

Such actions are impermissible and cannot prosper. It is not, as

already pointed out, within the power of public prosecutors, or
the Ombudsman or his deputies, directly or vicariously, to
review judgments or final orders or resolutions of the Courts of
the land. The power of reviewby appeal or special civil action
is not only lodged exclusively in the Courts themselves but
must be exercised in accordance with a well-defined and long
established hierarchy, and long standing processes and
procedures. No other review is allowed; otherwise litigation
would be interminable, and vexatiously repetitive.

Moreover, in Re: Verified Complaint of Engr. Oscar L. Ongjoco,

Chairman of the Board/CEO of FH-Gymn Multi-Purpose and
Transport Service Cooperative, against Hon. Juan Q. Enriquez,
Jr., Hon. Ramon M. Bato, Jr. and Hon. Florito S. Macalino,
Associate Justices, Court of Appeals,16 the Court ruminates:

In this regard, we reiterate that a judges failure to correctly

interpret the law or to properly appreciate the evidence
presented does not necessarily incur administrative liability, for
to hold him administratively accountable for every erroneous
ruling or decision he renders, assuming he has erred, will be
nothing short of harassment and will make his position doubly
unbearable. His judicial office will then be rendered untenable,
because no one called upon to try the facts or to interpret the law
in the process of administering justice can be infallible in his
judgment. Administrative sanction and criminal liability should
be visited on him only when the error is so gross, deliberate and
malicious, or is committed with evident bad faith, or only in
clear cases of violations by him of the standards and norms of
propriety and good behavior prescribed by law and the rules of
procedure, or fixed and defined by pertinent
jurisprudence.1wphi1

To be clear, although we do not shirk from the responsibility of

imposing discipline on the erring Judges or Justices and
employees of the Judiciary, we shall not hesitate to shield them
from baseless charges that only serve to disrupt rather than
promote the orderly administration of justice.17

Even as we dismiss the administrative charge, we deem it

necessary to observe further, in the exercise of our
administrative supervision over the CA, that the matter
addressed here was really simple and avoidable if only the CA
had promptly implemented its current procedure for the
consolidation of petitions or proceedings relating to or arising
from the same controversies. Section 3(a), Rule III of the 2009
Internal Rules of the Court of Appeals has forthrightly mandated
the consolidation of related cases assigned to different Justices,
viz:
Section 3. Consolidation of Cases. When related cases are
assigned to different justices, they shall be consolidated and
assigned to one Justice.

(a) Upon motion of a party with notice to the other party/ies, or

at the instance of the Justice to whom any or the related cases is
assigned, upon notice to the parties, consolidation shall ensue
when the cases involve the same parties and/or related questions
of fact and/or law. (Emphases supplied)

xxxx

A perusal of the two petitions showed that they involved the

same parties and the same facts. Even their issues of law, albeit
not entirely identical, were closely related to one another. It
could not also be denied that they assailed the same decision of
the NLRC. For these reasons alone, the request for consolidation
by the heirs of Fabiana should have been granted, and the two
petitions consolidated in the same Division of the CA.

The consolidation of two or more actions is authorized where

the cases 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 and
that consolidation will not give one party an undue advantage or
that consolidation will not prejudice the substantial rights of any
of the parties.18 As to parties, their substantial identity will
suffice. Substantial identity of parties exists when there is a
community of interest or privity of interest between a party in
the first case and a party in the second, even if the latter has not
been impleaded in the first case.19 As to issues, what is required
is mere identity of issues where the parties, although not
identical, present conflicting claims.20 The justification for
consolidation is to prevent a judge from deciding identical
issues presented in the case assigned to him in a manner that
will prejudice another judge from deciding a similar case before
him.
We are perplexed why the CA did not act on and grant the
request for consolidation filed on August 20, 2009 by the heirs
of Fabiana. In fact, the consolidation should have been required
as a matter of course even without any of the parties seeking the
consolidation of the petitions, considering that the two cases
rested on the same set of facts, and involved claims arising from
the death of the late Marlon Fabiana.

It is true that under the Rules of Court,21 the consolidation of

cases for trial is permissive and a matter of judicial discretion. 22
This is because trials held in the first instance require the
attendance of the parties, their respective counsel and their
witnesses, a task that surely entails an expense that can multiply
if there are several proceedings upon the same issues involving
the same parties. At the trial stage, the avoidance of unnecessary
expenses and undue vexation to the parties is the primary
objective of consolidation of cases.23 But the permissiveness of
consolidation does not carry over to the appellate stage where
the primary objective is less the avoidance of unnecessary
expenses and undue vexation than it is the ideal realization of
the dual function of all appellate adjudications. The dual
function is expounded thuswise:

An appellate court serves a dual function. The first is the review

for correctness function, whereby the case is reviewed on appeal
to assure that substantial justice has been done. The second is
the institutional function, which refers to the progressive
development of the law for general application in the judicial
system.

Differently stated, the review for correctness function is

concerned with the justice of the particular case while the
institutional function is concerned with the articulation and
application of constitutional principles, the authoritative
interpretation of statutes, and the formulation of policy within
the proper sphere of the judicial function.
The duality also relates to the dual function of all adjudication in
the common law system. The first pertains to the doctrine of res
judicata, which decides the case and settles the controversy; the
second is the doctrine of stare decisis, which pertains to the
precedential value of the case which assists in deciding future
similar cases by the application of the rule or principle derived
from the earlier case.

With each level of the appellate structure, the review for

correctness function diminishes and the institutional function,
which concerns itself with uniformity of judicial administration
and the progressive development of the law, increases.24

In the appellate stage, therefore, the rigid policy is to make the

consolidation of all cases and proceedings resting on the same
set of facts, or involving identical claims or interests or parties
mandatory. Such consolidation should be made regardless of
whether or not the parties or any of them requests it. A
mandatory policy eliminates conflicting results concerning
similar or like issues between the same parties or interests even
as it enhances the administration of justice.

In this connection, the Court reminds all attorneys appearing as

counsel for the initiating parties of their direct responsibility to
give prompt notice of any related cases pending in the courts,
and to move for the consolidation of such related cases in the
proper courts. This responsibility proceeds from their express
undertakings in the certifications against forum-shopping that
accompany their initiatory pleadings pursuant to Section 5 of
Rule 7 and related rules in the Rules of Court, to the effect that
they have not theretofore commenced any actions or filed any
claims involving the same issues in any court, tribunal or quasi-
judicial agency and, to the best of their knowledge, no such
other actions or claims are pending therein; that if there were
such other pending actions or claims, to render complete
statements of the present status thereof; and if they should
thereafter learn that the same or similar actions or claims have
been filed or are pending, they shall report that fact within five
days therefrom to the courts wherein the said complaints or
initiatory pleadings have been filed.

WHEREFORE, the Court DISMISSES the administrative

complaint against Presiding Justice Andres B. Reyes, Jr.,
Associate Justice Isaias P. Dicdican and Associate Justice
Stephen C. Cruz of the Court of Appeals for its lack of merit.

The Court of Appeals is DIRECTED to forthwith adopt

measures that will ensure the strict observance of Section 3,
Rule III of the 2009 Internal Rules of the Court of Appeals,
including the revision of the rule itself to make the consolidation
of cases and proceedings concerning similar or like issues or
involving the same parties or interests mandatory and not
dependent on the initiative of the parties or of any of them.

All attorneys of the parties in cases brought to the third level

courts either on appeal or interlocutory review (like certiorari)
are REQUIRED to promptly notify the reviewing courts of the
pendency of any other cases and proceedings involving the same
parties and issues pending in the same or other courts.

Let this decision be FURNISHED to the Court of Appeals,

Sandiganbayan, Court of Tax Appeals and the Office of the
Court Administrator for their guidance; and to the Integrated Bar
of the Philippines for dissemination to all its chapters.

SO ORDERED.

Sereno, C.J., Carpio, Velasco, Jr., Leonardo-De Castro,

Brion, Peralta, Del Castillo, Abad, Villarama, Jr., Perez,
Mendoza, Reyes, Perlas-Bernabe, and Leonen, JJ., concur.
 FIRST DIVISION

G.R. No. 184622 July 3, 2013

PHILIPPINE OVERSEAS TELECOMMUNICATIONS

CORPORATION (POTC) AND PHILIPPINE
COMMUNICATIONS SATELLITE CORPORATION
(PHILCOMSAT), Petitioners,
vs.
VICTOR AFRICA, ERLINDA I. BILDNER, SYLVIA K.
ILUSORIO, HONORIO POBLADOR III, VICTORIA C.
DELOS REYES, JOHN BENEDICT SIOSON, AND
JOHN/JANE DOES. Respondents.

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

G.R. Nos. 184712-14

PHILIPPINE OVERSEAS TELECOMMUNICATIONS

CORPORATION (POTC) AND PHILIPPINE
COMMUNICATIONS SATELLITE CORPORATION
(PHILCOMSAT), Petitioners,
vs.
HON. JENNY LIN ALDECOA-DELORINO, PAIRING
JUDGE OF THE REGIONAL TRIAL COURT OF
MAKATI CITY-BRANCH 138, VICTOR AFRICA,
purportedly representing PHILCOMSAT, AND
JOHN/JANE DOES. Respondents.

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

G.R. No. 186066

PHILCOMSAT HOLDINGS CORPORATION, represented

by CONCEPCION POBLADOR, Petitioner,
vs.
PHILIPPINE COMMUNlCATIONS SATELLITE
CORPORATION (PHILCOMSAT), represented by
VICTOR AFRICA, Respondent.
x-----------------------x

G.R. No. 186590

PHILCOMSAT HOLDINGS CORPORATION, represented

by ERLINDA I. BILDNER, Petitioner,
vs.
PHILCOMSAT HOLDINGS CORPORATION, represented
by ENRIQUE L. LOCSIN, Respondent.

DECISION

BERSAMIN, J.:

An intra-corporate dispute involving a corporation under

sequestration of the Presidential Commission on Good
Government (PCGG) falls under the jurisdiction of the Regional
Trial Court (RTC), not the Sandiganbayan.

The Cases

These consolidated appeals via petitions for review on certiorari

include the following:

(a) G.R. No.184622 - the appeal from the dismissal by the

Sandiganbayan of the petitioners complaint for injunction
docketed as Civil Case No. 0198 on the ground that the
Sandiganbayan had no jurisdiction over the issue due to its
being an intra-corporate dispute;

(b) G.R. No.184712-14 and G.R. No. 186066 - the appeals of

the Locsin Group (in representation of Philippine Overseas
Telecommunications Corporation (POTC), Philippine
Communications Satellite Corporation (PHILCOMSAT), and
Philcomsat Holdings Corporation (PHC) from the consolidated
decision the Court of Appeals (CA) promulgated on September
30, 2008 in C.A.-G.R. SP No. 101225, C.A.-G.R. SP No. 98097
and C.A.-G.R. SP No. 98399; and
(c) G.R. No. 186590 - the appeal of the Ilusorio Group seeking
the reversal of the decision promulgated by the CA on July 16,
2008 in C.A.-G.R. SP No. 102437.

Common Antecedents

POTC is a domestic corporation organized for the purpose of,

among others, constructing, installing, maintaining, and
operating communications satellite systems, satellite terminal
stations and associated equipments and facilities in the
Philippines.1

PHILCOMSAT is also a domestic corporation. Its purposes

include providing telecommunications services through space
relay and repeater stations throughout the Philippines.

PHC is likewise a domestic corporation, previously known as

Liberty Mines, Inc., and is engaged in the discovery,
exploitation, development and exploration of oil. In 1997,
Liberty Mines, Inc. changed its name to PHC, declassified its
shares, and amended its primary purpose to become a holding
company.2

The ownership structure of these corporations implies that

whoever had control of POTC necessarily held 100% control of
PHILCOMSAT, and in turn whoever controlled PHILCOMSAT
wielded 81% majority control of PHC. Records reveal that
POTC has been owned by seven families through their
individual members or their corporations, namely: (a) the
Ilusorio Family; (b) the Nieto Family; (c) the Poblador Family;
(d) the Africa Family; (e) the Benedicto Family; (f) the Ponce
Enrile Family; and (g) the Elizalde Family.3

Atty. Potenciano Ilusorio, the patriarch of the Ilusorio Family,

owned shares of stock in POTC. A block consisting of 5,400
POTC shares of stock has become the bone of contention in a
prolonged controversy among the parties. Atty. Ilusorio claimed
that he had incurred the ire of Imelda Marcos during the regime
of President Marcos, leading to the Marcos spouses grabbing
from him the POTC shares of stock through threats and
intimidation and without any valuable consideration, and
placing such shares under the names of their alter egos, namely:
3,644 shares in the name of Independent Realty Corporation
(IRC); 1,755 shares in the name of MidPasig Land Development
(Mid-Pasig); and one share in the name of Ferdinand Marcos,
Jr.4

On February 25, 1986, the EDSA People Power Revolution

deposed President Marcos from power and forced him and his
family to flee the country. On February 28, 1986, newly-
installed President Corazon C. Aquino issued Executive Order
No. 1 to create the PCGG whose task was to assist the President
in the recovery of all ill-gotten wealth amassed by President
Marcos, his immediate family, relatives, subordinates and close
associates, whether located in the Philippines or abroad, through
the takeover or sequestration of all business enterprises and
entities owned or controlled by them during President Marcos
administration, directly or through nominees, by taking undue
advantage of their public office and/or using their powers,
authority, influence, connections or relationships.5

Subsequently, Jose Y. Campos, a self-confessed crony of

President Marcos, voluntarily surrendered to the PCGG the
properties, assets, and corporations he had held in trust for the
deposed President. Among the corporations surrendered were
IRC (which, in the books of POTC, held 3,644 POTC shares)
and Mid-Pasig (which, in the books of POTC, owned 1,755
POTC shares). Also turned over was one POTC share in the
name of Ferdinand Marcos, Jr.6

With Campos surrender of IRC and Mid-Pasig to the PCGG,

the ownership structure of POTC became as follows:

Owner % of Shareholdings

Ilusorio, Africa,
Poblador,
Benedicto and Ponce Enrile
46.39%
Families

PCGG (IRC and Mid-

39.92%
Pasig)
Nieto Family 13.12%
Elizalde Family 0.57%
Total 100.00%
With 39.92% of the POTC shareholdings under its control, the
PCGG obtained three out of the seven seats in the POTC Board
of Directors. At the time, Manuel Nieto, Jr. was the President of
both POTC and PHILCOMSAT. However, Nieto, Jr. had a
falling out with other stockholders. To keep control of the POTC
and PHILCOMSAT, Nieto, Jr. aligned with the PCGG nominees
to enable him to wrest four out of seven seats in the POTC
Board of Directors and five out of the nine seats in the
PHILCOMSAT Board of Directors. Thus, Nieto, Jr. remained as
the President of POTC and PHILCOMSAT.7

On July 22, 1987, the Government, represented by the PCGG,

filed in the Sandiganbayan a Complaint for reconveyance,
reversion, accounting, restitution and damages against Jose L.
Africa, Manuel H. Nieto, Jr., President Marcos, Imelda R.
Marcos, Ferdinand R. Marcos, Jr., Roberto S. Benedicto, Juan
Ponce Enrile and Atty. Potenciano Ilusorio.8 The Complaint,
docketed as SB Civil Case No. 009, alleged that the defendants
"acted in collaboration with each other as dummies, nominees
and/or agents of defendants Ferdinand E. Marcos, Imelda R.
Marcos and Ferdinand R. Marcos, Jr. in several corporations,
such as the Mid-Pasig Land Development Corporation and the
Independent Realty Corporation which, through manipulations
by said defendants, appropriated a substantial portion of the
shareholdings in Philippine Overseas Telecommunications
Corporation and Philippine Communications Satellite
Corporation held by the late Honorio Poblador, Jr., Jose Valdez
and Francisco Reyes, thereby further advancing defendants
scheme to monopolize the telecommunications industry;" that
through their illegal acts, they acquired ill-gotten wealth; that
their acts constituted "breach of public trust and the law, abuse
of rights and power, and unjust enrichment;" and that their
illgotten wealth, real and personal, "are deemed to have been
acquired (by them) for the benefit of the plaintiff (Republic) and
are, therefore, impressed with constructive trust in favor of (the
latter) and the Filipino people."9

The Complaint prayed that all the funds, properties and assets
illegally acquired by the defendants, or their equivalent value,
be reconveyed or reverted to the Government; and that the
defendants be ordered to render an accounting and to pay
damages.10

In his Amended Answer with Cross-Claim (against the

Marcoses) and Third-Party Complaint against Mid-Pasig and
IRC, Atty. Ilusorio denied having acquired ill-gotten wealth and
having unjustly enriched himself by conspiring with any of the
defendants in committing a breach of public trust or abuse of
right or of power, stating that "he has never held any public
office nor has he been a government employee;" and that he was
never a dummy or agent of the Marcoses. He interposed the
affirmative defense that he owned 5,400 POTC shares of stock,
having acquired them through his honest toil, but the Marcoses
had taken the shares from him through threats and intimidation
and without valuable consideration and then placed the shares in
the names of their alter egos; and that he thus became "the
hapless victim of injustice," with the right to recover the shares
and their corresponding dividends.11

On June 28, 1996, after a decade of litigation, the Republic, IRC

and Mid-Pasig, and the PCGG (acting through PCGG
Commissioner Hermilo Rosal) entered into a compromise
agreement with Atty. Ilusorio, whereby Atty. Ilusorio recognized
the ownership of the Republic over 4,727 of the POTC shares of
stock in the names of IRC and Mid-Pasig, and, in turn, the
Republic acknowledged his ownership of 673 of the POTC
shares of stock and undertook to dismiss Civil Case No. 009 as
against him.

The compromise agreement relevantly stated:

WHEREAS, this Compromise Agreement covers the full,

comprehensive and final settlement of the claims of the
GOVERNMENT against ILUSORIO in Civil Case No. SB-009,
pending before the Third Division of the Sandiganbayan; the
Cross-Claim involving several properties located in Paraaque,
Metro Manila; and the Third-Party Complaint filed by
ILUSORIO, in the same case, involving the Five Thousand Four
Hundred (5,400) shares of stocks registered in the names of
Mid-Pasig Land Development Corporation (MLDC) and
Independent Realty Corporation (IRC), respectively, in the
Philippine Overseas Telecommunications Corporation (POTC);

xxxx

President Ramos approved the compromise agreement, and

directed its submission to the Sandiganbayan for approval
through his marginal note dated October 5, 1996.12

It was not until June 8, 1998, or nearly two years from its
execution, however, that the Sandiganbayan approved the
compromise agreement, the resolution for which reads:

WHEREFORE, and as prayed for in the Motion dated June 3,

1998, which is hereby granted.

1. The foregoing Compromise Agreement dated June 28, 1996

executed by and between the plaintiff and defendant Potenciano
T. Ilusorio is hereby approved, the same not being contrary to
law, good morals and public policy. The parties thereto are
hereby enjoined to strictly abide by and comply with the terms
and conditions of the said Compromise Agreement.
2. The complaint as against defendant Potenciano T. Ilusorio
only in the above-entitled case No. 0009 is hereby dismissed.

3. The Motions for Injunction and Contempt, respectively, filed

by defendant Potenciano T. Ilusorio against the
Government/PCGG, its officers and agents, in Civil Case No.
0009 are hereby withdrawn;

4. The Third-Party Complaint and the Cross-Claim of defendant

Potenciano T. Ilusorio are hereby dismissed; and

5. The Board of Directors, President and Corporate Secretary of

the Philippine Overseas Telecommunications Corporation are
hereby ordered to issue the corresponding stock certificates to,
and in the names of Potenciano T. Ilusorio, Mid-Pasig Land
Development Corporation, and Independent Realty Corporation,
respectively.13

The result was the redistribution of the POTC shareholdings as

follows:

1wphi1
Owner % of Shareholdings
Ilusorio, Africa, Poblador,
Benedicto and Ponce Enrile
51.37%
Families
PCGG (IRC and Mid-Pasig) 34.94%
Nieto Family 13.12%
Elizalde Family 0.57%
Total 100.00%
The Ilusorio Familys shareholding became 18.12%, while that
of the PCGG (through IRC and Mid-Pasig) was reduced to
34.94%. With its reduced shareholdings, the PCGGs number of
seats in the POTC Board settled at only two. The Ilusorio
Family continued its alliance with the Africa, Poblador,
Benedicto and Ponce Enrile Families. In effect, the compromise
agreement tilted the control in POTC, PHILCOMSAT and PHC,
such that the alliance between the Nieto Family and the PCGG,
theretofore dominant, became the minority.14

After assuming the Presidency in mid-1998, President Estrada

nominated through the PCGG Ronaldo Salonga and Benito
Araneta, the latter a nephew of Nieto, Jr., to the POTC Board of
Directors to represent the IRC and Mid-Pasig shareholdings.15

As to the PHILCOMSAT Board of Directors, however,

President Estrada through the PCGG nominated four nominees,
namely: Salonga, Araneta, Carmelo Africa and Edgardo
Villanueva. The nomination of the four ignored the reduction of
the IRC and Mid-Pasig shareholdings in POTC that should have
correspondingly reduced the board seats in PHILCOMSAT that
the PCGG was entitled to from four to only three.16

On August 16, 1998, Mid-Pasig, represented by Salonga, filed in

the Sandiganbayan in Civil Case No. 009 a Motion to Vacate the
order dated June 8, 1998 approving the compromise agreement.
On October 2, 1998, IRC, also represented by Salonga, filed a
similar motion. Both motions insisted that the compromise
agreement did not bind Mid-Pasig and IRC for not being parties
thereto, although they held substantial interests in the POTC
shareholdings subject of the compromise agreement; and that
the compromise agreement was void because its terms were
contrary to law, good morals and public policy for being grossly
and manifestly disadvantageous to the Government.17

Aside from supporting the position taken by Mid-Pasig and IRC,

PCGG added that the compromise agreement was fatally
defective for lack of any PCGG resolution authorizing
Commissioner Rosal to enter into the compromise agreement in
behalf of the Government.18

On his part, Atty. Ilusorio vigorously opposed the motions.19

On August 28, 1998, PHILCOMSAT stockholders held an

informal gathering at the Manila Golf Club for the apparent
purpose of introducing the new PCGG nominees to the
stockholders. During the proceedings, however, Atty. Luis
Lokin, Jr. announced that the gathering was being considered as
a Special PHILCOMSAT Stockholders Meeting. Those in
attendance then proceeded to elect as Directors and Officers of
PHILCOMSAT Nieto, Jr., Lourdes Africa, Honorio Poblador III,
Salvador Hizon, Salonga, Araneta, Carmelo Africa, and Edgardo
Villanueva (Nieto Group-PCGG).20

As a consequence, other PHILCOMSAT stockholders (namely,

Ilusorio, Katrina Ponce Enrile, Fidelity Farms, Inc., Great Asia
Enterprises and JAKA Investments Corporation) instituted a
Complaint with application for the issuance of temporary
restraining order (TRO) and writ of preliminary injunction
(WPI) in the Securities and Exchange Commission (SEC)
assailing the election of the Directors and Officers on several
grounds, such as the lack of sufficient notice of the meeting, the
lack of quorum, and the lack of qualifying shares of those who
were elected. They maintained that by reason of POTCs 100%
beneficial ownership of PHILCOMSAT, there should have been
a notice to POTC, which, upon a proper board meeting, should
have appointed proxies to attend the PHILCOMSAT
Stockholders Meeting. The case was docketed as SEC Case No.
09-98-6086.21

The SEC issued a TRO, and, later on, a WPI enjoining the Nieto
Group-PCGG from acting as Directors and Officers of
PHILCOMSAT and from representing themselves as such.22

Salonga, Araneta, Africa and Villanueva commenced in the CA a

special civil action for certiorari to nullify the WPI issued by the
SEC (C.A.-G.R. SP NO. 49205). On October 15, 1998,
however, the CA dismissed the petition for certiorari because of
the petitioners failure to furnish a copy of the petition to the
SEC. The dismissal became final and executory.23

Still, Salonga, Araneta, Africa and Villanueva brought in the CA

another petition assailing the WPI issued by the SEC (C.A.-G.R.
SP No. 49328). The CA also dismissed their petition on October
26, 1999.24

For their part, Nieto, Jr. and Lourdes Africa likewise went to the
CA to assail the WPI issued by the SEC (C.A.-G.R. SP No.
49770), but on April 19, 2001, the CA dismissed the petition.
Nieto, Jr. initially intended to appeal the dismissal, but the Court
denied his motion for extension of time to file petition for
review on certiorari.25

Following the enactment of Republic Act No. 8799 (Securities

Regulation Code),26 SEC Case No. 09-98-6086 was transferred
to the RTC in Makati City, which re-docketed it as Civil Case
No. 01-840 and raffled it to Branch 138.27

Meanwhile, on January 18, 1999, POTC held a Special

Stockholders Meeting, at which the following were elected as
Directors of POTC, namely: Roberto S. Benedicto, Atty. Victor
Africa, Sylvia Ilusorio, Honorio Poblador III, Cristina Agcaoili,
Katrina Ponce Enrile, and Nieto, Jr. The elected Directors,
except Nieto, Jr., eventually formed the Africa-Ilusorio Group.
Thereafter, the Board of Directors held an organizational
meeting during which they elected the following as the Officers
of POTC, namely: Roberto S. Benedicto (Chairman); Atty.
Victor Africa (Vice-Chairman); Sylvia Ilusorio (President);
Katrina Ponce Enrile (Vice President); Rafael Poblador
(Treasurer); Kitchie Benedicto (Assistant Treasurer); and Atty.
Victoria de los Reyes (Corporate Secretary).28

On December 20, 1999, the Sandiganbayan promulgated a

resolution in SB Civil Case No. 009 denying IRC and Mid-
Pasigs motions to vacate the order approving the compromise
agreement, viz:

WHEREFORE, premises considered, third-party defendant

Mid-Pasigs Motion to Vacate Resolution Approving
Compromise Agreement dated August 16, 1998 and third party
defendant Independent Realty Corporation's Manifestation and
Motion dated October 2, 1998 and the redundant and
inappropriate concurrence of the PCGG and the OSG are hereby
denied for lack of merit.

The Court also declares all POTC shares in the name of Mid-
Pasig and IRC as null and void. Accordingly, out of the 5,400
POTC shares, six hundred seventy three (673) is hereby directed
to be issued in the name of Potenciano Ilusorio and four
thousand seven hundred twenty seven (4,727) in the name of the
Republic of the Philippines. The Board of Directors, President
and Corporate Secretary of the POTC are hereby ordered to
comply with this requirement within ten (10) days from receipt
of this Resolution.29

In compliance with the resolution, POTC Corporate Secretary

Victoria de los Reyes effected the cancellation of the shares
registered in the names of IRC and Mid-Pasig and issued
Certificate of Stocks No. 131 covering the 4,727 POTC shares
in the name of the Republic. Thereafter, Certificate of Stocks
No. 131 was transmitted to then Chief Presidential Legal
Counsel and PCGG Chairman Magdangal Elma, who
acknowledged receipt. Through its resolution dated January 12,
2000, the Sandiganbayan noted the POTC Corporate Secretarys
compliance.30

As earlier mentioned, the implementation of the

Sandiganbayans resolution dated December 20, 1999 resulted
in the re-distribution of the shareholdings in POTC in the
manner earlier shown.

On March 16, 2000, the PCGG filed in this Court its petition
assailing the resolution of the Sandiganbayan dated December
20, 1999 (G.R. No. 141796 entitled Republic of the Philippines,
represented by the Presidential Commission on Good
Government v. Sandiganbayan and Potenciano T. Ilusorio,
substituted by Ma. Erlinda Ilusorio Bildner).

IRC and Mid-Pasig also filed in this Court their own petition to
assail the resolution dated December 20, 1999 (G.R. No. 141804
entitled Independent Realty Corporation and Mid-Pasig Land
Development Corporation v. Sandiganbayan and Potenciano T.
Ilusorio, substituted by Ma. Erlinda Ilusorio Bildner).

On March 29, 2000, this Court issued a TRO to enjoin the

Sandiganbayan from executing its assailed resolution.31

On September 6, 2000, President Estrada nominated another set

to the PHILCOMSAT Board of Directors, namely: Carmelo
Africa, Federico Agcaoili, Pacifico Marcelo and Edgardo
Villanueva. Thereby, Africa and Villanueva were retained as
PHILCOMSAT Directors, while Agcaoili and Marcelo replaced
Araneta and Salonga.32

Subsequently, POTC, through the Africa-Bildner Group, decided

to hold a Special Stockholders Meeting on September 22, 2000.
POTC Corporate Secretary de los Reyes issued a Notice of
Meeting. Attempting to stop the Stockholders Meeting, Nieto,
Jr., Araneta and Salonga filed in this Court in G.R. No. 141796
and G.R. No.141804 a Motion for Leave to Intervene with
urgent manifestation for contempt of court, praying, among
others, that POTC Corporate Secretary de los Reyes be cited in
contempt and/or disbarred for issuing the Notice of Meeting.33

The Special Stockholders Meeting on September 22, 2000 was

attended by stockholders representing 81.32% of the outstanding
capital stock of POTC (including PCGG). During the meeting, a
new set of POTC Board of Directors were elected, namely:
Nieto, Jr., Katrina Ponce Enrile, Victor V. Africa, Sylvia K.
Ilusorio, Honorio A. Poblador III, Carmelo Africa and PCGG
Commissioner Jorge Sarmiento (the latter two being nominated
by PCGG).34

POTC then convened a Special Stockholders Meeting of

PHILCOMSAT, at which the following were elected as
Directors: Nieto, Jr., Francisca Benedicto, Katrina Ponce Enrile,
Sylvia Ilusorio, Honorio Poblador III, and government
representatives Africa, Marcelo, Villanueva and Agcaoili (the
latter four being nominated by PCGG).35
In line with existing corporate policy requiring the elected
Directors to accept their election before assuming their
positions, all the elected Directors (including Nieto, Jr.) were
requested to sign acceptance letters to be submitted to POTC
Corporate Secretary de los Reyes. A few days later, however,
Nieto, Jr. refused to accept and instead opted to assail the
validity of the September 22, 2000 POTC Special Stockholders
Meeting.36

By virtue of the September 22, 2000 elections, the Africa-

Bildner Group, together with the PCGG nominees, took control
of the management and operations of POTC and
PHILCOMSAT.37

In March 2002, President Gloria Macapagal-Arroyo named

Enrique L. Locsin and Manuel D. Andal as new PCGG
nominees to sit in the POTC and PHILCOMSAT Boards of
Directors. Julio Jalandoni was named as the third new PCGG
nominee to the PHILCOMSAT Board of Directors.38

On April 29, 2002, POTC, through the Africa-Ilusorio Group,

decided to hold a stockholders meeting. Notices for the meeting
were dispatched to all stockholders of record, including the
Republic. However, the meeting was adjourned for failure to
obtain a quorum because of the absence of several stockholders,
including the proxy for the Republic.39

On December 3, 2003, Atty. Jose Ma. Ozamiz, a stockholder of

PHC, sent a letter-complaint informing the SEC that PHC had
not conducted its annual stockholders meetings since 2001. His
letter-complaint was docketed as SEC Case No. 12-03-03.40

On December 29, 2003, the SEC issued the following Order in

SEC Case No. 12-03-03, to wit:

PREMISES CONSIDERED, the Commission in the exercise of

its regulatory authority over corporations and associations
registered with it hereby issues the following directives:
1. The board of directors, responsible
officers of Philcomsat Holdings, Inc (PHI)
(sic) shall organize a COMELEC composed of
three members within ten (10) days from
date of actual receipt of this Order. One
member to be nominated by the group of
Atty. Jose Ma. Ozamiz, the second member
to be nominated by the group of either Mr.
Manuel H. Nieto or Mr. Carmelo P. Africa,
Jr. and the third member a neutral party,
to be jointly nominated by both groups.
Failure on the part of the contending
parties to designate their common nominee,
the SEC shall be constrained to designate
the neutral party.
x x x x.41
By letter dated January 8, 2004, Philip
Brodett and Locsin communicated to the SEC
that:
1. PHC and its directors and officers are
not averse to the holding of meetings of
its stockholders annually. PHC's inability
to hold its annual stockholders meeting
in the past years can be attributed to the
following: previous attempts of the group
of Mesdames Cristina Ilusorio and Sylvia
Ilusorio and Mr. Carmelo Africa (for
brevity the "Ilusorio Group") to control
PHC without legal basis; delay in the
completion of PHC's audited financial
statements for the years 2001, 2002 and
2003 was caused by the Ilusorio Group and
the pending dispute as to who between the
Ilusorio Group, on one hand, and the group
of Ambassador Manuel Nieto, Jr. Philippine
Government, on the other, properly
constitutes the governing board of
directors and officers of the parent
 companies of PHC's, namely the Philcomsat
and POTC;
Considering the aforesaid pending dispute
as to who really controls the mother
companies of PHC, it would be advisable
and practicable that the annual meetings
of the stockholders and the election of
the directors and officers of Philcomsat
and POTC should precede those of PHC. In
view thereof, and for practical reasons
and good order's sake, it was suggested
that perhaps the Commission should direct
the holding of the annual stockholders'
meetings and election of directors and
officers of both Philcomsat and POTC at a
date or dates prior to those of PHC.
x x x x
4. x x x. Considering the foregoing, it is
believed and humbly submitted that the
'COMELEC' directed to be organized under
the Order is unnecessary considering that
its would-be functions (we note that the
Order did not state what are the functions
of said COMELEC) can and will be performed
by the Nomination Committee and the
special committee of inspectors.
Considering the foregoing, it is respectfully requested and
prayed that the said Order dated 5 January 2004 of the
Commission be reconsidered and set aside. To enable PHC to
hold an orderly and controversy-free meeting of its stockholders
and election of directors this year, it is likewise requested that
the Commission first direct and cause PHC's parent companies,
namely Philcomsat and POTC, to hold their respective
stockholders' meeting and election and directors and officers
prior to those of PHC.42

On May 6, 2004, the SEC ruled as follows:

Based on the foregoing premises, the Commission, in the
exercise of its regulatory authority as well as supervision
corporations and pursuant to its power under Section 5 (k) of the
Securities Regulation Code (SRC) which states: "Compel the
officers of any registered corporation or association to call
meetings of stockholders or members thereof under its
supervision," hereby orders the following:

1. The board of directors, responsible officers of Philcomsat

Holdings, Corporation ("PHC") shall immediately convene the
COMELEC to consider the proposed election and annual
meeting of subject corporation.

2. The board of directors and other responsible PHC officers are

also enjoined to prepare proper notices of the intended annual
meeting and all the necessary documents required by Section 20
of the SRC rules within the stated period provided thereunder in
time for the scheduled annual meeting set by the Commission.

3. For the purpose of the meeting, Attys. Myla Gloria C. Amboy

and Nicanor Patricio are hereby designated as the SEC
representatives to observe the PHC meeting.

4. The PHC and all its responsible directors or officers are

hereby directed to hold a meeting for the purpose of conducting
the election of the board of directors of the PHC on 28 May
2004 at 10:00 a.m. To be held at the principal office of the
corporation.

5. Failure on the part of the authorized person to set/call the

meeting within five (5) days from date hereof, Atty. Ozamiz
shall be authorized to call the meeting and to provide other
stockholders with notice required under the Corporation Code,
the Securities Regulation Code and By-laws of the corporation.
In such event, Atty. Ozamiz shall preside in said meeting until at
least a majority of the PHC stockholders present shall have
chosen one of their members as the presiding officer in the
meeting.
6. The board of directors and authorized officers of PHC are
hereby directed for the last time to submit the calendar of
activities for the forthcoming meeting within five (5) days from
date of this Order. The petitioning stockholder, Atty. Ozamiz, is
likewise directed to submit his proposed calendar of activities
which shall be used in case of failure on the part of PHC to
submit the aforesaid calendar.43

On June 7, 2004, the SEC received PCGGs comment through

Commissioner Victoria A. Avena, to wit:

1. For the sake of accuracy, we respectfully draw attention to the

fact that Messrs. Enrique L. Locsin and Manuel Andal are
nominee-directors representing the Republic of the Philippines,
through the PCGG, in the board of directors of the Philippine
Overseas Telecommunications Corporation ("POTC") and the
board of directors of Philippine Communications Satellite
Corporation ("Philcomsat"), but not of Philcomsat Holdings
Corporation ("PHC"). The third government nominee-director in
Philcomsat is Mr. Julio Jalandoni. In February of 2004, Mr. Guy
de Leon was nominated by President Gloria Macapagal-Arroyo
as a third director for POTC in the event elections.

2. Based on the records of PCGG, it is true and correct that

POTC has not held an uncontested annual meeting since its last
uncontested stockholders' meeting in the year 1999.

3. Based on records of PCGG, it is true and correct that

Philcomsat has not had an uncontested annual meeting since its
special stockholders' meeting in the year 2000.

4. The Republic owns forty percent (40%) of the outstanding

capital stock of POTC; Philcomsat is a wholly-owned subsidiary
of POTC; and Philcomsat owns approximately eighty-five
percent (85%) of the outstanding capital stock of PHC.

5. Because of the non-holding of elections for the board of

directors of POTC, Philcomsat and PHC, the incumbent
respective boards thereof have been holding office as "hold-
over" directors, and opposing stockholders have contested their
legitimacy.

6. The incumbent board of directors having actual corporate

control of POTC and Philcomsat have invited government
nominee-directors Messrs. Locsin and Andal, and Mr. Julio
Jalandoni in respect of Philcomsat, to respectively occupy seats
in said boards rendered vacant by resignations.

7. However, Messrs. Locsin, Andal and Jalandoni have not

physically and actually assumed said positions, because of their
request for assumption thereof on the basis of election for the
board of directors through stockholders' meetings for the
purpose.

8. In view of the ownership structure of POTC, Philcomsat and

PHC and the rump boards that have resulted over the years, the
more judicious mode towards a truly fair election of directors
based on an accurate identification of stockholder representation
in PHC (including in respect of government shares) would be to
determine issues of representation in Philcomsat and POTC.

9. Accordingly, annual stockholders' meetings and election of

directors of the board must first be held for POTC, and then for
Philcomsat, then for PHC.44

On July 8, 2004, the SEC directed thuswise:

On the bases of the mandatory provision of Sec. 50 of the

Corporation Code on calling of annual meeting and the PCGG's
comment/manifestation which should be given weight, the
following are hereby directed to:

1. POTC and Philcomsat, their respective board of directors or

their duly authorized representatives are hereby directed to
constitute, within ten (10) days from the date of actual receipt
hereof, their COMELEC to be composed of the PCGG
nominee/director to act as the neutral party, a representative
from the Africa Group and one representative from Nieto Group
to perform any and all acts necessary for the determination of
the legitimate stockholders of the corporation qualified to vote
or be represented in the corporate meetings and ensure a clean,
orderly, and credible election of POTC and Philcomsat.

2. POTC is likewise directed to conduct its annual stockholders'

meeting not later than 5 August 2004 while Philcomsat shall
hold its annual stockholders' meeting on or before 12 August
2004. Thereafter, PHC shall call its annual stockholders' meeting
not later than August 31, 2004.

3. PHC, on the other hand, its board of directors or duly

authorized representative are ordered to submit a revised
calendar of activities for the forthcoming 31 August 2004 annual
stockholders' meeting within five (5) days from actual receipt of
this Order. The said date for the Annual Stockholders' Meeting
shall not be postponed unless with prior Order of the
Commission. A nomination's (sic) Committee (NOMELEC)
shall be constituted pursuant to the corporation's Manual on
Corporate Governance submitted to this Commission. This
Committee shall be composed of three (3) voting members and
one (1) non-voting member in the person of the HR
Director/Manager pursuant to x x x section 2.2.2.1 of the said
Manual. One representative each from the Africa Group and the
Nieto Group and a nominee/representative of the PCGG (to act
as an independent member) shall comprise three (3) voting
members. The committee shall perform the functions outlined in
Sections 2.2.2.1.1, 2.2.2.1.2, 2.2.2.1.3 and 2.2.2.1.4 of the
Manual in connection with the forthcoming election. Failure to
submit the names of the representative of each group within ten
(10) days from receipt of this Order shall authorize the
Commission to appoint persons to represent each group. Failure
or refusal on the part of the corporation to hold the stockholders'
meeting on the scheduled date shall authorize the petitioning
shareholder to call and preside in the said meeting pursuant to
Section 50 of the Corporation Code. All previous orders
inconsistent herewith are hereby revoked.1wphi1
4. Let the Corporate Finance Department (CFD) of this
Commission be furnished with a copy of this Order for its
appropriate action on the matter.

5. To ensure protection of the interest of all outstanding capital

stocks, including minority shareholders, Attys. Nicanor P.
Patricio Jr. and Myla Gloria A. Amboy are hereby designated as
SEC representatives to attend and supervise the said Annual
Stockholders' Meeting.45

On July 26, 2004, the SEC clarified its immediately preceding

order, as follows:

Pending consideration by the Commission is the letter dated 22

July 2004 of Mr. Enrique Locsin, Nominees/Director of the
Presidential Commission on Good Government To POTC and
Philcomsat, seeking to enjoin the holding of any and all
meetings of POTC, Philcomsat and/or PHC, contrary to the 8
July 2004 SEC Order and requesting the correction of the date
of the Order cited in the 22 July 2004 Stay Order.

In order to clarify the Order issued by the Commission on July

8, 2004 and 22 July 2004, the following explications are hereby
made:

First. The SEC Order of 8 July 2004 which states in part:

POTC is likewise directed to conduct its annual stockholders'

meeting not later than 5 August 2004 while Philcomsat shall
hold its annual stockholders' meeting on or before 12 August
2004. Thereafter, PHC shall call its annual stockholders' meeting
not later than August 31, 2004, should be interpreted to mean
that the stockholders' meeting of POTC, Philcomsat and PHC
should be held successively, in the order mentioned, that is,
POTC first, then Philcomsat, and lastly, PHC. This was the
intention of the Commission in issuing the said Order (July 8,
2004).
To further clarify and ensure that the meetings shall be
conducted on specific dates, the Order of July 8, 2004 is hereby
modified and the dates of the meetings are hereby scheduled as
follows:

1. For POTC July 28, 2004

2. For Philcomsat August 12, 2004

3. For PHC August 31, 2004

Second. One of the relevant orders was inadvertently referred to

in the Stay Order of 22 July 2004 as "June 8, 2004," which
should have been actually written as "July 8, 2004." Hence, the
same should be properly corrected.

Accordingly, POTC, Philcomsat and Philcomsat Holdings

Corporation (PHC) are hereby reminded to strictly adhere to the
schedule dates of meetings of the said corporations set forth in
this Order. POTC, Philcomsat and PHC are further reminded to
also comply with the manner of the conduct of their respective
meetings as provided in the Order of the Commission dated July
8, 2004.

As requested, let the 22 July 2004 Stay Order, particularly

paragraphs 1, 2, and 3 thereof, be corrected to reflect the correct
date of the Order cited therein as "July 8, 2004" not "June 8,
2004."46

On July 28, 2004, the Africa-Bildner Group held successive

stockholders meetings for POTC and PHILCOMSAT. Elected
as Directors during the POTC stockholders meeting were
Katrina Ponce Enrile, Victor Africa, Erlinda Bildner and
Honorio Poblador III, all from the Africa-Bilder Group.
Although absent from the meeting, Nieto, Jr., Locsin and Andal
of the NietoPCGG Group were also elected as Directors.
Resultantly, the groups were represented on a 4:3 ratio. Victor
Africa was designated as the POTC proxy to the PHILCOMSAT
stockholders meeting.
Locsin and Andal were also elected as PHILCOMSAT
Directors. However, Nieto, Jr., Locsin and Andal did not accept
their election as POTC and PHILCOMSAT Directors.47

On August 5, 2004, the Nieto-PCGG Group conducted the

annual stockholders meeting for POTC at the Manila Golf
Club. Elected were Nieto, Jr. as President and Guy de Leon, a
government nominee to POTC, as Chairman. At the same
meeting, the Nieto-PCGG Group, through its elected Board of
Directors, issued a proxy in favor of Nieto, Jr. and/or Locsin
authorizing them to represent POTC and vote the POTC shares
in the PHILCOMSAT stockholders meeting scheduled on
August 9, 2004.48

On August 9, 2004, the Nieto-PCGG Group held the

stockholders meeting for PHILCOMSAT at the Manila Golf
Club. Immediately after the stockholders meeting, an
organizational meeting was held, and Nieto, Jr. and Locsin were
respectively elected as Chairman and President of
PHILCOMSAT. At the same meeting, PHILCOMSAT (Nieto-
PCGG Group) issued a proxy in favor of Nieto, Jr. and/or
Locsin authorizing them to represent PHILCOMSAT and vote
the PHILCOMSAT shares in the stockholders meeting of PHC
scheduled on August 31, 2004.49

On August 11, 2004, POTC (Africa-Bildner Group), Victor

Africa, Honorio Poblador III and Katrina Ponce Enrile filed a
Complaint for injunction with prayer for TRO and WPI in the
RTC in Makati City (Branch 133) against Nieto, Jr., Luis Lokin,
Jr., and Alma Kristina O. Alobba seeking to enjoin the latter
from acting as Directors and Officers of POTC (Civil Case No.
04-935).

On August 27, 2004, the RTC (Branch 133) dismissed Civil

Case No. 04-935 for lack of jurisdiction over the subject matter,
explaining its action thusly:

xxxx
After a perusal of the complaint and of the memoranda filed,
with particular attention on the authorities cited, the Court is of
the opinion that it has no jurisdiction over the case but the
Sandiganbayan.50

xxxx

Thereafter, the Africa-Bildner Group filed a motion for

reconsideration.

Earlier, on August 18, 2004, PHC (Nieto-PCGG Group)

submitted to the SEC a final list of candidates for Independent
Directors of PHC for the 2004-2005 term, to wit:

Please be informed that in connection with the annual

stockholders' meeting of PHILCOMSAT HOLDINGS
CORPORATION (PHC) to be held on August 31, 2004, and in
compliance with the Order dated 8 July 2004 of the Securities
and Exchange Commission in SEC Case No. 12-03-03 entitled
"In the matter of Philcomsat Holdings Corporation, For: Calling
of Meeting," the Board of Directors of PHC, at its meeting today
constituted the Nomination Committee with the following
persons as its members:

Voting Members:

1. Luis K. Lokin, Jr. (representative of the Nieto Group)

2. Enrique L. Locsin (representative of the PCGG)

3. Vacant (to be designated by the Securities and Exchange

Commission in default of the designation of representative by
the Africa group)

Non-voting member:

1. Philip G. Brodett
The said Nomination Committee which shall act upon the
affirmative vote of at least two (2) of its voting members, shall
have the following powers, duties and functions:

(1) To pre-screen and shortlist all candidates nominated to

become members of the board of directors in accordance with
the qualifications and disqualifications and the procedures
prescribed in the Corporation's Manual on Corporate
Governance and the Securities Regulation Code (SRC) and its
Implementing Rules and Regulations (SRC Rules);

(2) To submit to the Securities and Exchange Commission and

the Philippine Stock Exchange the Final List of candidates for
Independent Directors as required under the SEC Rules;

(3) To act as the committee of inspectors with powers to pass

upon the validity of proxies, to canvass and tally the votes for
the election of directors and to certify the winning directors
based on the votes garnered;

(4) To do such acts or things as may from time to time be

directed or delegated by the Board.51

On August 20, 2004, the SEC issued an order, pertinently

stating:

On separate dates, the group of Atty. Victor Africa ("Africa

Group) and the group of Ambassador Nieto ("Nieto group")
conducted their respective annual stockholders meetings. The
Africa group held successive meetings for POTC and
Philcomsat on July 28, 2004, while the Nieto group held similar
meetings for POTC and Philcomsat on August 5 and August 9,
respectively. On all these meetings, where the SEC
representative was present (except the Philcomsat meeting of the
Africa group), the Commission noted the following
observations:

xxxx
In light of the foregoing, the Commission hereby upholds the
validity of the stockholders' meetings conducted by the Nieto
Group in view of the clear compliance by the said group with
the condition set forth by the Commission in its Orders of July 8
and 26, 2004.

Meanwhile, the PHC meeting shall proceed as scheduled on

August 31, 2004. The Officers and Directors of PHC are hereby
reminded to strictly conform to the conditions stated in the July
8 and 26 Orders.

The President and the Corporate Secretary of PHC and its Stock
and Transfer Agent are hereby ordered to submit to the
Commission the certified list of stockholders and the stock and
transfer book of PHC on or before August 25, 2004.

Due to the failure of the Africa group to nominate their

representative to the PHC NOMELEC, Atty. Victoria De Los
Reyes is hereby designated as the representative of the Africa
group in the forthcoming August 31, 2004 PHC meeting.

The Corporation Finance Department is hereby directed to

monitor PHC's compliance with the laws, rules and regulations
relative to the calling of the stockholders' meeting and to make
the necessary action to ensure such compliance.

The Orders of 8 July 2004 and 26 July 2004 insofar as not

inconsistent with this Order shall remain in full force and
effect.52

On August 23, 2004, the Africa Group commenced Civil Case

No. 01-555 in the RTC in Makati City (Branch 61), praying for
the issuance of a TRO or WPI to "enjoin Philcomsat Holdings
Corporation from recognizing defendants Nieto, Jr. and Lokin as
the representatives of PHILCOMSAT," and to prevent Nieto, Jr.
and Lokin from acting as Directors and Officers for and on
behalf of POTC and PHILCOMSAT.
On August 30, 2004, the RTC denied the motion for the issuance
of TRO and WPI.53

On August 26, 2004, the Nomination Committee (NOMELEC)

of PHC (Nieto Group) met to conduct the validation of the
proxies and the evaluation and prequalification of the nominees
for election as Independent Directors. After a majority vote of
its voting members, the NOMELEC recognized and validated
the proxy submitted by Locsin.

On August 27, 2004, the Nieto Group submitted to the SEC the
final list of candidates for Independent Directors of PHC for the
term 2004-2005. The list contained the names of Benito Araneta
and Roberto Abad, both nominated by Brodett. The list was
submitted by NOMELEC members Lokin, Jr., Locsin and
Brodett.

On the same date, POTC and PHILCOMSAT (Africa Group),

through Atty. Victor Africa, filed in the CA a petition for
certiorari and prohibition (with prayer for TRO and WPI)
seeking to annul and set aside the orders issued on July 8, 2004,
July 26, 2004 and August 20, 2004 issued in SEC Case No. 12-
03-03 (C.A.-G.R. SP No. 85959).54

On August 31, 2004, the CA promulgated in C.A.-G.R. SP No.

85959 a resolution granting a TRO, pertinently stating:

In the meantime, since the petition questions the jurisdiction of

public respondents in issuing the assailed Orders dated July 8,
2004, July 26, 2004 and August 20, 2004, and the
implementation of the same will render moot and academic any
and all orders, resolutions and decisions of this Court, this Court
hereby TEMPORARILY RESTRAINS respondents, their
officers, agents and other persons acting for and in their behalf,
from enforcing, implementing and executing the aforesaid
assailed Orders within a period of sixty (60) days or until sooner
revoked.55
The CA later granted the application for WPI, and enjoined the
respondents therein, their agents, officers, representatives and
other persons acting for and in their behalf from executing,
enforcing and implementing the assailed SEC orders issued on
July 8, 2004, July 26, 2004 and August 20, 2004 pending final
resolution of the petition, or unless the WPI was sooner lifted.56

Also on August 31, 2004, the PHC (Nieto Group) conducted its
annual stockholders meeting. The Officers elected were Locsin
as Director and Acting Chairman; Oliverio Laperal as Director
and Vice Chairman; Nieto, Jr. as Director, President and Chief
Executive Officer; Brodett as Director and Vice President;
Manuel D. Andal as Director, Treasurer and Chief Financial
Officer; Roberto San Jose as Director and Corporate Secretary;
Julio Jalandoni, Lokin, Jr., Prudencio Somera, Roberto Abad,
and Benito Araneta as Directors.57

On September 10, 2004, PHILCOMSAT (Africa Group),

represented by Victor Africa, filed in the RTC in Makati City
(Branch 138) a complaint against PHC, Lokin, Jr., Locsin and
Brodett (Civil Case No. 04-1049) seeking the following reliefs,
to wit:

1. The proceedings of the Nomination Committee be invalidated

for having been in violation of the Manual of Corporate
Governance of defendant PHC;

2. The act of the Nomination Committee in validating the proxy

issued in favor of Manuel Nieto and/or defendant Enrique
Locsin and in invalidating the proxy issued in favor of Victor
Africa be annulled;

3. The elections held and the proclamation of winners during the

Annual Stockholders' Meeting of defendant PHC held on 31
August 2004 be annulled;

4. Defendant PHC be directed to recognize Atty. Victor Africa as

the proxy of plaintiff and that he be allowed to vote the shares
standing in the name of plaintiff at subsequent elections for the
members of the board of directors of defendant PHC.58

On October 21, 2004, PHILCOMSAT (Nieto Group) and Lokin,

Jr. filed their Answer with Grounds for Dismissal and
Compulsory Counterclaims, averring therein, among others, as
follows:

37. The instant complaint must be DISMISSED for lack of

capacity and/or authority of the alleged representative, Victor V.
Africa, to file the same and sue the defendants on behalf of
Philcomsat.

38. While the Complaint names Philcomsat as the plaintiff,

allegedly represented by Victor Africa, at no time did
[P]hilcomsat, through its duly constituted Board of Directors,
authorize him to file the same.

39. Victor Africa bases his authority upon the Secretary

Certificate, alleging that the Philcomsat Board of Directors,
during its meeting held on 28 July 2004, authorized him to file
legal actions on behalf of the corporation.

40. It is respectfully averred, however, that Philcomsat, through

its duly constituted Board of Directors DID NOT HOLD any
meeting on 28 July 2004, and DID NOT AUTHORIZE Africa to
file any action or to do any act or deed on its behalf. The
Secretary's Certificate he represented is not signed by Atty. Luis
K. Lokin, Jr., the duly-elected Corporate Secretary of
Philcomsat.

xxxx

50. There was no Philcomsat Board meeting held or authorized

to be held on 28 July 2004. Neither was there any authority
vested upon Victor Africa to file this nuisance suit, which is only
aimed at needlessly harassing defendants and the other lawful
stockholders of Philcomsat and PHC and the public at large.
51. For lack of any factual and legal basis of the alleged
authority of the person instituting and verifying the instant
complaint, it must be declared as a NUISANCE SUIT and
immediately DISMISSED by the Honorable Court, pursuant to
Section 1 (b) of the Interim Rules.

52. Furthermore, not only does Africa lack any authority to file
the instant action, the complaint itself is devoid of any
meritorious legal basis.

53. The relevant facts are as follows: In 2003, a stockholder of

PHC filed a letter-complaint (later docketed as SEC Case No.
12-03-03) with the SEC, alleging the non-holding of the annual
stockholders' meeting since 2002. Hearings were conducted
wherein the officers and directors of POTC and Philcomsat were
required to be present and to file their comments. Victor Africa
actively participated in the proceedings before the SEC, in his
alleged capacity as officer of POTC, Philcomsat and PHC.

54. In view of the government interest in POTC which is the

sole beneficial owner of Philcomsat, which in turn, is the 80%
stockholder of PHC, and the fact that POTC and Philcomsat are
under sequestration, the PCGG was likewise directed to file
their comments on the matters raised by the parties. PCGG,
through then Commissioner Victoria Avena, asserted that the
government holds 40% interest in POTC. x x x.

55. Thereafter, the SEC issued the aforestated Order on 08 July

2004, directing the officers of POTC and Philcomsat to conduct
their respective stockholders' meetings. Before the rendition of
the 08 July 2004 Order, the Africa group did not conduct any
stockholders' meeting of POTC or Philcomsat, but they would
later claim that they had agreed, as early as 02 July 2004, to
hold the meetings on 08 July 2004. Given the timing of the
meeting, however, which was held after the 08 July 2004 SEC
Order, no credence could be given to such self-serving claim.
The timing and dates are more than mere convenient
coincidences.
56. After POTC and Philcomsat duly held their respective
stockholders' meetings on 05 August 2004 and 09 August 2004,
the SEC upheld the validity of their meetings in its Order dated
20 August 2004.

57. Thereafter, Africa initiated a series of actions in different

tribunals in an attempt to basically prevent the POTC and
Philcomsat Directors and Officers from acting in their capacity
as such.59

On November 18, 2004, PCGG expressly adopted the Answer of

PHILCOMSAT (Nieto Group) as its own Answer in Civil Case
No. 04-1049.60

On December 7, 2004, the RTC denied the Africa Groups

Motion for Reconsideration assailing the order issued on August
27, 2004 in Civil Case No. 04-935.

Whereupon, POTC (Africa Group) went to the CA on certiorari

to annul and set aside the orders issued on August 27, 2004 and
December 7, 2004 in Civil Case No. 04-935 by the RTC
(Branch 133). The suit, docketed as C.A.-G.R. SP NO. 88664,
was dismissed by the CA on July 5, 2005, the decision
pertinently stating:

x x x We thus have to address one crucial issue: Was the lower

court correct in ruling that the Sandiganbayan had jurisdiction
over the instant case?

It was.

It must be stressed that the petitioners' complaint essentially

questions the legality by which the private respondents are
exercising control over the assets and operations of a
sequestered corporation. They posit that the private respondents
are usurpers and have no right to sit in the board of directors or
act as corporate officers of the POTC. Evidently, these issues are
"arising from, incidental to, or related to" the sequestration case
against POTC which, under the law, should be addressed by the
Sandiganbayan.

xxxx

All told, the lower court did not commit grave abuse of
discretion amounting to lack of or in excess of jurisdiction in
dismissing the instant complaint for lack of jurisdiction, the
same being vested in the Sandiganbayan.61

On June 15, 2005, this Court rendered its decision in G.R. No.
141796 and G.R. No. 141804 by affirming the validity of the
compromise agreement dated June 28, 1996 between the PCGG
and Atty. Ilusorio, holding:

With the imprimatur of no less than the former President Fidel

V. Ramos and the approval of the Sandiganbayan, the
Compromise Agreement must be accorded utmost respect. Such
amicable settlement is not only allowed but even encouraged. x
x x.

Having been sealed with court approval, the Compromise

Agreement has the force of res judicata between the parties and
should be complied with in accordance with its terms. Pursuant
thereto, Victoria C. de los Reyes, Corporate Secretary of the
POTC, transmitted to Mr. Magdangal B. Elma, then Chief
Presidential Legal Counsel and Chairman of PCGG, Stock
Certificate No. 131 dated January 10, 2000, issued in the name
of the Republic of the Philippines, for 4,727 POTC shares. Thus,
the Compromise Agreement was partly implemented.62

On July 5, 2005, the Africa Group, citing the decision in G.R.

No.141796 and G.R. No. 141804, filed a Manifestation with Ex-
Parte Motion to Resolve in Civil Case No. 04-1049.63

Also on July 5, 2005, the CA promulgated its decision in C.A.-

G.R. SP No. 88664, dismissing the petition for certiorari
(brought to assail the dismissal by the RTC (Branch 133) of the
complaint in Civil Case No. 04-935).64
On August 18, 2005, PHILCOMSAT (Nieto Group), through
Locsin, submitted a Counter-Manifestation, contending that the
decision in G.R. No. 141796 and G.R. No. 141804 did not
operate to automatically nullify the proceedings during the
stockholders meeting of PHC on August 31, 2004.65

On August 19, 2005, the RTC (Branch 138), apprised of the

pendency of motions for reconsideration in G.R. No. 141796
and G.R. No. 141804, held in abeyance its action upon the
parties respective manifestations until after the resolution of the
pending motions for reconsideration.66

On September 7, 2005, the Court denied the motions for

reconsideration in G.R. No. 141796 and G.R. No. 141804,
stating:

Obviously, petitioners motions for reconsideration are devoid of

merit. The matters they raise are mere reiterations of the
previous arguments in their petitions already considered and
exhaustively passed upon in our July 27, 2005 (sic) Decision.
Indeed, we find no cogent reason to deviate from our Decision.

As regards the second incident, respondent Bildner seeks a

clarification on the effect of the TRO, issued by this Court on
March 29, 2000, restraining the implementation of the
challenged Sandiganbayan Resolution dated December 20, 1999
in Civil Case No. 0009.

It may be recalled that in our June 15, 2005 Decision, we

dismissed these consolidated petitions assailing the
Sandiganbayan Resolution of December 20, 1999. This
Resolution (1) denied petitioners' separate motions to vacate the
Sandiganbayan Order dated June 8, 1998 approving the
Compromise Agreement; (2) declared the 5,400 POTC shares
registered in the names of petitioners IRC and MLDC null and
void as they categorically admitted that such shares are ill-
gotten wealth of deposed President Marcos and his Family, and
that the same were surrendered to the Government which now
owns the same; and (3) ordered the Corporate Secretary of
POTC, within 10 days from receipt of the Resolution, to issue
4,727 POTC shares in the name of the Republic, and 673 POTC
shares in the name of Potenciano Ilusorio, pursuant to the
approved Compromise Agreement. In compliance with the
Sandiganbayan Resolution, Atty. Victoria C. de los Reyes,
Corporate Secretary of the POTC, on January 10, 2000,
transmitted to Mr. Justice Magdangal B. Elma, then Chief
Presidential Legal Counsel and Chairman of Philippine
Commission on Good Government (PCGG), Stock Certificate
No. 131 (of even date) issued in the name of the Republic of the
Philippines, for 4,727 POTC shares. Thus, the Compromise
Agreement was partly implemented.

In her present motion for clarification, respondent Bildner

alleges inter alia that, on March 29, 2000 or more than two (2)
months after the Compromise Agreement had been implemented
on January 10, 2000, this Court issued a TRO restraining its
implementation.

There is no need for us to make a clarification being sought by

respondent Bildner in her motion. Suffice it to say that when the
TRO was issued on March 29, 2000, the Sandiganbayan
Resolution of December 20, 1999 directing the issuance of
POTC shares in the names of the Republic and Potenciano
Ilusorio in accordance with the Compromise Agreement had
been partially implemented on January 10, 2000 or more than
two (2) months earlier by POTC Corporate Secretary Victoria C.
de los Reyes. She already transmitted to then PCGG Chairman
Magdangal B. Elma Stock Certificate No. 131 issued in the
name of the Republic of the Philippines, for 4,727 POTC shares.
This was never mentioned by petitioners in their petitions. In
fact, even before the petitions in these cases were filed, the
implementation of the Compromise Judgment had been partially
effected. We were thus misled in issuing the TRO. In any case,
the TRO has become moot and academic, the same having no
more legal force as the act sought to be restrained had been
partially implemented and considering our Decision in this case.
WHEREFORE, petitioners instant motions for reconsideration
are DENIED with FINALITY. On respondent Bildner's motion
for clarification, the same is considered moot and academic.67

In the meantime, the RTC (Branch 138) required the parties to

submit their respective memoranda in Civil Case No. 04-1049.
Both parties complied.68

On September 14, 2005, the Africa Group brought a special civil

action for certiorari and prohibition in this Court assailing the
decision promulgated on July 5, 2005 in C.A.-G.R. SP No.
88664 (G.R. No. 171799).69

On September 22, 2005, POTC and PHILCOMSAT (Africa-

Ilusorio Group) elected a new set of Directors and Officers. Ma.
Erlinda I. Bildner was elected as the Chairman of the Boards of
Directors of both POTC and PHILCOMSAT.70

On September 26, 2005, POTC and PHILCOMSAT (Nieto

Group) initiated a Complaint for injunction and damages with
prayer for TRO and WPI in the Sandiganbayan (SB Civil Case
No. 0198).71

The Sandiganbayan issued a TRO in SB Civil Case No. 0198,

enjoining the Africa-Ilusorio Group from acting as Officers and
Directors of POTC and PHILCOMSAT.72

On June 5, 2006, the Court dismissed G.R. No. 171799, viz:

Considering the allegations, issues and arguments adduced in

the petition for certiorari and prohibition with prayer for writ of
preliminary injunction and/or temporary restraining order dated
14 September 2005, the Court Resolves to DISMISS the petition
for failure to sufficiently show that the questioned judgment of
the Court of Appeals is tainted with grave abuse of discretion.73

On October 14, 2006, the RTC (Branch 138) rendered its

decision in Civil Case No. 04-1049, thus:
In the case at bar, the Nieto Group did not specifically deny
plaintiff's allegation that their votes during the 2004 annual
stockholders' meeting for POTC and Philcomsat mainly relied
on the IRC and Mid-Pasig shares. Upon the promulgation of the
above-cited Supreme Court Decision dated 15 June 2005, even
as early as 1986, both IRC and Mid-Pasig corporations have no
more right or interest over the subject POTC shares which was
already surrendered by Jose Y. Campos to the Government.
Mid-Pasig and IRC themselves were sequestered, and then
voluntarily surrendered as part of the res covered by the Campos
Compromise Agreement. Insofar as Mid-Pasig and IRC are
concerned, they have already relinquished all rights or interest
over all POTC shares registered in their names in favor of the
Republic represented by PCGG, even as early as 1986. Hence,
the Supreme Court Decision, in effect, invalidates the elections
held by the Nieto Group in the annual stockholders' meeting of
POTC and Philcomsat on 5 August 2004 and 9 August 2004, for
not having the majority control of the said corporation. In turn,
the defendant Nieto Group could not have, therefore, issued a
valid proxy nor could they have appointed defendant Locsin as
Philcomsats representative to the PHC annual stockholders
meeting.

WHEREFORE, judgment is hereby rendered invalidating the

proxy issued in favor Manuel Nieto and/or defendant Locsin for
purposes of the Annual Stockholders' Meeting for the year 2004
and declaring the proxy issued in favor of Victor V. Africa for
the said purpose, valid. Corollarily, the elections held and the
proclamation of winners during the annual stockholders'
meeting of defendant PHC held on 31 August 2004 is hereby
annulled.74

On October 23, 2006, the RTC (Branch 138) dismissed Civil

Case No. 01-840 for lack of jurisdiction. Subsequently, the RTC
(Branch 138) denied the petitioners Motion for
Reconsideration, and treated it instead as a notice of appeal.75
On March 1, 2007, PHC (Nieto Group) and Brodett appealed the
decision dated October 14, 2006 rendered in Civil Case No. 04-
1049 to the CA via a petition for review (CA-G.R. SP NO.
98097). On March 27, 2007, the Africa-Ilusorio Groups
submitted their comment (with opposition to the application for
TRO and WPI).76

On March 21, 2007, POTC and PHILCOMSAT (Nieto Group)

brought to the CA a petition for certiorari (with prayer for TRO
and WPI), similarly assailing the decision rendered on October
14, 2006 in Civil Case No. 04-1049 (C.A.-G.R. SP No. 98399).77

On March 27, 2007, PHILCOMSAT (Africa Group) sought the

execution of the decision rendered on October 14, 2006 in Civil
Case No. 04-1049 by the RTC (Branch 138). Although on April
4, 2007, PHC (Nieto Group), Locsin and Brodett opposed the
motion for execution, the RTC (Branch 138) granted the motion
on April 12, 2007, to wit:

WHEREFORE, premises considered, the Court hereby grants

the plaintiff's Motion. Let a writ of execution be issued directing
the implementation of the following orders:

1) the individuals elected by defendant Locsin in the 2004 PHC

ASM, and so proclaimed to be PHCs board of directors,
namely: Enrique Locsin, Julio Jalandoni, Manuel Andal, Luis
Lokin, Jr., Prudencio Somera, Jr., Manuel H. Nieto, Jr., Roberto
V. San Jose, Philip Brodett, Oliverio Laperal, Benito Araneta
and Roberto Abad and all their representatives or agents are
enjoined from continuing to act as PHC board of directors;

2) the proxy of plaintiff issued to Victor V. Africa is declared

valid and thus, the individuals elected by plaintiff's proxy in the
2004 PHC ASM namely: Victor V. Africa, Erlinda I. Bildner,
Katrina Ponce Enrile, Honorio Poblador III, Federico Agcaoili,
Sylvia K. Ilusorio and Jose Ma. Ozamiz are declared as the valid
board of directors of PHC; and
3) the defendants are directed to render an accounting of funds
of PHC since 2004 up to the present within 15 days from the
finality of this Order.78

On April 18, 2007, PHC (Nieto Group) and Brodett filed their
Reply with Reiteration of the Urgent Application for Temporary
Restraining Order and Preliminary Injunction in C.A.-G.R. SP
NO. 98097. On April 20, 2007, they filed a Supplemental
Petition with Urgent Application for Temporary Restraining
Order and Preliminary Injunction, alleging that, upon motion of
respondent (Africa Group), the RTC had issued an order dated
April 12, 2007 directing the issuance of a writ of execution to
implement the decision dated October 14, 2006.79

On April 18, 2007, the RTC (Branch 138) issued a writ of

execution of the decision dated October 14, 2006.80

On April 24, 2007, the PHC (Africa Group) held an

organizational meeting of its Board of Directors pursuant to the
decision dated October 14, 2006 as well as the order dated April
12, 2007 and the writ of execution dated April 20, 2007, all
issued in Civil Case No. 04-1049. At that organizational
meeting, Victor V. Africa, Federico R. Agcaoili, Erlinda I.
Bildner, Katrina C. Ponce Enrile, Sylvia K. Ilusorio, Honorio
Poblador III, Jose Ozamiz, Prudencio Somera, Pablo Lobregat
and Oliverio Laperal were elected as Directors. On the same
occasion, the following were elected as Officers of PHC,
namely: Honorio Poblador III as Chairman; Oliverio Laperal as
Vice-Chairman; Erlinda I. Bildner as President; Lorna P.
Kapunan as Vice President; Pablo Lobregat as Vice-President;
Katrina Ponce Enrile as Treasurer; Rafael Poblador as Assistant
Treasurer; John Benedict Sioson as Corporate Secretary; and
Dennis R. Manzanal as Assistant Corporate Secretary.81

On April 30, 2007, PHILCOMSAT (Africa Group) filed an

Urgent Motion to Lift the TRO in C.A.-G.R. SP No. 98399.82

On May 2, 2007, PHC (Nieto Group) presented a Manifestation

in C.A.-G.R. SP NO. 98097, alleging that they were informed
that POTC and PHILCOMSAT had filed a petition dated March
14, 2007 in this Court which involved substantially the same
issues raised in C.A.-G.R. SP No. 98097.83

On May 10, 2007, the CA directed POTC and PHILCOMSAT

(Nieto Group) to comment on the Urgent Motion to Lift the
TRO filed in C.A.-G.R. SP NO. 98399.84

On May 17, 2007, the CA issued a resolution in C.A.-G.R. SP

No. 98097, to wit:

WHEREFORE, petitioners application for a temporary

restraining order/writ of preliminary injunction to enjoin the
execution of the Decision dated October 14, 2006 of the court a
quo in Civil Case No. 04-1049 is merely NOTED as the same
has been rendered moot and academic.

The issues having been joined with the filing of the comment
and reply, the petition for review is considered submitted for
decision.85

On June 8, 2007, the CA dismissed the petition in C.A.-G.R. CV

NO. 88360 for being an improper mode of appeal.86

On June 12, 2007, POTC and PHILCOMSAT (Nieto Group)

filed their Reply with Urgent Motion to Resolve the Application
for Preliminary Injunction in CA-G.R. SP No. 98399. The CA
granted the Urgent Motion to Resolve on June 25, 2007, and
issued the WPI on the same date.87

On August 17, 2007, POTC and PHILCOMSAT (Africa-Ilusorio

Group) brought a petition for certiorari to annul and set aside the
CAs resolution dated June 25, 2007 in C.A.-G.R. SP No.
98399.88

Earlier, on August 15, 2007, the Sandiganbayan issued its

resolution dismissing the Complaint of POTC and
PHILCOMSAT (Nieto Group) in SB Civil Case No. 0198, to
wit:
WHEREFORE, in view of the foregoing, the Court hereby
resolves as follows:

1) The Urgent Motion to Dismiss dated September 29, 2005 of

the defendant is hereby GRANTED. Accordingly, the plaintiffs'
Complaint dated September 20, 2005 is hereby ordered
DISMISSED.

2) The following motions and pleadings are considered MOOT

AND ACADEMIC in view of the dismissal of the case.

a. Motion to Consider and Declare Defendants in Default dated

October 21, 2005 of the plaintiffs;

b. Motion for Consolidation with SB Civil Case No. 0009 dated

September 24, 2006 of the plaintiffs;

c. Petition to Show Cause dated April 25, 2007 filed by the

plaintiffs; and

d. Motion for Leave to Intervene and to Admit Complaint-In-

Intervention dated May 16, 2007 filed by the PCGG.

3) The Court hereby REPRIMANDS Enrique L. Locsin and

Atty. Sikini C. Labastilla for omitting material facts in their
Complaint and Urgent Motion for Special Raffle and WARNS
that a repetition of the same or similar acts in the future shall be
dealt with more severely.89

POTC and PHILCOMSAT (Nieto Group) moved for

reconsideration on September 5, 2007, and later supplemented
the motion.90

On November 5, 2007, Atty. Sikini C. Labastilla filed in the CA

a petition to cite Erlinda I. Bildner and her lawyer Atty. Dennis
R. Manzanal for indirect contempt of court (C.A.-G.R. SP No.
101225), and prayed that the petition be consolidated with C.A.-
G.R. SP No. 98399. The consolidation was allowed on
December 12, 2007.91
On November 13, 2007, President Arroyo named new nominees
to the POTC Board of Directors, namely: Daniel C. Gutierrez,
Allan S. Montao, and Retired Justice Santiago J. Ranada; and
to the PHILCOMSAT Board of Directors, namely: Ramon P.
Jacinto, Abraham R. Abesamis, and Rodolfo G. Serrano, Jr.92

On November 19, 2007, POTC held its Annual Stockholders

Meeting and Organizational Meeting of the Board of Directors.
Elected were Daniel C. Gutierrez as Director and Chairman;
Erlinda I. Bildner as Director and Vice Chairman; Katrina Ponce
Enrile as Director and President/CEO;

Marietta K. Ilusorio as Director and Treasurer; Francisca

Benedicto Paulino, Pablo L. Lobregat, Allan Montao, Honario
A. Poblador III and Justice Ranada as Directors; Rafael A.
Poblador as Assistant Treasurer; and Victoria C. de los Reyes as
Corporate Secretary.93

On the same date, PHILCOMSAT held its Annual Stockholders

Meeting and Organizational Meeting of the Board of Directors.
Elected were: Abraham R. Abesamis as Director and Chairman;
Pablo L. Lobregat as Director and Vice-Chairman; Ramon
Jacinto as Director and Chairman of the Executive Committee;
Erlinda I. Bildner as Director and President/CEO; Marietta K.
Ilusorio as Director and Vice President; Katrina Ponce Enrile as
Director and Treasurer; Lorna P. Kapunan, Honorio A. Poblador
III and Rodolfo G. Serrano, Jr. as Directors; Rafael A. Poblador
as Assistant Treasurer; and John Benedict L. Sioson as
Corporate Secretary.94

Thereafter, Concepcion A. Poblador of the Nieto Group filed a

Complaint for injunction and declaration of nullity (with prayer
for TRO and WPI) with the Sandiganbayan, seeking to enjoin
the PCGG from recognizing the stockholders meeting held on
November 19, 2007 (Civil Case No. 07-0001).

Meanwhile, PHC (Africa Group), through Erlinda I. Bildner,

filed a Complaint for injunction against the Bank of the
Philippine Islands (BPI) with the RTC (Branch 62) in Makati
City, seeking to enjoin BPI from allowing further disbursements
of PHC funds to unauthorized persons comprising those who
were no longer members of the PHC Board of Directors due to
the nullification of their election.

On the basis of the Complaint, the RTC (Branch 62) issued an

order on December 13, 2007, as follows:

FOREGOING CONSIDERED, pending final adjudication on

the principal action raised herein and subject to the posting of
the indemnity bond in the sum of Three Million Pesos (Php
3,000,000.00) issued in favor of the defendant Bank of the
Philippine Islands and defendant intervener PHC represented by
Enrique M. Locsin, let a writ of preliminary injunction issue,
enjoining the said defendant bank, its employees, officers, and
representatives from allowing the defendant intervener, Locsin
Group, their officers, employees, agents, and/or representatives
to inquire, withdraw, and/or in any manner transact relative to
any and all Philcomsat Holdings Corporation accounts
maintained with Bank of the Philippine Islands until further
orders from this Court.

Finally, the defendant bank is hereby ordered to submit to this

Court the latest (as of receipt of this Order) bank statements
and/or certificates of all PHC accounts deposited with its bank
within ten (10) days from notice thereof.95

On December 14, 2007, POTC and PHILCOMSAT (Africa

Group) filed in C.A.-G.R. SP NO. 98399 a Manifestation and
Urgent Motion to Withdraw Petition, praying that the petition be
considered withdrawn, and that the WPI issued on June 25, 2007
be immediately lifted. In support of the motion, POTC and
PHILCOMSAT (Africa Group) averred:

(1) On 21 March 2007, Mr. Enrique Locsin (Locsin) purportedly

representing POTC and PHILCOMSAT filed the instant
petition, assailing the decision issued by the Regional Trial
Court (RTC) of Makati Branch 138 in Civil Case No. 04-1049 x
x x.
 xxxx

(3) What Mr. Locsin has deliberately failed and/or refused to

divulge to this Honorable Court upon filing the instant petition
are the following facts: (1) Mr. Locsin and his group are exactly
the same set of individuals who comprise the respondents in
Civil Case No. 04-1049, the decision which is now herein
assailed; and that (2) Mr. Locsin and his group, purportedly,
representing earlier or two weeks prior to the filing of the instant
petition, already filed an appeal also with this Honorable Court,
albeit pending in a different division, docketed as CA-G.R. SP
No. 98097, raising exactly the same issues and seeking identical
reliefs as they are now pending in the case at bar.

xxxx

(5) The difficulty in resolving the present controversy lodged

before this Honorable Court stems from the fact that even the
legitimate POTC and PHILCOMSAT representatives become
apparently undeterminable.

xxxx

(9) Nonetheless, the conflicting claims over POTC and

PHILCOMSAT have finally come to resolution with the recent
developments.

(10) On 13 November 2007, the government appointed its new

nominees to POTC and PHILCOMSAT. For POTC, the
government, through Undersecretary Enrique D. Perez with the
directive of President Gloria Macapagal Arroyo, appointed Atty.
Daniel C. Gutierrez, Atty. Allan S. Montao and Justice
Santiago J. Ranada (Ret.) to the POTC board and represent the
government's 34.9% shareholdings in the board of directors of
POTC. In the same manner and for an akin purpose, the
government appointed Mr. Ramon P. Jacinto, Mr. Rodolfo G.
Serrano, Jr. and Radm. Abraham R. Abesamis (Ret.) to represent
the government's 34.9% shareholdings on the board of directors
of PHILCOMSAT. Although this Honorable Court may take
judicial notice of these appointments, to evidence such new
appointments, copies of the proxy issued by the Republic of the
Philippines to Undersecretary Perez and the "I desire" letter of
the Office of the President for the government's nominees to
PHILCOMSAT, both dated 13 November 2007, and the list of
nominees of Undersecretary Perez for POTC and his letter to
PCGG Chairman Camilo Sabio, both dated 19 November 2007,
are attached and made integral parts hereof as Annexes "B", "B",
"C" and "D", respectively.

(11) Needless to state, with the designation and their selection of

the new government nominees to POTC and PHILCOMSAT, the
old nominees, namely: Mr. Locsin, Mr. Manuel Andal, Mr. Julio
Jalandoni and Mr. Guy de Leon are automatically replaced. This
is an undeniable fact and had always been the procedure in the
appointment and replacement of government nominees to the
board of companies where the government has a substantial
interest.

(12) Following the said appointment of new nominees,

necessarily, annual stockholders meetings of both POTC and
PHILCOMSAT were conducted and held on 19 November 2007
in order to elect the new directors of the respective boards of the
two companies. During the said meetings, where over 90% of
the shareholders were present and/or duly represented, the
stockholders elected the new board of directors of POTC and
PHILCOMSAT. These elections are evidenced by the
Secretary's Certificates duly executed by the Corporate
Secretaries of POTC and PHILCOMSAT, copies of which are
attached and made integral parts hereof as Annexes "E" and "F",
respectively.

(13) Thus, the new government nominees, together with the

private shareholders of POTC and Philcomsat are joined
together in a unified board of directors for the two companies. In
fact, after the new sets of directors had been elected, both
companies conducted their respective organizational and board
meetings.
(14) At the board meetings of POTC and Philcomsat held on 4
December 2007, POTC and PHILCOMSAT have decided, as the
new, unassailably legitimate and only board of directors of
POTC and PHILCOMSAT, to authorize the withdrawal of the
instant petition filed in the name of POTC and PHILCOMSAT.
The boards likewise in their resolutions, disallowed other
persons to represent their companies. Copies of these resolutions
issued by POTC and PHILCOMSAT are attached and made
integral parts hereof as Annexes "G" and "H", respectively.

(15) Thus, based on the foregoing, POTC and PHILCOMSAT,

who are supposedly the petitioners in this case, move for the
immediate withdrawal of the petition dated 14 March 2007 and
the immediate lifting of the Writ of Preliminary Injunction dated
25 June 2007.96

The Urgent Motion to Withdraw Petition was opposed in a

Comment and Opposition filed on February 13, 2008 that
averred as follows:

xxxx

4. Through the malicious motion to withdraw, there is a veiled

attempt, to have this Honorable Court uphold and recognize the
validity of the supposed meetings held by rump boards on
November 19, 2007.This is a matter that is properly cognizable
only by the Sandiganbayan.

5. In fact, there is already a pending complaint before the

Sandiganbayan that assails the supposed November 19, 2007
meetings stated in the motion to withdraw.

6. The Sandiganbayan, acting through the Fifth Division,

granted the issuance of a Temporary Restraining Order on
December 21, 2007, to prevent and prohibit any recognition of
these November 19, 2007 meetings. x x x.

12. Petitioners, however, are compelled to address the

misleading allegations and conclusions in the motion to
withdraw. It is respectfully manifested that these alleged
November 19, 2007 meetings were not called by the legitimate
boards of petitioners POTC and Philcomsat. Only the legitimate
boards, here represented by Mr. Locsin, can properly act upon
any change in the government nominees, and it is only the
legitimate boards that can install them. As manifested by
petitioners to this Honorable Court, since there are no more
legal challenges to the respective Boards of Directors of
petitioners originally led by Ronaldo Salonga and Manuel Nieto,
Jr., since 1998, only the successors of these boards, here
represented by Mr. Locsin, can properly represent petitioners
POTC and PHILCOMSAT.

12.1. The issue was settled with the dismissal of the appeal in
CA G.R. CV No. 88360, which stemmed from the original
petition filed in 1998 by Potenciano Ilusorio, Katrina Ponce-
Enrile, and their family owned corporations, to question the
election of the Nieto-Salonga board. The appeal was dismissed
by the Honorable Court of Appeals in its Resolution dated June
8, 2007, a copy of which is hereto attached as Annex B.

13. It is significant that the manifestation and motion to

withdraw made admissions that recognize the validity of the
boards represented by Mr. Locsin. While petitioners do not
admit to the genuineness or due execution of the Secretary's
Certificates which were not signed by the duly-elected
Corporate Secretary x x x, it must be noted that the authority of
Mr. Locsin to file the instant petition was recognized and
admitted therein. It was only claimed that such authority "was
lost" when he was allegedly replaced, which replacement, as
discussed above, is still disputed. Thus, even the rump boards
admit that the filing of this petition by Mr. Locsin was duly
authorized by POTC and PHILCOMSAT.97

xxxx

On December 21, 2007, the Sandiganbayan (Fifth Division)

issued an order in Civil Case No. 07-0001, to wit:
 xxxx

Wherefore, finding the complaint to be sufficient in form and

substance and considering the necessity to maintain the status
quo lest grave and irreparable injury would result to plaintiff
pending the hearing of the main incident (Injunction and
Declaration of Nullity), let a TEMPORARY RESTRAINING
ORDER issue ordering the defendants, their agents, executives
and other persons acting upon their instructions, from
recognizing or acting pursuant to the 19 November 2007
stockholders meetings of POTC and PHILCOMSAT. The
restraining order is good for twenty (20) days from notice to
defendants or any of their representatives.98

xxxx

On May 7, 2008, the PCGG passed Resolution No. 2008-009,

viz:

NOW, THEREFORE, be it RESOLVED, as it is hereby

RESOLVED, that:

1. The PCGG recognize the validity of the 19 November 2007

POTC/Philcomsat stockholders' meeting and confirm as valid
the election of the following government nominees: Atty. Daniel
C. Gutierrez, Justice Santiago J. Ranada and Atty. Allan S.
Montano to the Board of Directors of POTC and Radm.
Abraham R. Abesamis, Mr. Ramon P. Jacinto and Mr. Rodolfo
G. Serrano, Jr. to the Board of Directors of Philcomsat;

2. The PCGG recognize the validity of the 11 December 2007

and 18 January 2008 special stockholders' meetings of
Philcomsat subsidiaries, PHC and TCI, at which the new
government nominees were also elected as members of their
respective Board of Directors subject to the "I Desire" letter of
the President requiring the nomination and installation of Mr.
Enrique Locsin in PHC vice Mr. Rodolfo Serrano;
3. The PCGG direct the old government nominees and their
appointed Corporate Secretaries under pain of contempt to
submit to the Commission within ten (10) days from their
receipt of the Resolution:

a. A complete set of Minutes of the Meetings of the Boards of

Directors, Executive Committee, Legal Committee, Audit
Committee and all other committees with a Certification under
oath of the completeness thereof from 1998 up to the present;

b. A complete and updated list of stockholders of the

corporations with their last known addresses and number of
shares duly certified by the Corporate Secretary and/or Stock
Transfer Agent;

c. Copies of all audited and interim financial statements of these

corporations; and

d. The stock transfer book and stock certificate booklet of PHC

and TCI.

4. The PCGG request the Securities and Exchange Commission

("SEC") and the Philippine Stock Exchange ("PSE") to regulate
and monitor POTC, Philcomsat, PHC and TCI, to cooperate
with the new government nominees and assist them in
complying with the reportorial requirements of these
corporations, including, but not limited to, compelling the old
government nominees and their appointed officers to submit
copies of the documents referred to above;

RESOLVED, FURTHER, that the Commission Secretary be

directed to furnish copies of this Resolution to the old
government nominees/directors of POTC, Philcomsat, PHC and
TCI namely Enrique Locsin, Manuel Andal, Julio Jalandoni,
Guy De Leon, Benito Araneta and Ronaldo Salonga, to the new
government nominees Daniel Gutierrez, Santiago Ranada, Allan
Montano, Abraham Abesamis, Ramon Jacinto, Rodolfo Serrano,
Jr. Enrique Locsin and to the SEC, PSE and BSP for their
guidance, observation and compliance.99
On July 16, 2008, the CA rendered its assailed decision in C.A.-
G.R. SP No. 102437, annulling and setting aside the order dated
December 13, 2007 and the WPI issued on December 17, 2007
by the RTC (Branch 62).100

On February 13, 2009, the CA denied the motion for

reconsideration.101

On September 30, 2008, the CA promulgated its assailed

consolidated decision in C.A.-G.R. SP No. 98097, C.A.-G.R. SP
No. 98399 and C.A.-G.R. SP No. 101225, dismissing the
petitions.102 The CA held that the RTC acted within its
jurisdiction in resolving the intra-corporate dispute; that the
conduct of pre-trial was not required in corporate election cases;
that the RTC had the authority to decide Civil Case No. 04-
1049; that the decision of the RTC was valid and correct; and
that the petition for contempt filed against Atty. Sikini C.
Labastilla was without basis. The CA lifted and dissolved the
WPI issued on June 25, 2007.103

On December 23, 2008, the CA denied the motion for

reconsideration.104

Issues

G.R. No. 184622

WHETHER THE SANDIGANBAYANS REFUSAL TO
TAKE COGNIZANCE OF THE CONTROVERSY ON THE
GROUND THAT THE SAME IS AN INTRA-CORPORATE
CONTROVERSY IS IMPROPER AND AGAINST
JURISPRUDENCE.105
G.R. No. 184712-14
WHETHER THE SANDIGANBAYAN HAS ORIGINAL AND
EXCLUSIVE JURISDICTION OVER SEQUESTERED
CORPORATIONS, SEQUESTRATION-RELATED CASES,
AND ANY AND OVER ALL INCIDENTS ARISING
 FROM, INCIDENTAL TO, OR RELATED TO SUCH
CASES.106
WHETHER THE SEQUESTRATION OVER POTC AND
PHILCOMSAT REMAINS DESPITE THE APPROVAL OF
THE PCGG-ILUSORIO COMPROMISE AGREEMENT IN
G.R. NOS. 141796 AND 141804.107
WHETHER THE MAKATI RTC MAY RENDER JUDGMENT
ON THE COMPLAINT PURSUANT TO THE INTERIM
RULES WHEN THE SAID COURT HAS NOT BEEN
DESIGNATED AS A SPECIAL COMMERCIAL COURT
BY THE SUPREME COURT.108
WHETHER THE ORDER TO CONDUCT PRE-TRIAL AND
THE SUBMISSION OF THE PRE-TRIAL BRIEFS IS
MANDATORYUNDER ALL CASES FILED UNDER THE
INTERIM RULES.109
G.R. No. 186590

WHETHER THE COURT OF APPEALS ERRED WHEN IT

NULLIFIED THE WRIT OF PRELIMINARY
INJUNCTION ISSUED BY THE TRIAL COURT.110
G.R. No. 186066

WHETHER OR NOT THE CA ERRED IN RULING THAT

THE REGIONAL TRIAL COURT OF MAKATI HAD
JURISDICTION OVER CIVIL CASE NO. 04-1049;
WHETHER OR NOT THE CA ERRED IN RULING THAT
THE DECISION IN G.R. NOS. 141796 AND
141804 FINALLY SETTLED THE ISSUES IN CIVIL
CASE NO. 04-1049 AND CONSEQUENTLY ANNULLED
THE POTC PROXY IN FAVOR OF MESSRS. NIETO
AND LOCSIN;
WHETHER OR NOT THE CA ERRED IN RULING THAT
BRANCH 138 COULD STILL ACT ON AND DECIDE
CIVIL CASE NO. 04-1049 DESPITE THIS
HONORABLE COURTS REVOCATION OF ITS
 DESIGNATION AS SPECIAL COMMERCIAL COURT OF
RTC MAKATI CITY;
WHETHER OR NOT THE CA ERRED IN RULING THAT
PRE-TRIAL AND TRIAL CAN BE DISPENSED WITH
IN CIVIL CASE NO. 01-1049;
WHETHER OR NOT THE CA ERRED IN AFFIRMING
THE DECISION OF THE TRIAL COURT WHICH WAS
CONTRARY TO THE FACTS AND EXISTING
JURISPRUDENCE.111
The Court reduces the issues for resolution to two main ones,
namely:

(a) Did RTC (Branch 138) have jurisdiction over the intra-
corporate controversy (election contest)?

(b)Who among the contending parties or groups held the

controlling interest in POTC and, consequently, in
PHILCOMSAT and PHC?

In G.R. No. 184712-14, the petitioners postulate that the

Sandiganbayan had original and exclusive jurisdiction over
sequestered corporations, sequestration-related cases, and any
and over all incidents arising from, or incidental or related to
such cases;112 that it was error on the part of the CA to conclude
that the Sandiganbayan was automatically ousted of jurisdiction
over the sequestered assets once the complaint alleged an intra-
corporate dispute due to the sequestered assets being in custodia
legis of the Sandiganbayan;113 that the sequestration of POTC
and PHILCOMSAT remained despite the approval of the
compromise agreement in G.R. No. 141796 and G.R. No.
141804; that because the proceedings involving the shares of the
Nieto, Africa and Ponce Enrile Families were still pending and
had not yet been finally resolved, 114 the RTC could not render a
valid judgment on the dispute because it had not been
designated as a Commercial Court;115 and that the conduct of a
pre-trial and the submission of a pre-trial brief were mandatory
under all cases filed under the Interim Rules.116
In its Comment, PHILCOMSAT counters that the rulings in
Olaguer and Del Moral were not applicable because such cases
arose from different factual settings; 117 that the RTC had ample
authority to rule upon the intra-corporate dispute;118 and that the
conduct of pre-trial was not mandatory in corporate election
cases.119

In G.R. No. 184622, the petitioners claim that the

Sandiganbayan committed an error in refusing to take
cognizance of the injunction suit they had filed on the ground
that it was an intra-corporate dispute; that the Sandiganbayan
thereby went against the spirit and intent of the Courts rulings
stressing the importance of protecting sequestered assets and
recovering ill-gotten wealth;120 and that the Courts
pronouncement in G.R. No. 171799 affirming the status of
POTC shares as sequestered shares was more than enough
reason for the Sandiganbayan to take cognizance of the
injunction suit.121

In its Comment,122 respondent Ilusorio-Africa Group counter

that the injunction suit was not within the jurisdiction of the
Sandiganbayan; and that Locsin had no authority to institute the
injunction suit due to his election being a patent nullity
considering that the proxies issued by IRC and Mid-Pasig could
not be given effect after the Court had affirmed the ruling of the
Sandiganbayan on IRC and Mid-Pasigs shareholdings in
POTC.123

In G.R. No. 186590, PHILCOMSAT posits that the trial court

properly issued the injunction against PHC after receiving
evidence of massive looting of corporate funds that led to PHCs
external auditor being suspended as found by Senate
Committees and the SEC.124

In its Comment, PHC states that PHILCOMSAT failed to

establish its right in esse or the existence of a right to be
protected so as to warrant the issuance of the injunctive writ in
its favor.125
In G.R. No. 186066, PHC argues that the CA erred in ruling that
the RTC (Branch 138) was clothed with authority to decide Civil
Case No. 04-1049 because POTC and PHILCOMSAT were
under sequestration of the PCGG; that, accordingly, all issues
and controversies arising or related or incidental to the
sequestration fell under the sole and exclusive original
jurisdiction of the Sandiganbayan;126 that the CA erred in
appreciating the nature of Civil Case No. 04-1049; that the
controversy, albeit involving an intra-corporate dispute, was still
cognizable by the Sandiganbayan because POTC and
PHILCOMSAT shares were under sequestration;127 that the
ruling in G.R. Nos. 141796 and 141804 does not constitute res
judicata; that even assuming that the RTC (Branch 138) had
jurisdiction, its authority was revoked prior to the issuance of its
assailed judgment;128 and that PHC was denied due process due
to the RTCs open violation of the Interim Rules.129

In its Comment, PHILCOMSAT counters that the insistence of

PHC that the sequestration of PHILCOMSAT automatically
took away the jurisdiction of the RTC and conferred it to the
Sandiganbayan was misplaced;130 that the rulings in Olaguer and
Del Moral are not on all fours with this case; 131 that the issue of
the shares being ill-gotten was already settled in G.R. Nos.
141796 and 141804;132 that the RTC (Branch 138) had ample
authority to decide the intra-corporate controversy because the
case, being already submitted for decision, remained cognizable
by the same branch;133 and that the conduct of the pre-trial was
not required in election cases.134

Ruling of the Court

We DENY the petitions in G.R. No. 184622, G.R. Nos.184712-

14, and G.R. No.186066; but GRANT the petition in G.R. No.
186590.

1.
RTC (Branch 138) had jurisdiction
over the election contest between the
Ilusorio-Africa Groups and Nieto-Locsin Groups

Both Civil Case No. 04-1049 of the RTC (Branch 138) in

Makati City and SB Civil Case No. 0198 of the Sandiganbayan
involved intra-corporate controversies among the stockholders
and officers of the corporations. It is settled that there is an intra-
corporate controversy when the dispute involves any of the
following relationships, to wit: (a) between the corporation,
partnership or association and the public; (b) between the
corporation, partnership or association and the State in so far as
its franchise, permit or license to operate is concerned; (c)
between the corporation, partnership or association and its
stockholders, partners, members or officers; and (d) among the
stockholders, partners or associates themselves.135

Consequently, we agree with the CAs consolidated decision

promulgated on September 30, 2008 that the RTC (Branch 138),
not the Sandiganbayan, had jurisdiction because Civil Case No.
04-1049 did not involve a sequestration-related incident but an
intra-corporate controversy.

Originally, Section 5 of Presidential Decree (P.D.) No. 902-A

vested the original and exclusive jurisdiction over cases
involving the following in the SEC, to wit:

xxxx

(a) Devices or schemes employed by, or any acts of the board of

directors, business associates, its officers or partners, amounting
to fraud and misrepresentation which may be detrimental to the
interest of the public and/or of the stockholder, partners,
members of associations or organization registered with the
Commission;

(b) Controversies arising out of intra-corporate or partnership

relations, between and among stockholders, members or
associates; between any or all of them and the corporation,
partnership or association of which they are stockholders,
members or associates, respectively; and between such
corporation, partnership or association and the State insofar as it
concerns their individual franchise or right as such entity;

(c) Controversies in the election or appointment of directors,

trustees, officers or managers of such corporations, partnership
or associations;

(d) Petitions of corporations, partnerships or associations to be

declared in the state of suspension of payment in cases where
the corporation, partnership or association possesses sufficient
property to cover all its debts but foresees the impossibility of
meeting them when they respective fall due or in cases where
the corporation, partnership or association has no sufficient
assets to cover its liabilities but is under the management of a
Rehabilitation Receiver or Management Committee created
pursuant to this Decree.136

Upon the enactment of Republic Act No. 8799 (The Securities

Regulation Code), effective on August 8, 2000, the jurisdiction
of the SEC over intra-corporate controversies and the other
cases enumerated in Section 5 of P.D. No. 902-A was transferred
to the Regional Trial Court pursuant to Section 5.2 of the law,
which provides:

5.2. The Commissions jurisdiction over all cases enumerated in

Section 5 of Presidential Decree No. 902-A is hereby transferred
to the Courts of general jurisdiction or the appropriate Regional
Trial Court; Provided, That the Supreme Court in the exercise of
its authority may designate the Regional Trial Court branches
that shall exercise jurisdiction over these cases. The
Commission shall retain jurisdiction over pending cases
involving intra-corporate disputes submitted for final resolution
which should be resolved within one (1) year from the
enactment of this Code. The Commission shall retain
jurisdiction over pending suspension of payments/rehabilitation
cases filed as of 30 June 2000 until finally disposed.
To implement Republic Act No. 8799, the Court promulgated its
resolution of November 21, 2000 in A.M. No. 00-11-03-SC
designating certain branches of the RTC to try and decide the
cases enumerated in Section 5 of P.D. No. 902-A. Among the
RTCs designated as special commercial courts was the RTC
(Branch 138) in Makati City, the trial court for Civil Case No.
04-1049.

On March 13, 2001, the Court adopted and approved the Interim
Rules of Procedure for Intra-Corporate Controversies under
Republic Act No. 8799 in A.M. No. 01-2-04-SC, effective on
April 1, 2001, whose Section 1 and Section 2, Rule 6 state:

Section 1. Cases covered. The provisions of this rule shall

apply to election contests in stock and non-stock corporations.

Section 2. Definition. An election contest refers to any

controversy or dispute involving title or claim to any elective
office in a stock or non-stock corporation, the validation of
proxies, the manner and validity of elections, and the
qualifications of candidates, including the proclamation of
winners, to the office of director, trustee or other officer directly
elected by the stockholders in a close corporation or by
members of a non-stock corporation where the articles of
incorporation or by-laws so provide. (bold underscoring
supplied)

Conformably with Republic Act No. 8799, and with the ensuing
resolutions of the Court on the implementation of the transfer of
jurisdiction to the Regional Trial Court, the RTC (Branch 138)
in Makati had the authority to hear and decide the election
contest between the parties herein. There should be no
disagreement that jurisdiction over the subject matter of an
action, being conferred by law, could neither be altered nor
conveniently set aside by the courts and the parties.137

To buttress its position, however, the Nieto-Locsin Group relied

on Section 2 of Executive Order No. 14, 138 which expressly
mandated that the PCGG "shall file all such cases, whether civil
or criminal, with the Sandiganbayan, which shall have exclusive
and original jurisdiction thereof."

The reliance was unwarranted.

Section 2 of Executive Order No. 14 had no application herein

simply because the subject matter involved was an intra-
corporate controversy, not any incidents arising from, incidental
to, or related to any case involving assets whose nature as ill-
gotten wealth was yet to be determined. In San Miguel
Corporation v. Kahn,139 the Court held that:

The subject matter of his complaint in the SEC does not

therefore fall within the ambit of this Courts Resolution of
August 10, 1988 on the cases just mentioned, to the effect that,
citing PCGG v. Pena, et al., all cases of the Commission
regarding the funds, moneys, assets, and properties illegally
acquired or misappropriated by former President Ferdinand
Marcos, Mrs. Imelda Romualdez Marcos, their close relatives,
Subordinates, Business Associates, Dummies, Agents, or
Nominees, whether civil or criminal, are lodged within the
exclusive and original jurisdiction of the Sandiganbayan, and
all incidents arising from, incidental to, or related to, such cases
necessarily fall likewise under the Sandiganbayan's exclusive
and original jurisdiction, subject to review on certiorari
exclusively by the Supreme Court." His complaint does not
involve any property illegally acquired or misappropriated by
Marcos, et al., or "any incidents arising from, incidental to, or
related to" any case involving such property, but assets
indisputably belonging to San Miguel Corporation which were,
in his (de los Angeles') view, being illicitly committed by a
majority of its board of directors to answer for loans assumed by
a sister corporation, Neptunia Co., Ltd.

De los Angeles complaint, in fine, is confined to the issue of the

validity of the assumption by the corporation of the
indebtedness of Neptunia Co., Ltd., allegedly for the benefit of
certain of its officers and stockholders, an issue evidently
distinct from, and not even remotely requiring inquiry into the
matter of whether or not the 33,133,266 SMC shares
sequestered by the PCGG belong to Marcos and his cronies or
dummies (on which, issue, as already pointed out, de los
Angeles, in common with the PCGG, had in fact espoused the
affirmative). De los Angeles dispute, as stockholder and
director of SMC, with other SMC directors, an intra-corporate
one, to be sure, is of no concern to the Sandiganbayan, having
no relevance whatever to the ownership of the sequestered
stock. The contention, therefore, that in view of this Court's
ruling as regards the sequestered SMC stock above adverted to,
the SEC has no jurisdiction over the de los Angeles complaint,
cannot be sustained and must be rejected. The dispute concerns
acts of the board of directors claimed to amount to fraud and
misrepresentation which may be detrimental to the interest of
the stockholders, or is one arising out of intra-corporate relations
between and among stockholders, or between any or all of them
and the corporation of which they are stockholders.140

Moreover, the jurisdiction of the Sandiganbayan has been held

not to extend even to a case involving a sequestered company
notwithstanding that the majority of the members of the board of
directors were PCGG nominees. The Court marked this
distinction clearly in Holiday Inn (Phils.), Inc. v.
Sandiganbayan,141 holding thusly:

The subject-matter of petitioners proposed complaint-

inintervention involves basically, an interpretation of contract,
i.e., whether or not the right of first refusal could and/or should
have been observed, based on the Addendum/Agreement of July
14, 1988, which extended the terms and conditions of the
original agreement of January 1, 1976. The question of whether
or not the sequestered property was lawfully acquired by
Roberto S. Benedicto has no bearing on the legality of the
termination of the management contract by NRHDCs Board of
Directors. The two are independent and unrelated issues and
resolution of either may proceed independently of each other.
Upholding the legality of Benedictos acquisition of the
sequestered property is not a guarantee that HIP's management
contract would be upheld, for only the Board of Directors of
NRHDC is qualified to make such a determination.

Likewise, the Sandiganbayan correctly denied jurisdiction over

the proposed complaint-in-intervention. The original and
exclusive jurisdiction given to the Sandiganbayan over PCGG
cases pertains to (a) cases filed by the PCGG, pursuant to the
exercise of its powers under Executive Order Nos. 1, 2 and 14.
as amended by the Office of the President, and Article XVIII,
Section 26 of the Constitution, i.e., where the principal cause of
action is the recovery of ill-gotten wealth, as well as all
incidents arising from, incidental to, or related to such cases and
(b) cases filed by those who wish to question or challenge the
commissions acts or orders in such cases.

Evidently, petitioners proposed complaint-in-intervention is an

ordinary civil case that does not pertain to the Sandiganbayan.
As the Solicitor General stated, the complaint is not directed
against PCGG as an entity, but against a private corporation, in
which case it is not per se, a PCGG case.

In the cases now before the Court, what are sought to be

determined are the propriety of the election of a party as a
Director, and his authority to act in that capacity. Such issues
should be exclusively determined only by the RTC pursuant to
the pertinent law on jurisdiction because they did not concern
the recovery of ill-gotten wealth.

2.

Lack of pre-trial was not fatal

in intra-corporate election contests

Under Section 4 of Rule 6 (Election Contests) of the Interim

Rules of Procedure for Intra-Corporate Controversies, which
took effect on April 1, 2001 (A.M. No. 01-2-04-SC), issued
pursuant to Republic Act No. 8799, the trial court, within two
days from the filing of the complaint, may outrightly dismiss the
complaint upon a consideration of the allegations thereof if the
complaint is not sufficient in form and substance, or, if the
complaint is sufficient, may order the issuance of summons
which shall be served, together with a copy of the complaint, on
the defendant within two days from its issuance. Should it find
the need to hold a hearing to clarify specific factual matters, the
trial court shall set the case for hearing, and the hearing shall be
completed not later than 15 days from the date of the first
hearing. The trial court is mandated to render a decision within
15 days from receipt of the last pleading, or from the date of the
last hearing, as the case may be.

The CA correctly pointed out that Rule 6 nowhere required that

the RTC acting as a special commercial court should first
conduct a pre-trial conference before it could render its
judgment in a corporate election contest. Hence, the RTC
(Branch 138) in Makati properly heard the case of annulment of
the election with dispatch in accordance with the guidelines set
in the resolution in A.M. No. 01-2-04-SC. With the requirements
of due process having been served, no defect infirmed the RTCs
ruling to set aside the election, and to oust those illegally
elected.

3.

RTC (Branch 138) retained its jurisdiction

over the case that was ripe for adjudication

While it is true that this Court meanwhile revoked on June 27,

2006 the designation of the RTC (Branch 138) to act as a special
commercial court, through the resolution in A.M. No. 03-3-03-
SC, the RTC (Branch 138) did not thereafter become bereft of
the jurisdiction to decide the controversy because of the
exception expressly stated in the resolution in A.M. No. 03-3-
03-SC itself, to wit:

xxxx
Upon the effectivity of this designation, all commercial cases
pending before Branches 138 and 61 shall be transferred to
RTC, Branch 149, Makati City, except those which are already
submitted for decision, which cases shall be decided by the
acting presiding judges thereat. x x x.

Contrary to the assertion of the Nieto-PCGG group, the

foregoing provision did not require the issuance of any special
order stating that the case was already submitted for decision. It
was sufficient, given the summary nature of intra-corporate
controversies, especially election contests, that the trial court
was done collating all the evidence from the pleadings (i.e.,
pleadings, affidavits, documentary and other evidence attached
thereto, and the answers of the witnesses to the clarificatory
questions of the court given during the hearings), if deemed
sufficient, or from the clarificatory hearings, if conducted. The
purpose of the exception is to obviate the repetition of the
gathering of evidence. It is clear from Section 9 of Rule 6 that
after the collation of evidence, the only thing that remains is for
the RTC to render its decision without issuing a special order
declaring the case submitted for decision, viz:

Section 9. Decision. The Court shall render a decision within

fifteen (15) days from receipt of the last pleading, or from the
date of the last hearing, as the case may be. The decision shall
be based on the pleadings, affidavits, documentary and other
evidence attached thereto and the answers of the witnesses to the
clarificatory questions of the court given during the hearings.

4.

Ruling in G.R. No. 141796 and

G.R. No. 141804 was properly applied
to Civil Case No. 04-1049

It was not the principle of res judicata, as claimed by the Nieto-

PCGG Group, that justified the application to Civil Case No. 04-
1049 of the Courts ruling in G.R. No. 141796 and G.R. No.
141804 invalidating the PHC elections conducted by the Nieto-
PCGG Group, but rather the doctrine of stare decisis et non
quieta movere, which means "to adhere to precedents, and not to
unsettle things which are established."142

Under the doctrine of stare decisis, when the Court has once laid
down a principle of law as applicable to a certain state of facts,
the courts will adhere to that principle, and apply it to all future
cases in which the facts are substantially similar, regardless of
whether the parties and property involved are the same. 143 The
doctrine of stare decisis is based upon the legal principle or rule
involved, not upon the judgment that results therefrom. It is in
this particular sense that stare decisis differs from res judicata,
because res judicata is based upon the judgment.144

The doctrine of stare decisis is grounded on the necessity for

securing certainty and stability in judicial decisions, thus:

Time and again, the Court has held that it is a very desirable and
necessary judicial practice that when a court has laid down a
principle of law as applicable to a certain state of facts, it will
adhere to that principle and apply it to all future cases in which
the facts are substantially the same. Stare decisis et non quieta
movere. Stand by the decisions and disturb not what is settled.
Stare decisis simply means that for the sake of certainty, a
conclusion reached in one case should be applied to those that
follow if the facts are substantially the same, even though the
parties may be different. It proceeds from the first principle of
justice that, absent any powerful countervailing considerations,
like cases ought to be decided alike. Thus, where the same
questions relating to the same event have been put forward by
the parties similarly situated as in a previous case litigated and
decided by a competent court, the rule of stare decisis is a bar to
any attempt to relitigate the same issue.145

The question of who held the majority shareholdings in POTC

and PHILCOMSAT was definitively laid to rest in G.R. No.
141796 and G.R. No. 141804, whereby the Court upheld the
validity of the compromise agreement the Government had
concluded with Atty. Ilusorio. Said the Court:

With the imprimatur of no less than the former President Fidel

V. Ramos and the approval of the Sandiganbayan, the
Compromise Agreement must be accorded utmost respect. Such
amicable settlement is not only allowed but even encouraged.
Thus, in Republic vs. Sandiganbayan, we held:

It is advocated by the PCGG that respondent Benedicto

retaining a portion of the assets is anathema to, and incongruous
with, the zero-retention policy of the government in the pursuit
for the recovery of all ill-gotten wealth pursuant to Section 2(a)
of Executive Order No. 1. While full recovery is ideal, the
PCGG is not precluded from entering into a Compromise
Agreement which entails reciprocal concessions if only to
expedite recovery so that the remaining funds, assets and other
properties may be used to hasten national economic recovery
(3rd WHEREAS clause, Executive Order No. 14-A). To be sure,
the so-called zero retention mentioned in Section 2(a) of
Executive Order No. 1 had been modified to read:

WHEREAS, the Presidential Commission on Good

Government was created on February 28, 1986 by Executive
Order No. 1 to assist the President in the recovery of ill-gotten
wealth accumulated by former President Ferdinand E. Marcos,
his immediate family, relatives, subordinates and close
associates;

which undoubtedly suggests a departure from the former goal of

total restitution.

xxxx

The authority of the PCGG to enter into Compromise

Agreements in civil cases and to grant immunity, under certain
circumstances, in criminal cases is now settled and established.
In Republic of the Philippines and Jose O. Campos, Jr. vs.
Sandiganbayan, et al. (173 SCRA 72 [1989]), this Court
categorically stated that amicable settlements and compromises
are not only allowed but actually encouraged in civil cases. A
specific grant of immunity from criminal prosecutions was also
sustained. In Benedicto vs. Board of Administrators of
Television Stations RPN, BBC, and IBC (207 SCRA 659
[1992]), the Court ruled that the authority of the PCGG to
validly enter into Compromise Agreement for thepurpose of
avoiding litigation or putting an end to one already commenced
was indisputable. x x x (italics supplied)

Having been sealed with court approval, the Compromise

Agreement has the force of res judicata between the parties and
should be complied with in accordance with its terms. Pursuant
thereto, Victoria C. de los Reyes, Corporate Secretary of the
POTC, transmitted to Mr. Magdangal B. Elma, then Chief
Presidential Legal Counsel and Chairman of PCGG, Stock
Certificate No. 131 dated January 10, 2000, issued in the name
of the Republic of the Philippines, for 4,727 POTC shares. Thus,
the Compromise Agreement was partly implemented.146

As a result of the Government having expressly recognized that

673 POTC shares belonged to Atty. Ilusorio, Atty. Ilusorio and
his group gained the majority control of POTC.

Applying the ruling in G.R. No. 141796 and G.R. No. 141804 to
Civil Case No. 04-1049, the RTC (Branch 138) correctly
concluded that the Nieto-PCGG Group, because it did not have
the majority control of POTC, could not have validly convened
and held the stockholders meeting and election of POTC
officers on August 5, 2004 during which Nieto, Jr. and PCGG
representative Guy De Leon were respectively elected as
President and Chairman; and that there could not be a valid
authority for Nieto, Jr. and/or Locsin to vote the proxies of the
group in the PHILCOMSAT meeting.

For the same reason, the POTC proxies used by Nieto, Jr. and
Locsin to elect themselves respectively as Chairman and
President of PHILCOMSAT; and the PHILCOMSAT proxies
used by Nieto, Jr. and Locsin in the August 31, 2004 PHC
elections to elect themselves respectively as President and
Acting Chairman of PHC, were all invalid for not having the
support of the majority shareholders of said corporations.

While it is true that judicial decisions should be given a

prospective effect, such prospectivity did not apply to the June
15, 2005 ruling in G.R. No. 141796 and G.R. No. 141804
because the ruling did not enunciate a new legal doctrine or
change the interpretation of the law as to prejudice the parties
and undo their situations established under an old doctrine or
prior interpretation. Indeed, the ruling only affirmed the
compromise agreement consummated on June 28, 1996 and
approved by the Sandiganbayan on June 8, 1998, and
accordingly implemented through the cancellation of the shares
in the names of IRC and MLDC and their registration in the
names of Atty. Ilusorio to the extent of 673 shares, and of the
Republic to the extent of 4,727 shares. In a manner of speaking,
the decision of the Court in G.R. No. 141796 and G.R. No.
141804 promulgated on June 15, 2005 declared the compromise
agreement valid, and such validation properly retroacted to the
date of the judicial approval of the compromise agreement on
June 8, 1998.

Consequently, although the assailed elections were conducted by

the Nieto-PCGG group on August 31, 2004 but the ruling in
G.R. No. 141796 and G.R. No. 141804 was promulgated only
on June 15, 2005, the ruling was the legal standard by which the
issues raised in Civil Case No. 04-1049 should be resolved.

5.

Proper mode of appeal in intra-corporate cases

is by petition for review under Rule 43

In Dee Ping Wee v. Lee Hiong Wee,147 the Court has expounded
that the appropriate mode of appeal for an aggrieved party in an
intra-corporate dispute is a petition for review under Rule 43 of
the Rules of Court, to wit:
Verily, the first part of Section 4, Rule 1 of the Interim Rules is
categorical. Save for the exceptions clearly stated therein, the
provision enunciates that a decision and order issued under the
Interim Rules shall be enforceable immediately after the
rendition thereof. In order to assail the decision or order,
however, the second part of the provision speaks of an appeal or
petition that needs to be filed by the party concerned. In this
appeal or petition, a restraining order must be sought from the
appellate court to enjoin the enforcement or implementation of
the decision or order. Unless a restraining order is so issued, the
decision or order rendered under the Interim Rules shall remain
to be immediately executory.

On September 14, 2004, the Court issued a Resolution in A.M.

No. 04-9-07-SC to rectify the situation wherein "lawyers and
litigants are in a quandary on how to prevent under appropriate
circumstances the execution of decisions and orders in cases
involving corporate rehabilitation and intra-corporate
controversies." To address the "need to clarify the proper mode
of appeal in [cases involving corporate rehabilitation and intra-
corporate controversies] in order to prevent cluttering the
dockets of the courts with appeals and/or petitions for
certiorari," the Court thereby resolved that:

1. All decisions and final orders in cases falling under the

Interim Rules of Corporate Rehabilitation and the Interim Rules
of Procedure Governing Intra-Corporate Controversies under
Republic Act No. 8799 shall be appealable to the Court of
Appeals through a petition for review under Rule 43 of the
Rules of Court.

2. The petition for review shall be taken within fifteen (15) days
from notice of the decision or final order of the Regional Trial
Court. Upon proper motion and the payment of the full amount
of the legal fee prescribed in Rule 141 as amended before the
expiration of the reglementary period, the Court of Appeals may
grant an additional period of fifteen (15) days within which to
file the petition for review. No further extension shall be granted
except for the most compelling reasons and in no case to exceed
fifteen (15) days. (Emphases ours.)

xxxx

The issue that needs to be resolved at this point is whether or not

petitioners pursued the correct remedy in questioning the RTC
Decisions in Civil Case Nos. Q-04-091, Q-04-092 and Q-04-
093. Corollary to this is whether or not the petitions for
certiorari filed by petitioners could have been treated as
petitions for review under Rule 43 of the Rules of Court, in
accordance with the provisions of the Resolution in A.M. No.
04-9-07-SC, such that petitioners can be considered to have
availed themselves of the proper remedy in assailing the rulings
of the RTC.

We answer in the negative.

The term "petition" in the third and fourth paragraphs of A.M.

No. 04-9-07-SC, cannot be construed as to include a petition for
certiorari under Rule 65 of the Rules of Court. The rationale for
this lies in the essential difference between a petition for review
under Rule 43 and a petition for certiorari under Rule 65 of the
Rules of Court.

xxxx

The RTC Decisions in Civil Case Nos. Q-04-091, Q-04-092 and

Q-04-093 are final orders that disposed of the whole subject
matter or terminated the particular proceedings or action,
leaving nothing to be done but to enforce by execution what has
been determined. As the RTC was unquestionably acting within
its jurisdiction, all errors that it might have committed in the
exercise of such jurisdiction are errors of judgment, which are
reviewable by a timely appeal.

xxxx
The Court of Appeals (12th Division) was, therefore, correct in
dismissing the petition for certiorari in CA-G.R. SP No. 85878,
which assailed the RTC Decision in Civil Case No. Q-04-091. x
x x148

The rule providing that a petition for review under Rule 43 of

the Rules of Court is the proper mode of appeal in intra-
corporate controversies, as embodied in A. M. No. 04-9-07-SC,
has been in effect since October 15, 2004. Hence, the filing by
POTC and PHC (Nieto Group) of the petition for certiorari on
March 21, 2007 (C.A.-G.R. SP No. 98399) was inexcusably
improper and ineffectual. By virtue of its being an extraordinary
remedy, certiorari could neither replace nor substitute an
adequate remedy in the ordinary course of law, like appeal in
due course.149 Indeed, the appeal under Rule 43 of the Rules of
Court would have been adequate to review and correct even the
grave abuse of discretion imputed to the RTC.150

As a consequence of the impropriety and ineffectuality of the

remedy chosen by POTC and PHC (Nieto Group), the TRO and
the WPI initially issued by the CA in C.A.-G.R. SP No. 98399
did not prevent the immediately executory character of the
decision in Civil Case No. 04-1049.

6.

Petition for contempt against Bildner had no basis

The filing by Bildner and her counsel Atty. Manzanal of the

complaint for perjury against Locsin and his counsel Atty.
Labastilla in the Office of the City Prosecutor of Manila did not
amount to unlawful interference with the processes of the CA.
There is no denying that Bildner was within her right as a party
in interest in the proceedings then pending in the CA to bring the
perjury charge against Locsin and his counsel for their failure to
aver in the certification against forum shopping attached to the
petition for certiorari in C.A.-G.R. SP No. 98399 of the
pendency of another petition in C.A.-G.R. SP No. 98087 despite
their knowledge thereof. Her complaint for perjury could really
be dealt with by the Office of the City Prosecutor of Manila
independently from any action the CA would take on the issue
of forum shopping. As such, the filing of the complaint did not
interfere with the CAs authority over the petition in C.A.-G.R.
SP No. 98399.

In this regard, we deem to be appropriate to reiterate what the

Court said on the nature of contempt of court in Lorenzo
Shipping Corporation v. Distribution Management Association
of the Philippines,151 viz:

Misbehavior means something more than adverse comment or

disrespect. There is no question that in contempt the intent goes
to the gravamen of the offense. Thus, the good faith, or lack of
it, of the alleged contemnor should be considered. Where the act
complained of is ambiguous or does not clearly show on its face
that it is contempt, and is one which, if the party is acting in
good faith, is within his rights, the presence or absence of a
contumacious intent is, in some instances, held to be
determinative of its character. A person should not be
condemned for contempt where he contends for what he
believes to be right and in good faith institutes proceedings for
the purpose, however erroneous may be his conclusion as to his
rights. To constitute contempt, the act must be done willfully
and for an illegitimate or improper purpose.

Nonetheless, the Court states that 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 ultimately, to the due administration of justice. But such
power should be exercised on the preservative, not on the
vindictive, principle. 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.152

7.
Bildner Group entitled to injunctive relief

Concerning the propriety of the issuance of the WPI to enjoin

BPI from letting the Locsin Group withdraw funds or transact
with BPI on PHCs deposits, the Court finds that the Bildner
Group as the applicant had a right in esse to be protected by the
injunctive relief. A right that is in esse is a clear and
unmistakable right to be protected, and is one founded on or
granted by law or is enforceable as a matter of law.153 The
Bildner Group, because of the indubitability of its standing as a
party in interest, showed a clear and unmistakable right to be
protected.

In granting the Bildner Groups application for the WPI, the

RTC (Branch 62) emphasized the peculiarities of the case.
Apparently, the Bildner Group relied on the fact that their
election to the PHC Board of Directors was implemented and
executed even prior to the WPI issued by the CA to stop the
RTC (Branch 138) from implementing its decision in Civil Case
No. 04-1049. The right that the Bildner Group relied on in
seeking the execution of the decision was enforceable as a
matter of law, for it emanated from the validly issued decision
that was immediately executory under the pertinent rule. On the
other hand, the TRO and WPI the CA issued in C.A.-G. R. SP
No. 98399 could not and did not have any restraining effect on
the immediately executory nature of the decision rendered in
Civil Case No. 04-1049, because the matter had been brought to
the CA through the wrong remedy.

Considering that the Bildner Groups clear right to an injunctive

relief was established, coupled with the affirmance of the
consolidated decision of the CA upholding the validity of the
July 28, 2004 election of the Bildner Group as Directors and
Officers of PHC, the decision promulgated in C.A.-G.R. SP No.
102437 to the effect that Bildners standing as a party-ininterest
was unclear, and that she failed to show a clear and
unmistakable right to be protected by the writ of injunction, lost
its ground.
Accordingly, the reversal of the decision promulgated in C.A.-
G.R. SP No. 102437, and the reinstatement of the WPI issued
against BPI by the RTC (Branch 62) in Civil Case No. 07-840
are in order.

8.

Supreme Court, not being a trier of facts,

will not reexamine the evidence

The insistence by POTC and PHC (Nieto Group) that the RTCs
decision in Civil Case No. 04-1049 was contrary to the facts and
the evidence lacks merit.

The Court is not a trier of facts, and thus should not reexamine
the evidence in order to determine whether the facts were as
POTC and PHC (Nieto Group) now insist they were. The Court
must respect the findings of the CA sustaining the factual
findings of the RTC in Civil Case No. 04-1049. As a rule, the
findings of fact by the CA are not reviewed on appeal, but are
binding and conclusive.154 The reason for this has been well
stated in J.R. Blanco v. Quasha:155

To begin with, this Court is not a trier of facts. It is not its

function to examine and determine the weight of the evidence
supporting the assailed decision. In Philippine Airlines, Inc. vs.
Court of Appeals (275 SCRA 621 [1997]), the Court held that
factual findings of the Court of Appeals which are supported by
substantial evidence are binding, final and conclusive upon the
Supreme Court. So also, well-established is the rule that "factual
findings of the Court of Appeals are conclusive on the parties
and carry even more weight when the said court affirms the
factual findings of the trial court." Moreover, well entrenched is
the prevailing jurisprudence that only errors of law and not of
facts are reviewable by this Court in a petition for review on
certiorari under Rule 45 of the Revised Rules of Court, which
applies with greater force to the Petition under consideration
because the factual findings by the Court of Appeals are in full
agreement with what the trial court found.1wphi1
We affirm, therefore, the appealed consolidated decision
promulgated in C.A.-G.R. SP No. 101225, C.A.-G.R. SP No.
98097 and C.A.-G.R. SP No. 98399, and dismiss the petitions of
the Locsin/Nieto-PCGG Group filed in G.R. No. 184712-14 and
G.R. No. 186066.

WHEREFORE, the Court DENIES the petitions for review on

certiorari in G.R. No. 184622, G.R. No. 184712-14, and G.R.
No. 186066; AFFIRMS the resolution promulgated on August
15, 2007 by the Sandiganbayan in Civil Case No. 0198 and the
consolidated decision promulgated on September 30, 2008 in
C.A.-G.R. SP No. 101225, C.A.-G.R. SP No. 98097 and C.A.-
G.R. SP No. 98399; GRANTS the petition for review on
certiorari in G.R. No. 186590, and, accordingly, ANNULS and
SETS ASIDE the decision promulgated on July 16, 2008 in
C.A.-G.R. SP No. 102437; AFFIRMS the order issued on
December 13, 2007 by the Regional Trial Court, Branch 62, in
Makati City; and REINSTATES the writ of injunction issued on
December 17, 2007 against Bank of Philippine Islands.

The Court DIRECTS the Locsin/Nieto-PCGG Group to render

an accounting of all the funds and other assets received from the
PHILIPPINE OVERSEAS TELECOMMUNICATIONS
CORPORATION, PHILIPPINE HOLDINGS CORPORATION
and PHILIPPINE COMMUNICATIONS SATELLITE
CORPORATION since September 1, 2004, and to return such
funds to the respective corporations within thirty days from the
finality of this decision.

Costs of suit to be paid by the Group of Enrique L. Locsin and

Manuel H. Nieto, Jr.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
G.R. No. 159213 July 3, 2013

VECTOR SHIPPING CORPORATION and FRANCISCO SORIANO,

Petitioners,
vs.
AMERICAN HOME ASSURANCE COMPANY and SULPICIO LINES,
INC., Respondents.

DECISION

BERSAMIN, J.:

Subrogation under Article 2207 of the Civil Code gives rise to a cause of action
created by law. For purposes of the law on the prescription of actions, the period
of limitation is ten years.

The Case

Vector Shipping Corporation (Vector) and Francisco Soriano appeal the decision
promulgated on July 22, 2003,1 whereby the Court of Appeals (CA) held them
jointly and severally liable to pay P7 ,455,421.08 to American Home Assurance
Company (respondent) as and by way of actual damages on the basis of
respondent being the subrogee of its insured Caltex Philippines, Inc. (Caltex).

Antecedents

Vector was the operator of the motor tanker M/T Vector, while Soriano was the
registered owner of the M/T Vector. Respondent is a domestic insurance
corporation.2

On September 30, 1987, Caltex entered into a contract of Affreightment 3 with

Vector for the transport of Caltexs petroleum cargo through the M/T Vector.
Caltex insured the petroleum cargo with respondent for P7,455,421.08 under
Marine Open Policy No. 34-5093-6.4 In the evening of December 20, 1987, the
M/T Vector and the M/V Doa Paz, the latter a vessel owned and operated by
Sulpicio Lines, Inc., collided in the open sea near Dumali Point in Tablas Strait,
located between the Provinces of Marinduque and Oriental Mindoro. The
collision led to the sinking of both vessels. The entire petroleum cargo of Caltex
on board the M/T Vector perished. 5 On July 12, 1988, respondent indemnified
Caltex for the loss of the petroleum cargo in the full amount of P7,455,421.08.6

On March 5, 1992, respondent filed a complaint against Vector, Soriano, and

Sulpicio Lines, Inc. to recover the full amount of P7,455,421.08 it paid to Caltex
(Civil Case No. 92-620).7 The case was raffled to Branch 145 of the Regional
Trial Court (RTC) in Makati City.

On December 10, 1997, the RTC issued a resolution dismissing Civil Case No.
92-620 on the following grounds:

This action is upon a quasi-delict and as such must be commenced within four 4
years from the day they may be brought. [Art. 1145 in relation to Art. 1150, Civil
Code] "From the day [the action] may be brought" means from the day the quasi-
delict occurred. [Capuno v. Pepsi Cola, 13 SCRA 663]

The tort complained of in this case occurred on 20 December 1987. The action
arising therefrom would under the law prescribe, unless interrupted, on 20
December 1991.

When the case was filed against defendants Vector Shipping and Francisco
Soriano on 5 March 1992, the action not having been interrupted, had already
prescribed.

Under the same situation, the cross-claim of Sulpicio Lines against Vector
Shipping and Francisco Soriano filed on 25 June 1992 had likewise prescribed.

The letter of demand upon defendant Sulpicio Lines allegedly on 6 November

1991 did not interrupt the tolling of the prescriptive period since there is no
evidence that it was actually received by the addressee. Under such
circumstances, the action against Sulpicio Lines had likewise prescribed.

Even assuming that such written extra-judicial demand was received and the
prescriptive period interrupted in accordance with Art. 1155, Civil Code, it was
only for the 10-day period within which Sulpicio Lines was required to settle its
obligation. After that period lapsed, the prescriptive period started again. A new
4-year period to file action was not created by the extra-judicial demand; it
merely suspended and extended the period for 10 days, which in this case meant
that the action should be commenced by 30 December 1991, rather than 20
December 1991.

Thus, when the complaint against Sulpicio Lines was filed on 5 March 1992, the
action had prescribed.

PREMISES CONSIDERED, the complaint of American Home Assurance

Company and the cross-claim of Sulpicio Lines against Vector Shipping
Corporation and Francisco Soriano are DISMISSED.
Without costs.

SO ORDERED.8

Respondent appealed to the CA, which promulgated its assailed decision on July
22, 2003 reversing the RTC.9 Although thereby absolving Sulpicio Lines, Inc. of
any liability to respondent, the CA held Vector and Soriano jointly and severally
liable to respondent for the reimbursement of the amount of P7,455,421.08 paid
to Caltex, explaining:

xxxx

The resolution of this case is primarily anchored on the determination of what

kind of relationship existed between Caltex and M/V Dona Paz and between
Caltex and M/T Vector for purposes of applying the laws on prescription. The
Civil Code expressly provides for the number of years before the extinctive
prescription sets in depending on the relationship that governs the parties.

xxxx

After a careful perusal of the factual milieu and the evidence adduced by the
parties, We are constrained to rule that the relationship that existed between
Caltex and M/V Dona Paz is that of a quasi-delict while that between Caltex and
M/T Vector is culpa contractual based on a Contract of Affreightment or a charter
party.

xxxx

On the other hand, the claim of appellant against M/T Vector is anchored on a
breach of contract of affreightment. The appellant averred that M/T Vector
committed such act for having misrepresented to the appellant that said vessel is
seaworthy when in fact it is not. The contract was executed between Caltex and
M/T Vector on September 30, 1987 for the latter to transport thousands of barrels
of different petroleum products. Under Article 1144 of the New Civil Code,
actions based on written contract must be brought within 10 years from the time
the right of action accrued. A passenger of a ship, or his heirs, can bring an action
based on culpa contractual within a period of 10 years because the ticket issued
for the transportation is by itself a complete written contract (Peralta de Guerrero
vs. Madrigal Shipping Co., L 12951, November 17, 1959).

Viewed with reference to the statute of limitations, an action against a carrier,

whether of goods or of passengers, for injury resulting from a breach of contract
for safe carriage is one on contract, and not in tort, and is therefore, in the
absence of a specific statute relating to such actions governed by the statute
fixing the period within which actions for breach of contract must be brought (53
C.J.S. 1002 citing Southern Pac. R. Co. of Mexico vs. Gonzales 61 P. 2d 377, 48
Ariz. 260, 106 A.L.R. 1012).

Considering that We have already concluded that the prescriptive periods for
filing action against M/V Doa Paz based on quasi delict and M/T Vector based
on breach of contract have not yet expired, are We in a position to decide the
appeal on its merit.

We say yes.

xxxx

Article 2207 of the Civil Code on subrogation is explicit that if the plaintiffs
property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company should be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract.
Undoubtedly, the herein appellant has the rights of a subrogee to recover from
M/T Vector what it has paid by way of indemnity to Caltex.

WHEREFORE, foregoing premises considered, the decision dated December 10,

1997 of the RTC of Makati City, Branch 145 is hereby REVERSED.
Accordingly, the defendant-appellees Vector Shipping Corporation and Francisco
Soriano are held jointly and severally liable to the plaintiff-appellant American
Home Assurance Company for the payment of P7,455,421.08 as and by way of
actual damages.

SO ORDERED.10

Respondent sought the partial reconsideration of the decision of the CA,

contending that Sulpicio Lines, Inc. should also be held jointly liable with Vector
and Soriano for the actual damages awarded. 11 On their part, however, Vector and
Soriano immediately appealed to the Court on September 12, 2003. 12 Thus, on
October 1, 2003, the CA held in abeyance its action on respondents partial
motion for reconsideration pursuant to its internal rules until the Court has
resolved this appeal.13

Issues
The main issue is whether this action of respondent was already barred by
prescription for bringing it only on March 5, 1992. A related issue concerns the
proper determination of the nature of the cause of action as arising either from a
quasi-delict or a breach of contract.

The Court will not pass upon whether or not Sulpicio Lines, Inc. should also be
held jointly liable with Vector and Soriano for the actual damages claimed.

Ruling

The petition lacks merit.

Vector and Soriano posit that the RTC correctly dismissed respondents
complaint on the ground of prescription. They insist that this action was premised
on a quasi-delict or upon an injury to the rights of the plaintiff, which, pursuant
to Article 1146 of the Civil Code, must be instituted within four years from the
time the cause of action accrued; that because respondents cause of action
accrued on December 20, 1987, the date of the collision, respondent had only
four years, or until December 20, 1991, within which to bring its action, but its
complaint was filed only on March 5, 1992, thereby rendering its action already
barred for being commenced beyond the four-year prescriptive period; 14 and that
there was no showing that respondent had made extrajudicial written demands
upon them for the reimbursement of the insurance proceeds as to interrupt the
running of the prescriptive period.15

We concur with the CAs ruling that respondents action did not yet prescribe.
The legal provision governing this case was not Article 1146 of the Civil Code, 16
but Article 1144 of the Civil Code, which states:

Article 1144. The following actions must be brought within ten years from the
time the cause of action accrues:

(1)Upon a written contract;

(2)Upon an obligation created by law;

(3)Upon a judgment.

We need to clarify, however, that we cannot adopt the CAs characterization of

the cause of action as based on the contract of affreightment between Caltex and
Vector, with the breach of contract being the failure of Vector to make the M/T
Vector seaworthy, as to make this action come under Article 1144 (1), supra.
Instead, we find and hold that that the present action was not upon a written
contract, but upon an obligation created by law. Hence, it came under Article
1144 (2) of the Civil Code. This is because the subrogation of respondent to the
rights of Caltex as the insured was by virtue of the express provision of law
embodied in Article 2207 of the Civil Code, to wit:

Article 2207. If the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury. (Emphasis supplied)

The juridical situation arising under Article 2207 of the Civil Code is well
explained in Pan Malayan Insurance Corporation v. Court of Appeals, 17 as
follows:

Article 2207 of the Civil Code is founded on the well-settled principle of

subrogation.1wphi1 If the insured property is destroyed or damaged through the
fault or negligence of a party other than the assured, then the insurer, upon
payment to the assured, will be subrogated to the rights of the assured to recover
from the wrongdoer to the extent that the insurer has been obligated to pay.
Payment by the insurer to the assured operates as an equitable assignment to the
former of all remedies which the latter may have against the third party whose
negligence or wrongful act caused the loss.1wphi1 The right of subrogation is
not dependent upon, nor does it grow out of, any privity of contract or upon
written assignment of claim. It accrues simply upon payment of the insurance
claim by the insurer [Compania Maritima v. Insurance Company of North
America, G.R. No. L-18965, October 30, 1964, 12 SCRA 213; Firemans Fund
Insurance Company v. Jamilla & Company, Inc., G.R. No. L-27427, April 7,
1976, 70 SCRA 323].18

Verily, the contract of affreightment that Caltex and Vector entered into did not
give rise to the legal obligation of Vector and Soriano to pay the demand for
reimbursement by respondent because it concerned only the agreement for the
transport of Caltexs petroleum cargo. As the Court has aptly put it in Pan
Malayan Insurance Corporation v. Court of Appeals, supra, respondents right of
subrogation pursuant to Article 2207, supra, was "not dependent upon, nor did it
grow out of, any privity of contract or upon written assignment of claim but
accrued simply upon payment of the insurance claim by the insurer."
Considering that the cause of action accrued as of the time respondent actually
indemnified Caltex in the amount of P7,455,421.08 on July 12, 1988,19 the action
was not yet barred by the time of the filing of its complaint on March 5, 1992, 20
which was well within the 10-year period prescribed by Article 1144 of the Civil
Code.

The insistence by Vector and Soriano that the running of the prescriptive period
was not interrupted because of the failure of respondent to serve any extrajudicial
demand was rendered inconsequential by our foregoing finding that respondents
cause of action was not based on a quasi-delict that prescribed in four years from
the date of the collision on December 20, 1987, as the RTC misappreciated, but
on an obligation created by law, for which the law fixed a longer prescriptive
period of ten years from the accrual of the action.

Still, Vector and Soriano assert that respondent had no right of subrogation to
begin with, because the complaint did not allege that respondent had actually
paid Caltex for the loss of the cargo. They further assert that the subrogation
receipt submitted by respondent was inadmissible for not being properly
identified by Ricardo C. Ongpauco, respondents witness, who, although
supposed to identify the subrogation receipt based on his affidavit, was not called
to testify in court; and that respondent presented only one witness in the person
of Teresita Espiritu, who identified Marine Open Policy No. 34-5093-6 issued by
respondent to Caltex.21

We disagree with petitioners assertions. It is undeniable that respondent

preponderantly established its right of subrogation. Its Exhibit C was Marine
Open Policy No. 34-5093-6 that it had issued to Caltex to insure the petroleum
cargo against marine peril.22 Its Exhibit D was the formal written claim of Caltex
for the payment of the insurance coverage of P7,455,421.08 coursed through
respondents adjuster.23 Its Exhibits E to H were marine documents relating to the
perished cargo on board the M/V Vector that were processed for the purpose of
verifying the insurance claim of Caltex.24 Its Exhibit I was the subrogation receipt
dated July 12, 1988 showing that respondent paid Caltex P7,455,421.00 as the
full settlement of Caltexs claim under Marine Open Policy No. 34-5093-6. 25 All
these exhibits were unquestionably duly presented, marked, and admitted during
the trial.26 Specifically, Exhibit C was admitted as an authentic copy of Marine
Open Policy No. 34-5093-6, while Exhibits D, E, F, G, H and I, inclusive, were
admitted as parts of the testimony of respondents witness Efren Villanueva, the
manager for the adjustment service of the Manila Adjusters and Surveyors
Company.27
Consistent with the pertinent law and jurisprudence, therefore, Exhibit I was
already enough by itself to prove the payment of P7,455,421.00 as the full
settlement of Caltexs claim.28 The payment made to Caltex as the insured being
thereby duly documented, respondent became subrogated as a matter of course
pursuant to Article 2207 of the Civil Code. In legal contemplation, subrogation is
the "substitution of another person in the place of the creditor, to whose rights he
succeeds in relation to the debt;" and is "independent of any mere contractual
relations between the parties to be affected by it, and is broad enough to cover
every instance in which one party is required to pay a debt for which another is
primarily answerable, and which in equity and conscience ought to be discharged
by the latter."29

Lastly, Vector and Soriano argue that Caltex waived and abandoned its claim by
not setting up a cross-claim against them in Civil Case No. 18735, the suit that
Sulpicio Lines, Inc. had brought to claim damages for the loss of the M/V Doa
Paz from them, Oriental Assurance Company (as insurer of the M/T Vector), and
Caltex; that such failure to set up its cross- claim on the part of Caltex, the real
party in interest who had suffered the loss, left respondent without any better
right than Caltex, its insured, to recover anything from them, and forever barred
Caltex from asserting any claim against them for the loss of the cargo; and that
respondent was similarly barred from asserting its present claim due to its being
merely the successor-in-interest of Caltex.

The argument of Vector and Soriano would have substance and merit had Civil
Case No. 18735 and this case involved the same parties and litigated the same
rights and obligations. But the two actions were separate from and independent
of each other. Civil Case No. 18735 was instituted by Sulpicio Lines, Inc. to
recover damages for the loss of its M/V Doa Paz. In contrast, this action was
brought by respondent to recover from Vector and Soriano whatever it had paid
to Caltex under its marine insurance policy on the basis of its right of
subrogation. With the clear variance between the two actions, the failure to set up
the cross-claim against them in Civil Case No. 18735 is no reason to bar this
action.

WHEREFORE, the Court DENIES the petition for review on certiorari;

AFFIRMS the decision promulgated on July 22, 2003; and ORDERS petitioners
to pay the costs of suit.

SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice