rapid city realty and development corporation,

Present:
Petitioner,

PUNO, C.J., Chairperson,

CARPIO MORALES,
- versus -
NACHURA,*

CASTRO,

BERSAMIN, and

VILLARAMA, JR., JJ.

ORLANDO VILLA and LOURDES PAEZ-VILLA,[1]

Promulgated:
Respondents.
February 11, 2010

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

G.R. No. 184197

D E C I S I O N

CARPIO MORALES, J.:
Sometime in 2004, Rapid City Realty and Development Corporation (petitioner) filed a complaint
for declaration of nullity of subdivision plans . . . mandamus and damages against several defendants
including Spouses Orlando and Lourdes Villa (respondents). The complaint, which was docketed
at the Regional Trial Court of Antipolo City as Civil Case No. 04-7350, was lodged at Branch
71 thereof.
After one failed attempt at personal service of summons, Gregorio Zapanta (Zapanta), court process
server, resorted to substituted service by serving summons upon respondents househelp who did
not acknowledge receipt thereof and refused to divulge their names. Thus Zapanta stated in the Return
of Summons:
THIS IS TO CERTIFY that on September 24, 2004, the undersigned caused the service of summons
together with a copy of the complaint with its annexes to defendant Spouses Lourdes Estudillo
Paez-Cline and Orlando Villa at their given address at 905 Padre Faura Street, Ermita Manila, as
per information given by two lady househelps who are also residing at the said address, the defendant
spouses are not around at that time. On the 27th of September, 2004, I returned to the same
place to serve the summons. I served the summons and the copy of the complaint with its annexes
to the two ladies (The same lady househelp I met on Sept. 24, 2004) but they refused to sign
to acknowledge receipt and they refused to tell their name as per instruction of the defendants. With
me who can attest to the said incident is Mr. Jun Llanes, who was with me at that time.[2] x x
x (emphasis and underscoring supplied)
Despite substituted service, respondents failed to file their Answer, prompting petitioner to file a Motion
to Declare Defendants[-herein respondents] in Default which the trial court granted by Order of May
3, 2005.
More than eight months thereafter or on January 30, 2006, respondents filed a Motion to Lift Order
of Default,[3] claiming that on January 27, 2006 they officially received all pertinent papers such
as Complaint and Annexes. Motion to Dismiss of the Solicitor General and the ORDER dated May
3, 2005 granting the Motion to Declare [them] in Default. And they denied the existence of two
women helpers who allegedly refused to sign and acknowledge receipt of the summons. In any event,
they contended that assuming that the allegation were true, the helpers had no authority to receive
the documents.[4]
By Order of July 17, 2006, the trial court set aside the Order of Default and gave herein respondents
five days to file their Answer. Respondents just the same did not file an Answer, drawing petitioner
to again file a Motion to declare them in default, which the trial court again granted by Order of
February 21, 2007.
On April 18, 2007, respondents filed an Omnibus Motion for reconsideration of the second order
declaring them in default and to vacate proceedings, this time claiming that the trial court did not
acquire jurisdiction over their persons due to invalid service of summons.
The trial court denied respondents Omnibus Motion by Order of May 22, 2007 and proceeded to
receive ex-parte evidence for petitioner.
Respondents, via certiorari, challenged the trial courts February 21, 2007 and April 18, 2007 Orders
before the Court of Appeals.
In the meantime, the trial court, by Decision of September 4, 2007, rendered judgment in favor
of petitioner.
By Decision of April 29, 2008,[5] the appellate court annulled the trial courts Orders declaring
respondents in default for the second time in this wise:
In assailing the orders of the trial court through their Motion to Lift and later their Omnibus Motion
the petitioners [herein-respondents] never raised any other defense in avoidance of the respondents
[herein petitioners] claim, and instead focused all their energies on questioning the said courts
jurisdiction. The latter motion clearly stated prefatorily their counsels reservation or special appearance
to question jurisdiction over the persons of the petitioners. A party who makes a special appearance
in court challenging the jurisdiction of said court based on the ground of invalid service of summons
is not deemed to have submitted himself to the jurisdiction of the court.[6] (citation omitted; italics,
emphasis and underscoring supplied)
Petitioners motion for reconsideration having been denied by the appellate court by Resolution of
August 12, 2008, it comes to the Court via petition for review on certiorari, arguing in the main
that respondents, in filing the first Motion to Lift the Order of Default, voluntarily submitted themselves
to the jurisdiction of the court.
The petition is impressed with merit.
It is settled that if there is no valid service of summons, the court can still acquire jurisdiction over
the person of the defendant by virtue of the latters voluntary appearance. Thus Section 20 of Rule
14 of the Rules of Court provides:
Sec. 20. Voluntary appearance. The defendants voluntary appearance in the action shall be equivalent
to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of
jurisdiction over the person shall not be deemed a voluntary appearance.
And Philippine Commercial International Bank v. Spouses Wilson Dy Hong Pi and Lolita Dy, et al.
enlightens:
Preliminarily, jurisdiction over the defendant in a civil case is acquired either by the coercive power
of legal processes exerted over his person, or his voluntary appearance in court. As a general
proposition, one who seeks an affirmative relief is deemed to have submitted to the jurisdiction of
the court. It is by reason of this rule that we have had occasion to declare that the filing of motions
to admit answer, for additional time to file answer, for reconsideration of a default judgment, and
to lift order of default with motion for reconsideration, is considered voluntary submission to the courts
jurisdiction. This, however, is tempered by the concept of conditional appearance, such that a party
who makes a special appearance to challenge, among others, the courts jurisdiction over his person
cannot be considered to have submitted to its authority.
Prescinding from the foregoing, it is thus clear that:
5. It would be the height of injustice if the respondents is [sic] denied the equal protection of the
laws[;]
(1) Special appearance operates as an exception to the general rule on voluntary appearance;

6. Respondents must be afforded Due process of Law as enshrined in the New Constitution, which
(2) Accordingly, objections to the jurisdiction of the court over the person of the defendant must is a basic right of every Filipino, since they were not furnished copies of pleadings by the plaintiff
be explicitly made, i.e., set forth in an unequivocal manner; and and the Order dated May 3, 2005;

(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court, especially in x x x x[9]
instances where a pleading or motion seeking affirmative relief is filed and submitted to the court
for resolution.[7] (italics and underscoring supplied)

and accordingly prayed as follows:

In their first Motion to Lift the Order of Default[8] dated January 30, 2006, respondents alleged:

WHEREFORE, . . . it is most respectfully prayed . . . that the Order dated May 5, 2005 declaring
[them] in default be LIFTED.[10]
x x x x

4. In the case of respondents, there is no reason why they should not receive the Orders of this
Honorable Court since the subject of the case is their multi-million real estate property and naturally
they would not want to be declared in default or lose the same outright without the benefit of a
trial on the merits;

Respondents did not, in said motion, allege that their filing thereof was a special appearance for
the purpose only to question the jurisdiction over their persons. Clearly, they had acquiesced to the
jurisdiction of the court.
respondent's motion to dismiss the complaint against her.3 Based on this finding, the Court of Appeals
reversed and set aside the Orders, dated 8 November 20044 and 22 December 2004,5 respectively,
of the Regional Trial Court (RTC) of Manila, Branch 24.
The Facts

WHEREFORE, the petition is GRANTED. The assailed Court of Appeals Decision of April 29, 2008
is REVERSED and SET ASIDE.
Let the original records of Civil Case No. 04-7350 be remanded to the court of origin, Regional
Trial Court of Antipolo City, Branch 71.
On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the issuance
of a writ of preliminary attachment against the spouses Manuel and Lolita Toledo.6 Herein respondent
filed an Answer dated 19 March 1998 but on 7 May 1998, she filed a Motion for Leave to Admit
Amended Answer7 in which she alleged, among others, that her husband and co-defendant, Manuel
Toledo (Manuel), is already dead.8 The death certificate9 of Manuel states "13 July 1995" as
the date of death. As a result, petitioner filed a motion, dated 5 August 1999, to require respondent
to disclose the heirs of Manuel.10 In compliance with the verbal order of the court during the 11
October 1999 hearing of the case, respondent submitted the required names and addresses of the
heirs.11 Petitioner then filed a Motion for Substitution,12 dated 18 January 2000, praying that
Manuel be substituted by his children as party-defendants. It appears that this motion was granted
by the trial court in an Order dated 9 October 2000.13

Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial order containing,
among others, the dates of hearing of the case.14

SO ORDERED. The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its evidence and its
exhibits were thereafter admitted.

BOSTON EQUITY RESOURCES, INC., Petitioner,

vs. On 26 May 2004, the reception of evidence for herein respondent was cancelled upon agreement
of the parties. On 24 September 2004, counsel for herein respondent was given a period of fifteen
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents. days within which to file a demurrer to evidence.15 However, on 7 October 2004, respondent instead
filed a motion to dismiss the complaint, citing the following as grounds: (1) that the complaint failed
to implead an indispensable party or a real party in interest; hence, the case must be dismissed
for failure to state a cause of action; (2) that the trial court did not acquire jurisdiction over the
D E C I S I O N
person of Manuel pursuant to Section 5, Rule 86 of the Revised Rules of Court; (3) that the
trial court erred in ordering the substitution of the deceased Manuel by his heirs; and (4) that the
court must also dismiss the case against Lolita Toledo in accordance with Section 6, Rule 86 of
PEREZ, J.: the Rules of Court.16

Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside: (1) the The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having been
Decision,1 dated 28 February 2006 and (2) the Resolution,2 dated 1 August 2006 of the Court filed out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that: "Within
of Appeals in CA-G.R. SP No. 88586. The challenged decision granted herein respondent's petition the time for but before filing the answer to the complaint or pleading asserting a claim, a motion
for certiorari upon a finding that the trial court committed grave abuse of discretion in denying to dismiss may be made x x x."17 Respondents motion for reconsideration of the order of denial
was likewise denied on the ground that "defendants attack on the jurisdiction of this Court is now
barred by estoppel by laches" since respondent failed to raise the issue despite several chances
to do so.18 Respondents motion to dismiss the complaint should have been granted by public respondent judge
as the same was in order. Considering that the obligation of Manuel S. Toledo is solidary with another
debtor, x x x, the claim x x x should be filed against the estate of Manuel S. Toledo, in conformity
with the provision of Section 6, Rule 86 of the Rules of Court, x x x.20
Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the trial
court seriously erred and gravely abused its discretion in denying her motion to dismiss despite
discovery, during the trial of the case, of evidence that would constitute a ground for dismissal of
the case.19 The Court of Appeals denied petitioners motion for reconsideration. Hence, this petition.

The Court of Appeals granted the petition based on the following grounds: The Issues

It is elementary that courts acquire jurisdiction over the person of the defendant x x x only when Petitioner claims that the Court of Appeals erred in not holding that:
the latter voluntarily appeared or submitted to the court or by coercive process issued by the court
to him, x x x. In this case, it is undisputed that when petitioner Boston filed the complaint on December
24, 1997, defendant Manuel S. Toledo was already dead, x x x. Such being the case, the court 1. Respondent is already estopped from questioning the trial courts jurisdiction;
a quo could not have acquired jurisdiction over the person of defendant Manuel S. Toledo.

2. Petitioner never failed to implead an indispensable party as the estate of Manuel is not an
x x x the court a quos denial of respondents motion to dismiss was based on its finding that indispensable party;
respondents attack on the jurisdiction of the court was already barred by laches as respondent failed
to raise the said ground in its [sic] amended answer and during the pre-trial, despite her active
participation in the proceedings.
3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not warranting the
dismissal of the case before the lower court; and

However, x x x it is well-settled that issue on jurisdiction may be raised at any stage of the proceeding,
even for the first time on appeal. By timely raising the issue on jurisdiction in her motion to dismiss
x x x respondent is not estopped from raising the question on jurisdiction. 4. Since the estate of Manuel is not an indispensable party, it is not necessary that petitioner file
its claim against the estate of Manuel.

Moreover, when issue on jurisdiction was raised by respondent, the court a quo had not yet decided
the case, hence, there is no basis for the court a quo to invoke estoppel to justify its denial of In essence, what is at issue here is the correctness of the trial courts orders denying respondents
the motion for reconsideration; motion to dismiss.

It should be stressed that when the complaint was filed, defendant Manuel S. Toledo was already The Ruling of the Court
dead. The complaint should have impleaded the estate of Manuel S. Toledo as defendant, not only
the wife, considering that the estate of Manuel S. Toledo is an indispensable party, which stands
to be benefited or be injured in the outcome of the case. x x x We find merit in the petition.

x x x x Motion to dismiss filed out of time


To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of respondent.
Well settled is the rule that the special civil action for certiorari is not the proper remedy to assail
the denial by the trial court of a motion to dismiss. The order of the trial court denying a motion
to dismiss is merely interlocutory, as it neither terminates nor finally disposes of a case and still
leaves something to be done by the court before a case is finally decided on the merits.21 Therefore,
"the proper remedy in such a case is to appeal after a decision has been rendered."22
As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher Education:23
A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted
only to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to lack
of jurisdiction. Its function is limited to keeping an inferior court within its jurisdiction and to relieve
persons from arbitrary acts acts which courts or judges have no power or authority in law to perform.
It is not designed to correct erroneous findings and conclusions made by the courts. (Emphasis
supplied)
Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse of
discretion in denying respondents motion to dismiss. It, in fact, acted correctly when it issued the
questioned orders as respondents motion to dismiss was filed SIX YEARS AND FIVE MONTHS
AFTER SHE FILED HER AMENDED ANSWER. This circumstance alone already warranted the
outright dismissal of the motion for having been filed in clear contravention of the express mandate
of Section 1, Rule 16, of the Revised Rules of Court. Under this provision, a motion to dismiss
shall be filed within the time for but before the filing of an answer to the complaint or pleading asserting
a claim.24
More importantly, respondents motion to dismiss was filed after petitioner has completed the
presentation of its evidence in the trial court, giving credence to petitioners and the trial courts
conclusion that the filing of the motion to dismiss was a mere ploy on the part of respondent to
delay the prompt resolution of the case against her.
Also worth mentioning is the fact that respondents motion to dismiss under consideration herein is
not the first motion to dismiss she filed in the trial court. It appears that she had filed an earlier
motion to dismiss26 on the sole ground of the unenforceability of petitioners claim under the Statute
of Frauds, which motion was denied by the trial court. More telling is the following narration of the
trial court in its Order denying respondents motion for reconsideration of the denial of her motion
to dismiss:
As can be gleaned from the records, with the admission of plaintiffs exhibits, reception of defendants
evidence was set on March 31, and April 23, 2004 x x x . On motion of the defendants, the
hearing on March 31, 2004 was cancelled.
On April 14, 2004, defendants sought the issuance of subpoena ad testificandum and duces tecum
to one Gina M. Madulid, to appear and testify for the defendants on April 23, 2004. Reception
of defendants evidence was again deferred to May 26, June 2 and June 30, 2004, x x x.
On May 13, 2004, defendants sought again the issuance of a subpoena duces tecum and ad
testificandum to the said Gina Madulid. On May 26, 2004, reception of defendants [sic] evidence
was cancelled upon the agreement of the parties. On July 28, 2004, in the absence of defendants
witness, hearing was reset to September 24 and October 8, 2004 x x x.
On September 24, 2004, counsel for defendants was given a period of fifteen (15) days to file
a demurrer to evidence. On October 7, 2004, defendants filed instead a Motion to Dismiss x x
x.27
Respondents act of filing multiple motions, such as the first and earlier motion to dismiss and then
the motion to dismiss at issue here, as well as several motions for postponement, lends credibility
to the position taken by petitioner, which is shared by the trial court, that respondent is
deliberately impeding the early disposition of this case. The filing of the second motion to dismiss
was, therefore, "not only improper but also dilatory."28 Thus, the trial court, "far from deviating or
straying off course from established jurisprudence on the matter, x x x had in fact faithfully observed
the law and legal precedents in this case."29 The Court of Appeals, therefore, erred not only in
entertaining respondents petition for certiorari, it likewise erred in ruling that the trial court committed
grave abuse of discretion when it denied respondents motion to dismiss.
On whether or not respondent is estopped from
questioning the jurisdiction of the trial court
At the outset, it must be here stated that, as the succeeding discussions will demonstrate, jurisdiction
over the person of Manuel should not be an issue in this case. A protracted discourse on jurisdiction
is, nevertheless, demanded by the fact that jurisdiction has been raised as an issue from the lower
court, to the Court of Appeals and, finally, before this Court. For the sake of clarity, and in order
to finally settle the controversy and fully dispose of all the issues in this case, it was deemed imperative
to resolve the issue of jurisdiction.
1. Aspects of Jurisdiction
Petitioner calls attention to the fact that respondents motion to dismiss questioning the trial courts
jurisdiction was filed more than six years after her amended answer was filed. According to petitioner,
respondent had several opportunities, at various stages of the proceedings, to assail the trial courts
jurisdiction but never did so for six straight years. Citing the doctrine laid down in the case of Tijam,
et al. v. Sibonghanoy, et al.30 petitioner claimed that respondents failure to raise the question of
jurisdiction at an earlier stage bars her from later questioning it, especially since she actively
participated in the proceedings conducted by the trial court.
Petitioners argument is misplaced, in that, it failed to consider that the concept of jurisdiction has
several aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the parties;
(3) jurisdiction over the issues of the case; and (4) in cases involving property, jurisdiction over
the res or the thing which is the subject of the litigation.31
The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by laches
is jurisdiction over the subject matter. Thus, in Tijam, the case relied upon by petitioner, the issue
involved was the authority of the then Court of First Instance to hear a case for the collection of
a sum of money in the amount of P1,908.00 which amount was, at that time, within the exclusive
original jurisdiction of the municipal courts.
In subsequent cases citing the ruling of the Court in Tijam, what was likewise at issue was the
jurisdiction of the trial court over the subject matter of the case. Accordingly, in Spouses Gonzaga
v. Court of Appeals,32 the issue for consideration was the authority of the regional trial court to
hear and decide an action for reformation of contract and damages involving a subdivision lot, it
being argued therein that jurisdiction is vested in the Housing and Land Use Regulatory Board pursuant
to PD 957 (The Subdivision and Condominium Buyers Protective Decree). In Lee v. Presiding Judge,
MTC, Legaspi City,33 petitioners argued that the respondent municipal trial court had no jurisdiction
over the complaint for ejectment because the issue of ownership was raised in the pleadings. Finally,
in People v. Casuga,34 accused-appellant claimed that the crime of grave slander, of which she
was charged, falls within the concurrent jurisdiction of municipal courts or city courts and the then
courts of first instance, and that the judgment of the court of first instance, to which she had appealed
the municipal court's conviction, should be deemed null and void for want of jurisdiction as her appeal
should have been filed with the Court of Appeals or the Supreme Court.
In all of these cases, the Supreme Court barred the attack on the jurisdiction of the respective courts
concerned over the subject matter of the case based on estoppel by laches, declaring that parties
cannot be allowed to belatedly adopt an inconsistent posture by attacking the jurisdiction of a court
to which they submitted their cause voluntarily.35
Here, what respondent was questioning in her motion to dismiss before the trial court was that courts
jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel by laches finds no
application in this case. Instead, the principles relating to jurisdiction over the person of the parties
are pertinent herein.
The Rules of Court provide:
RULE 9
EFFECT OF FAILURE TO PLEAD
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.
RULE 15
MOTIONS
Sec. 8. Omnibus motion. Subject to the provisions of Section 1 of Rule 9, a motion attacking
a pleading, order, judgment, or proceeding shall include all objections then available, and all objections
not so included shall be deemed waived.
Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived even
if not alleged in a motion to dismiss or the answer is lack of jurisdiction over the subject matter.
x x x Lack of jurisdiction over the subject matter can always be raised anytime, even for the first
time on appeal, since jurisdictional issues cannot be waived x x x subject, however, to the principle
of estoppel by laches."36
Since the defense of lack of jurisdiction over the person of a party to a case is not one of those
defenses which are not deemed waived under Section 1 of Rule 9, such defense must be invoked
when an answer or a motion to dismiss is filed in order to prevent a waiver of the defense.37
If the objection is not raised either in a motion to dismiss or in the answer, the objection to the
jurisdiction over the person of the plaintiff or the defendant is deemed waived by virtue of the first
sentence of the above-quoted Section 1 of Rule 9 of the Rules of Court.38

The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its questioned
decision, stating that "issue on jurisdiction may be raised at any stage of the proceeding, even for
the first time on appeal" and that, therefore, respondent timely raised the issue in her motion to
dismiss and is, consequently, not estopped from raising the question of jurisdiction. As the question
of jurisdiction involved here is that over the person of the defendant Manuel, the same is deemed
waived if not raised in the answer or a motion to dismiss. In any case, respondent cannot claim
the defense since "lack of jurisdiction over the person, being subject to waiver, is a personal defense
which can only be asserted by the party who can thereby waive it by silence."39
2. Jurisdiction over the person of a defendant is acquired through a valid service of summons; trial
court did not acquire jurisdiction over the person of Manuel Toledo
In the first place, jurisdiction over the person of Manuel was never acquired by the trial court. A
defendant is informed of a case against him when he receives summons. "Summons is a writ by
which the defendant is notified of the action brought against him. Service of such writ is the means
by which the court acquires jurisdiction over his person."40
all the defendants and the claim should be filed against the estate of the deceased defendant. The
petitioner in Sarsaba, therefore, prayed that the complaint be dismissed, not only against Sereno,
but as to all the defendants, considering that the RTC did not acquire jurisdiction over the person
of Sereno.42 This is exactly the same prayer made by respondent herein in her motion to dismiss.
The Court, in the Sarsaba Case, resolved the issue in this wise:
x x x We cannot countenance petitioners argument that the complaint against the other defendants
should have been dismissed, considering that the RTC never acquired jurisdiction over the person
of Sereno. The courts failure to acquire jurisdiction over ones person is a defense which is personal
to the person claiming it. Obviously, it is now impossible for Sereno to invoke the same in view
of his death. Neither can petitioner invoke such ground, on behalf of Sereno, so as to reap the
benefit of having the case dismissed against all of the defendants. Failure to serve summons on
Serenos person will not be a cause for the dismissal of the complaint against the other defendants,
considering that they have been served with copies of the summons and complaints and have long
submitted their respective responsive pleadings. In fact, the other defendants in the complaint were
given the chance to raise all possible defenses and objections personal to them in their respective
motions to dismiss and their subsequent answers.43 (Emphasis supplied.)

In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since there Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against Sereno
was no valid service of summons upon him, precisely because he was already dead even before only.
the complaint against him and his wife was filed in the trial court. The issues presented in this case
are similar to those in the case of Sarsaba v. Vda. de Te.41
Based on the foregoing pronouncements, there is no basis for dismissing the complaint against
respondent herein. Thus, as already emphasized above, the trial court correctly denied her motion
In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally dismissed to dismiss.
from employment and ordering the payment of his monetary claims. To satisfy the claim, a truck
in the possession of Serenos employer was levied upon by a sheriff of the NLRC, accompanied
by Sereno and his lawyer, Rogelio Sarsaba, the petitioner in that case. A complaint for recovery
of motor vehicle and damages, with prayer for the delivery of the truck pendente lite was eventually On whether or not the estate of Manuel
filed against Sarsaba, Sereno, the NLRC sheriff and the NLRC by the registered owner of the truck.
After his motion to dismiss was denied by the trial court, petitioner Sarsaba filed his answer. Later
on, however, he filed an omnibus motion to dismiss citing, as one of the grounds, lack of jurisdiction Toledo is an indispensable party
over one of the principal defendants, in view of the fact that Sereno was already dead when the
complaint for recovery of possession was filed.
Rule 3, Section 7 of the 1997 Rules of Court states:

Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of the
issues submitted for resolution in both cases is similar: whether or not a case, where one of the
named defendants was already dead at the time of its filing, should be dismissed so that the claim SEC. 7. Compulsory joinder of indispensable parties. Parties-in-interest without whom no final
may be pursued instead in the proceedings for the settlement of the estate of the deceased defendant. determination can be had of an action shall be joined either as plaintiffs or defendants.
The petitioner in the Sarsaba Case claimed, as did respondent herein, that since one of the defendants
died before summons was served on him, the trial court should have dismissed the complaint against
An indispensable party is one who has such an interest in the controversy or subject matter of a
case that a final adjudication cannot be made in his or her absence, without injuring or affecting
that interest. He or she is a party who has not only an interest in the subject matter of the controversy,
but "an interest of such nature that a final decree cannot be made without affecting that interest
or leaving the controversy in such a condition that its final determination may be wholly inconsistent
with equity and good conscience. It has also been considered that an indispensable party is a person
in whose absence there cannot be a determination between the parties already before the court which
is effective, complete or equitable." Further, an indispensable party is one who must be included
in an action before it may properly proceed.44
On the other hand, a "person is not an indispensable party if his interest in the controversy or subject
matter is separable from the interest of the other parties, so that it will not necessarily be directly
or injuriously affected by a decree which does complete justice between them. Also, a person is
not an indispensable party if his presence would merely permit complete relief between him or her
and those already parties to the action, or if he or she has no interest in the subject matter of
the action." It is not a sufficient reason to declare a person to be an indispensable party simply
because his or her presence will avoid multiple litigations.45
Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel is
not an indispensable party to the collection case, for the simple reason that the obligation of Manuel
and his wife, respondent herein, is solidary.
The contract between petitioner, on the one hand and respondent and respondents husband, on
the other, states:
FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise to pay BOSTON
EQUITY RESOURCES, INC. x x x the sum of PESOS: [ONE MILLION FOUR HUNDRED
(P1,400,000.00)] x x x.47
The provisions and stipulations of the contract were then followed by the respective signatures of
respondent as "MAKER" and her husband as "CO-MAKER."48 Thus, pursuant to Article 1216
of the Civil Code, petitioner may collect the entire amount of the obligation from respondent only.
The aforementioned provision states: "The creditor may proceed against any one of the solidary
debtors or some or all of them simultaneously. The demand made against one of them shall not
be an obstacle to those which may subsequently be directed against the others, so long as the
debt has not been fully collected."
In other words, the collection case can proceed and the demands of petitioner can be satisfied by
respondent only, even without impleading the estate of Manuel. Consequently, the estate of Manuel
is not an indispensable party to petitioners complaint for sum of money.
However, the Court of Appeals, agreeing with the contention of respondent, held that the claim of
petitioner should have been filed against the estate of Manuel in accordance with Sections 5 and
6 of Rule 86 of the Rules of Court. The aforementioned provisions provide:
SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims
for money against the decedent, arising from contract, express or implied, whether the same be due,
not due, or contingent, all claims for funeral expenses and judgment for money against the decedent,
must be filed within the time limited in the notice; otherwise, they are barred forever, except that
they may be set forth as counterclaims in any action that the executor or administrator may bring
against the claimants. x x x.
SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with another
debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice
to the right of the estate to recover contribution from the other debtor. x x x.
The Court of Appeals erred in its interpretation of the above-quoted provisions.
In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86
of the Revised Rules of Court, which latter provision has been retained in the present Rules of Court
without any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v. Villarama,
et. al.,49 held:50
Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was
taken, this Court held that where two persons are bound in solidum for the same debt and one
of them dies, the whole indebtedness can be proved against the estate of the latter, the decedents
liability being absolute and primary; x x x. It is evident from the foregoing that Section 6 of Rule
87 provides the procedure should the creditor desire to go against the deceased debtor, but there
is certainly nothing in the said provision making compliance with such procedure a condition precedent
before an ordinary action against the surviving solidary debtors, should the creditor choose to demand
payment from the latter, could be entertained to the extent that failure to observe the same would
deprive the court jurisdiction to take cognizance of the action against the surviving debtors. Upon
the other hand, the Civil Code expressly allows the creditor to proceed against any one of the solidary
debtors or some or all of them simultaneously. There is, therefore, nothing improper in the creditors
filing of an action against the surviving solidary debtors alone, instead of instituting a proceeding
for the settlement of the estate of the deceased debtor wherein his claim could be filed.

The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank v.
Asuncion51 where the Supreme Court pronounced:
A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein
prevents a creditor from proceeding against the surviving solidary debtors. Said provision merely sets
up the procedure in enforcing collection in case a creditor chooses to pursue his claim against the
estate of the deceased solidary debtor. The rule has been set forth that a creditor (in a solidary
obligation) has the option whether to file or not to file a claim against the estate of the solidary
debtor. x x x
x x x x
It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter.
Said provision gives the creditor the right to "proceed against anyone of the solidary debtors or some
or all of them simultaneously." The choice is undoubtedly left to the solidary creditor to determine
against whom he will enforce collection. In case of the death of one of the solidary debtors, he
(the creditor) may, if he so chooses, proceed against the surviving solidary debtors without necessity
of filing a claim in the estate of the deceased debtors. It is not mandatory for him to have the case
dismissed as against the surviving debtors and file its claim against the estate of the deceased solidary
debtor, x x x. For to require the creditor to proceed against the estate, making it a condition precedent
for any collection action against the surviving debtors to prosper, would deprive him of his substantive
rightsprovided by Article 1216 of the New Civil Code. (Emphasis supplied.)
As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied
literally, Article 1216 of the New Civil Code would, in effect, be repealed since under the Rules
of Court, petitioner has no choice but to proceed against the estate of [the deceased debtor] only.
Obviously, this provision diminishes the [creditors] right under the New Civil Code to proceed against
any one, some or all of the solidary debtors. Such a construction is not sanctioned by principle,
which is too well settled to require citation, that a substantive law cannot be amended by a procedural
rule. Otherwise stated, Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail
over Article 1216 of the New Civil Code, the former being merely procedural, while the latter,
substantive.
Based on the foregoing, the estate of Manuel is not an indispensable party and the case can proceed
as against respondent only. That petitioner opted to collect from respondent and not from the estate
of Manuel is evidenced by its opposition to respondents motion to dismiss asserting that the case,
as against her, should be dismissed so that petitioner can proceed against the estate of Manuel.
On whether or not the inclusion of Manuel as
party defendant is a misjoinder of party
Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder nor non-joinder of parties
is ground for dismissal of an action. Parties may be dropped or added by order of the court on
motion of any party or on its own initiative at any stage of the action and on such terms as are
just. Any claim against a misjoined party may be severed and proceeded with separately."
Based on the last sentence of the afore-quoted provision of law, a misjoined party must have the
capacity to sue or be sued in the event that the claim by or against the misjoined party is pursued
in a separate case. In this case, therefore, the inclusion of Manuel in the complaint cannot be
considered a misjoinder, as in fact, the action would have proceeded against him had he been alive
at the time the collection case was filed by petitioner. This being the case, the remedy provided
by Section 11 of Rule 3 does not obtain here. The name of Manuel as party-defendant cannot
simply be dropped from the case. Instead, the procedure taken by the Court in Sarsaba v. Vda.
de Te,52 whose facts, as mentioned earlier, resemble those of this case, should be followed herein.
There, the Supreme Court agreed with the trial court when it resolved the issue of jurisdiction over
the person of the deceased Sereno in this wise:
As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the person
of Patricio Sereno since there was indeed no valid service of summons insofar as Patricio Sereno
is concerned. Patricio Sereno died before the summons, together with a copy of the complaint and
its annexes, could be served upon him.
However, the failure to effect service of summons unto Patricio Sereno, one of the defendants herein,
does not render the action DISMISSIBLE, considering that the three (3) other defendants, x x x,
were validly served with summons and the case with respect to the answering defendants may still
proceed independently. Be it recalled that the three (3) answering defendants have previously filed
a Motion to Dismiss the Complaint which was denied by the Court.
Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as
a claim against the estate of Patricio Sereno, but the case with respect to the three (3) other
accused [sic] will proceed. (Emphasis supplied.)53
As a result, the case, as against Manuel, must be dismissed.
In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule 3
of the Rules of Court, which states that: only natural or juridical persons, or entities authorized by
law may be parties in a civil action." Applying this provision of law, the Court, in the case of Ventura
v. Militante,54 held:
Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of
justice, the plaintiff must have an actual legal existence, that is, he, she or it must be a person
in law and possessed of a legal entity as either a natural or an artificial person, and no suit can
be lawfully prosecuted save in the name of such a person.
The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes
a judicial proceeding, to name the proper party defendant to his cause of action. In a suit or proceeding
in personam of an adversary character, the court can acquire no jurisdiction for the purpose of trial
or judgment until a party defendant who actually or legally exists and is legally capable of being
sued, is brought before it. It has even been held that the question of the legal personality of a
party defendant is a question of substance going to the jurisdiction of the court and not one of
procedure.
The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving
spouse Ms. Sulpicia Ventura" as the defendant.1wphi1 Petitioner moved to dismiss the same on
the ground that the defendant as named in the complaint had no legal personality. We agree.
x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same
extent, a decedent does not have the capacity to be sued and may not be named a party defendant
in a court action. (Emphases supplied.)
Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized by
law, the complaint may be dismissed on the ground that the pleading asserting the claim states no
cause of action or for failure to state a cause of action pursuant to Section 1(g) of Rule 16 of
the Rules of Court, because a complaint cannot possibly state a cause of action against one who
cannot be a party to a civil action.55
Since the proper course of action against the wrongful inclusion of Manuel as party-defendant is
the dismissal of the case as against him, thus did the trial court err when it ordered the substitution
of Manuel by his heirs. Substitution is proper only where the party to be substituted died during
the pendency of the case, as expressly provided for by Section 16, Rule 3 of the Rules of Court,
which states:
Death of party;duty of counsel. Whenever a party to a pending action dies, and the claim is not
thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days
after such death of the fact thereof, and to give the name and address of his legal representative
or representatives. x x x
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring
the appointment of an executor or administrator x x x.
The court shall forthwith order said legal representative or representatives to appear and be substituted
within a period of thirty (30) days from notice. (Emphasis supplied.)
Here, since Manuel was already dead at the time of the filing of the complaint, the court never
acquired jurisdiction over his person and, in effect, there was no party to be substituted.
WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006 and the Resolution
dated 1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586 are REVERSED and
SET ASIDE. The Orders of the Regional Trial Court dated 8 November 2004 and 22 December
2004, respectively, in Civil Case No. 97-86672, are REINSTATED. The Regional Trial Court,
Branch 24, Manila is hereby DIRECTED to proceed with the trial of Civil Case No. 97-86672
against respondent Lolita G. Toledo only, in accordance with the above pronouncements of the Court,
and to decide the case with dispatch.
SO ORDERED.
PHILIPPINE COCONUT, PRODUCERS FEDERATION, INC. (COCOFED), MANUEL V. DEL
ROSARIO, DOMINGO P. ESPINA, SALVADOR P. BALLARES, JOSELITO A. MORALEDA, PAZ
M. YASON, VICENTE A. CADIZ, CESARIA DE LUNA TITULAR, and RAYMUNDO C. DE VILLA,
Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent,
WIGBERTO E. TAADA, OSCAR F. SANTOS, SURIGAO DEL SUR FEDERATION OF
AGRICULTURAL COOPERATIVES (SUFAC) and MORO FARMERS ASSOCIATION OF
ZAMBOANGA DEL SUR (MOFAZS), represented by ROMEO C. ROYANDOYAN, Intervenors.
x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 178193
DANILO S. URSUA, Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent,
D E C I S I O N
VELASCO, JR., J.:
The Case
Cast against a similar backdrop, these consolidated petitions for review under Rule 45 of the Rules
of Court assail and seek to annul certain issuances of the Sandiganbayan in its Civil Case No.
0033-A entitled, "Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al.,
Defendants, COCOFED, et al., BALLARES, et al., Class Action Movants," and Civil Case No.
0033-F entitled, "Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al.,
Defendants." Civil Case (CC) Nos. 0033-A and 0033-F are the results of the splitting into eight
(8) amended complaints of CC No. 0033 entitled, "Republic of the Philippines v. Eduardo
Cojuangco, Jr., et al.," a suit for recovery of ill-gotten wealth commenced by the Presidential
Commission on Good Government (PCGG), for the Republic of the Philippines (Republic), against
Ferdinand E. Marcos and several individuals, among them, Ma. Clara Lobregat (Lobregat) and
petitioner Danilo S. Ursua (Ursua). Lobregat and Ursua occupied, at one time or another, directorial
or top management positions in either the Philippine Coconut Producers Federation, Inc. (COCOFED)
or the Philippine Coconut Authority (PCA), or both.1 Each of the eight (8) subdivided complaints
correspondingly impleaded as defendants only the alleged participants in the transaction/s subject
of the suit, or who are averred as owner/s of the assets involved.
The original complaint, CC No. 0033, as later amended to make the allegations more specific, is
described in Republic v. Sandiganbayan2 (one of several ill-gotten suits of the same title disposed
of by the Court) as revolving around the provisional take over by the PCGG of COCOFED, Cocomark,
and Coconut Investment Company and their assets and the sequestration of shares of stock in United
Coconut Planters Bank (UCPB) allegedly owned by, among others, over a million coconut farmers,
and the six (6) Coconut Industry Investment Fund (CIIF) corporations,3 referred to in some
pleadings as CIIF oil mills and the fourteen (14) CIIF holding companies4 (hereafter collectively
called "CIIF companies"), so-called for having been either organized, acquired and/or funded as
UCPB subsidiaries with the use of the CIIF levy. The basic complaint also contained allegations
about the alleged misuse of the coconut levy funds to buy out the majority of the outstanding shares
of stock of San Miguel Corporation (SMC).
More particularly, in G.R. Nos. 177857-58, class action petitioners COCOFED and a group of
purported coconut farmers and COCOFED members (hereinafter "COCOFED et al." collectively)5
seek the reversal of the following judgments and resolutions of the anti-graft court insofar as these
issuances are adverse to their interests:
1) Partial Summary Judgment6 dated July 11, 2003, as reiterated in a resolution7 of December
28, 2004, denying COCOFEDs motion for reconsideration, and the May 11, 2007 resolution
denying COCOFEDs motion to set case for trial and declaring the partial summary judgment final
and appealable,8 all issued in Civil Case No. 0033-A; and
2) Partial Summary Judgment9 dated May 7, 2004, as also reiterated in a resolution10 of
December 28, 2004, and the May 11, 2007 resolution11 issued in Civil Case No. 0033-F. The
December 28, 2004 resolution denied COCOFEDs Class Action Omnibus Motion therein praying
to dismiss CC Case No. 0033-F on jurisdictional ground and alternatively, reconsideration and to
set case for trial. The May 11, 2007 resolution declared the judgment final and appealable.
For convenience, the partial summary judgment (PSJ) rendered on July 11, 2003 in CC No.
0033-A shall hereinafter be referred to as PSJ-A, and that issued on May 7, 2004 in CC 0033-F,
as PSJ-F. PSJ-A and PSJ-F basically granted the Republics separate motions for summary
judgment.
On June 5, 2007, the court a quo issued a Resolution in CC No. 0033-A, which modified PSJ-A
by ruling that no further trial is needed on the issue of ownership of the subject properties. Likewise,
on May 11, 2007, the said court issued a Resolution in CC No. 0033-F amending PSJ-F in
like manner.
On the other hand, petitioner Ursua, in G.R. No. 178193, limits his petition for review on PSJ-A
to the extent that it negates his claims over shares of stock in UCPB.
Taada, et al. have intervened12 in G.R. Nos. 177857-58 in support of the governments case.
Another petition was filed and docketed as G.R. No. 180705. It involves questions relating to
Eduardo M. Cojuangco, Jr.s (Cojuangco, Jr.s) ownership of the UCPB shares, which he allegedly
received as option shares, and which is one of the issues raised in PSJ-A.13 G.R. No. 180705
was consolidated with G.R. Nos. 177857-58 and 178193. On September 28, 2011, respondent
Republic filed a Motion to Resolve G.R. Nos. 177857-58 and 178193.14 On January 17, 2012,
the Court issued a Resolution deconsolidating G.R. Nos. 177857-58 and 178193 from G.R. No.
180705. This Decision is therefore separate and distinct from the decision to be rendered in G.R.
No. 180705.
The Facts
The relevant facts, as culled from the records and as gathered from Decisions of the Court in a
batch of coco levy and illegal wealth cases, are:
In 1971, Republic Act No. (R.A.) 6260 was enacted creating the Coconut Investment Company
(CIC) to administer the Coconut Investment Fund (CIF), which, under Section 815 thereof, was
to be sourced from a PhP 0.55 levy on the sale of every 100 kg. of copra. Of the PhP 0.55
levy of which the copra seller was, or ought to be, issued COCOFUND receipts, PhP 0.02 was
placed at the disposition of COCOFED, the national association of coconut producers declared by
the Philippine Coconut Administration (PHILCOA, now PCA16 ) as having the largest
membership.17
The declaration of martial law in September 1972 saw the issuance of several presidential decrees
("P.Ds.") purportedly designed to improve the coconut industry through the collection and use of
the coconut levy fund. While coming generally from impositions on the first sale of copra, the coconut
levy fund came under various names, the different establishing laws and the stated ostensible purpose
for the exaction explaining the differing denominations. Charged with the duty of collecting and
administering the Fund was PCA.18 Like COCOFED with which it had a legal linkage,19 the PCA,
by statutory provisions scattered in different coco levy decrees, had its share of the coco levy.20
The following were some of the issuances on the coco levy, its collection and utilization, how the
proceeds of the levy will be managed and by whom, and the purpose it was supposed to serve:
1. P.D. No. 276 established the Coconut Consumers Stabilization Fund (CCSF) and declared the
proceeds of the CCSF levy as trust fund,21 to be utilized to subsidize the sale of coconut-based
products, thus stabilizing the price of edible oil.22
2. P.D. No. 582 created the Coconut Industry Development Fund (CIDF) to finance the operation
of a hybrid coconut seed farm.
3. Then came P.D. No. 755 providing under its Section 1 the following:
It is hereby declared that the policy of the State is to provide readily available credit facilities to
the coconut farmers at a preferential rates; that this policy can be expeditiously and efficiently realized
by the implementation of the "Agreement for the Acquisition of a Commercial Bank for the benefit
of Coconut Farmers" executed by the [PCA]; and that the [PCA] is hereby authorized to distribute,
for free, the shares of stock of the bank it acquired to the coconut farmers.
Towards achieving the policy thus declared, P.D. No. 755, under its Section 2, authorized PCA
to utilize the CCSF and the CIDF collections to acquire a commercial bank and deposit the CCSF
levy collections in said bank, interest free, the deposit withdrawable only when the bank has attained
a certain level of sufficiency in its equity capital. The same section also decreed that all levies PCA
is authorized to collect shall not be considered as special and/or fiduciary funds or form part of
the general funds of the government within the contemplation of P.D. No. 711.23
4. P.D. No. 961 codified the various laws relating to the development of coconut/palm oil industries.
5. The relevant provisions of P.D. No. 961, as later amended by P.D. No. 1468 (Revised Coconut
Industry Code), read:
ARTICLE III
Levies
Section 1. Coconut Consumers Stabilization Fund Levy. The [PCA] is hereby empowered to impose
and collect the Coconut Consumers Stabilization Fund Levy .
.
Section 5. Exemption. The [CCSF] and the [CIDF] as well as all disbursements as herein
authorized, shall not be construed as special and/or fiduciary funds, or as part of the general
funds of the national government within the contemplation of PD 711; the intention being that
said Fund and the disbursements thereof as herein authorized for the benefit of the coconut farmers
shall be owned by them in their private capacities: . (Emphasis supplied.)
6. Letter of Instructions No. (LOI) 926, Series of 1979, made reference to the creation, out of
other coco levy funds, of the Coconut Industry Investment Fund (CIIF) in P.D. No. 1468 and
entrusted a portion of the CIIF levy to UCPB for investment, on behalf of coconut farmers, in oil
mills and other private corporations, with the following equity ownership structure:24
Section 2. Organization of the Cooperative Endeavor. The [UCPB], in its capacity as the investment
arm of the coconut farmers thru the [CIIF] is hereby directed to invest, on behalf of the coconut
farmers, such portion of the CIIF in private corporations under the following guidelines:
a) The coconut farmers shall own or control at least (50%) of the outstanding voting capital
stock of the private corporation [acquired] thru the CIIF and/or corporation owned or controlled by
the farmers thru the CIIF . (Words in bracket added.)
Through the years, a part of the coconut levy funds went directly or indirectly to various projects
and/or was converted into different assets or investments.25 Of particular relevance to this case
was their use to acquire the First United Bank (FUB), later renamed UCPB, and the acquisition
by UCPB, through the CIIF companies, of a large block of SMC shares. 26
Apropos the intended acquisition of a commercial bank for the purpose stated earlier, it would appear
that FUB was the bank of choice which the Pedro Cojuangco group (collectively, "Pedro Cojuangco")
had control of. The plan, then, was for PCA to buy all of Pedro Cojuangcos shares in FUB. However,
as later events unfolded, a simple direct sale from the seller (Pedro) to PCA did not ensue as
it was made to appear that Cojuangco, Jr. had the exclusive option to acquire the formers FUB
controlling interests. Emerging from this elaborate, circuitous arrangement were two deeds; the first,
simply denominated as Agreement,27 dated May 1975,28 entered into by and between Cojuangco,
Jr., for and in his behalf and in behalf of "certain other buyers," and Pedro Cojuangco, purportedly
accorded Cojuangco, Jr. the option to buy 72.2% of FUBs outstanding capital stock, or 137,866
shares (the "option shares," for brevity), at PhP 200 per share.
The second but related contract, dated May 25, 1975, was denominated as Agreement for the
Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the Philippines.29 It
had PCA,30 for itself and for the benefit of the coconut farmers, purchase from Cojuangco, Jr. the
shares of stock subject of the First Agreement for PhP 200 per share. As additional consideration
for PCAs buy-out of what Cojuangco, Jr. would later claim to be his exclusive and personal option,31
it was stipulated that, from PCA, Cojuangco, Jr. shall receive equity in FUB amounting to 10%,
or 7.22%, of the 72.2%, or fully paid shares.
Apart from the aforementioned 72.2%, PCA purchased from other FUB shareholders 6,534 shares.
While the 64.98% portion of the option shares (72.2% 7.22% = 64.98%) ostensibly pertained
to the farmers, the corresponding stock certificates supposedly representing the farmers equity were
in the name of and delivered to PCA.32 There were, however, shares forming part of the aforesaid
64.98% portion, which ended up in the hands of non-farmers.33 The remaining 27.8% of the FUB
capital stock were not covered by any of the agreements.
Under paragraph 8 of the second agreement, PCA agreed to expeditiously distribute the FUB shares
purchased to such "coconut farmers holding registered COCOFUND receipts" on equitable basis.
As found by the Sandiganbayan, the PCA appropriated, out of its own fund, an amount for the
purchase of the said 72.2% equity, albeit it would later reimburse itself from the coconut levy fund.34
As of June 30, 1975, the list of FUB stockholders shows PCA with 129,955 shares.35
Shortly after the execution of the PCA Cojuangco, Jr. Agreement, President Marcos issued, on
July 29, 1975, P.D. No. 755 directing, as earlier narrated, PCA to use the CCSF and CIDF to
acquire a commercial bank to provide coco farmers with "readily available credit facilities at preferential
rate," and PCA "to distribute, for free," the bank shares to coconut farmers.
Then came the 1986 EDSA event. One of the priorities of then President Corazon C. Aquinos
revolutionary government was the recovery of ill-gotten wealth reportedly amassed by the Marcos
family and close relatives, their nominees and associates. Apropos thereto, she issued Executive
Order Nos. (E.Os.) 1, 2 and 14, as amended by E.O. 14-A, all Series of 1986. E.O. 1 created
the PCGG and provided it with the tools and processes it may avail of in the recovery efforts;36
E.O. No. 2 asserted that the ill-gotten assets and properties come in the form of shares of stocks,
etc.; while E.O. No. 14 conferred on the Sandiganbayan exclusive and original jurisdiction over
ill-gotten wealth cases, with the proviso that "technical rules of procedure and evidence shall not
be applied strictly" to the civil cases filed under the E.O. Pursuant to these issuances, the PCGG
issued numerous orders of sequestration, among which were those handed out, as earlier mentioned,
against shares of stock in UCPB purportedly owned by or registered in the names of (a) more
than a million coconut farmers and (b) the CIIF companies, including the SMC shares held by the
CIIF companies. On July 31, 1987, the PCGG instituted before the Sandiganbayan a recovery suit
docketed thereat as CC No. 0033.
After the filing and subsequent amendments of the complaint in CC 0033, Lobregat, COCOFED
et al., and Ballares et al., purportedly representing over a million coconut farmers, sought and were
allowed to intervene.37 Meanwhile, the following incidents/events transpired:

1. On the postulate, inter alia, that its coco-farmer members own at least 51% of the outstanding
capital stock of UCPB, the CIIF companies, etc., COCOFED et al., on November 29, 1989, filed
Class Action Omnibus Motion praying for the lifting of the orders of sequestration referred to above
and for a chance to present evidence to prove the coconut farmers ownership of the UCPB and
CIIF shares. The plea to present evidence was denied;
2. Later, the Republic moved for and secured approval of a motion for separate trial which paved
the way for the subdivision of the causes of action in CC 0033, each detailing how the assets
subject thereof were acquired and the key roles the principal played;
3. Civil Case 0033, pursuant to an order of the Sandiganbayan would be subdivided into eight
complaints, docketed as CC 0033-A to CC 0033-H.38
Lobregat, Ballares et al., COCOFED, et al., on the strength of their authority to intervene in CC
0033, continued to participate in CC 0033-A where one of the issues raised was the misuse of
the names/identities of the over a million coconut farmers;39
4. On February 23, 2001, Lobregat, COCOFED, Ballares et al., filed a Class Action Omnibus Motion
to enjoin the PCGG from voting the sequestered UCPB shares and the SMC shares registered in
the names of the CIIF companies. The Sandiganbayan, by Order of February 28, 2001, granted
the motion, sending the Republic to come to this Court on certiorari, docketed as G.R. Nos.
147062-64, to annul said order; and
5. By Decision of December 14, 2001, in G.R. Nos. 147062-64 (Republic v. COCOFED), 40
the Court declared the coco levy funds as prima facie public funds. And purchased as the sequestered
UCPB shares were by such funds, beneficial ownership thereon and the corollary voting rights prima
facie pertain, according to the Court, to the government.
The instant proceedings revolve around CC 0033-A (Re: Anomalous Purchase and Use of [FUB]
now [UCPB])41 and CC 0033-F (Re: Acquisition of San Miguel Corporation Shares of Stock),
the first case pivoting mainly on the series of transactions culminating in the alleged anomalous
purchase of 72.2% of FUBs outstanding capital stock and the transfer by PCA of a portion thereof
to private individuals. COCOFED, et al. and Ballares, et al. participated in CC No. 0033-A as class
action movants.
Petitioners COCOFED et al.42 and Ursua43 narrate in their petitions how the farmers UCPB shares
in question ended up in the possession of those as hereunder indicated:
1) The farmers UCPB shares were originally registered in the name of PCA for the eventual free
distribution thereof to and registration in the individual names of the coconut farmers in accordance
with PD 755 and the IRR that PCA shall issue;
2) Pursuant to the stock distribution procedures set out in PCA Administrative Order No. 1, s. of
1975, (PCA AO 1),44 farmers who had paid to the CIF under RA 6260 and registered their
COCOFUND (CIF) receipts with PCA were given their corresponding UCPB stock certificates. As
of June 1976, the cut-off date for the extended registration, only 16 million worth of COCOFUND
receipts were registered, leaving over 50 million shares undistributed;
3) PCA would later pass Res. 074-78, s. of 1978, to allocate the 50 million undistributed shares
to (a) farmers who were already recipients thereof and (b) qualified farmers to be identified by
COCOFED after a national census.
4) As of May 1981, some 15.6 million shares were still held by and registered in the name of
COCOFED "in behalf of coconut farmers" for distribution immediately after the completion of the
national census, to all those determined by the PCA to be bonafide coconut farmers, but who have
not received the bank shares;45 and
5) Prior to June 1986, a large number of coconut farmers opted to sell all/part of their UCPB
shares below their par value. This prompted the UCPB Board to authorize the CIIF companies to
buy these shares. Some 40.34 million common voting shares of UCPB ended up with these CIIF
companies albeit initially registered in the name of UCPB.
On the other hand, the subject of CC 0033-F are two (2) blocks of SMC shares of stock, the
first referring to shares purchased through and registered in the name of the CIIF holding companies.
The purported ownership of the second block of SMC shares is for the nonce irrelevant to the
disposition of this case. During the time material, the CIIF block of SMC shares represented 27%
of the outstanding capital stock of SMC.
Civil Case No. 0033-A
After the pre-trial, but before the Republic, as plaintiff a quo, could present, as it committed to,
a list of UCPB stockholders as of February 25, 1986,46 among other evidence, COCOFED, et
al., on the premise that the sequestered farmers UCPB shares are not unlawfully acquired assets,
filed in April 2001 their Class Action Motion for a Separate Summary Judgment. In it, they prayed
for a judgment dismissing the complaint in CC 0033-A, for the reason that the over than a million
unimpleaded coconut farmers own the UCPB shares. In March 2002, they filed Class Action Motion
for Partial Separate Trial on the issue of whether said UCPB shares have legitimately become the
private property of the million coconut farmers.
Correlatively, the Republic, on the strength of the December 14, 2001 ruling in Republic v.
COCOFED47 and on the argument, among others, that the claim of COCOFED and Ballares et
al. over the subject UCPB shares is based solely on the supposed COCOFUND receipts issued
for payment of the R.A. 6260 CIF levy, filed a Motion for Partial Summary Judgment [RE: COCOFED,
et al. and Ballares, et al.] dated April 22, 2002, praying that a summary judgment be rendered
declaring:
a. That Section 2 of [PD] 755, Section 5, Article III of P.D. 961 and Section 5, Article III of
P.D. No. 1468 are unconstitutional;
b. That (CIF) payments under (R.A.) No. 6260 are not valid and legal bases for ownership
claims over UCPB shares; and
c. That COCOFED, et al., and Ballares, et al. have not legally and validly obtained title over the
subject UCPB shares.
After an exchange of pleadings, the Republic filed its sur-rejoinder praying that it be conclusively
held to be the true and absolute owner of the coconut levy funds and the UCPB shares acquired
therefrom.48
A joint hearing on the separate motions for summary judgment to determine what material facts exist
with or without controversy followed.49 By Order50 of March 11, 2003, the Sandiganbayan detailed,
based on this Courts ruling in related cases, the parties manifestations made in open court and
the pleadings and evidence on record, the facts it found to be without substantial controversy, together
with the admissions and/or extent of the admission made by the parties respecting relevant facts,
as follows:
As culled from the exhaustive discussions and manifestations of the parties in open court of their
respective pleadings and evidence on record, the facts which exist without any substantial controversy
are set forth hereunder, together with the admissions and/or the extent or scope of the admissions
made by the parties relating to the relevant facts:
1. The late President Ferdinand E. Marcos was President for two terms . . . and, during the
second term, declared Martial Law through Proclamation No. 1081 dated September 21, 1972.
2. On January 17, 1973, [he] issued Proclamation No. 1102 announcing the ratification of the
1973 Constitution.
3. From January 17, 1973 to April 7, 1981, [he] . . .exercised the powers and prerogative of
President under the 1935 Constitution and the powers and prerogative of President . . . the 1973
Constitution.
[He] promulgated various [P.D.s], among which were P.D. No. 232, P.D. No. 276, P.D. No.
414, P.D. No. 755, P.D. No. 961 and P.D. No. 1468.
4. On April 17, 1981, amendments to the 1973 Constitution were effected and, on June 30, 1981,
[he], after being elected President, "reassumed the title and exercised the powers of the President
until 25 February 1986."
5. Defendants Maria Clara Lobregat and Jose R. Eleazar, Jr. were [PCA] Directors during the
period 1970 to 1986.
6. Plaintiff admits the existence of the following agreements which are attached as Annexes "A"
and "B" to the Opposition dated October 10, 2002 of defendant Eduardo M. Cojuangco, Jr. to
the above-cited Motion for Partial Summary Judgment:
a) "Agreement made and entered into this ______ day of May, 1975 at Makati, Rizal,
Philippines, by and between:
PEDRO COJUANGCO, Filipino, x x x, for and in his own behalf and in behalf of certain other
stockholders of First United Bank listed in Annex "A" attached hereto (hereinafter collectively called
the SELLERS);
and
 EDUARDO COJUANGCO, JR., Filipino, x x x, represented in this act by his duly authorized
attorney-in-fact, EDGARDO J. ANGARA, for and in his own behalf and in behalf of certain other
buyers, (hereinafter collectively called the BUYERS)";
WITNESSETH: That
WHEREAS, the SELLERS own of record and beneficially a total of 137,866 shares of stock,
with a par value of P100.00 each, of the common stock of the First United Bank (the "Bank"),
a commercial banking corporation existing under the laws of the Philippines;
WHEREAS, the BUYERS desire to purchase, and the SELLERS are willing to sell, the
aforementioned shares of stock totaling 137,866 shares (hereinafter called the "Contract Shares")
owned by the SELLERS due to their special relationship to EDUARDO COJUANGCO, JR.;
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants herein
contained, the parties agree as follows:
1. Sale and Purchase of Contract Shares
Subject to the terms and conditions of this Agreement, the SELLERS hereby sell, assign, transfer
and convey unto the BUYERS, and the BUYERS hereby purchase and acquire, the Contract Shares
free and clear of all liens and encumbrances thereon.
2. Contract Price
The purchase price per share of the Contract Shares payable by the BUYERS is P200.00
or an aggregate price of P27,573,200.00 (the "Contract Price").
3. Delivery of, and payment for, stock certificates
Upon the execution of this Agreement, (i) the SELLERS shall deliver to the BUYERS the
stock certificates representing the Contract Shares, free and clear of all liens, encumbrances,
obligations, liabilities and other burdens in favor of the Bank or third parties, duly endorsed in blank
or with stock powers sufficient to transfer the shares to bearer; and (ii) BUYERS shall deliver to
the SELLERS P27,511,295.50 representing the Contract Price less the amount of stock transfer
taxes payable by the SELLERS, which the BUYERS undertake to remit to the appropriate authorities.
(Emphasis added.)
4. Representation and Warranties of Sellers
The SELLERS respectively and independently of each other represent and warrant that:
(a) The SELLERS are the lawful owners of, with good marketable title to, the Contract Shares
and that (i) the certificates to be delivered pursuant thereto have been validly issued and are fully
paid and no-assessable; (ii) the Contract Shares are free and clear of all liens, encumbrances,
obligations, liabilities and other burdens in favor of the Bank or third parties
This representation shall survive the execution and delivery of this Agreement and the
consummation or transfer hereby contemplated.
(b) The execution, delivery and performance of this Agreement by the SELLERS does not
conflict with or constitute any breach of any provision in any agreement to which they are a party
or by which they may be bound.
(c) They have complied with the condition set forth in Article X of the Amended Articles of
Incorporation of the Bank.
5. Representation of BUYERS .
6. Implementation
The parties hereto hereby agree to execute or cause to be executed such documents and
instruments as may be required in order to carry out the intent and purpose of this Agreement.
7. Notices .
 IN WITNESS WHEREOF, the parties hereto have hereunto set their hands at the place and WITNESSETH: That
on the date first above written.
PEDRO COJUANGCO
WHEREAS, on May 17, 1975, the Philippine Coconut Producers Federation ("PCPF"),
(on his own behalf and in through its Board of Directors, expressed the desire of the coconut farmers to own a commercial
bank which will be an effective instrument to solve the perennial credit problems and, for that purpose,
behalf of the other Sellers passed a resolution requesting the PCA to negotiate with the SELLER for the transfer to the coconut
listed in Annex "A" hereof) farmers of the SELLERs option to buy the First United Bank (the "Bank") under such terms and
conditions as BUYER may deem to be in the best interest of the coconut farmers and instructed
(SELLERS) EDUARDO COJUANGCO, JR. Mrs. Maria Clara Lobregat to convey such request to the BUYER;

(on his own behalf and in behalf

of the other Buyers) WHEREAS, the PCPF further instructed Mrs. Maria Clara Lobregat to make representations
with the BUYER to utilize its funds to finance the purchase of the Bank;
(BUYERS)

WHEREAS, the SELLER has the exclusive and personal option to buy 144,400 shares (the
By: "Option Shares") of the Bank, constituting 72.2% of the present outstanding shares of stock of
the Bank, at the price of P200.00 per share, which option only the SELLER can validly exercise;

EDGARDO J. ANGARA
WHEREAS, in response to the representations made by the coconut farmers, the BUYER has
Attorney-in-Fact requested the SELLER to exercise his personal option for the benefit of the coconut farmers;

x x x x x x x x x WHEREAS, the SELLER is willing to transfer the Option Shares to the BUYER at a price
equal to his option price of P200 per share;

b) "Agreement for the Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers
of the Philippines, made and entered into this 25th day of May 1975 at Makati, Rizal, Philippines,
by and between:
EDUARDO M. COJUANGCO, JR., x x x, hereinafter referred to as the SELLER;
and
WHEREAS, recognizing that ownership by the coconut farmers of a commercial bank is a
permanent solution to their perennial credit problems, that it will accelerate the growth and development
of the coconut industry and that the policy of the state which the BUYER is required to implement
is to achieve vertical integration thereof so that coconut farmers will become participants in, and
beneficiaries of, the request of PCPF that it acquire a commercial bank to be owned by the coconut
farmers and, appropriated, for that purpose, the sum of P150 Million to enable the farmers to buy
the Bank and capitalize the Bank to such an extension as to be in a position to adopt a credit
policy for the coconut farmers at preferential rates;

WHEREAS, x x x the BUYER is willing to subscribe to additional shares ("Subscribed Shares")

PHILIPPINE COCONUT AUTHORITY, a public corporation created by Presidential Decree No.
and place the Bank in a more favorable financial position to extend loans and credit facilities to
232, as amended, for itself and for the benefit of the coconut farmers of the Philippines, (hereinafter
coconut farmers at preferential rates;
called the BUYER)"
 NOW, THEREFORE, for and in consideration of the foregoing premises and the other terms
and conditions hereinafter contained, the parties hereby declare and affirm that their principal
contractual intent is (1) to ensure that the coconut farmers own at least 60% of the outstanding
capital stock of the Bank; and (2) that the SELLER shall receive compensation for exercising his
personal and exclusive option to acquire the Option Shares, for transferring such shares to the coconut
farmers at the option price of P200 per share, and for performing the management services required
of him hereunder.
1. To ensure that the transfer to the coconut farmers of the Option Shares is effected with
the least possible delay and to provide for the faithful performance of the obligations of the parties
hereunder, the parties hereby appoint the Philippine National Bank as their escrow agent (the "Escrow
Agent").
Upon execution of this Agreement, the BUYER shall deposit with the Escrow Agent such amount
as may be necessary to implement the terms of this Agreement.
2. As promptly as practicable after execution of this Agreement, the SELLER shall exercise
his option to acquire the Option Share and SELLER shall immediately thereafter deliver and turn
over to the Escrow Agent such stock certificates as are herein provided to be received from the
existing stockholders of the Bank by virtue of the exercise on the aforementioned option.
3. To ensure the stability of the Bank and continuity of management and credit policies to
be adopted for the benefit of the coconut farmers, the parties undertake to cause the stockholders
and the Board of Directors of the Bank to authorize and approve a management contract between
the Bank and the SELLER under the following terms:
(a) The management contract shall be for a period of five (5) years, renewable for another
five (5) years by mutual agreement of the SELLER and the Bank;
(b) The SELLER shall be elected President and shall hold office at the pleasure of the Board
of Directors. While serving in such capacity, he shall be entitled to such salaries and emoluments
as the Board of Directors may determine;
(c) The SELLER shall recruit and develop a professional management team to manage and
operate the Bank under the control and supervision of the Board of Directors of the Bank;
(d) The BUYER undertakes to cause three (3) persons designated by the SELLER to be
elected to the Board of Directors of the Bank;
(e) The SELLER shall receive no compensation for managing the Bank, other than such
salaries or emoluments to which he may be entitled by virtue of the discharge of his function and
duties as President, provided and
(f) The management contract may be assigned to a management company owned and
controlled by the SELLER.
4. As compensation for exercising his personal and exclusive option to acquire the Option
Shares and for transferring such shares to the coconut farmers, as well as for performing the
management services required of him, SELLER shall receive equity in the Bank amounting, in the
aggregate, to 95,304 fully paid shares in accordance with the procedure set forth in paragraph 6
below;
5. In order to comply with the Central Bank program for increased capitalization of banks and
to ensure that the Bank will be in a more favorable financial position to attain its objective to extend
to the coconut farmers loans and credit facilities, the BUYER undertakes to subscribe to shares with
an aggregate par value of P80,864,000 (the "Subscribed Shares"). The obligation of the BUYER
with respect to the Subscribed Shares shall be as follows:
(a) The BUYER undertakes to subscribe, for the benefit of the coconut farmers, to shares
with an aggregate par value of P15,884,000 from the present authorized but unissued shares of
the Bank; and
(b) The BUYER undertakes to subscribe, for the benefit of the coconut farmers, to shares
with an aggregate par value of P64,980,000 from the increased capital stock of the Bank, which
subscriptions shall be deemed made upon the approval by the stockholders of the increase of the
authorized capital stock of the Bank from P50 Million to P140 Million.
The parties undertake to declare stock dividends of P8 Million out of the present authorized
but unissued capital stock of P30 Million.
6. To carry into effect the agreement of the parties that the SELLER shall receive as his
compensation 95,304 shares:
 (a) .
(b) With respect to the Subscribed Shares, the BUYER undertakes, in order to prevent the
dilution of SELLERs equity position, that it shall cede over to the SELLER 64,980 fully-paid shares
out of the Subscribed Shares. Such undertaking shall be complied with in the following manner: .
7. The parties further undertake that the Board of Directors and management of the Bank shall
establish and implement a loan policy for the Bank of making available for loans at preferential rates
of interest to the coconut farmers .
8. The BUYER shall expeditiously distribute from time to time the shares of the Bank, that
shall be held by it for the benefit of the coconut farmers of the Philippines under the provisions
of this Agreement, to such, coconut farmers holding registered COCOFUND receipts on such equitable
basis as may be determine by the BUYER in its sound discretion.
9. .
10. To ensure that not only existing but future coconut farmers shall be participants in and
beneficiaries of the credit policies, and shall be entitled to the benefit of loans and credit facilities
to be extended by the Bank to coconut farmers at preferential rates, the shares held by the coconut
farmers shall not be entitled to pre-emptive rights with respect to the unissued portion of the authorized
capital stock or any increase thereof.
11. After the parties shall have acquired two-thirds (2/3) of the outstanding shares of the
Bank, the parties shall call a special stockholders meeting of the Bank:
(a) To classify the present authorized capital stock of P50,000,000 divided into 500,000
shares, with a par value of P100.00 per share into: 361,000 Class A shares, with an aggregate
par value of P36,100,000 and 139,000 Class B shares, with an aggregate par value of
P13,900,000. All of the Option Shares constituting 72.2% of the outstanding shares, shall be
classified as Class A shares and the balance of the outstanding shares, constituting 27.8% of the
outstanding shares, as Class B shares;
(b) To amend the articles of incorporation of the Bank to effect the following changes:
(i) change of corporate name to First United Coconut Bank;
(ii) replace the present provision restricting the transferability of the shares with a limitation
on ownership by any individual or entity to not more than 10% of the outstanding shares of the
Bank;
(iii) provide that the holders of Class A shares shall not be entitled to pre-emptive rights
with respect to the unissued portion of the authorized capital stock or any increase thereof; and
(iv) provide that the holders of Class B shares shall be absolutely entitled to pre-emptive
rights, with respect to the unissued portion of Class B shares comprising part of the authorized capital
stock or any increase thereof, to subscribe to Class B shares in proportion t the subscriptions of
Class A shares, and to pay for their subscriptions to Class B shares within a period of five (5)
years from the call of the Board of Directors.
(c) To increase the authorized capital stock of the Bank from P50 Million to P140 Million.;
(d) To declare a stock dividend of P8 Million payable to the SELLER, the BUYER and other
stockholders of the Bank out of the present authorized but unissued capital stock of P30 Million;
(e) To amend the by-laws of the Bank accordingly; and
(f) To authorize and approve the management contract provided in paragraph 2 above.
The parties agree that they shall vote their shares and take all the necessary corporate action
in order to carry into effect the foregoing provisions of this paragraph 11 .
12. It is the contemplation of the parties that the Bank shall achieve a financial and equity
position to be able to lend to the coconut farmers at preferential rates.
 In order to achieve such objective, the parties shall cause the Bank to adopt a policy of
reinvestment, by way of stock dividends, of such percentage of the profits of the Bank as may be
necessary.
13. The parties agree to execute or cause to be executed such documents and instruments
as may be required in order to carry out the intent and purpose of this Agreement.
IN WITNESS WHEREOF,
PHILIPPINE COCONUT AUTHORITY
(BUYER)
By:
EDUARDO COJUANGCO, JR. MARIA CLARA L. LOBREGAT
(SELLER)
x x x x x x x x x
7. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the
(PCA) was the "other buyers" represented by . Cojuangco, Jr. in the May 1975 Agreement
entered into between Pedro Cojuangco (on his own behalf and in behalf of other sellers listed in
Annex "A" of the agreement) and Cojuangco, Jr. (on his own behalf and in behalf of the other
buyers). Defendant Cojuangco insists he was the "only buyer" under the aforesaid Agreement.
8. ..
9. Defendants Lobregat, et al., and COCOFED, et al., and Ballares, et al. admit that in addition
to the 137,866 FUB shares of Pedro Cojuangco, et al. covered by the Agreement, other FUB
stockholders sold their shares to PCA such that the total number of FUB shares purchased by PCA
increased from 137,866 shares to 144,400 shares, the OPTION SHARES referred to in the
Agreement of May 25, 1975. Defendant Cojuangco did not make said admission as to the said
6,534 shares in excess of the 137,866 shares covered by the Agreement with Pedro Cojuangco.
10. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the
Agreement, described in Section 1 of Presidential Decree (P.D.) No. 755 dated July 29, 1975
as the "Agreement for the Acquisition of a Commercial Bank for the Benefit of Coconut Farmers"
executed by the Philippine Coconut Authority" and incorporated in Section 1 of P.D. No. 755 by
reference, refers to the "AGREEMENT FOR THE ACQUISITION OF A COMMERCIAL BANK FOR
THE BENEFIT OF THE COCONUT FARMERS OF THE PHILIPPINES" dated May 25, 1975
between defendant Eduardo M. Cojuangco, Jr. and the [PCA] (Annex "B" for defendant Cojuangcos
OPPOSITION TO PLAINTIFFS MOTION FOR PARTIAL SUMMARY JUDGMENT [RE: EDUARDO
M. COJUANGCO, JR.] dated September 18, 2002).
Plaintiff refused to make the same admission.
11. the Court takes judicial notice that P.D. No. 755 was published [in] volume 71
of the Official Gazette but the text of the agreement was not so published with P.D. No. 755.
12. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the PCA
used public funds, in the total amount of P150 million, to purchase the FUB shares amounting
to 72.2% of the authorized capital stock of the FUB, although the PCA was later reimbursed from
the coconut levy funds and that the PCA subscription in the increased capitalization of the FUB,
which was later renamed the (UCPB), came from the said coconut levy funds.
13. Pursuant to the May 25, 1975 Agreement, out of the 72.2% shares of the authorized
and the increased capital stock of the FUB (later UCPB), entirely paid for by PCA, 64.98% of
the shares were placed in the name of the "PCA for the benefit of the coconut farmers" and 7,22%
were given to defendant Cojuangco. The remaining 27.8% shares of stock in the FUB which later
became the UCPB were not covered by the two (2) agreements referred to in item no. 6, par.
(a) and (b) above.
"There were shares forming part of the aforementioned 64.98% which were later sold or
transferred to non-coconut farmers.
14. Under the May 27, 1975 Agreement, defendant Cojuangcos equity in the FUB (now
UCPB) was ten percent (10%) of the shares of stock acquired by the PCA for the benefit of the
coconut farmers.
 15. That the fully paid 95.304 shares of the FUB, later the UCPB, acquired by defendant
Cojuangco, Jr. pursuant to the May 25, 1975 Agreement were paid for by the PCA in accordance
with the terms and conditions provided in the said Agreement.
16. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the
affidavits of the coconut farmers (specifically, Exhibit "1-Farmer" to "70-Farmer") uniformly state
that:
a. they are coconut farmers who sold coconut products;
b. in the sale thereof, they received COCOFUND receipts pursuant to R.A. No. 6260;
c. they registered the said COCOFUND receipts; and
d. by virtue thereof, and under R.A. No. 6260, P.D. Nos. 755, 961 and 1468, they are
allegedly entitled to the subject UCPB shares.
but subject to the following qualifications:
a. there were other coconut farmers who received UCPB shares although they did not present
said COCOFUND receipt because the PCA distributed the unclaimed UCPB shares not only to those
who already received their UCPB shares in exchange for their COCOFUND receipts but also to the
coconut farmers determined by a national census conducted pursuant to PCA administrative issuances;
b. [t]here were other affidavits executed by Lobregat, Eleazar, Ballares and Aldeguer relative
to the said distribution of the unclaimed UCPB shares; and
c. the coconut farmers claim the UCPB shares by virtue of their compliance not only with the
laws mentioned in item (d) above but also with the relevant issuances of the PCA such as, PCA
Administrative Order No. 1, dated August 20, 1975 (Exh. "298-Farmer"); PCA Resolution No.
033-78 dated February 16, 1978.
The plaintiff did not make any admission as to the foregoing qualifications.
17. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. claim that the UCPB
shares in question have legitimately become the private properties of the 1,405,366 coconut farmers
solely on the basis of their having acquired said shares in compliance with R.A. No. 6260, P.D.
Nos. 755, 961 and 1468 and the administrative issuances of the PCA cited above.
18. ..
On July 11, 2003, the Sandiganbayan issued the assailed PSJ-A finding for the Republic,
the judgment accentuated by (a) the observation that COCOFED has all along manifested as
representing over a million coconut farmers and (b) a declaration on the issue of ownership of
UCPB shares and the unconstitutionality of certain provisions of P.D. No. 755 and its implementing
regulations. On the matter of ownership in particular, the anti-graft court declared that the 64.98%
sequestered "Farmers UCPB shares," plus other shares paid by PCA are "conclusively" owned by
the Republic. In its pertinent parts, PSJ-A, resolving the separate motions for summary judgment
in seriatim with separate dispositive portions for each, reads:
WHEREFORE, in view of the foregoing, we rule as follows:
x x x x x x x x x
A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY JUDGMENT dated April 11, 2001
filed by Defendant Maria Clara L. Lobregat, COCOFED, et al., and Ballares, et al.
The Class Action Motion for Separate Summary Judgment dated April 11, 2001 filed by defendant
Maria Clara L. Lobregat, COCOFED, et al. and Ballares, et al., is hereby DENIED for lack of merit.
B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: COCOFED, ET AL. AND BALLARES,
ET AL.) dated April 22, 2002 filed by Plaintiff.
1. a. Section 1 of P.D. No. 755, taken in relation to Section 2 of the same P.D., is unconstitutional:
(i) for having allowed the use of the CCSF to benefit directly private interest by the outright and
unconditional grant of absolute ownership of the FUB/UCPB shares paid for by PCA entirely with
the CCSF to the undefined "coconut farmers", which negated or circumvented the national policy
or public purpose declared by P.D. No. 755 to accelerate the growth and development of the coconut
industry and achieve its vertical integration; and (ii) for having unduly delegated legislative power
to the PCA.
b. Additional Bank Shares Subscribed and Paid by PCA, consisting of:

b. The implementing regulations issued by PCA, namely, Administrative Order No. 1, Series of 1975
and Resolution No. 074-78 are likewise invalid for their failure to see to it that the distribution 1. Fifteen Thousand Eight Hundred Eighty-Four (15,884) shares out of the authorized but unissued
of shares serve exclusively or at least primarily or directly the aforementioned public purpose or shares of the bank, subscribed and paid by PCA;
national policy declared by P.D. No. 755.

2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not be considered
special and/or fiduciary funds nor part of the general funds of the national government and similar
provisions of Sec. 5, Art. III, P.D. No. 961 and Sec. 5, Art. III, P.D. No. 1468 contravene the
provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3).
2. Sixty Four Thousand Nine Hundred Eighty (64,980) shares of the increased capital stock
subscribed and paid by PCA; and
3. Stock dividends declared pursuant to paragraph 5 and paragraph 11 (iv) (d) of the Agreement.

3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and validly obtained title of
ownership over the subject UCPB shares by virtue of P.D. No. 755, the Agreement dated May
25, 1975 between the PCA and defendant Cojuangco, and PCA implementing rules, namely, Adm.
Order No. 1, s. 1975 and Resolution No. 074-78.
4. The so-called "Farmers UCPB shares" covered by 64.98% of the UCPB shares of stock, which
formed part of the 72.2% of the shares of stock of the former FUB and now of the UCPB, the
entire consideration of which was charged by PCA to the CCSF, are hereby declared conclusively
owned by, the Plaintiff Republic of the Philippines.
C. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: EDUARDO M. COJUANGCO, JR.)
dated September 18, 2002 filed by Plaintiff.
3. The above-mentioned shares of stock of the FUB/UCPB transferred to defendant Cojuangco are
hereby declared conclusively owned by the Republic of the Philippines.
4. The UCPB shares of stock of the alleged fronts, nominees and dummies of defendant Eduardo
M. Cojuangco, Jr. which form part of the 72.2% shares of the FUB/UCPB paid for by the PCA
with public funds later charged to the coconut levy funds, particularly the CCSF, belong to the plaintiff
Republic of the Philippines as their true and beneficial owner.
Let trial of this Civil Case proceed with respect to the issues which have not been disposed of in
this Partial Summary Judgment. For this purpose, the plaintiffs Motion Ad Cautelam to Present
Additional Evidence dated March 28, 2001 is hereby GRANTED.

1. Sec. 1 of P.D. No. 755 did not validate the Agreement between PCA and defendant Eduardo
M. Cojuangco, Jr. dated May 25, 1975 nor did it give the Agreement the binding force of a law
because of the non-publication of the said Agreement.
From PSJ-A, Lobregat moved for reconsideration which COCOFED, et al. and Ballares, et al. adopted.
All these motions were denied in the extended assailed Resolution51 of December 28, 2004.
Civil Case No. 0033-F

2. Regarding the questioned transfer of the shares of stock of FUB (later UCPB) by PCA to
defendant Cojuangco or the so-called "Cojuangco UCPB shares" which cost the PCA more than
Ten Million Pesos in CCSF in 1975, we declare, that the transfer of the following FUB/UCPB shares
to defendant Eduardo M. Cojuangco, Jr. was not supported by valuable consideration, and therefore
null and void:
Here, the Republic, after filing its pre-trial brief, interposed a Motion for Judgment on the Pleadings
and/or for [PSJ] (Re: Defendants CIIF Companies, 14 Holding Companies and COCOFED, et al.)
praying that, in light of the parties submissions and the supervening ruling in Republic v.
COCOFED52 which left certain facts beyond question, a judgment issue:

a. The 14,400 shares from the "Option Shares";

1) Declaring Section 5 of Article III of P.D. No. 961 (Coconut Industry Code) and Section 5 2. Cagayan de Oro Oil Co., Inc. (CAGOIL);
of Article III of P.D. No. 1468 (Revised Coconut Industry Code) to be unconstitutional;

3. Iligan Coconut Industries, Inc. (ILICOCO);

2) Declaring that CIF payments under RA No. 6260 are not valid and legal bases for ownership
claims over the CIIF companies and, ultimately, the CIIF block of SMC shares; and
4. San Pablo Manufacturing Corp. (SPMC);

3) Ordering the reconveyance of the CIIF companies, the 14 holding companies, and the 27%
CIIF block of San Miguel Corporation shares of stocks in favor of the government and declaring 5. Granexport Manufacturing Corp. (GRANEX); and
the ownership thereof to belong to the government in trust for all the coconut farmers.

6. Legaspi Oil Co., Inc. (LEGOIL),

At this juncture, it may be stated that, vis--vis CC 0033-F, Gabay Foundation, Inc. sought but
was denied leave to intervene. But petitioners COCOFED, et al. moved and were allowed to
intervene53 on the basis of their claim that COCOFED members beneficially own the block of SMC
shares held by the CIIF companies, at least 51% of whose capitol stock such members own. The AS WELL AS THE 14 HOLDING COMPANIES, NAMELY:
claim, as the OSG explained, arose from the interplay of the following: (a) COCOFED et al.s alleged
majority ownership of the CIIF companies under Sections 954 and 1055 of P.D. No. 1468, and
(b) their alleged entitlement to shares in the CIIF companies by virtue of their supposed registration 1. Soriano Shares, Inc.;
of COCOFUND receipts allegedly issued to COCOFED members upon payment of the R.A. 6260
CIF levy.56
2. ACS Investors, Inc.;
Just as in CC No. 0033-A, the Sandiganbayan also conducted a hearing in CC No. 0033-F to
determine facts that appeared without substantial controversy as culled from the records and, by
Order57 of February 23, 2004, outlined those facts. 3. Roxas Shares, Inc.;

On May 7, 2004, the Sandiganbayan, in light of its ruling in CC No. 0033-A and disposing of 4. Arc Investors, Inc.;
the issue on ownership of the CIIF oil and holding companies and their entire block of subject SMC
shares, issued the assailed PSJ-F also finding for the Republic, the fallo of which pertinently reading:
5. Toda Holdings, Inc.;

WHEREFORE, in view of the foregoing, we hold that:

6. AP Holdings, Inc.;

The Motion for Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding Companies
and Cocofed et al.) filed by Plaintiff is hereby GRANTED. ACCORDINGLY, THE CIIF COMPANIES, 7. Fernandez Holdings, Inc.;
namely:

8. SMC Officers Corps, Inc.;

1. Southern Luzon Coconut Oil Mills (SOLCOM);
9. Te Deum Resources, Inc.;
10. Anglo Ventures, Inc.;
11. Randy Allied Ventures, Inc.;
12. Rock Steel Resources, Inc.;
13. Valhalla Properties Ltd., Inc.; and
14. First Meridian Development, Inc.
AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION (SMC) SHARES OF STOCK
TOTALLING 33,133,266 SHARES AS OF 1983 ARE DECLARED OWNED BY THE
GOVERNMENT IN TRUST FOR ALL THE COCONUT FARMERS GOVERNMENT AND ORDERDED
RECONVEYED TO THE GOVERNMENT.58 (Emphasis and capitalization in the original;
underscoring added.)
Let the trial of this Civil Case proceed with respect to the issues which have not been disposed
of in this Partial Summary Judgment, including the determination of whether the CIIF Block of SMC
Shares adjudged to be owned by the Government represents 27% of the issued and outstanding
capital stock of SMC according to plaintiff or to 31.3% of said capital stock according to COCOFED,
et al and Ballares, et al.
SO ORDERED.
Expressly covered by the declaration and the reconveyance directive are "all dividends declared, paid
and issued thereon as well as any increments thereto arising from, but not limited to, exercise of
pre-emptive rights."
On May 26, 2004, COCOFED et al., filed an omnibus motion (to dismiss for lack of subject matter
jurisdiction or alternatively for reconsideration and to set case for trial), but this motion was denied
per the Sandiganbayans Resolution59 of December 28, 2004.
On May 11, 2007, in CC 0033-A, the Sandiganbayan issued a Resolution60 denying Lobregats
and COCOFEDs separate motions to set the case for trial/hearing, noting that there is no longer
any point in proceeding to trial when the issue of their claim of ownership of the sequestered UCPB
shares and related sub-issues have already been resolved in PSJ-A.
For ease of reference, PSJ-A and PSJ-F each originally decreed trial or further hearing on issues
yet to be disposed of. However, the Resolution61 issued on June 5, 2007 in CC 0033-A and
the Resolution62 of May 11, 2007 rendered in CC 0033-F effectively modified the underlying
partial summary judgments by deleting that portions on the necessity of further trial on the issue
of ownership of (1) the sequestered UCPB shares, (2) the CIIF block of SMC shares and (3)
the CIIF companies. As the anti-graft court stressed in both resolutions, the said issue of ownership
has been finally resolved in the corresponding PSJs.63
Hence, the instant petitions.
The Issues
COCOFED et al., in G.R. Nos. 177857-58, impute reversible error on the Sandiganbayan for (a)
assuming jurisdiction over CC Nos. 0033-A and 0033-F despite the Republics failure to establish
below the jurisdictional facts, i.e., that the sequestered assets sought to be recovered are ill-gotten
in the context of E.O. Nos. 1, 2, 14 and 14-A; (b) declaring certain provisions of coco levy
issuances unconstitutional; and (c) denying the petitioners plea to prove that the sequestered assets
belong to coconut farmers. Specifically, petitioners aver:
I. The Sandiganbayan gravely erred when it refused to acknowledge that it did not have
subject matter jurisdiction over the ill-gotten wealth cases because the respondent Republic failed
to prove, and did not even attempt to prove, the jurisdictional fact that the sequestered assets
constitute ill-gotten wealth of former President Marcos and Cojuangco. Being without subject matter
jurisdiction over the ill-gotten wealth cases, a defect previously pointed out and repeatedly assailed
by COCOFED, et al., the assailed PSJs and the assailed Resolutions are all null and void.
A. Insofar as the ill-gotten wealth cases are concerned, the Sandiganbayans subject matter
jurisdiction is limited to the recovery of "ill-gotten wealth" as defined in Eos 1, 2, 14 and 14-A.
Consistent with that jurisdiction, the subdivided complaints in the ill-gotten wealth cases expressly
alleged that the sequestered assets constitutes "ill-gotten wealth" of former President Marcos and
Cojuangco, having been filed pursuant to, and in connection with, Eos 1, 2, 14 and 14-A, the
Sandiganbayan gravely erred, if not exceeded its jurisdiction, when it refused to require the respondent
Republic to prove the aforesaid jurisdictional fact.

B. . Having no evidence on record to prove the said jurisdictional fact, the Sandiganbayan
gravely erred, if not grossly exceeded its statutory jurisdiction, when it rendered the assailed PSJs
instead of dismissing the ill-gotten wealth cases.
C. Under Section 1 of Rule 9 of the Rules of Court, lack of jurisdiction over the subject matter
may be raised at any stage of the proceedings. In any event, in pursuing its intervention in the
ill-gotten wealth cases, COCOFED, et al precisely questioned the Sandiganbayans subject matter
jurisdiction, asserted that the jurisdictional fact does not exist, moved to dismiss the ill-gotten wealth
cases and even prayed that the writs of sequestration over the sequestered assets be lifted. In
concluding that those actions constitute an "invocation" of its jurisdiction, the Sandiganbayan clearly
acted whimsically, capriciously and in grave abuse of its discretion.
II. Through the assailed PSJs and the assailed Resolutions, the Sandiganbayan declared certain
provisions of the coconut levy laws as well as certain administrative issuances of the PCA as
unconstitutional. In doing so, the Sandiganbayan erroneously employed, if not grossly abused, its
power of judicial review.
A. the Sandiganbayan gravely erred, if not brazenly exceeded its statutory jurisdiction and
abused the judicial powers, when it concluded that the public purpose of certain coconut levy laws
was not evident, when it thereupon formulated its own public policies and purposes for the coconut
levy laws and at the same time disregarded the national policies specifically prescribed therein.
B. In ruling that "it is not clear or evident how the means employed by the [coconut levy]
laws" would "serve the avowed purpose of the law" or "can serve a public purpose", the
Sandiganbayan erroneously examined, determined and evaluated the wisdom of such laws, a
constitutional power within the exclusive province of the legislative department.
C. The Sandiganbayan gravely erred in declaring Section 1 of PD 755, PCA [AO] 1 and
PCA Resolution No. 074-78 constitutionally infirm by reason of alleged but unproven and
unsubstantiated flaws in their implementation.
D. The Sandiganbayan gravely erred in concluding that Section 1 of PD 755 constitutes an
undue delegation of legislative power insofar as it authorizes the PCA to promulgate rules and
regulations governing the distribution of the UCPB shares to the coconut farmers. Rather, taken in
their proper context, Section 1 of PD 755 was complete in itself, [and] prescribed sufficient standards
that circumscribed the discretion of the PCA.
More importantly, this Honorable Court has, on three (3) separate occasions, rejected
respondent Republics motion to declare the coconut levy laws unconstitutional. The Sandiganbayan
gravely erred, if not acted in excess of its jurisdiction, when it ignored the settled doctrines of law
of the case and/or stare decisis and granted respondent Republics fourth attempt to declare the
coconut levy laws unconstitutional, despite fact that such declaration of unconstitutionality was not
necessary to resolve the ultimate issue of ownership involved in the ill-gotten wealth cases.
III. In rendering the assailed PSJs and thereafter refusing to proceed to trial on the merits,
on the mere say-so of the respondent Republic, the Sandiganbayan committed gross and irreversible
error, gravely abused its judicial discretion and flagrantly exceeded its jurisdiction as it effectively
sanctioned the taking of COCOFED, et al.s property by the respondent Republic without due process
of law and through retroactive application of the declaration of unconstitutionality of the coconut levy
laws, an act that is not only illegal and violative of the settled Operative Fact Doctrine but, more
importantly, inequitable to the coconut farmers whose only possible mistake, offense or misfortune
was to follow the law.
A. .
1. In the course of the almost twenty (20) years that the ill-gotten wealth cases were pending,
COCOFED, et al. repeatedly asked to be allowed to present evidence to prove that the true, actual
and beneficial owners of the sequestered assets are the coconut farmers and not Cojuangco, an
alleged "crony" of former President Marcos. The Sandiganbayan grievously erred and clearly abused
its judicial discretion when it repeatedly and continuously denied COCOFED, et al. the opportunity
to present their evidence to disprove the baseless allegations of the Ill-Gotten Wealth Cases that
the sequestered assets constitute ill-gotten wealth of Cojuangco and of former President Marcos,
an error that undeniably and illegally deprived COCOFED, et al of their constitutional right to be
heard.
2. The Sandiganbayan erroneously concluded that the Assailed PSJs and Assailed Resolutions
settled the ultimate issue of ownership of the Sequestered Assets and, more importantly, resolved
all factual and legal issues involved in the ill-gotten wealth cases. Rather, as there are triable issues
still to be resolved, it was incumbent upon the Sandiganbayan to receive evidence thereon and conduct
trial on the merits.
3. Having expressly ordered the parties to proceed to trial and thereafter decreeing that trial
is unnecessary as the Assailed PSJs were "final" and "appealable" judgments, the Sandiganbayan
acted whimsically, capriciously and contrary to the Rules of Court, treated the parties in the ill-gotten
wealth cases unfairly, disobeyed the dictate of this Honorable Court and, worse, violated COCOFED,
et als right to due process and equal protection of the laws.
 B. The Sandiganbayan gravely erred if not grossly abused its discretion when it repeatedly
disregarded, and outrightly refused to recognize, the operative facts that existed as well as the rights
that vested from the time the coconut levy laws were enacted until their declaration of
unconstitutionality in the assailed PSJs. As a result, the assailed PSJs constitute a proscribed
retroactive application of the declaration of unconstitutionality, a taking of private property, and an
impairment of vested rights of ownership, all without due process of law.64 Otherwise stated, the
assailed PSJs and the assailed Resolutions effectively penalized the coconut farmers whose only
possible mistake, offense or misfortune was to follow the laws that were then legal, valid and
constitutional.
IV. The voluminous records of these ill-gotten wealth cases readily reveal the various dilatory
tactics respondent Republic resorted to. As a result, despite the lapse of almost twenty (20) years
of litigation, the respondent Republic has not been required to, and has not even attempted to prove,
the bases of its perjurious claim that the sequestered assets constitute ill-gotten wealth of former
President Marcos and his crony, Cojuangco. In tolerating respondent Republics antics for almost
twenty (20) years, the Sandiganbayan so glaringly departed from procedure and thereby flagrantly
violated COCOFED, et al.s right to speedy trial.
In G.R. No. 178193, petitioner Ursua virtually imputes to the Sandiganbayan the same errors
attributed to it by petitioners in G.R. Nos. 177857-58.65 He replicates as follows:
I
The Sandiganbayan decided in a manner not in accord with the Rules of Court and settled
jurisprudence in rendering the questioned PSJ as final and appealable thereafter taking the
sequestered assets from their owners or record without presentation of any evidence, thus, the
questioned PSJ and the questioned Resolutions are all null and void.
A. The Sandiganbayans jurisdiction insofar as the ill-gotten wealth cases are concerned, is limited
to the recovery of "ill-gotten wealth" as defined in Executive Orders No. 1, 2, 14 and 14-A.
B. The Sandiganbayan should have decided to dismiss the case or continue to receive evidence
instead of ruling against the constitutionality of some coconut levy laws and PCA issuances because
it could decide on other grounds available to it.
II
The Sandiganbayan gravely erred when it declared PD. 755, Section 1 and 2, Section 5, Article
1 of PD 961, and Section 5 of Art. III of PD 1468 as well as administrative issuances of the
PCA as unconstitutional in effect, it abused it power of judicial review.
A. The Sandiganbayan gravely erred in concluding that the purpose of PD 755 Section 1 and 2,
Section 5, Article 1 of PD 961, and Section 5 of Art. III of PD 1468 is not evident. It then proceeded
to formulated its own purpose thereby intruding into the wisdom of the legislature in enacting [t]he
law.
B. The Sandiganbayan gravely erred in declaring Section 1 of PD 755, PCA [AO] No. 1 and PCA
Resolution No. 074-78 unconstitutional due to alleged flaws in their implementation.
C. The Sandiganbayan gravely erred in concluding that Section 1 of PD No. 755 constitutes an
undue delegation of legislative power insofar as it authorizes the PCA to promulgate rules and
regulations governing the distribution of the UCPB shares to the coconut farmers. Section 1 of PD
755 was complete in itself, prescribed sufficient standards that circumscribed the discretion of the
PCA and merely authorized the PCA to fill matters of detail an execution through promulgated rules
and regulations.
III
The coconut levy laws, insofar as they allowed the PCA to promulgate rules and regulations governing
the distribution of the UCPB to the coconut farmers, do not constitute an undue delegation of legislative
power as they were complete in themselves and prescribed sufficient standards that circumscribed
the discretion of the PCA.
IV
Assuming ex-gratia argumenti that the coconut levy laws are unconstitutional, still, the owners thereof
cannot be deprived of their property without due process of law considering that they have in good
faith acquired vested rights over the sequestered assets.
In sum, the instant petitions seek to question the decisions of the Sandiganbayan in both CC Nos.
0033-A and 0033-F, along with the preliminary issues of objection. We shall address at the outset,
(1) the common preliminary questions, including jurisdictional issue, followed by (2) the common
primary contentious issues (i.e. constitutional questions), and (3) the issues particular to each case.

The Courts Ruling
I
The Sandiganbayan has jurisdiction over the subject
matter ofthe subdivided amended complaints.
The primary issue, as petitioners COCOFED, et al. and Ursua put forward, boils down to the
Sandiganbayans alleged lack of jurisdiction over the subject matter of the amended complaints.
Petitioners maintain that the jurisdictional facts necessary to acquire jurisdiction over the subject matter
in CC No. 0033-A have yet to be established. In fine, the Republic, so petitioners claim, has failed
to prove the ill-gotten nature of the sequestered coconut farmers UCPB shares. Accordingly, the
controversy is removed from the subject matter jurisdiction of the Sandiganbayan and necessarily
any decision rendered on the merits, such as PSJ-A and PSJ-F, is void.
To petitioners, it behooves the Republic to prove the jurisdictional facts warranting the
Sandiganbayans continued exercise of jurisdiction over ill-gotten wealth cases. Citing Manila Electric
Company [Meralco] v. Ortaez,66 petitioners argue that the jurisdiction of an adjudicatory tribunal
exercising limited jurisdiction, like the Sandiganbayan, "depends upon the facts of the case as proved
at the trial and not merely upon the allegation in the complaint."67 Cited too is PCGG v.
Nepumuceno,68 where the Court held:
The determinations made by the PCGG at the time of issuing sequestration orders cannot be
considered as final determinations; that the properties or entities sequestered or taken-over in fact
constitute "ill-gotten wealth" according to [E.O.] No. 1 is a question which can be finally determined
only by a court the Sandiganbayan. The PCGG has the burden of proving before the Sandiganbayan
that the assets it has sequestered or business entity it has provisionally taken-over constitutes
"ill-gotten wealth" within the meaning of [E.O.] No. 1 and Article No. XVIII (26) of the 1987
Constitution.
Petitioners above posture is without merit.
Justice Florenz D. Regalado explicates subject matter jurisdiction:
16. Basic is the doctrine that the jurisdiction of a court over the subject-matter of an action is
conferred only by the Constitution or the law and that the Rules of Court yield to substantive law,
in this case, the Judiciary Act and B.P. Blg. 129, both as amended, and of which jurisdiction is
only a part. Jurisdiction cannot be acquired through, or waived, enlarged or diminished by, any
act or omission of the parties; neither can it be conferred by the acquiescence of the court.
Jurisdiction must exist as a matter of law. Consequently, questions of jurisdiction may be raised
for the first time on appeal even if such issue was not raised in the lower court.
17. Nevertheless, in some case, the principle of estoppel by laches has been availed to bar
attacks on jurisdiction.69
It is, therefore, clear that jurisdiction over the subject matter is conferred by law. In turn, the question
on whether a given suit comes within the pale of a statutory conferment is determined by the
allegations in the complaint, regardless of whether or not the plaintiff will be entitled at the end to
recover upon all or some of the claims asserted therein.70 We said as much in Magay v.
Estiandan:71
[J]urisdiction over the subject matter is determined by the allegations of the complaint, irrespective
of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein-a
matter that can be resolved only after and as a result of the trial. Nor may the jurisdiction of the
court be made to depend upon the defenses set up in the answer or upon the motion to dismiss,
for, were we to be governed by such rule, the question of jurisdiction could depend almost entirely
upon the defendant.
Of the same tenor was what the Court wrote in Allied Domecq Philippines, Inc. v. Villon:72
Jurisdiction over the subject matter is the power to hear and determine the general class to which
the proceedings in question belong. Jurisdiction over the subject matter is conferred by law and not
by the consent or acquiescence of any or all of the parties or by erroneous belief of the court that
it exists. Basic is the rule that jurisdiction over the subject matter is determined by the cause or
causes of action as alleged in the complaint.
The material averments in subdivided CC No. 0033-A and CC No. 0033-F included the following:
12. Defendant Eduardo Cojuangco, Jr served as a public officer during the Marcos administration.
13. Defendant Eduardo Cojuangco, Jr., taking advantage of his association, influence and connection,
acting in unlawful concert with the [Marcoses] and the individual defendants, embarked upon devices,
schemes and stratagems, including the use of defendant corporations as fronts, to unjustly enrich
themselves as the expense of the Plaintiff and the Filipino people, such as when he
a) manipulated, beginning the year 1975 with the active collaboration of Defendants , Marai Clara
Lobregat, Danilo Ursua [etc.], the purchase by the (PCA) of 72.2% of the outstanding capital
stock of the (FUB) which was subsequently converted into a universal bank named (UCPB)
through the use of (CCSF) in a manner contrary to law and to the specific purposes for
which said coconut levy funds were imposed and collected under P.D. 276 and under anomalous
and sinister designs and circumstances, to wit:
(i) Defendant Eduardo Cojuangco, Jr. coveted the coconut levy funds as a cheap, lucrative and
risk-free source of funds with which to exercise his private option to buy the controlling interest in
FUB.
(ii) to legitimize a posteriori his highly anomalous and irregular use and diversion of government
funds to advance his own private and commercial interests Defendant Eduardo Cojuangco, Jr.
caused the issuance of PD 755 (a) declaring that the coconut levy funds shall not be considered
special and fiduciary and trust funds conveniently repealing for that purpose a series of previous
decrees establishing the character of the coconut levy funds as special, fiduciary, trust and
governments; (b) confirming the agreement between Cojuangco and PCA on the purchase of FUB
by incorporating by reference said private commercial agreement in PD 755;
(iii) .
(iv) To perpetuate his opportunity to build his economic empire, Cojuangco caused the issuance
of an unconstitutional decree (PD 1468) requiring the deposit of all coconut levy funds with UCPB
interest free to the prejudice of the government and finally
(v) Having fully established himself as the undisputed "coconut king" with unlimited powers to deal
with the coconut levy funds, the stage was now set for Defendant Eduardo Cojuangco, Jr. to launch
his predatory forays into almost all aspects of Philippine activity namely . oil mills.
(vi) In gross violation of their fiduciary positions and in contravention of the goal to create a bank
for coconut farmers of the country, the capital stock of UCPB as of February 25, 1986 was actually
held by the defendants, their lawyers, factotum and business associates, thereby finally gaining control
of the UCPB by misusing the names and identities of the so-called "more than one million coconut
farmers."
(b) created and/or funded with the use of coconut levy funds various corporations, such as
(COCOFED) with the active collaboration and participation of Defendants Juan Ponce Enrile,
Maria Clara Lobregat most of whom comprised the interlocking officers and directors of said
companies; dissipated, misused and/or misappropriated a substantial part of said coco levy funds
FINALLY GAIN OWNERSHIP AND CONTROL OF THE UNITED COCONUT PLANTERS BANK BY
MISUSING THE NAMES AND/OR IDENTIFIES OF THE SO-CALLLED "MORE THAN ONE
MILLION COCONUT FARNMERS;
(c) misappropriated, misused and dissipated P840 million of the (CIDF) levy funds deposited
with the National Development Corporation (NIDC) as administrator trustee of said funds and later
with UCPB, of which Defendant Eduardo Cojuangco, Jr. was the Chief Executive Officer.
(d) established and caused to be funded with coconut levy fundfs, with the active collaboration of
Defendants Ferdinand E. Marcos through the issuance of LOI 926 and of [other] defendants
the United Coconut Oil Mills, Inc., a corporation controlled by Defendant Eduardo Cojuangco, Jr.
and bought sixteen (16) certain competing oil mills at exorbitant prices then mothballed them.
x x x x x x x x x
(i) misused coconut levy funds to buy majority of the outstanding shares of stock of San Miguel
Corporation.
x x x x x x x x x
14. Defendants Eduardo Cojuangco, Jr. of the Angara Concepcion Cruz Regala and Abello law
offices (ACCRA) plotted, devised, schemed, conspired and confederated with each other in setting
up, through the use of the coconut levy funds the financial and corporate structures that led to the
establishment of UCPB UNICOM [etc.] and more than twenty other coconut levy funded corporations
including the acquisition of [SMC] shares and its institutionalization through presidential directives
of the coconut monopoly.
x x x x x x x x x
16. The acts of Defendants, singly or collectively, and /or in unlawful concert with one another,
constitute gross abuse of official position and authority, flagrant breach of public trust and fiduciary
obligations, brazen abuse of right and power, unjust enrichment, violation of the Constitution and
laws to the grave and irreparable damage of the Plaintiff and the Filipino people.
CC No. 0033-F
12. Defendant Eduardo Cojuangco, Jr., served as a public officer during the Marcos administration.
13. Having fully established himself as the undisputed "coconut king" with unlimited powers to deal
with the coconut levy funds, the stage was now set for Cojuangco, Jr. to launch his predatory
forays into almost all aspects of Philippine economic activity namely oil mills .
14. Defendant Eduardo Cojuangco, Jr., taking undue advantage of his association, influence, and
connection, acting in unlawful concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos,
and the individual defendants, embarked upon devices, schemes and stratagems, including the use
of defendant corporations as fronts, to unjustly enrich themselves at the expense of Plaintiff and
the Filipino people.
(a) Having control over the coconut levy, Defendant Eduardo M. Cojuangco invested the funds in
diverse activities, such as the various businesses SMC was engaged in.;
x x x x x x x x x
(c) Later that year [1983], Cojuangco also acquired the Soriano stocks through a series of
complicated and secret agreements, a key feature of which was a "voting trust agreement" that
stipulated that Andres, Jr. or his heir would proxy over the vote of the shares owned by Soriano
and Cojuangco.
x x x x x x x x x
(g) All together, Cojuangco purchased 33 million shares of the SMC through the 14 holding
companies
x x x x x x x x x
3.1. The same fourteen companies were in turn owned by the six (6) so-called CIIF Companies.
(h) Defendant Corporations are but "shell" corporations owned by interlocking shareholders who
have previously admitted that they are just "nominee stockholders" who do not have any proprietary
interest over the shares in their names. [L]awyers of the Angara Abello Concepcion Regala &
Cruz (ACCRA) Law offices, the previous counsel who incorporated said corporations, prove that
they were merely nominee stockholders thereof.
(l) These companies, which ACCRA Law Offices organized for Defendant Cojuangco to be able
to control more than 60% of SMC shares, were funded by institutions which depended upon the
coconut levy such as the UCPB, UNICOM, (COCOLIFE), among others. Cojuangco and his
ACCRA lawyers used the funds from 6 large coconut oil mills and 10 copra trading companies to
borrow money from the UCPB and purchase these holding companies and the SMC stocks. Cojuangco
used $ 150 million from the coconut levy, broken down as follows:
Amount Source Purpose
(in million)
$ 22.26 Oil Mills equity in holding
Companies
$ 65.6 Oil Mills loan to holding
Companies
$ 61.2 UCPB loan to holding
Companies [164]
The entire amount, therefore, came from the coconut levy, some passing through the Unicom Oil
mills, others directly from the UCPB.
(m) With his entry into the said Company, it began to get favors from the Marcos government,
significantly the lowering of the excise taxes on beer, one of the main products of SMC.
15. Defendants plotted, devised, schemed, conspired and confederated with each other in setting
up, through the use of coconut levy funds, the financial and corporate framework and structures that
led to the establishment of UCPB, [etc.], and more than twenty other coconut levy-funded
corporations, including the acquisition of [SMC] shares and its institutionalization through presidential
directives of the coconut monopoly.
16. The acts of Defendants, singly or collectively, and/or in unlawful concert with one another,
constitute gross abuse of official position and authority, flagrant breach of public trust and fiduciary
obligations, brazen abuse of right and power, unjust enrichment, violation of the constitution and laws
of the Republic of the Philippines, to the grave and irreparable damage of Plaintiff and the Filipino
people.73
Judging from the allegations of the defendants illegal acts thereat made, it is fairly obvious that
both CC Nos. 0033-A and CC 0033-F partake, in the context of EO Nos. 1, 2 and 14, series
of 1986, the nature of ill-gotten wealth suits. Both deal with the recovery of sequestered shares,
property or business enterprises claimed, as alleged in the corresponding basic complaints, to be
ill-gotten assets of President Marcos, his cronies and nominees and acquired by taking undue
advantage of relationships or influence and/or through or as a result of improper use, conversion
or diversion of government funds or property. Recovery of these assetsdetermined as shall
hereinafter be discussed as prima facie ill-gottenfalls within the unquestionable jurisdiction of the
Sandiganbayan.74
P.D. No. 1606, as amended by R.A. 7975 and E.O. No. 14, Series of 1986, vests the
Sandiganbayan with, among others, original jurisdiction over civil and criminal cases instituted pursuant
to and in connection with E.O. Nos. 1, 2, 14 and 14-A. Correlatively, the PCGG Rules and
Regulations defines the term "Ill-Gotten Wealth" as "any asset, property, business enterprise or
material possession of persons within the purview of [E.O.] Nos. 1 and 2, acquired by them directly,
or indirectly thru dummies, nominees, agents, subordinates and/or business associates by any of
the following means or similar schemes":
(1) Through misappropriation, conversion, misuse or malversation of public funds or raids on the
public treasury;
(2) .;
(3) By the illegal or fraudulent conveyance or disposition of assets belonging to the government
or any of its subdivisions, agencies or instrumentalities or government-owned or controlled
corporations;
(4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any
other form of interest or participation in any business enterprise or undertaking;
(5) Through the establishment of agricultural, industrial or commercial monopolies or other
combination and/or by the issuance, promulgation and/or implementation of decrees and orders
intended to benefit particular persons or special interests; and
(6) By taking undue advantage of official position, authority, relationship or influence for personal
gain or benefit.75 (Emphasis supplied)
Section 2(a) of E.O. No. 1 charged the PCGG with the task of assisting the President in "[T]he
recovery of all ill-gotten wealth accumulated by former [President] Marcos, his immediate family,
relatives, subordinates and close associates including the takeover or sequestration of all business
enterprises and entities owned or controlled by them, during his administration, directly or through
nominees, by taking undue advantage of their public office and/or using their powers, authority,
influence, connections or relationship." Complementing the aforesaid Section 2(a) is Section 1 of
E.O. No. 2 decreeing the freezing of all assets "in which the [Marcoses] their close relatives,
subordinates, business associates, dummies, agents or nominees have any interest or participation."
The Republics averments in the amended complaints, particularly those detailing the alleged wrongful
acts of the defendants, sufficiently reveal that the subject matter thereof comprises the recovery by
the Government of ill-gotten wealth acquired by then President Marcos, his cronies or their associates
and dummies through the unlawful, improper utilization or diversion of coconut levy funds aided by
P.D. No. 755 and other sister decrees. President Marcos himself issued these decrees in a brazen
bid to legalize what amounts to private taking of the said public funds.
Petitioners COCOFED et al. and Ursua, however, would insist that the Republic has failed to prove
the jurisdiction facts: that the sequestered assets indeed constitute ill-gotten wealth as averred in
the amended subdivided complaints.
This contention is incorrect.

There was no actual need for Republic, as plaintiff a quo, to adduce evidence to show that the
Sandiganbayan has jurisdiction over the subject matter of the complaints as it leaned on the averments
in the initiatory pleadings to make visible the jurisdiction of the Sandiganbayan over the ill-gotten
wealth complaints. As previously discussed, a perusal of the allegations easily reveals the sufficiency
of the statement of matters disclosing the claim of the government against the coco levy funds and
the assets acquired directly or indirectly through said funds as ill-gotten wealth. Moreover, the Court
finds no rule that directs the plaintiff to first prove the subject matter jurisdiction of the court before
which the complaint is filed. Rather, such burden falls on the shoulders of defendant in the hearing
of a motion to dismiss anchored on said ground or a preliminary hearing thereon when such ground
is alleged in the answer.
COCOFED et al. and Ursuas reliance on Manila Electric Company [Meralco] v. Ortanez76 is
misplaced, there being a total factual dissimilarity between that and the case at bar. Meralco involved
a labor dispute before the Court of Industrial Relations (CIR) requiring the interpretation of a collective
bargaining agreement to determine which between a regular court and CIR has jurisdiction. There,
it was held that in case of doubt, the case may not be dismissed for failure to state a cause of
action as jurisdiction of CIR is not merely based on the allegations of the complaint but must be
proved during the trial of the case. The factual milieu of Meralco shows that the said procedural
holding is peculiar to the CIR. Thus, it is not and could not be a precedent to the cases at bar.
Even PCGG v. Nepomuceno77 is not on all fours with the cases at bench, the issue therein being
whether the regional trial court has jurisdiction over the PCGG and sequestered properties, vis--vis
the present cases, which involve an issue concerning the Sandiganbayans jurisdiction. Like in Meralco,
the holding in Nepomuceno is not determinative of the outcome of the cases at bar.
While the 1964 Meralco and the Nepomuceno cases are inapplicable, the Courts ruling in Tijam
v. Sibonhonoy78 is the leading case on estoppel relating to jurisdiction. In Tijam, the Court expressed
displeasure on "the undesirable practice of a party submitting his case for decision and then accepting
judgment, only if favorable, and then attacking it for lack of jurisdiction, when adverse."
Considering the antecedents of CC Nos. 0033-A and 0033-F, COCOFED, Lobregat, Ballares, et
al. and Ursua are already precluded from assailing the jurisdiction of the Sandiganbayan. Remember
that the COCOFED and the Lobregat group were not originally impleaded as defendants in CC No.
0033. They later asked and were allowed by the Sandiganbayan to intervene. If they really believe
then that the Sandiganbayan is without jurisdiction over the subject matter of the complaint in question,
then why intervene in the first place? They could have sat idly by and let the proceedings continue
and would not have been affected by the outcome of the case as they can challenge the jurisdiction
of the Sandiganbayan when the time for implementation of the flawed decision comes. More
importantly, the decision in the case will have no effect on them since they were not impleaded
as indispensable parties. After all, the joinder of all indispensable parties to a suit is not only mandatory,
but jurisdictional as well.79 By their intervention, which the Sandiganbayan allowed per its resolution
dated September 30, 1991, COCOFED and Ursua have clearly manifested their desire to submit
to the jurisdiction of the Sandiganbayan and seek relief from said court. Thereafter, they filed numerous
pleadings in the subdivided complaints seeking relief and actively participated in numerous proceedings.
Among the pleadings thus filed are the Oppositions to the Motion for Intervention interposed by the
Pambansang Koalisyon ng mga Samahang Magsasaka at Manggagawa sa Niyogan and Gabay ng
Mundo sa Kaunlaran Foundation, Inc., a Class Action Omnibus Motion to enjoin the PCGG from
voting the SMC shares dated February 23, 2001 (granted by Sandiganbayan) and the Class Action
Motion for a Separate Summary Judgment dated April 11, 2001. By these acts, COCOFED et al.
are now legally estopped from asserting the Sandiganbayns want of jurisdiction, if that be the case,
over the subject matter of the complaint as they have voluntarily yielded to the jurisdiction of the
Sandiganbayan. Estoppel has now barred the challenge on Sandiganbayans jurisdiction.
The ensuing excerpts from Macahilig v. Heirs of Magalit80 are instructive:
We cannot allow her to attack its jurisdiction simply because it rendered a Decision prejudicial to
her position. Participation in all stages of a case before a trial court effectively estops a party from
challenging its jurisdiction. One cannot belatedly reject or repudiate its decision after voluntarily
submitting to its jurisdiction, just to secure affirmative relief against ones opponent or after failing
to obtain such relief. If, by deed or conduct, a party has induced another to act in a particular manner,
estoppel effectively bars the former from adopting an inconsistent position, attitude or course of conduct
that thereby causes loss or injury to the latter.
Lest it be overlooked, this Court has already decided that the sequestered shares are prima facie
ill-gotten wealth rendering the issue of the validity of their sequestration and of the jurisdiction of
the Sandiganbayan over the case beyond doubt. In the case of COCOFED v. PCGG,81 We stated
that:
It is of course not for this Court to pass upon the factual issues thus raised. That function pertains
to the Sandiganbayan in the first instance. For purposes of this proceeding, all that the Court needs
to determine is whether or not there is prima facie justification for the sequestration ordered by the
PCGG. The Court is satisfied that there is. The cited incidents, given the public character of the
coconut levy funds, place petitioners COCOFED and its leaders and officials, at least prima facie,
squarely within the purview of Executive Orders Nos. 1, 2 and 14, as construed and applied in
BASECO, to wit:
"1. that ill-gotten properties (were) amassed by the leaders and supporters of the previous regime;
"a. more particularly, that (i)ll-gotten wealth was accumulated by Marcos, his immediate family,
relatives, subordinates and close associates, . (and) business enterprises and entities (came to
be) owned or controlled by them, during (the Marcos) administration, directly or through nominees,
by taking undue advantage of their public office and using their powers, authority, influence,
connections or relationships;
"b. otherwise stated, that there are assets and properties purportedly pertaining to [the Marcoses],
their close relatives, subordinates, business associates, dummies, agents or nominees which had been
or were acquired by them directly or indirectly, through or as a result of the improper or illegal use
of funds or properties owned by the Government or any of its branches, instrumentalities, enterprises,
banks or financial institutions, or by taking undue advantage of their office, authority, influence,
connections or relationship, resulting in their unjust enrichment .;
x x x x x x x x x
2. The petitioners claim that the assets acquired with the coconut levy funds are privately owned
by the coconut farmers is founded on certain provisions of law, to wit [Sec. 7, RA 6260 and Sec.
5, Art. III, PD 1468] (Words in bracket added; italics in the original).
In their attempt to dismiss the amended complaints in question, petitioners asseverate that (1) the
coconut farmers cannot be considered as "subordinates, close and/or business associates, dummies,
agents and nominees" of Cojuangco, Jr. or the Marcoses, and (2) the sequestered shares were
not illegally acquired nor acquired "through or as result of improper or illegal use or conversion of
funds belonging to the Government." While not saying so explicitly, petitioners are doubtless conveying
the idea that wealth, however acquired, would not be considered "ill-gotten" in the context of EO
1, 2 and 14, s. of 1986, absent proof that the recipient or end possessor thereof is outside the
Marcos circle of friends, associates, cronies or nominees.
We are not convinced.
As may be noted, E.O. 1 and 2 advert to President Marcos, or his associates nominees. In its
most common signification, the term "nominee" refers to one who is designated to act for another
usually in a limited way; 82 a person in whose name a stock or bond certificate is registered but
who is not the actual owner thereof is considered a nominee."83 Corpus Juris Secundum describes
a nominee as one:
designated to act for another as his representative in a rather limited sense. It has no connotation,
however, other than that of acting for another, in representation of another or as the grantee of
another. In its commonly accepted meaning the term connoted the delegation of authority to the
nominee in a representative or nominal capacity only, and does not connote the transfer or assignment
to the nominee of any property in, or ownership of, the rights of the person nominating him.84
So, the next question that comes to the fore is: would the term "nominee" include the more than
one million coconut farmers alleged to be the recipients of the UCPB shares?
Guided by the foregoing definitions, the query must be answered in the affirmative if only to give
life to those executive issuances aimed at ensuring the recovery of ill-gotten wealth. It is basic,
almost elementary, that:
Laws must receive a sensible interpretation to promote the ends for which they are enacted. They
should be so given reasonable and practical construction as will give life to them, if it can be done
without doing violence to reason. Conversely, a law should not be so construed as to allow the
doing of an act which is prohibited by law, not so interpreted as to afford an opportunity to defeat
compliance with its terms, create an inconsistency, or contravene the plain words of the law.
Interpretatio fienda est ut res magis valeat quam pereat or that interpretation as will give the thing
efficacy is to be adopted.85
E.O. 1, 2, 14 and 14-A, it bears to stress, were issued precisely to effect the recovery of ill-gotten
assets amassed by the Marcoses, their associates, subordinates and cronies, or through their
nominees. Be that as it may, it stands to reason that persons listed as associated with the Marcoses86
refer to those in possession of such ill-gotten wealth but holding the same in behalf of the actual,
albeit undisclosed owner, to prevent discovery and consequently recovery. Certainly, it is well-nigh
inconceivable that ill-gotten assets would be distributed to and left in the hands of individuals or
entities with obvious traceable connections to Mr. Marcos and his cronies. The Court can take, as
it has in fact taken, judicial notice of schemes and machinations that have been put in place to
keep ill-gotten assets under wraps. These would include the setting up of layers after layers of shell
or dummy, but controlled, corporations87 or manipulated instruments calculated to confuse if not
altogether mislead would-be investigators from recovering wealth deceitfully amassed at the expense
of the people or simply the fruits thereof. Transferring the illegal assets to third parties not readily
perceived as Marcos cronies would be another. So it was that in PCGG v. Pena, the Court, describing
the rule of Marcos as a "well entrenched plundering regime of twenty years," noted the magnitude
of the past regimes organized pillage and the ingenuity of the plunderers and pillagers with the
assistance of experts and the best legal minds in the market.88
Hence, to give full effect to E.O. 1, 2 and 14, s. of 1986, the term "nominee," as used in the
above issuances, must be taken to mean to include any person or group of persons, natural or
juridical, in whose name government funds or assets were transferred to by Pres. Marcos, his cronies
or his associates. To this characterization must include what the Sandiganbayan considered the
"unidentified" coconut farmers, more than a million of faceless and nameless coconut farmers, the
alleged beneficiaries of the distributed UCPB shares, who, under the terms of Sec. 10 of PCA A.O.
No. 1, s. of 1975, were required, upon the delivery of their respective stock certificates, to execute
an irrevocable proxy in favor of the Banks manager. There is thus ample truth to the observations
- "[That] the PCA provided this condition only indicates that the PCA had no intention to constitute
the coconut farmer UCPB stockholder as a bona fide stockholder;" that the 1.5 million registered
farmer-stockholders were "mere nominal stockholders."89
From the foregoing, the challenge on the Sandiganbayans subject matter jurisdiction at bar must
fail.
II
Petitioners COCOFED et al. were not
deprived of their right to be heard.
As a procedural issue, COCOFED, et al. and Ursua next contend that in the course of almost 20
years that the cases have been with the anti-graft court, they have repeatedly sought leave to adduce
evidence (prior to respondents complete presentation of evidence) to prove the coco farmers actual
and beneficial ownership of the sequestered shares. The Sandiganbayan, however, had repeatedly
and continuously disallowed such requests, thus depriving them of their constitutional right to be heard.
This contention is untenable, their demand to adduce evidence being disallowable on the ground
of prematurity.
The records reveal that the Republic, after adducing its evidence in CC No. 0033-A, subsequently
filed a Motion Ad Cautelam for Leave to Present Additional Evidence dated March 28, 2001. This
motion remained unresolved at the time the Republic interposed its Motion for Partial Summary
Judgment. The Sandiganbayan granted the later motion and accordingly rendered the Partial Summary
Judgment, effectively preempting the presentation of evidence by the defendants in said case (herein
petitioners COCOFED and Ursua).
Section 5, Rule 30 the Rules of Court clearly sets out the order of presenting evidence:
SEC. 5. Order of trial.Subject to the provisions of section 2 of Rule 31, and unless the court
for special reasons otherwise directs, the trial shall be limited to the issues stated in the pre-trial
order and shall proceed as follows:
(a) The plaintiff shall adduce evidence in support of his complaint;
(b) The defendant shall then adduce evidence in support of his defense, counterclaim, cross-claim
and third-party complaint;
x x x x x x x x x
(g) Upon admission of the evidence, the case shall be deemed submitted for decision, unless the
court directs the parties to argue or to submit their respective memoranda or any further pleadings.
If several defendants or third-party defendants, and so forth. having separate defenses appear by
different counsel, the court shall determine the relative order of presentation of their evidence.
(Emphasis supplied.)
Evidently, for the orderly administration of justice, the plaintiff shall first adduce evidence in support
of his complaint and after the formal offer of evidence and the ruling thereon, then comes the turn
of defendant under Section 3 (b) to adduce evidence in support of his defense, counterclaim,
cross-claim and third party complaint, if any. Deviation from such order of trial is purely discretionary
upon the trial court, in this case, the Sandiganbayan, which cannot be questioned by the parties
unless the vitiating element of grave abuse of discretion supervenes. Thus, the right of COCOFED
to present evidence on the main case had not yet ripened. And the rendition of the partial summary
judgments overtook their right to present evidence on their defenses.
It cannot be stressed enough that the Republic as well as herein petitioners were well within their
rights to move, as they in fact separately did, for a partial summary judgment. Summary judgment
may be allowed where, save for the amount of damages, there is, as shown by affidavits and like
evidentiary documents, no genuine issue as to any material fact and the moving party is entitled
to a judgment as a matter of law. A "genuine issue", as distinguished from one that is fictitious,
contrived and set up in bad faith, means an issue of fact that calls for the presentation of evidence.90
Summary or accelerated judgment, therefore, is a procedural technique aimed at weeding out sham
claims or defenses at an early stage of the litigation.91 Sections 1, 2 and 4 of Rule 35 of the
Rules of Court on Summary Judgment, respectively provide:
SECTION 1. Summary judgment for claimant.A party seeking to recover upon a claim, counterclaim,
or cross-claim may, at any time after the pleading in answer thereto has been served, move
with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all
or any part thereof.

SEC. 2. Summary judgment for defending party.A party against whom a claim, counterclaim or
cross-claim is asserted is sought may, at any time, move with supporting affidavits, depositions
or admissions for a summary judgment in his favor as to all or any part thereof.
SEC. 4. Case not fully adjudicated on motion.If on motion under this Rule, judgment is not rendered
upon the whole case or for all the reliefs sought and a trial is necessary, the court at the hearing
of the motion, by examining the pleadings and the evidence before it and by interrogating counsel
shall ascertain what material facts exist without substantial controversy and what are actually and
in good faith controverted. It shall thereupon make an order specifying the facts that appear without
substantial controversy, including the extent to which the amount of damages or other relief is not
in controversy, and directing such further proceedings in the action as are just. The facts so specified
shall be deemed established, and the trial shall be conducted on the controverted facts accordingly.
Clearly, petitioner COCOFEDs right to be heard had not been violated by the mere issuance of
PSJ-A and PSJ-F before they can adduce their evidence.
As it were, petitioners COCOFED et al. were able to present documentary evidence in conjunction
with its "Class Action Omnibus Motion" dated February 23, 2001 where they appended around
four hundred (400) documents including affidavits of alleged farmers. These petitioners manifested
that said documents comprise their evidence to prove the farmers ownership of the UCPB shares,
which were distributed in accordance with valid and existing laws.92
Lastly, COCOFED et al. even filed their own Motion for Separate Summary Judgment, an event
reflective of their admission that there are no more factual issues left to be determined at the level
of the Sandiganbayan. This act of filing a motion for summary judgment is a judicial admission against
COCOFED under Section 26, Rule 130 which declares that the "act, declaration or omission of
a party as to a relevant fact may be given in evidence against him."
Viewed in this light, the Court has to reject petitioners self-serving allegations about being deprived
the right to adduce evidence.
III
The right to speedy trial was not violated.
This brings to the fore the alleged violation of petitioners right to a speedy trial and speedy disposition
of the case. In support of their contention, petitioners cite Licaros v. Sandiganbayan,93 where the
Court dismissed the case pending before the Sandiganbayan for violation of the accuseds right to
a speedy trial.
It must be clarified right off that the right to a speedy disposition of case and the accuseds right
to a speedy trial are distinct, albeit kindred, guarantees, the most obvious difference being that a
speedy disposition of cases, as provided in Article III, Section 16 of the Constitution, obtains
regardless of the nature of the case:
Section 16. All persons shall have the right to a speedy disposition of their cases before all judicial,
quasi-judicial, or administrative bodies.
In fine, the right to a speedy trial is available only to an accused and is a peculiarly criminal law
concept, while the broader right to a speedy disposition of cases may be tapped in any proceedings
conducted by state agencies. Thus, in Licaros the Court dismissed the criminal case against the
accused due to the palpable transgression of his right to a speedy trial.
In the instant case, the appropriate right involved is the right to a speedy disposition of cases, the
recovery of ill-gotten wealth being a civil suit.
Nonetheless, the Court has had the occasion to dismiss several cases owing to the infringement
of a partys right to a speedy disposition of cases.94 Dismissal of the case for violation of this
right is the general rule. Bernat v. The Honorable Sandiganbayan (5th Division)95 expounds on
the extent of the right to a speedy disposition of cases as follows:
Section 16 of Article III of the Constitution guarantees the right of all persons to a "speedy disposition
of their cases." Nevertheless, this right is deemed violated only when the proceedings are attended
by vexatious, capricious and oppressive delays. Moreover, the determination of whether the delays
are of said nature is relative and cannot be based on a mere mathematical reckoning of time. Particular
regard must be taken of the facts and circumstances peculiar to each case. As a guideline, the
Court in Dela Pea v. Sandiganbayan mentioned certain factors that should be considered and
balanced, namely: 1) length of delay; 2) reasons for the delay; 3) assertion or failure to assert
such right by the accused; and 4) prejudice caused by the delay.
x x x x x x x x x
While this Court recognizes the right to speedy disposition quite distinctly from the right to a speedy
trial, and although this Court has always zealously espoused protection from oppressive and vexatious
delays not attributable to the party involved, at the same time, we hold that a partys individual rights
should not work against and preclude the peoples equally important right to public justice. In the
instant case, three people died as a result of the crash of the airplane that the accused was flying.
It appears to us that the delay in the disposition of the case prejudiced not just the accused but
the people as well. Since the accused has completely failed to assert his right seasonably and
inasmuch as the respondent judge was not in a position to dispose of the case on the merits
we hold it proper and equitable to give the parties fair opportunity to obtain substantial justice
in the premises.
The more recent case of Tello v. People96 laid stress to the restrictive dimension to the right to
speedy disposition of cases, i.e., it is lost unless seasonably invoked:
In Bernat , the Court denied petitioners claim of denial of his right to a speedy disposition of
cases considering that [he] chose to remain silent for eight years before complaining of the delay
in the disposition of his case. The Court ruled that petitioner failed to seasonably assert his right
and he merely sat and waited from the time his case was submitted for resolution. In this case,
petitioner similarly failed to assert his right to a speedy disposition of his case. He only invoked
his right to a speedy disposition of cases after [his conviction]. Petitioners silence may be
considered as a waiver of his right.
An examination of the petitioners arguments and the cited indicia of delay would reveal the absence
of any allegation that petitioners moved before the Sandiganbayan for the dismissal of the case on
account of vexatious, capricious and oppressive delays that attended the proceedings. Following Tello,
petitioners are deemed to have waived their right to a speedy disposition of the case. Moreover,
delays, if any, prejudiced the Republic as well. What is more, the alleged breach of the right in
question was not raised below. As a matter of settled jurisprudence, but subject to equally settled
exception, an issue not raised before the trial court cannot be raised for the first time on appeal.97
The sporting idea forbidding one from pulling surprises underpins this rule. For these reasons, the
instant case cannot be dismissed for the alleged violation of petitioners right to a speedy disposition
of the case.
IV
Sections 1 and 2 of P.D. No. 755, Article III, Section 5 of P.D. No. 961 and Article III, Section
5 of P.D. No. 1468, are unconstitutional.
The Court may pass upon the constitutionality of P.D. Nos. 755, 961 and 1468.
Petitioners COCOFED et al. and Ursua uniformly scored the Sandiganbayan for abusing its power
of judicial review and wrongly encroaching into the exclusive domain of Congress when it declared
certain provisions of the coconut levy laws and PCA administrative issuances as unconstitutional.
We are not persuaded.
It is basic that courts will not delve into matters of constitutionality unless unavoidable, when the
question of constitutionality is the very lis mota of the case, meaning, that the case cannot be legally
resolved unless the constitutional issue raised is determined. This rule finds anchorage on the
presumptive constitutionality of every enactment. Withal, to justify the nullification of a statute, there
must be a clear and unequivocal breach of the Constitution. A doubtful or speculative infringement
would simply not suffice.98
Just as basic is the precept that lower courts are not precluded from resolving, whenever warranted,
constitutional questions, subject only to review by this Court.
To Us, the present controversy cannot be peremptorily resolved without going into the constitutionality
of P.D. Nos. 755, 961 and 1468 in particular. For petitioners COCOFED et al. and Ballares et
al. predicate their claim over the sequestered shares and necessarily their cause on laws and martial
law issuances assailed by the Republic on constitutional grounds. Indeed, as aptly observed by the
Solicitor General, this case is for the recovery of shares grounded on the invalidity of certain
enactments, which in turn is rooted in the shares being public in character, purchased as they were
by funds raised by the taxing and/or a mix of taxing and police powers of the state.99 As may
be recalled, P.D. No. 755, under the policy-declaring provision, authorized the distribution of UCPB
shares of stock free to coconut farmers. On the other hand, Section 2 of P.D. No. 755, hereunder
quoted below, effectively authorized the PCA to utilize portions of the CCSF to pay the financial
commitment of the farmers to acquire UCPB and to deposit portions of the CCSF levies with UCPB
interest free. And as there also provided, the CCSF, CIDF and like levies that PCA is authorized
to collect shall be considered as non-special or fiduciary funds to be transferred to the general fund
of the Government, meaning they shall be deemed private funds.
Section 2 of P.D. No. 755 reads:
Section 2. Financial Assistance. To enable the coconut farmers to comply with their contractual
obligations under the aforesaid Agreement, the [PCA] is hereby directed to draw and utilize the
collections under the [CCSF] authorized to be levied by [PD] No. 232, as amended, to pay for
the financial commitments of the coconut farmers under the said agreement and, except for [PCAs]
budgetary requirements , all collections under the [CCSF] Levy and (50%) of the collections under
the [CIDF] shall be deposited, interest free, with the said bank of the coconut farmers and such
deposits shall not be withdrawn until the the bank has sufficient equity capital ; and since the
operations, and activities of the [PCA] are all in accord with the present social economic plans and
programs of the Government, all collections and levies which the [PCA] is authorized to levy and
collect such as but not limited to the [CCS Levy] and the [CIDF] shall not be considered or
construed, under any law or regulation, special and/or fiduciary funds and do not form part of the
general funds of the national government within the contemplation of [P.D.] No. 711. (Emphasis
supplied)
A similar provision can also be found in Article III, Section 5 of P.D. No. 961 and Article III, Section
5 of P.D. No. 1468, which We shall later discuss in turn:
P.D. No. 961
Section 5. Exemptions. The Coconut Consumers Stabilization Fund and the Coconut Industry
Development Fund as well as all disbursements of said funds for the benefit of the coconut farmers
as herein authorized shall not be construed or interpreted, under any law or regulation, as special
and/or fiduciary funds, or as part of the general funds of the national government within the
contemplation of P.D. No. 711; nor as a subsidy, donation, levy, government funded investment,
or government share within the contemplation of P.D. 898, the intention being that said Fund and
the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned
by them in their own private capacities.100 (Emphasis Ours)
P.D. No. 1468
Section 5. Exemptions. The [CCSF] and the [CIDF] as well as all disbursement as herein authorized,
shall not be construed or interpreted, under nay law or regulation, as special and/or fiduciary funds,
or as part of the general funds of the national government within the contemplation of PD 711;
nor as subsidy, donation, levy government funded investment, or government share within the
contemplation of PD 898, the intention being that said Fund and the disbursements thereof as herein
authorized for the benefit of the coconut farmers shall be owned by them in their private
capacities.101 (Emphasis Ours.)
In other words, the relevant provisions of P.D. Nos. 755, as well as those of P.D. Nos. 961 and
1468, could have been the only plausible means by which close to a purported million and a half
coconut farmers could have acquired the said shares of stock. It has, therefore, become necessary
to determine the validity of the authorizing law, which made the stock transfer and acquisitions
possible.
To reiterate, it is of crucial importance to determine the validity of P.D. Nos. 755, 961 and 1468
in light of the constitutional proscription against the use of special funds save for the purpose it was
established. Otherwise, petitioners claim of legitimate private ownership over UCPB shares and
indirectly over SMC shares held by UCPBs subsidiaries will have no leg to stand on, P.D. No.
755 being the only law authorizing the distribution of the SMC and UCPB shares of stock to coconut
farmers, and with the aforementioned provisions actually stating and holding that the coco levy fund
shall not be considered as a special not even general fund, but shall be owned by the farmers
in their private capacities.102
The Sandiganbayans ensuing ratiocination on the need to pass upon constitutional issues the Republic
raised below commends itself for concurrence:
This Court is convinced of the imperative need to pass upon the issues of constitutionality raised
by Plaintiff. The issue of constitutionality of the provisions of P.D. No. 755 and the laws related
thereto goes to the very core of Plaintiffs causes of action and defenses thereto. It will serve the
best interest of justice to define this early the legal framework within which this case shall be heard
and tried, taking into account the admission of the parties and the established facts, particularly those
relating to the main substance of the defense of Lobregat, COCOFED, et al. and Ballares, et al.,
which is anchored on the laws being assailed by Plaintiff on constitutional grounds.
x x x x x x x x x
The Court is also mindful that lower courts are admonished to observe a becoming modesty in
examining constitutional questions, but that they are nonetheless not prevented from resolving the
same whenever warranted, subject only to review by the highest tribunal (Ynot v. Intermediate
Appellate Court).
x x x x x x x x x
It is true that, as a general rule, the question of constitutionality must be raised at the earliest
opportunity. The Honorable Supreme Court has clearly stated that the general rule admits of
exceptions, thus:
x x x x x x x x x
For courts will pass upon a constitutional question only when presented before it in bona fide cases
for determination, and the fact that the question has not been raised before is not a valid reason
for refusing to allow it to be raised later. It has been held that the determination of a constitutional
question is necessary whenever it is essential to the decision of the case as where the right
of a party is founded solely on a statute, the validity of which is attacked.
In the case now before us, the allegations of the Subdivided Complaint are consistent with those
in the subject Motion, and they sufficiently raise the issue of constitutionality of the provisions of
laws in question. The Third Amended Complaint (Subdivided) states:
(ii) to legitimize a posteriori his highly anomalous and irregular use and diversion of government
funds to advance his own private and commercial interests, Cojuangco, Jr. caused the issuance
of PD 755 (a) declaring that the coconut levy funds shall not be considered special and fiduciary
and trusts funds and do not form part of the general funds of the National Government, conveniently
repealing for that purpose a series of coconut levy funds as special, fiduciary, trust and government
funds.
x x x x x x x x x
(iv) To perpetuate his opportunity to deal with and make use the coconut levy funds to build his
economic empire, Cojuangco, Jr. caused the issuance by Defendant Ferdinand E. Marcos of an
unconstitutional decree (PD 1468) requiring the deposit of all coconut levy funds with UCPB, interest
free, to the prejudice of the government.
The above-quoted allegations in the Third Amended Complaint (Subdivided) already question the
"legitimacy" of the exercise by former President Marcos of his legislative authority when he issued
P.D. Nos. 755 and 1468. The provision of Sec. 5, Art. III of P.D. 961 is substantially similar
to the provisions of the aforesaid two [PDs]. P.D. No. 755 allegedly legitimized the "highly anomalous
and irregular use and diversion of government funds to advance his [defendant Cojuangcos] own
private and commercial interest." The issuance of the said [PD] which has the force and effect of
a law can only be assailed on constitutional grounds. The merits of the grounds adverted to in the
allegations of the Third Amended Complaint (Subdivided) can only be resolved by this Court by
testing the questioned [PDs], which are considered part of the laws of the land.
As early as June 20, 1989, this Court in its Resolution expressed this Courts understanding of
the import of the allegations of the complaint, as follows:
"It is likewise alleged in the Complaint that in order to legitimize the diversion of funds, defendant
Ferdinand E. Marcos issued the Presidential Decrees referred to by the movants. This is then the
core of Plaintiffs complaint: that, insofar as the coconut levy is concerned, these decrees had been
enacted as tools for the acquisition of ill-gotten wealth for specific favored individuals.
"Even if Plaintiff may not have said so effectively, the complaint in fact disputes the legitimacy, and,
if one pleases, the constitutionality of such enactments.
"The issue is validly raised on the face of the complaint and defendants must respond to it."
Since the question of constitutionality may be raised even on appeal if the determination of
such a question is essential to the decision of the case, we find more reason to resolve this
constitutional question at this stage of the proceedings, where the defense is grounded solely on
the very laws the constitutionality of which are being questioned and where the evidence of the
defendants would seek mainly to prove their faithful and good faith compliance with the said laws
and their implementing rules and regulations.103 (Emphasis added.)
The Courts rulings in COCOFED v. PCGG and Republic v. Sandiganbayan, as law of the case,
are speciously invoked.
To thwart the ruling on the constitutionality of P.D. Nos. 755, 961 and 1468, petitioners would
sneak in the argument that the Court has, in three separate instances, upheld the validity, and thumbed
down the Republics challenge to the constitutionality, of said laws imposing the different coconut
levies and prescribing the uses of the fund collected. The separate actions of the Court, petitioners
add, would conclude the Sandiganbayan on the issue of constitutionality of said issuances, following
the law-of-the-case principle. Petitioners allege:
Otherwise stated, the decision of this Honorable Court in the COCOFED Case overruling the strict
public fund theory espoused by the Respondent Republic, upholding the propriety of the laws imposing
the collections of the different Coconut Levies and expressly allowing COCOFED, et al., to prove
that the Sequestered Assets have legitimately become their private properties had become final and
immutable.104
Petitioners are mistaken.
Yu v. Yu,105 as effectively reiterated in Vios v. Pantangco,106 defines and explains the ramifications
of the law of the case principle as follows:
Law of the case has been defined as the opinion delivered on a former appeal. It is a term applied
to an established rule that when an appellate court passes on a question and remands the case
to the lower court for further proceedings, the question there settled becomes the law of the case
upon subsequent appeal. It means that whatever is once irrevocably established as the controlling
legal rule or decision between the same parties in the same case continues to be the law of the
case, so long as the facts on which such decision was predicated continue to be the facts of
the case before the court.
Otherwise put, the principle means that questions of law that have been previously raised and disposed
of in the proceedings shall be controlling in succeeding instances where the same legal question
is raised, provided that the facts on which the legal issue was predicated continue to be the facts
of the case before the court. Guided by this definition, the law of the case principle cannot provide
petitioners any comfort. We shall explain why.
In the first instance, petitioners cite COCOFED v. PCGG.107 There, respondent PCGG questioned
the validity of the coconut levy laws based on the limits of the states taxing and police power, as
may be deduced from the ensuing observations of the Court:
. Indeed, the Solicitor General suggests quite strongly that the laws operating or purporting to convert
the coconut levy funds into private funds, are a transgression of the basic limitations for the licit
exercise of the state's taxing and police powers, and that certain provisions of said laws are merely
clever stratagems to keep away government audit in order to facilitate misappropriation of the funds
in question.
The utilization and proper management of the coconut levy funds, [to acquire shares of stocks for
coconut farmers and workers] raised as they were by the States police and taxing power are certainly
the concern of the Government. The coconut levy funds are clearly affected with public interest.
Until it is demonstrated satisfactorily that they have legitimately become private funds, they must prima
facie be accounted subject to measures prescribed in EO Nos. 1, 2, and 14 to prevent their
concealment, dissipation, etc.108 [Words in bracket added.]
The issue, therefore, in COCOFED v. PCGG turns on the legality of the transfer of the shares of
stock bought with the coconut levy funds to coconut farmers. This must be distinguished with the
issues in the instant case of whether P.D. No. 755 violated Section 29, paragraph 3 of Article
VI of the 1987 Constitution as well as to whether P.D. No. 755 constitutes undue delegation of
legislative power. Clearly, the issues in both sets of cases are so different as to preclude the
application of the law of the case rule.
The second and third instances that petitioners draw attention to refer to the rulings in Republic v.
Sandiganbayan, where the Court by Resolution of December 13, 1994, as reiterated in another
resolution dated March 26, 1996, resolved to deny the separate motions of the Republic to resolve
legal questions on the character of the coconut levy funds, more particularly to declare as
unconstitutional (a) coconut levies collected pursuant to various issuances as public funds and (b)
Article III, Section 5 of P.D. No. 1468.
Prescinding from the foregoing considerations, petitioners would state: "Having filed at least three
(3) motions seeking, among others, to declare certain provisions of the Coconut Levy Laws
unconstitutional and having been rebuffed all three times by this Court," the Republic - and necessarily
Sandiganbayan "should have followed as [they were] legally bound by this Courts prior
determination" on that above issue of constitutionality under the doctrine of Law of the Case.
Petitioners are wrong. The Court merely declined to pass upon the constitutionality of the coconut
levy laws or some of their provisions. It did not declare that the UCPB shares acquired with the
use of coconut levy funds have legitimately become private.
The coconut levy funds are in the nature of taxes and can only be used for public purpose.
Consequently, they cannot be used to purchase shares of stocks to be given for free to private
individuals.
Indeed, We have hitherto discussed, the coconut levy was imposed in the exercise of the States
inherent power of taxation. As We wrote in Republic v. COCOFED:109
Indeed, coconut levy funds partake of the nature of taxes, which, in general, are enforced proportional
contributions from persons and properties, exacted by the State by virtue of its sovereignty for the
support of government and for all public needs.
Based on its definition, a tax has three elements, namely: a) it is an enforced proportional contribution
from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it
is levied for the support of the government. The coconut levy funds fall squarely into these elements
for the following reasons:
(a) They were generated by virtue of statutory enactments imposed on the coconut farmers requiring
the payment of prescribed amounts. Thus, PD No. 276, which created the Coconut Consumer[s]
Stabilization Fund (CCSF), mandated the following:
"a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its equivalent in other coconut
products, shall be imposed on every first sale, in accordance with the mechanics established under
RA 6260, effective at the start of business hours on August 10, 1973.
"The proceeds from the levy shall be deposited with the Philippine National Bank or any other
government bank to the account of the Coconut Consumers Stabilization Fund, as a separate trust
fund which shall not form part of the general fund of the government."
The coco levies were further clarified in amendatory laws, specifically PD No. 961 and PD No.
1468 in this wise:
"The Authority (PCA) is hereby empowered to impose and collect a levy, to be known as the Coconut
Consumers Stabilization Fund Levy, on every one hundred kilos of copra resecada, or its equivalent
delivered to, and/or purchased by, copra exporters, oil millers, desiccators and other end-users of
copra or its equivalent in other coconut products. The levy shall be paid by such copra exporters,
oil millers, desiccators and other end-users of copra or its equivalent in other coconut products under
such rules and regulations as the Authority may prescribe. Until otherwise prescribed by the Authority,
the current levy being collected shall be continued."
Like other tax measures, they were not voluntary payments or donations by the people. They were
enforced contributions exacted on pain of penal sanctions, as provided under PD No. 276:
"3. Any person or firm who violates any provision of this Decree or the rules and regulations
promulgated thereunder, shall, in addition to penalties already prescribed under existing administrative
and special law, pay a fine of not less than P2,500 or more than P10,000, or suffer cancellation
of licenses to operate, or both, at the discretion of the Court."
Such penalties were later amended thus: .
(b) The coconut levies were imposed pursuant to the laws enacted by the proper legislative authorities
of the State. Indeed, the CCSF was collected under PD No. 276."
(c) They were clearly imposed for a public purpose. There is absolutely no question that they were
collected to advance the governments avowed policy of protecting the coconut industry. This Court
takes judicial notice of the fact that the coconut industry is one of the great economic pillars of our
nation, and coconuts and their byproducts occupy a leading position among the countrys export
products.
Taxation is done not merely to raise revenues to support the government, but also to provide means
for the rehabilitation and the stabilization of a threatened industry, which is so affected with public
interest as to be within the police power of the State.
Even if the money is allocated for a special purpose and raised by special means, it is still public
in character. In Cocofed v. PCGG, the Court observed that certain agencies or enterprises "were
organized and financed with revenues derived from coconut levies imposed under a succession of
law of the late dictatorship with deposed Ferdinand Marcos and his cronies as the suspected
authors and chief beneficiaries of the resulting coconut industry monopoly." The Court continued:
". It cannot be denied that the coconut industry is one of the major industries supporting the national
economy. It is, therefore, the States concern to make it a strong and secure source not only of
the livelihood of a significant segment of the population, but also of export earnings the sustained
growth of which is one of the imperatives of economic stability.110 (Emphasis Ours)
We have ruled time and again that taxes are imposed only for a public purpose.111 "They cannot
be used for purely private purposes or for the exclusive benefit of private persons."112 When a
law imposes taxes or levies from the public, with the intent to give undue benefit or advantage to
private persons, or the promotion of private enterprises, that law cannot be said to satisfy the
requirement of public purpose.113 In Gaston v. Republic Planters Bank, the petitioning sugar
producers, sugarcane planters and millers sought the distribution of the shares of stock of the Republic
Planters Bank, alleging that they are the true beneficial owners thereof.114 In that case, the
investment, i.e., the purchase of the said bank, was funded by the deduction of PhP 1.00 per picul
from the sugar proceeds of the sugar producers pursuant to P.D. No. 388.115 In ruling against
the petitioners, the Court held that to rule in their favor would contravene the general principle that
revenues received from the imposition of taxes or levies "cannot be used for purely private purposes
or for the exclusive benefit of private persons."116 The Court amply reasoned that the Stabilization
Fund must "be utilized for the benefit of the entire sugar industry, and all its components, stabilization
of the domestic market including foreign market, the industry being of vital importance to the countrys
economy and to national interest."117
Similarly in this case, the coconut levy funds were sourced from forced exactions decreed under
P.D. Nos. 232, 276 and 582, among others,118 with the end-goal of developing the entire coconut
industry.119 Clearly, to hold therefore, even by law, that the revenues received from the imposition
of the coconut levies be used purely for private purposes to be owned by private individuals in their
private capacity and for their benefit, would contravene the rationale behind the imposition of taxes
or levies.
Needless to stress, courts do not, as they cannot, allow by judicial fiat the conversion of special
funds into a private fund for the benefit of private individuals. In the same vein, We cannot subscribe
to the idea of what appears to be an indirect if not exactly direct conversion of special funds
into private funds, i.e., by using special funds to purchase shares of stocks, which in turn would
be distributed for free to private individuals. Even if these private individuals belong to, or are a
part of the coconut industry, the free distribution of shares of stocks purchased with special public
funds to them, nevertheless cannot be justified. The ratio in Gaston,120 as expressed below, applies
mutatis mutandis to this case:
The stabilization fees in question are levied by the State for a special purpose that of "financing
the growth and development of the sugar industry and all its components, stabilization of the domestic
market including the foreign market." The fact that the State has taken possession of moneys pursuant
to law is sufficient to constitute them as state funds even though they are held for a special purpose.
That the fees were collected from sugar producers,[etc.], and that the funds were channeled to the
purchase of shares of stock in respondent Bank do not convert the funds into a trust fund for their
benefit nor make them the beneficial owners of the shares so purchased. It is but rational that the
fees be collected from them since it is also they who are benefited from the expenditure of the
funds derived from it. .121 (Emphasis Ours.)
In this case, the coconut levy funds were being exacted from copra exporters, oil millers, desiccators
and other end-users of copra or its equivalent in other coconut products.122 Likewise so, the funds
here were channeled to the purchase of the shares of stock in UCPB. Drawing a clear parallelism
between Gaston and this case, the fact that the coconut levy funds were collected from the persons
or entities in the coconut industry, among others, does not and cannot entitle them to be beneficial
owners of the subject funds or more bluntly, owners thereof in their private capacity. Parenthetically,
the said private individuals cannot own the UCPB shares of stocks so purchased using the said
special funds of the government.123
Coconut levy funds are special public funds of the government.
Plainly enough, the coconut levy funds are public funds. We have ruled in Republic v. COCOFED
that the coconut levy funds are not only affected with public interest; they are prima facie public
funds.124 In fact, this pronouncement that the levies are government funds was admitted and
recognized by respondents, COCOFED, et al., in G.R. No. 147062-64.125 And more importantly,
in the same decision, We clearly explained exactly what kind of government fund the coconut levies
are. We were categorical in saying that coconut levies are treated as special funds by the very laws
which created them:
Finally and tellingly, the very laws governing the coconut levies recognize their public character. Thus,
the third Whereas clause of PD No. 276 treats them as special funds for a specific public purpose.
Furthermore, PD No. 711 transferred to the general funds of the State all existing special and fiduciary
funds including the CCSF. On the other hand, PD No. 1234 specifically declared the CCSF as
a special fund for a special purpose, which should be treated as a special account in the National
Treasury.126 (Emphasis Ours.)
If only to stress the point, P.D. No. 1234 expressly stated that coconut levies are special funds
to be remitted to the Treasury in the General Fund of the State, but treated as Special Accounts:
Section 1. All income and collections for Special or Fiduciary Funds authorized by law shall be remitted
to the Treasury and treated as Special Accounts in the General Fund, including the following:
(a) [PCA] Development Fund, including all income derived therefrom under Sections 13 and 14
of [RA] No. 1145; Coconut Investments Fund under Section 8 of [RA] No. 6260, including earnings,
profits, proceeds and interests derived therefrom; Coconut Consumers Stabilization Funds under
Section 3-A of PD No. 232, as inserted by Section 3 of P.D. No. 232, as inserted by Section
2 of P.D. No. 583; and all other fees accruing to the [PCA] under the provisions of Section 19
of [RA] No. 1365, in accordance with Section 2 of P.D. No. 755 and all other income accruing
to the [PCA] under existing laws.127 (Emphasis Ours)
Moreover, the Court, in Gaston, stated the observation that the character of a stabilization fund as
a special fund "is emphasized by the fact that the funds are deposited in the Philippine National
Bank [PNB] and not in the Philippine Treasury, moneys from which may be paid out only in pursuance
of an appropriation made by law."128 Similarly in this case, Sec.1 (a) of P.D. No. 276 states
that the proceeds from the coconut levy shall be deposited with the PNB, then a government bank,
or any other government bank under the account of the CCSF, as a separate trust fund, which shall
not form part of the governments general fund.129 And even assuming arguendo that the coconut
levy funds were transferred to the general fund pursuant to P.D. No. 1234, it was with the specific
directive that the same be treated as special accounts in the general fund.130
The coconut levy funds can only be used for the special purpose and the balance thereof should
revert back to the general fund. Consequently, their subsequent reclassification as a private fund
to be owned by private individuals in their private capacities under P.D. Nos. 755, 961 and 1468
are unconstitutional.
To recapitulate, Article VI, Section 29 (3) of the 1987 Constitution, restating a general principle
on taxation, enjoins the disbursement of a special fund in accordance with the special purpose for
which it was collected, the balance, if there be any, after the purpose has been fulfilled or is no
longer forthcoming, to be transferred to the general funds of the government, thus:
Section 29(3).

(3) All money collected on any tax levied for a special purpose shall be treated as a special fund
and paid out for such purpose only. If the purpose for which a special fund was created has been
fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government.
(Emphasis Ours)
Correlatively, Section 2 of P.D. No. 755 clearly states that:
Section 2. Financial Assistance. To enable the coconut farmers to comply with their contractual
obligations under the aforesaid Agreement, the [PCA] is hereby directed to draw and utilize the
collections under the Coconut Consumers Stabilization Fund [CCSF] authorized to be levied by [P.D.]
232, as amended, to pay for the financial commitments of the coconut farmers under the said
agreement. and the Coconut Industry Development Fund as prescribed by Presidential Decree No.
582 shall not be considered or construed, under any law or regulation, special and/or fiduciary funds
and do not form part of the general funds of the national government within the contemplation of
Presidential Decree No. 711. (Emphasis Ours)
Likewise, as discussed supra, Article III, Section 5 of both P.D. Nos. 961 and 1468 provides that
the CCSF shall not be construed by any law as a special and/or trust fund, the stated intention
being that actual ownership of the said fund shall pertain to coconut farmers in their private
capacities.131 Thus, in order to determine whether the relevant provisions of P.D. Nos. 755, 961
and 1468 complied with Article VI, Section 29 (3) of the 1987 Constitution, a look at the public
policy or the purpose for which the CCSF levy was imposed is necessary.
The CCSF was established by virtue of P.D. No. 276 wherein it is stated that:
WHEREAS, an escalating crisis brought about by an abnormal situation in the world market for fats
and oils has resulted in supply and price dislocations in the domestic market for coconut-based goods,
and has created hardships for consumers thereof;
WHEREAS, the representatives of the coconut industry have proposed the implementation of an
industry-financed stabilization scheme which will permit socialized pricing of coconut-based
commodities;
WHEREAS, it is the policy of the State to promote the welfare and economic well-being of the
consuming public;
.
1. In addition to its powers granted under [P.D.] No. 232, the [PCA] is hereby authorized to
formulate and immediately implement a stabilization scheme for coconut-based consumer goods, along
the following general guidelines:
(a) .The proceeds of the levy shall be deposited with the Philippine National Bank or any other
government bank to the account of the CCSF as a separate trust fund.
(b) The Fund shall be utilized to subsidize the sale of coconut-based products at prices set by
the Price Control Council.:
.
As couched, P.D. No. 276 created and exacted the CCSF "to advance the governments avowed
policy of protecting the coconut industry."132 Evidently, the CCSF was originally set up as a special
fund to support consumer purchases of coconut products. To put it a bit differently, the protection
of the entire coconut industry, and even more importantly, for the consuming public provides the
rationale for the creation of the coconut levy fund. There can be no quibbling then that the foregoing
provisions of P.D. No. 276 intended the fund created and set up therein not especially for the coconut
farmers but for the entire coconut industry, albeit the improvement of the industry would doubtless
redound to the benefit of the farmers. Upon the foregoing perspective, the following provisions of
P.D. Nos. 755, 961 and 1468 insofar as they declared, as the case may be, that: "[the coconut
levy] fund and the disbursements thereof [shall be] authorized for the benefit of the coconut farmers
and shall be owned by them in their private capacities;"133 or the coconut levy fund shall not be
construed by any law to be a special and/or fiduciary fund, and do not therefore form part of the
general fund of the national government later on;134 or the UCPB shares acquired using the coconut
levy fund shall be distributed to the coconut farmers for free,135 violated the special public purpose
for which the CCSF was established.
In sum, not only were the challenged presidential issuances unconstitutional for decreeing the
distribution of the shares of stock for free to the coconut farmers and, therefore, negating the public
purpose declared by P.D. No. 276, i.e., to stabilize the price of edible oil136 and to protect the
coconut industry.137 They likewise reclassified, nay treated, the coconut levy fund as private fund
to be disbursed and/or invested for the benefit of private individuals in their private capacities, contrary
to the original purpose for which the fund was created. To compound the situation, the offending
provisions effectively removed the coconut levy fund away from the cavil of public funds which normally
can be paid out only pursuant to an appropriation made by law.138 The conversion of public funds
into private assets was illegally allowed, in fact mandated, by these provisions. Clearly therefore,
the pertinent provisions of P.D. Nos. 755, 961 and 1468 are unconstitutional for violating Article
VI, Section 29 (3) of the Constitution. In this context, the distribution by PCA of the UCPB shares
purchased by means of the coconut levy fund a special fund of the government to the coconut
farmers, is therefore void.
We quote with approval the Sandiganbayans reasons for declaring the provisions of P.D. Nos. 755,
961 and 1468 as unconstitutional:
It is now settled, in view of the ruling in Republic v. COCOFED, et al., supra, that "Coconut levy
funds are raised with the use of the police and taxing powers of the State;" that "they are levies
imposed by the State for the benefit of the coconut industry and its farmers" and that "they were
clearly imposed for a public purpose." This public purpose is explained in the said case, as follows:
. c) They were clearly imposed for a public purpose. There is absolutely no question that they
were colleted to advance the governments avowed policy of protecting the coconut industry.
"Taxation is done not merely to raise revenues to support the government, but also to provide means
for the rehabilitation and the stabilization of a threatened industry, which is so affected with public
interest as to be within the police power of the State, as held in Caltex Philippines v. COA and
Osmea v. Orbos.
x x x x x x x x x
The avowed public purpose for the disbursement of the CCSF is contained in the perambulatory
clauses and Section 1 of P.D. No. 755. The imperativeness of enunciating the public purpose of
the expenditure of funds raised through taxation is underscored in the case of Pascual v. The Secretary
of Public Works and Communications, et al, supra, which held:
"As regards the legal feasibility of appropriating public funds for a private purpose the principle
according to Ruling Case Law, is this:
It is a general rule that the legislature is without power to appropriate public revenue for anything
but a public purpose it is the essential character of the direct object of the expenditure which
must determine its validity as justifying a tax, and not the magnitude of the interests to be affected
nor the degree to which the general advantage of the community, and thus the public welfare may
be ultimately benefited by their promotion. Incidental advantage to the public or to the state, which
results from the promotion of private interests and the prosperity of private enterprises or business,
does not justify their aid by the use of public money. 25 R.L.C. pp. 398-400)
"The rule is set forth in Corpus Juris Secundum in the following language:
x x x x x x x x x
The test of the constitutionality of a statute requiring the use of public funds is whether the statute
is designed to promote the public interests, as opposed to the furtherance of the advantage of
individuals, although each advantage to individuals might incidentally serve the public. (81 C.J.S.
p. 1147)
"Needless to say, this Court is fully in accord with the foregoing views. Besides, reflecting as they
do, the established jurisprudence in the United States, after whose constitutional system ours has
been patterned, said views and jurisprudence are, likewise, part and parcel of our own constitutional
law."
The gift of funds raised by the exercise of the taxing powers of the State which were converted
into shares of stock in a private corporation, slated for free distribution to the coconut farmers, can
only be accorded constitutional sanction if it will directly serve the public purpose declared by
law.139
Section 1 of P.D. No. 755, as well as PCA Administrative Order No. 1, Series of 1975 (PCA
AO 1), and Resolution No. 074-75, are invalid delegations of legislative power.
Petitioners argue that the anti-graft court erred in declaring Section 1 of PD 755, PCA Administrative
Order No. 1 and PCA Resolution No. 074-78 constitutionally infirm by reason of alleged but
unproven and unsubstantiated flaws in their implementation. Additionally, they explain that said court
erred in concluding that Section 1 of PD No. 755 constitutes an undue delegation of legislative
power insofar as it authorizes the PCA to promulgate rules and regulations governing the distribution
of the UCPB shares to the farmers.
These propositions are meritless.
The assailed PSJ-A noted the operational distribution nightmare faced by PCA and the mode of
distribution of UCPB shares set in motion by that agency left much room for diversion. Wrote the
Sandiganbayan:
The actual distribution of the bank shares was admittedly an enormous operational problem which
resulted in the failure of the intended beneficiaries to receive their shares of stocks in the bank,
as shown by the rules and regulations, issued by the PCA, without adequate guidelines being provided
to it by P.D. No. 755. PCA Administrative Order No. 1, Series of 1975 (August 20, 1975),
"Rules and Regulations Governing the Distribution of Shares of Stock of the Bank Authorized to
be Acquired Pursuant to PCA Board Resolution No. 246-75", quoted hereunder discloses how the
undistributed shares of stocks due to anonymous coconut farmers or payors of the coconut levy fees
were authorized to be distributed to existing shareholders of the Bank:
"Section 9. Fractional and Undistributed Shares Fractional shares and shares which remain
undistributed shall be distributed to all the coconut farmers who have qualified and received equity
in the Bank and shall be apportioned among them, as far as practicable, in proportion to their equity
in relation to the number of undistributed equity and such further rules and regulations as may hereafter
be promulgated.
The foregoing PCA issuance was further amended by Resolution No. 074-78, still citing the same
problem of distribution of the bank shares.:
x x x x x x x x x
Thus, when 51,200,806 shares in the bank remained undistributed, the PCA deemed it proper
to give a "bonanza" to coconut farmers who already got their bank shares, by giving them an additional
share for each share owned by them and by converting their fractional shares into full shares. The
rest of the shares were then transferred to a private organization, the COCOFED, for distribution
to those determined to be "bona fide coconut farmers" who had "not received shares of stock of
the Bank." .
The PCA thus assumed, due to lack of adequate guidelines set by P.D. No. 755, that it had complete
authority to define who are the coconut farmers and to decide as to who among the coconut farmers
shall be given the gift of bank shares; how many shares shall be given to them, and what basis
it shall use to determine the amount of shares to be distributed for free to the coconut farmers.
In other words, P.D. No. 755 fails the completeness test which renders it constitutionally infirm.
Regarding the second requisite of standard, it is settled that legislative standard need not be
expressed.
We observed, however, that the PCA [AO] No. 1, Series of 1975 and PCA Rules and Regulations
074-78, did not take into consideration the accomplishment of the public purpose or the national
standard/policy of P.D. No. 755 which is directly to accelerate the development and growth of the
coconut industry and as a consequence thereof, to make the coconut farmers "participants in and
beneficiaries" of such growth and development. The said PCA issuances did nothing more than provide
guidelines as to whom the UCPB shares were to be distributed and how many bank shares shall
be allotted to the beneficiaries. There was no mention of how the distributed shares shall be used
to achieve exclusively or at least directly or primarily the aim or public purpose enunciated by P.D.
No. 755. The numerical or quantitative distribution of shares contemplated by the PCA regulations
which is a condition for the validly of said administrative issuances. There was a reversal of priorities.
The narrow private interests prevailed over the laudable objectives of the law. However, under the
May 25, 1975 agreement implemented by the PCA issuances, the PCA acquired only 64.98%
of the shares of the bank and even the shares covering the said 64.98% were later on transferred
to non-coconut farmers."
The distribution for free of the shares of stock of the CIIF Companies is tainted with the
above-mentioned constitutional infirmities of the PCA administrative issuances. In view of the foregoing,
we cannot consider the provision of P.D. No. 961 and P.D. No. 1468 and the implementing
regulations issued by the PCA as valid legal basis to hold that assets acquired with public funds
have legitimately become private properties." 140 (Emphasis added.)
P.D. No. 755 involves an invalid delegation of legislative power, a concept discussed in Soriano
v. Laguardia,141 citing the following excerpts from Edu v. Ericta:
It is a fundamental that Congress may not delegate its legislative power. What cannot be
delegated is the authority to make laws and to alter and repeal them; the test is the completeness
of the statute in all its term and provisions when it leaves the hands of the legislature. To determine
whether or not there is an undue delegation of legislative power, the inquiry must be directed to
the scope and definiteness of the measure enacted. The legislature does not abdicate its functions
when it describes what job must be done, who is to do it, and what is the scope of his authority.
To avoid the taint of unlawful delegation, there must be a standard, which implies at the very least
that the legislature itself determines matters of principle and lays down fundamental policy. Otherwise,
the charge of complete abdication may be hard to repel. A standard thus defines legislative policy,
marks its limits, maps out its boundaries and specifies the public agency to apply it. It indicates
the circumstances under which the legislative command is to be effected. It is the criterion by which
legislative purpose may be carried out. Thereafter, the executive or administrative office designated
may in pursuance of the above guidelines promulgate supplemental rules and regulations.142
(Emphasis supplied)
Jurisprudence is consistent as regards the two tests, which must be complied with to determine the
existence of a valid delegation of legislative power. In Abakada Guro Party List, et al. v. Purisima,143
We reiterated the discussion, to wit:
Two tests determine the validity of delegation of legislative power: (1) the completeness test and
(2) the sufficient standard test. A law is complete when it sets forth therein the policy to be executed,
carried out or implemented by the delegate. It lays down a sufficient standard when it provides
adequate guidelines or limitations in the law to map out the boundaries of the delegates authority
and prevent the delegation from running riot. To be sufficient, the standard must specify the limits
of the delegates authority, announce the legislative policy and identify the conditions under which
it is to be implemented.
In the instant case, the requisite standards or criteria are absent in P.D. No. 755. As may be noted,
the decree authorizes the PCA to distribute to coconut farmers, for free, the shares of stocks of
UCPB and to pay from the CCSF levy the financial commitments of the coconut farmers under the
Agreement for the acquisition of such bank. Yet, the decree does not even state who are to be
considered as coconut farmers. Would, say, one who plants a single coconut tree be already
considered a coconut farmer and, therefore, entitled to own UCPB shares? If so, how many shares
shall be given to him? The definition of a coconut farmer and the basis as to the number of shares
a farmer is entitled to receive for free are important variables to be determined by law and cannot
be left to the discretion of the implementing agency.
Moreover, P.D. No. 755 did not identify or delineate any clear condition as to how the disposition
of the UCPB shares or their conversion into private ownership will redound to the advancement of
the national policy declared under it. To recall, P.D. No. 755 seeks to "accelerate the growth and
development of the coconut industry and achieve a vertical integration thereof so that coconut farmers
will become participants in, and beneficiaries of, such growth and development."144 The
Sandiganbayan is correct in its observation and ruling that the said law gratuitously gave away public
funds to private individuals, and converted them exclusively into private property without any restriction
as to its use that would reflect the avowed national policy or public purpose. Conversely, the private
individuals to whom the UCPB shares were transferred are free to dispose of them by sale or any
other mode from the moment of their acquisition. In fact and true enough, the Sandiganbayan
categorically stated in its Order dated March 11, 2003,145 that out of the 72.2% shares and
increased capital stock of the FUB (later UCPB) allegedly covered by the May 25, 1975
Agreement,146 entirely paid for by PCA, 7.22% were given to Cojuangco and the remaining 64.98%,
which were originally held by PCA for the benefit of the coconut farmers, were later sold or transferred
to non-coconut farmers.147 Even the proposed rewording of the factual allegations of Lobregat,
COCOFED, et al. and Ballares, et al., reveals that indeed, P.D. No. 755 did not provide for any
guideline, standard, condition or restriction by which the said shares shall be distributed to the coconut
farmers that would ensure that the same will be undertaken to accelerate the growth and development
of the coconut industry pursuant to its national policy. The proposed rewording of admissions reads:
There were shares forming part of the aforementioned 64.98% which were, after their distribution,
for free, to the coconut farmers as required by P.D. No. 755, sold or transferred respectively by
individual coconut farmers who were then the registered stockholders of those UCPB shares to
non-coconut farmers.148
Clearly, P.D. No. 755, insofar as it grants PCA a veritable carte blanche to distribute to coconut
farmers UCPB shares at the level it may determine, as well as the full disposition of such shares
to private individuals in their private capacity without any conditions or restrictions that would advance
the laws national policy or public purpose, present a case of undue delegation of legislative power.
As such, there is even no need to discuss the validity of the administrative orders and resolutions
of PCA implementing P.D. No. 755. Water cannot rise higher than its source.
Even so, PCA AO 1 and PCA Resolution No. 078-74, are in themselves, infirm under the undue
delegation of legislative powers. Particularly, Section 9 of PCA AO I provides:
SECTION 9. Fractional and Undistributed Shares Fractional shares and shares which remain
undistributed as a consequence of the failure of the coconut farmers to register their COCOFUND
receipts or the destruction of the COCOFUND receipts or the registration of COCOFUND receipts
in the name of an unqualified individual, after the final distribution is made on the basis of the
consolidated IBM registration Report as of March 31, 1976 shall be distributed to all the coconut
farmers who have qualified and received equity in the Bank and shall be appointed among them,
as far as practicable, in proportion to their equity in relation to the number of undistributed equity
and such further rules and regulations as may hereafter be promulgated.
The foregoing provision directs and authorizes the distribution of fractional and undistributed shares
as a consequence of the failure of the coconut farmers with Coco Fund receipts to register them,
even without a clear mandate or instruction on the same in any pertinent existing law. PCA Resolution
No. 078-74 had a similar provision, albeit providing more detailed information. The said Resolution
identified 51,200,806 shares of the bank that remained undistributed and PCA devised its own
rules as to how these undistributed and fractional shares shall be disposed of, notwithstanding the
dearth as to the standards or parameters in the laws which it sought to implement.
Eventually, what happened was that, as correctly pointed out by the Sandiganbayan, the PCA gave
a "bonanza" to supposed coconut farmers who already got their bank shares, by giving them extra
shares according to the rules established on its own by the PCA under PCA AO 1 and Resolution
No. 078-74. Because of the lack of adequate guidelines under P.D. No. 755 as to how the shares
were supposed to be distributed to the coconut farmers, the PCA thus assumed that it could decide
for itself how these shares will be distributed. This obviously paved the way to playing favorites,
if not allowing outright shenanigans. In this regard, this poser raised in the Courts February 16,
1993 Resolution in G.R. No. 96073 is as relevant then as it is now: "How is it that shares of
stocks in such entities which was organized and financed by revenues derived from coconut levy
funds which were imbued with public interest ended up in private hands who are not farmers or
beneficiaries; and whether or not the holders of said stock, who in one way or another had had
some part in the collection, administration, disbursement or other disposition of the coconut levy funds
were qualified to acquire stock in the corporations formed and operated from these funds." 149
Likewise, the said PCA issuances did not take note of the national policy or public purpose for which
the coconut levy funds were imposed under P.D. No. 755, i.e. the acceleration of the growth and
development of the entire coconut industry, and the achievement of a vertical integration thereof that
could make the coconut farmers participants in, and beneficiaries of, such growth and
development.150 Instead, the PCA prioritized the coconut farmers themselves by fully disposing of
the bank shares, totally disregarding the national policy for which the funds were created. This is
clearly an undue delegation of legislative powers.
With this pronouncement, there is hardly any need to establish that the sequestered assets are
ill-gotten wealth. The documentary evidence, the P.D.s and Agreements, prove that the transfer of
the shares to the more than one million of supposed coconut farmers was tainted with illegality.
Article III, Section 5 of P.D. No. 961 and Article III, Section 5 of P.D. No. 1468 violate Article
IX (D) (2) of the 1987 Constitution.
Article III, Section 5 of P.D. No. 961 explicitly takes away the coconut levy funds from the coffer
of the public funds, or, to be precise, privatized revenues derived from the coco levy. Particularly,
the aforesaid Section 5 provides:
Section 5. Exemptions. The Coconut Consumers Stabilization Fund and the Coconut Industry
Development fund as well as all disbursements of said funds for the benefit of the coconut farmers
as herein authorized shall not be construed or interpreted, under any law or regulation, as special
and/or fiduciary funds, or as part of the general funds of the national government within the
contemplation of P.D. No. 711; nor as a subsidy, donation, levy, government funded investment,
or government share within the contemplation of P.D. 898 the intention being that said Fund and
the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned
in their own private capacity.151 (Emphasis Ours)
The same provision is carried over in Article III, Section 5 of P.D. No. 1468, the Revised Coconut
Industry Code:
These identical provisions of P.D. Nos. 961 and 1468 likewise violate Article IX (D), Section 2(1)
of the Constitution, defining the powers and functions of the Commission on Audit ("COA") as a
constitutional commission:
Sec. 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit,
and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds
and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities, including government-owned and controlled corporations with original
charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have
been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities;
(c) other government-owned or controlled corporations and their subsidiaries;.152 (Emphasis Ours)
A similar provision was likewise previously found in Article XII (D), Section 2 (1) of the 1973
Constitution, thus:
Section 2. The Commission on Audit shall have the following powers and functions:
(1) Examine, audit, and settle, in accordance with law and regulations, all accounts pertaining to
the revenues and receipts of, and expenditures or uses of funds and property, owned or held in
trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities,
including government-owned and controlled corporations; keep the general accounts of the government
and, for such period as may be provided by law, preserve the vouchers pertaining thereto; and
promulgate accounting and auditing rules and regulations including those for the prevention of irregular,
unnecessary, excessive, or extravagant expenditures or use of funds and property.153 (Emphasis
Ours)
The Constitution, by express provision, vests the COA with the responsibility for State audit.154
As an independent supreme State auditor, its audit jurisdiction cannot be undermined by any law.
Indeed, under Article IX (D), Section 3 of the 1987 Constitution, "[n]o law shall be passed
exempting any entity of the Government or its subsidiary in any guise whatever, or any investment
of public funds, from the jurisdiction of the Commission on Audit."155 Following the mandate of
the COA and the parameters set forth by the foregoing provisions, it is clear that it has jurisdiction
over the coconut levy funds, being special public funds. Conversely, the COA has the power, authority
and duty to examine, audit and settle all accounts pertaining to the coconut levy funds and,
consequently, to the UCPB shares purchased using the said funds. However, declaring the said funds
as partaking the nature of private funds, ergo subject to private appropriation, removes them from
the coffer of the public funds of the government, and consequently renders them impervious to the
COA audit jurisdiction. Clearly, the pertinent provisions of P.D. Nos. 961 and 1468 divest the COA
of its constitutionally-mandated function and undermine its constitutional independence.
The assailed purchase of UCPB shares of stocks using the coconut levy funds presents a classic
example of an investment of public funds. The conversion of these special public funds into private
funds by allowing private individuals to own them in their private capacities is something else. It
effectively deprives the COA of its constitutionally-invested power to audit and settle such accounts.
The conversion of the said shares purchased using special public funds into pure and exclusive private
ownership has taken, or will completely take away the said funds from the boundaries with which
the COA has jurisdiction. Obviously, the COA is without audit jurisdiction over the receipt or
disbursement of private property. Accordingly, Article III, Section 5 of both P.D. Nos. 961 and 1468
must be struck down for being unconstitutional, be they assayed against Section 2(1), Article XII
(D) of the 1973 Constitution or its counterpart provision in the 1987 Constitution.
The Court, however, takes note of the dispositive portion of PSJ-A, which states that:156
x x x x x x x x x
2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not be considered
special and/or fiduciary funds nor part of the general funds of the national government and similar
provisions of Sec. 3, Art. III, P.D. 961 and Sec. 5, Art. III, P.D. 1468 contravene the provisions
of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3). (Emphasis Ours)
x x x x x x x x x
However, a careful reading of the discussion in PSJ-A reveals that it is Section 5 of Article III of
P.D. No. 961 and not Section 3 of said decree, which is at issue, and which was therefore held
to be contrary to the Constitution. The dispositive portion of the said PSJ should therefore be corrected
to reflect the proper provision that was declared as unconstitutional, which is Section 5 of Article
III of P.D. No. 961 and not Section 3 thereof.
V beneficial and true owner.
The CIIF Companies and the CIIF Block
of SMC shares are public funds/assets
From the foregoing discussions, it is fairly established that the coconut levy funds are special public
funds. Consequently, any property purchased by means of the coconut levy funds should likewise
be treated as public funds or public property, subject to burdens and restrictions attached by law
to such property.
In this case, the 6 CIIF Oil Mills were acquired by the UCPB using coconut levy funds.157 On
the other hand, the 14 CIIF holding companies are wholly owned subsidiaries of the CIIF Oil Mills.158
Conversely, these companies were acquired using or whose capitalization comes from the coconut
levy funds. However, as in the case of UCPB, UCPB itself distributed a part of its investments in
the CIIF oil mills to coconut farmers, and retained a part thereof as administrator.159 The portion
distributed to the supposed coconut farmers followed the procedure outlined in PCA Resolution No.
033-78.160 And as the administrator of the CIIF holding companies, the UCPB authorized the
acquisition of the SMC shares.161 In fact, these companies were formed or organized solely for
the purpose of holding the SMC shares.162 As found by the Sandiganbayan, the 14 CIIF holding
companies used borrowed funds from the UCPB to acquire the SMC shares in the aggregate amount
of P1.656 Billion.163
Since the CIIF companies and the CIIF block of SMC shares were acquired using coconut levy funds
funds, which have been established to be public in character it goes without saying that these
acquired corporations and assets ought to be regarded and treated as government assets. Being
government properties, they are accordingly owned by the Government, for the coconut industry
pursuant to currently existing laws.164
It may be conceded hypothetically, as COCOFED et al. urge, that the 14 CIIF holding companies
acquired the SMC shares in question using advances from the CIIF companies and from UCPB loans.
But there can be no gainsaying that the same advances and UCPB loans are public in character,
constituting as they do assets of the 14 holding companies, which in turn are wholly-owned
subsidiaries of the 6 CIIF Oil Mills. And these oil mills were organized, capitalized and/or financed
using coconut levy funds. In net effect, the CIIF block of SMC shares are simply the fruits of the
coconut levy funds acquired at the expense of the coconut industry. In Republic v. COCOFED,165
the en banc Court, speaking through Justice (later Chief Justice) Artemio Panganiban, stated:
"Because the subject UCPB shares were acquired with government funds, the government becomes
their prima facie beneficial and true owner." By parity of reasoning, the adverted block of SMC shares,
acquired as they were with government funds, belong to the government as, at the very least, their
We thus affirm the decision of the Sandiganbayan on this point. But as We have earlier discussed,
reiterating our holding in Republic v. COCOFED, the States avowed policy or purpose in creating
the coconut levy fund is for the development of the entire coconut industry, which is one of the
major industries that promotes sustained economic stability, and not merely the livelihood of a
significant segment of the population.166 Accordingly, We sustain the ruling of the Sandiganbayan
in CC No. 0033-F that the CIIF companies and the CIIF block of SMC shares are public funds
necessary owned by the Government. We, however, modify the same in the following wise: These
shares shall belong to the Government, which shall be used only for the benefit of the coconut farmers
and for the development of the coconut industry.
Sandiganbayan did not err in ruling that
PCA (AO) No. 1, Series of 1975 and
PCA rules and regulations 074-78 did
not comply with the national standard
or policy of P.D. No. 755.
According to the petitioners, the Sandiganbayan has identified the national policy sought to be
enhanced by and expressed under Section 1 in relation to Section 2 of P.D. No. 755. Yet, so
petitioners argue, that court, with grave abuse of discretion, disregarded such policy and thereafter,
ruled that Section 1 in relation to Section 2 of P.D. No. 755 is unconstitutional as the decree failed
to promote the purpose for which it was enacted in the first place.
We are not persuaded. The relevant assailed portion of PSJ-A states:
We observe, however, that the PCA [AO] No. 1, Series of 1975 and PCA Rules and Regulations
074-78, did not take into consideration the accomplishment of the public purpose or the national
standard/policy of P.D. No. 755 which is directly to accelerate the development and growth of the
coconut industry and as a consequence thereof, to make the coconut farmers "participants in and
beneficiaries" of such growth and development.
It is a basic legal precept that courts do not look into the wisdom of the laws passed. The principle
of separation of powers demands this hands-off attitude from the judiciary. Saguiguit v. People167
teaches why:
[W]hat the petitioner asks is for the Court to delve into the policy behind or wisdom of a statute,
which, under the doctrine of separation of powers, it cannot do,. Even with the best of motives,
the Court can only interpret and apply the law and cannot, despite doubts about its wisdom, amend
or repeal it. Courts of justice have no right to encroach on the prerogatives of lawmakers, as long
as it has not been shown that they have acted with grave abuse of discretion. And while the judiciary
may interpret laws and evaluate them for constitutional soundness and to strike them down if they
are proven to be infirm, this solemn power and duty do not include the discretion to correct by reading
into the law what is not written therein.
We reproduce the policy-declaring provision of P.D. No. 755, thus:
Section 1. Declaration of National Policy. It is hereby declared that the policy of the State is
to provide readily available credit facilities to the coconut farmers at preferential rates; that this policy
can be efficiently realized by the implementation of the "Agreement for the Acquisition of a
Commercial Bank for the benefit of the Coconut Farmers" executed by the [PCA], the terms of which
"Agreement" are hereby incorporated by reference; and that the [PCA] is hereby authorized to
distribute, for free, the shares of stock of the bank it acquired to the coconut farmers under such
rules and regulations it may promulgate.
P.D. No. 755 having stated in no uncertain terms that the national policy of providing cheap credit
facilities to coconut farmers shall be achieved with the acquisition of a commercial bank, the Court
is without discretion to rule on the wisdom of such an undertaking. It is abundantly clear, however,
that the Sandiganbayan did not look into the policy behind, or the wisdom of, P.D. No. 755. In
context, it did no more than to inquire whether the purpose defined in P.D. No. 755 and for which
the coco levy fund was established would be carried out, obviously having in mind the (a) dictum
that the power to tax should only be exercised for a public purpose and (b) command of Section
29, paragraph 3 of Article VI of the 1987 Constitution that:
(3) All money collected on any tax levied for a special purpose shall be treated as a special fund
and paid out for such purpose only. If the purpose for which a special fund was created has been
fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government.
(Emphasis supplied)
For the above reason, the above-assailed action of the Sandiganbayan was well within the scope
of its sound discretion and mandate.
Moreover, petitioners impute on the anti-graft court the commission of grave abuse of discretion for
going into the validity of and in declaring the coco levy laws as unconstitutional, when there were
still factual issues to be resolved in a full blown trial as directed by this Court.168
Petitioners COCOFED and the farmer representatives miss the point. They acknowledged that their
alleged ownership of the sequestered shares in UCPB and SMC is predicated on the coco levy
decrees. Thus, the legality and propriety of their ownership of these valuable assets are directly related
to and must be assayed against the constitutionality of those presidential decrees. This is a primordial
issue, which must be determined to address the validity of the rest of petitioners claims of ownership.
Verily, the Sandiganbayan did not commit grave abuse of discretion, a phrase which, in the abstract,
denotes the idea of capricious or whimsical exercise of judgment or the exercise of power in an
arbitrary or despotic manner by reason of passion or personal hostility as to be equivalent to having
acted without jurisdiction.169
The Operative Fact Doctrine does not apply
Petitioners assert that the Sandiganbayans refusal to recognize the vested rights purportedly created
under the coconut levy laws constitutes taking of private property without due process of law. They
reason out that to accord retroactive application to a declaration of unconstitutionality would be unfair
inasmuch as such approach would penalize the farmers who merely obeyed then valid laws.
This contention is specious.
In Yap v. Thenamaris Ships Management,170 the Operative Fact Doctrine was discussed in that:
As a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties;
it affords no protection; it creates no office; it is inoperative as if it has not been passed at all.
The general rule is supported by Article 7 of the Civil Code, which provides:
Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall
not be excused by disuse or custom or practice to the contrary.
The doctrine of operative fact serves as an exception to the aforementioned general rule. In Planters
Products, Inc. v. Fertiphil Corporation, we held:
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity
and fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of
a statute prior to a determination of unconstitutionality is an operative fact and may have consequences
which cannot always be ignored. The past cannot always be erased by a new judicial declaration.
The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on
those who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration
of unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done
by a municipality in reliance upon a law creating it.171
In that case, this Court further held that the Operative Fact Doctrine will not be applied as an exception
when to rule otherwise would be iniquitous and would send a wrong signal that an act may be justified
when based on an unconstitutional provision of law.172
The Court had the following disquisition on the concept of the Operative Fact Doctrine in the case
of Chavez v. National Housing Authority:173
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated
that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is
valid and must be complied with, thus:
As the new Civil Code puts it: "When the courts declare a law to be inconsistent with the Constitution,
the former shall be void and the latter shall govern. Administrative or executive acts, orders and
regulations shall be valid only when they are not contrary to the laws of the Constitution." It is
understandable why it should be so, the Constitution being supreme and paramount. Any legislative
or executive act contrary to its terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not however be
sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with. This is so as
until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and
respect. Parties may have acted under it and may have changed their positions. What could be
more fitting than that in a subsequent litigation regard be had to what has been done while such
legislative or executive act was in operation and presumed to be valid in all respects. It is now
accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned
with. This is merely to reflect awareness that precisely because the judiciary is the governmental
organ which has the final say on whether or not a legislative or executive measure is valid, a period
of time may have elapsed before it can exercise the power of judicial review that may lead to a
declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if
there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior
to such a determination [of unconstitutionality], is an operative fact and may have consequences
which cannot justly be ignored. The past cannot always be erased by a new judicial declaration.
The effect of the subsequent ruling as to invalidity may have to be considered in various aspects,
with respect to particular relations, individual and corporate, and particular conduct, private and
official." This language has been quoted with approval in a resolution in Araneta v. Hill and the
decision in Manila Motor Co., Inc. v. Flores. An even more recent instance is the opinion of Justice
Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (Emphasis supplied.)
The principle was further explicated in the case of Rieta v. People of the Philippines, thus:
In similar situations in the past this Court had taken the pragmatic and realistic course set forth
in Chicot County Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having been found to
be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no
duties, and hence affording no basis for the challenged decree. It is quite clear, however, that
such broad statements as to the effect of a determination of unconstitutionality must be taken with
qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an
operative fact and may have consequences which cannot justly be ignored. The past cannot always
be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may
have to be considered in various aspects with respect to particular conduct, private and official.
Questions of rights claimed to have become vested, of status, of prior determinations deemed to
have finality and acted upon accordingly, of public policy in the light of the nature both of the statute
and of its previous application, demand examination. These questions are among the most difficult
of those which have engaged the attention of courts, state and federal, and it is manifest from
numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity
cannot be justified.
Moreover, the Court ruled in Chavez that:
Furthermore, when petitioner filed the instant case against respondents on August 5, 2004, the JVAs
were already terminated by virtue of the MOA between the NHA and RBI. The respondents had
no reason to think that their agreements were unconstitutional or even questionable, as in fact, the
concurrent acts of the executive department lent validity to the implementation of the Project. The
SMDRP agreements have produced vested rights in favor of the slum dwellers, the buyers of reclaimed
land who were issued titles over said land, and the agencies and investors who made investments
in the project or who bought SMPPCs. These properties and rights cannot be disturbed or questioned
after the passage of around ten (10) years from the start of the SMDRP implementation. Evidently,
the "operative fact" principle has set in. The titles to the lands in the hands of the buyers can no
longer be invalidated.174
In the case at bar, the Court rules that the dictates of justice, fairness and equity do not support
the claim of the alleged farmer-owners that their ownership of the UCPB shares should be respected.
Our reasons:
1. Said farmers or alleged claimants do not have any legal right to own the UCPB shares distributed
to them. It was not successfully refuted that said claimants were issued receipts under R.A. 6260
for the payment of the levy that went into the Coconut Investment Fund (CIF) upon which shares
in the "Coconut Investment Company" will be issued. The Court upholds the finding of the
Sandiganbayan that said investment company is a different corporate entity from the United Coconut
Planters Bank. This was in fact admitted by petitioners during the April 17, 2001 oral arguments
in G.R. Nos. 147062-64.175
The payments under R.A. 6260 cannot be equated with the payments under P.D. No. 276, the
first having been made as contributions to the Coconut Investment Fund while the payments under
P.D. No. 276 constituted the Coconut Consumers Stabilization Fund ("CCSF"). R.A. 6260 reads:
Section 2. Declaration of Policy. It is hereby declared to be the national policy to accelerate the
development of the coconut industry through the provision of adequate medium and long-term
financing for capital investment in the industry, by instituting a Coconut Investment fund capitalized
and administered by coconut farmers through a Coconut Investment Company.176
P.D. No. 276 provides:
1. In addition to its powers granted under Presidential Decree No. 232, the Philippine Coconut
Authority is hereby authorized to formulate and immediately implement a stabilization scheme for
coconut-based consumer goods, along the following general guidelines:
(a) .
The proceeds from the levy shall be deposited with the Philippine National Bank or any other
government bank to the account of the Coconut Consumers Stabilization Fund, as a separate trust
fund which shall not form part of the general fund of the government.
(b) The Fund shall be utilized to subsidize the sale of coconut-based products at prices set by
the Price Control Council, under rules and regulations to be promulgated by the Philippine Consumers
Stabilization Committee.177
The PCA, via Resolution No. 045-75 dated May 21, 1975, clarified the distinction between the
CIF levy payments under R.A. 6260 and the CCSF levy paid pursuant to P.D. 276, thusly:
It must be remembered that the receipts issued under R.A. No. 6260 were to be registered in
exchange for shares of stock in the Coconut Investment Company (CIC), which obviously is a
different corporate entity from UCPB. This fact was admitted by petitioners during the April 17, 2001
oral arguments in G.R. Nos. 147062-64.
In fact, while the CIF levy payments claimed to have been paid by petitioners were meant for the
CIC, the distribution of UCPB stock certificates to the coconut farmers, if at all, were meant for the
payors of the CCSF in proportion to the coconut farmers CCSF contributions pursuant to PCA
Resolution No. 045-75 dated May 21, 1975:
RESOLVED, FURTHER, That the amount of ONE HUNDRED FIFTY MILLION (P150,000,000.00)
PESOS be appropriated and set aside from available funds of the PCA to be utilized in payment
for the shares of stock of such existing commercial bank and that the Treasurer be instructed to
disburse the said amount accordingly.
x x x x x x x x x
RESOLVED, FINALLY, That be directed to organize a team which shall prepare a list of coconut
farmers who have paid the levy and contributed to the [CCSF] and to prepare a stock distribution
plan to the end that the aforesaid coconut farmers shall receive certificates of stock of such commercial
bank in proportion to their contributions to the Fund.
Unfortunately, the said resolution was never complied with in the distribution of the so-called "farmers"
UCPB shares.
The payments therefore under R.A. 6260 are not the same as those under P.D. No. 276. The
amounts of CIF contributions under R.A. 6260 which were collected starting 1971 are undeniably
different from the CCSF levy under P.D. No. 276, which were collected starting 1973. The two
(2) groups of claimants differ not only in identity but also in the levy paid, the amount of produce
and the time the government started the collection.
Thus, petitioners and the alleged farmers claiming them pursuant to R.A. 6260 do not have any
legal basis to own the UCPB shares distributed to them, assuming for a moment the legal feasibility
of transferring these shares paid from the R.A. 6260 levy to private individuals.
2. To grant all the UCPB shares to petitioners and its alleged members would be iniquitous and
prejudicial to the remaining 4.6 million farmers who have not received any UCPB shares when in
fact they also made payments to either the CIF or the CCSF but did not receive any receipt or
who was not able to register their receipts or misplaced them.
Section 1 of P.D. No. 755 which was declared unconstitutional cannot be considered to be the
legal basis for the transfer of the supposed private ownership of the UCPB shares to petitioners
who allegedly paid the same under R.A. 6260. The Solicitor General is correct in concluding that
such unauthorized grant to petitioners constitutes illegal deprivation of property without due process
of law. Due process of law would mean that the distribution of the UCPB shares should be made
only to farmers who have paid the contribution to the CCSF pursuant to P.D. No. 276, and not
to those who paid pursuant to R.A. 6260. What would have been the appropriate distribution scheme
was violated by Section 1 of P.D. No. 755 when it required that the UCPB shares should be
distributed to coconut farmers without distinction in fact, giving the PCA limitless power and free
hand, to determine who these farmers are, or would be.
We cannot sanction the award of the UCPB shares to petitioners who appear to represent only 1.4
million members without any legal basis to the extreme prejudice of the other 4.6 million coconut
farmers (Executive Order No. 747 fixed the number of coconut farmers at 6 million in 1981).
Indeed, petitioners constitute only a small percentage of the coconut farmers in the Philippines. Thus,
the Sandiganbayan correctly declared that the UCPB shares are government assets in trust for the
coconut farmers, which would be more beneficial to all the coconut farmers instead of a very few
dubious claimants;
3. The Sandiganbayan made the finding that due to enormous operational problems and administrative
complications, the intended beneficiaries of the UCPB shares were not able to receive the shares
due to them. To reiterate what the anti-graft court said:
The actual distribution of the bank shares was admittedly an enormous operational problem which First Distribution - 12,573,059
resulted in the failure of the intended beneficiaries to receive their shares of stocks in the bank,
as shown by the rules and regulations, issued by the PCA, without adequate guidelines being provided
to it by P.D. No. 755. PCA Administrative Order No. 1, Series of 1975 (August 20, 1975), Second Distribution - 10,841,409
"Rules and Regulations Governing the Distribution of Shares of Stock of the Bank Authorized to
be Acquired Pursuant to PCA Board Resolution No. 246-75", quoted hereunder discloses how the
undistributed shares of stocks due to anonymous coconut farmers or payors of the coconut levy fees
were authorized to be distributed to existing shareholders of the Bank: Third Distribution - 11,158,326

"Section 9. Fractional and Undistributed Shares Fractional shares and shares which remain 34,572,794
undistributed as a consequence of the failure of the coconut farmers to register their COCOFUND
receipts or the destruction of the COCOFUND receipts or the registration of the COCOFUND receipts
in the name of an unqualified individual, after the final distribution is made on the basis of the "WHEREAS, there is, therefore, a total of 51,200,806 shares still available for distribution among
consolidated IBM registration Report as of March 31, 1976 shall be distributed to all the coconut the coconut farmers;
farmers who have qualified and received equity in the Bank and shall be apportioned among them,
as far as practicable, in proportion to their equity in relation to the number of undistributed equity
and such further rules and regulations as may hereafter be promulgated.
WHEREAS, it was determined by the PCA Board, in consonance with the policy of the state on
the integration of the coconut industry, that the Bank shares must be widely distributed as possible
among the coconut farmers, for which purpose a national census of coconut farmers was made through
The foregoing PCA issuance was further amended by Resolution No. 074-78, still citing the same the Philippine Coconut Producers Federation (COCOFED);
problem of distribution of the bank shares. This latter Resolution is quoted as follows:

WHEREAS, to implement such determination of the PCA Board, there is a need to accordingly amend
RESOLUTION NO. 074-78 Administrative Order No. 1, Series of 1975;

AMENDMENT OF ADMINISTRATIVE ORDER NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED, that the remaining
51,200,806 shares of stock of the Bank authorized to be acquired pursuant to the PCA Board
Resolution No. 246-75 dated July 25, 1975 be distributed as follows:
NO. 1, SERIES OF 1975, GOVERNING THE

(1) All the coconut farmers who have received their shares in the equity of the Bank on the basis
DISTRIBUTION OF SHARES of Section 8 of Administrative Order No. 1, Series of 1975, shall receive additional share for each
share presently owned by them;

WHEREAS, pursuant to PCA Board Resolution No. 246-75, the total par value of the shares of
stock of the Bank purchased by the PCA for the benefit of the coconut farmers is P85,773,600.00 (2) Fractional shares shall be completed into full shares, and such full shares shall be distributed
with a par value of P1.00 per share or equivalent to 85,773.600 shares; among the coconut farmers who qualified for the corresponding fractional shares;

WHEREAS, out of the 85,773,600 shares, a total of 34,572,794 shares have already been (3) The balance of the shares, after deducting those to be distributed in accordance with (1)
distributed in accordance with Administrative Order No. 1, Series of 1975, to wit: and (2) above, shall be transferred to COCOFED for distribution, immediately after completion of
the national census of coconut farmers prescribed under Resolution No. 033-78 of the PCA Board,
to all those who are determined by the PCA Board to be bona fide coconut farmers and have not
received shares of stock of the Bank. The shares shall be equally determined among them on the
basis of per capita.
RESOLVED, FURTHER, That the rules and regulations under Administrative Order No. 1, Series
of 1975, which are inconsistent with this Administrative Order be, as they are hereby, repealed
and/or amended accordingly."
Thus, when 51,200,806 shares in the bank remained undistributed, the PCA deemed it proper
to give a "bonanza" to coconut farmers who already got their bank shares, by giving them an additional
share for each share owned by them and by converting their fractional shares into full shares. The
rest of the shares were then transferred to a private organization, the COCOFED, for distribution
to those determined to be "bona fide coconut farmers" who had "not received shares of stock of
the Bank." The distribution to the latter was made on the basis of "per capita", meaning without
regard to the COCOFUND receipts. The PCA considered itself free to disregard the said receipts
in the distribution of the shares although they were considered by the May 25, 1975 Agreement
between the PCA and defendant Cojuangco (par. [8] of said Agreement) and by Sections 1, 3,
4, 6 and 9, PCA Administrative Order No. 1, Series of 1975 as the basis for the distribution of
shares.
The PCA thus assumed, due to lack of adequate guidelines set by P.D. No. 755, that it had complete
authority to define who are the coconut farmers and to decide as to who among the coconut farmers
shall be given the gift of bank shares; how many shares shall be given to them, and what basis
it shall use to determine the amount of shares to be distributed for free to the coconut farmers.
In other words, P.D. No. 755 fails the completeness test which renders it constitutionally infirm.
Due to numerous flaws in the distribution of the UCPB shares by PCA, it would be best for the
interest of all coconut farmers to revert the ownership of the UCBP shares to the government for
the entire coconut industry, which includes the farmers;
4. The Court also takes judicial cognizance of the fact that a number, if not all, of the coconut
farmers who sold copra did not get the receipts for the payment of the coconut levy for the reason
that the copra they produced were bought by traders or middlemen who in turn sold the same to
the coconut mills. The reality on the ground is that it was these traders who got the receipts and
the corresponding UCPB shares. In addition, some uninformed coconut farmers who actually got the
COCOFUND receipts, not appreciating the importance and value of said receipts, have already sold
said receipts to non-coconut farmers, thereby depriving them of the benefits under the coconut levy
laws. Ergo, the coconut farmers are the ones who will not be benefited by the distribution of the
UCPB shares contrary to the policy behind the coconut levy laws. The nullification of the distribution
of the UCPB shares and their transfer to the government for the coconut industry will, therefore,
ensure that the benefits to be deprived from the UCPB shares will actually accrue to the intended
beneficiaries the genuine coconut farmers.
From the foregoing, it is highly inappropriate to apply the operative fact doctrine to the UCPB shares.
Public funds, which were supposedly given utmost safeguard, were haphazardly distributed to private
individuals based on statutory provisions that are found to be constitutionally infirm on not only one
but on a variety of grounds. Worse still, the recipients of the UCPB shares may not actually be
the intended beneficiaries of said benefit. Clearly, applying the Operative Fact Doctrine would not
only be iniquitous but would also serve injustice to the Government, to the coconut industry, and
to the people, who, whether willingly or unwillingly, contributed to the public funds, and therefore
expect that their Government would take utmost care of them and that they would be used no less,
than for public purpose.
We clarify that PSJ-A is subject of another petition for review interposed by Eduardo Cojuangco,
Jr., in G.R. No. 180705 entitled, Eduardo M. Cojuangco, Jr. v. Republic of the Philippines, which
shall be decided separately by this Court. Said petition should accordingly not be affected by this
Decision save for determinatively legal issues directly addressed herein.
WHEREFORE, the petitions in G.R. Nos. 177857-58 and 178793 are hereby DENIED. The Partial
Summary Judgment dated July 11, 2003 in Civil Case No. 0033-A as reiterated with modification
in Resolution dated June 5, 2007, as well as the Partial Summary Judgment dated May 7, 2004
in Civil Case No. 0033-F, which was effectively amended in Resolution dated May 11, 2007,
are AFFIRMED with modification, only with respect to those issues subject of the petitions in G.R.
Nos. 177857-58 and 178193. However, the issues raised in G.R. No. 180705 in relation to
Partial Summary Judgment dated July 11, 2003 and Resolution dated June 5, 2007 in Civil Case
No. 0033-A, shall be decided by this Court in a separate decision.
The Partial Summary Judgment in Civil Case No. 0033-A dated July 11, 2003, is hereby
MODIFIED, and shall read as follows:
WHEREFORE, in view of the foregoing, We rule as follows:
SUMMARY OF THE COURTS RULING.
A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY JUDGMENT dated April 11, 2001
filed by Defendant Maria Clara L. Lobregat, COCOFED, et al., and Ballares, et al.
The Class Action Motion for Separate Summary Judgment dated April 11, 2001 filed by defendant
Maria Clara L. Lobregat, COCOFED, et al. and Ballares, et al., is hereby DENIED for lack of merit.
 x x x x x x x x x
B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: COCOFED, ET AL. AND BALLARES,
ET AL.) dated April 22, 2002 filed by Plaintiff.
So ordered.

1. a. The portion of Section 1 of P.D. No. 755, which reads:

and that the Philippine Coconut Authority is hereby authorized to distribute, for free, the shares
of stock of the bank it acquired to the coconut farmers under such rules and regulations it may
promulgate.
taken in relation to Section 2 of the same P.D., is unconstitutional: (i) for having allowed the use
of the CCSF to benefit directly private interest by the outright and unconditional grant of absolute
ownership of the FUB/UCPB shares paid for by PCA entirely with the CCSF to the undefined "coconut
farmers", which negated or circumvented the national policy or public purpose declared by P.D. No.
755 to accelerate the growth and development of the coconut industry and achieve its vertical
integration; and (ii) for having unduly delegated legislative power to the PCA.
The Partial Summary Judgment in Civil Case No. 0033-F dated May 7, 2004, is hereby MODIFIED,
and shall read as follows:
WHEREFORE, the Motion for Execution of Partial summary judgment (re: CIIF Block of Smc Shares
of Stock) dated August 8, 2005 of the plaintiff is hereby denied for lack of merit. However, this
Court orders the severance of this particular claim of Plaintiff. The Partial Summary Judgment dated
May 7, 2004 is now considered a separate final and appealable judgment with respect to the said
CIIF Block of SMC shares of stock.1avvphi1
The Partial Summary Judgment rendered on May 7, 2004 is modified by deleting the last paragraph
of the dispositive portion, which will now read, as follows:

b. The implementing regulations issued by PCA, namely, Administrative Order No. 1, Series of 1975
and Resolution No. 074-78 are likewise invalid for their failure to see to it that the distribution
of shares serve exclusively or at least primarily or directly the aforementioned public purpose or
national policy declared by P.D. No. 755.
Wherefore, in view of the foregoing, we hold that:
The Motion for Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding Companies
and Cocofed, et al) filed by Plaintiff is hereby GRANTED. Accordingly, the CIIF Companies, namely:

2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not be considered
special and/or fiduciary funds nor part of the general funds of the national government and similar 1. Southern Luzon Coconut Oil Mills (SOLCOM);
provisions of Sec. 5, Art. III, P.D. No. 961 and Sec. 5, Art. III, P.D. No. 1468 contravene the
provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3).
2. Cagayan de Oro Oil Co., Inc. (CAGOIL);

3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and validly obtained title of
ownership over the subject UCPB shares by virtue of P.D. No. 755, the Agreement dated May
25, 1975 between the PCA and defendant Cojuangco, and PCA implementing rules, namely, Adm. 3. Iligan Coconut Industries, Inc. (ILICOCO);
Order No. 1, s. 1975 and Resolution No. 074-78.

4. San Pablo Manufacturing Corp. (SPMC);

4. The so-called "Farmers UCPB shares" covered by 64.98% of the UCPB shares of stock, which
formed part of the 72.2% of the shares of stock of the former FUB and now of the UCPB, the
entire consideration of which was charged by PCA to the CCSF, are hereby declared conclusively 5. Granexport Manufacturing Corp. (GRANEX); and
owned by, the Plaintiff Republic of the Philippines.
6. Legaspi Oil Co., Inc. (LEGOIL), 13. Valhalla Properties Ltd., Inc.; and

As well as the 14 Holding Companies, namely: 14. First Meridian Development, Inc.

1. Soriano Shares, Inc.; AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION (SMC) SHARES OF STOCK TOTALING
33,133,266 SHARES AS OF 1983 TOGETHER WITH ALL DIVIDENDS DECLARED, PAID AND
ISSUED THEREON AS WELL AS ANY INCREMENTS THERETO ARISING FROM, BUT NOT
2. ACS Investors, Inc.; LIMITED TO, EXERCISE OF PRE-EMPTIVE RIGHTS ARE DECLARED OWNED BY THE
GOVERNMENT TO BE USED ONLY FOR THE BENEFIT OF ALL COCONUT FARMERS AND FOR
THE DEVELOPMENT OF THE COCONUT INDUSTRY, AND ORDERED RECONVEYED TO THE
GOVERNMENT.
3. Roxas Shares, Inc.;

The Court affirms the Resolutions issued by the Sandiganbayan on June 5, 2007 in civil case no.
4. Arc Investors; Inc.; 0033-A and ON May 11, 2007 in civil case No. 0033-F, that there is no more necessity of
further trial with respect to the issue of ownership of (1) the sequestered UCPB shares, (2) the
CIIF block of SMC shares, and (3) the CIIF companies. as they have finally been ADJUDICATED
5. Toda Holdings, Inc.; in the AFOREMENTIONED PARTIAL SUMMARY JUDGMENTS DATED jULY 11, 2003 AND mAY
7, 2004.

6. AP Holdings, Inc.;
SO ORDERED.

7. Fernandez Holdings, Inc.;

CITY OF DUMAGUETE, herein Represented by City Mayor, Agustin R. Perdices,

8. SMC Officers Corps, Inc.;

Petitioner,

9. Te Deum Resources, Inc.;

10. Anglo Ventures, Inc.;

11. Randy Allied Ventures, Inc.;

12. Rock Steel Resources, Inc.;

- versus -
 BERSAMIN,

DEL CASTILLO, and

VILLARAMA, JR., JJ.

PHILIPPINE PORTS AUTHORITY,

Respondent. Promulgated:

August 24, 2011

G.R. No. 168973 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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

Present:

D E C I S I O N

CORONA, C.J.,

Chairperson,

LEONARDO-DE CASTRO, J.:

LEONARDO-DE CASTRO,
 and Natural Resources] DENR, Regional Office, Cebu City herein attached as ANNEX B) and
technical descriptions attached hereto (technical description attached as ANNEX C) and made a
part hereof;

Before Us is a Petition for Review under Rule 45 of the Rules of Court assailing the Decision[1]
dated March 4, 2005 and Resolution[2] dated June 6, 2005 of the Court Appeals in CA-G.R.
SP No. 64379, which granted the Petition for Certiorari and Prohibition of respondent Philippine
Ports Authority and set aside the Orders dated December 7, 2000 and February 20, 2001 of
the Regional Trial Court (RTC), Branch 44 of the City of Dumaguete in LRC Case No. N-201. 2. That said land at the last assessment for taxation was assessed at
P676,250, Philippine currency, with market value of P1,352,500.00, Philippine currency.
(Declaration of Real Property with the assessed and market values attached as ANNEX D);

The antecedent facts are as follows:

3. That to the best of my knowledge and belief, there is no mortgage or
encumbrance of any kind whatsoever affecting said land, nor another person having any estate or
interest therein, legal or equitable, in possession, remainder, reversion or expectancy;

On October 14, 1998, petitioner City of Dumaguete, through Mayor Felipe Antonio B. Remollo
(Remollo), filed before the RTC an Application for Original Registration of Title over a parcel of
land with improvements, located at Barangay Looc, City of Dumaguete (subject property), under
the Property Registration Decree. The application was docketed as LRC Case No. N-201.
4. That the land was acquired by possessory title in open, continuous,
adverse occupation and possession in the concept of owner for more than thirty years since 1960
(please refer to ANNEX A);

Petitioner alleged in support of its application:

5. That the land is adjoined by the following:

1. That the applicant, City of Dumaguete through its Honorable Mayor Felipe
Antonio B. Remollo, is the owner of the land subject of this application with all improvements and
buildings comprising the Engineers Compound where it is now situated and has been in continuous
occupation and possession of the same for more than 30 years or from the year 1960 (Affidavit NorthWest
of Ownership executed by Felipe Antonio G. Remollo, the City Mayor, dated August 21, 1998 herein
attached as ANNEX A). The said land consist of 5,410 square meters and is situated and bounded
and described as shown on the plan (true and photostatic copies of the original plan marked NorthEast
Psu-07-006805 approved by the Regional Technical Director of the [Department of Environment
SouthEast

a) two blue print copies of the approved plan;

All along line 1-2-3-4-5-6-7-8-9-10 by Flores Avenue, City Road and the Dumaguete Port
Road

b) two copies of the technical description of the lot sought to be registered;

SouthWest along line 10-1 by Plan Msi-V-20453

c) two copies of the Surveyors certificate;

x x x x

d) a certificate in quadruplicate of the City Assessor of the assessed value

8. That the land included is bounded on the West by Flores Avenue and on the North by the City of the land;
Road, all public highways and on the East by the Dumaguete Port Road, a private road made part
of the Port Zone.[3]

e) all original muniments of title in the possession of the applicant which

prove ownership of the land;

In an Order[4] dated October 23, 1998, the RTC noted that:

f) two copies of the petition/application.

A perusal of the records of the case shows that the annexes lack the following copies:
Further, the application did not state the number of the lot sought to be registered, the number of
parcels applied for, the improvements found thereon, and indicate whether it claims a portion of the
road which serves as a boundary line.
All these must be alleged in the petition so that the Court will know the nature of the property.
The RTC explained that the extra copies submitted by petitioner shall be forwarded by the RTC
Clerk of Court to the Land Registration Commission (LRC) in Manila for comment. Only thereafter
would the RTC set the application for hearing.
Petitioner filed its Compliance[5] with the above-mentioned Order, submitting additional copies of
the required documents and clarifying thus:
1. The approved plan does not state the number of lot sought to be
registered because it is a public land, thus, only PSU-07-006805 appears on the plan which is
being applied for registration;
2. Only one (1) parcel of land is applied for by petitioners which consist
of five thousand four hundred ten (5,410) square meters, more or less;
3. The City Engineers Building within the City Engineers compound are the
only improvement found thereon; and
4. Petitioners do not claim any portion of the road which serves as a
boundary line.
The RTC accordingly set the initial hearing of LRC Case No. N-201 on April 12, 1999, and sent
notices to the parties.
The Republic of the Philippines, represented by the Director of Lands, and respondent, represented
by the Office of the Government Corporate Counsel, filed separate Oppositions [6] to the application
for registration of petitioner. Both the Republic and respondent averred that petitioner may not register
the subject property in its name since petitioner had never been in open, continuous, exclusive, and
notorious possession of the said property for at least 30 years immediately preceding the filing of
the application; and the subject property remains to be a portion of the public domain which belongs
to the Republic.
After several postponements of the scheduled hearings, petitioner presented the testimony of its first
witness, Engineer Rilthe P. Dorado (Engr. Dorado), on January 14, 2000. Engr. Dorados
examination on the witness stand was terminated on April 7, 2000. The presentation of the other
witnesses of petitioner was then scheduled to continue on June 2, 2000.[7]
However, before the next hearing, respondent filed a Motion to Dismiss,[8] seeking the dismissal
of LRC Case No. N-201 on the ground that the RTC lacked jurisdiction to hear and decide the
case. Respondent argued that Section 14(1) of Presidential Decree No. 1529, otherwise known
as the Property Registration Decree, refers only to alienable and disposable lands of the public domain
under a bona fide claim of ownership. The subject property in LRC Case No. N-201 is not alienable
and disposable, since it is a foreshore land, as explicitly testified to by petitioners own witness, Engr.
Dorado. A foreshore land is not registerable. This was precisely the reason why, respondent points
out, that the subject property was included in Presidential Proclamation No. 1232 (delineating the
territorial boundaries of the Dumaguete Port Zone), so that the same would be administered and
managed by the State, through respondent, for the benefit of the people.
The Court agrees with [herein respondent] Philippine Ports Authority that the basis of the [herein
petitioners] application for original registration of the subject lot is Section 14 of the Presidential
Decree No. 1529, otherwise known as the Property Registration Decree. A circumspect scrutiny
of said Section readily shows that it refers to alienable and disposable lands of the public domain
as proper subjects of registration, provided the applicant has met the other requirements such as
open, continuous, exclusive and notorious possession for at least thirty (30) years under a bona
fide claim of ownership.

In its Terse Opposition to Oppositors Motion to Dismiss, petitioner claimed that the subject property
was a swamp reclaimed about 40 years ago, which it occupied openly, continuously, exclusively,
and notoriously under a bona fide claim of ownership. The technical description and approved plan
of the subject property showed that the said property was not bounded by any part of the sea.
Petitioner invoked Republic Act No. 1899,[9] which authorizes chartered cities and municipalities
to undertake and carry out, at their own expense, the reclamation of foreshore lands bordering them;
and grants said chartered cities and municipalities ownership over the reclaimed lands. Presidential
Proclamation No. 1232 is immaterial to the present application for registration because it merely
authorizes respondent to administer and manage the Dumaguete Port Zone and does not confer upon It having been shown by [petitioners] own evidence that the lot subject of the application for original
respondent ownership of the subject property.[10] registration is a foreshore land, and therefore not registerable (Dizon, et al. vs. Bayona, et al., 98
SCRA 942, 944), the application must be denied.

Respondent filed a Reply/Rejoinder (To Applicants Opposition to Oppositors Motion to Dismiss),

[11] asserting that there are no factual or legal basis for the claim of petitioner that the subject
property is reclaimed land. Petitioner sought the original registration of its title over the subject property
acquired through alleged continuous possession for 30 years under Section 14(1) of the Property
Registration Decree, and not through the reclamation of the said property at its own expense under
Republic Act No. 1899. The present claim of petitioner that the subject property is reclaimed land
should not be allowed for it would improperly change the earlier theory in support of the application
for registration. Respondent reiterated that the subject property is foreshore land which cannot be
registered; and that Presidential Proclamation No. 1232 is very material to LRC Case No. N-201
because it confirms that areas within the Dumaguete Port Zone, including the subject property, are
not alienable and disposable lands of the public domain.
Again as correctly argued by [respondent], [petitioners] reliance on Republic Act 1899 which
authorizes all municipalities and chartered cities to undertake and carry out the reclamation by dredging,
filling or other means of any foreshore lands bordering them and which confers ownership on them
of the lands so reclaimed, is misplaced, as such has never been alleged in the application. It is
fundamental that a party cannot prove what it has not alleged in his complaint or application, as
in this case.

The admission by Engr. Dorado that there is no formal declaration from the executive branch of
government or law passed by Congress that the land in question is no longer needed for public
use or special industries x x x further militates against the application.

On September 7, 2000, the RTC issued an Order[12] granting the Motion to Dismiss of respondent
based on the following ratiocination:

Moreover, the authority granted to municipalities and chartered cities to undertake and carry out at
their own expense the reclamation by dredging, filling, or other means, of any foreshore lands
bordering them is for the purpose of establishing, providing, constructing, maintaining, and repairing
proper and adequate docking and harbor facilities as such municipalities and chartered cities may
determine in consultation with the Secretary of Finance and the Secretary of Public Works and
Communications.
By its own evidence, [petitioner] has utilized the subject property allegedly reclaimed by it as Office
of the City Engineer and not as docking and harboring facilities. [Petitioner] has failed to show that
such reclamation was undertaken by it in consultation with the Secretary of Finance and the Secretary
of Public Works and Communications.[13]
The RTC decreed in the end that the instant application for original registration is dismissed for lack
of merit.[14]
In its Motion for Reconsideration[15] and Supplemental Motion for Reconsideration,[16] petitioner
contended that the dismissal of its application was premature and tantamount to a denial of its right
to due process. It has yet to present evidence to prove factual matters in support of its application,
such as the subject property already being alienable and disposable at the time it was occupied
and possessed by petitioner.
Petitioner also pointed out that its witness, Engr. Dorado, testified only as to the physical status
of the land in question at the time when the cadastral survey of Dumaguete was made sometime
in 1916.[17] In fact, Engr. Dorado expressly testified that the subject property was part of the shore
or foreshore a long time ago[;][18] and he did not testify at all that the subject property was a
foreshore lot at the time petitioner occupied and possessed the same. The physical state of the subject
property had already changed since 1916. It is now within the alienable and disposable area as
per the Land Classification Map No. 674, Project No. 1-D, BL C-6, certified on July 3, 1927,
of the Bureau of Lands, now Land Management Sector of the Department of Environment and Natural
Resources[,][19] as verified and certified by the Chief of the Map Projection Section, Land
Management Sector, DENR Regional Office in Cebu City, who has yet to take the witness stand
before the RTC.
Petitioner insisted that the RTC should continue with the hearing of LRC Case No. N-201 and
allow petitioner to present evidence that the subject property is reclaimed land. Petitioner sufficiently
alleged in its application for registration that it has been in open, continuous, exclusive, and notorious
possession of the [subject property] for more than thirty (30) years under a bona fide claim of
ownership.[20] In support of such allegation, petitioner must necessarily prove that the subject
property was previously a swampy area, which had to be filled or reclaimed before the construction
of the City Engineers Office building thereon.
Respondent based its Opposition (To Applicants Motion for Reconsideration dated September 28,
2000)[21] and Opposition (To Applicants Supplemental Motion for Reconsideration)[22] on
technical and substantive grounds.
According to respondent, the Motion for Reconsideration of petitioner violated Sections 4 (Hearing
of motion), 5 (Notice of hearing), and 6 (Proof of service necessary), Rule 15 of the Rules
of Court. Petitioner did not set its Motion for Reconsideration for hearing even when the said Motion
could not be considered as non-litigable. The RTC could not hear the motion for reconsideration
ex parte as they are prejudicial to the rights of respondent. Petitioner also failed to comply with
Section 11, Rule 13 of the Rules of Court when it did not attach to the Motion for Reconsideration
a written explanation why it did not resort to personal service of the said Motion. Thus, respondent
averred that the Motion for Reconsideration of petitioner should be treated as a mere scrap of paper
with no legal effect. It did not interrupt the reglementary period to appeal and the RTC Order dated
September 7, 2000, dismissing LRC Case No. N-201, had already attained finality. Respondent
also pointed out that the Supplemental Motion for Reconsideration of petitioner suffered from the
same fatal defects as the original Motion for Reconsideration.
Respondent again posited that the subject property was foreshore land belonging to the State and
not subject to private appropriation, unless the same had already been declared by the executive
or legislative department of the national government as no longer needed for coast guard service,
public use, or special industries, and classified as alienable and disposable. Full- blown trial in LRC
Case No. N-201 was no longer necessary as the evidence so far presented by petitioner had already
established that the RTC lacked jurisdiction over the subject matter of the case.
In its Order[23] dated November 16, 2000, the RTC initially agreed with respondent that the Motion
for Reconsideration of petitioner violated Sections 4, 5, and 6, Rule 15 and Section 11, Rule 13
of the Rules of Court. Resultantly, the Motion for Reconsideration of petitioner was considered as
not filed and did not toll the running of the period to file an appeal, rendering final and executory
the order of dismissal of LRC Case No. N-201.
However, after taking into consideration the Supplemental Motion for Reconsideration of petitioner,
the RTC issued another Order[24] dated December 7, 2000, setting aside its Order dated
September 7, 2000 in the interest of justice and resolving to have a full-blown proceeding to
determine factual issues in LRC Case No. N-201.
It was then the turn of respondent to file with the RTC a Motion for Reconsideration[25] of the
Order dated December 7, 2000. In an Order[26] dated February 20, 2001, the RTC denied the
motion of respondent and admitted the following:
A thorough review and perusal of the disputed order dated September 7, 2000 and December 7,
2000, whereby this Court dismissed [petitioners] petition for registration of Lot No. 1, Dumaguete
Cadastre, and later set aside the Order of September 7, 2000, shows that there was honest mistake
in declaring said lot 1, as a shoreline. Indeed, the adjoining lots are already titled and bounded
by a City Road. It is not bounded by a sea. The Court wants to correct this error in its findings
on the September 7, 2000 Order, that Lot No. 1 is situated on the shoreline of Dumaguete City.
The Court simply committed an oversight on the petitioners evidence that the lot in question is a
foreshore land x x x when in fact it is not. And it is for this reason that the court reconsidered
and set aside said September 7, 2000 Order, to correct the same while it is true that said September
7, 2000 Order had attained its finality, yet this Court cannot in conscience allow injustice to
perpetuate in this case and that hearing on the merits must proceed to determine the legality and
truthfulness of its application for registration of title.
Respondent sought recourse from the Court of Appeals by filing a Petition for Certiorari and Prohibition
under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 64379. Respondent challenged
the RTC Orders dated December 7, 2000 and February 20, 2001 for having been issued by the
RTC in grave abuse of discretion amounting to lack or excess of jurisdiction. Respondent reiterated
that the RTC Order dated September 7, 2000, dismissing LRC Case No. N-201 had already
attained finality. The defects of the Motion for Reconsideration of petitioner rendered the same as
a mere scrap of paper, which did not toll the running of the prescriptive period to appeal the RTC
Order dated September 7, 2000.
The Court of Appeals, in its Decision dated March 4, 2005, found merit in the Petition of respondent
and set aside the RTC Orders dated December 7, 2000 and February 20, 2001. The appellate
court, in its Resolution dated June 6, 2005, denied the Motion for Reconsideration of petitioner.
Hence, petitioner comes before us via the instant Petition for Review with the following assignment
of error:
 The grant of a petition for certiorari under Rule 65 of the Rules of Court requires grave abuse of
discretion amounting to lack or excess of jurisdiction. Grave abuse of discretion exists where an act
is performed with a capricious or whimsical exercise of judgment equivalent to lack of jurisdiction.
The abuse of discretion must be patent and gross as to amount to an evasion of positive duty or
to a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as
where the power is exercised in an arbitrary and despotic manner by reason of passion or personal
hostility.[28]

GROUND FOR THE APPEAL

The Court of Appeals erred in granting the writ of certiorari in favor of respondent. The RTC did
not commit grave abuse of discretion when, in its Orders dated December 7, 2000 and February
20, 2001, it set aside the order of dismissal of LRC Case No. N-201 and resolved to have a
Error of law: The March 4, 2005 decision of the Court of Appeals and its June 6, 2005 Resolution, full-blown proceeding to determine factual issues in said case.
erred on question of law in setting aside the Orders of the Regional Trial Court, Branch 44, dated
December 7, 2000 and February 20, 2001. The said Orders of the trial court were made in order
to determine factual issues and to correct its error in its findings on the September 7, 2000 Order.
Thus, the Court of Appeals decision is contrary to law, justice, equity and existing jurisprudence.[27]

Procedural rules were conceived to aid the attainment of justice. If a stringent application of the
rules would hinder rather than serve the demands of substantial justice, the former must yield to
the latter.[29] In Basco v. Court of Appeals,[30] we allowed a liberal application of technical rules
of procedure, pertaining to the requisites of a proper notice of hearing, upon consideration of the
importance of the subject matter of the controversy, as illustrated in well-settled cases, to wit:

Respondent insists on the strict application of Sections 4, 5, and 6, Rule 15 and Section 11, Rule
13 of the Rules of Court. Violations of the said rules were fatal to the Motion for Reconsideration
and Supplemental Motion for Reconsideration of the petitioner, and as a result, the RTC Order dated
September 7, 2000, dismissing LRC Case No. N-201, had already become final and executory
and, thus, beyond the jurisdiction of the RTC to set aside. Respondent urges us to reject the plea The liberal construction of the rules on notice of hearing is exemplified in Goldloop Properties, Inc.
of petitioner for a liberal application of the rules in the absence of a compelling reason to do so. v. CA:

We grant the Petition. Admittedly, the filing of respondent-spouses' motion for reconsideration did not stop the running of
the period of appeal because of the absence of a notice of hearing required in Secs. 3, 4 and
5, Rule 15, of the Rules of Court. As we have repeatedly held, a motion that does not contain
a notice of hearing is a mere scrap of paper; it presents no question which merits the attention
of the court. Being a mere scrap of paper, the trial court had no alternative but to disregard it.
Such being the case, it was as if no motion for reconsideration was filed and, therefore, the
reglementary period within which respondent-spouses should have filed an appeal expired on 23
November 1989.
In the instant case, it is petitioner's life and liberty that is at stake. The trial court has sentenced
him to suffer the penalty of reclusion perpetua and his conviction attained finality on the basis of
mere technicality. It is but just, therefore, that petitioner be given the opportunity to defend himself
and pursue his appeal. To do otherwise would be tantamount to grave injustice. A relaxation of the
procedural rules, considering the particular circumstances herein, is justified.[31] (Emphasis ours.)

But, where a rigid application of that rule will result in a manifest failure or miscarriage of justice,
then the rule may be relaxed, especially if a party successfully shows that the alleged defect in
the questioned final and executory judgment is not apparent on its face or from the recitals contained
therein. Technicalities may thus be disregarded in order to resolve the case. After all, no party can
even claim a vested right in technicalities. Litigations should, as much as possible, be decided on
the merits and not on technicalities.

In the case at bar, the Motion for Reconsideration and Supplemental Motion for Reconsideration of
petitioner, which sought the reversal of RTC Order dated September 7, 2000 dismissing LRC Case
No. N-201, cite meritorious grounds that justify a liberal application of procedural rules.
Hence, this Court should not easily allow a party to lose title and ownership over a party worth
P4,000,000.00 for a measly P650,000.00 without affording him ample opportunity to prove his
claim that the transaction entered into was not in fact an absolute sale but one of mortgage. Such
grave injustice must not be permitted to prevail on the anvil of technicalities.

The dismissal by the RTC of LRC Case No. N-201 for lack of jurisdiction is patently erroneous.

Likewise, in Samoso v. CA, the Court ruled:

But time and again, the Court has stressed that the rules of procedure are not to be applied in
a very strict and technical sense. The rules of procedure are used only to help secure not override
substantial justice (National Waterworks & Sewerage System vs. Municipality of Libmanan, 97 SCRA
138 [1980]; Gregorio v. Court of Appeals, 72 SCRA 120 [1976]). The right to appeal should
not be lightly disregarded by a stringent application of rules of procedure especially where the appeal
is on its face meritorious and the interests of substantial justice would be served by permitting the
appeal (Siguenza v. Court of Appeals, 137 SCRA 570 [1985]; Pacific Asia Overseas Shipping
Corporation v. National Labor Relations Commission, et al., G.R. No. 76595, May 6, 1998). . . .
Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by
law and determined by the allegations in the complaint which comprise a concise statement of the
ultimate facts constituting the plaintiff's cause of action. The nature of an action, as well as which
court or body has jurisdiction over it, is determined based on the allegations contained in the complaint
of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all or some
of the claims asserted therein. The averments in the complaint and the character of the relief sought
are the ones to be consulted. Once vested by the allegations in the complaint, jurisdiction also remains
vested irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims
asserted therein.[32]
As a necessary consequence, the jurisdiction of the court cannot be made to depend upon the
defenses set up in the answer or upon the motion to dismiss; for otherwise, the question of jurisdiction
would almost entirely depend upon the defendant. What determines the jurisdiction of the court is
the nature of the action pleaded as appearing from the allegations in the complaint. The averments
therein and the character of the relief sought are the ones to be consulted.[33]
Under Act No. 496, otherwise known as the Land Registration Act, as amended by Act No. 2347,
jurisdiction over all applications for registration of title to land was conferred upon the Courts of First
Instance (CFI) of the respective provinces in which the land sought to be registered was situated.
Jurisdiction over land registration cases, as in ordinary actions, is acquired upon the filing in court
of the application for registration, and is retained up to the end of the litigation.[34]
The land registration laws were updated and codified by the Property Registration Decree, and under
Section 17 thereof, jurisdiction over an application for land registration was still vested on the CFI
of the province or city where the land was situated, viz:
SEC. 17. What and where to file. The application for land registration shall be filed with the Court
of First Instance of the province or city where the land is situated. The applicant shall file together
with the application all original muniments of titles or copies thereof and a survey plan of the land
approved by the Bureau of Lands.
The Clerk of Court shall not accept any application unless it is shown that the applicant has furnished
the Director of Lands with a copy of the application and all annexes.
Batas Pambansa Blg. 129, otherwise known as The Judiciary Reorganization Act of 1980, created
the RTC[35] in place of the CFI. Presently, jurisdiction over an application for land registration
remains with the RTC where the land is situated, except when such jurisdiction is delegated by the
Supreme Court to the Metropolitan Trial Court, Municipal Trial Courts, and Municipal Circuit Trial
Courts under certain circumstances.[36]
It is not disputed that the Application for Original Registration of Title filed by petitioner before the
RTC of the City of Dumaguete conformed to Section 15 of the Property Registration Decree, which
prescribes the form and contents of such applications. In its Application, petitioner prayed that its
title to the subject property, which it repeatedly alleged to have acquired through continuous and
adverse possession and occupation of the said property for more than 30 years or since 1960,
be placed under the land registration laws. The allegations and prayer in the Application of petitioner
were sufficient to vest jurisdiction on the RTC over the said Application upon the filing thereof.
Respondent sought the dismissal of LRC Case No. N-201 on the ground of lack of jurisdiction,
not because of the insufficiency of the allegations and prayer therein, but because the evidence
presented by petitioner itself during the trial supposedly showed that the subject property is a foreshore
land, which is not alienable and disposable. The RTC granted the Motion to Dismiss of respondent
in its Order dated September 7, 2000. The RTC went beyond the allegations and prayer for relief
in the Application for Original Registration of petitioner, and already scrutinized and weighed the
testimony of Engr. Dorado, the only witness petitioner was able to present.
As to whether or not the subject property is indeed foreshore land is a factual issue which the RTC
should resolve in the exercise of its jurisdiction, after giving both parties the opportunity to present
their respective evidence at a full-blown trial. As we have explained in the Estate of the Late Jesus
S. Yujuico v. Republic[37]:

The plain import of Municipality of Antipolo is that a land registration court, the RTC at present,
has no jurisdiction over the subject matter of the application which respondent Republic claims is
public land. This ruling needs elucidation.
Firmly entrenched is the principle that jurisdiction over the subject matter is conferred by law.
Consequently, the proper CFI (now the RTC) under Section 14 of PD 1529 (Property Registration
Decree) has jurisdiction over applications for registration of title to land.
x x x x
Conformably, the Pasig-Rizal CFI, Branch XXII has jurisdiction over the subject matter of the land
registration case filed by Fermina Castro, petitioners predecessor-in-interest, since jurisdiction over
the subject matter is determined by the allegations of the initiatory pleading the application. Settled
is the rule that the authority to decide a case and not the decision rendered therein is what makes
up jurisdiction. When there is jurisdiction, the decision of all questions arising in the case is but
an exercise of jurisdiction.
In our view, it was imprecise to state in Municipality of Antipolo that the Land Registration Court
[has] no jurisdiction to entertain the application for registration of public property x x x for such court
precisely has the jurisdiction to entertain land registration applications since that is conferred by PD
1529. The applicant in a land registration case usually claims the land subject matter of the
application as his/her private property, as in the case of the application of Castro. Thus, the conclusion
of the CA that the Pasig-Rizal CFI has no jurisdiction over the subject matter of the application
of Castro has no mooring. The land registration court initially has jurisdiction over the land applied
for at the time of the filing of the application. After trial, the court, in the exercise of its jurisdiction,
can determine whether the title to the land applied for is registerable and can be confirmed. In the
event that the subject matter of the application turns out to be inalienable public land, then it has
no jurisdiction to order the registration of the land and perforce must dismiss the application. [38]
(Emphasis ours.)
It is true that petitioner, as the applicant, has the burden of proving that the subject property is
alienable and disposable and its title to the same is capable of registration. However, we stress
that the RTC, when it issued its Order dated September 7, 2000, had so far heard only the testimony
of Engr. Dorado, the first witness for the petitioner. Petitioner was no longer afforded the opportunity
to present other witnesses and pieces of evidence in support of its Application. The RTC Order dated
September 7, 2000 already declaring the subject property as inalienable public land, over which
the RTC has no jurisdiction to order registration was evidently premature.
The RTC Order dated September 7, 2000 has not yet become final and executory as petitioner
was able to duly file a Motion for Reconsideration and Supplemental Motion for Reconsideration of
the same, which the RTC eventually granted in its Order dated December 7, 2000. Admittedly,
said motions filed by petitioner did not comply with certain rules of procedure. Ordinarily, such
non-compliance would have rendered said motions as mere scraps of paper, considered as not having
been filed at all, and unable to toll the reglementary period for an appeal. However, we find that
the exceptional circumstances extant in the present case warrant the liberal application of the rules.
Also, the Motion for Reconsideration and Supplemental Motion for Reconsideration of the Order dated
September 7, 2000 filed by petitioner did not comply with Section 11, Rule 13 of the Rules of
Court, for these did not include a written explanation why service or filing thereof was not done
personally. Nonetheless, in Maceda v. Encarnacion de Guzman Vda. de Magpantay,[39] citing Solar
Team Entertainment, Inc. v. Ricafort,[40] and Musa v. Amor,[41] we explained the rationale behind
said rule and the mandatory nature of the same, vis--vis the exercise of discretion by the court
in case of non-compliance therewith:
In Solar Team Entertainment, Inc. v. Ricafort, this Court, passing upon Section 11 of Rule 13 of
the Rules of Court, held that a court has the discretion to consider a pleading or paper as not filed
if said rule is not complied with.
Personal service and filing are preferred for obvious reasons. Plainly, such should expedite action
or resolution on a pleading, motion or other paper; and conversely, minimize, if not eliminate, delays
likely to be incurred if service or filing is done by mail, considering the inefficiency of the postal
service. Likewise, personal service will do away with the practice of some lawyers who, wanting
to appear clever, resort to the following less than ethical practices: (1) serving or filing pleadings
by mail to catch opposing counsel off-guard, thus leaving the latter with little or no time to prepare,
for instance, responsive pleadings or an opposition; or (2) upon receiving notice from the post office
that the registered containing the pleading of or other paper from the adverse party may be claimed,
unduly procrastinating before claiming the parcel, or, worse, not claiming it at all, thereby causing
undue delay in the disposition of such pleading or other papers.
If only to underscore the mandatory nature of this innovation to our set of adjective rules requiring
personal service whenever practicable, Section 11 of Rule 13 then gives the court the discretion
to consider a pleading or paper as not filed if the other modes of service or filing were not resorted
to and no written explanation was made as to why personal service was not done in the first place.
The exercise of discretion must, necessarily consider the practicability of personal service, for Section
11 itself begins with the clause whenever practicable.
We thus take this opportunity to clarify that under Section 11, Rule 13 of the 1997 Rules of Civil
Procedure, personal service and filing is the general rule, and resort to other modes of service and
filing, the exception. Henceforth, whenever personal service or filing is practicable, in the light of
the circumstances of time, place and person, personal service or filing is mandatory. Only when
personal service or filing is not practicable may resort to other modes be had, which must then be
accompanied by a written explanation as to why personal service or filing was not practicable to
begin with. In adjudging the plausibility of an explanation, a court shall likewise consider the
importance of the subject matter of the case or the issues involved therein, and the prima facie
merit of the pleading sought to be expunged for violation of Section 11.
In Musa v. Amor, this Court, on noting the impracticality of personal service, exercised its discretion
and liberally applied Section 11 of Rule 13:
As [Section 11, Rule 13 of the Rules of Court] requires, service and filing of pleadings must be
done personally whenever practicable. The court notes that in the present case, personal service
would not be practicable. Considering the distance between the Court of Appeals and Donsol,
Sorsogon where the petition was posted, clearly, service by registered mail [sic] would have entailed
considerable time, effort and expense. A written explanation why service was not done personally
might have been superfluous. In any case, as the rule is so worded with the use of may, signifying
permissiveness, a violation thereof gives the court discretion whether or not to consider the paper
as not filed. While it is true that procedural rules are necessary to secure an orderly and speedy
administration of justice, rigid application of Section 11, Rule 13 may be relaxed in this case in
the interest of substantial justice.
In the case at bar, the address of respondents counsel is Lopez, Quezon, while petitioner Sonias
counsels is Lucena City. Lopez, Quezon is 83 kilometers away from Lucena City. Such distance
makes personal service impracticable. As in Musa v. Amor, a written explanation why service was
not done personally might have been superfluous.[42] (Emphases supplied and citations omitted.)
Our ruling in the above-cited cases is relevant to the instant case. Counsel for petitioner holds office
in Dumaguete City, Negros Oriental, in the Visayas; while counsel for respondent holds office in
Quezon City, Metro Manila, in Luzon. Given the considerable distance between the offices of these
two counsels, personal service of pleadings and motions by one upon the other was clearly not
practicable and a written explanation as to why personal service was not done would only be
superfluous.[43] In addition, we refer once more to the merits of the Motion for Reconsideration
and Supplemental Motion for Reconsideration of the RTC Order dated September 7, 2000 filed
by petitioner, which justify the liberal interpretation of Section 11, Rule 13 of the Rules of Court
in this case.
Jurisprudence confirms that the requirements laid down in Sections 4, 5, and 6, Rule 15 of the
Rules of Court that the notice of hearing shall be directed to the parties concerned, and shall state
the time and place for the hearing of the motion, are mandatory. If not religiously complied with,
they render the motion pro forma. As such, the motion is a useless piece of paper that will not
toll the running of the prescriptive period.[44]
Yet, again, there were previous cases with peculiar circumstances that had compelled us to liberally
apply the rules on notice of hearing and recognize substantial compliance with the same. Once such
case is Philippine National Bank v. Paneda,[45] where we adjudged:
Thus, even if the Motion may be defective for failure to address the notice of hearing of said motion
to the parties concerned, the defect was cured by the court's taking cognizance thereof and the fact
that the adverse party was otherwise notified of the existence of said pleading. There is substantial
compliance with the foregoing rules if a copy of the said motion for reconsideration was furnished
to the counsel of herein private respondents.
In the present case, records reveal that the notices in the Motion were addressed to the respective
counsels of the private respondents and they were duly furnished with copies of the same as shown
by the receipts signed by their staff or agents.
Consequently, the Court finds that the petitioner substantially complied with the pertinent provisions
of the Rules of Court and existing jurisprudence on the requirements of motions and pleadings.[46]
(Emphasis supplied.)
It was not refuted that petitioner furnished respondent and respondent actually received copies of
the Motion for Reconsideration, as well as the Supplemental Motion for Reconsideration of the RTC
Order dated September 7, 2000 filed by petitioner. As a result, respondent was able to file its
Oppositions to the said Motions. The RTC, in issuing its Order dated December 7, 2000, was able
to consider the arguments presented by both sides. Hence, there was substantial compliance by
petitioner with the rules on notice of hearing for its Motion for Reconsideration and Supplemental
Motion for Reconsideration of the RTC Order dated September 7, 2000. Respondent cannot claim
that it was deprived of the opportunity to be heard on its opposition to said Motions.
In view of the foregoing circumstances, the RTC judiciously, rather than abusively or arbitrarily,
exercised its discretion when it subsequently issued the Order dated December 7, 2000, setting
aside its Order dated September 7, 2000 and proceeding with the trial in LRC Case No. N-201.
WHEREFORE, the instant Petition for Review of petitioner City of Dumaguete is hereby GRANTED.
The Decision dated March 4, 2005 and Resolution dated June 6, 2005 of the Court Appeals in
CA-G.R. SP No. 64379 are SET ASIDE, and the Orders dated December 7, 2000 and February
20, 2001 of Branch 44 of the Regional Trial Court of the City of Dumaguete in LRC Case No.
N-201 are REINSTATED. The said trial court is DIRECTED to proceed with the hearing of LRC
Case No. N-201 with dispatch.
SO ORDERED.
THE PROVINCE OF AKLAN, Petitioner,
vs.
JODY KING CONSTRUCTION AND DEVELOPMENT CORP., Respondent.

D E C I S I O N
VILLARAMA, JR., J.:
These consolidated petitions for review on certiorari seek to reverse and set aside the following:
(1) Decision1 dated October 18, 2010 and Resolution2 dated July 5, 2011 of the Court of
Appeals (CA) in CA-G.R. SP No. 111754; and (2) Decision3 dated August 31, 2011 and
Resolution4 dated June 27, 2012 in CA-G.R. SP No. 114073.
The Facts
On January 12, 1998, the Province of Aklan (petitioner) and Jody King Construction and
Development Corp. (respondent) entered into a contract for the design and -construction of the
Caticlan Jetty Port and Terminal (Phase I) in Malay, Aklan. The total project cost is P38,900,000:
P 18,700,000 for the design and construction of passenger terminal, and P20,200,000 for the
design and construction of the jetty port facility.5 In the course of construction, petitioner issued
variation/change orders for additional works. The scope of work under these change orders were
agreed upon by petitioner and respondent.6
On January 5, 2001, petitioner entered into a negotiated contract with respondent for the construction
of Passenger Terminal Building (Phase II) also at Caticlan Jetty Port in Malay, Aklan. The contract
price for Phase II is P2,475,345.54.7
On October 22, 2001, respondent made a demand for the total amount of P22,419,112.96
covering the following items which petitioner allegedly failed to settle:
1. Unpaid accomplishments on additional works
undertaken - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 12,396,143.09
2. Refund of taxes levied despite it not being
covered by original contract- - - - - - - - - - - - - - - - - - - - - - Php 884,098.59
3. Price escalation (Consistent with Section 7.5,
Original Contract- - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 1,291,714.98
4. Additional Labor Cost resulting [from]
numerous change orders issued sporadically - - - - - - - - Php 3,303,486.60
5. Additional Overhead Cost resulting [from]
numerous Orders issued sporadically - - - - - - - - - - - - - Php 1,101,162.60
6. Interest resulting [from] payment delays
consistent with Section 7.3.b of the Original
Contract - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 3,442,507.50.8
On July 13, 2006, respondent sued petitioner in the Regional Trial Court (RTC) of Marikina City
(Civil Case No. 06-1122-MK) to collect the aforesaid amounts.9 On August 17, 2006, the trial
court issued a writ of preliminary attachment.10
Petitioner denied any unpaid balance and interest due to respondent. It asserted that the sums being
claimed by respondent were not indicated in Change Order No. 3 as approved by the Office of
Provincial Governor. Also cited was respondents June 10, 2003 letter absolving petitioner from
liability for any cost in connection with the Caticlan Passenger Terminal Project.11
After trial, the trial court rendered its Decision12 on August 14, 2009, the dispositive portion of
which reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered in favor of plaintiff Jody
King Construction And Development Corporation and against defendant Province of Aklan, as follows:
1. ordering the defendant to pay to the plaintiff the amount of Php7,396,143.09 representing the
unpaid accomplishment on additional works undertaken by the plaintiff;
2. ordering the defendant to refund to the plaintiff the amount of Php884,098.59 representing
additional 2% tax levied upon against the plaintiff;
3. ordering the defendant to pay to the plaintiff price escalation in the amount of Php1,291,714.98
pursuant to Section 7.5 of the original contract;
4. ordering the defendant to pay to the plaintiff the amount of Php3,303,486.60 representing
additional labor cost resulting from change orders issued by the defendant;
5. ordering the defendant to pay to the plaintiff the sum of Php1,101,162.00 overhead cost resulting
from change orders issued by the defendant;
6. ordering the defendant to pay the sum of Php3,442,507.50 representing interest resulting from
payment delays up to October 15, 2001 pursuant to Section 7.3.b of the original contract;
7. ordering the defendant to pay interest of 3% per month from unpaid claims as of October 16,
2001 to date of actual payment pursuant to Section 7.3.b[;]
8. ordering the [defendant] to pay to the plaintiff the sum of Php500,000.00 as moral damages;
9. ordering the defendant to pay to the plaintiff the sum of Php300,000.00 as exemplary damages;
10. ordering the defendant to pay the plaintiff the sum of Php200,000.00, as and for attorneys
fees; and
11. ordering the defendant to pay the cost of suit.
SO ORDERED.13
Petitioner filed its motion for reconsideration14 on October 9, 2009 stating that it received a copy
of the decision on September 25, 2009. In its Order15 dated October 27, 2009, the trial court
denied the motion for reconsideration upon verification from the records that as shown by the return
card, copy of the decision was actually received by both Assistant Provincial Prosecutor Ronaldo
B. Ingente and Atty. Lee T. Manares on September 23, 2009. Since petitioner only had until October
8, 2009 within which to file a motion for reconsideration, its motion filed on October 9, 2009 was
filed one day after the finality of the decision. The trial court further noted that there was a deliberate
attempt on both Atty. Manares and Prosecutor Ingente to mislead the court and make it appear that
their motion for reconsideration was filed on time. Petitioner filed a Manifestation16 reiterating the
explanation set forth in its Rejoinder to respondents comment/opposition and motion to dismiss that
the wrong date of receipt of the decision stated in the motion for reconsideration was due to pure
inadvertence attributable to the staff of petitioners counsel. It stressed that there was no intention
to mislead the trial court nor cause undue prejudice to the case, as in fact its counsel immediately
corrected the error upon discovery by explaining the attendant circumstances in the Rejoinder dated
October 29, 2009.
On November 24, 2009, the trial court issued a writ of execution ordering Sheriff IV Antonio E.
Gamboa, Jr. to demand from petitioner the immediate payment of P67,027,378.34 and tender the
same to the respondent. Consequently, Sheriff Gamboa served notices of garnishment on Land Bank
of the Philippines, Philippine National Bank and Development Bank of the Philippines at their branches
in Kalibo, Aklan for the satisfaction of the judgment debt from the funds deposited under the account
of petitioner. Said banks, however, refused to give due course to the court order, citing the relevant
provisions of statutes, circulars and jurisprudence on the determination of government monetary
liabilities, their enforcement and satisfaction.17
Petitioner filed in the CA a petition for certiorari with application for temporary restraining order (TRO)
and preliminary injunction assailing the Writ of Execution dated November 24, 2009, docketed as
CA-G.R. SP No. 111754.
On December 7, 2009, the trial court denied petitioners notice of appeal filed on December 1,
2009. Petitioners motion for reconsideration of the December 7, 2009 Order was likewise denied.18
On May 20, 2010, petitioner filed another petition for certiorari in the CA questioning the aforesaid
orders denying due course to its notice of appeal, docketed as CA-G.R. SP No. 114073.
By Decision dated October 18, 2010, the CAs First Division dismissed the petition in CA-G.R.
SP No. 111754 as it found no grave abuse of discretion in the lower courts issuance of the writ
of execution. Petitioner filed a motion for reconsideration which was likewise denied by the CA. The
CA stressed that even assuming as true the alleged errors committed by the trial court, these were
insufficient for a ruling that grave abuse of discretion had been committed. On the matter of execution
of the trial courts decision, the appellate court said that it was rendered moot by respondents filing
of a petition before the Commission on Audit (COA).
On August 31, 2011, the CAs Sixteenth Division rendered its Decision dismissing the petition in
CA-G.R. SP No. 114073. The CA said that petitioner failed to provide valid justification for its
failure to file a timely motion for reconsideration; counsels explanation that he believed in good faith
that the August 14, 2009 Decision of the trial court was received on September 25, 2009 because
it was handed to him by his personnel only on that day is not a justifiable excuse that would warrant
the relaxation of the rule on reglementary period of appeal. The CA also held that petitioner is
estopped from invoking the doctrine of primary jurisdiction as it only raised the issue of COAs primary
jurisdiction after its notice of appeal was denied and a writ of execution was issued against it.
The Cases
In G.R. No. 197592, petitioner submits the following issues:
I.
WHETHER OR NOT THE DECISION DATED 14 AUGUST 2009 RENDERED BY THE REGIONAL
TRIAL COURT, BRANCH 273, MARIKINA CITY AND THE WRIT OF EXECUTION DATED 24
NOVEMBER 2009 SHOULD BE RENDERED VOID FOR LACK OF JURISDICTION OVER THE
SUBJECT MATTER OF THE CASE.
II.
WHETHER OR NOT THE REGIONAL TRIAL COURT, BRANCH 273, MARIKINA CITY GRAVELY
ABUSED ITS DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN
RENDERING THE DECISION DATED 14 AUGUST 2009 AND ISSUING THE WRIT OF
EXECUTION DATED 24 NOVEMBER 2009 EVEN IT FAILED TO DISPOSE ALL THE ISSUES
OF THE CASE BY NOT RESOLVING PETITIONERS "URGENT MOTION TO DISCHARGE
EX-PARTE WRIT OF PRELIMINARY ATTACHMENT" DATED 31 AUGUST 2006.
III.
WHETHER OR NOT THE WRIT OF EXECUTION DATED 24 NOVEMBER 2009 WHICH WAS
HASTILY ISSUED IN VIOLATION OF SUPREME COURT ADMINISTRATIVE CIRCULAR NO.
10-2000 SHOULD BE RENDERED VOID.19
The petition in G.R. No. 202623 sets forth the following arguments:
Petitioner is not estopped in questioning the jurisdiction of the Regional Trial Court, Branch 273,
Marikina City over the subject matter of the case.20
The petition for certiorari filed before the CA due to the RTCs denial of petitioners Notice of Appeal
was in accord with jurisprudence.21
The Issues
The controversy boils down to the following issues: (1) the applicability of the doctrine of primary
jurisdiction to this case; and (2) the propriety of the issuance of the writ of execution.
Our Ruling
The petitions are meritorious.
COA has primary jurisdiction over private respondents money claims Petitioner is not estopped from
raising the issue of jurisdiction
The doctrine of primary jurisdiction holds that if a case is such that its determination requires the
expertise, specialized training and knowledge of the proper administrative bodies, relief must first be
obtained in an administrative proceeding before a remedy is supplied by the courts even if the matter
may well be within their proper jurisdiction.22 It applies where a claim is originally cognizable in
the courts, and comes into play whenever enforcement of the claim requires the resolution of issues
which, under a regulatory scheme, have been placed within the special competence of an
administrative agency. In such a case, the court in which the claim is sought to be enforced may
suspend the judicial process pending referral of such issues to the administrative body for its view
or, if the parties would not be unfairly disadvantaged, dismiss the case without prejudice.23
The objective of the doctrine of primary jurisdiction is to guide the court in determining whether it
should refrain from exercising its jurisdiction until after an administrative agency has determined some
question or some aspect of some question arising in the proceeding before the court.24
As can be gleaned, respondent seeks to enforce a claim for sums of money allegedly owed by
petitioner, a local government unit.
Under Commonwealth Act No. 327,25 as amended by Section 26 of Presidential Decree No.
1445,26 it is the COA which has primary jurisdiction over money claims against government agencies
and instrumentalities.
Section 26. General jurisdiction. The authority and powers of the Commission shall extend to and
comprehend all matters relating to auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers pertaining thereto for a period
of ten years, the examination and inspection of the books, records, and papers relating to those
accounts; and the audit and settlement of the accounts of all persons respecting funds or property
received or held by them in an accountable capacity, as well as the examination, audit, and settlement
of all debts and claims of any sort due from or owing to the Government or any of its subdivisions,
agencies and instrumentalities. The said jurisdiction extends to all government-owned or controlled
corporations, including their subsidiaries, and other self-governing boards, commissions, or agencies
of the Government, and as herein prescribed, including non-governmental entities subsidized by the
government, those funded by donations through the government, those required to pay levies or
government share, and those for which the government has put up a counterpart fund or those partly
funded by the government. (Emphasis supplied.)
Pursuant to its rule-making authority conferred by the 1987 Constitution27 and existing laws, the
COA promulgated the 2009 Revised Rules of Procedure of the Commission on Audit. Rule II, Section
1 specifically enumerated those matters falling under COAs exclusive jurisdiction, which include
"money claims due from or owing to any government agency." Rule VIII, Section 1 further provides:
Section 1. Original Jurisdiction - The Commission Proper shall have original jurisdiction over:
a) money claim against the Government; b) request for concurrence in the hiring of legal retainers
by government agency; c) write off of unliquidated cash advances and dormant accounts receivable
in amounts exceeding one million pesos (P1,000,000.00); d) request for relief from accountability
for loses due to acts of man, i.e. theft, robbery, arson, etc, in amounts in excess of Five Million
pesos (P5,000,000.00).
In Euro-Med Laboratories Phil., Inc. v. Province of Batangas,28 we ruled that it is the COA and
not the RTC which has primary jurisdiction to pass upon petitioners money claim against respondent
local government unit. Such jurisdiction may not be waived by the parties failure to argue the issue
nor active participation in the proceedings. Thus:
This case is one over which the doctrine of primary jurisdiction clearly held sway for although
petitioners collection suit for P487,662.80 was within the jurisdiction of the RTC, the circumstances
surrounding petitioners claim brought it clearly within the ambit of the COAs jurisdiction.
First, petitioner was seeking the enforcement of a claim for a certain amount of money against a
local government unit. This brought the case within the COAs domain to pass upon money claims
against the government or any subdivision thereof under Section 26 of the Government Auditing
Code of the Philippines:
The authority and powers of the Commission [on Audit] shall extend to and comprehend all matters
relating to x x x the examination, audit, and settlement of all debts and claims of any sort due from
or owing to the Government or any of its subdivisions, agencies, and instrumentalities. x x x.
The scope of the COAs authority to take cognizance of claims is circumscribed, however, by an
unbroken line of cases holding statutes of similar import to mean only liquidated claims, or those
determined or readily determinable from vouchers, invoices, and such other papers within reach of
accounting officers. Petitioners claim was for a fixed amount and although respondent took issue
with the accuracy of petitioners summation of its accountabilities, the amount thereof was readily
determinable from the receipts, invoices and other documents. Thus, the claim was well within the
COAs jurisdiction under the Government Auditing Code of the Philippines.
Second, petitioners money claim was founded on a series of purchases for the medical supplies
of respondents public hospitals. Both parties agreed that these transactions were governed by the
Local Government Code provisions on supply and property management and their implementing rules
and regulations promulgated by the COA pursuant to Section 383 of said Code. Petitioners claim
therefore involved compliance with applicable auditing laws and rules on procurement. Such matters
are not within the usual area of knowledge, experience and expertise of most judges but within the
special competence of COA auditors and accountants. Thus, it was but proper, out of fidelity to the
doctrine of primary jurisdiction, for the RTC to dismiss petitioners complaint.
Petitioner argues, however, that respondent could no longer question the RTCs jurisdiction over the
matter after it had filed its answer and participated in the subsequent proceedings. To this, we need
only state that the court may raise the issue of primary jurisdiction sua sponte and its invocation
cannot be waived by the failure of the parties to argue it as the doctrine exists for the proper
distribution of power between judicial and administrative bodies and not for the convenience of the
parties.29 (Emphasis supplied.)
Respondents collection suit being directed against a local government unit, such money claim should
have been first brought to the COA.30 Hence, the RTC should have suspended the proceedings
and refer the filing of the claim before the COA. Moreover, petitioner is not estopped from raising
the issue of jurisdiction even after the denial of its notice of appeal and before the CA.
There are established exceptions to the doctrine of primary jurisdiction, such as: (a) where there
is estoppel on the part of the party invoking the doctrine; (b) where the challenged administrative
act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or
official inaction that will irretrievably prejudice the complainant; (d) where the amount involved is
relatively small so as to make the rule impractical and oppressive; (e) where the question involved
is purely legal and will ultimately have to be decided by the courts of justice; (f) where judicial
intervention is urgent; (g) when its application may cause great and irreparable damage; (h) where
the controverted acts violate due process; (i) when the issue of non-exhaustion of administrative
remedies has been rendered moot; (j) when there is no other plain, speedy and adequate remedy;
(k) when strong public interest is involved; and, (l) in quo warranto proceedings.31 However, none
of the foregoing circumstances is applicable in the present case.
Finally, the RTC should have exercised utmost caution, prudence and judiciousness in issuing the
writ of execution and notices of garnishment against petitioner. The RTC had no authority to direct
the immediate withdrawal of any portion of the garnished funds from petitioner's depositary banks.36
Such act violated the express directives of this Court under Administrative Circular No. 10-2000,37
which was issued "precisely in order to prevent the circumvention of Presidential Decree No. 1445,
as well as of the rules and procedures of the COA."38 WHEREFORE, both petitions in G.R. Nos.
197592 and 202623 are GRANTED. The Decision dated October 18, 2010 and Resolution dated
July 5 2011 of the Court of Appeals in CA-G.R. SP No. 111754, and Decision dated August
31, 2011 and Resolution dated June 27, 2012 in CA- G.R. SP No. 114073 are hereby
REVERSED and SET ASIDE. The Decision dated August 14 2009, Writ of Execution and
subsequent issuances implementing the said decision of the Regional Trial Court of Marikina City
in Civil Case No. 06-1122-MK are all SET ASIDE. No pronouncement as to costs.
SO ORDERED.

The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself authority to resolve LUCIA BARRAMEDA VDA. DE BALLESTEROS,
a controversy the jurisdiction over which is initially lodged with an administrative body of special
competence.32 All the proceedings of the court in violation of the doctrine and all orders and decisions
rendered thereby are null and void.33 Petitioner,

Writ of Execution issued in violation of COAs primary jurisdiction is void

Since a judgment rendered by a body or tribunal that has no jurisdiction over the subject matter
of the case is no judgment at all, it cannot be the source of any right or the creator of any obligation.34
All acts pursuant to it and all claims emanating from it have no legal effect and the void judgment
can never be final and any writ of execution based on it is likewise void.35

Clearly, the CA erred in ruling that the RTC committed no grave abuse of discretion when it ordered
the execution of its judgment against petitioner and garnishment of the latters funds. - versus -

In its Supplement to the Motion for Reconsideration, petitioner argued that it is the COA and not
the RTC which has original jurisdiction over money claim against government agencies and
subdivisions.1wphi1 The CA, in denying petitioner's motion for reconsideration, simply stated that
the issue had become moot by respondent's filing of the proper petition with the COA. However,
respondent's belated compliance with the formal requirements of presenting its money claim before
the COA did not cure the serious errors committed by the RTC in implementing its void decision.
The RTC's orders implementing its judgment rendered without jurisdiction must be set aside because
a void judgment can never be validly executed. RURAL BANK OF CANAMAN INC., represented by its Liquidator, the philippine deposit insurance
corporation,
Respondent.

Promulgated:

G.R. No. 176260 November 24, 2010

Present: X
------------------------------------------------------------------------------
-------- X

CARPIO, J., Chairperson,

D E C I S I O N
NACHURA,

PERALTA,

ABAD, and

MENDOZA, J.:
MENDOZA, JJ.
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Civil Procedure
assailing the August 15, 2006 Decision[1] of the Court of Appeals (CA) in CA-G.R. No. 82711,
modifying the decision of the Regional Trial Court of Iriga City, Branch 36 (RTC-Iriga), in Civil
Case No. IR-3128, by ordering the consolidation of the said civil case with Special Proceeding
Case No. M-5290 (liquidation case) before the Regional Trial Court of Makati City, Branch 59
(RTC-Makati). The case was then set for pre-trial conference. During the pre-trial, RBCIs counsel filed a motion
to withdraw after being informed that Philippine Deposit Insurance Corporation (PDIC) would handle
the case as RBCI had already been closed and placed under the receivership of the PDIC.
Consequently, on February 4, 2002, the lawyers of PDIC took over the case of RBCI.

It appears from the records that on March 17, 2000, petitioner Lucia Barrameda Vda. De Ballesteros
(Lucia) filed a complaint for Annulment of Deed of Extrajudicial Partition, Deed of Mortgage and
Damages with prayer for Preliminary Injunction against her children, Roy, Rito, Amy, Arabel, Rico,
Abe, Ponce Rex and Adden, all surnamed Ballesteros, and the Rural Bank of Canaman, Inc., Baao
Branch (RBCI) before the RTC-Iriga. The case was docketed as Civil Case No. IR-3128.
On May 9, 2003, RBCI, through PDIC, filed a motion to dismiss on the ground that the RTC-Iriga
has no jurisdiction over the subject matter of the action. RBCI stated that pursuant to Section 30,
Republic Act No. 7653 (RA No. 7653), otherwise known as the New Central Bank Act, the
RTC-Makati, already constituted itself, per its Order dated August 10, 2001, as the liquidation court
to assist PDIC in undertaking the liquidation of RBCI. Thus, the subject matter of Civil Case No.
IR-3128 fell within the exclusive jurisdiction of such liquidation court. Lucia opposed the motion.

In her complaint, Lucia alleged that her deceased husband, Eugenio, left two (2) parcels of land
located in San Nicolas, Baao, Camarines Sur, each with an area of 357 square meters; that on On July 29, 2003, the RTC-Iriga issued an order[2] granting the Motion to Dismiss, to wit:
March 6, 1995, without her knowledge and consent, her children executed a deed of extrajudicial
partition and waiver of the estate of her husband wherein all the heirs, including Lucia, agreed to
allot the two parcels to Rico Ballesteros (Rico); that, still, without her knowledge and consent, Rico
mortgaged Parcel B of the estate in favor of RBCI which mortgage was being foreclosed for failure
to settle the loan secured by the lot; and that Lucia was occupying Parcel B and had no other
place to live. She prayed that the deed of extrajudicial partition and waiver, and the subsequent
mortgage in favor of RBCI be declared null and void having been executed without her knowledge This resolves the Motion to Dismiss filed by the defendant Rural Bank of Canaman, Inc., premised
and consent. She also prayed for damages. on the ground that this court has no jurisdiction over the subject matter of the action. This issue
of jurisdiction was raised in view of the pronouncement of the Supreme Court in Ong v. C.A. 253
SCRA 105 and in the case of Hernandez v. Rural Bank of Lucena, Inc., G.R. No. L-29791 dated
January 10, 1978, wherein it was held that the liquidation court shall have jurisdiction to adjudicate
all claims against the bank whether they be against assets of the insolvent bank, for Specific
Performance, Breach of Contract, Damages or whatever.

In its Answer, RBCI claimed that in 1979, Lucia sold one of the two parcels to Rico which represented
her share in the estate of her husband. The extrajudicial partition, waiver and mortgage were all
executed with the knowledge and consent of Lucia although she was not able to sign the document.
RBCI further claimed that Parcel B had already been foreclosed way back in 1999 which fact was
known to Lucia through the auctioning notary public. Attorneys fees were pleaded as counterclaim.
 in obtaining just, speedy and inexpensive determination of their cases (Allied Banking Corporation
v. Court of Appeals, 259 SCRA 371 [1996]).

It is in view of this jurisprudential pronouncement made by no less than the Supreme Court, that
this case is, as far as defendant Rural Bank of Canaman Inc., is concerned, hereby ordered
DISMISSED without prejudice on the part of the plaintiff to ventilate their claim before the Liquidation
Court now, RTC Branch 59, Makati City. The dispositive portion of the decision reads:

SO ORDERED. IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby MODIFIED, in such a way
that the dismissal of this case (Civil Case No. IR-3128) is set aside and in lieu thereof another
one is entered ordering the consolidation of said case with the liquidation case docketed as Special
Proceeding No. M-5290 before Branch 59 of the Regional Trial Court of Makati City, entitled In
Re: Assistance in the Judicial Liquidation of Rural Bank of Canaman, Camarines Sur, Inc., Philippine
Deposit Corporation, Petitioner. No pronouncement as to cost.

Not in conformity, Lucia appealed the RTC ruling to the CA on the ground that the RTC-Iriga erred
in dismissing the case because it had jurisdiction over Civil Case No. IR-3128 under the rule on
adherence of jurisdiction.

SO ORDERED.[3]

On August 15, 2006, the CA rendered the questioned decision ordering the consolidation of Civil
Case No. IR-3128 and the liquidation case pending before RTC-Makati. The appellate court
ratiocinated thus:

Lucia filed a motion for reconsideration[4] but it was denied by the CA in its Resolution dated
December 14, 2006.[5]
The consolidation is desirable in order to prevent confusion, to avoid multiplicity of suits and to save
unnecessary cost and expense. Needless to add, this procedure is well in accord with the principle
that the rules of procedure shall be liberally construed in order to promote their object and to assist Hence, the present petition for review on certiorari anchored on the following
the parties in obtaining just, speedy and inexpensive determination of every action and proceeding
(Vallacar Transit, Inc. v. Yap, 126 SCRA 500 [1983]; Suntay v. Aguiluz, 209 SCRA 500 [1992]
citing Ramos v. Ebarle, 182 SCRA 245 [1990]). It would be more in keeping with the demands
of equity if the cases are simply ordered consolidated. Pursuant to Section 2, Rule 1, Revised Rules
of Court, the rules on consolidation should be liberally construed to achieve the object of the parties
GROUNDS
(I)
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE REGIONAL TRIAL COURT OF
IRIGA CITY, BRANCH 36 IS VESTED WITH JURISDICTION TO CONTINUE TRYING AND
ULTIMATELY DECIDE CIVIL CASE NO. IR-3128.
(II)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN ORDERING
THE CONSOLIDATION OF CIVIL CASE NO. IR-3128 WITH THE LIQUIDATION CASE DOCKETED
AS SPECIAL PROCEEDINGS NO. M-5290 BEFORE BRANCH 59 OF THE REGIONAL TRIAL
COURT OF MAKATI CITY.[6]
Given the foregoing arguments, the Court finds that the core issue to be resolved in this petition
involves a determination of whether a liquidation court can take cognizance of a case wherein the
main cause of action is not a simple money claim against a bank ordered closed, placed under
receivership of the PDIC, and undergoing a liquidation proceeding.
Lucia contends that the RTC-Iriga is vested with jurisdiction over Civil Case No. 3128, the constitution
of the liquidation court notwithstanding. According to her, the case was filed before the RTC-Iriga
on March 17, 2000 at the time RBCI was still doing business or before the defendant bank was
placed under receivership of PDIC in January 2001.
She further argues that the consolidation of the two cases is improper. Her case, which is for
annulment of deed of partition and waiver, deed of mortgage and damages, cannot be legally brought
before the RTC-Makati with the liquidation case considering that her cause of action against RBCI
is not a simple claim arising out of a creditor-debtor relationship, but one which involves her rights
and interest over a certain property irregularly acquired by RBCI. Neither is she a creditor of the
bank, as only the creditors of the insolvent bank are allowed to file and ventilate claims before the
liquidator, pursuant to the August 10, 2001 Order of the RTC-Makati which granted the petition
for assistance in the liquidation of RBCI.
In its Comment,[7] PDIC, as liquidator of RBCI, counters that the consolidation of Civil Case No.
3128 with the liquidation proceeding is proper. It posits that the liquidation court of RBCI, having
been established, shall have exclusive jurisdiction over all claims against the said bank.
After due consideration, the Court finds the petition devoid of merit.
Lucias argument, that the RTC-Iriga is vested with jurisdiction to continue trying Civil Case No.
IR-3128 until its final disposition, evidently falls out from a strained interpretation of the law and
jurisprudence. She contends that:

Since the RTC-Iriga has already obtained jurisdiction over the case it should continue exercising
such jurisdiction until the final termination of the case. The jurisdiction of a court once attached cannot
be ousted by subsequent happenings or events, although of a character which would have prevented
jurisdiction from attaching in the first instance, and the Court retains jurisdiction until it finally disposes
of the case (Aruego Jr. v. Court of Appeals, 254 SCRA 711).
When a court has already obtained and is exercising jurisdiction over a controversy, its jurisdiction
to proceed to final determination of the case is not affected by a new legislation transferring jurisdiction
over such proceedings to another tribunal. (Alindao v. Joson, 264 SCRA 211). Once jurisdiction
is vested, the same is retained up to the end of the litigation (Bernate v. Court of Appeals, 263
SCRA 323).[8]
The afore-quoted cases, cited by Lucia to bolster the plea for the continuance of her case, find
no application in the case at bench.
Indeed, the Court recognizes the doctrine on adherence of jurisdiction. Lucia, however, must be
reminded that such principle is not without exceptions. It is well to quote the ruling of the CA on
this matter, thus:
This Court is not unmindful nor unaware of the doctrine on the adherence of jurisdiction. However,
the rule on adherence of jurisdiction is not absolute and has exceptions. One of the exceptions is
that when the change in jurisdiction is curative in character (Garcia v. Martinez, 90 SCRA 331
[1979]; Calderon, Sr. v. Court of Appeals, 100 SCRA 459 [1980]; Atlas Fertilizer Corporation
v. Navarro, 149 SCRA 432 [1987]; Abad v. RTC of Manila, Br. Lll, 154 SCRA 664 [1987]).
For sure, Section 30, R.A. 7653 is curative in character when it declared that the liquidation court
shall have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims
against the Bank. The interpretation of this Section (formerly Section 29, R.A. 265) becomes more
obvious in the light of its intent. In Manalo v. Court of Appeals (366 SCRA 752, [2001]), the
Supreme Court says:
xxx The requirement that all claims against the bank be pursued in the liquidation proceedings filed
by the Central Bank is intended to prevent multiplicity of actions against the insolvent bank and
designed to establish due process and orderliness in the liquidation of the bank, to obviate the
proliferation of litigations and to avoid injustice and arbitrariness (citing Ong v. CA, 253 SCRA 105
[1996]). The lawmaking body contemplated that for convenience, only one court, if possible, should
pass upon the claims against the insolvent bank and that the liquidation court should assist the
Superintendents of Banks and regulate his operations (citing Central Bank of the Philippines, et al.
v. CA, et al., 163 SCRA 482 [1988]).[9]
As regards Lucias contention that jurisdiction already attached when Civil Case No. IR-3128 was
filed with, and jurisdiction obtained by, the RTC-Iriga prior to the filing of the liquidation case before
the RTC-Makati, her stance fails to persuade this Court. In refuting this assertion, respondent PDIC
cited the case of Lipana v. Development Bank of Rizal[10] where it was held that the time of the
filing of the complaint is immaterial, viz:
It is the contention of petitioners, however, that the placing under receivership of Respondent Bank
long after the filing of the complaint removed it from the doctrine in the said Morfe Case.
This contention is untenable. The time of the filing of the complaint is immaterial. It is the execution
that will obviously prejudice the other depositors and creditors. Moreover, as stated in the said Morfe
case, the effect of the judgment is only to fix the amount of the debt, and not to give priority over
other depositors and creditors.

The cited Morfe case[11] held that after the Monetary Board has declared that a bank is insolvent
and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal
benefit of all the creditors, including depositors. The assets of the insolvent banking institution are
held in trust for the equal benefit of all creditors, and after its insolvency, one cannot obtain an
advantage or a preference over another by an attachment, execution or otherwise.
Thus, to allow Lucias case to proceed independently of the liquidation case, a possibility of favorable
judgment and execution thereof against the assets of RBCI would not only prejudice the other creditors
and depositors but would defeat the very purpose for which a liquidation court was constituted as
well.
Anent the second issue, Lucia faults the CA in directing the consolidation of Civil Case No. IR-3128
with Special Proceedings No. M-5290. The CA committed no error. Lucias complaint involving
annulment of deed of mortgage and damages falls within the purview of a disputed claim in
contemplation of Section 30 of R.A. 7653 (The New Central Bank Act). The jurisdiction should
be lodged with the liquidation court. Section 30 provides:
Sec. 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head of the
supervising or examining department, the Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided,
That this shall not include inability to pay caused by extraordinary demands induced by financial panic
in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities;
or
(c) cannot continue in business without involving probable losses to its depositors or creditors; or
(d) has wilfully violated a cease and desist order under Section 37 that has become final, involving
acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which
cases, the Monetary Board may summarily and without need for prior hearing forbid the institution
from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation
as receiver of the banking institution.
For a quasi-bank, any person of recognized competence in banking or finance may be designated
as receiver.
The receiver shall immediately gather and take charge of all the assets and liabilities of the institution,
administer the same for the benefit of its creditors, and exercise the general powers of a receiver
under the Revised Rules of Court but shall not, with the exception of administrative expenditures,
pay or commit any act that will involve the transfer or disposition of any asset of the institution:
Provided, That the receiver may deposit or place the funds of the institution in non-speculative
investments. The receiver shall determine as soon as possible, but not later than ninety (90) days
from take over, whether the institution may be rehabilitated or otherwise placed in such a condition
that it may be permitted to resume business with safety to its depositors and creditors and the general
public: Provided, That any determination for the resumption of business of the institution shall be
subject to prior approval of the Monetary Board.
If the receiver determines that the institution cannot be rehabilitated or permitted to resume business
in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board
of directors of its findings and direct the receiver to proceed with the liquidation of the institution.
The receiver shall:
(1) file ex parte with the proper regional trial court, and without requirement of prior notice or any
other action, a petition for assistance in the liquidation of the institution pursuant to a liquidation
plan adopted by the Philippine Deposit Insurance Corporation for general application to all closed
banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon
acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate disputed
claims against the institution, assist the enforcement of individual liabilities of the stockholders, directors
and officers, and decide on other issues as may be material to implement the liquidation plan adopted.
The receiver shall pay the cost of the proceedings from the assets of the institution.
(2) convert the assets of the institution to money, dispose of the same to creditors and other parties,
for the purpose of paying the debts of such institution in accordance with the rules on concurrence
and preference of credit under the Civil Code of the Philippines and he may, in the name of the
institution, and with the assistance of counsel as he may retain, institute such actions as may be
necessary to collect and recover accounts and assets of, or defend any action against, the institution.
The assets of an institution under receivership or liquidation shall be deemed in custodia legis in
the hands of the receiver and shall, from the moment the institution was placed under such
receivership or liquidation, be exempt from any order of garnishment, levy, attachment, or execution.
[Emphasis supplied] x x x

x x x

Disputed claims refers to all claims, whether they be against the assets of the insolvent bank, for
specific performance, breach of contract, damages, or whatever.[12] Lucias action being a claim
against RBCI can properly be consolidated with the liquidation proceedings before the RTC-Makati.
A liquidation proceeding has been explained in the case of In Re: Petition For Assistance in the
Liquidation of the Rural Bank of BOKOD (Benguet), Inc. v. Bureau of Internal Revenue[13] as
follows:
A liquidation proceeding is commenced by the filing of a single petition by the Solicitor General with
a court of competent jurisdiction entitled, "Petition for Assistance in the Liquidation of e.g., Pacific
Banking Corporation. All claims against the insolvent are required to be filed with the liquidation court.
Although the claims are litigated in the same proceeding, the treatment is individual. Each claim is
heard separately. And the Order issued relative to a particular claim applies only to said claim, leaving
the other claims unaffected, as each claim is considered separate and distinct from the others. x
x x [Emphasis supplied.]

It is clear, therefore, that the liquidation court has jurisdiction over all claims, including that of Lucia
against the insolvent bank. As declared in Miranda v. Philippine Deposit Insurance Corporation,[14]
A liquidation proceeding is a single proceeding which consists of a number of cases properly classified regular courts do not have jurisdiction over actions filed by claimants against an insolvent bank, unless
as "claims." It is basically a two-phased proceeding. The first phase is concerned with the approval there is a clear showing that the action taken by the BSP, through the Monetary Board, in the closure
and disapproval of claims. Upon the approval of the petition seeking the assistance of the proper of financial institutions was in excess of jurisdiction, or with grave abuse of discretion. The same
court in the liquidation of a closed entity, all money claims against the bank are required to be filed is not obtaining in this present case.
with the liquidation court. This phase may end with the declaration by the liquidation court that the
claim is not proper or without basis. On the other hand, it may also end with the liquidation court
allowing the claim. In the latter case, the claim shall be classified whether it is ordinary or preferred,
and thereafter included Liquidator. In either case, the order allowing or disallowing a particular claim
is final order, and may be appealed by the party aggrieved thereby.
The power and authority of the Monetary Board to close banks and liquidate them thereafter when
public interest so requires is an exercise of the police power of the State. Police power, however,
is subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could be set
aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial
of due process and equal protection clauses of the Constitution.[15]
The second phase involves the approval by the Court of the distribution plan prepared by the duly
appointed liquidator. The distribution plan specifies in detail the total amount available for distribution
to creditors whose claim were earlier allowed. The Order finally disposes of the issue of how much
property is available for disposal. Moreover, it ushers in the final phase of the liquidation proceeding
- payment of all allowed claims in accordance with the order of legal priority and the approved
distribution plan.
In sum, this Court holds that the consolidation is proper considering that the liquidation court has
jurisdiction over Lucias action. It would be more in keeping with law and equity if Lucias case is
consolidated with the liquidation case in order to expeditiously determine whether she is entitled to
recover the property subject of mortgage from RBCI and, if so, how much she is entitled to receive
from the remaining assets of the bank.

WHEREFORE, the petition is DENIED.

SO ORDERED.

PACIFIC ACE FINANCE LTD. (PAFIN),

CORONA, C.J., Chairperson,

G.R. No. 175303

Petitioner,

LEONARDO-DE CASTRO,

- versus -

Present:
 EIJI* YANAGISAWA,

BERSAMIN,

Promulgated:

Respondent.

DEL CASTILLO, and

April 11, 2012

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

VILLARAMA, JR., JJ.

D E C I S I O N

DEL CASTILLO, J.:

An undertaking not to dispose of a property pending litigation, made in open court and embodied
in a court order, and duly annotated on the title of the said property, creates a right in favor of
the person relying thereon. The latter may seek the annulment of actions that are done in violation
of such undertaking.
Before us is a Petition for Review[1] of the August 1, 2006 Decision[2] of the Court of Appeals
(CA) in CA-G.R. CV No. 78944, which held:
WHEREFORE, the Decision dated April 20, 2003 of the RTC, Branch 258, Paraaque City, is hereby
ANNULLED and SET ASIDE and a new one entered annulling the Real Estate Mortgage executed
on August 25, 1998 in favor of defendant Pacific Ace Finance Ltd.
SO ORDERED.[3]
Factual Antecedents
Respondent Eiji Yanagisawa (Eiji), a Japanese national, and Evelyn F. Castaeda (Evelyn), a Filipina,
contracted marriage on July 12, 1989 in the City Hall of Manila.[4]
On August 23, 1995, Evelyn purchased a 152 square-meter townhouse unit located at Bo. Sto.
Nio, Paraaque, Metro Manila (Paraaque townhouse unit).[5] The Registry of Deeds for Paraaque
issued Transfer Certificate of Title (TCT) No. 99791 to Evelyn P. Castaeda, Filipino, married to
Ejie Yanagisawa, Japanese citizen[,] both of legal age.[6]
In 1996, Eiji filed a complaint for the declaration of nullity of his marriage with Evelyn on the ground
of bigamy (nullity of marriage case). The complaint, docketed as Civil Case No. 96-776, was
raffled to Branch 149 of the Regional Trial Court of Makati (Makati RTC). During the pendency
of the case, Eiji filed a Motion for the Issuance of a Restraining Order against Evelyn and an
Application for a Writ of a Preliminary Injunction. He asked that Evelyn be enjoined from disposing
or encumbering all of the properties registered in her name.
At the hearing on the said motion, Evelyn and her lawyer voluntarily undertook not to dispose of
the properties registered in her name during the pendency of the case, thus rendering Eijis application
and motion moot. On the basis of said commitment, the Makati RTC rendered the following Order
dated October 2, 1996:
O R D E R
In view of the commitment made in open court by Atty. Lupo Leyva, counsel for the defendant [Evelyn],
together with his client, the defendant in this case, that the properties registered in the name of
the defendant would not be disposed of, alienated or encumbered in any manner during the pendency
of this petition, the Motion for the Issuance of a Restraining Order and Application for a Writ of
a Preliminary Injunction scheduled today is hereby considered moot and academic.
SO ORDERED.[7] (Emphasis supplied.)

The above Order was annotated on the title of the Paraaque townhouse unit or TCT No. 99791,
thus:
Entry No. 8729 Order issued by Hon. Josefina Guevara Salonga, Judge, RTC, Branch 149, Makati
City, ordering the defendant in Civil Case No. 96-776 entitled Eiji Yanagisawa,
Plaintiff-versus-Evelyn Castaeda Yanagisawa, that the properties registered in the name of the
defendant would not be disposed of, alienated or encumbered in any manner during the pendency
of the petition, the Motion for the Issuance of a Restraining Order and Application for a Writ of
Preliminary Injunction is hereby considered moot and academic.
Date of Instrument October 2, 1996
Date of Inscription March 17, 1997 11:21 a.m.[8] (Emphasis supplied.)
Sometime in March 1997, Evelyn obtained a loan of P500,000.00 from petitioner Pacific Ace
Finance Ltd. (PAFIN).[9] To secure the loan, Evelyn executed on August 25, 1998 a real estate
mortgage (REM)[10] in favor of PAFIN over the Paraaque townhouse unit covered by TCT No.
99791. The instrument was submitted to the Register of Deeds of Paraaque City for annotation
on the same date.[11]
At the time of the mortgage, Eijis appeal in the nullity of marriage case was pending before the
CA.[12] The Makati RTC had dissolved Eiji and Evelyns marriage,[13] and had ordered the
liquidation of their registered properties, including the Paraaque townhouse unit, with its proceeds
to be divided between the parties.[14] The Decision of the Makati RTC did not lift or dissolve its
October 2, 1996 Order on Evelyns commitment not to dispose of or encumber the properties
registered in her name.
Eiji learned of the REM upon its annotation on TCT No. 99791. Deeming the mortgage as a violation
of the Makati RTCs October 2, 1996 Order, Eiji filed a complaint for the annulment of REM
(annulment of mortgage case) against Evelyn and PAFIN.[15] The complaint, docketed as Civil
Case No. 98-0431, was raffled to Branch 258 of the Regional Trial Court of Paraaque City
(Paraaque RTC).
For its defense, PAFIN denied prior knowledge of the October 2, 1996 Order against Evelyn. It
admitted, however, that it did not conduct any verification of the title with the Registry of Deeds
of Paraaque City because x x x Evelyn was a good, friendly and trusted neighbor.[16] PAFIN
maintained that Eiji has no personality to seek the annulment of the REM because a foreign national
cannot own real properties located within the Philippines.[17]
Evelyn also denied having knowledge of the October 2, 1996 Order.[18] Evelyn asserted that she
paid for the property with her own funds[19] and that she has exclusive ownership thereof. [20]
Paraaque Regional Trial Court Decision[21]

The Paraaque RTC determined that the only issue before it is whether x x x [Eiji] has a cause
of action against the defendants and x x x is entitled to the reliefs prayed for despite the fact that
he is not the registered owner of the property being a Japanese national.[22]
The Paraaque RTC explained that Eiji, as a foreign national, cannot possibly own the mortgaged
property. Without ownership, or any other law or contract binding the defendants to him, Eiji has
no cause of action that may be asserted against them.[23] Thus, the Paraaque RTC dismissed
Eijis complaint:
WHEREFORE, premises considered, for failure of the plaintiff to state a cause of action against
defendants, EVELYN CASTAEDA YANAGISAWA and Pacific Ace Finance Ltd. (PAFIN), this case
is DISMISSED.
The counterclaim and cross-claim are likewise DISMISSED.
SO ORDERED.[24]
Eiji appealed the trial courts decision arguing that the trial court erred in holding that his inability
to own real estate property in the Philippines deprives him of all interest in the mortgaged property,
which was bought with his money. He added that the Makati RTC has even recognized his contribution
in the purchase of the property by its declaration that he is entitled to half of the proceeds that
would be obtained from its sale.
Eiji also emphasized that Evelyn had made a commitment to him and to the Makati RTC that she
would not dispose of, alienate, or encumber the properties registered in her name while the case
was pending. This commitment incapacitates Evelyn from entering into the REM contract.
Court of Appeals Decision[25]
The CA found merit in Eijis appeal.
The CA noted that the Makati RTC ruled on Eijis and Evelyns ownership rights over the properties
that were acquired during their marriage, including the Paraaque townhouse unit. It was determined
therein that the registered properties should be sold at public auction and the proceeds thereof to
be divided between Eiji and Evelyn.[26]
Contrary to this ruling, the Paraaque RTC ruled that Eiji has no ownership rights over the Paraaque
townhouse unit in light of the constitutional prohibition on foreign ownership of lands and that the
subject property is Evelyns exclusive property.[27]
 The parties to the annulled mortgage filed separate motions for reconsideration on August 22,
2006,[33] which were both denied for lack of merit by the appellate court in its November 7, 2006
Resolution.[34]

The appellate court determined that the Paraaque RTCs Decision was improper because it violated
the doctrine of non-interference. Courts of equal jurisdiction, such as regional trial courts, have no
appellate jurisdiction over each other.[28] For this reason, the CA annulled and set aside the
Paraaque RTCs
PAFIN filed this petition for review.

decision to dismiss Eijis complaint.[29]

Petitioners Arguments

The CA then proceeded to resolve Eijis complaint.[30] The CA noted that Eiji anchored his complaint
upon Evelyns violation of her commitment to the Makati RTC and to Eiji that she would not dispose
of, alienate, or encumber the properties registered in her name, including the Paraaque townhouse
unit. This commitment created a right in favor of Eiji to rely thereon and a correlative obligation
on Evelyns part not to encumber the Paraaque townhouse unit. Since Evelyns commitment was Petitioner seeks a reversal of the CA Decision, which allegedly affirmed the
annotated on TCT No. 99791, all those who deal with the said property are charged with notice
of the burdens on the property and its registered owner.[31]
Makati RTC ruling that Eiji is a co-owner of the mortgaged property. PAFIN insists that the CA
sustained a violation of the constitution with its declaration that an alien can have an interest in
real property located in the Philippines.[35]

On the basis of Evelyns commitment and its annotation on TCT No. 99791, the CA determined
that Eiji has a cause of action to annul the REM contract. Evelyn was aware of her legal impediment
to encumber and dispose of the Paraaque townhouse unit. Meanwhile, PAFIN displayed a wanton
disregard of ordinary prudence when it admitted not conducting any verification of the title whatsoever.
The CA determined that PAFIN was a mortgagee in bad faith.[32] Petitioner also seeks the reinstatement of the Paraaque RTCs Decision dated April 20, 2003[36]
and prays that this Court render a decision that Eiji cannot have ownership rights over the mortgaged
property and that Evelyn enjoys exclusive ownership thereof. As the sole owner, Evelyn can validly
mortgage the same to PAFIN without need of Eijis consent. Corollarily, Eiji has no cause of action
to seek the REMs annulment.[37]

Thus, the CA annulled the REM executed by Evelyn in favor of PAFIN.

Respondents Arguments
 3. Who is entitled to the real property mentioned above when the marriage is declared void?
Respondent argues that he has an interest to have the REM annulled on two grounds: First, Evelyn
made a commitment in open court that she will not encumber the Paraaque townhouse unit during
the pendency of the case. Second, the Makati RTCs decision declared that he is entitled to share
in the proceeds of the Paraaque townhouse unit.[38]

4. Whether the Paraaque RTC can rule on the issue of ownership, even as the same issue was
already ruled upon by the Makati RTC and is pending appeal in the CA.

Respondent also insists that petitioner is in bad faith for entering into the mortgage contract with
Evelyn despite the annotation on TCT No. 99791 that Evelyn committed herself not to encumber
the same.[39]
Our Ruling

Issues
The petition has no merit.

Petitioner raises the following issues:[40]

Contrary to petitioners stance, the CA did not make any disposition as to who between Eiji and
Evelyn owns the Paraaque townhouse unit. It simply ruled that the Makati RTC had acquired
jurisdiction over the said question and should not have been interfered with by the Paraaque RTC.
The CA only clarified that it was improper for the Paraaque RTC to have reviewed the ruling of
a co-equal court.
1. Whether a real property in the Philippines can be part of the community property of a Filipina
and her foreigner spouse;

2. Whether a real property registered solely in the name of the Filipina wife is paraphernal or conjugal;
The Court agrees with the CA. The issue of ownership and liquidation of properties acquired during
the cohabitation of Eiji and Evelyn has been submitted for the resolution of the Makati RTC, and
is pending[41] appeal before the CA. The doctrine of judicial stability or non-interference dictates
that the assumption by the Makati RTC over the issue operates as an insurmountable barrier to
the subsequent assumption by the Paraaque RTC.[42] By insisting on ruling on the same issue,
the Paraaque RTC effectively interfered with the Makati RTCs resolution of the issue and created
the possibility of conflicting decisions. Cojuangco v. Villegas[43] states: The various branches of
the [regional trial courts] of a province or city, having as they have the same or equal authority
and exercising as they do concurrent and coordinate jurisdiction, should not, cannot and are not
permitted to interfere with their respective cases, much less with their orders or judgments. A contrary
rule would obviously lead to confusion and seriously hamper the administration of justice. The matter
is further explained thus:
It has been held that "even in cases of concurrent jurisdiction, it is, also, axiomatic that the court
first acquiring jurisdiction excludes the other courts."
In addition, it is a familiar principle that when a court of competent jurisdiction acquires jurisdiction
over the subject matter of a case, its authority continues, subject only to the appellate authority,
until the matter is finally and completely disposed of, and that no court of co-ordinate authority is
at liberty to interfere with its action. This doctrine is applicable to civil cases, to criminal prosecutions,
and to courts-martial. The principle is essential to the proper and orderly administration of the laws;
and while its observance might be required on the grounds of judicial comity and courtesy, it does
not rest upon such considerations exclusively, but is enforced to prevent unseemly, expensive, and
dangerous conflicts of jurisdiction and of the process.[44]
Petitioner maintains that it was imperative for the Paraaque RTC to rule on the ownership issue
because it was essential for the determination of the validity of the REM.[45]
The Court disagrees. A review of the complaint shows that Eiji did not claim ownership of the Paraaque
townhouse unit or his right to consent to the REM as his bases for seeking its annulment. Instead,
Eiji invoked his right to rely on Evelyns commitment not to dispose of or encumber the property
(as confirmed in the October 2, 1996 Order of the Makati RTC), and the annotation of the said
commitment on TCT No. 99791.
It was Evelyn and PAFIN that raised Eijis incapacity to own real property as their defense to the
suit. They maintained that Eiji, as an alien incapacitated to own real estate in the Philippines, need
not consent to the REM contract for its validity. But this argument is beside the point and is not
a proper defense to the right asserted by Eiji. This defense does not negate Eijis right to rely on
the October 2, 1996 Order of the Makati RTC and to hold third persons, who deal with the registered
property, to the annotations entered on the title. Thus, the RTC erred in dismissing the complaint
based on this defense.
Petitioner did not question the rest of the appellate courts ruling, which held that Evelyn and PAFIN
executed the REM in complete disregard and violation of the October 2, 1996 Order of the Makati
RTC and the annotation on TCT No. 99791. It did not dispute the legal effect of the October 2,
1996 Order on Evelyns capacity to encumber the Paraaque townhouse unit nor the CAs finding
that petitioner is a mortgagee in bad faith.
The October 2, 1996 Order, embodying Evelyns commitment not to dispose of or encumber the
property, is akin to an injunction order against the disposition or encumbrance of the property.
Jurisprudence holds that all acts done in violation of a standing injunction order are voidable as to
the party enjoined and third parties who are not in good faith.[46] The party, in whose favor the
injunction is issued, has a cause of action to seek the annulment of the offending actions.[47] The
following is instructive:
An injunction or restraining order must be obeyed while it remains in full force and effect until the
injunction or restraining order has been set aside, vacated, or modified by the court which granted
it, or until the order or decree awarding it has been reversed on appeal. The injuction must be obeyed
irrespective of the ultimate validity of the order, and no matter how unreasonable and unjust the
injunction may be in its terms.[48]
In view of the foregoing discussion, we find no need to discuss the other issues raised by the
petitioner.
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. The August 1, 2006
Decision of the Court of Appeals in CA-G.R. CV No. 78944 is AFFIRMED.
SO ORDERED.
ERNESTO DY, Petitioner,
vs.
HON. GINA M. BIBAT- PALAMOS, in her capacity as Presiding Judge of the Regional Trial Court,
Branch 64, Makati City, and ORIX METRO LEASING AND FINANCE CORPORATION, Respondents.
D E C I S I O N
MENDOZA, J.:
This petition for certiorari under Rule 65 of the 1997 Revised Rules of Civil Procedure questions
the December 13, 2010 and March 7, 2011Orders1 of the Regional Trial Court of Makati, Branch
64 (RTC), in Civil Case No. 92-2311, granting the motion for execution of petitioner, but denying
his prayer for the return of his cargo vessel in the condition when the possession thereof was seized
from him.
The Facts
The present controversy finds its roots in the Courts decision in Orix Metro Leasing and Finance
Corporation v. M/V "Pilar-I" and Spouses Ernesto Dy and Lourdes Dy2 involving the same parties.
The facts, as culled from the Courts decision in the said case and the records, are not disputed
by the parties.
Petitioner Ernesto Dy (petitioner) and his wife, Lourdes Dy (Lourdes), were the proprietors of
Limchia Enterprises which was engaged in the shipping business. In 1990, Limchia Enterprises,
with Lourdes as co-maker, obtained a loan from Orix Metro Leasing and Finance Corporation
(respondent) to fund its acquisition of M/V Pilar-I, a cargo vessel. As additional security for the
loan, Limchia Enterprises executed the Deed of Chattel Mortgage over M/V Pilar-I.3
Due to financial losses suffered when M/V Pilar-I was attacked by pirates, Spouses Dy failed to
make the scheduled payments as required in their promissory note. After receiving several demand
letters from respondent, Spouses Dy applied for the restructuring of their loan. Meanwhile, Lourdes
issued several checks to cover the remainder of their loan but the same were dishonored by the
bank, prompting respondent to institute a criminal complaint for violation of the Bouncing Checks
Law. Lourdes appealed to respondent with a new proposal to update their outstanding loan
obligations.4
On August 18, 1992, respondent filed the Complaint and Petition for Extrajudicial Foreclosure of
Preferred Ship Mortgage under Presidential Decree No. 1521 with Urgent Prayer for Attachment
with the RTC. Following the filing of an affidavit of merit and the posting of bond by respondent,
the RTC ordered the seizure of M/V Pilar-I and turned over its possession to respondent. On
September 28, 1994, respondent transferred all of its rights, title to and interests, as mortgagee,
in M/V Pilar-I to Colorado Shipyard Corporation (Colorado).5
On July 31, 1997, the RTC rendered a decision in favor of Spouses Dy, ruling that they had not
yet defaulted on their loan because respondent agreed to a restructured schedule of payment. There
being no default, the foreclosure of the chattel mortgage on M/V Pilar-I was premature. The RTC
ordered that the vessel be returned to Spouses Dy.6 This was affirmed by the Court of Appeals
(CA), with the modification that Spouses Dy be ordered to reimburse the respondent for repair and
dry docking expenses while the vessel was in the latters possession.7 On appeal, the Court
promulgated its Decision, dated September 11, 2009, upholding the findings of the CA but deleting
the order requiring Spouses Dy to reimburse respondent.8
 1. Whether or not the rule on hierarchy of courts is applicable to the instant petition?
Consequently, on August 17, 2010, petitioner filed a motion for execution of judgment with the
RTC. In the intervening period, Colorado filed its Manifestation/Motion, dated July 29, 2010,
informing the RTC that M/V Pilar-I, which was in its possession, had sustained severe damage 2. Whether or not the honorable trial court gravely abused its discretion, amounting to lack or excess
and deterioration and had sunk in its shipyard because of its exposure to the elements. For this of jurisdiction, in finding that petitioner is not entitled to the return of M/VPilar-1 in the condition
reason, it sought permission from the court to cut the sunken vessel into pieces, sell its parts and that it had when it was wrongfully seized by Orix Metro, or in the alternative, to a vessel of similar
deposit the proceeds in escrow.9 In his Comment/Objection, petitioner insisted that he had the right tonnage, length, beam, and other particulars as M/VPilar-1;
to require that the vessel be returned to him in the same condition that it had been at the time
it was wrongfully seized by respondent or, should it no longer be possible, that another vessel of
the same tonnage, length and beam similar to that of M/V Pilar-I be delivered.10 Colorado, however, 3. Whether or not petitioner is estopped from asking for the return of the vessel in the condition
responded that the vessel had suffered severe damage and deterioration that refloating or restoring it had at the time it was seized?
it to its former condition would be futile, impossible and very costly; and should petitioner persist
in his demand that the ship be refloated, it should be done at the expense of the party adjudged
by the court to pay the same.11
4. Whether or not it was petitioners duty to look out for the vessels condition?13

The RTC issued its questioned December 13, 2010 Order granting the motion for execution but
denying petitioners prayer for the return of M/V Pilar-I in the same state in which it was taken To be succinct, only two central issues need to be resolved: (1) whether petitioner was justified
by respondent. In so resolving, the RTC ratiocinated: in resorting directly to this Court via a petition for certiorari under Rule 65; and (2) whether petitioner
is entitled to the return of M/V Pilar-I in the same condition when it was seized by respondent.

First, the judgment of the Supreme Court does not require the delivery of M/V Pilar in the state
the defendants wanted it to be. Secondly, said judgment has now become final and it is axiomatic The Courts Ruling
that after judgment has become executory, the court cannot amend the same, except: x x x None
of the three circumstances where a final and executory judgment may be amended is present in
this case. And third, the present deplorable state of M/V Pilar certainly did not happen overnight, The Court finds the petition to be partly meritorious.
thus, defendants should have brought it to the attention of this Court, the Court of Appeals or the
Supreme Court after it became apparent. Their inaction until after the judgment has become final,
executory and immutable rendered whatever right they may have to remedy the situation to be
Hierarchy of Courts; Direct Resort
nugatory. [Underlining supplied]
To The Supreme Court Justified

Petitioner moved for reconsideration but the motion was denied by the RTC in its March 7, 2011
Order.12 Petitioner argues that his situation calls for the direct invocation of this Courts jurisdiction in the
interest of justice. Moreover, as pointed out by the RTC, what is involved is a judgment of the Court
which the lower courts cannot modify. Hence, petitioner deemed it proper to bring this case
Hence, this petition. immediately to the attention of this Court. Lastly, petitioner claims that the present case involves
a novel issue of law that is, whether in an action to recover, a defendant in wrongful possession
of the subject matter in litigation may be allowed to return the same in a deteriorated condition without
any liability.14
The Issues

Respondent, on the other hand, contends that the petition should have been filed with the CA,
Petitioner raises the following issues in its Memorandum: following the doctrine of hierarchy of courts. It pointed out that petitioner failed to state any special
or important reason or any exceptional and compelling circumstance which would warrant a direct
recourse to this Court.15
Under the principle of hierarchy of courts, direct recourse to this Court is improper because the
Supreme Court is a court of last resort and must remain to be so in order for it to satisfactorily
perform its constitutional functions, thereby allowing it to devote its time and attention to matters
within its exclusive jurisdiction and preventing the overcrowding of its docket. 16 Nonetheless, the
invocation of this Courts original jurisdiction to issue writs of certiorari has been allowed in certain
instances on the ground of special and important reasons clearly stated in the petition, such as,(1)
when dictated by the public welfare and the advancement of public policy; (2) when demanded
by the broader interest of justice; (3) when the challenged orders were patent nullities; or (4)
when analogous exceptional and compelling circumstances called for and justified the immediate and
direct handling of the case.17
This case falls under one of the exceptions to the principle of hierarchy of courts. Justice demands
that this Court take cognizance of this case to put an end to the controversy and resolve the matter
which has been dragging on for more than twenty (20) years. Moreover, in light of the fact that
what is involved is a final judgment promulgated by this Court, it is but proper for petitioner to call
upon its original jurisdiction and seek final clarification.
Wrong Mode of Appeal;
Exception
Petitioner asserts that the RTC committed grave abuse of discretion when it failed to rule in his
favor despite the fact that he had been deprived by respondent of his property rights over M/V Pilar-I
for the past eighteen(18) years. Moreover, the change in the situation of the parties calls for a
relaxation of the rules which would make the execution of the earlier decision of this Court inequitable
or unjust. According to petitioner, for the RTC to allow respondent to return the ship to him in its
severely damaged and deteriorated condition without any liability would be to reward bad faith.18
Conversely, respondent submits that there was no grave abuse of discretion on the part of the RTC
as the latter merely observed due process and followed the principle that an execution order may
not vary or go beyond the terms of the judgment it seeks to enforce.19 Respondent adds that the
proper remedy should have been an ordinary appeal, where a factual review of the records can
be made to determine the condition of the ship at the time it was taken from petitioner, and not
a special civil action for certiorari.20
There are considerable differences between an ordinary appeal and a petition for certiorari which
have been exhaustively discussed by this Court in countless cases. The remedy for errors of judgment,
whether based on the law or the facts of the case or on the wisdom or legal soundness of a decision,
is an ordinary appeal.21 In contrast, a petition for certiorari under Rule 65 is an original action
designed to correct errors of jurisdiction, defined to be those "in which the act complained of was
issued by the court, officer, or quasi-judicial body without or in excess of jurisdiction, or with grave
abuse of discretion which is tantamount to lack of in excess of jurisdiction."22 A court or tribunal
can only be considered to have acted with grave abuse of discretion if its exercise of judgment was
so whimsical and capricious as to be equivalent to a lack of jurisdiction. The abuse must be extremely
patent and gross that it would amount to an "evasion of a positive duty or to virtual refusal to perform
a duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised
in an arbitrary and despotic manner by reason of passion and hostility."23
Therefore, a misappreciation of evidence on the part of the lower court, as asserted by petitioner,
may only be reviewed by appeal and not by certiorari because the issue raised by the petitioner
does not involve any jurisdictional ground.24 It is a general rule of procedural law that when a party
adopts an inappropriate mode of appeal, his petition may be dismissed outright to prevent the erring
party from benefiting from his neglect and mistakes.25 There are exceptions to this otherwise ironclad
rule, however. One is when the strict application of procedural technicalities would hinder the
expeditious disposition of this case on the merits,26 such as in this case.
Petitioner Not Barred from Demanding
Return of the Vessel in its Former Condition
Petitioner insists that it is respondent who should bear the responsibility for the deterioration of the
vessel because the latter, despite having in its possession the vessel M/V Pilar-I during the pendency
of the foreclosure proceedings, failed to inform the court and petitioner himself about the actual
condition of the ship. For estoppel to take effect, there must be knowledge of the real facts by the
party sought to be estopped and reliance by the party claiming estoppel on the representation made
by the former. In this case, petitioner cannot be estopped from asking for the return of the vessel
in the condition that it had been at the time it was seized by respondent because he had not known
of the deteriorated condition of the ship.27
On the contrary, respondent argues that petitioner is barred from asking for a modification of the
judgment since he never prayed for the return of M/V Pilar-I in the same condition that it had been
at the time it was seized.28 Petitioner could have prayed for such relief in his prior pleadings and
presented evidence thereon before the judgment became final and executory. During the course of
the trial, and even at the appellate phase of the case, petitioner failed to ask the courts to look
into the naturally foreseeable depreciation of M/V Pilar-I and to determine who should pay for the
wear and tear of the vessel. Consequently, petitioner can no longer pursue such relief for the first
time at this very late stage.29 Moreover, respondent posits that it can only be held liable for the
restoration and replacement of the vessel if it can be proven that M/V Pilar-I deteriorated through
the fault of respondent. Nowhere in the prior decision of this Court, however, does it appear that
respondent was found to have been negligent in its care of the vessel. In fact, respondent points
out that, for a certain period, it even paid for the repair and maintenance of the vessel and engaged
the services of security guards to watch over the vessel. It reasons that the vessels deterioration
was necessarily due to its exposure to sea water and the natural elements for the almost twenty
years that it was docked in the Colorado shipyard.30
On this matter, the Court finds for petitioner.
This Court is not unaware of the doctrine of immutability of judgments. When a judgment becomes
final and executory, it is made immutable and unalterable, meaning it can no longer be modified
in any respect either by the court which rendered it or even by this Court. Its purpose is to avoid
delay in the orderly administration of justice and to put an end to judicial controversies. Even at
the risk of occasional errors, public policy and sound practice dictate that judgments must become
final at some point.31
As with every rule, however, this admits of certain exceptions. When a supervening event renders
the execution of a judgment impossible or unjust, the interested party can petition the court to modify
the judgment to harmonize it with justice and the facts.32 A supervening event is a fact which
transpires or a new circumstance which develops after a judgment has become final and executory.
This includes matters which the parties were unaware of prior to or during trial because they were
not yet in existence at that time.33
In this case, the sinking of M/V Pilar-I can be considered a supervening event.1wphi1 Petitioner,
who did not have possession of the ship, was only informed of its destruction when Colorado filed
its Manifestation, dated July 29, 2010, long after the September 11, 2009 Decision of this Court
in Orix Metro Leasing and Finance Corporation v. M/V "Pilar-I" and Spouses Ernesto Dy and Lourdes
Dy attained finality on January 19, 2010. During the course of the proceedings in the RTC, the
CA and this Court, petitioner could not have known of the worsened condition of the vessel because
it was in the possession of Colorado.
It could be argued that petitioner and his lawyer should have had the foresight to ask for the return
of the vessel in its former condition at the time respondent took possession of the same during the
proceedings in the earlier case. Nonetheless, the modification of the Courts decision is warranted
by the superseding circumstances, that is, the severe damage to the vessel subject of the case and
the belated delivery of this information to the courts by the party in possession of the same.
Having declared that a modification of our earlier judgment is permissible in light of the exceptional
incident present in this case, the Court further rules that petitioner is entitled to the return of M/V
Pilar-I in the same condition in which respondent took possession of it. Considering, however, that
this is no longer possible, then respondent should pay petitioner the value of the ship at such time.
This disposition is not without precedent. In the case of Metro Manila Transit Corporation v. D.M.
Consortium, Inc.,34 D.M. Consortium, Inc. (DMCI) acquired 228 buses under a lease purchase
agreement with Metro Manila Transit Corporation (MMTC). MMTC later alleged that DMCI was in
default of its amortization, as a result of which, MMTC took possession of all the buses. This Court
upheld the right of DMCI, after having been unjustly denied of its right of possession to several
buses, to have them returned by MMTC. Considering, however, that the buses could no longer be
returned in their original state, the Court sustained the resolution of the CA ordering MMTC to pay
DMCI the value of the buses at the time of repossession.
The aforecited case finds application to the present situation of petitioner. After having been deprived
of his vessel for almost two decades, through no fault of his own, it would be the height of injustice
to permit there turn of M/V Pilar-I to petitioner in pieces, especially after a judgment by this very
same Court ordering respondent to restore possession of the vessel to petitioner. To do so would
leave petitioner with nothing but a hollow and illusory victory for although the Court ruled in his favor
and declared that respondent wrongfully took possession of his vessel, he could no longer enjoy
the beneficial use of his extremely deteriorated vessel that it is no longer seaworthy and has no
other commercial value but for the sale of its parts as scrap.
Moreover, the incongruity only becomes more palpable when consideration is taken of the fact that
petitioner's obligation to respondent, for which the now practically worthless vessel serves as security,
is still outstanding.35 The Court cannot countenance such an absurd outcome. It could not have
been the intention of this Court to perpetrate an injustice in the guise of a favorable decision. As
the court of last resort, this Court is the final bastion of justice where litigants can hope to correct
any error made in the lower courts.
WHEREFORE, the petition is PARTIALLYGRANTED. Respondent is ordered to pay petitioner the
value of M/V Pilar- I at the time it was wrongfully seized by it. The case is hereby REMANDED
to the Regional Trial Court, Branch 64, Makati City, for the proper determination of the value of
the vessel at said time.
SO ORDERED.
REPUBLIC OF THE PHILIPPINES,
Petitioner,
 CARPIO, J., Chairperson,

BRION,

PEREZ,

- versus - SERENO, and

REYES, JJ.

Promulgated:

BANTIGUE POINT DEVELOPMENT CORPORATION,

Respondent. March 14, 2012

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

G. R. No. 162322
D E C I S I O N

SERENO, J.:

Present:
This Rule 45 Petition requires this Court to address the issue of the proper scope of the delegated
jurisdiction of municipal trial courts in land registration cases. Petitioner Republic of the Philippines
(Republic) assails the Decision of the Court of Appeals (CA)[1] in CA-G.R. CV No. 70349,
which affirmed the Decision of the Municipal Trial Court (MTC) of San Juan, Batangas[2] in LRC
Case No. N-98-20, LRA Record No. 68329, granting respondent Bantigue Point Development The CA further found that respondent Corporation had sufficiently established the latters registrable
Corporations (Corporation) application for original registration of a parcel of land. Since only questions title over the subject property after having proven open, continuous, exclusive and notorious possession
of law have been raised, petitioner need not have filed a Motion for Reconsideration of the assailed and occupation of the subject land by itself and its predecessors-in-interest even before the outbreak
CA Decision before filing this Petition for Review. of World War II.[16]

The Facts Dissatisfied with the CAs ruling, petitioner Republic filed this instant Rule 45 Petition and raised
the following arguments in support of its appeal:

On 17 July 1997, respondent Bantigue Point Development Corporation filed with the Regional Trial
Court (RTC) of Rosario, Batangas an application for original registration of title over a parcel of
land with an assessed value of 4,330, 1,920 and 8,670, or a total assessed value of 14,920
for the entire property, more particularly described as Lot 8060 of Cad 453-D, San Juan Cadastre,
with an area of more or less 10,732 square meters, located at Barangay Barualte, San Juan, I.
Batangas. [3]

On 18 July 1997, the RTC issued an Order setting the case for initial hearing on 22 October
1997.[4] On 7 August 1997, it issued a second Order setting the initial hearing on 4 November
1997.[5]
THE REPUBLIC CANNOT BE ESTOPPED FROM QUESTIONING THE JURISDICTION OF THE
MUNICIPAL TRIAL COURT OVER THE APPLICATION FOR ORIGINAL REGISTRATION OF LAND
TITLE EVEN FOR THE FIRST TIME ON APPEAL
Petitioner Republic filed its Opposition to the application for registration on 8 January 1998 while
the records were still with the RTC.[6]

II.
On 31 March 1998, the RTC Clerk of Court transmitted motu proprio the records of the case to
the MTC of San Juan, because the assessed value of the property was allegedly less than
100,000.[7]

Thereafter, the MTC entered an Order of General Default[8] and commenced with the reception THE MUNICIPAL TRIAL COURT FAILED TO ACQUIRE JURISDICTION OVER THE APPLICATION
of evidence.[9] Among the documents presented by respondent in support of its application are Tax FOR ORIGINAL REGISTRATION OF LAND TITLE.[17]
Declarations,[10] a Deed of Absolute Sale in its favor,[11] and a Certification from the Department
of Environment and Natural Resources (DENR) Community Environment and Natural Resources
Office (CENRO) of Batangas City that the lot in question is within the alienable and disposable
zone.[12] Thereafter, it awarded the land to respondent Corporation.[13]

The Courts Ruling

Acting on an appeal filed by the Republic,[14] the CA ruled that since the former had actively
participated in the proceedings before the lower court, but failed to raise the jurisdictional challenge
therein, petitioner is thereby estopped from questioning the jurisdiction of the lower court on appeal.[15]
We uphold the jurisdiction of the MTC, but remand the case to the court a quo for further proceedings negligence or omission to assert a right within a reasonable time, warranting the presumption that
in order to determine if the property in question forms part of the alienable and disposable land the party entitled to assert it either has abandoned or declined to assert it.[27] In this case, petitioner
of the public domain. Republic has not displayed such unreasonable failure or neglect that would lead us to conclude that
it has abandoned or declined to assert its right to question the lower court's jurisdiction.

The Republic is not estopped from raising the issue of jurisdiction in this case.
II

At the outset, we rule that petitioner Republic is not estopped from questioning the jurisdiction of
the lower court, even if the former raised the jurisdictional question only on appeal. The rule is settled The Municipal Trial Court properly acquired jurisdiction over the case.
that lack of jurisdiction over the subject matter may be raised at any stage of the proceedings.[18]
Jurisdiction over the subject matter is conferred only by the Constitution or the law.[19] It cannot
be acquired through a waiver or enlarged by the omission of the parties or conferred by the In assailing the jurisdiction of the lower courts, petitioner Republic raised two points of contention:
acquiescence of the court.[20] Consequently, questions of jurisdiction may be cognizable even if (a) the period for setting the date and hour of the initial hearing; and (b) the value of the land
raised for the first time on appeal.[21] to be registered.

The ruling of the Court of Appeals that a party may be estopped from raising such [jurisdictional]
question if he has actively taken part in the very proceeding which he questions, belatedly objecting
to the courts jurisdiction in the event that the judgment or order subsequently rendered is adverse
to him[22] is based on the doctrine of estoppel by laches. We are aware of that doctrine first
enunciated by this Court in Tijam v. Sibonghanoy.[23] In Tijam, the party-litigant actively participated First, petitioner argued that the lower court failed to acquire jurisdiction over the application, because
in the proceedings before the lower court and filed pleadings therein. Only 15 years thereafter, and the RTC set the date and hour of the initial hearing beyond the 90-day period provided under the
after receiving an adverse Decision on the merits from the appellate court, did the party-litigant Property Registration Decree.[28]
question the lower courts jurisdiction. Considering the unique facts in that case, we held that estoppel
by laches had already precluded the party-litigant from raising the question of lack of jurisdiction
on appeal. In Figueroa v. People,[24] we cautioned that Tijam must be construed as an exception We disagree.
to the general rule and applied only in the most exceptional cases whose factual milieu is similar
to that in the latter case.

The facts are starkly different in this case, making the exceptional rule in Tijam inapplicable. Here,
petitioner Republic filed its Opposition to the application for registration when the records were still
with the RTC.[25] At that point, petitioner could not have questioned the delegated jurisdiction of The Property Registration Decree provides:
the MTC, simply because the case was not yet with that court. When the records were transferred
to the MTC, petitioner neither filed pleadings nor requested affirmative relief from that court. On appeal,
petitioner immediately raised the jurisdictional question in its Brief.[26] Clearly, the exceptional Sec. 23. Notice of initial hearing, publication, etc. - The court shall, within five days from filing
doctrine of estoppel by laches is inapplicable to the instant appeal. of the application, issue an order setting the date and hour of the initial hearing which shall not
be earlier than forty-five days nor later than ninety days from the date of the order. x x x.

Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of
time, to do that which, by exercising due diligence, could or should have been done earlier; it is
In this case, the application for original registration was filed on 17 July 1997.[29] On 18 July
1997, or a day after the filing of the application, the RTC immediately issued an Order setting the
case for initial hearing on 22 October 1997, which was 96 days from the Order.[30] While the
date set by the RTC was beyond the 90-day period provided for in Section 23, this fact did not
affect the jurisdiction of the trial court. In Republic v. Manna Properties, Inc.,[31] petitioner Republic
therein contended that there was failure to comply with the jurisdictional requirements for original
registration, because there were 125 days between the Order setting the date of the initial hearing
and the initial hearing itself. We ruled that the lapse of time between the issuance of the Order
setting the date of initial hearing and the date of the initial hearing itself was not fatal to the application.
Thus, we held:
x x x [A] party to an action has no control over the Administrator or the Clerk of Court acting as
a land court; he has no right to meddle unduly with the business of such official in the performance
of his duties. A party cannot intervene in matters within the exclusive power of the trial court. No
fault is attributable to such party if the trial court errs on matters within its sole power. It is unfair
to punish an applicant for an act or omission over which the applicant has neither responsibility nor
control, especially if the applicant has complied with all the requirements of the law.[32]
Indeed, it would be the height of injustice to penalize respondent Corporation by dismissing its
application for registration on account of events beyond its control.
Moreover, since the RTC issued a second Order on 7 August 1997 setting the initial hearing on
4 November 1997,[33] within the 90-day period provided by law, petitioner Republic argued that
the jurisdictional defect was still not cured, as the second Order was issued more than five days
from the filing of the application, again contrary to the prescribed period under the Property Registration
Decree.[34]
Petitioner is incorrect.
The RTCs failure to issue the Order setting the date and hour of the initial hearing within five days
from the filing of the application for registration, as provided in the Property Registration Decree,
did not affect the courts its jurisdiction. Observance of the five-day period was merely directory, and
failure to issue the Order within that period did not deprive the RTC of its jurisdiction over the case.
To rule that compliance with the five-day period is mandatory would make jurisdiction over the subject
matter dependent upon the trial court. Jurisdiction over the subject matter is conferred only by the
Constitution or the law.[35] It cannot be contingent upon the action or inaction of the court.
This does not mean that courts may disregard the statutory periods with impunity. We cannot assume
that the law deliberately meant the provision to become meaningless and to be treated as a dead
letter.[36] However, the records of this case do not show such blatant disregard for the law. In
fact, the RTC immediately set the case for initial hearing a day after the filing of the application
for registration,[37] except that it had to issue a second Order because the initial hearing had been
set beyond the 90-day period provided by law.
Second, petitioner contended[38] that since the selling price of the property based on the Deed
of Sale annexed to respondents application for original registration was 160,000,[39] the MTC
did not have jurisdiction over the case. Under Section 34 of the Judiciary Reorganization Act, as
amended,[40] the MTCs delegated jurisdiction to try cadastral and land registration cases is limited
to lands, the value of which should not exceed 100,000.
We are not persuaded.
The delegated jurisdiction of the MTC over cadastral and land registration cases is indeed set forth
in the Judiciary Reorganization Act, which provides:
Sec. 34. Delegated Jurisdiction in Cadastral and Land Registration Cases. - Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts may be assigned by the Supreme Court
to hear and determine cadastral or land registration cases covering lots where there is no controversy
or opposition, or contested lots where the value of which does not exceed One hundred thousand
pesos (100,000.00), such value to be ascertained by the affidavit of the claimant or by agreement
of the respective claimants if there are more than one, or from the corresponding tax declaration
of the real property. Their decision in these cases shall be appealable in the same manner as decisions
of the Regional Trial Courts. (As amended by R.A. No. 7691) (Emphasis supplied.)
Thus, the MTC has delegated jurisdiction in cadastral and land registration cases in two instances:
first, where there is no controversy or opposition; or, second, over contested lots, the value of which
does not exceed 100,000.
The case at bar does not fall under the first instance, because petitioner opposed respondent
Corporations application for registration on 8 January 1998.[41]
However, the MTC had jurisdiction under the second instance, because the value of the lot in this
case does not exceed 100,000.
Contrary to petitioners contention, the value of the land should not be determined with reference
to its selling price. Rather, Section 34 of the Judiciary Reorganization Act provides that the value
of the property sought to be registered may be ascertained in three ways: first, by the affidavit of
the claimant; second, by agreement of the respective claimants, if there are more than one; or, third,
from the corresponding tax declaration of the real property.[42]
In this case, the value of the property cannot be determined using the first method, because the
records are bereft of any affidavit executed by respondent as to the value of the property. Likewise,
valuation cannot be done through the second method, because this method finds application only
where there are multiple claimants who agree on and make a joint submission as to the value of
the property. Here, only respondent Bantigue Point Development Corporation claims the property.
The value of the property must therefore be ascertained with reference to the corresponding Tax
Declarations submitted by respondent Corporation together with its application for registration. From
the records, we find that the assessed value of the property is 4,330, 1,920 and 8,670, or
a total assessed value of 14,920 for the entire property.[43] Based on these Tax Declarations,
it is evident that the total value of the land in question does not exceed 100,000. Clearly, the
MTC may exercise its delegated jurisdiction under the Judiciary Reorganization Act, as amended.
III
A certification from the CENRO is not sufficient proof that the property in question is alienable and
disposable land of the public domain.
Even as we affirm the propriety of the MTCs exercise of its delegated jurisdiction, we find that the
lower court erred in granting respondent Corporations application for original registration in the absence
of sufficient proof that the property in question was alienable and disposable land of the public domain.
The Regalian doctrine dictates that all lands of the public domain belong to the State.[44] The
applicant for land registration has the burden of overcoming the presumption of State ownership by
establishing through incontrovertible evidence that the land sought to be registered is alienable or
disposable based on a positive act of the government.[45] We held in Republic v. T.A.N. Properties,
Inc. that a CENRO certification is insufficient to prove the alienable and disposable character of the
land sought to be registered.[46] The applicant must also show sufficient proof that the DENR
Secretary has approved the land classification and released the land in question as alienable and
disposable.[47]
Thus, the present rule is that an application for original registration must be accompanied by (1)
a CENRO or PENRO[48] Certification; and (2) a copy of the original classification approved by
the DENR Secretary and certified as a true copy by the legal custodian of the official records.[49]
Here, respondent Corporation only presented a CENRO certification in support of its application.[50]
Clearly, this falls short of the requirements for original registration.
We therefore remand this case to the court a quo for reception of further evidence to prove that
the property in question forms part of the alienable and disposable land of the public domain. If
respondent Bantigue Point Development Corporation presents a certified true copy of the original
classification approved by the DENR Secretary, the application for original registration should be
granted. If it fails to present sufficient proof that the land in question is alienable and disposable
based on a positive act of the government, the application should be denied.
WHEREFORE, premises considered, the instant Petition for Review is DENIED. Let this case be
REMANDED to the Municipal Trial Court of San Juan, Batangas, for reception of evidence to prove
that the property sought to be registered is alienable and disposable land of the public domain.
SO ORDERED.
SERAFIN TIJAM, ET AL., plaintiffs-appellees,
vs.
MAGDALENO SIBONGHANOY alias GAVINO SIBONGHANOY and LUCIA BAGUIO, defendants,
MANILA SURETY AND FIDELITY CO., INC. (CEBU BRANCH) bonding company and
defendant-appellant.
F. S. Urot and G. A. Uriate for plaintiffs-appellees.
Carlos J. Cuizon for defendants Gavino Sibonghanoy and Lucia Baguio.
Villaluz Law Office, Velasco Law Office, Pages and Soberano for defendant-appellant Manila Surety
and Fidelity Company, Inc.
DIZON, J.:
On July 19, 1948 barely one month after the effectivity of Republic Act No. 296 known as
the Judiciary Act of 1948 the spouses Serafin Tijam and Felicitas Tagalog commenced Civil Case
No. R-660 in the Court of First Instance of Cebu against the spouses Magdaleno Sibonghanoy
and Lucia Baguio to recover from them the sum of P1,908.00, with legal interest thereon from
the date of the filing of the complaint until the whole obligation is paid, plus costs. As prayed for
in the complaint, a writ of attachment was issued by the court against defendants' properties, but
the same was soon dissolved upon the filing of a counter-bond by defendants and the Manila Surety
and Fidelity Co., Inc. hereinafter referred to as the Surety, on the 31st of the same month.
After being duly served with summons the defendants filed their answer in which, after making some
admissions and denials of the material averments of the complaint, they interposed a counterclaim.
This counterclaim was answered by the plaintiffs.
After trial upon the issues thus joined, the Court rendered judgment in favor of the plaintiffs and,
after the same had become final and executory, upon motion of the latter, the Court issued a writ
of execution against the defendants. The writ having been returned unsatisfied, the plaintiffs moved
for the issuance of a writ of execution against the Surety's bond (Rec. on Appeal, pp. 46-49),
against which the Surety filed a written opposition (Id. pp. 49) upon two grounds, namely, (1)
Failure to prosecute and (2) Absence of a demand upon the Surety for the payment of the amount
due under the judgment. Upon these grounds the Surety prayed the Court not only to deny the
motion for execution against its counter-bond but also the following affirmative relief : "to relieve
the herein bonding company of its liability, if any, under the bond in question" (Id. p. 54) The
Court denied this motion on the ground solely that no previous demand had been made on the Surety
for the satisfaction of the judgment. Thereafter the necessary demand was made, and upon failure
of the Surety to satisfy the judgment, the plaintiffs filed a second motion for execution against the
counterbond. On the date set for the hearing thereon, the Court, upon motion of the Surety's counsel,
granted the latter a period of five days within which to answer the motion. Upon its failure to file
such answer, the Court granted the motion for execution and the corresponding writ was issued.
Subsequently, the Surety moved to quash the writ on the ground that the same was issued without
the required summary hearing provided for in Section 17 of Rule 59 of the Rules of Court. As
the Court denied the motion, the Surety appealed to the Court of Appeals from such order of denial
and from the one denying its motion for reconsideration (Id. p. 97). Its record on appeal was then
printed as required by the Rules, and in due time it filed its brief raising therein no other question
but the ones covered by the following assignment of errors:
I. That the Honorable Court a quo erred in issuing its order dated November 2, 1957, by holding
the incident as submitted for resolution, without a summary hearing and compliance with the other
mandatory requirements provided for in Section 17, Rule 59 of the Rules of Court.
II. That the Honorable Court a quo erred in ordering the issuance of execution against the herein
bonding company-appellant.
III. That the Honorable Court a quo erred in denying the motion to quash the writ of execution filed
by the herein bonding company-appellant as well as its subsequent motion for reconsideration, and/or
in not quashing or setting aside the writ of execution.
Not one of the assignment of errors it is obvious raises the question of lack of jurisdiction,
neither directly nor indirectly.
Although the appellees failed to file their brief, the Court of Appeals, on December 11, 1962, decided
the case affirming the orders appealed from.
On January 8, 1963 five days after the Surety received notice of the decision, it filed a motion
asking for extension of time within which to file a motion for reconsideration. The Court of Appeals
granted the motion in its resolution of January 10 of the same year. Two days later the Surety
filed a pleading entitled MOTION TO DISMISS, alleging substantially that appellees action was filed
in the Court of First Instance of Cebu on July 19, 1948 for the recovery of the sum of P1,908.00
only; that a month before that date Republic Act No. 296, otherwise known as the Judiciary Act
of 1948, had already become effective, Section 88 of which placed within the original exclusive
jurisdiction of inferior courts all civil actions where the value of the subject-matter or the amount
of the demand does not exceed P2,000.00, exclusive of interest and costs; that the Court of First
Instance therefore had no jurisdiction to try and decide the case. Upon these premises the Surety's
motion prayed the Court of Appeals to set aside its decision and to dismiss the case. By resolution
of January 16, 1963 the Court of Appeals required the appellees to answer the motion to dismiss,
but they failed to do so. Whereupon, on May 20 of the same year, the Court resolved to set aside
its decision and to certify the case to Us. The pertinent portions of its resolution read as follows:
It would indeed appear from the record that the action at bar, which is a suit for collection of money
in the sum of exactly P1,908.00 exclusive of interest, was originally instituted in the Court of First
Instance of Cebu on July 19, 1948. But about a month prior to the filing of the complaint, more
specifically on June 17, 1948, the Judiciary Act of 1948 took effect, depriving the Court of First
Instance of original jurisdiction over cases in which the demand, exclusive of interest, is not more
than P2,000.00. (Secs. 44[c] and 86[b], R.A. No. 296.)
We believe, therefore, that the point raised in appellant's motion is an important one which merits
serious consideration. As stated, the complaint was filed on July 19, 1948. This case therefore
has been pending now for almost 15 years, and throughout the entire proceeding appellant never
raised the question of jurisdiction until after receipt of this Court's adverse decision.
There are three cases decided by the Honorable Supreme Court which may be worthy of consideration
in connection with this case, namely: Tyson Tan, et al. vs. Filipinas Compaia de Seguros, et al.,
G.R. No. L-10096, March 23, 1956; Pindangan Agricultural Co., Inc. vs. Jose P. Dans, etc.,
et al., G.R. No. L-14591, September 26, 1962; and Alfredo Montelibano, et al. vs. Bacolod-Murcia
Milling Co., Inc., G.R. No. L-15092, September 29, 1962, wherein the Honorable Supreme Court
frowned upon the 'undesirable practice' of appellants submitting their case for decision and then
accepting the judgment, if favorable, but attacking it for lack of jurisdiction when adverse.
Considering, however, that the Supreme Court has the "exclusive" appellate jurisdiction over "all
cases in which the jurisdiction of any inferior court is in issue" (See. 1, Par. 3[3], Judiciary Act
of 1948, as amended), we have no choice but to certify, as we hereby do certify, this case to
the Supreme Court.1wph1.t
ACCORDINGLY, pursuant to Section 31 of the Judiciary Act of 1948 as amended, let the record
of this case be forwarded to the Supreme Court.
It is an undisputed fact that the action commenced by appellees in the Court of First Instance of
Cebu against the Sibonghanoy spouses was for the recovery of the sum of P1,908.00 only an
amount within the original exclusive jurisdiction of inferior courts in accordance with the provisions
of the Judiciary Act of 1948 which had taken effect about a month prior to the date when the
action was commenced. True also is the rule that jurisdiction over the subject matter is conferred
upon the courts exclusively by law, and as the lack of it affects the very authority of the court to
take cognizance of the case, the objection may be raised at any stage of the proceedings. However,
considering the facts and circumstances of the present case which shall forthwith be set forth
We are of the opinion that the Surety is now barred by laches from invoking this plea at this
late hour for the purpose of annuling everything done heretofore in the case with its active participation.
As already stated, the action was commenced in the Court of First Instance of Cebu on July 19,
1948, that is, almost fifteen years before the Surety filed its motion to dismiss on January 12,
1963 raising the question of lack of jurisdiction for the first time.
It must be remembered that although the action, originally, was exclusively against the Sibonghanoy
spouses the Surety became a quasi-party therein since July 31, 1948 when it filed a counter-bond
for the dissolution of the writ of attachment issued by the court of origin (Record on Appeal, pp.
15-19). Since then, it acquired certain rights and assumed specific obligations in connection with
the pending case, in accordance with sections 12 and 17, Rule 57, Rules of Court (Bautista vs.
Joaquin, 46 Phil. 885; Kimpang & Co. vs. Javier, 65 Phil. 170).
Upon the filing of the first motion for execution against the counter-bond the Surety not only filed
a written opposition thereto praying for its denial but also asked for an additional affirmative relief
that it be relieved of its liability under the counter-bond upon the grounds relied upon in support
of its opposition lack of jurisdiction of the court a quo not being one of them.
Then, at the hearing on the second motion for execution against the counter-bond, the Surety
appeared, through counsel, to ask for time within which to file an answer or opposition thereto. This
motion was granted, but instead of such answer or opposition, the Surety filed the motion to dismiss
mentioned heretofore.
A party may be estopped or barred from raising a question in different ways and for different reasons.
Thus we speak of estoppel in pais, or estoppel by deed or by record, and of estoppel by laches.
Laches, in a general sense is failure or neglect, for an unreasonable and unexplained length of time,
to do that which, by exercising due diligence, could or should have been done earlier; it is negligence
or omission to assert a right within a reasonable time, warranting a presumption that the party entitled
to assert it either has abandoned it or declined to assert it.
The doctrine of laches or of "stale demands" is based upon grounds of public policy which requires,
for the peace of society, the discouragement of stale claims and, unlike the statute of limitations,
is not a mere question of time but is principally a question of the inequity or unfairness of permitting
a right or claim to be enforced or asserted.
It has been held that a party can not invoke the jurisdiction of a court to sure affirmative relief against
his opponent and, after obtaining or failing to obtain such relief, repudiate or question that same
jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of
explaining the rule, it was further said that the question whether the court had jurisdiction either of
the subject-matter of the action or of the parties was not important in such cases because the party
is barred from such conduct not because the judgment or order of the court is valid and conclusive
as an adjudication, but for the reason that such a practice can not be tolerated obviously for
reasons of public policy.
Furthermore, it has also been held that after voluntarily submitting a cause and encountering an
adverse decision on the merits, it is too late for the loser to question the jurisdiction or power of
the court (Pease vs. Rathbun-Jones etc., 243 U.S. 273, 61 L. Ed. 715, 37 S. Ct. 283; St.
Louis etc. vs. McBride, 141 U.S. 127, 35 L. Ed. 659). And in Littleton vs. Burgess, 16 Wyo.
58, the Court said that it is not right for a party who has affirmed and invoked the jurisdiction of
a court in a particular matter to secure an affirmative relief, to afterwards deny that same jurisdiction
to escape a penalty.
Upon this same principle is what We said in the three cases mentioned in the resolution of the
Court of Appeals of May 20, 1963 (supra) to the effect that we frown upon the "undesirable
practice" of a party submitting his case for decision and then accepting the judgment, only if favorable,
and attacking it for lack of jurisdiction, when adverse as well as in Pindagan etc. vs. Dans,
et al., G.R. L-14591, September 26, 1962; Montelibano, et al., vs. Bacolod-Murcia Milling Co.,
Inc., G.R. L-15092; Young Men Labor Union etc. vs. The Court of Industrial Relation et al., G.R.
L-20307, Feb. 26, 1965, and Mejia vs. Lucas, 100 Phil. p. 277.
The facts of this case show that from the time the Surety became a quasi-party on July 31, 1948,
it could have raised the question of the lack of jurisdiction of the Court of First Instance of Cebu
to take cognizance of the present action by reason of the sum of money involved which, according
to the law then in force, was within the original exclusive jurisdiction of inferior courts. It failed to
do so. Instead, at several stages of the proceedings in the court a quo as well as in the Court
of Appeals, it invoked the jurisdiction of said courts to obtain affirmative relief and submitted its case
for a final adjudication on the merits. It was only after an adverse decision was rendered by the
Court of Appeals that it finally woke up to raise the question of jurisdiction. Were we to sanction
such conduct on its part, We would in effect be declaring as useless all the proceedings had in
the present case since it was commenced on July 19, 1948 and compel the judgment creditors
to go up their Calvary once more. The inequity and unfairness of this is not only patent but revolting.
Coming now to the merits of the appeal: after going over the entire record, We have become
persuaded that We can do nothing better than to quote in toto, with approval, the decision rendered
by the Court of Appeals on December 11, 1962 as follows:
In Civil Case No. R-660 of the Court of First Instance of Cebu, which was a suit for collection
of a sum of money, a writ of attachment was issued against defendants' properties. The attachment,
however, was subsequently discharged under Section 12 of Rule 59 upon the filing by defendants
of a bond subscribed by Manila Surety & Fidelity Co., Inc.
After trial, judgment was rendered in favor of plaintiffs.
The writ of execution against defendants having been returned totally unsatisfied, plaintiffs moved,
under Section 17 of Rule 59, for issuance of writ of execution against Manila Surety & Fidelity
Co., Inc. to enforce the obligation of the bond. But the motion was, upon the surety's opposition,
denied on the ground that there was "no showing that a demand had been made, by the plaintiffs
to the bonding company for payment of the amount due under the judgment" (Record on Appeal,
p. 60).
Hence, plaintiffs made the necessary demand upon the surety for satisfaction of the judgment, and
upon the latter's failure to pay the amount due, plaintiffs again filed a motion dated October 31,
1957, for issuance of writ of execution against the surety, with notice of hearing on November 2,
1957. On October 31, 1957, the surety received copy of said motion and notice of hearing.
It appears that when the motion was called on November 2, 1957, the surety's counsel asked that
he be given time within which to answer the motion, and so an order was issued in open court,
as follows:1wph1.t
As prayed for, Atty. Jose P. Soberano, Jr., counsel for the Manila Surety & Fidelity Co., Inc., Cebu
Branch, is given until Wednesday, November 6, 1957, to file his answer to the motion for the
issuance of a writ of execution dated October 30, 1957 of the plaintiffs, after which this incident
shall be deemed submitted for resolution.
SO ORDERED.
Given in open court, this 2nd day of November, 1957, at Cebu City, Philippines.
(Sgd.) JOSE M. MENDOZA
Judge
(Record on Appeal, pp.
64-65, emphasis ours)
Since the surety's counsel failed to file any answer or objection within the period given him, the
court, on December 7, 1957, issued an order granting plaintiffs' motion for execution against the
surety; and on December 12, 1957, the corresponding writ of execution was issued.
On December 24, 1957, the surety filed a motion to quash the writ of execution on the ground
that the same was "issued without the requirements of Section 17, Rule 59 of the Rules of Court
having been complied with," more specifically, that the same was issued without the required
"summary hearing". This motion was denied by order of February 10, 1958.
On February 25, 1958, the surety filed a motion for reconsideration of the above-stated order of
denial; which motion was likewise denied by order of March 26, 1958.
From the above-stated orders of February 10, 1958 and March 26, 1958 denying the surety's
motion to quash the writ of execution and motion for reconsideration, respectively the surety has
interposed the appeal on hand.
The surety insists that the lower court should have granted its motion to quash the writ of execution
because the same was issued without the summary hearing required by Section 17 of Rule 59,
which reads;
"Sec. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be
returned unsatisfied in whole or in part, the surety or sureties on any bond given pursuant to the
provisions of this role to secure the payment of the judgment shall become finally charged on such
bond, and bound to pay to the plaintiff upon demand the amount due under the judgment, which
amount may be recovered from such surety or sureties after notice and summary hearing in the
same action." (Emphasis ours)
Summary hearing is "not intended to be carried on in the formal manner in which ordinary actions
are prosecuted" (83 C.J.S. 792). It is, rather, a procedure by which a question is resolved "with
dispatch, with the least possible delay, and in preference to ordinary legal and regular judicial
proceedings" (Ibid, p. 790). What is essential is that "the defendant is notified or summoned to
appear and is given an opportunity to hear what is urged upon him, and to interpose a defense,
after which follows an adjudication of the rights of the parties" (Ibid., pp. 793-794); and as to
the extent and latitude of the hearing, the same will naturally lie upon the discretion of the court,
depending upon the attending circumstances and the nature of the incident up for consideration.
In the case at bar, the surety had been notified of the plaintiffs' motion for execution and of the
date when the same would be submitted for consideration. In fact, the surety's counsel was present
in court when the motion was called, and it was upon his request that the court a quo gave him
a period of four days within which to file an answer. Yet he allowed that period to lapse without
filing an answer or objection. The surety cannot now, therefore, complain that it was deprived of
its day in court.
It is argued that the surety's counsel did not file an answer to the motion "for the simple reason
that all its defenses can be set up during the hearing of the motion even if the same are not reduced
to writing" (Appellant's brief, p. 4). There is obviously no merit in this pretense because, as stated
above, the record will show that when the motion was called, what the surety's counsel did was
to ask that he be allowed and given time to file an answer. Moreover, it was stated in the order
given in open court upon request of the surety's counsel that after the four-day period within which
to file an answer, "the incident shall be deemed submitted for resolution"; and counsel apparently
agreed, as the order was issued upon his instance and he interposed no objection thereto.
It is also urged that although according to Section 17 of Rule 59, supra, there is no need for a
separate action, there must, however, be a separate judgment against the surety in order to hold
it liable on the bond (Appellant's Brief, p. 15). Not so, in our opinion. A bond filed for discharge
of attachment is, per Section 12 of Rule 59, "to secure the payment to the plaintiff of any judgment
he may recover in the action," and stands "in place of the property so released". Hence, after the
judgment for the plaintiff has become executory and the execution is "returned unsatisfied" (Sec.
17, Rule 59), as in this case, the liability of the bond automatically attaches and, in failure of
the surety to satisfy the judgment against the defendant despite demand therefor, writ of execution
may issue against the surety to enforce the obligation of the bond.
UPON ALL THE FOREGOING, the orders appealed from are hereby affirmed, with costs against
the appellant Manila Surety and Fidelity Company, Inc.
SAMUEL JULIAN, represented by his
G.R. No. 174193
Attorney-in-Fact, ROBERTO DELA
CRUZ,

CORONA, C.J., Chairperson,

- versus -

Petitioner,

LEONARDO-DE CASTRO,

Present:

BERSAMIN,
 Promulgated:

Respondents.

DEL CASTILLO, and

DEVELOPMENT BANK OF THE

December 7, 2011

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

VILLARAMA, JR., JJ.

PHILIPPINES and THE CITY

D E C I S I O N

SHERIFF,
DEL CASTILLO, J.:
The requirement of an appeal fee is not a mere technicality of law or procedure and should not
be disregarded without the most compelling of reasons.
Before us is a Petition for Review on Certiorari[1] of the Resolution[2] of the Court of Appeals
(CA) in CA-G.R. CV No. 00240 dated April 12, 2005 which dismissed petitioners appeal as
follows:
Considering that per JRD Report dated March 30, 2005, the appellant failed to pay the required
docket and other lawful fees, the instant Appeal is hereby DISMISSED pursuant to Section [1](c)
Rule 50 of the 1997 Rules of Civil Procedure.
SO ORDERED.[3]
Also assailed is the CAs Resolution[4] dated July 27, 2006 which denied the Motion for
Reconsideration thereto.
Petitioner seeks to reverse the aforesaid Resolutions of the CA and direct the latter to admit the
payment for the docket fees enclosed in his Motion for Reconsideration[5] so that his appeal may
be given due course, or, in the alternative, to remand the case to the court a quo for further
proceedings.
Factual Antecedents
This case stemmed from a Real Estate Mortgage[6] executed by Thelma Julian (Thelma), mother
of herein petitioner Samuel Julian, over a property situated in Fuentes Subdivision, Roxas City covered
by Transfer Certificate of Title (TCT) No. T-16705.[7]
On December 23, 1980,[8] Thelma obtained a housing loan from respondent Development Bank
of the Philippines (DBP) in the amount of P99,400.00.[9] To secure payment of the loan, she
executed in favor of the respondent a Real Estate Mortgage on the aforementioned parcel of land
registered under her name. A Special Power of Attorney (SPA) appointing the respondent and its
personnel to sell the property in the event of extrajudicial foreclosure was inserted and made an
integral part of the mortgage contract.[10]
Subsequently, Thelma died on January 8, 1982.[11]
Because of arrearages in the monthly amortizations, respondent foreclosed
the mortgaged property. Same was sold at public auction on September 15, 1983[12] with
respondent as the highest bidder.[13] No redemption having been made, title to the property was
consolidated in favor of the respondent on September 21, 1984[14] and TCT No. T-19303[15]
was thereafter issued in its name.
Thereafter, the actual occupants of the mortgaged property, spouses Ramon de la Cruz and his wife,
who is likewise petitioners sibling, Ruth Julian de la Cruz (spouses De la Cruz), offered to purchase
the property. Respondent accepted the offer and executed a Deed of Conditional Sale[16] on October
31, 1985. However, spouses De la Cruz failed to pay[17] 72 monthly amortizations resulting in
the rescission of the said deed on February 28, 1992. Notwithstanding, spouses De la Cruz refused Ruling of the Regional Trial Court
to vacate the premises compelling respondent to file an Unlawful Detainer case against them on
February 23, 1993. Judgment was rendered in favor of respondent on July 29, 1993.[18]

On January 28, 2004 or six months from the issuance of the show cause Order, the trial court
dismissed the case in an Order[31] which states:
However, before the Writ of Execution could be carried out,[19] petitioner filed Civil Case No.
6387[20] before the Regional Trial Court (RTC) of Roxas City on October 27, 1993,[21] for
the cancellation of respondents TCT No. T-19303. He contended that the SPA which was used
to sell the mortgaged property at public auction in 1983 was no longer effective in view of Thelmas
death in 1982. Consequently, the public auction, the resulting Deed of Sale,[22] Affidavit of
Consolidation and TCT No. T-19303 are null and void.
For failure of the parties thru counsel to comply with the Order dated July 24, 2003, the instant
case is hereby DISMISSED.

During the course of the proceedings, a series of postponements[23] were

SO ORDERED.

made at the instance of both parties due to an impending amicable settlement. Eventually, the parties
were able to reach a settlement. Thus, in an Order[24] dated October 28, 1998, the RTC directed
both parties to submit a joint motion to dismiss the case. However, almost two years passed without
the parties complying with the said Order.

Petitioner, through his new counsel, timely filed a Notice of Appeal[32] on April 26, 2004 but failed
Consequently, in an Order[25] dated October 11, 2000, the RTC dismissed the case for failure to pay the docket and other lawful fees.
of the parties to comply for an unreasonable length of time. The dismissal, however, was set aside
in an Order[26] dated February 12, 2003 in consideration of petitioners payment of ten percent
(10%) of respondents claim. The parties were then given 15 days from notice within which to submit
their compromise agreement,[27] which was subsequently extended for 30 days from notice.[28]
Despite the extensions, however, no compromise agreement was filed in court. As a result, in an
Order[29] dated July 24, 2003, the trial court directed the parties to show cause within 15 days
Ruling of the Court of Appeals
from notice why the case should not be dismissed for failure to prosecute. Meanwhile, with petitioners
conformity, his counsel withdrew her appearance on August 13, 2003.[30]
As earlier mentioned, the CA dismissed the appeal for non-payment of the required docket and other
lawful fees pursuant to Section 1(c), Rule 50 of the Rules of Court.[33]
Seeking reconsideration,[34] petitioner attached to his motion Postal Money Order Nos.
A-0620000276, B-0610000283 and J-065000566 in the aggregate amount of P3,020.00[35]
as payment for the docket fees. He explained that his failure to pay the required fees was due to
oversight and non-cognizance of the necessity to pay the said fees since his counsel did not inform
him of such requirement to pay. Petitioner prayed for liberal application of the Rules as according
to him, a strict enforcement would be tantamount to imposing a penalty not commensurate to his
thoughtlessness or oversight in not adhering to the procedural requisite.[36]
Petitioners submission did not move the CA, which disposed of his motion for reconsideration through
its second assailed Resolution[37] thus:
Procedural rules are not to be belittled or dismissed simply because their non-observance may have
resulted in prejudice to a partys substantive rights. Like all rules, they are required to be followed
except only for the most persuasive of reasons when they may be relaxed to relieve a litigant of
an injustice not proportionate with the degree of his thoughtlessness in not complying with the
procedure prescribed.
In his Motion for Reconsideration, appellant has not shown weighty and persuasive reasons to compel
Us to exercise Our discretion of suspending the strict adherence to the Rules. Other than his flimsy
excuse that the ground in the Courts Resolution is merely technical, appellant has miserably failed
to proffer a convincing justification for [his] procedural error. Thus, appellant failed to justify why
the Rules should be relaxed and [why] the equitable consideration of the Court should be exercised
in his situation as an exception to the strict implementation of the Rules.

IN VIEW THEREOF, the Motion for Reconsideration is hereby DENIED and the Resolution dated
April 12, 2005 MAINTAINED.
In the case of Meatmaster International Corporation vs. Lelis Integrated Development Corporation,
it was held that the payment of docket fees within the prescribed period is mandatory for the perfection
of an appeal. This is so because a court acquires jurisdiction over the subject matter of the action
only upon the payment of the correct amount of docket fees regardless of the actual date of filing
of the case in court. The payment of the full amount of the docket fee is sine qua non for the
perfection of an appeal. The court acquires jurisdiction over the case only upon the payment of the SO ORDERED.[38]
prescribed docket fees.

Verily, the requirement of an appeal fee is not a mere technicality of law or procedure but an essential
requirement without which the decision appealed from would become final and executory as if no
appeal was filed at all. Thus, if We allow belated payment as prayed for and reinstate the instant
appeal, it will have the effect of withholding the finality of the judgment or order appealed from. Issues

Petitioner comes before this Court by way of Petition for Review on Certiorari raising the following
issues:
A.
WHETHER X X X THE DISMISSAL OF THE TRIAL COURT [WAS] PROPER.
B.
WHETHER X X X THE COURT OF APPEALS ERRED IN APPLYING STRICTLY THE RULES ON
DOCKET FEES.[39]
The pivotal issue is whether the CA was correct in strictly applying the rules on the payment of
docket fees.
Petitioner acknowledges the mandatory nature of the rule that docket and other lawful fees must
be paid in full within the prescribed period for an appeal to be perfected. However, he asserts that
the broader interest of justice and the desired objective of deciding the case on the merits call for
leniency in the application of the rules. Hence, he must be given an opportunity to air his cause
without the constraints of technicalities. Petitioner contends that the CA should apply the
pronouncement of this Court in Yambao v. Court of Appeals[40] relaxing the policy of strict adherence
to the rule regarding appeal fees if justifiable reason for the non-payment of the correct amount
of docket fees within the prescribed period is shown. He further contends that his act of attaching
the payment for the fees to his Motion for Reconsideration shows his intention and willingness to
comply with the rules.
Our Ruling
The petition lacks merit.
Payment of full docket fees within the prescribed period for taking an appeal is mandatory.
It is well-established that [t]he right to appeal is a statutory privilege and must be exercised only
in the manner and in accordance with the provisions of the law.[41] Thus, one who seeks to avail
of the right to appeal must strictly comply with the requirements of the rules, and failure to do so
leads to the loss of the right to appeal.[42]
The applicable rule for appeals from judgments issued by the RTC in the exercise of its original
jurisdiction is Rule 41 of the Rules of Court, Section 4 of which provides:

Section 4. Appellate court docket and other lawful fees. - Within the period for taking an appeal,
the appellant shall pay to the clerk of the court which rendered the judgment or final order appealed
from, the full amount of the appellate court docket and other lawful fees. Proof of payment of said
fees shall be transmitted to the appellate court together with the original record or the record on
appeal.
The Rules also provide that failure of the appellant to pay the docket and other lawful fees is a
ground for dismissal of the appeal.[43]
The Court has consistently ruled in a number of cases that the payment of the full amount of docket
fees within the prescribed period is both mandatory and jurisdictional.[44] It is a condition sine qua
non for the appeal to be perfected and only then can a court acquire jurisdiction over the case.[45]
The requirement of an appeal fee is not a mere technicality of law or procedure and should not
be undermined except for the most persuasive of reasons. Non-observance would be tantamount
to no appeal being filed thereby rendering the challenged decision, resolution or order final and
executory.
Admittedly, this rule is not without recognized qualifications. The Court has declared that in appealed
cases, failure to pay the appellate court docket fee within the prescribed period warrants only
discretionary as opposed to automatic dismissal of the appeal and that the court shall exercise its
power to dismiss in accordance with the tenets of justice and fair play and with great deal of
circumspection considering all attendant circumstances.[46]
In the case at bench, the justifications presented by petitioner for the non-payment of the docket
fees are oversight and the lack of advice from his counsel. Unfortunately, the reasons presented
are neither convincing nor adequate to merit leniency. Petitioner submits that he only found out about
the requirement to pay the docket fees when he received the CA Resolution denying his appeal
on April 22, 2005 or three days short of one year from filing of the said appeal. This Court finds
this not to be logically true to human experience. It is unusual for petitioners counsel not to advice
him of the required docket fees. More often than not, counsels are aware of the docket fees required
to be paid to the courts, and will ask clients for the said amount prior to filing pleadings in court.
This is so because counsels are not expected to shoulder or advance payment for their clients.
Assuming arguendo that petitioners counsel did not inform him of the requirement to pay the docket
fees to perfect the appeal, what we find incredible is that petitioner apparently failed to communicate
with his counsel after the filing of said appeal. This Court has repeatedly held that litigants, represented
by counsel, should not expect that all they need to do is sit back, relax and await the outcome
of their case.[47] It is the duty of a party-litigant to be in contact with his counsel from time to
time in order to be informed of the progress of his case.[48] Moreover, the counsels negligence
binds petitioner and, for that reason alone the loss of his remedy was caused by his own
negligence.[49] Consequently, a relaxation of the rule cannot be granted.[50] The bitter consequence
of such grave inadvertence is to render the trial courts order final and executory.[51]
Further, the Court notes that petitioner only attempted to perfect his appeal on May 6, 2005 by
appending the postal money orders to his Motion for Reconsideration, or one year and nine days
too late.[52] By that time, the challenged
Order has long become final and no longer open to an appeal.[53]
Petitioners reliance on the policy espoused in the case of Yambao[54] is likewise unavailing. The
pertinent portion relied on by petitioner reads:
Thus, the appellate court may extend the time for the payment of the docket fees if appellant is
able to show that there is a justifiable reason for his failure to pay the correct amount of docket
fees within the prescribed period, like fraud, accident, mistake, excusable negligence, or a similar
supervening casualty, without fault on the part of the appellant. x x x[55] (Emphasis supplied.)
 procedure.[56] Here, the Court finds that petitioner is under no threat of suffering an injustice. On
the contrary, it will be the height of injustice if the Court accords petitioner leniency and reinstates
his appeal as this would mean further waiting on the part of the respondent which has long been
deprived of its right to possess the property it owns.

Clearly, the case applies to a situation where payment of the docket fees was made albeit incomplete.
In the instant case, no payment was made by petitioner at all. Even assuming arguendo that Yambao WHEREFORE, the petition is DENIED. The Resolutions of the Court of Appeals in CA-G.R. CV
is applicable to petitioners case, still, the Court sees no justifiable reason to allow this Court to relax No. 00240 dated April 12, 2005 and July 27, 2006 are AFFIRMED.
the strict application of the Rules.

SO ORDERED.
Likewise assuming for the sake of argument that consideration be given to petitioners willingness
to comply with the rules since he attached postal money orders to his motion for reconsideration,
the broader interest of justice will still not be served if petitioners appeal is reinstated. On one hand,
petitioner calls for leniency to enable him to establish his case. On the other hand is respondent,
which has been embroiled in a decades-long waiting game. The long-running dispute could be
recapped thus: (1) petitioners predecessor-in-interest, Thelma, obtained a loan from respondent
secured by a Real Estate Mortgage on the subject property; (2) Thelma was unable to pay the FEDMAN DEVELOPMENT CORPORATION,
loan thereby causing foreclosure of the Real Estate Mortgage; (3) petitioner filed his civil action
to question the validity of the public auction sale only on October 27, 1993 or 10 years after the
sale was conducted; and, (4) from the time of the consolidation of title in the name of respondent
in 1984 until the present, spouses De la Cruz have been in possession of the foreclosed property. Petitioner,

Petitioner and his sister Ruth Julian de la Cruz (Ruth) know that their mother Thelma has already
lost ownership rights to the property in question when the latter defaulted in her payment to respondent
and none of her successors-in-interest redeemed the property within the prescribed period. This is
the reason why Ruth and her husband offered to purchase the property from respondent. However,
when the said spouses De la Cruz defaulted in their payment, they refused to surrender the property
to respondent. For his part, petitioner reinforces such refusal to surrender by questioning the validity
of the public auction sale.

Now petitioner comes before this Court praying for leniency in the interest of justice. It must be
- versus -
stressed, however, that it is only when persuasive reasons exist that the Rules may be relaxed to
spare a litigant of an injustice not commensurate with his failure to comply with the prescribed
 VILLARAMA, JR., JJ.

Promulgated:

FEDERICO AGCAOILI,
August 31, 2011
Respondent.

G.R. No. 165025 x-----------------------------------------------------------------------------

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

Present:
D E C I S I O N

CORONA, C.J., Chairperson,

BERSAMIN, J.:

LEONARDO-DE CASTRO,

BERSAMIN,

DEL CASTILLO, and

The non-payment of the prescribed filing fees at the time of the filing of the complaint or other
initiatory pleading fails to vest jurisdiction over the case in the trial court. Yet, where the plaintiff
has paid the amount of filing fees assessed by the clerk of court, and the amount paid turns out
to be deficient, the trial court still acquires jurisdiction over the case, subject to the payment by the
plaintiff of the deficiency assessment.
Fedman Development Corporation (FDC) appeals the decision promulgated on August 20, 2004,
[1] whereby the Court of Appeals (CA) affirmed the judgment rendered on August 28, 1998 by
the Regional Trial Court (RTC), Branch 150, Makati City, in favor of the respondent.[2]
Antecedents
FDC was the owner and developer of a condominium project known as Fedman Suites Building (FSB)
located on Salcedo Street, Legazpi Village, Makati City. On June 18, 1975, Interchem Laboratories
Incorporated (Interchem) purchased FSBs Unit 411 under a contract to sell. On March 31, 1977,
FDC executed a Master Deed with Declaration of Restrictions,[3] and formed the Fedman Suite
Condominium Corporation (FSCC) to manage FSB and hold title over its common areas.[4]
On October 10, 1980, Interchem, with FDCs consent, transferred all its rights in Unit 411 to
respondent Federico Agcaoili (Agcaoili), a practicing attorney who was then also a member of the
Provincial Board of Quezon Province.[5] As consideration for the transfer, Agcaoili agreed: (a) to
pay Interchem 150,000.00 upon signing of the deed of transfer; (b) to update the account by
paying to FDC the amount of 15,473.17 through a 90 day-postdated check; and (c) to deliver
to FDC the balance of 137,286.83 in 135 equal monthly installments of 1,857.24 effective
October 1980, inclusive of 12% interest per annum on the diminishing balance. The obligations
Agcaoili assumed totaled 302,760.00.[6]
In December 1983, the centralized air-conditioning unit of FSBs fourth floor broke down.[7] On
January 3, 1984, Agcaoili, being thereby adversely affected, wrote to Eduardo X. Genato (Genato),
vice-president and board member of FSCC, demanding the repair of the air-conditioning unit.[8]
Not getting any immediate response, Agcaoili sent follow-up letters to FSCC reiterating the demand,
but the letters went unheeded. He then informed FDC and FSCC that he was suspending the payment
of his condominium dues and monthly amortizations.[9]
On August 30, 1984, FDC cancelled the contract to sell involving Unit 411 and cut off the electric
supply to the unit. Agcaoili was thus prompted to sue FDC and FSCC in the RTC, Makati City,
Branch 144 for injunction and damages.[10] The parties later executed a compromise agreement
that the RTC approved through its decision of August 26, 1985. As stipulated in the compromise
agreement, Agcaoili paid FDC the sum of 39,002.04 as amortizations for the period from November
1983 to July 1985; and also paid FSCC an amount of 17,858.37 for accrued condominium
dues, realty taxes, electric bills, and surcharges as of March 1985. As a result, FDC reinstated
the contract to sell and allowed Agcaoili to temporarily install two window-type air-conditioners in
Unit 411.[11]
On April 22, 1986, FDC again disconnected the electric supply of Unit 411.[12] Agcaoili thus
moved for the execution of the RTC decision dated August 26, 1985.[13] On July 17, 1986,
the RTC issued an order temporarily allowing Agcaoili to obtain his electric supply from the other
units in the fourth floor of FSB until the main meter was restored.[14]
On March 6, 1987, Agcaoili lodged a complaint for damages against FDC and FSCC in the RTC,
which was raffled to Branch 150 in Makati City. He alleged that the disconnection of the electric
supply of Unit 411 on April 22, 1986 had unjustly deprived him of the use and enjoyment of the
unit; that the disconnection had seriously affected his law practice and had caused him sufferings,
inconvenience and embarrassment; that FDC and FSCC violated the compromise agreement; that
he was entitled to actual damages amounting to 21,626.60, as well as to moral and exemplary
damages, and attorneys fees as might be proven during the trial; that the payment of interest sought
by FDC and FSCC under the contract to sell was illegal; and that FDC and FSCC were one and
the same corporation. He also prayed that FDC and FSCC be directed to return the excessive amounts
collected for real estate taxes.[15]
By way of counterclaim, FSCC sought moral damages and attorneys fees of 100,000.00 and
50,000.00, respectively, and cost of suit.[18]

In its answer, FDC contended that it had a personality separate from that of FSCC; that it had no
obligation or liability in favor of Agcaoili; that FSCC, being the manager of FSB and the title-holder
over its common areas, was in charge of maintaining all central and appurtenant equipment and On August 28, 1998, the RTC rendered judgment in favor of Agcaoili, holding that his complaint
installations for utility services (like air-conditioning unit, elevator, light and others); that Agcaoili for damages was not barred by res judicata; that he was justified in suspending the payment of
failed to comply with the terms of the contract to sell; that despite demands, Agcaoili did not pay his monthly amortizations; that FDCs cancellation of the contract to sell was improper; that FDC
the amortizations due from November 1983 to March 1985 and the surcharges, the total amount and FSCC had no separate personalities; and that Agcaoili was entitled to damages. The RTC
of which was 376,539.09; that due to the non-payment, FDC cancelled the contract to sell and disposed thuswise:
forfeited the amount of 219,063.97 paid by Agcaoili, applying the amount to the payment of
liquidated damages, agents commission, and interest; that it demanded that Agcaoili vacate Unit 411,
but its demand was not heeded; that Agcaoili did not pay his monthly amortizations of 1,883.84
from October 1985 to May 1986, resulting in FSCC being unable to pay the electric bills on time
to the Manila Electric Company resulting in the disconnection of the electric supply of FSB; that
it allowed Agcaoili to obtain electric supply from other units because Agcaoili promised to settle his
accounts but he reneged on his promise; that Agcaoilis total obligation was 55,106.40; that WHEREFORE, judgment is hereby rendered in favor of the plaintiff and as against both defendants,
Agcaoilis complaint for damages was baseless and was intended to cover up his delinquencies; that declaring the increased rates sought by defendants to be illegal, and ordering defendant FDC/FSCC
the interest increase from 12% to 24% per annum was authorized under the contract to sell in view to reinstate the contract to sell, as well as to provide/restore the air-conditioning services/electric
of the adverse economic conditions then prevailing in the country; and that the complaint for damages supply to plaintiffs unit. Both defendants are likewise ordered to pay plaintiff:
was barred by the principle of res judicata because the issues raised therein were covered by the
RTC decision dated August 26, 1985.

As compulsory counterclaim, FDC prayed for an award of moral and exemplary damages each
amounting to 1,000,000.00, attorneys fees amounting to 100,000.00 and costs of suit.[16] a. The amount of 21,626.60 as actual damages;

On its part, FSCC filed an answer, admitting that the electric supply of Unit 411 was disconnected b. 500,000.00 as moral damages;
for the second time on April 22, 1986, but averring that the disconnection was justified because
of Agcaoilis failure to pay the monthly amortizations and condominium dues despite repeated demands.
It averred that it did not repair the air-conditioning unit because of dwindling collections caused by
the failure of some unit holders to pay their obligations on time; that the unit holders were notified
of the electricity disconnection; and that the electric supply of Unit 411 could not be restored until
Agcaoili paid his condominium dues totaling 14,701.16 as of April 1987. [17]
c. 50,000.00 as exemplary damages; and
d. 50,000.00 as and for attorneys fees. FDC also claims that the proceedings in the RTC were void because the jurisdiction over the subject
matter of the action pertained to the Housing and Land Use Regulatory Board (HLURB); and that
both the RTC and the CA erred in ruling: (a) that Agcaoili had the right to suspend payment of
his monthly amortizations; (b) that FDC had no right to cancel the contract to sell; and (c) that
FDC and FSCC were one and same corporation, and as such were solidarily liable to Agcaoili for
damages.[22]

and to return to plaintiff the excess amount collected from him for real estate taxes.

Ruling

SO ORDERED.[19]

The petition has no merit.

FDC appealed, but the CA affirmed the RTC.[20] Hence, FDC comes to us on further appeal.[21]

The filing of the complaint or other initiatory pleading and the payment of the prescribed docket fee
are the acts that vest a trial court with jurisdiction over the claim.[23] In an action where the reliefs
Issues sought are purely for sums of money and damages, the docket fees are assessed on the basis
of the aggregate amount being claimed.[24] Ideally, therefore, the complaint or similar pleading must
specify the sums of money to be recovered and the damages being sought in order that the clerk
of court may be put in a position to compute the correct amount of docket fees.

FDC claims that there was a failure to pay the correct amount of docket fee herein because the
complaint did not specify the amounts of moral damages, exemplary damages, and attorneys fees;
that the payment of the prescribed docket fee by Agcaoili was necessary for the RTC to acquire
jurisdiction over the case; and that, consequently, the RTC did not acquire jurisdiction over this case. If the amount of docket fees paid is insufficient in relation to the amounts being sought, the clerk
of court or his duly authorized deputy has the responsibility of making a deficiency assessment, and
the plaintiff will be required to pay the deficiency.[25] The non-specification of the amounts of
damages does not immediately divest the trial court of its jurisdiction over the case, provided there
is no bad faith or intent to defraud the Government on the part of the plaintiff.[26]
The prevailing rule is that if the correct amount of docket fees are not paid at the time of filing,
the trial court still acquires jurisdiction upon full payment of the fees within a reasonable time as
the court may grant, barring prescription.[27] The prescriptive period that bars the payment of the
docket fees refers to the period in which a specific action must be filed, so that in every case the
docket fees must be paid before the lapse of the prescriptive period, as provided in the applicable
laws, particularly Chapter 3, Title V, Book III, of the Civil Code, the principal law on prescription
of actions.[28]
In Rivera v. Del Rosario,[29] the Court, resolving the issue of the failure to pay the correct amount
of docket fees due to the inadequate assessment by the clerk of court, ruled that jurisdiction over
the complaint was still validly acquired upon the full payment of the docket fees assessed by the
Clerk of Court. Relying on Sun Insurance Office, Ltd., (SIOL) v. Asuncion,[30] the Court opined
that the filing of the complaint or appropriate initiatory pleading and the payment of the prescribed
docket fees vested a trial court with jurisdiction over the claim, and although the docket fees paid
were insufficient in relation to the amount of the claim, the clerk of court or his duly authorized deputy
retained the responsibility of making a deficiency assessment, and the party filing the action could
be required to pay the deficiency, without jurisdiction being automatically lost.
Even where the clerk of court fails to make a deficiency assessment, and the deficiency is not paid
as a result, the trial court nonetheless continues to have jurisdiction over the complaint, unless the
party liable is guilty of a fraud in that regard, considering that the deficiency will be collected as
a fee in lien within the contemplation of Section 2,[31] Rule 141 (as revised by A.M. No.
00-2-01-SC).[32] The reason is that to penalize the party for the omission of the clerk of court
is not fair if the party has acted in good faith.
Herein, the docket fees paid by Agcaoili were insufficient considering that the complaint did not specify
the amounts of moral damages, exemplary damages and attorneys fees. Nonetheless, it is not disputed
that Agcaoili paid the assessed docket fees. Such payment negated bad faith or intent to defraud
the Government.[33] Nonetheless, Agcaoili must remit any docket fee deficiency to the RTCs clerk
of court.
II
FDC is now barred from asserting that the HLURB, not the RTC, had jurisdiction over the case.
As already stated, Agcaoili filed a complaint against FDC in the RTC on February 28, 1985 after
FDC disconnected the electric supply of Unit 411. Agcaoili and FDC executed a compromise
agreement on August 16, 1985. The RTC approved the compromise agreement through its decision
of August 26, 1985. In all that time, FDC never challenged the RTCs jurisdiction nor invoked the
HLURBs authority. On the contrary, FDC apparently recognized the RTCs jurisdiction by its voluntary
submission of the compromise agreement to the RTC for approval. Also, FDC did not assert the
HLURBs jurisdiction in its answer to Agcaoilis second complaint (filed on March 6, 1987). Instead,
it even averred in that answer that the decision of August 26, 1985 approving the compromise
agreement already barred Agcaoili from filing the second complaint under the doctrine of res judicata.
FDC also thereby sought affirmative relief from the RTC through its counterclaim.
FDC invoked HLURBs authority only on September 10, 1990,[34] or more than five years from
the time the prior case was commenced on February 28, 1985, and after the RTC granted Agcaoilis
motion to enjoin FDC from cancelling the contract to sell.[35]
The principle of estoppel, which is based on equity and public policy,[36] dictates that FDCs active
participation in both RTC proceedings and its seeking therein affirmative reliefs now precluded it from
denying the RTCs jurisdiction. Its acknowledgment of the RTCs jurisdiction and its subsequent denial
of such jurisdiction only after an unfavorable judgment were inappropriate and intolerable. The Court
abhors the practice of any litigant of submitting a case for decision in the trial court, and then accepting
the judgment only if favorable, but attacking the judgment for lack of jurisdiction if it is not.[37]
Art. 1308 The contract must bind both contracting parties; its validity or compliance cannot be left
to the will of one of them.

III
For this reason, the court sees no valid reason for defendant FDC to cancel the contract to sell
on ground of default or non-payment of monthly amortizations. (RTC rollo, pp. 79-80)

In upholding Agcaoilis right to suspend the payment of his monthly amortizations due to the increased
interest rates imposed by FDC, and because he found FDCs cancellation of the contract to sell as
improper, the CA found and ruled as follows:
It is the contention of the appellee that he has the right to suspend payments since the increase
in interest rate imposed by defendant-appellant FDC is not valid and therefore cannot be given legal
effect. Although Section II, paragraph d of the Contract to Sell entered into by the parties states
that, should there be an increase in bank interest rate for loans and/or other financial accommodations,
the rate of interest provided for in this contract shall be automatically amended to equal the said
increased bank interest rate, the date of said amendment to coincide with the date of said increase
in interest rate, the said increase still needs to [be] accompanied by valid proofs and not one of
the parties must unilaterally alter what was originally agreed upon. However, FDC failed to substantiate
the alleged increase with sufficient proof, thus we quote with approval the findings of the lower court,
to wit:
It was also grave error on the part of the FDC to cancel the contract to sell for non-payment of
the monthly amortizations without taking into consideration Republic Act 6552, otherwise known as
the Maceda Law. The policy of law, as embodied in its title, is to provide protection to buyers of
real estate on installment payments. As clearly specified in Section 3, the declared public policy
espoused by Republic Act No. 6552 is to protect buyers of real estate on installment payments
against onerous and oppressive conditions. Thus, in order for FDC to have validly cancelled the
existing contract to sell, it must have first complied with Section 3 (b) of RA 6552. FDC should
have refund the appellee the cash surrender value of the payments on the property equivalent to
fifty percent of the total payments made. At this point, we, find no error on the part of the lower
court when it ruled that:
There is nothing in the record to show that the aforementioned requisites for a valid cancellation
of a contract where complied with by defendant FDC. Hence, the contract to sell which defendant
FDC cancelled as per its letter dated August 17, 1987 remains valid and subsisting. Defendant
FDC cannot by its own forfeit the payments already made by the plaintiff which as of the same
date amounts to 263,637.73.(RTC rollo, p. 81)[38]

In the instant case, defendant FDC failed to show by evidence that it incurred loans and /or other
financial accommodations to pay interest for its loans in developing the property. Thus, the increased
interest rates said defendant is imposing on plaintiff is not justified, and to allow the same is tantamount
to unilaterally altering the terms of the contract which the law proscribes. Article 1308 of the Civil
Code provides:
We sustain the aforequoted findings and ruling of the CA, which were supported by the records
and relevant laws, and were consistent with the findings and ruling of the RTC. Factual findings
and rulings of the CA are binding and conclusive upon this Court if they are supported by the records
and coincided with those made by the trial court.[39]

FDCs claim that it was distinct in personality from FSCC is unworthy of consideration due to its
being a question of fact that cannot be reviewed under Rule 45.[40]
Among the obligations of FDC and FSCC to the unit owners or purchasers of FSBs units was the
duty to provide a centralized air-conditioning unit, lighting, electricity, and water; and to maintain
adequate fire exit, elevators, and cleanliness in each floor of the common areas of FSB.[41] But
FDC and FSCC failed to repair the centralized air-conditioning unit of the fourth floor of FSB despite
repeated demands from Agcaoili.[42] To alleviate the physical discomfort and adverse effects on
his work as a practicing attorney brought about by the breakdown of the air-conditioning unit, he
installed two window-type air-conditioners at his own expense.[43] Also, FDC and FSCC failed to
provide water supply to the comfort room and to clean the corridors.[44] The fire exit and elevator
were also defective.[45] These defects, among other circumstances, rightly compelled Agcaoili to
suspend the payment of his monthly amortizations and condominium dues. Instead of addressing
his valid complaints, FDC disconnected the electric supply of his Unit 411 and unilaterally increased
the interest rate without justification.[46]
Clearly, FDC was liable for damages. Article 1171 of the Civil Code provides that those who in
the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof are liable for damages.
WHEREFORE, we DENY the petition for review; AFFIRM the decision of the Court of Appeals; and
DIRECT the Clerk of Court of the Regional Trial Court, Makati City, Branch 150, or his duly authorized
deputy to assess and collect the additional docket fees from the respondent as fees in lien in
accordance with Section 2, Rule 141 of the Rules of Court.
SO ORDERED.
G.R. No. 92383 July 17, 1992
SUN INSURANCE OFFICE, LTD., petitioner,
vs.
THE HON. COURT OF APPEALS and NERISSA LIM, respondents.
CRUZ, J.:
The petitioner issued Personal Accident Policy No. 05687 to Felix Lim, Jr. with a face value of
P200,000.00. Two months later, he was dead with a bullet wound in his head. As beneficiary,
his wife Nerissa Lim sought payment on the policy but her claim was rejected. The petitioner agreed
that there was no suicide. It argued, however that there was no accident either.
Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. It happened on October 6,
1982, at about 10 o'clock in the evening, after his mother's birthday party. According to Nalagon,
Lim was in a happy mood (but not drunk) and was playing with his handgun, from which he had
previously removed the magazine. As she watched television, he stood in front of her and pointed
the gun at her. She pushed it aside and said it might he loaded. He assured her it was not and
then pointed it to his temple. The next moment there was an explosion and Lim slumped to the
floor. He was dead before he fell. 1
The widow sued the petitioner in the Regional Trial Court of Zamboanga City and was sustained.
2
The petitioner was sentenced to pay her P200,000.00, representing the face value of the policy,
with interest at the legal rate; P10,000.00 as moral damages; P5,000.00 as exemplary damages;
P5,000.00 as actual and compensatory damages; and P5,000.00 as attorney's fees, plus the costs
of the suit. This decision was affirmed on appeal, and the motion for reconsideration was denied.
3
The petitioner then came to this Court to fault the Court of Appeals for approving the payment
of the claim and the award of damages.
The term "accident" has been defined as follows:
The words "accident" and "accidental" have never acquired any technical signification in law, and
when used in an insurance contract are to be construed and considered according to the ordinary
understanding and common usage and speech of people generally. In-substance, the courts are
practically agreed that the words "accident" and "accidental" mean that which happens by chance
or fortuitously, without intention or design, and which is unexpected, unusual, and unforeseen. The
definition that has usually been adopted by the courts is that an accident is an event that takes
place without one's foresight or expectation an event that proceeds from an unknown cause, or
is an unusual effect of a known case, and therefore not expected. 4
An accident is an event which happens without any human agency or, if happening through human
agency, an event which, under the circumstances, is unusual to and not expected by the person
to whom it happens. It has also been defined as an injury which happens by reason of some violence
or casualty to the injured without his design, consent, or voluntary co-operation. 5
In light of these definitions, the Court is convinced that the incident that resulted in Lim's death was
indeed an accident. The petitioner, invoking the case of De la Cruz v. Capital Insurance, 6 says
that "there is no accident when a deliberate act is performed unless some additional, unexpected,
independent and unforeseen happening occurs which produces or brings about their injury or death."
There was such a happening. This was the firing of the gun, which was the additional unexpected
and independent and unforeseen occurrence that led to the insured person's death.
The petitioner also cites one of the four exceptions provided for in the insurance contract and contends
that the private petitioner's claim is barred by such provision. It is there stated:
Exceptions
The company shall not be liable in respect of
1. Bodily injury
xxx xxx xxx
b. consequent upon
i) The insured person attempting to commit suicide or willfully exposing himself to needless peril
except in an attempt to save human life.
To repeat, the parties agree that Lim did not commit suicide. Nevertheless, the petitioner contends
that the insured willfully exposed himself to needless peril and thus removed himself from the coverage
of the insurance policy.
It should be noted at the outset that suicide and willful exposure to needless peril are in pari materia
because they both signify a disregard for one's life. The only difference is in degree, as suicide
imports a positive act of ending such life whereas the second act indicates a reckless risking of
it that is almost suicidal in intent. To illustrate, a person who walks a tightrope one thousand meters
above the ground and without any safety device may not actually be intending to commit suicide,
but his act is nonetheless suicidal. He would thus be considered as "willfully exposing himself to
needless peril" within the meaning of the exception in question.
The petitioner maintains that by the mere act of pointing the gun to hip temple, Lim had willfully
exposed himself to needless peril and so came under the exception. The theory is that a gun is
per se dangerous and should therefore be handled cautiously in every case.
That posture is arguable. But what is not is that, as the secretary testified, Lim had removed the
magazine from the gun and believed it was no longer dangerous. He expressly assured her that
the gun was not loaded. It is submitted that Lim did not willfully expose himself to needless peril
when he pointed the gun to his temple because the fact is that he thought it was not unsafe to
do so. The act was precisely intended to assure Nalagon that the gun was indeed harmless.
The contrary view is expressed by the petitioner thus:
Accident insurance policies were never intended to reward the insured for his tendency to show off
or for his miscalculations. They were intended to provide for contingencies. Hence, when I miscalculate
and jump from the Quezon Bridge into the Pasig River in the belief that I can overcome the current,
I have wilfully exposed myself to peril and must accept the consequences of my act. If I drown
I cannot go to the insurance company to ask them to compensate me for my failure to swim as
well as I thought I could. The insured in the case at bar deliberately put the gun to his head and
pulled the trigger. He wilfully exposed himself to peril.
The Court certainly agrees that a drowned man cannot go to the insurance company to ask for
compensation. That might frighten the insurance people to death. We also agree that under the
circumstances narrated, his beneficiary would not be able to collect on the insurance policy for it
is clear that when he braved the currents below, he deliberately exposed himself to a known peril.
The private respondent maintains that Lim did not. That is where she says the analogy fails. The
petitioner's hypothetical swimmer knew when he dived off the Quezon Bridge that the currents below
were dangerous. By contrast, Lim did not know that the gun he put to his head was loaded.
Lim was unquestionably negligent and that negligence cost him his own life. But it should not prevent
his widow from recovering from the insurance policy he obtained precisely against accident. There
is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed
upon if the insured is shown to have contributed to his own accident. Indeed, most accidents are
caused by negligence. There are only four exceptions expressly made in the contract to relieve the
insurer from liability, and none of these exceptions is applicable in the case at bar. **
It bears noting that insurance contracts are as a rule supposed to be interpreted liberally in favor
of the assured. There is no reason to deviate from this rule, especially in view of the circumstances
of this case as above analyzed.
On the second assigned error, however, the Court must rule in favor of the petitioner. The basic
issue raised in this case is, as the petitioner correctly observed, one of first impression. It is evident
that the petitioner was acting in good faith then it resisted the private respondent's claim on the
ground that the death of the insured was covered by the exception. The issue was indeed debatable
and was clearly not raised only for the purpose of evading a legitimate obligation. We hold therefore
that the award of moral and exemplary damages and of attorney's fees is unjust and so must be
disapproved.
In order that a person may be made liable to the payment of moral damages, the law requires that
his act be wrongful. The adverse result of an action does not per se make the act wrongful and
subject the act or to the payment of moral damages. The law could not have meant to impose a
penalty on the right to litigate; such right is so precious that moral damages may not be charged
on those who may exercise it erroneously. For these the law taxes costs. 7
The fact that the results of the trial were adverse to Barreto did not alone make his act in bringing
the action wrongful because in most cases one party will lose; we would be imposing an unjust
condition or limitation on the right to litigate. We hold that the award of moral damages in the case
at bar is not justified by the facts had circumstances as well as the law.
If a party wins, he cannot, as a rule, recover attorney's fees and litigation expenses, since it is
not the fact of winning alone that entitles him to recover such damages of the exceptional
circumstances enumerated in Art. 2208. Otherwise, every time a defendant wins, automatically the
plaintiff must pay attorney's fees thereby putting a premium on the right to litigate which should not
be so. For those expenses, the law deems the award of costs as sufficient. 8
WHEREFORE, the challenged decision of the Court of Appeals is AFFIRMED in so far as it holds
the petitioner liable to the private respondent in the sum of P200,000.00 representing the face
value of the insurance contract, with interest at the legal rate from the date of the filing of the complaint
until the full amount is paid, but MODIFIED with the deletion of all awards for damages, including
attorney's fees, except the costs of the suit.
SO ORDERED.
CONCORDE CONDOMINIUM, INC., BY ITSELF AND COMPRISING THE UNIT OWNERS OF
CONCORDE CONDOMINIUM BUILDING, Petitioner, v. AUGUSTO H. BACULIO; NEW PPI
CORPORATION; ASIAN SECURITY AND INVESTIGATION AGENCY AND ITS SECURITY GUARDS;
ENGR. NELSON B. MORALES, IN HIS CAPACITY AS BUILDING OFFICIAL OF THE MAKATI CITY
ENGINEERING DEPARTMENT; SUPT. RICARDO C. PERDIGON, IN HIS CAPACITY AS CITY FIRE
MARSHAL OF THE MAKATI CITY FIRE STATION; F/C SUPT. SANTIAGO E. LAGUNA, IN HIS
CAPACITY AS REGIONAL DIRECTOR OF THE BUREAU OF FIRE PROTECTION-NCR, AND ANY
AND ALL PERSONS ACTING WITH OR UNDER THEM, Respondents.
D E C I S I O N
PERALTA, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking
to reverse and set aside the Order dated June 28, 2012 and Resolution dated September 20,
2012 of the Regional Trial Court (RTC) of Makati City, Branch 149,1 which dismissed Civil Case
No. 12-309 for Injunction with Damages for lack of jurisdiction.
The antecedent facts are as follows:
On April 16, 2012, petitioner Concorde Condominium, Inc., by itself and comprising the Unit Owners
of Concorde Condominium Building, {petitioner) filed with the Regional Trial Court (RTC) of Makati
City a Petition for Injunction [with Damages with prayer for the issuance of a Temporary Restraining
Order (TRO), Writ of Preliminary (Prohibitory) Injunction, and Writ of Preliminary Mandatory
Injunction] against respondents New PPI Corporation and its President Augusto H. Baculio; Asian
Security and Investigation Agency and its security guards, Engr. Nelson B. Morales in his capacity
as Building Official of the Makati City Engineering Department; Supt. Ricardo C. Perdigon in his
capacity as City Fire Marshal of the Makati City Fire Station; F/C Supt. Santiago E. Laguna, in
his capacity as Regional Director of the Bureau of Fire Protection - NCR, and any and all persons
acting with or under them (respondents).
Petitioner seeks (1) to enjoin respondents Baculio and New PPI Corporation from misrepresenting
to the public, as well as to private and government offices/agencies, that they are the owners of
the disputed lots and Concorde Condominium Building, and from pushing for the demolition of the
building which they do not even own; (2) to prevent respondent Asian Security and Investigation
Agency from deploying its security guards within the perimeter of the said building; and (3) to restrain
respondents Engr. Morales, Supt. Perdigon and F/C Supt. Laguna from responding to and acting
upon the letters being sent by Baculio, who is a mere impostor and has no legal personality with
regard to matters concerning the revocation of building and occupancy permits, and the fire safety
issues of the same building. It also prays to hold respondents solidarily liable for actual damages,
moral damages, exemplary damages, attorney's fees, litigation expenses and costs of suit.
The case was docketed as Civil Case No. No. 12-309 and raffled to the Makati RTC, Branch
149, which was designated as a Special Commercial Court.2
On April 24, 2012, the RTC called the case for hearing to determine the propriety of issuing a
TRO, during which one Mary Jane Prieto testified and identified some documents. While she was
undergoing cross-examination by a counsel from the Office of the Solicitor General (OSG) relative
to the fire deficiencies of petitioner's building, the RTC interrupted her testimony to find a better solution
to the problem, and issued an Order which reads:
 Wherefore, this court ordered Supt. Ricardo C. Perdigon, Fire Marshal of Makati City, to conduct
an inspection of Concorde Condominium Building. He is hereby ordered to submit a report on his
investigation not later than 5:00 o'clock in the afternoon tomorrow.
In the same manner, the Building Official of Makati City, being represented by Atty. Fabio is
also hereby ordered to conduct an investigation on the status of the said building to ascertain whether
it [is] still structurally sound to stand. Such report shall be submitted to this court not later than
5:00 o'clock in the afternoon tomorrow.
If the report of the Building Official is negative, the unit owners of the condominium will be
given the opportunity to be heard on whether to condemn the building or not.
In the same manner, the alleged owner of the land, who should have transferred it to the
condominium corporation once the latter was created, and it appears that it was not complied with,
they are also given the opportunity to get their own structural engineer to ascertain the structural
soundness of the building. Afterwhich, the court will issue the necessary order whether to condemn
or not the building and the President of the condominium corporation has acceded to such undertaking
because that's the only way how to give them fair play and be heard on their right as condominium
owner of Concorde Building located at 200 Benavidez corner Salcedo Streets, Legaspi Village, Makati
City.
The President of the condominium corporation is hereby given, if there is still a chance to
repair, four (4) months from April 30, 2012 or up to August 30, 2012 to remedy all those problems
and/or deficiencies of the building.
The other parties are hereby enjoined not to threaten, interfere or molest the condominium unit
owners of said building. Any other party, including the herein parties, who will obstruct the smooth
implementation of this Order, is already considered to have committed a direct contempt of the order
of the court.
Let the continuation of the testimony of Ms. Mary Jane Prieto be set on September 17, 2012
at 8:30 in the morning.
SO ORDERED.3ChanRoblesVirtualawlibrary
Meanwhile, respondents Baculio and New PPI Corporation filed an Urgent Motion to Re-Raffle dated
April 25, 2012, claiming that it is a regular court, not a Special Commercial Court, which has
jurisdiction over the case.
In an Order dated April 26, 2012, the RTC denied the motion to re-raffle on the ground of failure
to comply with Sections 44 and 55 of Rule 15 of the Rules of Court.
In their Motion to Vacate Order and Motion to Dismiss dated May 8, 2012, respondents Baculio
and New PP1 Corporation assailed the RTC Order dated April 24, 2012, stating that the case
is beyond its jurisdiction as a Special Commercial Court. Respondents claimed that the petition seeks
to restrain or compel certain individuals and government officials to stop doing or performing particular
acts, and that there is no showing that the case involves a matter embraced in Section 5 of
Presidential Decree (P.D.) No. 902-A, which enumerates the cases over which the SEC [now
the RTC acting as Special Commercial Court pursuant to Republic Act (R.A.) No. 8799] exercises
exclusive jurisdiction. They added that petitioner failed to exhaust administrative remedies, which is
a condition precedent before filing the said petition.
In an Order dated June 28, 2012, the RTC dismissed the case for lack of jurisdiction. It noted
that by petitioner's own allegations and admissions, respondents Baculio and New PPI Corporation
are not owners of the two subject lots and the building. Due to the absence of intra-corporate relations
between the parties, it ruled that the case does not involve an intra-corporate controversy cognizable
by it sitting as a Special Commercial Court. It also held that there is no more necessity to discuss
the other issues raised in the motion to dismiss, as well as the motion to vacate order, for lack
of jurisdiction over the case.
Petitioner filed a motion for reconsideration of the Order dated June 28, 2012, which the RTC
denied for lack of merit.6 Hence, this petition for review on certiorari.
Petitioner raises a sole question of law in support of its petition:
A.
THE REGIONAL TRIAL COURT COMMITTED A MANIFEST ERROR OF LAW AND ACTED
IN A MANNER CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE IN DISMISSING THE
PETITION ON THE GROUND OF LACK OF JURISDICTION.7ChanRoblesVirtualawlibrary
Petitioner contends that its petition for injunction with damages is an ordinary civil case correctly
filed with the RTC which has jurisdiction over actions where the subject matter is incapable of
pecuniary estimation. However, petitioner claims that through no fault on its part, the petition was
raffled to Branch 149 of the Makati RTC, a designated Special Commercial Court tasked to hear
intra-corporate disputes.
Petitioner notes that R.A. 8799 merely transferred the Securities and Exchange Commission's
jurisdiction over cases enumerated under Section 5 of P.D. No. 902-A to the courts of general
jurisdiction or the appropriate Regional Trial Court, and that there is nothing in R.A. 8799 or in
A.M. No. 00-11 -03-SC which would limit or diminish the jurisdiction of those RTCs designated
as Special Commercial Courts. Petitioner stresses that such courts shall continue to participate in
the raffle of other cases, pursuant to OCA Circular No. 82-2003 on Consolidation of Intellectual
Property Courts with Commercial Court. It insists that for purposes of determining the jurisdiction
of the RTC, the different branches thereof (in case of a multiple sala court) should not be taken
as a separate or compartmentalized unit. It, thus, concludes that the designation by the Supreme
Court of Branch 149 as a Special Commercial Court did not divest it of its power as a court of
general jurisdiction.
Petitioner also submits that prior to the issuance of the Order setting the case for hearing on April
24, 2012, the Presiding Judge of Branch 149 had already determined from the averments in the
petition that it is an ordinary civil action and not an intra-corporate matter; thus, he should have
referred it back to the Executive Judge or the Office of the Clerk of Court for re-raffle to other
branches of the RTC, instead of calendaring it for hearing or dismissing it.
For public respondents Superintendent Ricardo C. Pedrigon and Fire Chief Superintendent Santiago
E. Laguna, the OSG avers that the petition for review on certiorari should be denied for lack of
merit. It points out that petitioner foiled to exhaust administrative remedies, i.e., appeal the revocation
of the building and occupancy permits with the Department of Public Works and Highways (DPWH)
Secretary, pursuant to Section 307 of the National Building Code (Presidential Decree No. 1096);
hence, the filing of a petition for injunction with damages is premature and immediately dismissible
for lack of cause of action.
The OSG further argues that even if the case is remanded back to the RTC, the same will not
prosper due to procedural and substantive defects, and will only further clog the trial court's dockets,
for the following reasons: (1) petitioner failed to implead an indispensable party, namely, the DPWH
Secretary to whom the power to reinstate the building permit and the occupancy permit is lodged;
(2) with regard to the occupancy permit and the "water sprinkler" clearance, they cannot be issued
without a building permit; and (3) the said clearance cannot also be issued due to lack of certification
from either the Building Official or Tandem, the structural engineers personally hired by petition, that
the structural integrity of Concorde Condominium Building can withstand the necessary damage and
load that would be caused by the installation of the water sprinkler system.
For their part, respondents Baculio and New PPI Corporation aver that the petition filed before the
RTC should be dismissed for lack of proper verification. They likewise assert that Branch 149 has
no jurisdiction over the same petition because (1) such case is not an intra-corporate controversy;
(2) petitioner failed to exhaust administrative remedies which is a condition precedent before filing
such case; (3) the subject building is a threat to the safety of members of petitioner themselves
and of the public in general; (4) the two lots allegedly owned by petitioner are both registered
in the name of New PPI Corporation; and (5) the engineering firm hired by petitioner could not
even guarantee the building's structural capacity.
Meanwhile, respondent Asian Security & Investigation Agency claims that petitioner's allegations
against it are already moot and academic because it had already terminated its security contract
with respondents New PPI Corporation and Baculio, and pulled out its guards from petitioner's
premises. At any rate, it manifests that it is adopting as part of its Comment the said respondents'
Comment/Opposition to the petition for review on certiorari.
Respondent Office of the Building Official of Makati City, represented by Engineer Mario V. Badillo,
likewise contends that the petition for review on certiorari should be dismissed for these reasons:
(1) that petitioner failed to exhaust administrative remedies which is a mandatory requirement before
filing the case with the RTC of Makati City; (2) that Branch 149, as a Special Commercial Court,
has jurisdiction over the said case because it is not an intra-corporate controversy; and (3)
petitioner's building is old and dilapidated, and ocular inspections conducted show that several
violations of the National Building Code were not corrected, despite several demands and extensions
made by the Building Official.
The petition is impressed with merit.
In resolving the issue of whether Branch 149 of the Makati RTC, a designated Special Commercial
Court, erred in dismissing the petition for injunction with damages for lack of jurisdiction over the
subject matter, the Court is guided by the rule "that jurisdiction over the subject matter of a case
is conferred by law and determined by the allegations in the complaint which comprise a concise
statement of the ultimate facts constituting the plaintiffs cause of action. The nature of an action,
as well as which court or body has jurisdiction over it, is determined based on the allegations contained
in the complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon
all or some of the claims asserted therein. The averments in the complaint and the character of
the relief sought are the ones to be consulted. Once vested by the allegations in the complaint,
jurisdiction also remains vested irrespective of whether or not the plaintiff is entitled to recover upon
all or some of the claims asserted therein."8
As a rule, actions for injunction and damages lie within the jurisdiction of the RTC, pursuant to Section
19 of Batas Pambansa Blg. 129, otherwise known as the judiciary Reorganization Act of 1980,
as amended by R.A. 7691:9
 Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original
jurisdiction:
(1) In all civil actions in which the subject of the litigations is incapable of pecuniary estimation;
x x x x
(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body
exercising x x x judicial or quasi-judicial functions;
x x x x
(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses, and costs or the value of the property in controversy exceeds
Three hundred thousand pesos (P300,000.00) or, in such other cases in Metro Manila, where
the demand exclusive of the above-mentioned items exceeds Four hundred thousand pesos
(P400,000.00).
Meanwhile, Section 6 (a) of P.D. No. 902-A empowered the SEC to issue preliminary or permanent
injunctions, whether prohibitory or mandatory, in all cases in which it exercises original and exclusive
jurisdiction,10 to wit:
(a) Devices or schemes employed by or any acts, of the board of directors, business associates,
its officers or partnership, 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 organizations
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 to exist as such entity; and
(c) Controversies in the election or appointments of directors, trustees, officers or managers
of such corporations, partnerships or associations.11
However, jurisdiction of the SEC over intra-corporate cases was transferred to Courts of general
jurisdiction or the appropriate Regional Trial Court when R.A. No. 8799 took effect on August 8,
2000. Section 5.2 of R.A. No. 8799 provides:
SEC. 5.2 The Commission's jurisdiction over all cases enumerated under Section 5 of
Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the
appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority
may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases.
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.
In GD Express Worldwide N. V., et al. v. Court of Appeals (4th Div.) et al,12 the Court stressed
that Special Commercial Courts are still considered courts of general jurisdiction which have the power
to hear and decide cases of all nature, whether civil, criminal or special proceedings, thus:
xxx Section 5.2 of R.A. No. 8799 directs merely the Supreme Court's designation of RTC
branches that shall exercise jurisdiction over intra-corporate disputes. Nothing in the language of
the law suggests the diminution of jurisdiction of those RTCs to be designated as SCCs. The
assignment of intra-corporate disputes to SCCs is only for the purpose of streamlining the workload
of the RTCs so that certain branches thereof like the SCCs can focus only on a particular subject
matter.
The designation of certain RTC branches to handle specific cases is nothing new. For instance,
pursuant to the provisions of R.A. No. 6657 or the Comprehensive Agrarian Reform Law, the
Supreme Court has assigned certain RTC branches to hear and decide cases under Sections 56
and 57 of R.A. No. 6657.
The RTC exercising jurisdiction over an intra-corporate dispute can be likened to an RTC
exercising its probate jurisdiction or sitting as a special agrarian court. The designation of the SCCs
as such has not in any way limited their jurisdiction to hear and decide cases of all nature, whether
civil, criminal or special proceedings.13
In Manuel Luis C. Gonzales and Francis Martin D. Gonzales v. GJH Land, Inc. (formerly known
as S.J. Land Inc.), Chang Hwan Jang a.k.a. Steve Jang, Sang Rak Kim, Mariechu N. Yap and
Atty. Roberto P. Mallari II,14 the Court en banc, voting 12-1,15 explained why transfer of jurisdiction
over cases enumerated in Section 5 of P.D. 902-A was made to the RTCs in general, and not
only in favor of particular RTC branches (Special Commercial Courts), to wit:
As a basic premise, let it be emphasized that a court's acquisition of jurisdiction over a particular
case's subject matter is different from incidents pertaining to the exercise of its jurisdiction. Jurisdiction
over the subject matter of a case is conferred by law, whereas a court's exercise of jurisdiction,
unless provided by the law itself, is governed by the Rules of Court or by the orders issued from
time to time by the Court. In Lozada v. Bracewell, it was recently held that the matter of whether
the RTC resolves an issue in the exercise of its general jurisdiction or of its limited jurisdiction as
a special court is only a matter of procedure and has nothing to do with the question of jurisdiction.
Pertinent to this case is RA 8799 which took effect on August 8, 2000. By virtue of said
law, jurisdiction over cases enumerated in Section 5 of Presidential Decree No. 902-A was
transferred from the Securities and Exchange Commission (SEC) to the RTCs, being courts of
general jurisdiction. Item 5.2, Section 5 of RA 8799 provides:
SEC. 5. Powers and Functions of the Commission. -
x x x x
5.2 The Commission's jurisdiction over all cases enumerated under Section 5 of
Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the
appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority
may designate the Regional Trial Court branches that shall exercise jurisdiction over the 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 payment/rehabilitation cases filed
as of 30 June 2000 until finally disposed. (Emphasis supplied)
The legal attribution of Regional Trial Court as courts of general jurisdiction stems from Section
19 (6) Chapter II of Batas Pambansa Bilang (BP) 129, known as "The Judiciary Reorganization
Act of 1980:"
Section 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive
original jurisdiction:
x x x x
(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or
body exercising judicial or quasi-judicial functions: ....
As enunciated in Durisol Philippines, Inc. v. CA:
The regional trial court, formerly the court of first instance, is a court of general jurisdiction.
All cases, the jurisdiction over which is not specifically provided for by law to be within the jurisdiction
of any other court, fall under the jurisdiction of the regional trial court.
To clarify, the word "or" in Item 5.2, Section 5 of RA 8799 was intentionally used by the
legislature to particularize the fact that the phrase "the Courts of general jurisdiction" is equivalent
to the phrase "the appropriate Regional Trial Court." In other words, the jurisdiction of the SEC
over the cases enumerated under Section 5 PD 902-A was transferred to the courts of general
jurisdiction, that is to say (or, otherwise known as), the proper Regional Trial Courts. This
interpretation is supported by San Miguel Corp. v. Municipal Council, wherein the Court held that:
chanRoblesvirtualLawlibrary
[T]he word "or" may be used as the equivalent of "that is to say" and gives that which
precedes it the same significance as that which follows it. It is not always disjunctive and is sometimes
interpretative or expository of the preceding word.
Further, as may be gleaned from the following excerpt of the Congressional deliberations:
Senator [Raul S.] Roco:
 chanRoblesvirtualLawlibrary
x x x x The first major departure is as regards the Securities and Exchange Commission.
The Securities and Exchange Commission has been authorized under this proposal to reorganize
itself. As an administrative agency, we strengthened it and at the same time we take away the
quasi-judicial functions. The quasi-judicial functions are not given back to the court of general
jurisdiction - The Regional Trial Court, except for two categories of cases.
In the case of corporate disputes, only those that are now submitted for final determination
of the SEC will remain with the SEC. So, all those cases, both memos of the plaintiff and the
defendant, that have been submitted for resolution will continue. At the same time cases involving
rehabilitation, bankruptcy, suspension of payments and receiverships that were filed before June 30,
2000 will continue with the SEC. In other words, we are avoiding the possibility, upon approval
of this bill, of people filing cases with the SEC, in manner of speaking, to select their court.
xxx (Emphasis supplied)
Therefore, one must be disabused of the notion that the transfer of jurisdiction was made only
in favor of particular RTC branches, and not the RTCs in general.
Having clearly settled that as courts of general jurisdiction, the designated Special Commercial Courts
and the regular RTCs are both conferred by law the power to hear and decide civil cases in which
the subject of the litigation is incapable of pecuniary estimation, such as an action for injunction,
the Court will now examine the material allegations in the petition for injunction with damages, in
order to determine whether Branch 149 of the Makati RTC has jurisdiction over the subject matter
of the case.
In its petition for injunction with damages, Concorde Condominium, Inc. (CCI), by itself and
comprising the unit owners of Concorde Condominium Building, alleged that:
8. CCI is the duly constituted Corporation or Association which owns the common areas in
the project that comprises: (a) Lot 1 where the condominium stands and Lot 2 which serves as
the parking lot for the benefit of the unit owners; and (b) Concorde Condominium Building ("the
building") that was developed by Pulp and Paper Distributors, Inc. (now, allegedly [as claimed by
respondent Baculio], the "New PPI Corp.").
8.1 Petitioner's ownership of both the two (2) lots and the building (except only the
units specifically owned by unit owners) is undisputable, as can be clearly gleaned in the following
provisions of the Master Deed with Declaration of Restrictions ("Master Deed"), as well as the
Amended By-laws of petitioner Concorde Condominium, Inc.
X X X X
8.4 At any rate, considering that the condominium corporation (herein petitioner) had
already been established or incorporated many years ago, and that the Developer (or any subsequent
transferor) had already sold the units in the building to the present unit owners/members, it therefore
follows that Developer had thereby lost its beneficial ownership over Lots 1 and 2 in favor of herein
petitioner.
9. Unfortunately, PPI, as developer and engaging in unsound real estate business practice,
altered the condominium plan to segregate a lot (Lot 2) from the common areas and fraudulently
cause the issuance of a separate title thereof in the name of PPI.
10. CCI has questioned said fraudulent act of PPI in Housing and Land Use Regulatory Board
(1TLURI3) Case No. REM-050500-10982 entitled "Concorde Condominium, Incorporated vs.
Pulp and Paper, Inc. et al." The same case was elevated on appeal to the HLURB Board of
Commissioners in a case entitled "Concorde Condominium, Incorporated, complainant vs. Pulp and
Paper, Inc., ct al., respondents, vs. Landmark Philippines Incorporated, et al., Intervenors.'1 In both
cases, the HLURB ruled in favor of CCI.
11. PPI did not anymore appeal the aforementioned decision of the HLURB Board of
Commissioners to the Office of the President, hence, the decision as against PPI is already final
and executory.
x x x x
12. Although HLURB has already decided that CCI or all the unit owners have vested rights
over the subject lots, recent events have compelled petitioner to urgently seek from this Honorable
Court the reliefs prayed for in the instant case, such as the immediate issuance of a temporary
restraining order (TRO) and/or writ of preliminary injunction against respondents.

x x x x
14. At present, a certain Augusto II. Baculio (respondent herein), by himself and on behalf
of New PPI Corp., deliberately, actively and with patent bad faith misrepresents and misleads the
public and certain government offices/agencies that the lot where the building stands and the lot
which serves as parking area arc owned by New PPI Corp.
x x x x
14.1 In a letter dated 31 January 2011, respondent Augusto Baculio, on behalf of New
PPI Corp., representing themselves as owners of the above-mentioned lots, requested from the Makati
Fire Station that the building be subjected to ocular inspection, x x x.
x x x x
14.3 On 12 August 2011, respondent Augusto H. Baculio, with the same
misrepresentation, sent another letter to respondent Supt. Ricardo C. Perdigon, City Fire Marshal
of Makati requesting for verification or inspection of Concorde, x x x.
x x x x
14.4 Worth noting in the aforementioned letter of respondent Baculio dated 12 August
2011 x x x is that, not only did he misrepresent that he or New PPI Corp. owns the two lots,
but he likewise openly misrepresented that he owns the building, x x x and even requested "xxx
to address its 'demolition ' as the Concorde is already 40 years old."
x x x x
14.7 In a letter dated 07 September 2011, respondent Supt. Ricardo C. Perdigon
forwarded or elevated to respondent F/C Supt. Santiago E. Laguna, Regional Director of the Bureau
of Fire Protection - NCR the matter about Concorde Condominium Building.
x x x x
14.8 On 21 October 2011, CCI sent a letter to respondent F/C Supt. Santiago E.
Laguna, informing the latter of the misrepresentations of respondents Augusto Baculio and New PPI
Corp.
x x x x
14.9 The misrepresentation of respondents Baculio and New PPI Corp. did not stop there.
On 17 November 2011, Mr. Baculio requested from Meralco for the cutting off of electricity in
Concorde Condominium Building, apparently with the misrepresentation that he owns the building.
x x x x
14.14 Moreover, on 7 March 2012, one of the unit owners in the building, Sister Lioba
Tiamson, OSB, sought the assistance and intervention of Honorable Mayor Jejomar Erwin S. Binay,
Jr. when Concorde received a letter dated 17 February 2012 from respondent Engr. Nelson B.
Morales informing Concorde of the revocation of the building and occupancy permits even if the period
of sixty (60) days to comply has not yet lapsed.
x x x x
16. Moreover, sometime in November 2011, petitioner and its unit owners noted that security
guards from Asian Security and Investigation Agency have stationed themselves on rotation basis
7 days a wcek/24 hours a day, within the perimeter of the building. Upon inquiry of one of the
administration personnel, it was discovered that they were hired by respondent August II. Baculio/New
PPI Corp.
x x x x
16.5 The presence of respondent security agency and its security guards within the perimeter
of the building poses threat to and sows serious fear and anxiety to the unit owners. Thus, they
should be ordered to leave the premises.
 17. Respondent Baculio and New PPI Corp.'s misleading, false, baseless and unauthorized
acts of claiming ownership over the subject lots and building arc clear violation of the rights of petitioner
and its unit owners to maintain their undisturbed ownership, possession and peaceful enjoyment of
their property. Hence, should be immediately estopped, restrained and permanently enjoined.
18. Moreover, respondents Baculio and New PPI Corp., by deceit and misrepresentation, are
surreptitiously attempting to dispossess petitioner of Concorde building to the extent of using the
instrumentality of the government to achieve this purpose.
19. Worse, respondent Baculio and New PPI Corp. by writing letters to Makati City Engineering
Department, are pushing for the demolition of the building which they do not even own.
20. Surprisingly, respondent Engr. Nelson B. Morales has been responding to and acting upon
the above-mentioned letters being sent by respondent Baculio despite the latter being a mere impostor
and has no legal personality whatsoever with regard to the matters concerning the lots and Concorde
Condominium Building.
x x x x
20.9 It is therefore necessary that respondent Engr. Nelson Morales be enjoined from
entertaining and acting upon the letters of respondent Baculio.
20.10 Respondent Engr. Morales should be immediately restrained from
implementing the revocation of petitioner's building and occupancy permit.
20.11 Respondent Engr. Morales should also be immediately restrained from ordering
the possible demolition of the building, as the building is structurally sound and stable, and docs
not pose any safety risks to occupants and passers-by.
x x x x
21. Respondents Supt. Ricardo C. Perdigon and F/C Supt. Santiago E. Laguna have likewise
been responding to and acting upon the above-mentioned letters being sent by respondent Baculio
despite the latter being a mere impostor and has no legal personality whatsoever with regard to
matters concerning the building.
22. Moreover, respondents Supt. Ricardo C. Perdigon and F/C Supt. Santiago E. Laguna
unjustifiably refused, and continuously refuses to issue the necessary permit for the contractor xxx
engaged by petitioner to be able to commence with the installation of n lire sprinkler system and
to correct other lire safety deficiencies in the building.
22.1 Thus, it is certainly ironic that the Bureau of Fire Protection headed by said
respondents x x x issued compliance order on petitioner to correct fire safety deficiencies, and yet,
they refused to issue the necessary work permit to the contractor hired by petitioner.
22.2 Hence, respondents Supt. Perdigon and F/C Supt. Laguna should be directed
to issue the necessary permit to the contractor engaged by petitioner.16ChanRoblesVirtualawlibrary
The concept of an action for injunction, as an ordinary civil action, was discussed in BPI v. Hong,
et al.17 as follows:
An action for injunction is a suit which has for its purpose the enjoinment of the defendant,
perpetually or for a particular time, from the commission or continuance of a specific act, or his
compulsion to continue performance of a particular act. It has an independent existence, and is distinct
from the ancillary remedy of preliminary injunction which cannot exist except only as a part or an
incident of an independent action or proceeding. In an action for injunction, the auxiliary remedy
of preliminary injunction, prohibitory or mandatory, may issue.
There is no doubt that the petition filed before the RTC is an action for injunction, as can be gleaned
from the allegations made and reliefs sought by petitioner, namely: (1) to enjoin respondents Baculio
and New PPI Corporation from misrepresenting to the public, as well as to private and government
offices/agencies, that they are the owners of the disputed lots and Concorde Condominium Building,
and from pushing for the demolition of the building which they do not even own; (2) to prevent
respondent Asian Security and Investigation Agency from deploying its security guards within the
perimeter of the said building; and (3) to restrain respondents Engr. Morales, Supt. Perdigon and
F/C Supt. Laguna from responding to and acting upon the letters being sent by Baculio, who is
a mere impostor and has no legal personality with regard to matters concerning the revocation of
building and occupancy permits, and the fire safety issues of the same building.
Applying the relationship test18 and the nature of the controversy test19 in determining whether which, as first discussed, is distinct from the concept of jurisdiction over the subject matter. The
a dispute constitutes an intra-corporate controversy, as enunciated in Medical Plaza Makati RTCs general jurisdiction over ordinary civil cases is therefore not abdicated by an internal rule
Condominium Corporation v. Cullen,20 the Court agrees with Branch 149 that Civil Case No. streamlining court procedure.22
12-309 for injunction with damages is an ordinary civil case, and not an intra-corporate controversy.

A careful review of the allegations in the petition for injunction with damages indicates no
intra-corporate relations exists between the opposing parties, namely (1) petitioner condominium It is apt to note, however, that the foregoing guideline applies only in a situation where the ordinary
corporation, by itself and comprising all its unit owners, on the one hand, and (2) respondent New civil case filed before the proper RTCs was "wrongly raffled" to its branches designated as Special
PP1 Corporation which Baculio claims to be the owner of the subject properties, together with the Commercial Courts, which situation does not obtain in this case. Here, no clear and convincing
respondents Building Official and City Fire Marshal of Makati City, the Regional Director of the Bureau evidence is shown to overturn the legal presumption that official duty has been regularly performed
of Fire Protection, and the private security agency, on the other hand. Moreover, the petition deals when the Clerk of Court of the Makati RTC docketed the petition for injunction with damages as
with the conflicting claims of ownership over the lots where Concorde Condominium Building stands an ordinary civil case -not as a commercial case - and, consequently, raffled it among all branches
and the parking lot for unit owners, which were developed by Pulp and Paper Distributors, Inc. (now of the same RTC, and eventually assigned it to Branch 149. To recall, the designation of the said
claimed by respondent Baculio as the New PPI Corporation), as well as the purported violations branch as a Special Commercial Court by no means diminished its power as a court of general
of the National Building Code which resulted in the revocation of the building and occupancy permits jurisdiction to hear and decide cases of all nature, whether civil, criminal or special proceedings.
by the Building Official of Makati City. Clearly, as the suit between petitioner and respondents neither There is no question, therefore, that the Makati RTC, Branch 149 erred in dismissing the petition
arises from an intra-corporate relationship nor does it pertain to the enforcement of their correlative for injunction with damages, which is clearly an ordinary civil case. As a court of general jurisdiction,
rights and obligations under the Corporation Code, and the internal and intra-corporate regulatory it still has jurisdiction over the subject matter thereof.
rules of the corporation, Branch 149 correctly found that the subject matter of the petition is in the
nature of an ordinary civil action.
In view of the above discussion, the Court finds no necessity to delve into the other contentions
raised by the parties, as they should be properly addressed by the Makati RTC, Branch 149 which
The Court is mindful of the recent guideline laid down in the recent case of Manuel Luis C. Gonzales has jurisdiction over the subject matter of the petition for injunction with damages.chanrobleslaw
and Francis Martin D. Gonzal.es v. GJH Land, Inc. (formerly known as S.J. Land Inc.), Chang
Hwan Jang a.k.a. Steve Jang, Sang Rak, Kim, Mariechu N. Yap and Atty. Roberto P. Mallari II,21
to wit: WHEREFORE, the petition for review on certiorari is GRANTED. The Order dated June 28, 2012
and Resolution dated September 20, 2012 issued by the Regional Trial Court of Makati City, Branch
149, in Civil Case No. 12-309, are hereby REVERSED and SET ASIDE. Civil Case No. 12-309
For further guidance, the Court finds it apt to point out that the same principles apply to the is REINSTATED in the docket of the same branch which is further ORDERED to resolve the case
inverse situation of ordinary civil cases filed before the proper RTCs but wrongly raffled to its branches with reasonable dispatch.
designated as Special Commercial Courts. In such a scenario, the ordinary civil case should then
be referred to the Executive Judge for re-docketing as an ordinary civil case; thereafter, the Executive
Judge should then order the raffling of the case to all branches of the same RTC, subject to limitations This Decision is immediately executory.
under existing internal rules, and the payment of the correct docket fees in case of any difference.
Unlike the limited assignment/raffling of a commercial case only to branches designated as Special
Commercial Courts in the scenarios stated above, the re-raffling of an ordinary civil case in this
instance to all courts is permissible due to the fact that a particular branch which has been designated SO ORDERED.
as a Special Commercial Court does not shed the RTCs general jurisdiction over ordinary civil cases
under the imprimatur of statutory law, i.e., Batas Pambansa Bilang (BP 129). To restate, the
designation of Special Commercial Courts was merely intended as a procedural tool to expedite the LOLITA B. COPIOSO, petitioner, vs. LAURO, DOLORES, RAFAEL, ESTEBAN, and CORAZON,
resolution of commercial cases in line with the court's exercise of jurisdiction. This designation was all surnamed COPIOSO, and COURT OF APPEALS, respondents.
not made by statute but only by an internal Supreme Court rule under its authority to promulgate
rules governing matters of procedure and its constitutional mandate to supervise the administration
of all courts and the personnel thereof. Certainly, an internal rule promulgated by the Court cannot
D E C I S I O N
go beyond the commanding statute. But as a more fundamental reason, the designation of Special
Commercial Courts is, to stress, merely an incident related to the court's exercise of jurisdiction,
BELLOSILLO, J.:
This petition for review assails the Decision[1] of the Court of Appeals in CA G.R. SP No. 62090
which dismissed petitioner's petition for certiorari as well as its Resolution denying reconsideration
thereof.
On 4 July 2000 respondents Lauro, Dolores, Rafael, Esteban and Corazon, all surnamed Copioso,
filed a complaint[2] for reconveyance of two (2) parcels of coconut land situated in Banilad,
Nagcarlan, Laguna, against Lolita B. Copioso, spouses Bernabe and Imelda Doria, and the estate
of deceased Antonio Copioso, as well as vendees Dolores Reduca, Mercedes Reduca, Rosario
Pascua, Elvira Bombasi and Federico Casabar.
Respondents alleged that they together with their deceased brother Antonio Copioso were co-owners
of the subject property having inherited the same from their parents, and that through fraud and
machination Antonio had the property transferred to his name and that of spouses Bernabe and Imelda
Doria who subsequently sold the same to third parties. They thus prayed for the reconveyance of
the property by virtue of their being co-owners thereof.
When respondents claimed in a manifestation with motion for bill of particulars that the assessed
value of the subject property was P3,770.00, petitioner Lolita Copioso and spouses Bernabe and
Imelda Doria separately moved to dismiss the complaint on the ground that it was the Municipal
Trial Court (MTC) and not the Regional Trial Court (RTC) that had jurisdiction over the case
considering that the assessed value of the property was lower than P20,000.00.
The trial court in its twin orders of 5 and 12 September 2000 denied the motions to dismiss holding
that since the subject matter of the action was beyond pecuniary estimation it was properly within
its jurisdiction.[3] Lolita Copioso's Motion for Reconsideration was denied,[4] hence, she filed with
the Court of Appeals a petition for certiorari and prohibition praying for the annulment of the twin
orders of the trial court which denied the motions to dismiss and at the same time maintaining her
position that the RTC had no jurisdiction over the case because the assessed value of the property
was below P20,000.00.
The appellate court denied the petition thus affirming the jurisdiction of the RTC over the complaint
for reconveyance. Motion for reconsideration thereon was similarly denied by the appellate court, hence
this petition.
Petitioner Lolita Copioso anchors her argument on Sec. 33, par. (3), of B.P. Blg. 129 otherwise
known as The Judiciary Reorganization Act of 1980 as amended by Sec. 3 of RA 7691 which
provides -
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts in Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts shall exercise: x x x x (3) Exclusive original jurisdiction in all civil actions which involve
title to, or possession of, real property, or any interest therein where the assessed value of the property
or interest therein does not exceed twenty thousand pesos (P20,000.00) or, in civil actions in
Metro Manila, where such assessed value does not exceed fifty thousand pesos (P50,000.00)
exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses and costs: Provided,
that in cases of land not declared for taxation purposes, the value of such property shall be determined
by the assessed value of the adjacent lots.
Petitioner argues that the complaint for reconveyance cannot be resolved unless the trial court delves
upon the issues of "title, possession and interests" of each of the stakeholders over the subject
parcels of land. She asserts that the allegations and relief prayed for in the complaint coupled with
the assessed value of the disputed property place the action within the exclusive jurisdiction of the
MTC and not the RTC.
In turn, private respondents anchor their position on Sec. 19, par. (1), of the same law which
provides -
Sec. 19. Jurisdiction in civil cases. The Regional Trial Courts shall exercise exclusive original
jurisdiction: In all civil actions in which the subject of the litigation is incapable of pecuniary estimation:
x x x
Simply, they claim that the instant complaint for reconveyance is a case of joinder of causes of
action which include the annulment of sale and other instruments of false conveyance incapable of
pecuniary estimation thus within the legal competence of the RTC.
The law on jurisdiction of trial courts over civil cases is neither ambiguous nor confusing. Sec. 33,
par. (3), in relation to Sec. 19 par. (2) of B.P. 129 as amended by RA 7691, deals with civil
cases capable of pecuniary estimation. On the other hand, Sec. 33, par. (3), in relation to Sec.
19, par. (1), applies to cases incapable of pecuniary estimation.
Sec. 33, par. (3), in relation to Sec. 19, par. (2), of B.P. 129, as amended by RA 7691,
provides that in civil cases involving sum of money or title to, possession of, or any interest in real
property, jurisdiction is determined on the basis of the amount of the claim or the assessed value merely an incidental matter to be dealt with by the court, when necessary, in the resolution of the
of the real property involved, such that where the sum of money or the assessed value of the real case but is not determinative of its jurisdiction.
property does not exceed P20,000.00, or P50,000.00 in Metro Manila, jurisdiction lies with the
MTC; and where it exceeds that amount, jurisdiction is vested with the RTC.
WHEREFORE, the petition is DENIED. The 16 May 2001 Decision of the Court of Appeals in
CA-G.R. SP No. 62090 as well as its 30 July 2001 Resolution denying reconsideration thereof
Indeed, the present dispute pertains to the title, possession and interest of each of the contending is AFFIRMED. Costs against petitioner.
parties over the contested property the assessed value of which falls within the jurisdictional range
of the MTC. Nonetheless, the nature of the action filed, the allegations set forth, and the reliefs
prayed for, forestall its cognizance by the MTC.

As can be readily gleaned from the records, the complaint was for "Reconveyance and/or Recovery
of Common Properties Illegally Disposed, with Annulment of Sales and other Instruments of False
Conveyance, with Damages, and Restraining Order." Private respondents alleged therein that they
were co-owners of the property along with their deceased brother Antonio Copioso; and that in or
about 1998, with fraud and machination, Antonio together with the spouses Bernabe and Imelda
Doria made it appear in a public document entitled Pagpapatunay ng Kusang Loob na Pagbabahagi
that they were the co-owners of the subject property and had divided the same equally between
themselves to the exclusion of private respondents. Subsequently, they sold the subdivided lots to
the other defendants namely Dolores Reduca, Mercedes Reduca, Rosario Pascua, Elvira Bombasi
and Federico Casabar.

Private respondents also sought payment of moral damages, exemplary damages, litigation expenses,
attorney's fees plus appearance fees amounting to more or less P286,500.00. They likewise applied
for a TRO pending the issuance of a writ of preliminary injunction restraining the defendants from
further alienating the common properties. They also prayed of the trial court to order the cancellation,
annulment and/or rescission of the four (4) deeds of absolute sale made in favor of the buyers,
and to order Lolita B. Copioso and the estate of Antonio Copioso to return the price that the
buyer-defendants had paid to them for the land sold.

Clearly, this is a case of joinder of causes of action which comprehends more than the issue of
title to, possession of, or any interest in the real property under contention but includes an action
to annul contracts, reconveyance or specific performance, and a claim for damages, which are
incapable of pecuniary estimation and thus properly within the jurisdiction of the RTC.

As correctly opined by the appellate court, if the only issue involved herein is naked possession
or bare ownership, then petitioner Lolita Copioso would not be amiss in her assertion that the instant
complaint for reconveyance, considering the assessed value of the disputed property, falls within the
exclusive jurisdiction of the MTC. But as herein before stated, the issue of title, ownership and/or
possession thereof is intertwined with the issue of annulment of sale and reconveyance hence within
the ambit of the jurisdiction of the RTC. The assessed value of the parcels of land thus becomes